Zara PESTEL Analysis

Today, Zara, a Spanish brand, earned a position in the fashion world as a global player. There
are multiple external conditions that directly or indirectly impact a company's business, and
the PESTEL analysis of a company can give an overview of those situations. PESTEL
includes components like political factors, economic factors, socio-cultural factors,
technological factors, environmental factors, legal factors, etcetera. PESTEL Zara can show
how those external factors impacted the company's business while exploring their future
scopes of growth

Political Factors:

Political factors can influence the firm's business. Various government policies, trade
agreements, and taxation directly impact organizational growth. As Zara operates in multiple
countries, the governmental policies of those countries regarding the foreign and domestic
brands can also influence the situation -

 The European Union's free-trade policies favor Zara's business. Zara is a Spanish
brand, and this agreement has allowed them to get the supply of raw materials and
export their products worldwide smoothly.
 Recently expanding its business in multiple countries, it needs to consider the
government policies of those regions. For example, for Zara, doing business in China
and India can be difficult due to red tapism.
 The political disruptions in the countries near the EU or where Zara operates can
disrupt the supply chain affecting the smooth flow of the business.

Economic Factors:

Just like supply-demand chains, raw materials availability and labor play a significant role in
the expansion of a business. The inflation rate, economic shrinkage, and financial distress of
the company are some reasons a business may face hard times planning its growth. Here are
some economic issues that can decide the business strategies of Zara -

 As Spain is a country that has a high unemployment rate, Zara can get cheap labor for
its production processes. The low labor cost and raw materials have helped Zara in
business expansion.
 Zara is one of the brands that sell trendy clothes at a competitive price, which brings
in more customers. They have already established a loyal customer base, and their
strong brand image is helping them to get new customers.
 Zara is one of the brands that operate worldwide. Therefore, the global economy plays
a significant role in its growth. The global economic slowdowns can harm business.
The whole world is presently experiencing financial distress. Thus, it is affecting
Zara's functioning. A high inflation rate and less money at the hand of customers can
show a negative impact on the business of Zara. This economic condition can limit
the financial growth of the brand too.

Socio-cultural factors:
When a company has a strong brand image, they need to put significant effort into retaining
it. As a brand that has a massive customer base, certain socio-cultural factors impact the
business of Zara -

 The brand is well aware of the communities they serve, which results in its affordable
price range and high demand. The connection that Zara has with its customers favors
their business.
 In recent years, the popularity of online shopping has been going up. Zara is putting
effort into offering a seamless online shopping experience. They are working on
maintaining a smooth logistic process to add up to customer satisfaction.
 Zara targets the communities and age groups in search of trendy accessories and
clothing items. They offer fast fashion clothing in an affordable range, which is
attractive to many customers.

Technological factors:

In the 21st century, a firm's business is no longer limited to physical stores. Therefore, the
brand's online presence is significant in bringing more customers. Here are some
technological factors that can affect their sales -

 They have a well-designed website that can help create a robust online presence to
grab the attention of potential customers. They can target the communities for online
marketing, eventually increasing their sales.
 Using advanced technology and worldwide reach, Zara does thorough market
research to learn the demand of their customers. It gives them ideas about the sectors
they need to improve.
 They can have a seamless supply chain and logistic process using technological
advances. Customer satisfaction will increase the rate of returning customers for the
brand. Their RFID technologies help solve inventory and logistic issues.

Environmental factors:

The environmental issues do not directly influence Zara's retail business. However, the
practice of prioritizing environmentally sustainable businesses has started everywhere. It is
inspiring businesses to take up eco-friendly ideas -

 Zara comes under the parent company Inditex. They have already decided to take up
several sustainable goals. Practices like having an energy-efficient store and
increasing the use of recyclable items for packaging can be considered environment-
friendly approaches.
 The brand is a fast-fashion store. Hence, there are chances for a lot of wastage. Zara is
aiming to streamline the manufacturing process to reduce wastage.
 The company has already pledged that it will manufacture environmentally
sustainable products. They respect issues, including animal welfare, sustainable
material, biodiversity, and more.

Legal factors:
When a brand operates in multiple territories, its business ought to be affected by the laws of
the areas. Zara is a fashion brand, and there can be several legal issues that may have a
significant impact on its sales -

 The trade and labor laws can impact the company's supply chain and production. Zara
enjoys a smooth supply of raw materials and exports because of the EU Free trade
policies. Similarly, the laws of the countries where the company operates can impact
the business.
 The brand caters to offering clothes of the latest trend for their customers, and this is
when they may get penalized due to copyright issues and trademarks. There can be
accusations of stealing designs or concepts on them. Previously, they were accused by
Balenciaga and Adidas of copying their designs.
 The country laws of where Zara operates can be decisive in the strategies the
company will follow in those regions to expand its business.