Evaluating External Factors of Zara through Pest Analysis


  • Unit No: NA
  • Level: High school
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  • Paper Type: Assignment
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Question :
  • An analyse the PEST Analysis through which the external factors can be evaluated.
Answer :

PEST Analysis

PEST Analysis is characterized as a strategic tool that is used by businesses to determine, evaluate and track the factors of macro environment that can impact on operations of business currently or in future. It includes political, economic, social and technological factors analysis of which helps in determining opportunities and threats for business. These factors are mentioned below:


This aspect involves foreign trade policy government policy, tax rates, trade restrictions, political stability or instability, competition regulation, corruption, bureaucracy, consumer protection laws, labour laws, funding grants &amp initiatives, etc. which impacts the operation of a firm in both negative and positive way (PEST Analysis, 2019).Extensive trade agreements of the country provides advantage to company to import raw products and export final goods easily within EU.


This includes factors like exchange rates, inflation, deflation, tax rates, economic trends etc. that greatly affects the operations and decision making of Zara. For instance,exchange rates can influence cost of export of Zara that impacts on its revenues. Low cost of labour in Spain helps Zara in manufacturing good fraction of clothes which allows it to minimize cost and improve profitability (PESTLE Analysis of Zara, 2019).


Factors like attitudes, cultural taboos, shared beliefs, lifestyle trends, etc. are involved in social factors that influence demand of Zara's products and the way it operates. As the needs and preferences of customers changing very frequently, so offer them products as per their needs helps Zara in earning healthy profit margins (PESTLE Analysis of Zara, 2019).


It involves aspects like research and innovation, automation, emerging technologies, R&ampD activities etc. that influence operations of company. Technological shifts would impact quality, cost and leads a firm to innovation (Sammut‐Bonnici and Galea, 2015). Use of high end technology in a business processes helps Zara in manufacturing quality clothes to consumers and provides it opportunity to gain competitive edge in market.

Porter's Five Force Analysis

Porter's five forces is a tool that helps marketers in understanding the competitiveness of business and determining the potential profitability of strategy.This assists organisation like Zara in analysing the competition level within a particular industry.It includes five forces which are mentio

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