Operation Management Report: Zara's Internal and External Factors

This report provides a comprehensive analysis of Zara's operations management, examining the impact of both internal and external environments on its business. It delves into how factors such as employee strength, strategic risks, financial resources, innovation, political and economic factors, social trends, technological advancements, environmental considerations, and legal regulations influence Zara's operations. The report further explores the role of corporate social responsibility (CSR) in shaping Zara's brand image, cash flow stability, employee retention, and customer satisfaction, and analyzes how operational managers respond to these factors. Additionally, the study employs SWOT and PEST analyses to evaluate Zara's business environment, identifying strengths, weaknesses, opportunities, and threats, as well as political, economic, social, and technological factors. The report also examines the impact of operational functions on organizational strategy and decision-making, using examples from packaging and inventory management departments. The report also discusses planning methods, control methods and quality system evaluation.

PRINCIPLES OF OPERATION
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................2
P1 Impact of external and internal environment on operations of business................................2
P2 Impact of corporate social responsibility on operations along with reaction of operational
managers......................................................................................................................................3
P3 External and internal environment analysis of organization's business environment............5
LO2..................................................................................................................................................6
P4 Impact of operational function on organizational strategy and decision making...................6
P5 Several controls and planning methods with their applicability to firm operations...............8
P6 Quality system evaluation along with applicability of operation management adding value
through supply chain....................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCE.................................................................................................................................11

INTRODUCTION
Operation management is process involving activities such as planning, organizing along
with supervising which further result in higher profitability along with improvement of effort in
an operational manufacturing. Basic principles of operations management includes reality,
organization, humility, success, accountability, causality, change, collaboration with customers,
knowing the competition along with controlling the quality. Zara is Spanish retail based
company by Amancio Ortega and Rosalia Mera dealing in fashion appliances including fast
fashion, clothing, shoes, accessories, beauty, swimwear and perfumes established in 1975
headquartered in Arteixo, Spain operating with approx 10,000 stores worldwide. The report will
address internal and external factors affecting operations of business, also the role of corporate
responsibility will be discussed on influencing business operations and justify response of
managers. Further the study will provide internal and external analysis of business environment
in organization. The study will also reflect support of operational functions on operational
strategy along with decision making. Further, types of control along with methods of planning
will be displayed in organizational context and evaluation of quality system on operation
management for influencing value by supply chain.
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LO1
P1 Impact of external and internal environment on operations of business.
The internal environment affecting business operations of Zara in various factors -
Strength of employees
The type of motivation of employees along with their working condition and talent will
affect business operations of Zara s will justify relationship between processes with that of
departments. These factors also cover financial resources, physical resources, human resources
as well as current processes (Albrecht and Dasigi, 2016).
Strategic risks
The ability of taking risk of Zara will develop plans ad strategies accordingly and help in
development of business plans. The factor occurs due to change in technology or demand of
customers. Zara thus will take corrective measures for running their business operations.
Financial
Business operations of Zara will be majorly affected by availability of financial sources
with the firm as being dependent on fluctuated interest rate along with current financial systems
such as changes in taxation, etc. will affect working conditions of Zara (Archer and et.al., 2016).
Innovation
The type of innovation implemented by Zara to cope up with competitors to do marketing
or promotional activities through planning and training coping up with technological
advancements. Zara realized leaving technology behind will push business out of competition.
External environment affecting business operations of Zara in various factors -
Political factors
These factors include policies of government along with political stability for establishing
business policies of Zara. The operational activities can be affected by various restrictions in
trade along with major labour laws, copyright laws along with rights for protection of consumers
will modify working conditions of Zara in various countries (Deihimi, Zahed and Iravani, 2016).
Economic factors
The factor of economic trends along with several growth rates, industrial rates, labour
cost, consumer disposable income and availability of credit for Zara will affect their business
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operations in various conditions and places. The factors will also cover availability of raw
material cost and monetary policies for operating business functions of Zara.
Social factors
Zara or any other business produce goods and services to introduce them to their
customers. These factors cover social attitudes and behaviour to be targeted by firm for their
product. Zara's business operations will be affected by demographies along with lifestyle of
people along with taboos and work in their region will help develop articles they fond of wearing
and can spend money on (Helleno and et.al., 2015).
Technological factors
Technological factors include communication, research and innovation along with
incentives and development. Zara to develop their articles need effective technology for
production, packaging and labelling along with further advertising them through technologies for
boosting sales and generate revenue.
Environmental factors
The factors of environmental nature covers consideration of weather to justify the need of
garment in the business operational area. Zara to manage business operations will have to
consider several policies of environment such as ban of use of plastic resulted in paper bags
articles from Zara that modified operations of business according to locations (Ichinose and
et.al., 2015).
Legal factors
These factors include employment laws along with health and safety laws need to be
followed by Zara along with laws of copyright and protection of consumers will enforce Zara to
operate business operation and monitor policies of business.
P2 Impact of corporate social responsibility on operations along with reaction of operational
managers.
Corporate social responsibilities play a vital role in operations of business.
Create positive image
Zara by indulging into corporate social responsibility will lead to develop positive and
effective image of brand in market. These practices lead to develop good relationship with
stakeholders resulting in availability of fund whenever required by developing trust forms. The
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managers are responsible to manage the CSR to ensure rights practices are being followed and
they business grows from their act. These practices by Zara enforced account of firm
contribution with their royalty towards benefit of society where manager guides and controls
them resulting in effective image creation for brand (Jabbari-Sabet and et.al., 2016).
Cash flow stability
Cash flow being life blood of companies helping them meet needs for payroll, funding
for marketing activities and development programme for business. The availability of CSR in
Zara will lead to avoidance of litigation and other problems helping company with stable flow of
cash for growth of the firms where managers are responsible for managing cash resources and
investing them in right place along with ensuring these practices help in future development.
Investment in corporate social responsibility of Zara resulted in enormous availability of investor
ready to show trust on companies resulting for their growth and development where manager is
responsible for the occurrence of the act. The availability of funds for firm will lead to access of
inventory and promotional activities monitored by managers ensuring they result in effective
profits for the firm progresses (Jarvis and et.al., 2019).
Employee retention
Practices of corporate social responsibilities led to retention of employees as these times
grown up era developed high awareness for environmental practices for their protection leading
to retention of employees reducing turnover for Zara. The dedication of company to ensure
protection of employees will lead to develop good practices in employees where managers
ensures employees also feel the sense of being protected and they are doing good as well. The
practices in Zara resulted in increase morale of employees where their rights are protected and
valued helping in generating effective outcomes for the brand (Kato., 2019).
Customer satisfaction
Social irresponsible companies have bad reputation and customers tend to ignore
choosing them for their purchasing and availing services. Zara by showing commitment to
community developing high values for society which will result in effective customer
satisfaction. Zara by doing this will develop stable, loyal base of customers as their valuable
assets that will boost business operations for them where manager is responsible to ensure they
hear concerns of customers. Customers from this act of Zara will invest in them ensuring their
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money is also used and contributed towards good and effective means (Kiehtreiber and et.al.,
2018).
P3 External and internal environment analysis of organization's business environment.
Internal and external environment analysis of organization's business environment is
analysed through.
SWOT analysis
SWOT analysis is technique of strategic planning used to aid person or firm to identify its
strength, weakness, opportunity and threats for business to plan for its projects and face
competition in market (Liu and et.al., 2018).
Strengths
 Zara has invested a lot in development of their bran image and gave way to organization
to enter new markets and make the brand extremely powerful and effective.
 Zara has developed strong network for its product which develop potential market for
their future growth opportunities .
Weakness
 The current structure of the company is only compatible for current business strategies
and procedure resulting in limitation of expansion for growth of product segmentation.
 New entrances in type of business proved to be challenges for Zara as they come up with
new and effective products and segments easily acceptable and appreciated in their
market type.
Opportunity
 Updated environmental policies created level playing for all the type in industry. Zara has
great opportunity to grow through its technological advancements along with manage
growth in developing new product into market.
 Development of market will lead to dilution gaining competitive advantage enabling Zara
boost their position in markets.
Threat
 Existing infrastructure model driven by supply chain model is threat to company due to
increase sales through online channels.
 Growing strengths among local business creates threats to business of Zara affecting their
price of competitive advantage.
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PEST analysis
The type of analysis state condition and business opportunities for firm based on factors
like political, economic, social and technological.
Political
Government does not have same outlook for every nation as they all are not open to
foreign direct investment along with local laws making entry of firms difficult as well. Zara has
faced tough time limiting its supply chain operations for home country and nations surrounding
them (Lotfi and et.al., 2017).
Economic
Economy of a nation justify business operations for firms as economy is always a critical
factor for business as Zara has great strategy in affordable pricing so at time of decline of
economy and people switch on cost cutting Zara manages to sell their articles. The low economic
crises helps them run their business operation in effective manner (Luo and et.al., 2017).
Social
Business stand in support of society as they run according to social trends and mange
their responsibility towards society too. Zara focus on performing preliminary research before
entering into society for business operations to minimise risk associated with their business
activities along with learning cultures to boost their buying capacities. They focus on research
ensuring development of local culture and sell their articles as hotcakes because they don't
believe in experiment (Nakamura and et.al., 2015).
Technological
Technology is changing rapidly in case of transportation, communication and various
other aspects. Zara being called most disruptive brand in fashion utilizing their uniqueness to
earn greater profits. Zara focused on establishing greater inventory management along with
establishing RFID system to track inventory and it's value chain helping in improvement of
customer experience (Parisio, Rikos and Glielmo, 2016).
LO2
P4 Impact of operational function on organizational strategy and decision making.
Zara to manage its business operation of retail store in various demographies developed several
strategies for organization along with for the process of decision making.
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Packaging department of Zara focused on initiating effective and efficient practices for
packaging of their articles based on different locations and stores. The developed need of using
environment friendly method for packaging of articles or delivery system will result change of
procedures and practices upgrading their business operations where they develop practices of
effective packaging using known personality and quality eco friendly bags. Zara to achieve this
changed their current practices eliminating use of plastic bags ensuring company is not violating
environmental law operating business activities effectively (Qin and et.al., 2019).
Inventory management department of Zara focused on managing their products and
articles based on segments such as clothing top wear, bottom wear, foot ware and segmented
distribution of articles based on gender and age diversification. Applicability of managing
effective inventory helped in effective segmenting of their products benefiting the customers as
well helped in maintain effective inventory and monitor their products. The practice helped Zara
to effectively manage their products which further resulted in eliminating waste and damage of
their articles along with ensuring their range is updated all the time to generate effective sales.
Company through assurance of their effective channel for distribution will ensure they are
capable of satisfying needs of all type of customers who plans to shop at their stores worldwide
(Radosavljević, Jevtić and Klimenta, 2016).
Logistic department manages the control of products of Zara according to current
consumptions and further needs. The department is responsible to plan for effective storage of
goods to control them from damage along with manage effective services to consumer till the
point of consumption. The department works on strategy of company to manage effective and
efficient store and supply of good to ensure Zara operations are regulated in well defined
manner. They focus on establishing storage place and warehouse for safe storage of their articles
to prevent them from damage such as physical damage, environmental harm and un
approachable to untrained and unknowns. The practices help them protect their articles and
manage effective movement within the company (Takagi and Tamura, Fujitsu Ltd, 2019).
Distribution department responsible for ensuring quality goods are being produced and
distributed in area of requirement. These departments in Zara assure raw material are high
quality standards and they perform proper warehousing and dispatching. The department help
them in managing their garment products effectively along with ensuring they are delivered at
the right time of requirement. Thus, the firm ensure their customers they can deliver their
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products in effective manner if ordered from sources such as Zara application or any other source
generating effective customer satisfaction for such practices. The company along with
developing stores, online mediators develop their delivery channels to approach large number of
users benefiting the firm (Tanabe., 2019).
P5 Several controls and planning methods with their applicability to firm operations.
Operations of firm are regulated by several controls and planning methods.
Controlling method
Controlling is most essential aspect in the business unit, if companies make effective
control over its operations then it can minimize cost and can raise its profitability to great extent.
Several methods that are used by several companies in order to control over operations are
described as below:
Financial ratio analyses
It is very essential for each firm that to have good understanding about current positon of
business. By calculating rations such as profitability, liquidity firms can find out loop fall in
existing operations and can manage its work accordingly so that it can sustain in the market for
longer duration. For example: Toyota is taking support of ratio analyses system in which it
compares its financial ratios with other competitors and own previous records. This comparison
helps in identifying the over expenses variables. By this wat Toyota makes changes in operation
and control over unnecessary expenditure. This method always helps Toyota in understanding its
liquidity position in market (Wakui and et.al., 2016).
Audit
This is type of controlling method also known as traditional controlling technique in
which internal auditors of the firm evaluate the business operations and analyses financial
activities of the firm. ZARA is using this method of controlling in which auditors evaluate
procedure, management and all financial activities of the business. Report given by auditors help
the ZARA in taking corrective actions to improve existing performance of business unit
(Yabuki., 2019).
Planning methods
Each company implements various planning methods to get the desired results. Each
method has different advantage. Description of these planning methods are described as below:
Strategic planning
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This is the type of planning in which strategies are formed in such manner that may help
in meeting the needs of all stakeholders of the organization. It shows the direction of the firm
that helps in meeting the common goal. For example: Toyota has implemented strategic planning
method in which it has proven that humanity is the best strategy for business because it raises its
brand image. Toyota has started contributing to economy of US by offering affordable cars to the
nation. Apart from this, production plant of Toyota is stable or managed which is also great
strategy which has helped firm in raising its brand image and generating more revenues
(Yamagata, and et.al., 2017).
Action planning
This is another planning method that pays more attention over daily activities of business
as it is very focused planning approach. Manager of company makes proper planning and work
in the direction so that objective can be obtained within stipulated period. This type of planning
is helpful in raising efficiency level of operation. For example Zara implements this method
which support organization in sustaining in the market for longer duration. Higher authorities
have great knowledge of market hence they always ensure that they make possible changes in
existing operation or implements innovative ideas so that ZARA can serve consumers well. This
type of planning helps the firm in sustaining in the market for longer duration and gaining
competitive advantage as well (Jarvis and et.al., 2019).
P6 Quality system evaluation along with applicability of operation management adding value
through supply chain.
Quality system is mechanism for managing along with making continuous improvement
in core process to attain maximum satisfaction of customers from the lowest cost. The
applicability of practices in business operations. The implementation of these practices in Zara
will focus on maintaining overall functions of organization to ensure they practice their
organization activity in effective manner to attain business sales and customer satisfaction as
well. These include
Waste management
Zara being a fashion multinational brand dealing in clothing and foot ware of different
standards for people manage and keep bulk inventory to satisfy needs of each and every
individual customer. Managing waste in firm will attain on ensuring each and every product in
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their stock match the standard quality of product firm used to make to eliminate waste and keep
them in organised and safe place from saving them from further harm (Kato., 2019).
Resource utilization
Quality system evaluation focuses on ensuring Zara focuses on utilizing every single
resource available for the firm ensuring they do not spend un necessary cost on their business
operations and processes. The practice of Zara will also include using effective and environment
friendlily resources eliminating waste. The practice will result in effective products and services
produced by them. Optimum utilization of resource will also raise profit margin of firm along
with effective practices leading them to competitive advantages (Kiehtreiber and et.al., 2018).
Eliminate un necessary cost
Applicability of quality system evolution focuses on using resources and assets of
company in their effective and efficient means to attain benefits of involvement of un necessary
cost in their production, movement or even storage processes. The practice will monitor and try
eliminate waste of machine type or even man-made (Liu and et.al., 2018).
The attainment of these practices will add value to supply chain in effective and efficient
means for the organization.
Effective and faster delivery
The process will bring effectiveness through involvement of effective practices and faster
delivery system ensuring value chain system of Zara is functioning through it's best practices.
The practice will ensure satisfaction of customers through effective practices of firm and other
factors as well. The process will result in saving time of company with effective means and they
can further focus on ensuring faster delivery that will aim on attainment of desired goal of
company and even raise satisfaction of customers as well (Lotfi and et.al., 2017).
React faster in changing conditions
The applicability of value through supply chain will ensure operating to customer end
and react according to their requirement and needs. The process in Zara will ensure they react
best in changing environment such as trend, environment, fashion and other factors. These
practices result in functioning of better outputs for Zara help them gain competitive advantage
among their own (Luo and et.al., 2017).
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CONCLUSION
The above study concluded impact of internal factors such as strength of employees, their
capability of taking strategic risks, financial position and innovation along with political,
economic, social, technological, environmental and legal actors affecting business operations of
Zara. The report also addressed effect of corporate social responsibility of firm impact on
creating positive image of firm along with generating cash flow and manage customer
satisfaction with increase retention of employees. Further the applicability of SWOT analysis
and PESTLE analysis analysed organizational business environment. Further it addresses
functions of organization such as packaging, logistic, etc. in affecting organizational stargate and
decision making. Further applicability of control method such as financial ratio analysis and
audit along with planing method such as strategic planing and action planning for firms
operation. Finally, applicability of resource management and waste utilization will justify
applicability of quality evaluation system and reacting to change will justify value added to
supply chain.
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