Business and the Business Environment Assignment Sample

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How Zara Adapts to Micro and Macro Environmental Changes

Micro and macro environment plays an important role in the working of organization. These are the factors which impact the profitability and sustainability of the firm. This report is based on the different type of organization and the difference between the firms on various bases. This report will discuss on impact of factors in fashion industries and Zara has been selected as the company for further research. This report will include discussion on various macro and micro factors which are impacting the working and profitability of Zara. It will also include various organizational functions which have been undertaken by company.

Difference between types of organization:

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Size, stricture and scope of organization are directly linked with the objective of the company. In private sectors, objectives are related to increasing in the profitability of company for which they focus on providing customized products. Whereas in public company, objective is linked to providing welfare to society because of which they focus on improving the infrastructure of country for ex: transportation and healthcare. In voluntary association there are huge numbers of members as they aim at finding solving for cultural and social issues which are faced by whole society.

ZARA and its business functions:

The company deals in providing clothing, accessories, beauty products and shoes to the costumer. Zara is aiming at providing latest clothes to consumer within 3 week of launching trends. The company was started in 1975 at Spain with the Zorbas. Once they identified that the has been used in the bar company they changes it to the Zara. Currently, the firm is having more than 2000 stores in 96 countries worldwide. The company is having net profit of 23 billion euro in 2022 with market share of 11.1 % in UK (Market share of Zara in UK, 2023).

Marketing function: This function includes creating awareness in the market regarding company’s product. The company is using both online and offline method for promoting product in the marketing (Chunling, 2020). As company is focusing on the young generation, marketing team uses influencer marketing and social media marketing for promoting product of the company. This helps in attracting and influencing large amount of customer towards company’s product and increasing sales of company. Advertising and sponsorship has been used by the company for promoting their products.

Finance function: This function is related to deciding on the budget, capital structure and price strategies for the company which will help in effectively carry out all financial process of the company. Zara is aiming at reducing its expenditure towards marketing and focus on reducing the cost of production. This will help in providing good quality products to customers at reasonable price which leads to create competitive edge in the industry.

Human resources function: It has been identified from the survey that Zara is effectively following the process of talent acquisition. The company is providing training and development program to its employees on regular period which help in achieving their goals. Under off-the- job training program, awareness has been created regarding fashion trends and products. On-the-job training involves learning regarding sticking shelves, point-of-sale and customer services. This help in increasing efficiency of employees in completing their task which eventually leads to attaining objective of organization (Zhu, 2023). The company provides reward on the basis of their performance and employees are providing with 25% discount for purchasing from company. For maintaining satisfaction level of employees and balancing work and life of individual, firm provided various other benefits which involve office cab, child care facility, cafeteria and health care facility and office gym. 

Production function: Zara does not produce their cloth in UK as the cost of production in country is expensive. Most of the production function of Zara is carry out in Spain because of lower salary expectation of employees. Logistics and distribution hub is located in Zaragoza in Spain (Dayson et al, 2023). In UK, clothes and accessories are sullied with airways. Just in time manufacturing strategy has been followed by company which aims at ordering garment in small quantities so they can replace them with new trends easily.

Analysis of PESTLE model

Macro environment refer to as the all external factors which are impacting the working of organization. These factors are not in control of the owner and impacted can be fully minimize (PESTLE analysis of Zara, 2023). Firm focused on introducing various measures by which the impact of these factors could be reduced on the organization and that will lead to maintaining stability within industry. PESTLE analysis of Zara is as follows:

1. Political factors: Brexit in UK has lead to creating many challenges for Zara in UK. Brexit has lead to increase in the cost for shipment, introducing traffics in import and export within country and there is drastic rise in the prices of raw materials and energy. This is leading to increasing in the cost of production for the company and impacting on the profitability. There is political stability in the country which helps in economic growth and eventually benefits the working of Zara. There is increase in the tax rate of corporate sectors which is leading to decreasing profitability of company.
2. Economic factors: There is increase in the demand of consumer good in UK which is leading to increase in inflation within country. It decreases the purchasing power of the consumer leading to reduction in sales of Zara. It has been identified that interest rate has increased on borrowed fund which is increasing cost of firm (Dewi, Suryaputra and Sondakh, 2022). There is increase in unemployment rate in the UK which is leading to reduction in disposable income of the consumer impacting sale of the Zara. Inflation has lead to increase in the cost of living in UK that is impacting the sales of the company.
3. Social factors: Need and preference in the fashion industry changes with drastic rate so Zara need to focus on changing its product with trends. There is change in the spending habits of consumer which can negatively impact the working of organization. Consumer preference has changes toward online shopping which is making it necessary for company to focus on their website. However Zara is having online website but then also firm should focus more towards increase their online market for sustainable development.
4. Technological factors: There are continuous changes in the technology which will help in producing good quality product at less cost. Zara should focus on using latest technology in their production by which cost for consumer could be reduced. Technology is been used to cover wide area of market, Zara should focus on using technology for marketing by which company could enhance its reach in the market. This will help in creating competitive edge in the industry and help in maintaining sustainability.
5. Legal factors: Zara need to compile with the rule and regulation formed by the CMA which is liable for easy working of fashion industry in UK (Grandia and Voncken, 2019). Zara is already facing issue relating to copyright which is creating problem in effective working of organization. The company should create effective policies and regulation for their employees which will help in filling labor law of UK.
6. Environmental factors: It has been identified that fashion industry is using high amount of energy as compared to the combination of aviation and shipping industries. There are various policies which have been formed by the government which will help in protecting the environment. For protecting environment Zara has taken sustainable pledge which is published on company’s website which indicates company’s commitment toward protecting surrounding.

Analysis of TWOS model:

TWOS refer to as indentify threats, opportunities, weaknesses strengths which are connected with the firm (TOWS analysis of Zara, 2023). This will help in determining appropriate strategies for organization which will be beneficial for growth of the company. TWOS analysis of Zara is as follows:

Identifying strengths and weakness of the firm will help in determine the impact of macro environment factors. This will help in taking the decision which can reduce the impact of macro factors by identify the weakness and strengths of the company. Managerial decisions are taken after evaluating correct strengths so that opportunities which are available in the market can be used by the firm. It will help in determine the exact amount of risk which is associated with the external factors and measures could be determined by which their impact could be reduced.

Impact of micro environment on business objective

• Micro environment consist of customers, suppliers, competitors, intermediaries and employees. This factor plays an important role in deciding objective of the business (Popovi?-Ševi? et al, 2021). Objective of business should be determined after evaluating the needs and preferences of the customers which will help in gaining more customers by satisfying their demands.
• Zara is facing threat of competitors which is making it difficult for companies to gain more customers. Objective should be determine after analysis the policies and strategies of competitors which will help in effective decision making.
• Company is aiming at providing trending goods to the consumer within 3 weeks after they have been launched. The company is having effective and efficient number of employees which help them in the accomplishing their goals within determined time period.
• Intermediaries help in timely distribution of goods and services to the customer. Zara sold its products by its own retail store and online modes which help in reducing the cost for the customer as there are less number of intermediaries present in the market.

Conclusion

It has been concluded form the report that micro and macro environment of organization should be evaluated for ensuring stability of company. It has been identified that there are different type of organization which differ on the basis of their size, scope and structure that describe their objective. Private sectors aim at improving profitability of company by using all possible measures whereas public and voluntary organization focuses on social well being. It has been identified that Zara provide training and development session to its employment for motivating them which help in effectively carries out HR function. Brexit, traffics duty, increasing in inflation rate, interest rate, change in consumer preference are various factors impacting working of Zara. Company is having good research and development team and effective supply chain which will help in improving its profitability by overcoming all threats.

References

Books and Journals

• Caro, F., Babio, F. and Peña, F., 2019. Coordination of inventory distribution and price markdowns for clearance sales at zara. Operations in an Omnichannel World, pp.311-339.
• Christodoulou, A. and Cullinane, K., 2019. Identifying the main opportunities and challenges from the implementation of a port energy management system: A SWOT/PESTLE analysis. Sustainability, 11(21), p.6046.
• Chunling, L., 2020. Analysis on the Marketing Strategy of Fast Fashion Brand Zara Based on 4C Theory. In 4th International Conference on Economics, Management Engineering and Education Technology (ICEMEET 2020) (pp. 3-5).
• Dayson, C., Bennett, E., Damm, C., Rees, J., Jarvis, C.J., Patmore, B., Baker, L., Terry, V. and Turner, K., 2023. The distinctiveness of smaller voluntary organisations providing welfare services. Journal of Social Policy, 52(4), pp.800-820.
• Dewi, N.L.P.T., Suryaputra, R. and Sondakh, O., 2022. Analysis of the Effect of Product Quality Factors, Product Style, Product Price, Brand Image, Service Quality and Store Environment against Brand Loyalty of Zara Customers in Surabaya. Zenodo (CERN European Organization for Nuclear Research).
• Grandia, J. and Voncken, D., 2019. Sustainable public procurement: The impact of ability, motivation, and opportunity on the implementation of different types of sustainable public procurement. Sustainability, 11(19), p.5215.
• Hermans, F., Geerling-Eiff, F., Potters, J. and Klerkx, L., 2019. Public-private partnerships as systemic agricultural innovation policy instruments–Assessing their contribution to innovation system function dynamics. NJAS-Wageningen Journal of Life Sciences, 88, pp.76-95.
• Khando, K., Gao, S., Islam, S.M. and Salman, A., 2021. Enhancing employees information security awareness in private and public organisations: A systematic literature review. Computers & security, 106, p.102267.
• Popovi?-Ševi?, N., Jeremi?, A., Slijep?evi?, M. and Ili?, M., 2021. Marketing focused on the online brand community: The example of Zara. Marketing, 52(1), pp.32-42.
• Yin, Z., 2022, July. How Fast-Fashion Brands Went Viral—Taking Zara as an Example. In 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) (pp. 538-542). Atlantis Press.
• Zhu, Y., 2023, June. Research on Fast Fashion Industry Under Sustainable Development Model: Based on ZARA’s SWOT Analysis. In Proceedings of the 6th International Conference on Economic Management and Green Development (pp. 935-942). Singapore: Springer Nature Singapore.
• Online
• Market share of Zara in UK. 2023. Online Available through :< https://ecommercedb.com/insights/zara-rising-global-sales-zara-store-numbers-latest-fashion-trends/3098#:~:text=Including%20the%20United%20Kingdom%20(11.1,and%20the%20Netherlands%20(2.6%25).>
• TOWS analysis of Zara. 2023. Online Available through :< https://www.edrawmind.com/article/zara-swot-analysis.html#:~:text=In%20the%20Zara%20SWOT%20analysis,it%20can%20improve%20on%2C%20like>
• PESTLE analysis of Zara. 2023. Online Available through :< https://pestleanalysis.com/pestle-analysis-of-zara/>