Zara's Business Environment and International Concepts in India Report

This report provides an in-depth analysis of Zara's business operations within the Indian market, examining its strategic approach, market position, and the various challenges it faces. The report begins with an introduction and literature review, highlighting Zara's global presence and its joint venture with the Tata Group in India. It delves into the complexities of the Indian market, including cultural and demographic considerations, and the importance of adapting to local consumer preferences. The report further explores Zara's strengths, weaknesses, opportunities, and threats (SWOT) using the PESTLE framework, considering factors such as political stability, economic conditions, technological advancements, and social trends. The analysis covers both internal and external factors influencing Zara's decision-making process, emphasizing the importance of adapting to the changing business environment to maintain a competitive edge. The report also addresses the impact of economic factors like currency valuation and the growing demand for innovative products, and recommends strategies for Zara to capitalize on these opportunities, while mitigating potential risks such as cybercrime. This assignment is available on Desklib, a platform offering AI-powered study tools and resources.

Report

Table of Contents
INTRODUCTION...........................................................................................................................1
LITERATURE REVIEW ...............................................................................................................1
DISCUSSION..................................................................................................................................7
CONCLUSION AND RECOMMENDATIONS............................................................................8
REFERENCES................................................................................................................................9
Books and Journals ....................................................................................................................9

INTRODUCTION
There are many multinational organisations and companies which operates their
businesses in various countries or nations. These companies have head-quarter in a specific
country that is called as its Home country. These sorts of organisations have many branches or
divisions in different countries all around the world. The present report is in context to a leading
company – ZARA, it is a popular clothing retailer leading in the industry globally. The company
was established in 1963 in Spain by Amancio Ortega. ZARA has more than 2000 thousands
branches across the world, it is a well known distributor of high quality apparel. It also offers a
huge range of products such as collections for kids, women and men, in addition to this ZARA
also launched other products such as perfumes, cosmetics and other accessories that attract
customers. The present report will analyse business environment and international concept
applied by the cited organisation while operating its business in India.
LITERATURE REVIEW
Zara is a part of a retail group Grupo Inditex, known to be one of the fastest and largest
growing clothing retail organisation in Europe. The group has various divisions or brands which
are popular for offering high quality products to customers. Zara has a great market position and
also has high demand in terms of luxury products and apparel. The clothing industry is currently
the second largest sector in UK retail. The market-place has been increased recently with fashion
products and brands as many Supermarket chains have launched their own clothing brands, The
entrance of new brands in the market has enhanced the competition which has affected many
companies to develop effective strategies which can help them sustain in the market. The
companies are using international business concept which assist them in growing their market
share by entering into the global market. Zara is a very popular brand and known for its high-
quality and designed apparel, it was among the top 100 international brands in 2015. In respect to
the Indian regulations on foreign direct investment, the Inditex group combined with the Tata
Group, India to create new joint venture in 2009. Inditex owns 50% of this partnership on the
other hand Tata's subsidiary Trent ltd holds 49% of share because of various challenges the
organisation is facing. According to Zara professionals Indian market is a top priority among all
the countries in Asia. The most effective method to enter in Indian market is to collaborate or
develop a joint venture with an Indian brand which already has an impressive brand value or
image in the market. With regard to this observation Inditex, Zara's parent company used the
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method partnership and develop a joint venture with Trent ltd, a Tata Group company. Trent ltd
is one of the most popular clothing distributor and has a high value in the market both locally and
globally. The major concerns Zara has while entering into Indian market were culture and
demography, Speaking of demography India has a high population of 1.2 billion. According to
the target market income becomes higher in India. Culture is a major concern while entering into
a new or foreign market, it must evaluate the beliefs and perspective of the culture. In India
social security is given high attention therefore, Zara considered Indian culture and beliefs while
expanding its business.
ZARA is lacking good marketing skills and techniques which they would be using or
utilizing so that weakness could be reduced. As it could be said that ZARA is having its
operations in about most of the countries of world which would be hampering their quality of
work. The economic and political conditions in India is hindering ZARA’s ability to manufacture
as the demand for company and its products are been diminishing or fluctuation on very regular
bases (author). This would be one of the reasons as to why company is planning to establish their
manufacturing unit in India which is emerging economies of world.
This kind of technique if they are using and applying with their decision making process
then it would be easy for them that they are increasing all strength which are there. ZARA could
be saving their time in way when they are using this strength part they could be getting more
time utilising in more important and other parts. Whereas if they are not looking at their
weakness which are hampering them so it would not be focusing on what are the weakness
which company is having author. SWOT is methods of analysing what could more company find
about their negative and positive points and how could they gain all opportunities that is there.
Other than this there are also some factors that are not been under control of company as
they are not been able to regulate those elements. These factors are analysed with help of
PESTLE which is mainly done in order to solve what the dimensions are of global leading firm
ZARA in India. As market of India is very much dynamic where many new type of technologies
and innovations are taking place as it could be included as most technological advance nation
author. Other than this there are also many other factors like that of support of government,
inflation, changes in tax rates and climate changes that are occurring within country or market of
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India. Company which need to decide over what they should be doing in respect of changing
environment or policies of country like that of India.
There are many factors like that of political stability within the markets of India would be
treated to as most important and essential part which is creating opportunity to other companies
to come into country. There are minimum hindrances from side of Indian government with also
including many free trade agreements. There are many other nations who are interested in
investment within India as it is known to as technically advance countries of world. These kinds
of agreements would be leading to improving operations of ZARA with other nations as well
which is giving opportunity to improve their market penetration. On the other hand if
government of supporting eco-friendly products within markets of India then this is also
regarded to as opportunity for ZARA to satisfy demand of customers. Other than this it was
looked that ZARA is having opportunities like that of mergers and acquisitions which is helping
company in gaining stronger base of customers. Other than this advancement in technology is
also one of the most important technique which ZARA is to use. This would be clear opportunity
with company that they are having and analysing need of customers with help of technology. For
organizations it becomes essential that they are helping or enabling to identify various kinds of
business environment which would be influencing them. It is very much important that company
is maintaining their position into market at global level so that they are leading with effective
methods. External factors or environment is that which is not into the control of company as
compared to those of internal one. This would be including factors like that of strengths,
weakness, opportunity and threats which company is having or facing. Strengths are those
elements of company that are enabling them to work in very good image or profits for company.
Like that ZARA is making new investments in India would be helping them in improving their
profits. Business environment are those which is influencing all functions and operations of
ZARA like that of employees, policies, legal and political environment in which company is
working author. External factors would be like those of related to tax, inflation, legal policies of
country within which they are working and all together impacting the level of market or their
decision making process. This analysis of market environment could be done on the basis of
PESTLE and SWOT tools which are most important in way of identifying factors and their
impact on decision making. Internal factors are those which are able to be controlled by firm
itself as it is the one who is formulating plans and policies for company so that it is able to
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operate in smooth from. This would be including like that of resources which they are having,
knowledge of employees and their skills. In order to analysis what are the internal factor that
could be impacting company and its functional areas managers should be using statistical
approach like that of SWOT. Cairns and Sliwa(2017) further clarify that there are also economic
factors like that of valuation of currency in market and gradual growth of other economies of
world. These factors are to be regarded as creating positive impacts within company and growing
their profits as well. ZARA could be having very clear and good opportunity within the countries
like that of UK as currency valuation of Indian rupees is lower than that of pound, Rugman and
Verbeke (2017). So there is chance of ZARA in improving exports with India due to lower down
of currency valuation. UK would be defined to as the second largest market for ZARA after
India so they could be having opportunity to grow their sales in UK, Hafner, O'mara and
Williamson(2017). On the other hand Raichstein and et.al, (2017) also included that there are
many countries of world which are growing on very fast and rapid bases which are regarded to as
positive impact of market of ZARA. In this way company would be introducing themselves in
markets around the world which is most positive thing as per ZARA. All these economic
conditions which are explained in above part are some main external factors which are creating
opportunities in creating business environment.
Titman, Keownn and Martin(2017) also mentioned some social or socio cultural factor
which is influencing business environment of ZARA. The company is facing many factors like
that of increase in demand of hybrid, electric cars and changes in wealth structure or
development in wealth of people. These factors of company would be impacting them in both
negative and positive manner so it is important that management of ZARA is able to identify
what is threat and what is opportunity for company. ZARA would be having opportunity as most
of its customers are demanding innovative products like that of electric and hybrid car which is
tending to increase profits and revenue of company on larger scale, Avouris and et.al (2017).
There is also one more factor in social factor like that of increasing gap between rich and poor
people would not be allowing company to sell their product to people who are not able to
purchase. Nelson and Noronha(2017) said that middle class are the most important source of
revenue for ZARA so this could be important factor of concern for company in social external
part.
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There are also technological factors including use of e-commerce within industries,
trending mobile technology and also cybercrimes associated with this factor and company as
well. ZARA is having very efficient use of innovation within their products they are also now
finding opportunity in improving all techniques of marketing. In this sense company must be
using online marketing of its services and products so that they are enhancing or improving
profits and revenue for company, Michailova (2017). The company is having capability to
exploit or use all its third party commerce services so that sales of products could be increased
especially that of clothes or aparrel. ZARA could also lay stress on use of mobile applications so
that their customer base is been increasing and they are including loyalty and engagement.
However, Emuchay and Jean (2017) said that with use of technology there are some risk as well
which are associated like that of cybercrime, Linn and et.al, (2018). So company must be
incorporating steps in handling and resolving issues like that of corporate cyber espionage. These
factors would be helping ZARA in achieving goals for the company which they have set in
starting of year or period. Thus, company must be following market segmentation techniques
which is helping them to improve their targets and effectively meeting all kinds of requirements,
Luthans and Doh(2018). Marketing techniques of ZARA are also very much good which enable
company to find new need and demand of target market within which they are to operate.
Environmental factors affecting Zara
There are many external environmental parameters that show their impact on ZARA
 Political: Politically there are many polices that has to be followed like political trends,
funding grants, government policies, terrorism, international pressure, wars and conflicts
Hill and et.al, (2017). This company has a large sum of turn over so if there are any
downturns in the economy of a collaborating country, the organizations will have to cope
with the
 Economical: Economic trends like, taxation rules, disposable income, market trade cycle.
Demand and supply effects, CPI, exchange rates etc. show a very direct effect the
revenues of company. This company needs steel, glasses in a bulk amount for
manufacturing of auto mobiles so it’s very important to find a place where these stuffs
can be made available easily. The polices that need to be tackled by that company are
Recruitment policy, Lay-offs, Reallocation of staffs, Locations choices.
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 These all polices affect the economy of a company situated in different countries because
the polices of the different countries vary from place to place.
 Sociological factors: Each and every company should know the social culture of a place
where there it is operated so that it would be easy to make recruitment of employees.
 Technological factors: A huge investment over technology is done by this company so
that most updated and modified auto mobiles can be manufactured.
 Legal Factors: Legal factors are the one the most important component of PESTLE
analysis. Factors like home legislation, future legislation, employment laws, regulatory
body and process are considers by the company, Vahlne and Johanson, (2017). Consumer
protection laws, intellectual property laws are taken legally for their employees. Strict
norms against sexual harassment discrimination among employees on the basis of race,
colour, or nationality are strictly followed by the company. If any issues of this type are
occurred with the engaged employees, company is not only going to warn but strict
actions will be taken according to the offences occurred.
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Illustrati
on 1: PESTLE Analysis
(Source : PESTLE Analysis, 2017)

DISCUSSION
ZARA achieved success in both local and international markets, this is due to its
competitive advantages and successful strategies. There are various internal factors that supports
or influence the functions or activities of a business or organisation. The different internal
elements affecting ZARA's performance can be analysed with the help of SWOT analysis.
SWOT analysis determines different internal factors or elements that influence the business
operations within a organisation or company. The various strengths, weaknesses, threats and
opportunities of an organisation will be identified with the help of this analysis tool or method.
Illustration 2: SWOT Analysis
(Source: SWOT Analysis, 2017)
1. Strengths – The major strength of ZARA is its value chain is integrated vertically, which
offers many benefits to the company. It helps in building high control on the whole
process from design to final product and also supports quick reaction.
2. Weaknesses – The business model of ZARA is very well adapted to current needs and
demands but it also has many weaknesses. The problem in exploiting scalability, rapid
activities can therefore compromising the quality of the products in few cases. The
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Inditex group is highly depended upon ZARA's sales figures which is also a weakness for
overall business.
3. Opportunities – There are various significant opportunities for ZARA such as various
new markets like India, it can enter into diverse markets in order to increase sales and
profit.
4. Threats – There are many competitors of ZARA, which are increasing competition in the
market. Another threat for ZARA is increasing rent of the stores and malls.
CONCLUSION AND RECOMMENDATIONS
The above report concluded that ZARA is a leading brand in clothing industry or sector,
it is operating its business in many countries all over the world successfully. The company is
offering high quality products and services to its customers to satisfy their needs and demands.
The company needs to focus on its marketing strategies in international market, along with
marketing it also needs to reduce its cost of production which can also be very effective in
increasing demands of their products. People of low level income are less interested in buying
costly clothes as they have many other options available in the market. Therefore, decreasing the
cost of production can help in offering low price products to customers along with considering
their quality and standards. On this part of whole business environment analysis of ZARA which
is helping in identifying external factors like that of political, legal and social would be creating
profits for company. But there are some important parts which the company needs to focus like
that of in developing products so that market opportunity could be used or exploited. They
should also be improving business operations and also the presence of ZARA in market which is
based on external factors. All technological measures should be incorporated within organisation
so that it is creating more revenue and profits for the cited firm.
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REFERENCES
Books and Journals
Vahlne, J. E., & Johanson, J. (2017). The internationalization process of the firm—a model of
knowledge development and increasing foreign market commitments. In International
Business (pp. 145-154). Routledge.
Hill, C., Hult, T., Wickramasekera, R., Liesch, P., & MacKenzie, K. (2017). Global Business
Today Asia-Pacific Perspective. McGraw-Hill Education.
Luthans, F., & Doh, J. P. (2018). International management: Culture, strategy, and behavior.
McGraw-Hill.
Linn, A., Sanden, G. R., Piekkari, R., & Guro, R. S. (2018). Language standardization in
sociolinguistics and international business: Theory and practice across the table.
Emuchay, N., & Jean, X. Y. (2017). U.S. Patent No. 9,632,817. Washington, DC: U.S. Patent and
Trademark Office.
Michailova, S., Piekkari, R., Storgaard, M., & Tienari, J. (2017). Rethinking ethnocentrism in
international business research. Global Strategy Journal, 7(4), 335-353.
Nelson, K. C., & Noronha, M. A. (2017). U.S. Patent No. 9,697,373. Washington, DC: U.S.
Patent and Trademark Office.
Avouris, P., Engel, M., Feger, C., Giro, R., Ferreira, R., & Steiner, M. (2017). U.S. Patent No.
9,759,643. Washington, DC: U.S. Patent and Trademark Office.
Titman, S., Keown, A. J., & Martin, J. D. (2017). Financial management: Principles and
applications. Pearson.
Raichstein, E., Smith, J. P., Tevis, G. J., Van Hise, D. G., & Oren, W. O. L. F. (2017). U.S.
Patent No. 9,632,875. Washington, DC: U.S. Patent and Trademark Office.
Hafner, J. L., O'mara, M. W., & Williamson, P. S. (2017). U.S. Patent No. 9,751,416.
Washington, DC: U.S. Patent and Trademark Office.
Rugman, A., & Verbeke, A. (2017). Global corporate strategy and trade policy. Routledge.
Cairns, G., & Sliwa, M. (2017). A very short, fairly interesting and reasonably cheap book about
international business. Sage.
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Online references
SWOT Analysis, 2017 [Online]. Available through: <http://country.0e3.co/zara-swot.html>
PESTLE Analysis, 2017 [Online]. Available through:< http://rypapervmtd.allthehits.us/zara-
external-environment-analysis.html >
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