Pestle Zara

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  • Topic: Inditex, Zara, Fast fashion
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Pestle Analysis of Zara

SOE11108

Sources of Competitive Advantage

Assessment 1

Group Presentation

PESTEL – Analysis

[pic]

Contents

1 Introduction 3

2 Overview 3

3 Business Environment 3

4 Political 4

5 Economic 4

6 Social 5

7 Technological 6

8 Environmental 6

9 Legislative 8

10 Conclusion 8

References 9

Introduction

The global apparel market is a consumer-driven industry. Also, globalization and new technologies have allowed consumers to have more access to fashion. As a result, consumers are changing, competition is fierce, and companies are evolving to meet these demands. Zara, a Spanish-based chain owned by Inditex, is a retailer who has taken a new approach in the industry. With their unique strategy, Zara has the competitive advantage to be sustainable. In order to maintain that advantage and growth they must confront certain challenges and face traditional retailers in the apparel industry. So, now our group will analysis the PESTLE of Zara Company. (Lopez & Fan, 2009)

Overview

Zara is one of the largest international fashion companies and belongs to Inditex, which is one of the largest fashion retailers worldwide. Inditex operates in textile design, distribution and manufacturing. (Inditex, 2011 b)

Zara operates in 78 countries worldwide with 1557 stores in the world’s largest cities. (Inditex, 2011 c)

The company is founded in 1975 by Amancio Ortega, located in Spain and had in 2010 a net sale of 8.088 million of euro. (Inditex, 2011 a)

The have worldwide 1557 stores in 78 different countries. (Inditex, 2011 a)

Aim: democratize fashion, offering latest fashion, medium quality and moderate price (Lopez & Fan, 2009)

Structure: customer oriented, satisfaction of consumer needs (Mazaira, González, & Avendano, 2003)

Business Environment

Global textile and clothing industry (Lopez & Fan, 2009) with 900 billion Euro in 200 worldwide (Ghemawat & Nueno, 2006).

Main competitors: H&M, Gap and Benetton (Ghemawat & Nueno, 2006)

Dynamic and innovative sector (Nordas, 2005)

High quality fashion market vs. lower quality products (Nordas, 2005)

Production in Europe vs. Production in low cost (Nordas, 2005)

Political

Internationalisation:

The key pull factors that explain the internationalisation of Zara include Spain’s entry into the European Union in 1986, the globalisation of the economy and thus potential economies of scale, the homogenisation of consumption patterns across countries – Zara’s belief is that “national frontiers are no impediment to sharing a single fashion culture” – and the abolition of barriers to export as well as the development of information technology (Lopez & Fan, 2009).

Indian Market:

India provided open market for Zara as Indian government is willingly to provide foreign investment in their country, but Indian Govt. Has their own policy which are to be adhered by organizations as Zara formed joint venture with TATA (Shah, 2011).

Economic

Production NOT transferred to low cost locations

Zara resisted the industry-wide trend towards transferring fast fashion production to low cost countries like for example China. Zara states that this gives the greater control as it controls most of its steps on the Supply Chain, designing, manufacturing and distributing of products (CNN, 2001). In the UK 50% of the product Zara sells are manufactured in Spain, 26% in the rest of Europe and 24% in Asian and African countries → clothes with longer shelf life like for example basic t-shirts are outsourced to low cost suppliers mainly in Asia and Turkey (Business Week, 2006).

Zero Advertising Policy

The most unusual company policy is its’ no advertising policy. It is worth noticing that Zara competitors rely heavily on costly advertising campaigns. However, Zara prefers to invest money in opening new stores instead (CNN, 2001).

Producer of about 11 000 items...
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