Business Environment Analysis Report: Zara SA and Organizational Types

This report provides a comprehensive analysis of Zara SA's business environment. It begins by defining the business environment and introducing Zara SA as a case study. The report explores different types of organizations, including private, public, and voluntary entities, and discusses their characteristics and legal structures. It examines Zara SA's size, scope, vision, mission, and objectives, along with its organizational structure and stakeholders. The report delves into the interrelation of various functions within a company, such as marketing, human resources, finance, and production, and their impact on organizational structure. Furthermore, the report includes PESTEL and SWOT analyses, examining macro-environmental factors and the company's strengths, weaknesses, opportunities, and threats, and reflects on how these findings influence decision-making within Zara SA. The report concludes with a summary of key findings and insights.

Business and Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.Explanation of different types of organisations and the growth of international business
environment.................................................................................................................................1
2. Size and scope of different organisations................................................................................3
3. Expatiation of the functions of a company, their interrelation and their impact on the
structure of the company.............................................................................................................5
TASK 2............................................................................................................................................7
1. Identify and discuss macro environmental factors that have an impact on the company.......7
2. SWOT analysis and the interrelationship of strengths and weaknesses with the external
macro factors...............................................................................................................................9
3. Reflection of key finding and evaluation how they influence decision making...................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business environment is the combination of internal and external factors that affect or
influence a company's operating situation. The mean of business environment can be all of the
internal and external factors that impacted that how the company functions including employees,
customers, supply, demand and management or business legislations. This assignment is based
on Zara SA, it is a Spanish fast fashion retailer which is founded by Amacio Ortega and Rosalia
Mera in 1975. In this report will be discussed about the different types, size and scope of
organisations. The interrelationship of the various functions within a company will be link with
the organisational structure. PESTEL and SWOT analysis will be defined and the
interrelationship of them also will be described with compare the strengths and weaknesses of
the company (Andersson, Forsgren and Holm, 2015).
TASK 1
1.Explanation of different types of organisations and the growth of international business
environment
There are various types of organisation such as public private and voluntary. These
enterprises are different from each other in order to their size, scope and legal structure. Different
types of organisations are as following:
Private organisation- These companies refers to any person, partnership, corporation,
association and agency which is not a public body that is operated for profit. Basically, these
organisation is the part of a country's economic system because they are run by individuals and
firms rather than the government. Zara is a private company which is a Spanish fast fashion
retailer based organisation. It is the main brand of Inditex group which is the world's largest
apparel retailer.
Purpose- Zara want to make contribution for the sustainable development of society and
fro the environment.
Legal structure- the legal structure of private organisation is as below:
Partnership- it is formal agreement or arrangement where two or more than two parties
agree to run the business to advance their mutual understandings and interests. In partnership, the
partners share in the ups and downs of profit and loss pooling their fund towards a common
purpose (Bah and Fang, 2015).
1

Sloe trader- They are also known as the sole proprietors and it is a simple business
agreement or arrange where an individual is responsible to runs or owns the whole business.
Public Organisation- It refers to any person, corporation, association and agency which is not not
a public body which is operated to earn profit. Private companies are those firms that are
regulated, owned and operated by the government to provide services for its citizens. HM
Revenue and Custom is the UK's tax, payments and customs authority and formed by bthe UK
government in 2005 (Bocken and et. al., 2013).
Purpose- The main purpose of this organisation is to collect the fund that pays for the UK's
public services and help families or individuals by targeting financial support.
Legal structure- This structure is as following:
Central government- It is a political authority that govern the entire nation. These kind
of bodies have power to develop legislations for the whole country in context with local
government. These authorities are responsible for various policies such as national environment
policy which are directed as to make contribution towards sustainable economic development.
State government- It is a unit of government which is specialised to generate or make
laws and policies for a state. The state government have some level of political autonomy to the
direct control of the federal government.
Local government- it refers to laws that are formed for public administration. These kind
of government includes both structures such as local and municipal government. In these kind of
enterprises, the manufacturing is only affected by local rules and laws but the strategic decision
making not affected by the local administration.
Voluntary organisation- It refers to a group and a union of individuals who enter into an
agreement as volunteers to from to accomplish a purpose. These organisation work for the social
benefits, generating employment and fro managing the living standard of the people. Oxfam is a
Voluntary organisation which is founded in 1942 and it is a confederation of 20 independent
charitable organisations.
Purpose- The main purpose of Oxfam is to create lasting solutions the injustice of
poverty so that they can empower the individuals by creating solution to provide a secure, just
and poverty free future (Boons and Lüdeke-Freund, 2013).
Legal structure- It is as following:
2

Trusts- It is company and firm which is work as an agent and a separate legal entity.
Under this kind of business, trustee carries or run out the business on the behalf of the trust's
members. These kind of enterprises are not flexible in nature so making change is not a easy in
company (Carroll and Buchholtz, 2014).
Unincorporated associations- It refers to a group of people who come together for a
reason to make or earn profit and this fund is collect for the benefits of the society. These kind of
association consists of two or more individuals bond through the rules of society.
2. Size and scope of different organisations
There are several types of different companies on the basis of their size, scope and
organisational structure, they are as following:
Zara
Background details- Zara SA is a Spanish fast fashion retailer which is founded in 1975
by Amancio Ortega and Rosalia Mera. It is a flagship brand of the Inditex group.
Vision and mission- The mission an d vision statement of Zara is to provide an exclusive
choice of fashion to its customers by providing a quicker turnover of new stock than other
retailers.
Business objectives- The main objective of Zara is to make contribution in the
sustainable development of society and environment also which are interacts by all.
Size and scope- There are over 7000 stores of Zara in more than 50 Countries located
across 96 markets. The revenue of the company is $18.9 billion and 162,450 employees are
working under it. There are large scope for the business of Zara because it produces clothing
products for men and women or operate its business worldwide in various market of different
countries.
Products and services- This company produces or manufactures men's and women's
clothing as well as children's clothing as Zara Kids.
Organisational structure- Zara follow hierarchical organisational structure and it is well
organised structure because the employees of the company know who to report to. It is divided in
to subordination of functional department.
Stakeholders- The stakeholders of this company are employees, customers and clients or
suppliers (Cohen and Kietzmann, 2014).
HM Revenue and Custom
3

Background details- Her Majesty's Revenue and Customs is a public organisation which
bis developed by UK government and it is a non-ministerial department of UK Government.
This body is founded in 2005 and it is responsible for the collection of taxes and supported other
regulatory regimes including the national minimum wage (Hillary, 2017).
Vision and mission- The vision of HMRC is to close or remove the tax gap so that
customer felt that the tax system is easy for them and it can be shown as highly professional and
efficient enterprise. The mission of HMRC is that money is available to fund the UK's public
services.
Business objectives- To facilitate legitimate international trade, protect the UK's fiscal
policy and collect UK trade statistics. By providing help to families and individuals with targeted
financial support by payment of tax credits.
Size and scope- There are 56,000 employees who are working under it and the annual
budget is £4.09 billion. There are wide scope of this firm such as maximise revenues due and
bear down on avoidance or implement tax and payments to their customers.
Products and services- the services which are provide by HMRC is capital allowance,
child benefits, Investments schemes and others public services such as help families through
financial support.
Organisational structure- HMRC follows hierarchical organisational structure because
the department of this organisation is organised four operational groups such as personal tax,
benefits & credits, Business tax and customer compliance or group is led by a director general.
Stakeholders- Government, employees, customers and suppliers are the stakeholder of
this organisation.
Oxfam
Background details- Oxfam is a non governmental organisation which is founded in
1942 to focusing on the alleviation of global poverty. Winnie Byanyima is the director of this
company.
Vision and mission- The mission and vision statement of it is to remove the poverty and
end the injustice of poverty so that people can build a better future for themselves. The mission
of this firm is to tackle the root causes of poverty and generate lasting solutions.
Business objectives- To help the people by creating lasting solutions to the injustice of
poverty is the business objective of this organisation (Hilton and Platt, 2013).
4

Size and scope- Oxfam is a confederation of 20 independent charitable organisations.
There are 5300 people who are working under this organisation and 22,000 volunteers
worldwide working in it (Jennings, 2014).
Organisational structure- This organisation follow hierarchical structure because all the
functional department is divide in to groups and the employees are well known that where they
will be report.
Stakeholders- Trustee, clients, volunteers and unincorporated bodies are the stakeholders
if it.
3. Expatiation of the functions of a company, their interrelation and their impact on the structure
of the company
Zara is one of the world's largest international fashion company and operates over 2,220
stores more than 88 countries world wide. It is a distributor of apparels and offers a wide range
of choices such as the collections for women, men and children. This brand also launched a line
of cosmetics, perfumes and household products. There are various functions of Zara, they are as
following:
Marketing- It is an essential function of each organisation and it is a process of
providing goods and services according to the consumers needs and demands which provide
satisfaction to their desires. In Zara, this function is responsible for new product development,
packaging branding, taking decision about the marketing channels and designing strategies or
policies.
Human Resources- This function deals with the human side of the busines of each
organisation. In Zara, this function is responsible to maintain a capable and effective or skiled
workforce, condaucting training and learning program for imparoving the skills and knowledge
of teh employees and motivating employees to contribute their maximum to the fulfillment of
oragnisational objectives.
Finance- It is most essential function of each company and in Zara, it responsible for
three decisions and their implementation such as investment decisions, financial decision and
dividend decisions. They provide fund and mange budget of the company when it manufacture
new product. They help the organisation because they maintain relationship with financial
marketing and major shareholders (Morgan, 2012).
5

Production- It is a process of creating goods and services and in Zara, this function is
responsible to ensure the production of goods and services in specified quantities, fulfilling the
quantity requirements (Pearson, 2017). It also responsible to produce the product in a given
period of time and delivery dates etc.
Organisational Chart of Zara
Source: Organisational Chart,(2019).
Interrelation of different organisational functions
Marketing with Human Resource- Marketing is an important function of each
organisation because with the help of it company promote its product in the market and advertise
their product so that the customer can aware with the goods and services. This function
interrelate with human resource because when there are needs to hire any employee, HR
department provide notification with the marketing function related to the vacant position. HR is
also a beneficial function for the marketing because when there is need to any employees in
marketing department, HR manger organise recruitment and selection process and hire a talented
6
Illustration: Organisational Chart

candidate that help in achieving the organisational goals and enhance profit or productivity of the
company.
Advantages- With the help of marketing function, the HR department can easily find
various candidates for the vacant position and save the cost or time which they invest to search a
candidate.
Disadvantage- It is easy to get various applicants for the vacant positions but it is not
sure that the candidate is hired is skilled and talented or will help in the organisational growth.
Finance with Production- Finance is a essential function and helpful for producing
goods and services. This function is helpful because it provide fund to manufacture the goods
and services to production department and maintain the budget so that this department can
smoothly complete its work. The productions of goods depends on the money, material and
facilities so this department help to provide all these thing to it. These functions are interrelate to
each other because production department determine and maintain the list according to their
requirements by market analysis so this department help in budgeting of finance.
Advantages- With the help of finance function, Zara can maintain their budget and
reduce the wastage of finance. Cause of budgeting it can easily get information about the fund
that where it invested (Savrul, Incekara and Sener, 2014).
Disadvantage- When a product is in trend or demand in the market, production
department produces that product in large number but sudden change in consumer needs, this
product is wasted. So these types of situations, the fund is also waste which is invest by the
finance department to manufacture goods and services (Sena Ferreira and et. al., 2012).
TASK 2
1. Identify and discuss macro environmental factors that have an impact on the company
PESTEL Analysis
It is an analytical tool which is used to evaluate the external environment of an
organisation. Most of the time company get influence by macro environment factor in which
company has no control. It enable company to develop strategic planning, bring organisational
change, introducing new product in order to capture the market effectively. In context to
ZARA, one of the leading Spanish clothing retailer in world and commenced in the year of 1975.
It is located in Arteixo, Spain. It is the main brand of Inditex group, which has the largest fashion
7

apparel. It is greatly influenced by several forces like government policies or regulations which
impact company's growth or expansion. One of the main attraction of ZARA is that they have
faster fashion cycle. Despite of all, company is facing various challenges from competitors in
terms of consumer demand and cost, government, society etc. To tackle these issues company
applies PESTEL analysis in order to evaluate the external factors which is described below:
Political: This factors relates with the pressure on company due to government policies, rules
regarding tax, price etc. which impact company's growth or expansion. For example, government
decided to impose new tax policy on country from which company's revenue generating structure
get effected. Positive: Modifying the taxation policy in ZARA, it will not affect its growth because
their government is stable in nature. It enable them to enhance their revenue structure and
also increase their productivity by smooth functioning of business operations or activities.
 Negative: Each country has their own policies so ZARA may get affected in terms of its
trade in various countries which impact their productivity (Wheelen and et. al., 2017).
Economic: Economic factor is related to economy structure of country like inflation, deflation
rate, import-export ratios etc. which directly impact the profitability of company. For example,
UK inflation rate got modified which affect the ZARA business operation (Siewiorek and et. al.,
2012). Positive: Moderate rate inflation increases and boost the country's economic condition
by exchanging more dollars to more spending and it creates more demand, more demand
cause more production. Thus more production helps ZARA's to maximise the profit.
 Negative: Higher rate of inflation affect the ZARA's business operation. It reduces the
purchasing power of consumer which impact the products demand and supply. Thus, it
decreases the overall performance of company.
Social: Social factors is concerned with society attitude, taste and preference towards products
which affect the demand & supply of product and also impact on overall performance of
company. For example, customer demand are increasing due to modern lifestyle so it effect
ZARA product demand. Positive: Introducing new and creative product according to trends it attract the customer
easily and inspire them to buy the product. Thus it increases the demand of product and
improves the productivity.
8

 Negative: Innovative product may decrease the purchasing power of people as each
consumer has unique taste toward product and it affect the proficiency of ZARA.
Technological: Technology factor includes innovative and latest technology which enhance the
company's performance in an effective manner. For example: ZARA launched new application
in order to control over wastage of product. Positive: Developing innovative technology to maximise the wastage it improves the
ZARA manufacturing operation and enlarge its growth.
 Negative: This new technology create difficulty among employees in terms of processing
the innovative application because they are not flexible to adapt the changes.
Environment: It includes the environment and ecological aspect which impact the company's
demand of product. For example, ZARA operates new operation for recycle wool in order to
prevent environment. Positive: This new business operation improves ZARA productivity and adds value to it.
 Negative: This latest operation may effect ZARA cost and need more skill (Zeng, L., Li,
L. and Duan, L., 2012).
Legal: It contains laws, regulations, legislation which effect the business operation. For example,
ZARA follows the equality acts and provide equal pay to employees (Andersson, Forsgren and
Holm, 2015). Positive: Employees get motivate and encouraged to put their full effort towards
achievement of goal.
 Negative: If company doesn't pay equally it create conflicts and dissatisfaction among
employees which decreases the efficiency of company.
2. SWOT analysis and the interrelationship of strengths and weaknesses with the external macro
factors
SWOT Analysis of ZARA
Strengths Weaknesses
 Zara has good brand image in the
market and have 2220 stores more than
80 countries. The organisation has
strong online presence with help of its
 This organisation have limited
marketing and advertisement as
compare to others so it have low
presence in some fast growing markets.
9

own website and other e-commerce
sites which make it a popular brand
name.
 Healthy financial performance and fast
delivery of new products and trends is
a strength of the company which make
more famous than its competitors.
 There are low safety stock because Zara
kept a strategy that customers walking
into stores to check out latest items and
they attract with them and it will
increase the sales but cause of it, there
are high chance raising to steel the new
designs or patters of the products.
Opportunities Threats
 There are various international market
where Zara can expand its business
such as Asia and America etc.
 This firm can get opportunity of the
online buying trend and make its
clothes available not only in its own
stores but also on E-commerce stores.
 There are various competitors of Zara
in the markets such as Prada, Gucci,
H&M and others or they crate threat of
competition for it in the market (Bah
and Fang, 2015).
 Exchange rate fluctuation and change
in consumers demands, price sensitivity
and fashion ideas also generate threats
for the business of the company.
SWOT analysis of H&M
Strengths Weaknesses
 H&M are the one of the largest
international retailer and operate its
business in approx 45 countries with
2300 stores in which 95000 employees
are working.
 This firm offers quality products at
affordable price.
 The affordable pricing strategy some
times affect the quality of the products
because cause of low price, they do not
use good quality raw materials.
 This firm invest a lot of cost for all
types of machines which are required
for the production of clothes.
Opportunities Threats
 The life style of the people are  There are various competitor in the
10

improving day by day and they prefer
trendy or fashionable clothes which
create various growth opportunities for
the business of H&M.
 With the help of online shopping apps
and e-commerce sites, it can make
increment in its customers number and
grape growth opportunities.
market such as Chanel, Burberry,
Prada, Gucci and others.
 Changes or fluctuation in the
government laws and polices also
generate threats for the business of
H&M (Bocken and et. al., 2013).
Interrelation between external macro factors and internal factors
Macro environmental factors are beneficial for improving the brand image and
performance of the company at marketplace. To achieve the maximum profit, Zara must be
analyse the strengths and weaknesses of external factors by formulating strategies accordingly:
Political- Zara operates its business in various countries of the world and they make
changes and fluctuation in their policies which can be weakness for the business of this
company (Boons and Lüdeke-Freund, 2013). Such as in China, the government make change in
its taxation policy this affect the growth of the firm but when this change reduce the tax rate, it
can be a strength for the company.
Economical- In UK, high inflation rate influence the business of the organisation and it
reduces the buying behaviour of the consumer which negatively affected the organisation's
growth and productivity or a weakness for Zara. The government of UK provide low tax rate to
expand the business of the firm which a positive thing fro the company (Carroll and Buchholtz,
2014).
Social- Change in customer taste & preferences and high competition or various
substitute products in the market is a weakness for Zara. This company manufacture and produce
good quality products according to the consumers demands. It help the company to enhance the
profit or productivity of the firm.
Technological- With the help of e-commerce sites, it can expand its business and provide
better services to its customers such as online purchasing because now these days people prefer
this kind of buying behaviour. It is the strength of the company because it help in the
organisational growth of the firm.
11

Environmental- The company follow all the laws such as environmental protection act
and various others which help the company to mange its production. With the help of new
operation, recycle wool, it can reduce the wastage and manage the fund which can be a strength
of the company. This new operation can effect the cost of the company because for this new
operation organisation should need more skills and it can be invest fund on the training and
others that can be a weakness of it.
Legal- The management department of Zara follow all legislations such as sex
discrimination, health and safety act, equality law and various others. By providing equality pay
to its all employees where it operate its business, it can enhance its profit and productivity
because the employees show their loyalty and do their work with all their efforts. If the company
will not provide equal pay and all those benefits or rights which are provided to employees
according to laws than it negatively influence the business. Because there can be high chance of
employees turnover and it can be a weakness of the company (Cohen and Kietzmann, 2014).
3. Reflection of key finding and evaluation how they influence decision making
According to me, I can identify that if Zara can do proper market research, it can identify
that the company can do modification in its existing polices or it can achieve its organisational
growth. For example, if the UK government fake change in its interest rate of if they are low for
expand the business the organisation can take advantages from it or enhance the profit and
productivity of the company. This positively impact the decision making of the firm because
the management department can take advantages from it and expand the business. High
competition situation can be affect the business of the firm because now these days, there are
various competitor of Zara and they also provide quality products according to the customers
demands. This can be create negative impact on the decision making because the firm will be do
market analysis to identify the consumers demand and it consume lots of coat and fund (Morgan,
2012).
CONCLUSION
From the above report can be concluded about different types and purpose of
organisations such as public, private and social which have different size, scope and structure
according their types. In this assignment discussed about the relationship between different
organisational functions such as marketing, HR, Finance and others that how they link with the
12

organisational objectives. To identify the positive and negative impact of macro environmental
factors upon business operations, PESTEL analysis is defined. Strengths and weaknesses of the
company are maintained through SWOT analysis and the interrelation of the external macro
factors with it also described in the report.
13

REFERENCES
Books & Journals
Andersson, U., Forsgren, M. and Holm, U., 2015. Balancing subsidiary influence in the
federative MNC: A business network view. In Knowledge, Networks and Power (pp.
393-420). Palgrave Macmillan, London.
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.
Bocken, N. and et. al., 2013. A value mapping tool for sustainable business modelling.
Corporate Governance. 13(5). pp.482-497.
Boons, F. and Lüdeke-Freund, F., 2013. Business models for sustainable innovation: state-of-
the-art and steps towards a research agenda. Journal of Cleaner production. 45. pp.9-
19.
Carroll, A. and Buchholtz, A., 2014. Business and society: Ethics, sustainability, and
stakeholder management. Nelson Education.
Cohen, B. and Kietzmann, J., 2014. Ride on! Mobility business models for the sharing economy.
Organization & Environment. 27(3). pp.279-296.
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Hilton, R. W. and Platt, D. E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Jennings, M. M., 2014. Business: Its legal, ethical, and global environment. Nelson Education.
Morgan, N. A., 2012. Marketing and business performance. Journal of the Academy of
Marketing Science. 40(1). pp.102-119.
Pearson, R., 2017. Business ethics as communication ethics: Public relations practice and the
idea of dialogue. In Public relations theory (pp. 111-131). Routledge.
Savrul, M., Incekara, A. and Sener, S., 2014. The potential of e-commerce for SMEs in a
globalizing business environment. Procedia-Social and Behavioral Sciences. 150.
pp.35-45.
Sena Ferreira, P., and et. al., 2012. Framework for performance measurement and management
in a collaborative business environment. International Journal of Productivity and
Performance Management. 61(6). pp.672-690.
Siewiorek, A. and et. al., 2012. Learning leadership skills in a simulated business environment.
Computers & Education. 58(1). pp.121-135.
Wheelen, T. L. and et. al., 2017. Strategic management and business policy (p. 55). Boston:
pearson.
Zeng, L., Li, L. and Duan, L., 2012. Business intelligence in enterprise computing environment.
Information Technology and Management. 13(4). pp.297-310.
Online
Business Environment. 2019. [Online]. Available Through:
<https://study.com/academy/lesson/what-is-business-environment-definition-factors-
quiz.html>.
Organizational Charts.2019. [Online]. Available Through:
<https://creately.com/blog/diagrams/types-of-organizational-charts/>.
14