Introduction.3
Political analysis 3
Economic analysis .4
Social analysis 5
Technological analysis ..6
Legal analysis .6
Environmental analysis 6
Conclusion7
Recommendations7
References.7
Introduction
Out of one hundred and ninety six countries in the world, Spain was chosen for this assignment in order to conduct PESTLE analysis. Political, economic, social, technological, legal and environmental factors are going to be analyzed systematically and the information is taken from one of the relevant and credible sources – CIA World Factbook, and others. General factors about Spain are going to be reviewed first before proceeding to the analysis of Zara in order to have a better understanding. Zara is a part of Spanish group Inditex that was founded in 1975 (Zara). Zara is the most successful and popular brand of Inditex, the majority of sales revenue are coming from Zara.
Political analysis
The Kingdom of Spain is part of many international organizations such as “Schengen Convention, WTO, UN, UN Security Council, UNESCO, Union Latina, OECD” (CIA, 2016), and many others. The head of the government in Spain is the Prime Minister Mariano Rajoy, and the chief of State is King Felipe the sixth (CIA, 2016). Spain follows a civil law system (CIA, 2016). Spain has diplomatic relationships with many countries, and there is no inhibition towards foreigners who operate or plan to operate their businesses in Spain. Spanish government does its best in order to “support investor sentiment” (CIA, 2016) that could help improve the country’s economy.
Because Spain is a member of WTO and other many organizations, it makes it less complicated for a Spanish company like to Zara to operate around the world. Currently Zara has more than two hundred and thousands stores around the world on all continents. The further expansion and the opening of new stores especially in European Union is the least complicated especially in those countries that are the members of Schengen and that have Euro currency. In case if Spanish government changes the laws and regulations that affect economy and therefore business, Zara will be affected or impacted by political factors, but currently Zara does not face any trade restrictions, restrictions towards operations or other serious issues.
Economic analysis
Global financial crisis of 2008 negatively affected Spain in terms of the economy, but in 2014, Spain finally experienced economic growth mostly thanks to the “increased private consumption, exports, and rising labor productivity” (CIA, 2016). The GDP of Spain in 2016 was “$1.69 trillion” (CIA, 2016), and in 2015, it was “$1.64 trillion” (CIA, 2016). The results of the GDP show that there is a growth instead of stagnation in the recent years of the Spanish economy. The real growth rate of the GDP accounted for three percent in 2016 and in 2015. GDP per capita increased from thirty-five thousands of dollars in 2015 to thirty-six thousands of dollars in 2016. However, the unemployment rate is quite high, it accounts for nineteen percentage according to 2016 (CIA, 2016). The inflation rate is minus zero point three percentage (CIA, 2016). The exchange rate of Spanish currency euro per USD in 2016 was “0.9214” (CIA, 2016), and in 2015 it was “0.885” (CIA, 2016). Foreign direct investment increased from seven hundred and twenty billion in 2015 to seven hundred and seventy billion in 2016 (CIA, 2016). In terms of the labor force, more than twenty millions of Spanish people are in the labor force (CIA, 2016), and the most popular occupation is services – seventy percent and the second in popularity is industry- about twenty-five percent (CIA, 2016). The purchasing power parity is “$1.69 trillion” in 2016 (CIA, 2016). Overall, Spanish economy shows growth and is recovering from the crisis.
Despite that the economic situation in Spain has been fluctuating, Zara is getting more and more successful and it was not affected by the recession in 2012. For example, in 2012 when the whole Spain was suffering from the economic recession, Zara completely “stunned the investors and its profit climbed thirty percent” (Borzykowski, 2012) during the first quarter that year. The company is getting more and more market share; its owner is one of the richest people on the planet and the expansion to the new markets and new stores is rapid and successful. One of the Zara success factors are that the company is operating only in euro, it has different pricing in different locations, it does a careful market research before entering the new market (Borzykowski, 2012). For example, Zara is less expensive in Europe, but more expensive in Asian and North American markets (Borzykowski, 2012). Zara is less expensive in Spain, Portugal and Greece compared to Austria, Germany and Netherlands in European markets, due to the higher cost of living, rent cost, salary cost, etc. in Austria, Germany and Netherlands. Zara has its own unique supply chain, it “stocks the clothing in limited quantities” (Borzykowski, 2012), it follows trends.
Social
The population of Spain is forty-million people (CIA, 2016), and there are different ethnic groups such as Spanish, Catalan, Basque, Galician, and many others. The official language is Castilian Spanish, but also in different regions different languages are spoken, such as Catalan that is official in Catalonia, Galician that is official in Galicia (CIA, 2016), etc. the most popular age structure consists of people from twenty-five to fifty-four years old, and they comprise forty-five percent of the population (CIA, 2016). People of Spain are known as friendly, easy-going, and family-oriented, love buying trends and sociable.
In terms of the social factors in Zara, as it was mentioned before, Zara does follow the market trends, spending habits of its potential customers (Kasi, 2016) and analyzes the market. Due to the unstable situation in many countries, people are focusing on affordable clothing in the majority of developing markets such as India, Bangladesh, etc., and Zara is a perfect match. Zara does not spend much on advertising; its social strength is the word of mouth.
Technological
Spain is technologically advanced country, and does pay attention towards technological progress and innovations. For example, in 2016 there was a mobile congress in Barcelona.
In terms of technological analysis of Zara, Zara does use the benefits of technologies for its business. Zara has social presence via social media accounts such as Instagram, Facebook, it has its own website zara.com (Kasi, 2016). The social media presence helps Zara to interact with its customers and to sell its collections via online as well. Technology helped Zara to interact more effectively with its consumers.
Legal
Spain follows a civil law and there are no restrictions by the Spanish government for the foreign investment, instead it encourages it. In addition, in terms of the easiness of doing business, Spain is it top twenty countries. In addition, it does not take many days in order to start a business in Spain.
There were no scandals with Zara in terms of legal issues, such as tax embezzlement, corruption, or other issues. Zara does cover all of its legal obligations, costs, profits, and so on.
Environmental
Spain does have environmental laws that are responsible for major environmental issues, such as the quality of the air and water, as well as the protection of the environment. In addition, Spain has a very advanced recycling system.
Nowadays consumers are becoming more and more environmentally conscious and Zara is paying more careful attention towards the contents of its products.
Conclusion
In the conclusion, Spain is a good country for doing business, thanks to the recovering economy, friendly locals, easiness for the foreign direct investment and business, and other factors. It is one of the most important EU economies. The fact that Spain is an open and free economy, it helped Zara to start its operations and to expand further around the world. Zara is a unique company with its own operations, logistics, supply chain, and most importantly, a careful approach to each market, creativity and responsibility that enabled the company to operate without any issues in legally, technologically, economically and socially.
Recommendations
In terms of the recommendations, Spain is a favorable country for foreign business people and Zara is a successful company according to all PESTLE analysis factors.
References
Cia.gov. (2016). The World Factbook — Central Intelligence Agency. [online] Available at: https://www.cia.gov/library/publications/resources/the-world-factbook/geos/sp.html [Accessed 25 Jan. 2017].
Inditex.com. (n.d.). Zara - inditex.com. [online] Available at: https://www.inditex.com/brands/zara [Accessed 31 Jan. 2017].
Borzykowski, B. (2012). Zara escapes economic recession in Spain - Canadian Business - Your Source For Business News. [online] Canadian Business - Your Source For Business News. Available at: http://www.canadianbusiness.com/investing/zara-escapes-economic-recession-in-spain/ [Accessed 31 Jan. 2017].
Kasi, A. (2016). PESTLE-PESTEL-PEST analysis of Zara. [online] Free PESTEL Analysis. Available at: http://freepestelanalysis.com/pestle-pestel-pest-analysis-of-zara/ [Accessed 31 Jan. 2017].
