ZARA: SWOT and PESTLE Analysis

This document provides a comprehensive analysis of ZARA, a leading fashion retail company. It includes a SWOT analysis, highlighting the company's strengths, weaknesses, opportunities, and threats. Additionally, it presents a PESTLE analysis, examining the impact of political, economic, social, technological, legal, and environmental factors on ZARA's business. The analysis helps in understanding the company's position in the market and its strategies for growth and sustainability.

Presentation
ZARA

Table of Contents
INTRODUCTION...........................................................................................................................1
SWOT Analysis......................................................................................................................1
PESTLE Analysis...................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
ZARA is a company which has a well renowned position in the fashion retail sector and
has its roots of origin in Spain. The organisation began from a very small store in Galicia, Spain
by famous modern business tycoon Amancio Ortega. It was started as a garment store with a
view to provide the high brand quality products at the price of locally made apparels. Thus in
present state ZARA does business in more than 96 countries all over the world owning to more
2259 stores (Bah and Fang, 2015). It significantly deals in all types of clothing styles of men as
well as women and the other segment named as ZARA kids, with a high sense of fashion trends
of market and being a quality good provide ZARA influences its customer segment effectively as
the bigger proportion of its customer segment belongs to the young generation. That is attracted
towards its brand image and quality products in suitable prices.
SWOT Analysis
The Strategic planning in a firm to achieve its goals and objectives is formed by
considering the major strengths, weaknesses, opportunities and threats which impacts on the
business internally (Nohria, 2017). It can be prove as a vital tool for the ZARA to understand and
critically assess the magnitude of the inner forces and balancing all the negative as well as
positive factors.
Strength Weakness
 The Strong distribution network –
Over the years Zara has built a reliable
distribution network that can reach
majority of its potential market.
 The firm gains advantages by its
influential designs, and physical
evidences within the stores
(Charfeddine, 2016).
 It gets a higher rate on the capital
investments as the operational cost on
products is too lower than the actual
market price criteria. Thus how it
 The product portfolio faces a wide gap
in between the current stock of apparels
and latest consumer taste trends.
 The current profitability ration and net
ratio are not effective as per the
standards of earning of the organisation
as they are even below of the industry
level.
 The organisation is not performing
efficiently in the acquisition and
integration with smaller firms.
 There is an improper management of
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increases a wide gap in the profit
margins
 ZARA has the position in the top
leading brands of clothing in the
world. It does increases its brand value
which is currently in a level of 18
billion US dollars approximately.
financial planning.
Opportunities Threats
 The organisation can use the emerging
techniques of Artificial Intelligence in
its stores for the better customer
experiences and gaining the attention
of a wide segment of potential market
share.
 The enhancing growth of the social
media traffic can also help ZARA to
use effective and cheap tools of
promotions that are available on
various social media platforms.
 The company can also use its social
media channel to build and maintain
effective relations with its customers
and get higher opportunities to interact
with the potential customers.
 The organisation expands its business
and further functional and operational
units in developing countries. This will
help in getting the effective and cost
efficient labour for the work and
enhancing the brand popularity from a
 The low quality product and obsolete
sense of fashion trends makes it
threatening for the ZARA.
 The intensive competition in the high
brand fashion retail challenges the
optimum capturing of market by the
respective firm. The major competition
is faced by H&M, Calvin Klein,
Wrangler etc.
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very subtle level of the market.
PESTLE Analysis
A firm's background is wholly responsible for the growth and failures of its functions.
Thus the external environmental factor of a firm impact on certain procedures and survival of
organisation within the respective boundaries of the nation where it is currently performing or it
is supposed to do the effective trading (Brown, 2018).
The PESTLE analysis will be performed in respect of ZARA to evaluate its external
macro environmental factors of the respective area of business. This analysis will majorly
emphasis on the 6 factors which are based on the elements of political, economical, social,
technological, legal and environmental factors of the nation.
Political Factors:
All those elements in the environment of business that are comprised of the respective
governmental policies, mind-set of the ruling party, principles and regulations that are imposed
by the existing political powers within the nation. The political environment within the confines
of all the nations where the business of Zara is taking place has their various theories and
multiple set of regulations. These regulations are not that complicated to be handle by the
management of ZARA. The organisation can make its operations and sales more effective and
efficient by understanding these factors and applying all the necessary measures in a way to
overcome the barriers of political issues and design its strategies according to the existing
policies of a particular state (Prajogo, 2016).
Economical Factor:
The economic factors are those elements which are directly and indirectly related to the
financial conditions of a respective market place wherein the company operates its business.
These elements include all such factors as the per capita income, gross domestic production,
buying power of the consumer and the capital growth of the respective nation. In relation to
ZARA the organisation has a wide impact of the economical factor for pertaining business of the
organisation domestically as well as in overseas operations. The economic environment within
Spain is quite developing in nature as it has an increased number of SMEs and foreign industry
chains (Quinlan and et. al., 2019). Thus for the international operations of business that is outside
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from its domestic boundaries, the firm gets an attractive response from the medium and upper
class market share.
Social factor:
The social factor can be understood by all those aspects of different society and culture in the
political boundaries of a respective nation. This factor plays an important role in the growth and
the survival of the business as the social aspects contributes in the lifestyle, trend, market taste,
consumer behaviour, social class culture etc. In this relation, it is identified that ZARA is a
company which has its operations spread across different parts of the globe (Quinlan and et. al.,
2019). Almost every country in which this fashion retailer operates consists of customers who
have knowledge of the latest trends and patterns. This facilitates the firm to come up with market
disruptive offerings that can appeal to public at large and persuade them to make a purchase.
Technological factor:
This constitutes the progress as well as advancements which take place within the domain
of technology. In this regard, it has been identified that ZARA is looking forward to leverage
technological trends to enhance its existent level of reach in market place. Being one of the
biggest fashion retailers across the globe, it has all the resources and capabilities to implement
the latest technologies (Charfeddine, 2016). ZARA is currently looking to capitalise upon the use
of Big Data in order to determine effective ways of reaching and appealing to public at large. If
the firm is able to do so strategically, it would be successful in gaining a top position at global
fashion market place.
Legal factor:
This factor is concerned with the legislation and laws that an entity needs to adhere to, to
ensure its long term sustainability within market place. In this regard, ZARA being a top fashion
brand also has to act within the constraints of statute. Copyright law is considered to be the most
important law for this brand (Charfeddine, 2016). In past, this brand has been accused of stealing
the design of Adidas as well as Balenciaga. Thus, it is important for the corporation to act in a
legal manner so that its goodwill and market positioning does not get at stake.
Environment factor:
This aspect of macro environmental analysis is concerned with sustainable practices and
environmental laws (Charter, 2017). Fashion brands such as ZARA need to take this element into
due consideration owing to the worldwide assumption that fashion industry produces a lot of
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waste. It is important for ZARA to take into the eco conscious nature of customers and thereby
undertake steps through which sustainable practices can be executed within the premises.
ZARA’s patent brand named Inditex has already laid down a sustainability pledge in this
relation. Hereby, the brand on its website has committed to save water, energy and biodiversity
by adopting sustainable practices within the organisational premises. This would ensure least
harm caused to the nature.
CONCLUSION
On the basis of above discussion, it can be said that scanning the business environment is
important for an organisation. In this regard, it is analysed that the environment within which an
entity functions consists of internal as well as external factors. The internal factors of the
business can be effectively analysed with the help of SWOT analysis. In addition to this,
PESTLE analysis is used to take into account the impact of external factors over the operations
of business. Both of these tools together form the base on which strategic planning and
management is executed by a company.
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REFERENCES
Books and Journals
Bah, E. H. and Fang, L., 2015. Impact of the business environment on output and productivity in
Africa. Journal of Development Economics.114.pp.159-171.
Brown, R. A., 2018. Chinese business enterprise in Asia. Routledge.
Chang, J. F., 2016. Business process management systems: strategy and implementation.
Auerbach Publications.
Charfeddine, O. B., 2016. Business environment-aware management of service-based business
processes (Doctoral dissertation, Université Paris-Saclay).
Charter, M., 2017. Greener marketing: A responsible approach to business. Routledge.
Nohria, N., 2017. Fast forward: The best ideas on managing business change. Business
Review. 9.p.10.
Prajogo, D. I., 2016. The strategic fit between innovation strategies and business environment in
delivering business performance. International Journal of Production Economics. 171.
pp.241-249.
Quinlan, C. and et. al., 2019. Business research methods. South Western Cengage.
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