PESTEL Analysis, Leadership Style, and CSR of ZARA in the Fashion Industry

This report analyzes the impact of external factors on ZARA's business through PESTEL analysis, evaluates appropriate leadership styles, and assesses the company's corporate social responsibility. It also examines the impact of Brexit and Covid-19 on the company.

Context of business

Contents
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Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Analyses by PESTEL factors.......................................................................................................1
Appropriate Leadership Style......................................................................................................2
Evaluation of Corporate Social Responsibility............................................................................4
Impact of Brexit and Covid over business...................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Business of fashion industry is keen to be influenced from what goes around it. Business
strategies should reflect its determination for sustaining in market and achieving goals set by it
(Lin, 2021). Present report will be dealing with one such company of fashion industry named
ZARA. It is Spanish origin brand with successful business retailing and having overreaching
impact across globe. It manages about 20 collections of clothing in a year with varied products
having shoes, beauty, swimwear, accessories, close, etc.
The report highlights use of PESTLE analysis to analyse impacts of external environment on
company, leadership style used in the establishment and corporate social responsibilities. It also
includes effects of Brexit and Covid-19 on the company.
MAIN BODY
Analyses by PESTEL factors
External environment refer to outer events and conditions which have impact over
operations of business. Goals of business when changes are reflection of how external
environment of business changes. To analyse external environment, business managers uses
PESTLE analysis which is a framework that guides in scanning changes pertaining in external
business environment of company. Within ZARA, use of PESTLE analysis helps managers in
gaining information about directions of company, growth targets and many more. Factors of
PESTLE Analysis in relevance to ZARA are as follows:
Factors Political in nature: Political condition of UK has profound impact over business
of ZARA. It was formed within European Union and now operates all over globe successfully.
political framework of country is such that policies of importing raw materials and exporting
finished goods is implemented properly (Crowr and Seifi, 2018). There are any political
disruptions in country, business of ZARA is also influenced being part of economic system. It
includes changes in financial structures too. Political framework of the country is highly
influential factor for business operations and enterprise has to look into them with utmost care to
make and carry forward the policies.
Factors Environmental in nature: Customers these days are more oriented for purchase
of eco-friendly goods. In UK, environment concerns are rising and transforming market
approaches into sustainable ones. They bring big brands under scrutiny and only buy ones which
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comes clear out of it. Fashion world is altogether associated with harming environment and
animals too. ZARA should adopt means which are sustainable for environment and then they
should work to seek competitive advantages of market.
Factors Social in nature: Social factors like change in preferences of people due to
change in social trends impacts businesses a lot. Social practises in UK have effectively changes
after Brexit and are constantly under modification. ZARA should work according to recent
trends and culture of area it works within shall be kept in mind while setting its business
objectives. Culture is though reflected in products of company as they do not go for complex
products. Relations like family, friends, neighbours, colleagues and media also influences the
company operations and employees of it. ZARA is also working within influence of social nature
and people who work within are also not prone to social factors working at macro level.
Factors Technological in nature: Efficiency of business in contemporary world is judged
on basis of technological advancement too. Technology in UK is changing and growing at high
levels. ZARA not only works on offline mode but offers varieties through its official website and
or platforms digitally also. New technologies like Artificial Intelligence, digital marketing an
others are highly in use. Trends in technology is also impact fully changing in the changing
environment. Technology is also utilized by it for maintaining security of information provided
to it by customers. Thus impact of technology as external factor is profound over it.
Factors Legal in nature: In UK, laws are very strict in sense of trade and business.
Legislations in country is more labour welfare oriented in nature. There exists laws like Equality
Act 2010, Minimum Wages Act and others regulating businesses in UK. Brand is required to
abide by all regulations framed by government and shall also regulate conduct of people working
under it according to laws. Management of supply chain is also maintained within limits of law
(Kalsum, 2021). Copyright infringements are also kept updated by business as it deals with
introduction of new fashion close too.
Factors Economic in nature: Brexit have led to massive change in policies of UK which
caused economic distress in country leading to operational difficulties for ZARA too. Initially,
when it formed unemployment was on peak which made cheap labour availability for it. But
rights of labour being much formulated, labour mobilization is also problem causing for
business. Economy of UK have considerably decline within the span of last 10 years. The focus
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of the government is now on speeding up the procedures of growth and development. Change in
economic policies by government will have impact on the working of ZARA.
Appropriate Leadership Style
Style of leadership is defined by manner in which mission and vision of company is to be
taken forward. Environment of operation of business is visible in effectiveness of management
by leadership style. Multiple leadership styles exist in area but one adopted by ZARA is dealt
forward. Founder of company, Amancio Ortega created vision of company and was directly
engaged in one to one conversation with everybody in company without any or authority of
managing and taking decisions. Style adopted in leadership was autocratic in nature and was
solely authorised to take all decisions in regard of companies functioning. More focus was kept
on building products and stores for business and not barely on lavish advertising. Believe of
locating near highest of luxury brands remained central to its working and thus stores were
located in high end markets. Decision making power is concentrated in hand of sole owner and
no need of other's approval lies for decisions affecting business of company.
Now this can be made out that styles of leadership followed by varied organisations are
different from each or. Whatever may style to be followed but proper management of business
and employer employee relationship shall be thought behind. Behavioural approaches are
adopted by multiple companies to work upon operations of business.
Other styles of leadership which can be considered here are:
 Transformational: This type of approach is used to bring transformation in the
operations of business. Leader tries to create an environment which is positive enough to
let team work with high levels of skill and creativity. Work which is to be carried out by
team is divided and all directly report to leaders (Zhang, Oo, and Lim, 2019). This style
focuses on building vision of growth among workers and then motivating them to achieve
desired development. Leader usually be under pressure of managing team here solely and
also healthy environment of company is his responsibility.
 Transactional: Leadership style here focuses on building work oriented relationship with
team. Work consideration is most in this type of leadership style. Rewards are also given
to workforce as a means of encouragement for them. Targets which are set are sometimes
are to meet and they then become source of pressure over employees who seem to be in
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regular work pressure for days. Completion of target is main concern here and
maintenance of amicable relation with employees is not focal point.
 Bureaucratic: Style here is dedicated to clear definition of rules and regulations
governing business. No favouritism can be practised in such style as security of job and
or benefits are pre decided at time of appointment and cannot be modified as such in
choice of employer. Solution of problem of working is governed by specified rules and
bias-ness towards organisational standards can be seen. Major drawback is this due
security offered in service, creativity is stopped. Also workforce becomes low in
efficiency.
 Laissez faire: Approach in this style is based completely upon autonomy and freedom
which is provided to employees without any restriction. In UK, businesses seldom follow
this approach as they do not want to lose control over businesses and thereby on profits.
They are given free hand in what methods they wish to work on, manner of completion of
tasks, resolution of problems erupting in between. This French phrase means let it be. In
ZARA this style is not adopted as the employees are not given free hand in operations.
ZARA is now recommended to adopt transformational leadership style as it will help
company in achieving growth with development of all the employees in positive environment.
Transformational leadership style will be beneficial as the employees will be given defined areas
of working with suitable targets. This will enrich company with all qualities of efficiency in
working.
Evaluation of Corporate Social Responsibility
Regulations and exercises adopted by companies to have influential position in world are
termed as Corporate Social Responsibility. This is done to maximise profits by going forward
with pro social factors determining changes in market. Most common CSR followed by
companies associated with fashion are environment orientation, donation towards charity and
promoting innovation contributing to whole industry. Policies of ZARA is oriented towards
environment and development of society it works under (Pan, Chen, and Zhan, 2019). Measures
include use of recyclable hangers of plastic which will be automatically taken out from stores
and also reduction in consumption of energy it uses approximately 20 % in line with current
usage of it. It is also turning to use of close with are made up of ecological methods using
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organic colours and fibres in them. It is also focusing on reducing use of synthetic fibres which
requires huge amount of fuel for their processing and production.
Responsibility of corporate nature also maintains relationship within company that is
between employers and employees. It ensures working in harmless manner to everybody
associated with business. Responsibility of company is also towards shareholders and is
governed by forces of corporate social responsibility only. It includes responsibilities in nature of
social, environmental, philanthropic and personal. during business operations. Consideration
here is not only profit earning or just external concerns but CSR is combination of policies
beneficial to company as well as to people associated with it and environment. Following are
corporate social responsibility which ZARA is following:
 Customer Safety: In past, there have been various issues including allegations of cancer
causing material used in grammaticalization of clothing. Now, policies of company are
more oriented towards safety of customers and their health. Test which now company
takes up of its stock reflects that working is based on welfare of customer. Elimination of
hazardous materials in stock reflects positive changes. Clothes that are offered by it now
do not contain products causing rashes and or skin problems. Safety thus is the main
concern of business now and whatever may be the cost inflicting for ensuring safety,
shall be borne by the company.
 Non-toxic Products: Producers in market are responsible for damage they cause to
environment with procedures of manufacturing. ZARA remained one among sellers who
used toxic products having NPE and or toxic amines. This created a lot of controversies
regarding brand as environment was dangerously injured with its practises. But now
focus of industry is to produce non-toxic products and maintain a sustainable
environment with its exercises. Now, concerns are also towards eliminating materials
causing pollution and harming human health.
 Data safety: Information that is provided by customers to company when y seek any
services online are securely protected by brand. Maintenance of website is also oriented
towards contributing to wholesome data protection of customers with offering them all
products at one place. Details related to account and transactions are kept under digital
locking databases which imparts highest level of security (Madsen and Grønseth, 2022.).
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It also protects data of its employees. Thus, policies under corporate social responsibility
of ZARA is focused on security keeping now.
 Charity: Company is working in field of charity too where it is most contributing partner
of British Red cross society. They have a scheme of collection of old and used garments
which are recycled and donated to needy. Customers are given discounts on new products
when they donate old close which they no longer need to outlets of ZARA. Items are also
sold through various charity shops. Recyclable fabrics are also collected and then new
close are produced from same to protect environment at same time to cater needs of
vulnerable people.
 Natural Products: Company uses more of natural resources as raw material for its
products like cotton, leather, wool, timber, etc. Procedures for extraction of these
materials incudes risks to environment. Thus, company now is orienting towards using
processes which do not cause harm to surrounding and environment friendly. Production
of wool is 100% mule free and that of textiles is certified up to 30%. Methods of
eliminating pollution from production of Footwear and or products are also adopted.
Natural products are in trend these days.
Impact of Brexit and Covid over business
Markets of whole world are affected by pandemic and businesses of United Kingdom has
profound changes in their operations after Brexit. Following is impact classified in heads:
Impact of Covid
Everybody have some familiarity with Coronavirus pandemic and what it antagonistically
meant for organization’s business. ZARA confronted weighty misfortunes because of lockdown
time frame in which all stores of organization across United Kingdom were shut. deals of items
during lockdown time frame had fallen by 35%. Organization additionally confronted pre charge
misfortune because of pandemic though more than £700 million cleared off from deals. ZARA
had approximate of 40,000 representatives working at different stores across country.
Organization decreased labour force during lockdown time frame. It cut many positions in
organization to revaluate its framework and mechanical headway (Chunling, 2020). One of
motivation to drop many labour force is that organization couldn't pay wages of representatives
and company even cut some measure of compensation from some of workers. In a similar
organization's business in web based selling has expanded by 60% in extended time of 2020
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when contrasted with extended time of 2019. This pandemic urged organization to more put
resources into online business though organization's portions hit unequalled high because of web
based selling.
Circumstantial examination of business of organization during Coronavirus pandemic
ZARA being a brand having business around globe, suffered huge losses due to situation
of no movement as transportation of products could not be done. Also, store closures led to huge
losses. organization has embraced various methodologies to come out from pandemic
circumstance. As organization more entered around web based shopping locales in which
organization made appealing sites to acquire consideration of more towards contribution.
organization additionally adhered to Coronavirus rules during dispatching and conveying items
to clients. organization embraced mechanical headway to get online instalment and quick
conveyance of item. Thus, it can be perceived that business though developed in terms of online
marketing but losses which occurred during closure of stores cannot be ignored.
Impact of Brexit
Brexit vigorously affected different associations in United Kingdom and European Union
(EU). Brexit characterized as ‘England' and 'Exit'. In Brexit UK formally declared withdrawal
from European Association in time of 2020. ZARA faced one of association which is uncertain
of advantages of Brexit. Greater part of organization’s tasks is in England and Ireland with more
than 500 stores. Organization is most elevated developing dress organization in United Kingdom.
There are 200+ stores in European Association countries (Jiang, 2022). Brexit impacted stores
outside UK because of that all assembling units of company is laid out in UK which was making
trouble to convey items outside country. Organization has confronted defer in unrefined
components since some piece of natural substance imported from different European nations.
Main pressing issue that impacted organization’s business is that changes in trade because of
Brexit. ZARA assessed that expense of extra instalments for clearance of client was around
£100,000. Organization has confronted extra gamble, for example, import and commodity
obligation when items offered on web and conveyed from UK to European that builds general
expense of items.
Circumstantial examination of Brexit impact
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After Brexit, organization halted inventory of its items to European Association nations.
government of United Kingdom postpone on checking merchandise imported from European
Association which assisted organization with getting sorted out its store network to satisfy
interest of client outside UK. Relaxations which were available to business being parcel of EU
also were stopped and it became difficult for company to get over exact estimated losses. Many
loyal customers were unable to seek products as they could not reach stores being at distant
places from area or locality they live into. Impact is thus can be said to be negative than positive
and brand is struggling to get its success back as that of pre Brexit Era.
CONCLUSION
It can be concluded from above report that in order to gain profits from any business,
management of business shall be framed in manner handling every issues with adequate
resolution. Analysis by PESTEL as provided in report shows that external factors may be leading
growth of business and highlights evaluation of those elements. ZARA being renowned brand for
highest business in market known or qualified and varied produced it serves for catering needs
for customers. Latest trends are reflected in stock of company and their corporate social
regulations reflect their orientation towards growth and development. Negative impact of
pandemic as well as that of Brexit needs to ascertained as clearly as possible and work of
company shall more be towards compensating with new techniques losses it incurred.
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REFERENCES
Books and Journals
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Jiang, B., 2022. How Consumers’ Response on CSR Affects Brand Competitiveness in Fast
Fashion Industry——Case Study of Zara (Inditex) and H&M. Academic Journal of
Business & Management, 4(1).
Kalsum, U., 2021. Factors Affecting Disclosure of Corporate Social Responsibility. International
Journal of Business Economics (IJBE), 2(2), pp.113-120.
Lin, Y., 2021. Legitimation strategies in corporate discourse: A comparison of UK and Chinese
corporate social responsibility reports. Journal of Pragmatics, 177, pp.157-169.
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Management and Marketing. Edward Elgar Publishing.
Pan, W., Chen, L. and Zhan, W., 2019. PESTEL analysis of construction productivity
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Swathi, C., 2019. A study on impact of BREXIT on UK Business. Business & Management
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Tetlow, G. and Pope, T., 2020. Brexit and coronavirus: economic impacts and policy response.
Zhang, Q., Oo, B.L. and Lim, B.T.H., 2019. Drivers, motivations, and barriers to implementation
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