PEST Analysis of Zara’s International Business Model

1804 words (7 pages) Essay in International Business

18/05/20 International Business Reference this

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Zara is a successful company founded by Amancio Ortega in 1975 in Northern Spain. It has grown since then to more than 2000-store chain and providing its services to customers in 96 countries. As it grows, ZARA Company has been launching and acquiring fashion brands, which are under the Inditex, the biggest fashion retailer globally (Hanbury,2019). Currently, Zara Company is in the position of manufacturing 840 garments every year and has a combined count of 7,442 locations.

Zara’s Mission Model

 Zara operating model has an objective of contributing to the supportable expansion of humanity and the surrounding.  The interesting thing about Zara is that it does not mention anything concerning clothing in its mission.  Notably, its mission is mainly focused on the business model, the environment and the society (Hanbury, 2019).Zara’s business model is an appeal to its unique strategy, while the environment and society elements appeal to environmental sustainability (Glovanni, 2018).  The evidence of environmental sustainability is found in its various initiatives in their product design and distribution.

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 Despite the fact that it is difficult to tell whether it is true or not that Zara has succeeded in creating general awareness on the welfare of the society, it can be argued that the company influences a great number of societies. Zara is providing its services to societies in China, US, Brazil, and Europe, an indication it serves different cultures (Glovanni, 2018). The way Zara sells its products is unique and it is one element for its success. Zara each and every transaction is engaged in voluntary, hence it can be concluded that Zara provides products whose prices are agreeable to many customers. This could be one way in which Zara increases general welfare.

 Latest Strategies by Zara

 Recently, Zara has announced an augmented reality (AR) practice in its outlets.  The aim of introducing it is to increase its customer engagement with its product by use of their mobile phones. AR can help the customers to see representations trying designated styles after connecting on the sensors positioned in the stores. The technology has been launched in its 120 stores in various regions of the world and the millennials are the target customers (Danziger, 2018). It is also a strategy by Zara Company is aimed at creating curiosity to the customers as it is a powerful tool in marketing.  By using AR, Zara is in a better position of drawing clients into the variety.

 Zara has evolved into the new 4Es promotion tactic, which is unique in the sense that it makes the customer be the central focus of the company.  Customers’ experience, exchange, evangelism over client, and all that Zara has put into considerations (Danziger, 2018). Zara has a clear understanding that the experience of a customer is more compared to the product itself.  It has also worked on its pricing formula as it has moved from the piling high, selling it cheaply to the concept of exchange. Deeper connections are being used by Zara to ensure that the customers are fully engaged. Zara has knowledge that the value is measured beyond the price of the product (Danziger, 2018).  Convenience and time have been included in value measurement. In the year 2017, Zara Company made over $30 billion in sales.

Potential Cultural, political, economic, or legal concerns of Zara in the United States and China

Zara’s Discrimination and mistreatment of customers and employees in the US

 Zara has been faced by a number of cultural concerns both in the USA and China. Recently, Zara has been reported to have a behavior of labelling suspicious customers using the code of words.  A report was prepared after a detailed investigation. It showed that black customers were the one being referred to as special orders. The African American is the group that is affected by discrimination, and they were targeted especially during stealing. Other allegations that have been identified by the report was the claims by dark workers are mainly disgruntled with their hours (Gajanan, 2015).  It was also reported that dark workers were not likely to be indorsed and they were also made to undergo harsh treatment from managers.  On the other hand, Zara’s white employees are treated better treatment compared to black employees.

 The favoritism that has been identified with Zara has the potential of affecting promotions to reach more customer.  It will also affect the spreading of labor hours as well as management evaluation and treatment.  Zara company responded by refuting the findings, claiming that the company was not contacted (Gajanan, 2015). The difficulty that Zara is facing in the USA is trying to convince the public that it does not have any discrimination or mistreatment.  Zara has a strong belief that the allegations are entirely unreliable with the ethos and the involvements of the company. Zara has also tried to defend itself by putting forward that it is an equal employer.

 The corporate culture has been a problem for Zara in the USA. The lawsuit helped in bringing to light the depth that discernment saturates Zara USA. The exposes of the lawsuit were much of importance as it helps Zara in reflecting the happenings of all the levels. Zara was also involved in controversies that included selling of items with insensitive designs (Gajanan, 2015).An example of a product that had controversy was Zara’s necklaces that had figurines in blackface.  The history of controversies on racism by Zara includes the case in New York where two most famous Zara stores faced investigation after clients reported that the stores were characterized by racial discrimination.

Zara’s Political concerns in the USA

The handbag originated from an Indian dealer and the design appropriate failed to include the feature symbols was withdrawn from its product variety. Later in the year 2014, Zara was again forced to withdraw the controversial kids’ shirt that resembled Holocaust uniform. Zara responded by claiming that the design of the shirt was inspired by western films.  Other controversies that been faced Zara include selling of T-shirts that were carrying the message that white is a new black (Hall, 2013). In June 2015, Zara faced a $40 million discernment ensemble, which came after it fired the business advocate for Zara’s US and the Canada business (Hall, 2013).  Also, Zara faced controversy on the ungendered clothing line, as a way of embracing androgynous designs.

Zara Legal Concerns in China

 Zara Company is trying to pull itself from Hong Kong.  The reason why it is trying to distance itself from form Hong Kong is due to the protests that have been taking place. The statement was issued by Chinese social media clearing air concerning the debate over the Asian monetary Centre. Zara had closed its four outlets in Hong Kong at the same time when Hong Kong was experiencing huge protests in its history (Reuters, 2019).  The Hong Kong newspaper claimed that the closure was a sign of support of the student strike.

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 The response statement by Zara concerning China’s social media made it be the top trending topic. It is worth noting that foreign brands in China are facing increasing pressure, especially from the consumers and regulators, resulting in Chinese sovereignty issues.  Zara, as well as other hundreds of products, have been obligatory to elucidate on their positions on Chinese dominion as the Hong Kong gripes continued and causing discussions in social media. In the year 2018, Zara was disapproved on the Chinese communal mass media as engaging Taiwan as a self-ruled island which is treated by China as a breakaway province.

Zara’s Economic Concerns in USA and China

  Zara will be facing problems in China as it will not be in the position of meeting the demands of the customers. The reason behind this is on the action of China sacrificing one of the most cost advantages of Zara. This is cheap transportation from the factories based in Spain. It is also being affected by the sudden change of products, and replenishment when suing air transportation, which has more expenses compared to trucks.  These types of difficulties are continuing to grow as Zara continues to open more stores (Reuters, 2019). The firm is highly dedicated not to leave the Chinese market despite the challenges it is facing. The solution for Zara to embrace is by replicating its model in China. The implication of this is that the Chinese design Center will need to be established. On the other hand, Zara has the potential of expanding its services to the South Asian market (Reuters, 2019).  In this way, Zara will have the opportunity of benefiting from the high-speed Chines freight trains, hence overcoming the different designs to the new market.

Conclusion

 Zara is expanding by opening new stores in the various city in different parts of the globe. It is one of the biggest fashion retailers.  The model of Zara’s Company is such that it is aimed at contributing to the sustainable development of society and the environment.  The sustainability concept is found in its business strategies, even though it has been surrounded by controversies that are against its mission, vision, product design and distribution. Zara has succeeded in the clothing industry due to its selling uniqueness as it provides prices that are agreeable with the customers.  The latest strategy for Zara is the introduction of augmented reality in its 120 stores. The company is facing challenges in terms of political, cultural and economic in its different market segments which need a solution to ensure that its operations are not hampered.

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