Business Organization Analysis: Zara Company Overview

This report provides a comprehensive analysis of Zara's business organization, delving into its background, business environment, and strategic approaches. The report examines Zara's operational structure, its parent company Inditex, and its global presence, highlighting its fast-fashion model and market strategies. It discusses Zara's business environment, including its value chain, manufacturing processes, and marketing strategies. Furthermore, the report applies analytical frameworks like Porter's Five Forces and PESTLE analysis to assess Zara's competitive landscape, political, economic, social, technological, legal, and environmental factors. The analysis includes an overview of Zara's organizational structure, including human resource management, research and development, and sales and marketing departments, providing a detailed understanding of Zara's operations and market position.

BUSINESS
ORGANISATION

Table of Contents
INTRODUCTION...........................................................................................................................1
1.1 Background of business organisation....................................................................................1
1.2 Discussion of the allocated business environment................................................................2
1.3 Application of an appropriate analytical approach...............................................................2
1.4 Zara company structure and segmentation ...........................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business organisation are the organisations which are developed by the people to earn
profits and provide the best customers services. Some business firms are established to earn
income while other are build for public purposes. Business organisations are of different types
like public, private and voluntary sectors. Zara is clothing company in Spain. It has 2169 stores
in the world and has total revenue of $15.9 billion (Anwar, 2017). In this report, the main
concern is given on the information of Zara. Further, the discussion of allocated business
environment is done. Additionally, analytical approach of the company is studied. Moreover, the
use of appropriate data and exampled are used to define the business environment of the
company.
1.1 Background of business organisation
Zara is the organisation which belongs to Inditex organisation. Inditex company operates
on trade market of Zara retailer which was established in the year 1975. It is located in Galicia-
Spain and operating in 62 countries on global textile and clothing industries. It is famous for
fashion group and has 7,200 stores in the world. The main flagship store of Inditex is Zara but
has owned Massimo Dutti, Zara home, Uterque etc. The organisation does not believe in
producing large amount of products for next season because it gives more concentration on
working on unique business model. It takes regular feedbacks from its customers to replenish
their store with new products (Ayala-Sumuano and et.al., 2017). Further, Inditex new fashion
brands are prototyped in 5 days while Zara take 15 to manufacture new products.
1

The company has international presence and works on developing the best products
according to the needs and demands of their customers. Further, its online presence has also
helped it in increasing its sale. It has launched Zara home online retail store which has developed
online websites to provide their services in different countries like Spain, Germany, Italy etc.
Zara online sale grow tremendously and helped in increasing the sale of Inditex (Burns, Mullet
and Bryant, 2016). Inditex has helped Zara to increase its online sale in Netherlands. Belgium,
Australia etc.
Inditex has adopted market strategy which mainly focuses on the prime location. It has
analysed local market environment and examined the niche opportunities. Main competitors of
Inditex are H & M and GAP. They are providing various brands including fashion and clothing.
Wide variety of products have given tough competition to Inditex and Zara. H & M has 3,450
stores in the world. Though Zara has many competitors but it is the leader in the development of
fast fashion trends. The overall sale of the company in 2014 is $19.7 Billion as compared to H &
M. Further, the overall sale of Inditex is increased by 8% as compared to its competitors.
Background of country:
Zara entered in Germany in the year 1990 on 50-50 joint venture. Germany has the
largest population ratio in the entire Europe. It has two legislative bodies that is Bundestag and
2
Illustration 1: Structure of Zara

Bundesrat. Berlin is the capital of Germany. The population of this country is approximately
82.175.700 which is GDP of $3980 trillion. The currency in Germany is Euro. The overall
contribution of service sector in GDP is 71%. Further, industries and agriculture contribution is
nearly 28% and 1% of total GDP. Germany is spreaded in the area of 137,847 square meter. In
this country the main religions are Protestant, Roman Catholic, Muslim, Jewish, unaffiliated and
others.
1.2 Discussion of the allocated business environment
Zara business model allows for substantial economic savings throughout their value
chain. Starting with new raw materials, Zara has a policy of acquiring only un-dyed fabric
initially, allowing the flexibility to change color and different design netting a substantial
material savings. In terms of manufacturing and production.
The company has chosen to complete in the garment retail industry as a quick response,
small production run chain that targets fashion conscious middle to high income sector of
society.
Companies business model can be broken down into three components such as concepts,
capabilities, and values drivers. Zara's fundamental concepts is to maintain design, production,
and distribution processes that will enables to the company respond quickly to change in
customer needs and wants.
Capabilities of Zara or required resources needed to exploit the opportunities and
executes this strategy of the company. Organization also tight control over the production
processes with keeping the design and latest trends of the market.
Present time the company maintain 80% of its production processes in Europe, 50% in Spain.
They have strategic agreements with local manufacturing that ensure timely delivery and service.
Through these strategic many of benefits for the company such as partnership, local commodity
support.
The marketing strategy of prime location has benefited Zara to increase its sale. The
organisation has analysed the market environment to understand the trend and culture of
different countries people. They have focused on providing brand loyalty by providing their
products at feasible price. The brand loyalty has increaser because they are continuously putting
their efforts in developing stylish products (Cai and Xie, 2016). Further, Zara brings stylish and
designable clothes in short cycles which helps them to attract the customers and increase their
3

volume. Further, the company has developed various market strategy to bridge the gap for the
middle class people. It brings best designed dresses at lower price so that it can increase its sale
and achieve customers trust and satisfaction.
It has also used pricing and positioning scheme in such a way that differentiates its
products from other competitors products. The customers are attracted towards products designs
and style as they are so good that they cannot let them go. All these has helped the company to
increase its sale.
1.3 Application of an appropriate analytical approach
Porter's five forces:
It is very essential tool which helps in determining the industrial parameters of Inditex. It
also assists the company to develop the best business strategies which helps them to increase
their sale.
Threat of new entrants:
Unique and innovative methods of producing products attracts more individuals to enter
in the market investing but Zara has faced difficulty in gathering the staff members in small
period. Further, the organisation benefits if the individual wishes to enter in the market because
their involvement encourages the company to increase its sale by entering into competitive
market.
Bargaining power of suppliers:
The suppliers power decreases due to continuous liberalisation. Lack of dynamism,
suppliers are demotivated which helped Zara to improve its business operations. Further, the
company has provided licenses to the suppliers which they find difficult to stick to specific
provision and therefore, modifications and manipulations in the products are reduced. Suppliers
are the important part of the company and they are considered high therefore the company find it
difficult to make quality relationships (Cowan and et.al., 2017). Supplier bargaining power
increases when the staff members of the organisation experience high costs. This happens when
the members of the firm moves to another suppliers. Zara have strong network of suppliers as
they have effective quality and safety knowledge. Zara has 1,398 suppliers to which they give
their raw materials to produce better quality of products.
Bargaining power of customers:
4

Zara has high and middle class customers which posses high buying power. Customers
gives more preference to the company which produce more fashionable products. In retailing
industry, the customers are more attracted to the products of those companies which provide
them fashionable and low price products (Yip and Huang, 2016). Therefore, Zara has developed
unique strategies to influence more customers.
Competitive rivalry within the industry:
The fashion industries are less which has increases the opportunities for Zara to make
more profits without spending large amount on the advertisements. Further, the organisation has
also increased their performance by facing the tough competition from H & M and GAP. The
buyer chances on switching to other products increases when they do not like their pricing
strategy.
Threat of substitute goods:
Duplicate products and fashion is the biggest threat to the revenue of the company. This
duplication misguides the customers and increases conflicts. Clothing retail industry is very
unpredictable and all the competitors looks for the new trends (Gassmann, Frankenberger and
Csik, 2016). Zara produces different products which are unique and attractive which helps it to
remain at the top in the market. Zara manufactures affordable and high quality products which
increases the trust and confidence of their customers towards the company. The cost of switching
increases when the pressure of substitute products is higher.
PESTLE analysis:
In order to evaluate the macro environment, Pestle analysis is done. It helps ion evaluating the
opportunities to develop more strong business strategies.
Political factors:
Zara affected by the political factors when the government policies changes. These
policies affect the business operation of the organisation as small change in the policies will
bring drastic change in the company (Xue, 2016). For example, when the interest rate changes
then company has to increase the price of their products which brings pressure on their
customers and they lose customers satisfaction.
Economic factors:
Economic factors like taxation changes, interest rates, inflation and economic growth of
the country. Zara is affected by these factors therefore it analyses all these aspects before
5

developing its business in another countries (Mandalari and et.al., 2016). The price of products
vary from one to another because every country has different level of tariffs and excise duties.
Social factors:
Different beliefs and culture of different people demands several products. The
organisation has to fulfil the customers need according to their different demands which creates
various problems for it. Zara has to updated with the changing needs and culture of their
customers so that they can provide them the best quality of products.
Technological factors:
Zara has to ensure that have the best technical equipments and facilities. Zara has to
ensure that they have the latest technologies which helps them to give innovative ideas. The
organisation has used online websites and e-commerce facilities of the market to provide the best
customers services.
Legal factors:
Zara has given its concern to the laws and regulation of every country in which it is
providing its services. It has given priority to the various laws like labour wages act, health and
safety act etc. The organisation has focused on creating ethical brand image so that it can ensure
that their brand make pace with local laws (Mannion and Savolainen, 2016).
Environmental factors:
The company has focused on providing eco-feriendly packaging and low carbon emission
products. The company believes in making sustainable products and committed to provide 100%
eco-efficient products by 2020. Further, it has invested more time and efforts in developing
green business. This approach has benefited the customers as well as the organisation. The
company is able to attract more customers by using this approach.
1.4 Zara company structure and segmentation
Organisational structure:
6

Human resource management:
Human resource manager of Zara is responsible for managing the employees and policies
of the organisation. It looks after employees training and development plans, their appraisal
policies etc. Further, it provides important resources which are necessary for the organisation to
increase its sale and revenue.
Research and development:
Research and development department of Zara provides innovative ideas to make
products. It also helps in maintaining the quality of products by testing it before launching it in
the market. Furthermore, R & D team evaluates the target customers and capability of the
product to withstand in the market. Further, Zara has strong team in this department which
researches new ideas to make product effective (McGirr, 2016).
Sales and Marketing:
The main responsibility of marketing manager is to promote the products of the company
to target market. They use different promotional methods like advertisements, social media
websites and different marketing strategies to increase their sale. Sales manager of the company
will adopt different techniques to increase their sale (Wrigley and Straker, 2016). They
7
Illustration 2: Organisational structure of Zara
(Source:The structure of an organisation, 2017)

communicate directly with the customers and give them proper information of their products so
that they can make more money.
Finance:
The finance manger of Zara looks after various budget of Zara. It provides funds and
arranges money for the company to implement better business strategies. Further, it looks after
the tax and loans related issues. They also make effective relationships with different banks so
that they can take loans from them.
Segmentation of Zara:
In order to fulfil the needs and demands of the customers, Zara has developed
demographic, psychographic and geographic segmentation strategies (Walter, 2015). Further, it
has given more focus on user based positioning strategy in order to give more attention to
customer centric approach. This approach helps the organisation to satisfy the changing demands
of their consumers. Zara has targeted young customers which believes in different variety of
products.
The competitive advantage of Zara is that it has strong parent company Inditex which is
specialised in facilitating 8 different brands (Seccia and et.al., 2016). This has helped Zara to
increase its financial conditions. Further, it has advertising and store location which has
8
Illustration 3: Segmentation offering at Zara

increased their publicity in the market. Additionally, their advertising expenses are very low as
compared to H & M and GAP.
Zara and H & M revenue:
H & M is Swedish clothing company which has overall revenue of 21.73 billion. It has
secured second position and is just behind of Inditex. It has online presence in 32 countries
which has best satisfied the customers needs. Zara owner Inditex beats H & M by increasing its
sales and profit. It has beaten its competitors as well as stock market by jumping to €1.61bn
(Orihuela, 2016). Further, Inditex has also focused on increasing online sale and increasing more
stores in key markets so that they can maintain their progress. It has increased its market in
Turkey which has population of 75 million people.
H & M shares increases 19.8 times as compared to Inditex. The gross market of this
organisation has also shrunk from 55.2% to 52%. On the other hand, Inditex has sales rise by
15% at constant exchange rates (Thompson and McLarney, 2017). Further, H & M has enjoyed
the profits by serving in low cost Asia rather than serving in European country.
9
Illustration 4: Revenue graph of Zara

CONCLUSION
Summarising above report, it can be concluded that Zara has beaten all its competitors
and stock market by launching stylish and designer products. The organisation background
details are studied. Further, the discussion of business environment of the company is done.
Various benefits of market strategy to the organisation are discussed. Porter's five forces and
Pestle analysis of Zara are done to evaluate various opportunities and threats of the company.
The organisational structure of Zara and its revenue are analysed in this report. Moreover, Zara
and H & M are compared on the basis of their revenue and services. All this has benefited the
Zara to accomplish its long term objectives and profits.
10