Impact of Emerging Markets on Zara's Business

The assignment provided explores the impact of emerging markets on Zara's business, including various factors that affect the company's decision-making process. It also mentions the use of tools such as flow charts and force field analysis to deal with dynamic forces affecting the company. Additionally, it touches upon the effects of rising economies in developing nations and competitive advantages on management decision-making. The assignment is likely related to a business or management course and may require students to analyze the impact of emerging markets on Zara's operations.

Contemporary Management
Issues

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Understanding of the key dynamic forces impacting on business and society.......................1
2. Critical evaluation of the relationship between above determined forces in context of
strategic decision making............................................................................................................1
3. Preparing an evaluation of an organisation’s responses to key dynamic forces in the
contemporary business world. ....................................................................................................3
4. Decision making tools to address contemporary drivers for change....................................4
5. Analyse the relevant theoretical foundations to support the identification and application of
effect corporate responses to contemporary management issues................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
Books and Journals.....................................................................................................................8

INTRODUCTION
Contemporary management issues is defined as the way of thinking that is required while
in case of any problem arises. Management has to make decisions after considering every issue
and number of individuals in the society. It can be said that there are various problems which
arises and decision are taken according to that only. In this present report ZARA company has
been chosen for assessment. ZARA is a clothing fashion brand which has 7475 stores all over the
world. Organisation was founded in the year 1976 and whose headquarter is in Spain. In this
present assessment major focus will be on the Understanding of the key dynamic forces
impacting on business and society. In addition to this, decision making tools to address
contemporary drivers for change will be discussed in detail. Other than this, an evaluation will be
prepared on ZARA response to the key dynamic forces in the business world. Furthermore,
relevant theoretical foundations to support the identification and application of effect corporate
responses to contemporary management issues will be covered in brief.
MAIN BODY
1. Understanding of the key dynamic forces impacting on business and society.
In every business there are various factors which affects the organisation in some or the
other way. In this recent times, there are extreme changes has witnessed in the society due to
growth in every sector different cultural and change in mindset of people. Every person started
focusing more on earning and living a good life. ZARA is a clothing brand which has always
focused on providing the latest fashionable trending clothes to its customers. There are some
different forces which affects the business of ZARA. The same are briefly discussed below in
detail.
Social factors : As in the world every person is majorly involved in buying and maintain
their standard of living. Due to this clothing sector has expanded to a great extent and major
business has developed by the same. The emerging economic powers has majorly developed the
business of companies Like ZARA due to shifting of people towards the fashionable clothes. In
nation like China and India purchasing power of people has grown to a great extent. This also
has given major business to ZARA and thus the organisation has managed the same by giving
majority of its business through it. On the other hand, as per Schaltegger and Burritt (2017), it
has been argued that these emerging nation also came up with different clothing brands in their
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own nation. This has affected the business of ZARA in countries like India and china. In these
developing nation people are also highly involved with there culture and traditions. So this factor
also affects the business of ZARA because the organisation only sales highly fashionable clothes
other than the traditional clothes.
Technological factor : It is a factor which helps in the development of business as if the
organisation will focus on more advancement. ZARA has always believed in developing its
business through different technological advancement. This has made the organisational growth
to a different extent. Now the management take such decisions which give advancement to the
company. ZARA has also made such advancement in communication sector and also through
social media bonded emotionally with people. Whereas, as per Van Niekerk (2017), it has stated
that this factor is adopted by developing nations in great way. Russia and china has developed
different new machineries for manufacturing of clothes which leads to cost effective clothing.
This has affected the sale of ZARA as the developing nations have reasonable clothing market.
This has affected the pricing strategies of the organisation, as ZARA have to take decisions on its
pricing in developing nations. ZARA should lower down its prices to sustain in long term and
maintain its sales In nations like India, China and Russia.
Economic forces : This force has affected majorly to the organisation in making their decisions
and has a great impact on the business of the company. Individual Income of people is increasing
in every nation due to various factors and this also leads to overall growth of the nation. So
ZARA gets affected and make decisions by highly concentrating on these factor. This will allow
the organisation to grab the golden opportunities when the nation will be touching raise in its
economy. ZARA has also got affected and due to the rise in economy of developing nations and
the competitive advantage. Management decision making get affected by such factors and it has
a great impact on the decision making of the company. In addition to this, the economic factor
also includes the purchasing power of people and raise in that has leads to growth and expansion
in the business of the organisation. This is the key factor of growing the concept and making the
effect of business on the same.
Political factors : There are different political aspects in any nation which affects the
organisation to a great extent. This factor has a great impact on the decision making of the
organisation as trade policies and taxation factors affects the entire business policies. Sales and
profits of the organisation gets affected by the different political aspects. That is reason behind
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considering all the political aspects and making the decisions accordingly. One of the major
factor is taxation system of the nation as after considering it the pricing strategies are formed and
maintained. So thus it can be said that political forces have the majority of impact on the decision
making of the company. It can be said that if in any nation where ZARA has it stores and there
trade policies got changed than it will affect the business of the company. This will lead to
change in its pricing policies and operations as per the political factors of the nation.
Legal factor : It is such factor which is required to be considered by every company for
operating its business in the nation. Every country has their own law, rules and regulations. This
affects the business to a great extent and helps the management in taking their decisions. This
has also affected the business and major decision making of the organisation. This is due to the
fact that these factor impacts on operations and entire management of the organisation. As every
business should operate its work and system as per the law and regulations of the nation. So legal
factor of nations has a great impact on the decision making of ZARA
(Pedersen and Thibault, 2018). This will help in establishing the various other rules and the
company requires operating its management as per the laws of the country. Many times the laws
get changed and which affects the business in some or the other way. This leads to change the
policies of the organisation as well and thus it affects the business decisions.
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2. Critical evaluation of the relationship between above determined forces in context of strategic
decision making
Zara is one of the biggest fashion clothing line around the world. The brand always
keeps its focus on changes and keeping freshness in its business and operational strategies.
These changes can be listed as environmental, industrial level, consumers taste and preference,
fashion trends, economical and internal inflation etc. The operation of the Zara are wide spread
with having its operation in more than 85 countries and operating 6300 stores in those nations.
Some the E7 countries are also the area of operation of Zara. This means its stores are also
present in certain E7 nations. The E 7 nations that is India, China, Brazil, Mexico, Indonesia,
Turkey and Russia are the emerging economic in the world, which means that these nations have
taken a step ahead from developing to developed countries (Shift of global economic power to
emerging economies set to continue in long run, 2018). These developments are not easy all of
member nation of E7 nations have gone through a lot of economic changes and this have
immense effect on the trade and commerce of each particular nation along with their
international trade and agreements. All these factors affect the practices and operations of Zara
in overall context, the management seeks to make strategies and decisions on the basis of those
changes and economical changes. Critical evaluation of the factors presented in above section is
done with strategic decision making process of the Zara as follows:
One of the emerging economy is India and its cultural values and beliefs are far
different from those 6 remaining nations. One of the example can be quoted as in the Indian
wedding traditional lahangas are preferred unlike in the other nation they wear gown in their
weddings. This is a factor where strategic decision have been taken by the management of Zara
to change their collection and clothing line in accordance to taste and preference of the
consumes. Another factors that has been denied in above section is enhancement in the
purchasing powers of the consumers in emerging economic nation (The Effects of Zara to the
SMEs of an Emerging Market, 2018). This have a positive impact in the Zara as the cost can be
increased for the outfits and expensive material can be used by the brand for making its products.
Moreover, with increasing the incomes more people get attracted towards the brand. This
enhances the sales revenue of the business. In these regards strategies must be formed to prompt
the brand on larger scale. The political insatiability and changes in nation wise rules and
regulation do have impact on the cost of production.
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Every year taxation and import export rules of almost all 7 nations gets changed and with
increase in tax rates, duty and tax implication of brand increases. Also, compliance with them
need legal advises which result in cost increment. The strategic decision need to made in this
regal as to establish manufacturing plants in those nations as to decrease the importation cost.
Russia and China are two of the most technical developed nation among E 7, and this can be
exploited by Zara as by taking decision on how it should use those technologies up gradation in
increasing its profits and revenues. Furthermore, the decision making process of Zara is effected
as they need to decided that in accordance with the availability of the technology they invest and
establish which section of their business in respective nation. As hand loom and handwork on
clothes are available in India at cheaper rates in India, so it must establish a plant in India where
it can carry out all the work related with hand work on the clothes (Emerging markets, online
growth help Zara, 2018). The inflation rates and interest rates in these nations are moderates as
they fall under the developing nation but with this the facts can be denied that loans are available
in these nations at lower rates and with lesser formalities. This effect the decision of the
management in context of the investment and expansion of the infrastructures of the brand in that
nation which have lower rates on interest. This will directly cut the cost of the overall business,
which is one of the major objective of the organization.
Apart from this nation Zara has it operation in more than 75 countries and this directly
affect the strategic decision making process of the brand. This can be explained as the
developing economies are more preferred countries in context of business engagement as
compared to other countries around the world. The decision are to made as to from which
counties business must be made limited and which in which nations trade and commerce must be
enhanced in order to increase the brand image and profitability of Zara. This can be stated from
above discussion that the emerging national economies of E 7 countries have a great impact on
the decision making process of Zara (Why Zara Succeeds, 2018). As the management have to
make strategies and planes on how they can exploit and used the factors which can have
positive impact on the business. Also, they need analysis the elements which can have bad or
worse effect on Zara's operation and how they can mitigate those effects. Moreover, the
management need to take decision for nations other than E 7 as to how the rising economies
effecting their business in other countries and how they can answer those issues and solve the
problems. Given the success of Zara in these markets, and knowing that each transaction is
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engaged in voluntarily, it can be said that Zara has at the very least provided a product at a price
many find agreeable. Whether this creates an increase in general welfare differ from nation to
nation. This can be stated that the with having its operation in all E 7 counties Zara 's decision
making process have to be more significant, critical and precise and strategical oriented.
3. Preparing an evaluation of an organisation’s responses to key dynamic forces in the
contemporary business world.
In order to manage and control the various dynamic forces Zara had made significant
developments in the building blocks of Zara's fast fashion model ad displays which can help in
managing the external factors in the business environment. The key strategic responses of Zara
are as discussed below -
 Value proposition – It consists of the products, services and offerings that assist in
creating value for the customers and are the reason why they get benefit from a
transaction made with an organisation or company. In order to enhance customer value
creation, Zara has selected to undertake certain developments in this building blocks for
increasing business model and stay ahead of its competitors. Continuous product design
and innovation changes are key strategic elements in Zara's business model and the key to
its sustainable competitive success and advantage (Waller and et.al., 2017). The new
collection and product lines that are delivered in every two weeks to the stores are highly
dependent on the trends and style demands perception of the customers. Zara aims to
consider and incorporate significant environmental aspects into the design of their
products with the intention for reducing the environmental footprints during the product
life cycle while promoting durability and sustainability. Since 2011, Zara has enhanced
its supply of ecological merchandised in chosen geographical segment and has introduced
over 4.2 million articles made with 100% organisation cotton within the market 2012.
However, in proposition to the 450 million products manufactured per annum, it is a start
for Zara to define health, safety & socially responsible principles for these clothes in
order to counteract negative impacts on human health. This step sets new sustainable
standards for the organisation and makes the work environment around the product more
complex, particularly in terms of changes in design, supply and production.
 Key partners – This building blocks provides insight into the key partnerships to
external parties that an organisation is developing in order to optimize its business model
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efficiency. In the year 2000, more than 80% of Zara's production activities have been
undertaken in Europe, generally in own production facilities in Spain. Keeping the
production within the company is more expensive but helps the organisation in
responding more quickly to changing trends in fashion industry with sorter lead times and
a higher flexible supply chain. This strategy has become an essential source of Zara's
competitive advantage. The company has shifted its production to external suppliers in
lower cost nations mainly in Asia such as Bangladesh, India or China.
 Customer Relationship - The customer relationship describes relationships an
organisation is establishing with its customer base which are influencing the experience
the customer is having when approaching and communicating with the organisation. In
Zara, the customers are the main priority for the company and every business activity is
built around the demands of the customers (Kaufman, 2018). It helps in making it a major
priority to incorporate an efficient and strong customer relationship management. Zara
has also implemented a customer care model which helps to make sure that the store
personnel enable a positive shopping experience in a pleasant environment to all shop
visitors.
4. Decision making tools to address contemporary drivers for change.
There are various tools which are used for managing the change in the company. These
tools are used and helpful in accepting the changes that occurs due to the key dynamic forces in
the company. There are certain major tools which are defined below in brief that are used by
ZARA for dealing with such changes.
Fresh service: It is a cloud based change management tool which allows the company to
make changes by focusing on its daily activities. It is really important to have a better control
over approvals and minimize the redundancy. When political and legal changes arise in the
nation that time organisation has to make change in its daily task so that the changes can be
easily accepted (O’Cass and Wetzels, 2018). By using this tool ZARA will make changes
through preparing future plans and making different documents by building and testing the plans.
Different tasks are required to be formed and build for the sake of company so that it can lead in
this competitive world. ZARA should focus on providing better services to its customers by
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delivering the best quality products and prompt services. This will help the organisation on
dealing with the changes in a better way.
Flowcharting: These are the maps which helps in visualising the entire processes in the
organisation. Current processes are perfectly defined in the process of flowcharts and it can be
preserved for the future reference. In context to ZARA, flowcharts are used by the organisation
so that entire process can be seen in precise way and changes can be made accordingly. This will
help the organisation in dealing with the change that arises due to dynamic forces and has a great
impact on the company. Once the change will begin it will be implemented to the company and it
will be added to the flowchart. It will help all the employee in knowing the change in a better
way and will raise their commitment towards achieving the goals of organisation.
Force field Analysis: This is a tool which gives the idea of initial view of change problems
which are required to be tackled. These are the original ideas which are developed by
psychologist for dealing with the change. These are the different forces which helps in resistance
to change which are helpful in dealing with the change in the organisation (Christ and Burritt,
2017). When the change is implemented every employee has to accept the members of the
organisation. This will help ZARA in knowing that changes should be implemented through
force filed analysis. Thus, discussion will be implemented for understanding and dealing with its
employees who are not ready to accept the change.
Project plan: This is another tools which will help in managing the change in the organisation.
This will help in dealing with the change and ZARA can deal with change management through
the same. It will help in utilising the change and come up with the clear plan and the new
proposed change is going to be implemented. Different projects plan will be prepared so that key
dynamic forces change can be implemented and deal in a better way through the same.
Above all the tools will help ZARA in managing the change and address contemporary
drivers for change.
5. Analyse the relevant theoretical foundations to support the identification and application of
effect corporate responses to contemporary management issues.
There are different theories which supports the identification and effects the responses to
different management issues that arises in the company. Some theories for the same are defined
below in detail.
System theory of management:
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Organisation management systems includes various internal subsystems that require to be
continually aligned with each other. As organisation grow, they establish more and more
complex subsystems that need to coordinate with one another in the procedure of transforming
inputs to outputs. These interdependencies are so complex that even a min or event in one
subsystem can enlarge into a major and serious consequences or issues in various areas of
organisation such as Zara (Colnar and Dimovski, 2017). The company does not exist in a
specific or limited area as well as operational environment It is highly dependent and affected by
the external forces or elements, it is a major part of a larger system such as the industry to which
it belongs, the society and economic system. According to this theory, Zara receives inputs,
convert them and exports the outputs to the environment. According to the system model, Zara
needs development and expansion into the processes or operational management that indicates
how the different inputs are developed through the functions of the management such as
planning, staffing, organising, controlling and leading. The basic elements of a system in Zara
can be described as below -
Inputs : These include all those variables which are capital, employees or different managerial
skills. These are the main reason which includes the various group of people and demand arises
by the same. It also includes stakeholders, state and local governments.
Transformational processes : Here at this stage in the theory all the inputs are converted in to
outputs in effective manner. These can be seen as a different perspective and entire focus can be
made on finance, production and personnel. As this the major step of System theory, external
environment forces such as legal and political factors plays a important role in transformation of
inputs to outputs.
Outputs : Now at this stage the managerial functions with due consideration for external
variables into outputs. Outputs of different kinds vary with ZARA and they usually include many
of the following; products, services, profits, satisfaction and integration of the goals of various
claimants to the organization.
Reenergising the system : In system theory it should be noticed that many outputs become
inputs again. It can be said that knowledge and skills of the workers is a very important human
element. And thus the profits of ZARA can be reinvested for the purpose of managing and
dealing with the change.
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CONCLUSION
From the above report it has been summarised that emerging nation has great impact on
the business of ZARA. There are various factors which has a great impact on the decision
making of the organisation as trade policies and taxation factors affects the entire business in
some or the other way. In addition to this, Flow chart and force filed analysis are some tools
which helps the organisation in dealing with the change that arises due to dynamic forces and has
a great impact on the company. Other than this, Zara has also implemented a customer care
model which helps to make sure that the store personnel enable a positive shopping experience in
a pleasant environment to all shop visitors. Furthermore, ZARA has also got affected and due to
the rise in economy of developing nations and the competitive advantage. Management decision
making get affected by such factors and it has a great impact on the decision making of the
company.
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REFERENCES
Books and Journals
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Van Niekerk, M., 2017. Contemporary issues in events, festivals and destination
management. International Journal of Contemporary Hospitality Management, 29(3),
pp.842-847.
Pedersen, P.M. and Thibault, L., 2018. Contemporary Sport Management 6th Edition. Human
Kinetics.
Waller, C.J. and et.al., 2017. Contemporary management of subclavian and axillary artery
injuries—A Western Trauma Association multicenter review. Journal of Trauma and
Acute Care Surgery, 83(6), pp.1023-1031.
Kaufman, A.S., 2018. Contemporary intellectual assessment: Theories, tests, and issues.
Guilford Publications.
O’Cass, A. and Wetzels, M., 2018. Contemporary Issues and Critical Challenges on Innovation
in Services. Journal of Product Innovation Management, 35(5), pp.674-681.
Christ, K.L. and Burritt, R.L., 2017. What constitutes contemporary corporate water accounting?
A review from a management perspective. Sustainable Development, 25(2), pp.138-149.
Colnar, S. and Dimovski, V., 2017. Knowledge management initiatives benefits for the
Slovenian public sector. Management: journal of contemporary management
issues, 22(Special Issue), pp.145-161.
Online
Shift of global economic power to emerging economies set to continue in long run. 2018.
[Online]. Available through :<https://www.pwc.ru/en/press-releases/2017/2050.html>.
The Effects of Zara to the SMEs of an Emerging Market. 2018. [Online]. Available
through :<https://www.tandfonline.com/doi/abs/10.1080/20932685.2011.10593077>.
Emerging markets, online growth help Zara. 2018. [Online]. Available through
:<https://www.reuters.com/article/us-inditex-results-idUSKBN16M0YP>.
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Why Zara Succeeds. 2018. [Online]. Available through
:<https://www.forbes.com/sites/pamdanziger/2018/04/23/zaras-difference-pull-people-in-
not-push-product-out/#3bb7b65b23cb>.
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