Zara Company Environment Assessment: PESTLE Analysis and Environmental Issues

This report evaluates Zara Company using PESTLE analysis to identify political, social, environmental, technological, legal and economic factors. It also analyzes the environmental issues faced by the company and the management's initiatives to reduce negative impact on the environment.

Zara Company
Environment assessment
Environmental issues
Name of the Author
University Name-

Executive Summary
There are several factors which may positively and negatively influence company in
short term and long run. Management needs to take proper strategic management plans to
achieve the certain goals and objectives. The PESTLE analysis is one of the strategic tool
which assists in evaluating all the external factors such as political, social, environment,
technological, legal and economic factors of Company. In this report, Zara Company has
been evaluated and determined that company has good potential in the market and the
positioning strategy of company in market is also very effective. The main strategy of Zara is
to lead the market with its cost leadership and product differentiation strategy. Zara Company
has achieved remarkable growth in the international market and selling modern designs that
public needs at affordable price.

Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................1
PESTLE analysis........................................................................................................................2
Task-2.........................................................................................................................................7
Environmental issue...................................................................................................................7
Recommendation......................................................................................................................12
Conclusion................................................................................................................................13
References................................................................................................................................15

Introduction
With the increasing ramified economic changes, each and every organization needs to
take proper strategic decisions to run the business effectively. Each and every organization is
affected by several internal and external factors which need to be undertaking by
management before implementing the effective strategic decisions making. There are several
strategic tools which could be used to assess the internal and external business factors before
implementing the effective strategic decision making. There are several internal and external
factors have been analyzed which assists in grabbing more potential market. In this report,
PESTLE analysis have been undertaken to identify the political, social, environment,
technological, legal and economic factors of Zara Company. after that environmental issues
of the company has been analyzed to determine whether Zara Company has good potential in
the market or not.
Description of Company
It is Spain based clothing and accessories Retailer Company founded by Duo
Amancio Ortego and Rosalia Mera under the umbrella of Inditex Group. Zara Company has
opened up more than 1700 stores. Zara Company has been indulged in selling clothes and
modern designs that public needs at affordable price to attract wide range of clients on
international level. Fashion director Louis Vuittond has been described it as one of the most
devasting retailer in the world (Zara Company. (2017).

(Zara Company. (2017).

Task-1
PESTLE analysis
It is the one of the most popular tool that helps to analyse external factors affecting
the organization. PESLTE is ideally used when manager attempt to identify factors pose as
threat to Zara Company or opportunity which company could use to climb the ladder of
success path. However, in order to analyse these all external factors, the below give table
have been used (Zara Company. (2017).
PESTLE points Factors Opportunity or threat Reason and comment
Political factors These factors are
associated with the
government policies,
legislative
frameworks, tax
regulation, trade
restriction and
taxation policies.
Political factor
mainly demonstrate
the legal and
economic aspects as
per the designed
political Zara plans
to expand factors. It
is analyzed that
whenever its root to
another country, it
has to designed
strategic planning as
per the political
The less restricted
policies and
international trade
program have
allowed Zara to
expand its business
on international
level. Currently Zara
has set up strong
business in Spain due
to the positive
political factors
(Lopez, and Fan,
2009).
The main reason of
liberal political
factors of Spain is
based on the
government strategic
planning to increase
its overall foreign
direct investment in
country. The
increased FDI is
required for the
increased GDP rate
of Spain (Bach, and
Allen, 2010).

scenario of that other
country (Mazaira, ,
Gonzalez, and
Avendaño, 2013).
Environmental It is analyzed
that the geographical
location, regulation
on the disposal of the
waste, efficiency and
people’s attitude
towards the
environment is strict
in Spain. The
government of Spain
and environment
protection act has
made the stronger
regulatory
requirement and
compliance program
for companies. It will
require Zara to set up
strong compliance
program.
It has become high
business threat for
the Zara Company in
Spain. It requires
high amount of
capital investment
which may
negatively impact the
business functions of
Zara. Company
needs to strengthen
the compliance
program to meet the
environmental
regulatory
requirement.
The main reason of
strengthening the
environmental
regulatory
requirement is related
to lower down the
negative business
functions which may
negatively impact the
environment.
Social This factor is
accompanied with
the social values,
perception, ideas,
The main challenge
for Zara Company is
to beat the existing
competition. With
Zara Company has
designed its cloths as
per the existing
fashions and

thoughts of the
people in Spain. It is
identified that people
in Spain are more
inclined towards
buying clothes which
are high in trend and
comfortable as well.
In addition to this,
fashionable cloths
available at
affordable price are
the positive point for
gaining the market in
Spain.
the increasing
changes in the taste,
preference of the
people in Spain, Zara
needs to consistently
change its outlets and
clothes as per the
choices and fashion
trend in market. It
may high require
high amount of
expertise and
investment to stich
different sort of
fashionable clothes.
consistently changes
it for clients. It is
analyzed that if Zara
wants to sustain its
business on
international level
then it will have to
make its business
more fashion
oriented.
Economical The economic factor
of Spain is related
with the several
factors such as
inflation; taxes and
duties; employment,
exchange rate,
purchasing power of
people; cost of
living, balance of
trade and increased
Trade balance.
Inflation rate of
Spain has been
increasing
throughout the time
and it is expected that
in 2018, Spain will
have 1.7% inflation
rate. The cost of
living of the people
in Spain is already
too high which
would be positive
indicator for the
future growth of the
Zara. People in Spain
are more inclined
towards making high
These economic
factors indicate that
Zara should focus on
customizing its all
fashionable clothes
and accessories as
per the trend. It will
not only increase the
overall outcomes and
efficiency of the
business but also
increase the overall
turnover of business
(Zara Company.
(2017).

amount of investment
in buying fashionable
cloths.
Legal factors There are several
applicable rules such
as employment act,
Child labour act,
Workman
compensation act and
legal analytical
factors which is
required to be
complied by Zara
while running its
business in Spain
(Zara Company.
(2017).
Zara should enter
into strategic alliance
with the legal firms
who could easily
meet its applicable
regulatory legal
requirements.
Zara should make
proper legal
compliance programs
to avoid penalties
and issues in Spain.
Technological With the changes in
time and ramified
growth of the Spain,
all the companies are
using the advance
technologies and
cyber system to tap
the online market.
Zara has to
strengthen its online
cyber mechanism to
grab the potential
Zara should install
new system process
and hire more IT
experts who could
undertake proper
mechanism to handle
the work process to
strengthen the work
process in
determined approach
(Fernie, and Sparks,
Using advance
sticking machines
and importing
international tailoring
machines would also
be required to
manage the clothes
and accessories as
per the required
intents (Mazaira, ,
Gonzalez, and

clients not only in
domestic market but
also from the
international market
to increase its overall
market share (Bach,
and Allen, 2010).
2014). Avendaño, 2013).

Task-2
Environmental issue
With the changes in time, there are several environmental issues which have been
faced by Zara Company while running its business. There are several factors which are
included in climate change, pollution, environmental degradation, depletion of resources and
other resources. Zara Company has been running its business on international level therefore,
management needs to undertake proper strategic program to undertake proper strategic
decisions to expand its business (Shen, et al., 2012). However, Zara Company has hired
expert persons in its KMP department who takes all the imperative strategic decisions to run
the business effectively. It is analyzed that Zara Company has to comply with the several
environmental programs and policies to strengthen the business work program. It is analyzed
that on international level, fashion brands and big companies indulged in the fashion business
have produced high amount of pollution, dirt and hazardous substance which may negatively
impact the environment at large (Lopez, and Fan, 2009). It is considered that Zara Company
has already set up several Eco-System and development program to save the environment
from all kind of negative impacts in environment. In Spain, government has mandatory for
the companies to set up the eco-system to lower down the negative impact of their business
activities on the society and environment. It is further observed that there are several
environmental damages such as water pollution, dirt and emergences of hazardous substance,
contaminated waste, and air pollution. These all substances not only negatively impact the
environment but also lower down the outcomes of the organization at large. It is analyzed that
other toxic chemicals used by the organizations indulged in fashion cloths manufacturing
include sodium hydroxide (caustic soda), and sulphuric acid which are also very hazardous
for the environment at large. The management decisions taken by the key managerial persons
of Zara need to analyses all these factors and its impact on the society and environment at
large. The corporate social responsibilities and activities plans have also been operated by
Zara to meet the environmental regulatory requirement. Managers are the person who takes
all the imperative decision for the betterment of the organization. However, if they undertake
all the environmental issues and problems then they will have to restrict their independent
decisions by undertaking environmental issues as well (McCornick, Awulachew, and Abebe,
2008). For instance, the management of Zara in the recent case were about to use
viscose stuff in its clothing fabrics which might be negative for the human body if they wear

these clothes for long run as viscose stuff is made of several hazardous substance such as
sodium hydroxide (caustic soda), and sulphuric acid. It is analyzed that if these factors are
analyzed it is found that management had to restrict the use of viscose stuff in its clothing
products (Kozlowski, Bardecki, and Searcy, 2012). However, it had impacted the quality of
is fashion clothes but have resulted to saving human from the body infection and other aching
issues. As per the management decisions taken by Zara, it was found that the key managerial
person of company in the best interest of environment had taken initiative to make their
stores more green and opened up several first flagship stores of their kind. They have
committed that all the Zara Stores opened up will use 30% less energy and 50% less water to
operate these stores (Frostenson, Helin, and Sandström, 2011). However, it is fact that major
of its fashion stores might face issue of pollution. There is another example of the
environmental friendly work program such as H&M’s recycling program, or Forever 21
building the largest solar powered system in LA which has also strengthens its working
program and work effectiveness in determined approach. These all the initiatives taken by the
management of Zara focuses on the reduction of the negative impact of its business
operiatons on the environment. These environmental issues have also influenced the
management decision and business policies of Zara on domestic and international level. The
recent online dashboard mechanism started by the Zara has shown the initiative to reduce the
pollution and environmental friendly practice (Jang, et al. 2012). This practice will allow
clients to directly connect with Zara fashion wardrobe for their shopping. It will not only save
their time but also reduce the pollution spreading in the environment. The greenhouse work
program undertaken by the Zara is the big initiative for supporting the environment rather
than just evolving more environmentally friendly business practice. The management policies
prepared by the management department of Zara have been designed to make its fashion
outlets more eco-friendly to consumers on their surface. Nonetheless, in the management
decisions, it is considered that the green work program undertaken by company is the right
initiative in itself which is vital for reducing the negative impact of its business operations on
the environment.
The management decision of the Zara Company has been highly influenced by the
greenhouse gas emission program and environmental issue program which are given have
been divulged as below (Klaas Jagersma, 2008).

Zara Company has promoted use of fibers in its manufacturing factories and stores which
would be more energy efficient. It will not only save the energy but also lowe down the
complexity of its business.
It is analyzed that Zara Company has pioneered commercialization of the recycled textiles
that would be used at par with the quality of new minerals. It will lower down the wastage of
the resources and increase the efficiency of the manufacturing chain of the Zara as well (Li,
et al. 2014).
With the scarcity of the resources, management department needs to bifurcate the potential
work functions in its stores which will be used to strengthen the business outcomes. It has set
up the proper work chain and internal control system to lower down the complexity of
business to create synergy in its business (De Brito, Carbone, and Blanquart, 2008).
The boards of directors have established the collaboration with the various other
organizations to share and adopt best business practice in energy management (Kwan,
Yeung,. and Au, 2013).
Zara has also invested 2 % of five year average net profit in Sustainable Development Goals
(SDGs) put forth by the UN for the betterment of the environment and society at large (Moro,
Mendes, and Neto, 2015).
The latest packaging policies undertaken by Zara on international level have also changed to
green to pack program leverage which makes the packing thinner to make more loading onto
one shipment. It will not only require less shipment but also lower down the hazardous gas
emission and fuel pollution (Vu, and Medina, 2014).
There is another investment made by Zara in the closing loop which makes effect on the up
cycling initiative with a focus on the circular economic and lower down the negative impact
on the environment at large (Lai, Wong, and Lam, 2015).
This waste collaborating management program with the several research universities have
also impacted the business organizations to develop innovative materials and technologies
that allow easy recycling of wastage and textile wastage. This recycling program not only
strengthens the work program to make the good uses of scarcity of resources (Anwar, 2017).

The management decisions have also influenced by the use of the recycling resources which
may negatively impact the future growth of the Zara. However, most of the investment has
been made by Zara in its future eco system process which lowers down the negative impact
of its business operations on the environment. The main influence of this eco supporting
system will be on the cost of capital of the business. These will not only reduce the overall
return on capital employed of Zara but also negatively impact the project acceptance decision
of company (González, 2017).
The environmental reporting of Zara has also shown that company has been planning to
implement the more supporting program for the better work program which will strengthen
the eco-supporting program of company at large. The communication of the efforts
undertaken by Zara for the environment protection and reduce the environment issues have
been done by using the independent environmental reporting frameworks. This will not only
make the business of the Zara more transparent but also strengthen the work process system
as per the government and stakeholders. Currently, Zara has promoted the stakeholders
oriented work policies program which not only increases the overall outcomes but also
increase the efficiency of the business (Truong, 2016). The main environmental protection
program which was designed by the Zara was related to change its business policy for using
the carry bag. The management department of Zara has also included the investment program
which adds value to environment protection and also increases the value to society at large. It
is analyzed that environmental related policies developed by Zara focuses on using the paper
bag instead of using the Polly bag (Boucher, et al. 2018). The initiative undertaken by the
management of Company was to promote the Environment supporting program which
strengthens the work culture and environmental issues. It has also lower down the negative
impact of the environmental work program which will strengthen the work policies. The
increased investment capital of company in the environmental program has also increased the
brand image of company on international level. Most of the work program and policies
designed by company have been made with a view to make the positive business outcomes
(Fernie, and Sparks, 2014). It has designed the system process which could add value to
environment protection work and increase the overall process quality. For instance, the
greenhouse gas emission program undertaken by Zara is one of the best programs which add
value to society and lower down the negative impact in determined approach (Nissen, et al.,
2018). The main responses of the Zara are related to establish the better integration of the
suppliers into internal control system which supports the transparency and regulatory

compliance program. The newly developed reporting frameworks increase the transparency
of the regulatory compliance and also share all the imperative information with the
stakeholders at large. It has been evaluated that the auditing and training program
implemented by Zara focuses on making the environment protection laws compliance
program mandatory. The buy- back program of the clothing is also designed with the sharing
economy via clothing libraries. Another environmental issue protection program adopted by
management of Zara has been designed for the betterment of the environment protection
work. It is analyzed that cannibalization process has been adopted by the company in the
adopted work policies (Amatulli, et al. 2017).
The environmental dimension inditex environmental policy of the Zara have found several
issues which are committed to taking environmental issues into account when planning and
carrying out our activities and undertake the strategic program with other business partners. It
encourages compliance with the environmental laws that governs activities, work system and
pollution control program which strengthen the work policies and CSR work program of Zara
(Armstrong et al. , 2015).
There are other several responses of Zara which have been undertaken by the management
such as following the international corporate social activities program in which installation of
Eco-developed system process have been done. This eco-system not only strengthens the
environment protection but also increases the overall quality of the work process which will
mitigate the negative impact of hazardous substance in society (Lueg, Pedersen, and
Clemmensen, 2015). The human rights abuses, design piracy and unsafe work environments
are the major factors which are considered by Zara in its environment protection policies.
This will not only lower down the negative impact of its business on environment but also
increase the efficiency of its business at large (Adams, Font, and Stanford, 2017).
The main environmental issue for Zara is related to its operation activities plan and high
energy consumption program. In the operational plan of company, it is found that there is a
toxic chemical used by the organizations indulged in fashion cloths manufacturing include
sodium hydroxide (caustic soda), and sulphuric acid which are also very hazardous for the
environment and may negatively impact the clients and employees while handling the same.
If Zara wants to save itself from the possible issues and negative impact of these hazardous
substances then it will first have to focus on adopting new value chain system process and
design new process chain (Ho, 2014).

Recommendation
There are several environmental issues which have been faced by Zara while running its
business on domestic and international level. It is analyzed that company should adopt the
notion of green washing environmental policies program to make the business more effective.
This notion of green washing and environmental friendly work system will apply to the other
efforts by Zara Company to position itself more favorably in the eyes of consumers. There
should be proper compliance program in the working system of Zara which increases the
overall outcomes complied with the heath safety standards and legal policies program. It has
been observed that Zara Company needs to use the sustainable fabrics and textiles in its
clothing products which are not harmful to human body (Pedersen, and Solerød, 2016). The
working process and operational plan of company should comply with the environmental
laws and regulations which strengthen the work policies program to make its business more
sustainable in long run. The main benefit or advantage of complying with the environmental
laws and regulations is related to sustainable business practice. Zara should keep the
consistent plan to meet the applicable laws for setting up the environmental protection
practice for the betterment of organization at large. Every action of Zara should be ethical
which undertakes the best possible course action for the betterment of the society and
environment at large (Chow, et al. 2017). The management department of company needs to
increase their efforts to be more sustainable in terms of adopting the environment friendly
work program, improving process system and adopting the environmental protection policies.
The decision of the management needs to be undertaken with a view to establish the linkage
between the organizational development and stakeholder’s growth. Company should expand
its business by using the effective work program for the sustainable future of its business but
at same time it should give back to society what it has taken while running it business. The
management policies prepared by Zara should be designed to make its fashion outlets more
eco-friendly to consumers on their surface. The main focus of company should be to promote
its business online which will lower down the pollution and negative environmental impact of
its business on the people (Schneider, and Jastram, 2018). The online business program and
window shopping program will assists people to go for shopping without tapping the market.
This increased offered and online shopping supporting program will assist organization to
implement people’s oriented work program. It is considered that Zara Company should set up
proper Eco-System and development program to save the environment from all kind of
negative impacts in environment. The use of paper bag and environment friendly work policy

will assist Zara Company to manage its work program to increase the sustainable business
practice (Sebastiani, et al. 2015).
Conclusion
There are several finding which have been observed in this report that could assist Zara to
make the effective strategic planning. The Zara Company is running its business on
international level and also used online dashboard mechanism to increase the visibility of its
clothing and accessories. However, the government intervention in Spain is less which may
be positive factors for company to expand its business in market. It is analyzed that the
initiative of company to make their stores more green and opened up several first flagship
stores of their kind will be the best suitable course of action which will add value of company
on sustainable basis. If these sustainable programs are implemented in the business of Zara
Company, then all the Stores opened up will use 30% less energy and 50% less water to
operate these stores. These sustainable future work practices has played good role in the
sustainable future of the business. The undertaken work program will not only reduce the
environmental issues and also increase the overall quality of the process system of the
business functions of Company.

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Appendix