Key Elements Which Will Determine Zara’s Profit Growth in the Next Three To Five Years Introduction
Zara is a Spanish company that starts its business as a clothing manufacturer. It started to grow from a small company over the decades until it possesses few factories that allocate their products to other countries. Zara crosses over the border of its own country, Spain and could be found in upscale locations in the cities like Europe, United States, Middle East, and Asia. Zara has its system of 1603 stores in 78 countries. Its stores are located at high-ended places in the world's major capitals, which target at upper-middle level people (INDITEX, n.d.). We have discovered a few factors in the macro-environment which we believe they will affect Zara’s profitability in the next three to five years. These factors are: 1. Economic factors
2. Environmental factors
3. Social factors, and
4. Technology factors
However to discuss on the each factors broadly would not bring any substantial understanding to the topic. Hence in these 4 factors we have decided to review on the key elements which we think are going to play important roles in affecting the profitability of Zara in the next few years. 1. Economic Factors
a. The Lack Of Main Competitors, Gap And H&M, In China, A Rapid Growing Economy Body In the year 2006, Zara came into China market. However, Gap and H&M are Zara’s main competitors that are neither in Hong Kong nor in China yet. Zara started up its first stores in China and has many stores opened in different upscale locations in the main cities. Zara has become a very well-liked rapid fashion product in China. With the aggressive expansion of Zara, there are 91 Zara’s outlets in China nowadays (EFU, n.d.).
b. Zara Sales Increases Despite Economy Crisis
Although recession occurred in the year 2008 and 2009, it did not affect Zara’s sales at all but increased net cash received for sale of products and services. In the year 2008, Zara has a net sale of 10,407 million euro and also an upsurge of 11,084 million euro in the year 2009. There are two significant factors that contribute to Zara's achievement. Zara is able to determine what shoppers want and provide an assurance to distribute products promptly to all the outlets throughout the world. As the result of annual report 2010, Inditex Group (Zara’ parent company) total sales have increased 1,443 million of Euro from 11,048 million in 2009 to 12,527 million in 2010. 2. Environmental Factors
c. Increasing Concern Of Environmental and Animal Welfare Issues Zara uses the following materials to produce the product: ecological fabrics, organic cotton, and poly vinyl chloride (PVC) free footwear which are environmental friendly.In the production of poly vinyl chloride (PVC) free footwear Zara uses non-biodegradable materials which are poly vinyl chloride (PVC) free.Zara supports organic farming which is the reason they produce their garments out of organic cotton which is 100% cotton. Zara recycles the hangers, cupboards and other plastic materials used for packaging which are picked up from their outlets and processed into other plastic elements. Zara processes millions of hangers and security tags are each year. They collect hangers and security tags from outlet and transform them into other plastic items. This recycling process helps the company be considered as environmental friendly and also save operation cost. As an international chain clothes store, people may perceive that Zara uses a lot plastic bags. However the fact is that 90% of the bags Zara gives out to customers are made of paper. Only at certain times such as sales clearances, they use plastic bags. Even then they see to that all the plastic bags they use are biodegradable and to be decomposed through a natural biological process (Sanblue Enterprises, 2012). There are a lot of wild animals are being killed each year just to get the finest...
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