PESTLE Analysis, Leadership Styles, and CSR of Zara

This report discusses the impact of external factors on Zara with PESTLE analysis, different leadership styles, and CSR initiatives followed by the company. It also covers the effects of Brexit and Covid-19 on the business. The subject, course code, and college/university are not mentioned.

Context to Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
PESTLE Analysis of Zara......................................................................................................1
Different types of leaderships style........................................................................................3
Corporate Social Responsibility followed by Zara................................................................5
Effects of Brexit and Covid-19 on business with their solution............................................7
CONCLUSION................................................................................................................................9
REFERENCES .............................................................................................................................10

INTRODUCTION
Business refers to an enterprising or organizational entity that has an engagement in
commercial, professional, or industrial activity, it can be either for-profit entities or non-profit
entities.(Gitman, McDaniel and Shah, 2018) Business is an economic activity that includes the
purchase, services, sale, exchange, and production of goods with a motive to earn profit and
satisfy customers needs. Zara is a Spanish apparel retailer company, located in Arteixo, Spain
which was founded by Amancio Ortega and Rosalia Mera in 1975 . The organization has a
specialization in fast fashion with its products that includes, accessories, swimwear, perfumes,
clothing, beauty, and shoes. In this report, there will be a discussion about the external
environmental factor that may impact a company, with the help of PESTLE analysis. A brief
about different leadership styles that can help a firm in order to achieve business objectives.
There will be an analysis of Corporate Social Responsibilities that the company is following in
its business operation. Lastly, the effects that the organisation has faced due to Brexit and Covid-
19 and how the business has addressed that situation.
MAIN BODY
PESTLE Analysis of Zara.
PESTEL analysis is a framework that helps to understand the dynamic impact of external
environment on the business. To maintain the growth, profitability,competitive advantage, the
respective industry make analysis of macro environment through this framework.
Political factor :
Political factor includes political policy and stability, taxation and labour laws,
international regulation etc. Zara being a Spanish retail brand, has successfully established the
extensive trade framework through which it can import the raw materials and export finished
goods. (de Sousa and Castañeda-Ayarza, 2022) In context of political factor, operating in
European Union agreement, it sends it merchandise across the world with little cost and effort. It
has benefited massively to brand as it also gives access for the international trade without giving
extra border tariffs which helps to increase the sales.
Economical factor:
It deals with unemployment rate, interest rate, economic growth, fiscal policy etc.
Respective company is one of the popular brand in clothing which is relatively less expensive.
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As Spain faces low economic growth which seriously deteriorate the status of financial position
of the company. With continuance to this, the exit of Brexit lead to decrease in pound which
affected the inflation rate through which employment got influenced and the spending power of
consumer became less. Moreover, it has made decline in the overall sales of the Zara.
Social factor:
It includes population growth, cultural trends, immigration rates, demographic structures
etc. With reference to the chosen company, it delivers a good quality product with reasonable
rate to the consumers. It gives more focus on corporate social responsibility which influences the
decision of customers to retain with the firm. It has to work according to the ongoing social
trends to make investment more worthy. Zara mainly does its research and produce product
based on the local and specific cultural group to gain attention of customers.
Technological factor:
It includes innovation in digital technologies, cyber crimes trends and security, trends in
automation etc. Change in technology is making business to be more customer oriented. Zara has
responded and coordinated well with utilizing the power of technology to gain profit. It is
working and managing its inventory and customer effectively and efficiently. The firm
coordinate and communicate with its customers through web presence also, where entire world's
consumer get response from the company. The proper use of data and information helps the firm
to make proper analysis of customer preference because its important to know the taste and
preference of consumer to gain more profit.
Environmental factor :
It includes climate change, waste disposal, weather ,natural disaster, sustainability etc. In
21st century consumer are being more oriented towards ozone-friendly products. So, Zara's parent
company Inditex is making 100% eco efficient store which consume less energy and water. The
firm is also committed towards recycling of the waste material generated while producing the
product. (Alanzi, 2018) The brand is giving more attention on climate change, biodiversity and
other environmental issues in depth.
Legal factor:
It deals with the privacy laws, trade and commerce policies, labour laws etc. Zara has to
work with certain legal structure to make its operation smooth so that it compliance with the
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rules. It is a requirement to follow a particular legal rules to make more focus on ethics and
sustainability. In order to prevent issue of stealing designs and concepts, respective firm needs to
have legal copyright infringement.
Different types of leaderships style.
Leadership style is defined as a moral action of a leader during supervision, influencing and
guiding a group of people. A great leader can motivate others in order to perform, innovate and
create. (Alblooshi, Shamsuzzaman and Haridy, 2020) It is determined by how someone is using
their authority and power to lead others in order to achieve an individual vision. There are
various types of leadership styles some of them are mentioned below.
 Democractic leadership- It is a method in which all people of any organisation
coordinate together in order to influence . Democratic leadership is also known as
participative leadership due to its similarity and everyone is encouraged to participate.
There are various advantages of the participative leadership style such as.
◦ Motivation: Members of an organisation feel motivated as they participate in the
process of making decisions. (Drzewiecka and Roczniewska, 2018) An individual
will coordinate in building the changes as they are a involved in making a
judgement.
◦ Creative thinking: Through establishing various concepts for agrument, firm will
receive variety creative and inventive out-of-the-box thinking.
◦ Employee satisfication: Group members will be more active in getting involved in
arugments with full potential. Due to this, they will feel more committed towards
organisation.
◦ Team groups will have to develop more events for client opportunities and they will
feel more united as everyone is working towards the same goals.
◦ Value: Team members will feel valued as their leaders will listen to their ideas.
Feeling value will lead to higher productivity.
Situational leadership style- It is a type of leadership where management adopts unique style to
deal with the situation and requirements of the task. This refers to a instructor of any company
adjusting their way to develop and lead groups. It is the leader, who decides to change their way,
where team have to adopt the selected style. Situational leadership defines as being able to
control outcomes because a leader is able to effectively influence their company in all directions
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as; across, upwards, and down. This helps in creating a more fexible working surrounding for
team members as this way implements a typical constent according to their aspects. (Sekareza,
Sulistiyani and Inayah, 2022) It addresses each empolyee to develop skills and needs at various
level . There are various advantages of situational leadership such as.
◦ It recognizes a need for flexibility: Every individual has a different perspective and
experience that generates multiplicity. Rather than treating employee unfairly through
a particular perspective, leader helps to recognize the need of the employee to be
more elastic.
◦ It helps in creating a more flexible and motivating surrounding to work for employee.
◦ This leads to various development approach into the consideration.
◦ This helps in increasing awareness of the leader.
 Contingency leadership style- It is a style where instructors effectiveness and ability is
taken into the consideration to review whether their way of leading matches with the
particular situation . A instructor can be a more productive leader in certain
circumstances and an unproductive leader in others. Contingency leadership theory is an
approach for management that suggest the best possible way to run an enterprise is
contingent or dependent on certain particular situations. (Chen and et. al., 2020). This
delivers a simpler path to access instructor's experience which have either maximum or
minimum impact. It also motivate manager to develop self-observation, an essential
character in order to make decisions for teams. The contingency approach is important
for business management because it gives manager a variety of range react to with
complication, and it also give significant direction in decision making process. If a
organization is implementing this theory it must allow its leader to bend some policies or
even have the authority to override according to circumstance requirements.
In the context of Zara, a company can follow a participative leadership style in order
to increase the effectiveness of leaders that involve team members in the decision-
making process of brand. (Lin, Liao and Kuo, 2018, July) Its style brings myriad benefits
to the company. If leaders use this style, they will be capable to include their group
members in operation process of a company. Through contribution and crowdsourcing
opinions, the decision-making process will become a collective endeavour that taps into
the expertise, skills, and ideas of every team member. Though there are risks in the
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deployment of participative leadership it helps in understanding potential weaknesses
and strengths of leadership style in order to make effective teamwork.
Corporate Social Responsibility followed by Zara.
This is a framework where management of firm integrates the concept of sustainable
development through economic, environmental, and social benefits in business operations for all
stakeholders. It is a concept which helps organisation to make balance between business and
wide variety of stakeholders. (Ye and et. al., 2020) The main aim of this is to provide
competitive advantage which enhances them to take part in various activities and provide a
quality value within the firm. Organizations are hugely reacting to CSR in order to make a
competitive market to gain more profits and to have strong brand image across the market.
Corporate social responsibility has been developed from the source of a approach that
organisation marks a part of the profit to give towards this initiative in order to become a basic
component of company operation. Some of the pros of CSR include.
 This helps in building mutual trust where Consumers are more likely to spend their
income on a organisation that encourage and engage in action in order to develop
organisation by helping the chosen firm either volunteering or giving money, this way
organisations can gain trust from their customers. CSR helps in developing good brand
image.
 It encourages to develop relationships- An organisation is building trust in the public, it
also develops a sense of responsibility in buyers. This can head to a good company–
customers relationship. It also fascinate and reserves employees of a company. Having
CSR doesn't only helps to attract visibly but also makes their employer more proud
within the organisation.
 Long term benefit- It is the most essential long-term benefit for a organisation. It help
organisation become more justifiable, as one of the way to become environmentally
responsible is that the organisation should start the use of renewable resources and reduce
the carbon emissions . Brands should encourage their workers to turn off the device
during non-usage and also turn off air conditioners and other electric devices after work.
By executing this, organisation can save a large amount of expenses on their electricity
bills and also will get recognition as being a environmental friendly organisation.
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 It helps in increasing profits- There are various ways to make sacrifices in order to
maximize profits while implementing CSR in operation. Profits of the company will
increase due to higher CSR, as it will attract more customers.
In context to Zara, the company is following Corporate Social Responsibility such as,
Zara’s initiative includes an effort in order to decrease consumption of energy by 20% in all of
their sales outlet, through a machine-controlled utilization hanger system, which choices up to
be prepared and plastics factors from their sales outlet and use them to make organic cotton and
ecological fabrics in all of their products.(Çapraz, 2022) The company is also supporting
environment business and uses structured cotton for the industry of several chosen unit of
clothing as 100% fabric, free from chemical substance broker & bleaches as well as completely
escaped of pesticides. Through the typical brand, such goods can be known well at outlet. Zara
wants to develop the society and the environment properly with which company act.
At the outlet- Organisation is saving energy and care is granted to brand sales outlet
which is eco-efficient. Company is also processing some specific economical direction rules for
their retail store. This theory aim a measure that can exist practically to all processes from
designing the outlet such as lights, temperature change or cooling system and utilization of
furnishing & ornaments.
The firm is reacting in the manufacture of waste product and promoting recycling-
There are recycling products and safety label that are gathered in sales outlet and then prepared
in to change into different plastics unit. (Kim, Chun and Wang, 2021) There are large integer of
safety label and product that are processed each year in addition to some of the cardboard and
plastics utilised for recycling.
Increasing awareness among employees- Organisation is also developing
consciousness among their squad unit through internal connection and a particular plan of
transmission activity that will increase consciousness of employees in demand of sustainable
practice such as using conveyance, change activity habits, or trimming consumption of energy.
Environmental practices at customers services- Zara has introduced biodegradable plastic
bags as 90% of bags granted out to buyers are invented of paper. Still, elastic bags are used in
minority cause, at a definite time such as gross sales campaigns and etc. Each bags used by the
brand are perishable and separate through a natural adoptive process which will prevent the
environment from impurity originated by handed-down plastics.
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Company is generating reusable subject matter- The seriousness to PEFC material &
reusable materials which is drawn-out as to materials in use for customers message. Their
manner list are mostly written on stuff with the mark.
Environmental plan of action with a good- Zara aids to environment agricultural uses
of structured fabric in the industry of the chosen item of clothing. With a description, these good
can be identified very fit at sales outlet. None crude oil derivative or imperishable physical are
put-upon in the industry of wearable items.
Effects of Brexit and Covid-19 on business with their solution.
BREXIT
Brexit affects the EU with decrease in net population during 2019-2020. UK imports
from the EU was suddenly declined more than UK imports from rest of the world after TCA
came into action. (Vătămănescu and et. al., 2021) There were reducing in profit for retailers that
was closure of many high street stores and a significant increase on online purchase. This was
most likely will be continued beyond this and so to avoid this retailers should be investing in
updating their websites with a effective and legally complaint online ordering procedures into
their operations. There are various issues faced by Zara that are mentioned below.
Border tariff- The taxation plays a crucial role in importing and exporting after the
separation of UK. As the government has increased tax rate that made it difficult for company to
manage different types of tax rates in UK.
Economic problems- The organisation components that are operated in UK have worst
impact from Brexit, as financial conditions of major countries were gone worst during that period
of time. (Barbeito‐Caamaño and Chalmeta, 2020) Due to this Zara has faced several challenges
in their export and import also their sales have reduced in last years.
Intellectual property- the intellectual property involve trade secrets, trademarks, designs
and copywriting. UK has left from European Union which lead to modification of intellectual
property laws in UK due to which company has affected from those changes.
Initiatives that Zara has taken to address Brexit
Zara has faced various difficulties during Brexit as UK has modified various rile and
regulation regarding employment that has created an unclear picture. The organisation has taken
some crucial decisions which asses in order to reactive companies operation and boost supply of
products in market.
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Effective communications- It is play a vital role in companies goals as it has asses in
decision-making process, so that business can run on right path. Zara has improved their
communication effectively in their workplace that help in order to modify firms policies as per
external changes.
Monitor potential impacts- Most of the organisation has affected due to Brexit changes
in law of nations. (Hantzsche, Kara and Young, 2019) Zara have monitored every potential
impacts of Brexit as company has assign time to HR team and their rules in order to examine
expected outcomes. The main sphere has taken into consideration such as, employees retention,
recruiting strategies, workforces and pensions.
Tracking and processing information- Zara has dedicated their resources to collect
knowledge and information so that company can build contingency plans. Firm has its main
focused on effective data that help in order to take competitive advantages and expand brand
across the multi-nation.
Employment laws- The entire employment law of UK governed the members of
European United. After the exit of UK government has designed their own laws. Company is
following those rules which has asses to manage smooth running of business in UK.
COVID-19
The first global pandemic in 2020 had made worst impact on various kinds of industries
around 73% of business in that period of time. Over one-third of companies has sealed their
operation in that time due to high restriction in multi nation. In context to to Zara company has
faced various challenges that mitigate the affects of global pandemic but their sales has
decreased by each day. High rates has spread a infection that led to certain difficulty such as.
Difficultly in operation- Business has faced difficulty in order to handle their operations
as different government had imposed certain restriction regarding social gathering in working
areas, factor and other areas related to this.(Manuel and Herron, 2020) In such conditions there
was higher chance of ineffective communication in their operational work as apparel sectors
requirement of high level of allocation of tasks to their employees.
Challenges in decision-making – The clothing sector strongly needs a decision making
in due to nature of changing as there are fast modifications in interest of customers. Zara has
failed in order to make effective decision due to requirement of top level of research and
identifying past experience.
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Initiative that Zara has taken to address Covid-19
Work from home- Zara offers work from home in order to reduce the gathering in office
premises so that their employees will perform their task more effectively and aim to attain
organisational goals.
Technology- companies success is depended on technology advancement that has asses
in order to make work more creative an innovative. (Hiep, 2018) Zara have used ZOOM, google
meet and many other software to attain business goals. These types of software have advantage
to virtual interview along with access to enhance strong communication.
CONCLUSION
From the above report it is concluded that Zara has strong establishment in market. From
external analysis of company it has show there are some factor that my affect operation of
business, which organisation need to take into consideration in order for smooth business. There
are various leadership styler available for business to choose their style to handle their
employees. In context to Zara participative leadership style will be suitable method to make
decision process of work with efforts from employees. Which give more benefits from
employees to companies success. Organisation has following various corporate social
responsibilities in order to make environment better and company is recycling and using bio-
degradable products more in their operation. Brand has faced various challenges due to Brexit
and Covid-19 but Zara has took necessary action to reduce those affects by taking them into
consideration in their operations.
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