Politics is linked to the business world as it plays a vital role in structuring of a business just like economics. Nevertheless, the significance of effect that political factors might have upon the business may differ vastly. Any activity under taken by the business will not go unnoticed by government. Hence, government interference is not just limited to the public sector; indirectly through taxes and directly by restricting certain products they do have interference in the private sector (Allen, 2001).
Zara is a big brand that has a vertical integration system, where the company owns different factories, transport system and their own outlets. It is very important for Zara to keep track of politics and political decisions. The management must know the trade system of the country they operate in, and be well aware about the import and export related regulations and government policies; E.g. Zara’s owner had to face fines in Brazil for providing poor working conditions (Butler, 2015). Since Zara has a global existence, the management must take in to account the political situation of countries in order to avoid unnecessary closures of their business in that particular country the organization plans to enter. The more stable a political situation of the host country better able Zara will be to form its business roots in a country.
Organizations should take in to consideration the economic growth thoroughly so that the decision makers have adequate knowledge about the inflation rates. Moreover, interest rates and exchange rates must also be accessed in order to know what would be the costs of exporting or importing goods; whereas firms cost of capital will be easily recorded if an organization is able to keep a track of interest rates. For instance, higher inflation rates may mean that a certain brand may not be affordable by the public.
Hence, Zara should be familiar with the economic growth, interest rates. Inflation, exchange rates, tariffs, and taxation charges, as Zara is a brand that does not sell to lower classes, therefore, it is important for them to know whether their brand is affordable or not in that particular market. This would also bring to the management’s notice the kind of profit margins that can be earned along managing the costs. Previous statistics of Zara suggest that Inditex sales in Spain in 2011 were 25%, although, in 2009 the Inditex annual report showed that the sales 6.8% higher. Fortunately, it did not hit Zara as much since the company has a global presence; hence, the capability to curb losses or slow profits is significant (Inditex, 2009).
The social factors that seem to impinge on fashion industry are the spending habits of potential customer that are elastic to the economic stability. During the global recession, individuals have faced unemployment, which increase the demands of products that were a necessity and were more affordable. In Zara’s case it is very important to be familiar with customer spending patterns and the changing trends in the fashion market. For instance it is of great interest for Zara to the population levels as it will aid in deciding that which population should be focused on in terms of producing clothes. Sometimes the population rates show higher birth rates to so this makes it easy for companies like Zara to be able to produce according to the population structure (Inditex, 2014).
Moreover, it is imperative to mention here that Zara operates in around the world catering to diverse cultures, thus, it is of significance to be able to surface out the socio-cultural factors. For Instance Bangladesh customers have a strong preference for bright colors and they do not bring a change to their wardrobes to frequently as compared to elsewhere in the world. The generation choices has introduced a whole new out look to buying and selling along with the changes in tastes. In order to stay ahead of the competition Zara must keep in mind innovation and follow the trends in the market (Inditex, 2014).
The newer the technology the better the efficiency levels in an organization. Technological changes also bring in quality control and maintain a type of standard throughout each product. In today’s world development of different forms of technologies have propelled the organizations in retail sector to integrate these technologies as a way their market share (Inditex, 2014). Zara has global presence physically; however with the help of zara.com and social media the organization can have virtual presence around the world as well. Being present on Facebook, Instagram, and Twitter etc. can help the company stay connected with the customers and involve through updating on the social media forums. Moreover, the organization has introduced a category where people could share their photos where they are wearing the products bought from Zara. This has made shopping with Zara more interactive and has bonded the customer emotionally with the brand (Inditex, 2014).
Legal factors are an integral part of any organization. The company has to make sure the coverage of all legal obligations while maintaining the operating costs and making profits. Legal formalities can affect a company’s reputation plus its costs. If a company fulfills all legal obligation like Zara it establishes a high reputation in the mind of the consumer and is welcomes by the international market. In the current era consumer is well informed and chooses a product, which accomplishes a beneficial role in the society and is socially responsible of its actions. As Zara is an international brand, they need to identify and fulfill all laws that govern the international market to be a successful brand (Inditex, 2014).
Consumer of the present era is well informed and use products that are socially accepted and belong to organizations that care about the environment. Any organization violating environmental safety measure might face a tough time in the international market or might be altogether banned from different countries. This factor is equally important as all other factors of the analysis. Therefore, the company needs to focus on how their products are created from environment friendly material also if any of their products is harming the environment in anyway. The management needs to have strict store policies of waste material or by products. In the present era organizations, issue a yearly or quarterly report on their environment friendly activities and procedures. This gives government assurance of the organizations commitment to produce environment friendly products.
Allen, M. (2001). Analysing the Organisational Environment. USA: Select Knowledge Limited.
Butler, S. (2015, May 12). Zara owner Inditex faces fines in Brazil over poor working conditions claim. The Guardian. Retrieved from http://www.theguardian.com/fashion/2015/may/12/zara-owner-inditex-fines-brazil-working-conditions-claim
Inditex (2009). Annual report. Retrieved from https://www.inditex.com/documents/10279/18789/Grupo_INDITEX_Annual_Report_INDITEX_09.pdf/64b4e624-5cb9-46bc-86a8-a533dd8a832e
Inditex (2014). Annual report. Retrieved from https://www.inditex.com/documents/10279/18789/Inditex_Annual_Report_2014_web.pdf/a8323597-3932-4357-9f36-6458f55ac099