PESTLE Analysis of Zara Retailer and Westfield Shopping Centre
PESTLE analysis is important in the analysis of business organizations in the local, national, regional, and global business environments. It implies the study of the external factors that influence the activities of organizations in the business environment. These external factors are political, economic, social, technological, legal, and environmental issues. Business organizations that are competitive understand these factors, and they develop effective strategies of leveraging on the factors to succeed in the market. The purpose of the discussion is to conduct a PESTLE study on two business organizations with the aim of improving the business outcomes. These organizations are the ZARA retailer and the Westfield Shopping mall.
Background of Retailer and Shopping Centre
ZARA retailer is a Spanish fashion outlet that deals with clothes and accessories. The retailer got established by Amancio Ortega and Rosalia Mera in 1975 (Mo 2015). The headquarters of the company is in Galicia, Spain. It is a multinational Corporation as it produces and sells the fashion products and services in the major towns and cities globally. Currently, it is the biggest apparel retailer globally. It is the biggest brand owned by the Inditex group. Other associated brands include Zara Home, Pull\"Bear, and Massimo Dutti. The company is profitable globally. In 2016 trading period, it recorded a sales revenue of USD9 billion from its 2266 stores (Hansen 2014).
Westfield Shopping Centre location is in the Stratford part of London. It began operations on September 13, 2011. The shopping complex has a huge retail floor, which is 177,030 m2 (bates and Rhys-Taylor 2017). It is among the largest shopping malls in Europe and globally. In the United Kingdom, Westfield Shopping Centre competes in the retail space sector with other competitive shopping malls, which include the Trafford Centre and the MetroCentre. Three organizations own the shopping mall; Westfield Group, ABP Pension Fund, and CPP Investment Board, at 50%, 25%, and 25% respectively (Bates and Rhys-Taylor 2017). The mall location is in a strategic business environment that is surrounded by important organizations; for example, London Olympic Park and Stratford International Stations. The organization has improved the economy of London as it has created about 10,000 permanent employment opportunities. The shopping mall has about 280 stores and about 70 restaurants (Bates and Rhys-Taylor 2017).
Zara is one of the important retails stores in the Westfield Shopping Center. Zara enables the thousands of shoppers who visit the shopping center to access fashion products that are of high-quality. The clothing products and accessories are trendy and appeal to all categories of customers; for example, children, men, women, and work uniforms (Hansen 2014). The clothing products are affordable and thus get purchased by the majority of London residents and visitors. However, there are also luxury fashion items for the thousands of the high net worth individuals living and working in Landon and across the United Kingdom.
PESTLE Analysis
The management of the Zara retailer at the Westfield Shopping Centre aims at being competitive and achieving the interests of the main stakeholders. For example, the company aims at generating high revenues and being profitable to provide good dividends and capital appreciation opportunities to the shareholders and investors. Likewise, Zara has a good work environment for the staff that ensures high employment security and sufficient opportunities for career development. The management staff benefits from the highly challenging work environment that involves sufficient authority and decision-making opportunities (Wetherly 2014). The suppliers benefit from the technical expertise that is provided by the staff of the retail chain. The PESTLE factors show the reason why Zara is competitive in the global fashion sector, and how it manages to maintain its appeal to the fashion conscious customer base.
Political Factors
The political environment in London is stable. Zara is a company that prefers to invest in countries and cities that have a predictable and a reliable political process (Paul, Yeates, and Cadle 2014). The local government of London and the British government develop stable legislation that supports the development and the expansion of businesses. There is a peaceful transfer of political authority in the United Kingdom, through the democratic process. The management of Zara, therefore, decided to open a store in the popular Westfield Shopping center. The shopping center was also established in London because of the good political environment (Sun et al. 2014). The legislation passed by the United Kingdom and the European Union parliaments are favorable towards encouraging the large-scale investments. The trend is similar globally because Zara invests in cities that are in politically stable nations (Wetherly 2014). For example, the fashion store has outlets in New York, Berlin, Paris, Hong Kong, Beijing, Sydney, Johannesburg, and New Delhi.
Economic Factors
Economic factors affect the investment decision of the leadership of the Zara retailer. The investment takes place in cities that have high disposable income. Most of the outlets are located in the major cities in the developed economies (Sun et al. 2014). These cities include New York, Tokyo, Berlin, London, and Paris. The developed economies have high Gross Domestic Product (GDP) and household income levels. Therefore, they have a high demand for fashion and luxury products offered by the Zara Retailer. The location of the retailer at the Westfield Shopping Centre is also strategic. It is due to the availability of the high customer traffic every day (Hubbard 2017). Additionally, retail outlets in the shopping centre have thousands of employees. They usually purchase clothing products and accessories from the Zara store. The company uses stable currency in transactions; for example, US Dollar, British Pound, Euro, Sterling Pound, and Japanese Yen (Paul, Yeates, and Cadle 2014). The stable and strong currencies protect the financial value of the company from the high fluctuation rates of the currencies in the global business environment.
Social Factors
Social factors involve the changing trends in the society. Zara store at the Westfield Shopping Center embraces the cultural diversity of the City of London. It has fashion products for all categories of people in the London society (Mo 2015). For example, it stocks Islamic clothing products for the benefits of the significant Muslim population in London. Also, it has normal fashion items for the Christians and the religious independents individuals. These include suits and jeans products. The store has fashion products for all age groups. The company sells clothing for the children, teenagers, youths, mature, and the elderly members of the community. Gender gets considered as Zara sells both male and female fashion items. The men can purchase their wallets and trousers, while the women can purchase their handbags and dresses.
Technological Factors
The organization embraces technology. Technological innovations improve the business process and, therefore, enhance the effectiveness and the efficiency of the Zara retail stores (Sun et al. 2014). Zara has a mobile app that enables the customers to access its store and navigate the sections easily. The app also enables the customers to select the item product that they desire and make payments. The company has embraced e-commerce (Wetherly 2014). The customers are advised to create an account with the store through the website. Orders and payments get made online. Zara sales staff ensure that the shipping of products gets made to its customers in any town, city, or country (Mo 2015). Interaction with the customers gets enhanced through the social media. The company posses an active presence in the popular social media sites; for example, YouTube, Instagram, Pinterest, Facebook, and Twitter. Customer inquiries and questions get answered on a timely basis.
Environmental Factors
Environmental factors influence the business process of companies. Zara was attracted to invest in the Westfield Shopping Center due to the environmentally sound installations. For example, the energy sources of the shopping center include the Pavegen floor tiles that generate kinetic energy (Hubbard 2017). The mall got built after a comprehensive Environmental Impact Assessment (EIA) process. Zara retail shop is, therefore, supplied with electricity from a clean and reliable source. Zara uses the environmentally sound material to make fashion products. For example, it uses cotton, leather, and silk materials to make clothes and accessories. These raw materials are desirable because they are recyclable and they do not harm the environment. The weather patterns influence the sales process. During the winter season, warm clothing is a preference by the customers. In summer, light clothing like t-shirts gets preferred.
Legal Factors
Legal environment influences business operations. The copyright laws in the United Kingdom are effective because the brands and the business symbols of companies receive protection. In London, the Zara brand and logo is unique because it cannot be found in inappropriate stores. Only the Zara retailers and their suppliers are legally allowed to use the brand name, logo, and business symbols. The United Kingdom legal system is effective in addressing businesses disputes. The location of Zara in the Westfield Shopping center is, therefore, desirable as any disagreement with the stakeholders will be addressed by the courts effectively. For example, the contractual disagreements with the suppliers get effectively addressed by the judicial system. The laws formulated by politically stable governments are appropriate for improving business activities as they ensure order in the business environment (Wetherly 2014). Zara adheres to all legal procedures in the countries of operations. For example, the company adheres to the Contracts of Employment Act 1963, Industrial relations Act 1971, Redundancy Payments Act 1965, and other workplace laws in the United Kingdom (Sun et al. 2014). It is with the aim of providing a good work environment for the employees and the managers.
Usefulness of PESTLE Analysis
PESTLE Analysis is important as it provides useful information for the decision-making process. Zara invests in a location after analyzing the political environment of that country. The United Kingdom is politically stable. It influenced Zara to invest in the Westfield Shopping Center (Hubbard 2017). The fashion outlet prefers to invest in urban areas that have high standards of living and disposable income. Thus, the company has an outlet in the major cities of all developed nations. The social trends influence the demand for certain fashion products (Paul, Yeates, and Cadle 2014). Women are more fashion conscious. Therefore, the company produces more and diverse female clothes and accessories. The United Kingdom has a high aging population due to low birthrates and enhanced quality of life. Hence, Zara offers fashion products that are suitable for the elderly customers above 50 years. Technological innovations improve the quality of fashion products offered by the company, and it also enhances the interaction with the customers (Mo 2015). Zara has an ethical business practice that ensures it adheres to the entire legal requirement by the local and the national governments. Environmental sustainability is a core issue in the Zara business environment. The environment ensures that the activities of the company do not pollute the environment. It makes fashion products using materials that are environmentally sustainable; for example, cloth and silk.
Conclusion
The report has provided an analysis of how Zara retail chain is affected by the environmental factors. The PESTLE analysis supports the strategic location of the Zara store in the Westfield Shopping Centre. The business environment in the shopping center is attractive due to the cosmopolitan and politically mature London society. Most of the residents of London are engaged in economic activities. Thus, they have sufficient disposable income to purchase the Zara fashion products. Diverse individuals frequent Westfield Shopping center. Thus the Zara retail outlet should continue stocking different fashion products. Technological innovation, via the Internet and social media, is important to enhance the communication between the Zara staff and the customers.
Recommendation
Zara should be proactive in using the external factors to maintain a competitive advantage in the European and the global fashion industries. The technological innovation strategy should be enhanced to improve the e-commerce business process. Billions of people use the internet and the social media channels. Zara should capture the online market by enhancing the e-commerce platform. Marketing and advertisements channels should inform the online users that they can purchase fashion products from the stores remotely and have them delivered at their addresses in the shortest time possible. E-commerce is desirable as it enables the companies to serve people located in countries and cities where there is no physical store. For example, people in the developing world should be able to purchase the Zara products through the internet, since the company does not have a store in their city or country. E-commerce is beneficial to the company as it has minimal costs. It reduces the need to lease premises in many parts of the world. Low operation costs directly translate into high sales revenues and profitability. Zara should invest heavily in the Information Technology function to ensure that the e-commerce system of the company is effective and millions of users have access to the company every day.
References
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Hubbard, P., 2017. Going Out of Town. In The Battle for the High Street (pp. 45-66). Palgrave Macmillan, London.
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Paul, D., Yeates, D. and Cadle, J. eds., 2014. Business analysis. British Computer Society.
Sun, Y., Guo, P., Ma, Z., Li, T. and Dang, S., 2014, November. UK-based external business environment analysis of outdoor adventure clothing using the PESTEL tool and its future outlook. In Information Technology Systems and Innovation (ICITSI), 2014 International Conference on (pp. 306-309). IEEE.
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