PESTEL Analysis - Zara

Extract

[...] Zara Pestel Analysis I. Introduction A. Presentation of The Brand 1. Zara • One of the world's best-known brands • One of the largest international fashion companies • The third-largest brand in the apparel industry • Inditex brand clothing line, a world leader in textile manufacturing • Several chains of shops • Head office located in Spain (Galicia) • Their first shop in Spain in Inditex • Zara represents a significant percentage of revenues of its parent company Inditex • Other clothing brands: Kiddy's Class (children's fashion), Pull and Bear (casual clothing for young people), Massimo Dutti (quality and conventional fashion), Bershka (avant-garde clothing), Stradivarius (fashionable clothing for young women), Oysho (underwear chain) and Zara Home (household textiles) • Inditex owns all of Zara's points of sale, with the exception of those places where they are not authorised to own stores 3. [...]

[...] Current Situation of The Brand and Ready-To-Wear Market • Since 2005, gradual phasing out of the global quota system: access to a wider market, with greater geographical scope and potentially more sales • The entry of the textile and clothing industry into the global free market: more competitive and more intense • The marginalisation of small businesses • Domination of large companies (Inditex, due to economies of scale (lower cost per unit resulting from increased production) • The Growing popularity of Zara: known for excellent designs and affordable prices • Faster fashion cycle: several cycles per year instead of two or three cycles per year • Significant international expansion and online sales • Focus on customer happiness: increasing traffic in Zara stores • Intelligent planning to cope with international market pressures Here is a PESTEL analysis that can help you understand the types of forces that a ready-to-wear, or "fast fashion” brand can be hit with in the fast- moving business world. Let's take a closer look at these forces and how they affect Zara's business. PESTEL is an acronym for Political, Economic, Social, Technological, Environmental and Legall. These forces are important and their effect on business is profound. [...]

[...] The economy is always a critical factor in terms of business. • Affordability of Zara: limiting sales drops in case of a drop in economic activity and reduced purchasing power (vs. luxury brands) • A strong dollar can make a foreign brand weaker: reduced profits outside the US • Increase in the cost of labour or raw material for the garments • Differences in entry fees and tariffs: product price variation • Inflation and exchange rates in the less developed countries: profit reduction compared to forecasts • Maintaining the clothing budget is less of a priority in the event of an economic downturn C. [...]

[...] Zara PESTEL Analysis A. Political It is the economic decisions of a country's government and financial regulations that affect the way a company operates: • Changing interest rates • Financial regulations • Foreign Direct Investment • Local laws concerning the entry of a foreign company: partnerships with local brands are mandatory, for example in China • Administrative barriers for foreign trademarks e.g. in India and China • Political stability and a friendly political environment leads to a more serene development for a local and/or foreign brand • Political turmoil: supply chain disruption. [...]

[...] • Sustainability goals: making stores 100% green by 2020. Less energy and water used, efficient recycling • Disposal of hazardous waste from its supply chain • Investment in sustainable wear and tear and creation of the “Join Life” line: clothing made from organic materials (cotton, recycled wool, Tencel) • Production of PVC footwear • Use of biodiesel F. Legal ZARA's focus is also on ethics and sustainability in its business and supply chain. There are a number of laws that companies must abide by. [...]