PESTLE analysis of Inditex

Topics: Inditex, Economics, PEST analysis Pages: 10 (2699 words) Published: December 8, 2013
The Inditex Group
 
Inditex, Industrias de Diseño Textil SA, is a group of almost one hundred companies dedicated to the different activities encompassed by the business of designing, manufacturing and distributing textile goods.  

The Spanish company was founded by Amancio Ortega, who remains the company's biggest share holder, in 1975 and started off as a family business. The group's achievements, together with the uniqueness of its business model which is based on innovation and flexibility have made it one of the largest fashion groups worldwide. The group's understanding of fashion, creativity and quality design and an agile response to the market demands have resulted in fast international expansion and a warm welcome of the business concept on behalf of the public. Inditex is present in 77 countries with stores of its nine different brands. The group's most renowned brand alone, Zara, has over 1600 stores around the globe (Inditex, N.D.a).  

Inditex is the only clothing company in the international field with its own manufacturing process. The supply of raw materials, the distribution process and the most capital intensive production phases such as design, quality control and packaging are all run within the group itself. The more employee intensive phases, however, are subcontracted to nearby businesses.  

Inditex has managed to adapt itself to the peculiarities of each of its market destinations. Thus, in areas where there is a high competition, a low risk or a high growth potential (that is most of Europe and the whole of America) the company adopts a position of growth through subsidiaries. In highly competitive unfamiliar markets it does so through joint ventures that soften the learning effect (such as Japan and Germany). And in situations where the risk is high and sales are low, where the cost of building its own stores is very high, acting through franchising (Middle East and Scandinavia).  

 
PESTLE Review
 
PESTLE describes six factors that apply to all businesses, although some factors will impact one particular business to a greater or lesser extent or in a more direct or indirect manner than others. Awareness and analysis of the PESTLE factors allow companies to align themselves to these external aspects and in many cases, soften the impact that they have on business. It is worth noting that PESTLE is a model and that in reality many of the forces affecting business relate to more than one of the factors explained below, that is, that factors are closely related and interdependent.  

Political
The political factor is concerned with the role of governments and their policies. Government systems and regulations will have direct implications on business. Considering politics is very important when operating in a new country in order to adapt to local procedure since local, national and international politics must be taken into consideration. Companies will typically side with one political party and it will be in their best interest for that party to govern since changes are brought around that would work to the company's advantage in the dynamic world of politics. For example, one party is generally more likely to support construction and the expansion of firms and is therefore more likely to give the licenses required. The political environment has a large impact on the economy as it fixes taxes and interest rates. Similarly, legal factors are also closely tied to politics.  

 
Economic
For most businesses the first and fundamental responsibility is to produce goods or services and sell them at a profit. All these businesses are of an economic nature as explained in Carroll's review (1979): 'All business roles are predicted on this fundamental assumption'. Hence the importance of examining unemployment and labour supply, possible changes in the economic environment and current economic growth, inflation and interest rates. All these have an impact on pricing and nonetheless on competition,...


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Global March, 2011. Retail fashion Zara under investigation for sweatshop in Brazil. [online] Available at: < http://www.globalmarch.org/news/230811.php>
MIT Sloan Management Review, 2004
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