Business strategies of Zara Essay Example | Topics and Well Written Essays - 4250 words

Business strategies of Zara - Essay Example This research will begin with the PESTEL analysis of Zara. PESTEL is a tool which helps in analyzing the external environment for the company. This tool divides the macro environment into six factors which are Political, Economic, Social, Technological, Environmental, and Legal. The PESTEL tool will be utilized to assess the impact of these external factors on the apparel industry in Spain. Among several measures, the Spanish government has increased the corporate tax rate from 24 percent to 24.75 per cent including royalty payments. The increase in tax rates would be effective from 01 January 2012. The increase in tax rates has also been imposed on multinational corporations investing in Spain. The increase in corporate tax rate has led to an increase in the prices of garments and affected the apparel industry of Spain. The current economic situation of the economy is very weak and the average GDP growth of the economy has been very slow since 2007. The GDP growth of Spain was 3.7 p ercent in the year 2009 and 0.2 percent in the year 2010. There has been a major decrease in consumer spending and employment. However, the apparel industry of Spain has been recovering steadily amidst the recession. The export value of garment increased from $68,120 in the year 2009 to $88,821 in the year 2010. As estimated by the analyst the rise in consumer spending on textiles and food would increase by the end of the year 2013. Social As per a survey conducted by Fashion United, a resident of European Union spent 5.3 percent of their salary on clothing and footwear (Fashion United, 2013). This reflects that fashion plays an integral part in the lives of Europeans. Europeans like wearing fashionable clothes and footwear as it enhances their personality. The apparel industry manages to yield profits even amidst a slow economy. Technological Technology plays a pivotal role in the fashion industry. Information Technology has helped the fashion companies of Europe in improving the supply chain management. Majority of the fashion companies use their official website as a medium to communicate and provide information to their customers. European fashion companies use their website extensively as an important communication tool. Technology like Location Based Mobile Technology permits the retailers to track and communicate with their customers (Wang et. al., n.d.). Environmental Most of the European companies have introduced their own environment policies which believe in the conservation of environment and preventing environment degradation. Fashion companies in Europe have introduced their own environmental policies which include usage of ecological fabrics and biodegradable materials in the manufacturing of clothes and footwear. Legal Plagiarism is a huge offence in the fashion industry (Jones, 2005). As per the intellectual property act the company can obtain ownership rights for its work to prevent plagiarism (Canberra Institute of Technology, 2011). In the year 2007, John Galliano was found guilty by the court of France for plagiarism for copying the design of Willam Klein (Daily Mail, 2007). The retail companies found guilty of plagiarism will be tried in the court of their respective countries. Porter’s Five Forces Model Before developing a business strategy, a company needs to identify the forces which affect the profitability of an industry (Henry, 2008). The five forces are as follows 1) Threat of new entrants: If a particular industry is witnessing high profit then it would naturally attract new entrants. A lot of time and cost is invested by the