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Essay / Why Zara Succeeds: Zara Business Analysis
Zara is one of the largest international fashion companies. It is owned by Inditex, one of the world's largest retail groups (Inditex, 2010). Inditex was founded by Amancio Ortega, now the third richest man in the world. Inditex is made up of nearly 10 companies specializing in clothing. The estimated share of Zara in the total turnover of the Inditex group is 80% (Wlodzimierz, 2012). There are now over 6,500 stores in 88 different countries (Ruddick, 2014). Zara is known for selling modern designs that the public needs, with quality at affordable prices, CNN called it a “Spanish success story” (SLIDESHARE). Zara's popularity has continued to grow over the years, one of the company's main attractions is its faster fashion cycles, instead of two or three, it brings several cycles per year (Pratap, 2017 ). According to Pratap (2017), Zara is “subject to several international market forces” like PESTLE. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an original essay The most important political factors for any business are the financial regulations of that country (Pratap, 2017). Indeed, according to Allen (2001), “any activity undertaken by the company will not go unnoticed by the government”. It is therefore important that companies such as Zara are aware of the regulations they must adhere to in this country. Zara operates under a “vertical integration system,” meaning it has different factories, sales outlets and transportation systems. Management must be aware of the trading system of the country in which it operates and be well versed in import and export regulations as well as government policies to avoid fines (Kasi, 2016). For example, Zara was fined in 2015 due to poor working conditions in Brazil (Butler, 2015). According to Butler, the fines totaled £25 million. The Brazilian Ministry of Labor found evidence that 7,000 workers had been treated poorly since 2012. Therefore, while the political environment is safe and peaceful, brands are happier because the market is disrupted by the policy. can affect the economy. Zara was able to overcome this problem by limiting its supply chain operations to its home country and neighboring countries, thereby minimizing the threat of political disruption (Pratap, 2017). The more stable the political situation in the host country, the more Zara will be able to establish its business roots in a country. Economic factors also play an important role in the success of a business. Companies such as Zara need to be aware of interest and exchange rates as well as the cost of importing and exporting goods (Kasi, 2016). Indeed, higher inflation rates mean that the brand might not be affordable to the public, as previous Zara statistics show that sales in Spain in 2011 were 25%, while in 2009 sales of Inditex were 6.8% higher. Although this did not affect Zara due to its global presence, the ability to limit losses or slow down profits is significant (Inditex, 2009). So Zara should be familiar with economic growth, interest rates and tax burdens to avoid this (Kasi, 2016). Zara uses affordable pricing to help combat the effects of low economic activity, as lower economic activity reduces the purchasing power of customers who may begin to cut costs, which can take a heavy toll on businesses. sales (Pratap,2017). The social aspect of business is also of utmost importance, as “business cannot bear divorce from society”, and therefore investing in society is a commendable thing (Pratap, 2017). Brands that shift their focus away from the cultural side of business and marketing risk losing customers. Zara does not enter any new market without conducting preliminary research because culture influences people's purchasing decisions, who prefer to buy items related to their culture (Pratap, 2017). It is very interesting for Zara to focus on population levels, as this will help decide which population to focus on in terms of clothing production for example; It is easy for companies like Zara to produce according to the population structure with a higher birth rate (Inditex, 2014). Information technologies have radically changed the lives of individuals and organizations. Now, accurate business planning, effective marketing, systematic management and long-term business growth could not be achieved at an optimal level without technology (Butt, 2015). Zara has a global physical presence, but with the help of the Zara.com website and social media, the brand can also have a virtual presence (Kasi, 2016). Instagram, Facebook, Twitter can help the business stay in touch with its customers. Customers can also share photos wearing products, which shows that Zara has an interactive connection with the brand (Inditex, 2014). Zara partnered with Toyota in 2014 for the application of JIT and Lean facilities across its manufacturing operations. This allowed Zara to respond more quickly to customer demand and better coordinate logistics activities. They also implemented an RFID system to track inventory throughout their value chain, allowing them to track inventory in other stores or on the Zara website and improve the customer experience (Pratap, 2017). The environment is also a key success factor. a business. Organizations must use products that are socially accepted as environmentally friendly. Any organization that violates security measures may face difficulties in its international market (Kasi, 2016). Sustainability is the most important concern for businesses globally. Inditex has committed to making its stores 100% eco-efficient by 2020. They have also invested in sustainable clothing “green wearable technologies” making them environmentally friendly (Pratap, 2017). There are several laws that companies must follow, Inditex has implemented programs to ensure a living wage for its workforce and Zara also focuses on creating an ethical brand image (Pratap, 2017). Legal formats can affect a company's reputation as well as its costs. If a company like Zara fulfills all its legal obligations, it will build a high reputation in the mind of the consumer and will be welcomed in the international market (Kasi, 2016). Zara being an international brand, it must justify and comply with all the laws that govern the international market to be a successful brand (Inditex, 2014). Microenvironmental factors are factors close to a business that have a direct impact on its business operations and success. (Tailor, 2017). A micro factor would be the suppliers, they control the success of the business while they are the sole/largest supplier of goods and therefore hold the power. The supplier's product is an essential part of the buyer's finished product and business (Allen, 2017). Inditex has more than 1,800,2017).