Business report on ZARA Essay Example | Topics and Well Written Essays - 1250 words

Business report on ZARA - Essay Example Zara operates in a highly competitive industry. In analyzing its external environment, this paper will use the PESTEL model, which details the various external factors that favor or affect the general performance of the company. The external factors in the analysis are political factors, economic factors, socio-cultural factors, Technological factors, Environmental factors and the legal factors in place (Brooks & Wilkinson, 2011, p.68). The PESTEL model generally measures the market of a company (Wetherly & Otter, 2011, p.10).Political factors The Governments and political parties in a country are key factors in the establishment of a political environment (Halbert & Ingulli, 2009, p.21). The Spanish government is relatively stable and has provided measures that boost the performance of businesses. Since the main production plant is in Spain, and it's being centralized, this makes it the backbone of the company. The favorable political environment made possible by the political stabi lity in the country and favorable government policies have been a key silent factor in the success of Zara’s production unit. In addition, the government tax policies and investment policies have been favorable for the past decade of its operation in Spain and can be attributed to influence the performance of Zara positively. The company faces normal economic fluctuations like other companies such as movement in interest rates, changes in foreign exchange rates and a shift in inflation rates.  ... Further, in its expansion into other countries of operation, the political support and stability was critically assessed before the decisions were made. Economic factors The company faces normal economic fluctuations like other companies such as movement in interest rates, changes in foreign exchange rates and a shift in inflation rates. However, Zara, for all its time of operation has only been dealing in a single currency. Though this had seemed to pose many transactional problems due to their large scale of operations, the company preferred to use a safer currency. This is believed to be the reason that Zara was not affected by the recession, which was caused by adverse movement in the dollar. Before its entry into new markets, the company evaluates the economic conditions of the country it wants to launch operations to ensure stability and relative predictability. Socio-cultural factors Social-cultural factors mainly include the cultural aspects in the region of operation includi ng factors such as population trends, the attitudes of the populations (Collison, 2003, p.32). Trends in socio-cultural factors have a great impact on the demand of a firms products and the operational processes of the company (Cadle & Yeates, 2010, p.33). For Zara, their element of trend chasing has led to them studying the cultural trends in terms of fashion and their attitudes towards dressing in order to give their customers a specific customised experience according to the region of operation hence gaining more market share. In addition, the company is located in a country that has firm cultural roots that contributes to its performance. Technological factors Technology is a key factor in the efficiency and effectiveness of business operations today (Kew &