Swot and Pestle Analysis of Zara: Evaluating Opportunities and Threats

This report provides a Swot and Pestle analysis of Zara, evaluating the opportunities and threats in the business environment. It also critically comments on how Zara is addressing their strengths to negate threats and weaknesses affecting their opportunities. A recommended Daniel Goleman's leadership style is also provided.

Context of business

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Swot analysis of Zara :................................................................................................................3
Pestle analysis of Zara :...............................................................................................................5
Evaluating how the changes in PESTEL factors has influenced the Opportunities and Threats
in Zara. Critically commenting on how Zara is addressing their Strengths to negate Threats
and Weakness affecting their Opportunities. .............................................................................7
Recommending a Daniel Goleman's leadership style that can help Zara to meet its objectives :
.....................................................................................................................................................8
Corporate social responsibilities in context of Zara:...................................................................9
Reflection of the report:..............................................................................................................9
REFERENCES:.............................................................................................................................11
Books and Journals:..................................................................................................................11

INTRODUCTION
Business organisation can be said as an entity which is formed to with the sole motive of
carrying on commercial related activities (buying and selling) in an enterprise. The system made
for smooth functioning in an business organisation consists of many different activities and
functions such as management, planning and operating. It needs to work in coordination with its
different resources such as employees, machineries and other assets. It have regulated under
certain laws and principles considering the exchange of goods and services. The following report
consist of the different factors in context of business. The chosen company is Zara which is a
well known brand known for its qualified and fashioned clothing products and related
accessories (Suharjo and Wibawa, 2021). It is a Spanish brand founded by Amancio Ortega in
1975. The report first analyse the brand's business environment through Swot and pestle modals.
Through the help of these modals, influencing opportunities and threats are evaluated with
addressing the strengths that negate its threats and weaknesses. Daniel Goleman's leadership
style is further explained with one recommendation fro the brand. At last, the Corporate Social
Responsibilities in context of Zara are covered.
TASK
Swot analysis of Zara :
Swot is a strategic management tool or technique that is used by a company for
identifying the points that are needed to be covered and considered in the process of making its
strategies through analysing both external and internal environment and providing the strengths,
weakness, opportunities and threats related to the company. Following the swot analysis of Zara :
 Strengths – These consider the strong elements of a company that provides it with a
competitive advantage and these should be maintained effectively. Strengths of Zara are:
◦ Unique designs – The company has made its perspective in the mind of customers as
a company that provides unique and attractive range of products and that are not
provided by other clothing and fashion related dealer (Dilek, 2018). It is consisted of
many expertise designers that understand the uniqueness of the brand and work in
maintaining it through considering the fashion and demand of customers.
◦ Strong global presence – The brand has worked on continuously increasing its
presence across the globe through opening its physical stores in different countries. It

has more than 2100 stores in different parts of the globe with a huge average of sales
as 15.9 billion per annum. The brand is not stopping and working on researches
needed for more expansion.
 Weakness – This provide with the weak points of a company that can provide it a
competitive disadvantage and are needed to be rectified and worked on. Weakness of
Zara are as follows:
◦ Less use of marketing strategies – The use of these types of strategy include
advertising which can make a deep impact on the visibility of the brand to the
consumers and directly have positive impact on sales. Zara does not uses or rarely
uses these techniques (Williams, 2019). This may lead to a cost advantage but this
small advantage is not worth it, as advertisements may lead to drastic increase in the
turnover.
◦ Less buffer stock – The stock in Zara stores are fast moving and focused on providing
different designs continuously with less buffer or safety stock for a particular design.
This is the strategy used by the brand to provide customers with the latest items to
increase customer satisfaction but this strategy sometimes also proves to be flop when
some particular type of designs get hit and are demanded by the customers in huge
quantities.
 Opportunities – These factors when considered and worked on may lead to higher
growth for a company. Few opportunities of Zara are as follows:
◦ Market expansion – Diversifying in new markets always give a business organisation
with opportunity to increase the presence and potential profitability. Zara needs to
keep an eye on emerging markets constantly as these markets have increasing
spending power and are open to adapt with new brands and companies.
◦ Developing online platform – The world is moulding towards the preference of
buying mostly every kind of product online to avoid time wastage. Zara focuses more
on developing its physical stores. Considering the huge potential of online market the
brand should focus on developing its online services (Fitzpatrick and Queenan, 2020).
 Threats – These are the elements that can lead to huge losses and uncertainty for a
company. Following are few threats in context of Zara:

◦ Competition – The clothing sector has a huge and neck to neck competition with
thousands of established brands due to the essential category / type of products. Zara
works in providing the products on less price to its customer which provide it with the
competitive advantage over its competitors and this is a great way to capture more
market. Some of the peak competitors of ZARA are – H&M, Vero moda and Mango.
◦ Low reach and advertising - The leading companies and brands of every industry
keeps on changing due to the competition. Lack of reach and using advertising put the
company away form consumer's view which can be used by its competitors to gain its
market share.
Pestle analysis of Zara :
Pestle analysis is a tool or technique used to analyse the external environment (macro
environment) related factors that have a deep impact on a company. This model is included of
seven factors that make the acronym PESTLE. This model can help Zara in building of its
business tactics though understanding the related market dynamics. The pestle analysis in
context of Zara is as follows:
 Political – The included elements in this factor are related to the government actions and
policies that effect the business environment. Zara was born out of European union and
now, the brand has its established presence in all over the world. The European market
has a well established framework of trade agreement between each other and this help
Zara to easily import and export the raw materials and its finished clothing products. The
Brexit occurrence (exit of Britain from the European market) has deeply effected the
brand and faced difficulties in the trade with the England which is one of the biggest
market for the company (Coulthard, 2020). Zara had to mould its certain policies in
context of this occurrence which leaded to increased expenditures.
 Economic – These include different elements form various aspects of a economy that
states the importance of the outlook on each area and economy in which a company
operates. The countries in which the brand mainly operates coincidently have low
employment rate which provide benefit for Zara to have low cost labour. Zara is well
known and valuable brand providing qualified products to the market at competitively
lesser rate than that of the other European high-street fashion brands. This puts less force
on the spending power of consumers and leads to attracting them.

 Social – These are related to the beliefs, culture, demographic trends and other element
that help in determining the consumer behaviour. Zara can consider this factor to build a
loyal relationship with its customers. The brand understand this factor and works in
avoiding any indulgence in activities that can harm the customer's beliefs. It focus on the
changing demands of the customers and use fast fashion changing strategy (Goyal and
Kumar, 2017). Through this it maintain and produce products in less quantity with less
buffer stock and focus on providing the customers with items according to the latest
trends and likeness. It does not focus on niche markets and read the trends and fashion
demands on global basis.
 Technological – These are the innovation related factors that can make the process of
manufacturing and other activities in procedure of providing products/ service to the
customers in a easy and efficient ways. Zara in the past, did not focus much on this but
considering the necessity, it tries to use this factor as effectively as possible by
considering the cost of investment needed. To use the technological factors in the best
way possible the brand has been divided in different segments – R&D (research and
development), Logistic and distributary chain. Through this it makes the products deliver
to its customers in less time then its competitive brands. It has a flexible supply chain that
is vertical integrated and controls the entire production.
 Legal – This tells a business entity with some legal forces about the certain things and
activities that it can or cannot do through bounding them with the legalisation. Breaking
of these forces leads to legal issues and the punishments depend on the extend to which
the legalities are broken. Zara has prioritized the following of these factors in its
operation globally. It focuses on establishing the legal principles across the entire line of
processes involved in different stages of its business from buying of raw material from
suppliers till providing it to the final users.
 Environmental – These are ecology related forces that impacts a business. These are
commonly ignored and considered of no use from some business organisations but have a
potential to make a vast impact on them (Chollet and Sandwidi, 2018). Zara sells
products of clothing accessories made from leather due to which it has been targeted
many time by the society in the past and also faced many difficulties due to this. The
brand tries to avoid the activities that harm the environment and implements measure

regarding this. It states that all the leather used comes from livestock and not by harming
the environment and animals.
Evaluating how the changes in PESTEL factors has influenced the Opportunities and Threats in
Zara. Critically commenting on how Zara is addressing their Strengths to negate Threats
and Weakness affecting their Opportunities.
Political:
The trade agreements in the European union has provided Zara with an opportunity to easily
diversify its stores and trade in all over the European market with minimum duties and taxes. It
imports raw materials and exports finished products to the world. These little or no charging of
duties and taxes has made a vast effect on the brand through minimising the costs which leads to
higher profits or customer holdings though providing products in less prices.
The changes in any trade agreements of European union can prove to be a threat of Zara and can
lead to formation of many difficulties, losses and changes in policies (such as Brexit occurrence).
Economical:
High unemployment rate in its operating countries has provided the brand with an opportunity
through providing workforce at lower rates which minimizes cost and gives chance to invest
money in growth process (Durai and Badhulika, 2020).
Social:
The social factor provide opportunity to Zara to read and understand consumer behaviour to
attract more and more customers and make loyal relationship with them.
The wrong practising of social related activities such as harming beliefs or culture of people may
lead to become a threat for it.
Technological:
Using of new and innovative technologies provides an opportunity for Zara to render customer
with more value and satisfaction.
The use of these technology in an incorrect way with less maintenance and expertise view is
also a threat which may lead to lead to losses or even risk to health.
Legal:

These are opportunity in a way as they provide safety security to the brand as other brands
cannot use its name or certain other elements through its trademarks and intellectual property
rights (Berber, 2017).
This factor may also prove to be an threat if Zara gives less consideration to legalities which can
lead to legal issues.
Environmental:
The use of leathers and fur in its clothings is in demand in the market, but some social welfare
and concerning groups are threat for Zara if any animal or environmental related factor gets
harmed in process of manufacturing these products.
Strengths that help in negating threats and weakness affecting opportunities of Zara:
The brand's strength of unique designs help it in to cope with both of its mentioned
weakness – less use of marketing strategies and keeping less buffer stock through providing the
customers with attractive and unique designs that helps it in building a strong image in the
market that do not need advertisements to attract customers. Continuous latest designed stock
help customers to not stick with any particular design (Liu and Xu, 2018). Strong global
presence of Zara provides it with a competitive advantage over the vast community of
competitors.
Recommending a Daniel Goleman's leadership style that can help Zara to meet its
objectives :
There are six types of leadership styles given by Daniel Goleman :
 The authoritative leadership style
 The commanding leadership style
 The affiliative leadership style
 The democratic leadership style
 The pacesetting leadership style
 The coaching leadership style
The recommended type is visionary leadership style. In this style, the leader
understands the complexity and view the organisation as a leading company / brand for a stable
and long period of time. The goals are large that are not set on small period basis but on a long

term basis through long term visionary skills of the leader or strategy makers. Small
achievements and wins are not enjoyed. The way a great visionary leader perceives the
organisation and its related business environment makes the members of the company feel
inspired and motivated to work in building their strong role in achievement of the long term goal
setted by the respective company (Dayan, Heisig and Matos, 2017). Adopting this strategy by
Zara will prove to more difficult to than it sounds as completion of these goals and visions need
continuous and steady efforts for a long time without experiencing the joy that comes through
achievement of goals. Due to its complexity and diversified business structure, it consists of
many layers where the vision can be misunderstood and diluted in Zara and should be clearly
mentioned and rapidly checked.
Corporate social responsibilities in context of Zara:
This is the concept which tells about the responsibilities that a business organisation is
aware of and uses in different activities of its business operations to maintain smoothness and
goodwill in the market. Zara has given certain commitments related to its corporate social
responsibility. It wants to help in sustainable development of the society. Some of commitments
that are he part of the inditext group corporate social responsibility policy of Zara are:
 It uses eco efficient modes for saving energy through its effective use of designs,
lighting, heating or cooling system equipments.
 Using of hangers, security tags and other items used in the different operations
that can be recycled in some plastic and cardboard items.
 Use of paper or biodegradable plastic bags (Delgado and Condori, 2018).
 Using of ecological and biodegradable materials in manufacturing of its products
such as PVC free footwear.
Reflection of the report:
Writing this report has provided me with some new experience and knowledge about
different things involved in this report. Lot of researches were involved in writing the report for
giving accurate and correct information, this helped in improving my researching ability. I also
got to know a lot things about the global leading clothing brand Zara, these involved its internal
and external environment affecting factors in the market and the way in which the brand uses
and can use strategies to gain and maintain a global market share.

CONCLUSION
From the above report it has been concluded that, Zara is clothing and related accessories
dealing brand that have its stores globally. Swot and pestle analysis are tools / framework that
helps a company to identify its external and internal business environmental factors that have a
huge impact on it. The brand can use its strengths (unique designs and strong global presence) in
coping up with its different threats and weakness. Daniel Goleman has given some leadership
styles to help a company identify or use some leadership style to help a company is gaining
competitive advantage. Zara also uses different ways for maintaining corporate social
responsibility in the market.

REFERENCES:
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