Detailed PESTEL Analysis of Zara
The success of Zara is deeply tied with the economic status of the territories it operates in. This PESTLE analysis of Zara by EdrawMax reviews its market standings through Political, Economic, Sociocultural, Technological, Legal, and Environmental lenses.
1. Lead-in
Zara is a familiar name in the fashion world for its unique and trendy designs. They bring collections of cloth, shoes, accessories, swimwear, beauty products, and many other items at an affordable price for their customers. Besides the internal issues that can decide the company's success, several external factors influence its growth.
To know the contribution of those external factors, companies require to do PESTEL Analysis. Pestel Zara shows how political factors, economic conditions, socio-cultural mindset, Technological advancement, legal actions, and environmental issues influence their business. In this article, we will introduce EdrawMax Online that helps in creating Nintendo SWOT Analysis diagrams with free templates.
2. About Zara
2.1 Introduction of Zara
Zara is a Spanish lifestyle brand recognized worldwide for its attractive accessories and clothing items. They concentrate on selling trendy clothes known as fast fashion, which is highly popular among the fashion-conscious young generations. They offer a broad collection of apparel at a competitive price which has helped them become a global name. Zara comes under the parent company Inditex known for its sustainable business practices.
Headquartered in Spain, the brand has successfully created a worldwide presence. They have more than 2000 stores serving millions of customers. A thorough and objective PESTEL analysis is significant to knowing how different factors affect the company's business. For PESTEL Zara, it is essential to have the basic details of the brand.
2.2 Overview of Nintendo
| Company Name: | Zara |
| CEO: | Amancio Ortega |
| Company Type: | Fashion brand |
| Year Founded: | 1975 |
| Employees: | 16,500 |
| Annual Revenue: | $2.2 billion (Inditex's revenue) |
| Founder: | Amancio Ortega, Rosalía Mera |
| Area Served: | Worldwide |
| Headquarters: | Arteixo, Spain |
| Operating Income: | $18 billion |
3. Zara PESTEL Analysis
Today Zara, a Spanish brand, earned a position in the fashion world as a global player. There are multiple external conditions that directly or indirectly impact a company's business, and the PESTEL analysis of a company can give an overview of those situations. PESTEL includes components like political factors, economic factors, socio-cultural factors, technological factors, environmental factors, legal factors, etcetera. PESTEL Zara can show how those external factors impacted the company's business while exploring their future scopes of growth -
Political Factors:
Political factors can influence the firm's business. Various government policies, trade agreements, and taxation directly impact organizational growth. As Zara operates in multiple countries, the governmental policies of those countries regarding the foreign and domestic brands can also influence the situation -
- The European Union's free-trade policies favor Zara's business. Zara is a Spanish brand, and this agreement has allowed them to get the supply of raw materials and export their products worldwide smoothly.
- Recently expanding its business in multiple countries, it needs to consider the government policies of those regions. For example, for Zara, doing business in China and India can be difficult due to red tapism.
- The political disruptions in the countries near the EU or where Zara operates can disrupt the supply chain affecting the smooth flow of the business.
Economic Factors:
Just like supply-demand chains, raw materials availability and labor play a significant role in the expansion of a business. The inflation rate, economic shrinkage, and financial distress of the company are some reasons a business may face hard times planning its growth. Here are some economic issues that can decide the business strategies of Zara -
- As Spain is a country that has a high unemployment rate, Zara can get cheap labor for its production processes. The low labor cost and raw materials have helped Zara in business expansion.
- Zara is one of the brands that sell trendy clothes at a competitive price, which brings in more customers. They have already established a loyal customer base, and their strong brand image is helping them to get new customers.
- Zara is one of the brands that operate worldwide. Therefore, the global economy plays a significant role in its growth. The global economic slowdowns can harm business. The whole world is presently experiencing financial distress. Thus, it is affecting Zara's functioning. A high inflation rate and less money at the hand of customers can show a negative impact on the business of Zara. This economic condition can limit the financial growth of the brand too.
Socio-cultural factors:
When a company has a strong brand image, they need to put significant effort into retaining it. As a brand that has a massive customer base, certain socio-cultural factors impact the business of Zara -
- The brand is well aware of the communities they serve, which results in its affordable price range and high demand. The connection that Zara has with its customers favors their business.
- In recent years, the popularity of online shopping has been going up. Zara is putting effort into offering a seamless online shopping experience. They are working on maintaining a smooth logistic process to add up to customer satisfaction.
- Zara targets the communities and age groups in search of trendy accessories and clothing items. They offer fast fashion clothing in an affordable range, which is attractive to many customers.
Technological factors:
In the 21st century, a firm's business is no longer limited to physical stores. Therefore, the brand's online presence is significant in bringing more customers. Here are some technological factors that can affect their sales -
- They have a well-designed website that can help create a robust online presence to grab the attention of potential customers. They can target the communities for online marketing, eventually increasing their sales.
- Using advanced technology and worldwide reach, Zara does thorough market research to learn the demand of their customers. It gives them ideas about the sectors they need to improve.
- They can have a seamless supply chain and logistic process using technological advances. Customer satisfaction will increase the rate of returning customers for the brand. Their RFID technologies help solve inventory and logistic issues.
Environmental factors:
The environmental issues do not directly influence Zara's retail business. However, the practice of prioritizing environmentally sustainable businesses has started everywhere. It is inspiring businesses to take up eco-friendly ideas -
- Zara comes under the parent company Inditex. They have already decided to take up several sustainable goals. Practices like having an energy-efficient store and increasing the use of recyclable items for packaging can be considered environment-friendly approaches.
- The brand is a fast-fashion store. Hence, there are chances for a lot of wastage. Zara is aiming to streamline the manufacturing process to reduce wastage.
- The company has already pledged that it will manufacture environmentally sustainable products. They respect issues, including animal welfare, sustainable material, biodiversity, and more.
Legal factors:
When a brand operates in multiple territories, its business ought to be affected by the laws of the areas. Zara is a fashion brand, and there can be several legal issues that may have a significant impact on its sales -
- The trade and labor laws can impact the company's supply chain and production. Zara enjoys a smooth supply of raw materials and exports because of the EU Free trade policies. Similarly, the laws of the countries where the company operates can impact the business.
- The brand caters to offering clothes of the latest trend for their customers, and this is when they may get penalized due to copyright issues and trademarks. There can be accusations of stealing designs or concepts on them. Previously, they were accused by Balenciaga and Adidas of copying their designs.
- The country laws of where Zara operates can be decisive in the strategies the company will follow in those regions to expand its business.
4. How to Do a PESTEL Analysis in EdrawMax
- Step - 1: Preparation
- Step - 2: Template Selection
- Step - 3: Add Textual Information
- Step - 4: Customize
- Step - 5: Export & Share
If you are using the offline version of EdrawMax, open the tool in your system. If you wish to access remote files, head to https://www.edrawmax.com/online/ and log in using your registered email address. If this is your first time using the tool, you can register with your personal or professional email address. Go to 'Marketing' diagrams under Business diagram type and click on 'PEST Analysis.'
EdrawMax has thousands of free templates. Head to the Template section on the left and type 'PESTEL Analysis' to see all the pre-built PESTEL Analysis templates like Netflix PESTEL Analysis, Amazon PESTEL Analysis, IKEA PESTEL Analysis, and more. Check the template that resonates closely with your business model. Click on 'Use Immediately' to import the template's contents to the EdrawMax canvas. You can start customizing the PESTEL analysis diagram as per your requirements. If you want to draw the PESTEL analysis diagram from scratch, you can click '+.' It will open up the user-friendly canvas of EdrawMax that has several features that ease your efforts in making PESTEL analysis diagrams.
PESTEL Analysis diagram requires you to add Political, Economic, Sociological, Technological, Legal, and Environmental content so that the reader will understand what influences an organization. Use the PEST symbols from the left side and add the content to your PESTEL analysis diagram.
EdrawMax gives you ample options to customize your PESTEL Analysis diagram. From changing the background to adding content, you can customize the diagram in any way you desire. In addition to this, you can go ahead and change the background color, modify the text, add hyperlinks, add multiple pages, add images, and even add vector-enabled texts to your PESTEL analysis diagram.
Once satisfied with your PESTEL Analysis diagram, you can export it into multiple formats, including Microsoft, JPEG, PNG, Visio, HTML, and more. EdrawMax lets you share your PESTEL Analysis diagram on social media platforms, like Facebook, Twitter, Line, etc.
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5. Key Takeaways
For any brand to successfully run its business, it is essential to consider the external issues. The brand can carefully set strategies for the factors that can negatively impact their business to ensure their success. PESTEL Zara reveals that they need to make plans to use technology and economic conditions in their favor while maintaining a seamless supply-distribution chain and incorporating sustainable, eco-friendly business ideas.
EdrawMax is one of those tools that not only let you create wonderful diagrams but also ensure that you can share them easily with your friends or colleagues. This PESTEL Analysis diagram software lets you export your diagrams in multiple formats and on different social media platforms. Now create a PESTEL Analysis diagram using EdrawMax's templates and share them on Facebook, Twitter, Pinterest, or even in your mail without worrying about privacy! Download EdrawMax today and create a unique PESTEL Analysis diagram per your industries' requirements.
Reference
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Bush, T., 2022. PESTLE Analysis of Zara., [online]. PESTLE Analysis. Available at: https://pestleanalysis.com/pestle-analysis-of-zara/ (Accessed 17 August 2022).
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Farooq, U., 2022. Zara PESTLE Analysis - Spanish Lifestyle and Retail Brand., [online]. Marketing Tutor. Available at: https://www.marketingtutor.net/zara-pestle-analysis/ (Accessed 17 August 2022).
