Topic > Why Zara is successful: Zara business analysis

Zara is one of the largest international fashion companies. It belongs to Inditex, one of the largest distribution groups in the world (Inditex, 2010). Inditex was founded by Amancio Ortega, who is now the third richest man in the world. Inditex is made up of almost 10 companies specializing in clothing. Zara's estimated share of the total turnover of the Inditex group is 80% (Wlodzimierz, 2012). Today there are 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 carries several cycles in a year (Pratap,2017). According to Pratap (2017), Zara is “subject to several forces in the international market” such as PESTLE. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay The most important political factors for any company are the financial regulations of that country (Pratap, 2017). This is because according to Allen (2001) “any activity undertaken by the company will not go unnoticed by the government”. Therefore it is important that companies like Zara are up to date with the regulations they must comply with within that country. Zara operates through a "vertical integration system," meaning it owns several factories, stores and transportation systems. Management must be aware of the trading system of the country in which it operates and be well aware of import and export regulations, as well as government policies to avoid fines (Kasi, 2016). For example, Zara faced fines in 2015, for poor working conditions in Brazil (Butler, 2015). According to Butler, fines have reached up to £25 million, the Brazilian Ministry of Labor has found evidence that 7,000 workers have been mistreated since 2012. Therefore, if the political context is safe and peaceful, brands are happier, this is due to the political upheaval in the market. can influence the economy. Zara managed to overcome this problem by limiting supply chain operations to its home country and neighboring nations, thus minimizing the threat of political disruption (Pratap, 2017). The more stable the political situation of the host country, the better Zara will be able to establish its business roots in that country. Economic factors also play an important role in the success of a company. Companies like Zara need to be aware of interest and exchange rates, as well as the costs of importing and exporting goods (Kasi, 2016). This is because higher inflation rates mean the brand may not be accessible to the public as Zara's previous statistics show that sales in Spain in 2011 were 25%, while in 2009 Inditex sales were 6.8% higher %. While this has not affected Zara due to its global presence, the ability to contain losses or slow profits is significant (Inditex, 2009). Therefore Zara should be familiar with economic growth, interest rates and tax burdens to avoid this (Kasi, 2016). Zara uses affordable prices to help combat the effects of low economic activity because lower economic activity reduces the purchasing power of customers who may begin to reduce costs, this can heavily impact sales (Pratap, 2017). Businesses are also of utmost importance, this is because "businesses cannot bear divorce from society", therefore investing in society isa thing worth doing (Pratap, 2017). Brands that divert their attention from the cultural aspect of business and marketing risk losing customers. Zara does not enter any new market without doing its preliminary research, because culture influences people's purchasing decisions, people prefer to buy items related to their culture (Pratap, 2017). It is of great interest for Zara to focus on population levels, as it will help decide which population to focus on in terms of, for example, clothing production; a higher birth rate is easy for companies like Zara to be able to produce based on the population structure (Inditex, 2014). Information technology has 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 presence physically but with the help of the website Zara.com and social media the brand can also have a virtual presence (Kasi, 2016). Instagram, Facebook, Twitter can help the company stay connected with its customers. Customers can also share photos wearing products, this shows that Zara has an interactive connection with the brand (Inditex, 2014). Zara collaborated with Toyota in 2014, to apply JIT and Lean structures in all its manufacturing activities. This allowed Zara to respond more quickly to customer demand and better coordinate logistics activities. They have also implemented an RFID system to track inventory along the value chain, which means they can track inventory in other stores or on Zara's website and improve customer experience (Pratap, 2017). The environment is also a key factor when it comes to the success of a business. Organizations must use products that are socially accepted as environmentally friendly. Any organization that violates security measures could find itself in trouble in its international market (Kasi, 2016). Sustainability is the most important concern of companies globally. Inditex has committed to making its stores 100% eco-efficient by 2020. They have also invested in “green to wear technologies” for sustainable clothing that make them eco-friendly (Pratap, 2017). There are several laws that companies must comply with, Inditex has implemented programs that guarantee decent wages to its workforce and Zara also focuses on creating an ethical brand image (Pratap, 2017). Legal formats can affect a company's reputation in addition to its costs, if a company like Zara fulfills all legal obligations it will establish a high reputation in the consumer's mind and be welcomed in the international market (Kasi,2016). Since Zara is an international brand, to be a successful brand it is necessary to justify and satisfy all laws regulating the international market (Inditex, 2014). Microenvironmental factors are factors close to a company that have a direct impact on its business operations and success (Sarto, 2017). A micro factor would be the suppliers, who control the success of the company when they are the only/largest supplier of goods and consequently hold the power. The supplier's product is a critical part of the buyer's finished product and business (Allen, 2017). Inditex has over 1800 suppliers according to its website, stating that “we only work with suppliers who meet our requirements” (Inditex, 2017). However, they have little power over suppliers because there are several suppliers in the apparel industry. The macro environment is,2017).