Zara Company Analysis: Economic, Political, and Expansion Factors

This report provides an analysis of Zara, a brand under the Inditex Company, focusing on key developments and challenges. It examines economic risks, such as the impact of currency fluctuations (particularly the Euro) on profitability and sales, and the company's strategies to mitigate these risks. The report also addresses global expansion limitations, including the impact of the COVID-19 pandemic and the growth of Inditex, highlighting the relationship between GDP and profitability. Furthermore, the report assesses the political environment in Spain, Zara's headquarters, and how political stability and government policies influence the company's performance. The report includes financial data from 2018 and 2019, and references relevant academic literature to support its findings.

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ZARA- KEY DEVELOPMENTS
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Amanico Ortega founded Inditex Company in 1975 in Spain and Rosalia Mere with the purpose
to keep the costumers updated with the latest trends in fashion. Some of the fashion items that
are included are clothing, shoes, beauty, swimwear, and perfumes (Willems, 2012). After a
period, Inditex became one of the largest retailers in the world. The company boasts off 2270
stores that initiated the revenue of 18.9$billion annually. It is headquartered in Arteixo, Spain.
The brands that fall in the inditex company are Bershaka , Zara, Oysho, pull and bear,
Stradivarius and Uterque. The brand‘s good qualities of products have got featured in one of the
best magazines of the world. Some of the recent developments of Zara company are-
Economic risk assessment –
Zara is a brand of Inditex Company that has stores in almost every part of the world, which are
reasons for its high annual income. Some of the factors that affect the establishment of the
companies on foreign land are government regulations, foreign exchange rate, and credit risk. In
2018, the Euro became 10 percent stronger than other currencies as shares closed up at 4
percentage at 25.24 Euros (Saraswat, 2018). The stronger Euro caused the dip in the profitability
by 40 percentages as compared in 2017 when it was the 41-percentage increase (Anwar, 2017).
In 2019, there was the spike in the sales of the products of Zara Company that led to the
improvement in the profitability by 45 percentages. The increase in sales and profitability was
due to cold weather as people started purchasing the clothes where as the shares also rose by 1.1
percentage at 25.57 Euros (Saraswat, 2018). The stronger Euro has resulted in loss of 10
percentage in sales in almost all brands while the weak Euro promoted the 10 percentage in
increase in the sales of the company (Saraswat, 2018).
Global expansion limitation-
There was the increase in the expansion of the company strategies of Inditex Company as the
overall revenue of Inditex Company increased by 3 percentages from 2018 to 2019. There was
also the increase in the gross profit.
There was the increase in the net profits of the company from 2018 to 2019 that offered the
bright changes to the company to expand in other countries. In 2020, covid-19 pandemic had put
the whole world on halt thus making the revered companies like Inditex to forgo plans of global

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expansion to other countries (Anwar, 2017). In the data, there was the also the increase in the
gross domestic product from 2018 to 2019 as it was about thus resulting in greater profitability
for the company as it profitability ratio increased from 40 percentage to 50 percentage. The
inevitable situations have made it difficult for the company to lay it foot in foreign land as the
whole world grapples with the pandemic (Anwar, 2017).
Political assessment –
The Spanish state has a parliamentary monarchy with King Felipe as head of state. It is multi-
party country where people have the rights to choose their government so that the right politics
can lead to better opportunities for businesses. In the 2020 elections of 7 January, Pedro Sanchez
was chosen as the leader of the country from the socialist party. Pedro Sanchez was chosen
leader for the second time in the row. The leadership of Pedro Sanchez had improved the
economic condition of the country thus leading to 2.6 percentage growth since 2014. The growth
in the economic condition of Spain had promoted the growth of the companies like Inditex.
During the leadership, the increased investment was involved in Education sector thus leading to
improvement in the educational sector of the country (Lloyd, 2010).
The improved educational status of the country had increased the purchasing power of the
Spanish people thus resulting in the higher profitability in the companies in the best possible
manner. The good ways of doing things were exploited so that the right things can be achieved.
The political stability has promoted the purchasing power of the Spanish people by 20
percentages thus leading to high level of profits for the company in 2019 (Saraswat, 2018).

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Bibliography
Anwar, S. T. (2017). Zara vs. Uniqlo: Leadership strategies in the competitive textile and apparel
industry. Global Business and Organizational Excellence, , 36 (5), 26-35.
Lloyd, A. E. (2010). The devil wears Prada or Zara: A revelation into customer perceived value
of luxury and mass fashion brands. Journal of Global Fashion Marketing , 1 (3), 129-141.
Saraswat, S. (2018). Strategies v/s Consumer Perception of Brand Zara-India. IITM Journal of
Management and IT, , 68-80.
Willems, K. J. (2012). From Armani to Zara: Impression formation based on fashion store
patronage. Journal of Business Research , 65 (10), 1487-1494.

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Appendix
2019 2018 YOY
CHG.
CHG IN LOCAL
CURRENCIES
Net sales 26,145 25,336 3% 7%
Gross profit
Gross
margin
14,816
56.7%
14,260
56.3% 4% 8%
EBITDA 5,457 5,277 3% 11%
EBIT 4,357 4,314 1% 9%
Net profit 3,444 3,368 2% 12%
(Anwar, 2017)
2010 2018
GDP growth (annual %) 0.0% 2.6%
(Saraswat, 2018)