VINCENT A. KWARTENG
MBA 617: ORGANIZATIONAL THEORY
ENVIROMENTAL COMPLEXITY
How turbulent is your company’s environment, and how well do they adapt?
Zara’s environment is very turbulent and more so because it is in the fashion
industry. In the fashion industry, just like any other industry, a company’s ability to
satisfy consumer’s expectation is essential for profitability, a process contemporary
termed fast fashion. However, consumers’ taste and style in fashion changes
frequently and for that reason companies need to be flexible and agile to meet the
consumers’ demands. Zara has admirably structured and designed its organization
to meet the fast fashion trend and done it better than its competitors.
#1: List out as many elements affecting your company as you can for each of the
sectors below.
Industry (Competitors, industry size, competitiveness, related industries):



Zara is the leading company in the fast fashion industry.
It is a multibillion dollar fashion company that is larger and more profitable
than its competitors
Produces quality clothes at the most affordable prices
Raw Materials (Suppliers, manufacturers, real estate, services):



Zara obtains raw materials from Spain, Italy, and Greece. Since they
buy in large quantities; they are able to capitalize on economies of scale.
They also sign agreement with suppliers to deliver raw materials no
later than five days.
Zara invests heavily in real estate especially at prime locations.
Zara owns the production, design, and distribution process of its goods.
Human Resources (Labor market, employment agencies, universities, unions):
 Zara targets recent college graduates or interns as employees.
 They prefer young energetic individuals who are creative.
Financial Resources (Stock markets, banks, private investors):
 In 2012, alone the owner of Zara increased his net worth by 22.2
billion dollars mainly from Zara. This makes him the third richest
man in the world. Zara has been very profitable in the past years.
 On May 23rd 2001, Inditex went public, selling 26% of its stocks to public
investors for $8 million. The company has been profitable since then.
Market (Customers, clients, potential users):
1


Main customers are people within the age of 25 – 35.
Zara also makes clothes for other age groups and children.
Technology (Techniques of productions, computers, information technology, ecommerce):
 Zara has harnessed the power of technology by capturing digital images of
new trends and immediately transmitting it for production.
 Agents of Zara patrol night clubs and businesses taking pictures of new
fashion trends.
 Their factories are highly mechanized. Robots work around the clock
manufacturing clothes consequently saving Zara overtime.
Economic Conditions (Recession, unemployment rate, inflation rate, growth):
 In spite of the recent economic downturns, Zara has still managed to be very
profitable. It has proven to be flexible to the demands of its consumers.
Government (City, state, and federal laws, regulations, taxes):
 No significant government
 Zara has positioned some of his factories in places such as Brazil, Bangladesh,
and Argentina to obtain cheap labor.
 Recently, Zara has been accused of illegal labor practices including the recent
incent of buildings collapsing in Bangladesh. Several law suits have been filed
against Zara.
 In the past Zara has been required to negotiate with newly formed labor
unions backed by a popular Socialist government.
Sociocultural (Age, values, beliefs, educations, religion, work ethic, consumer and
green movements):
 Zara constantly finds out the needs of consumers and immediately fulfills
these needs.
 In 2013 Zara donated 1.5 million to humanitarian projects run by Médicos
Sin Fronteras in India and Turkey. Zara also earmarked 10 million to finance
educational programs run by the Entreculturas Foundation in Africa and
Latin America
 In December of 2013, Zara Bowed to Greenpeace, Committing to Zero
Chemical Discharge. The company says it will eliminate all discharge of
hazardous chemicals from its supply chain and products by 2020, following a
Greenpeace campaign pressuring the brand to end use of toxic chemicals in
its products.
International (Competition from and acquisition by foreign firms, entry into
overseas markets, foreign customs, regulations, exchange rate):
 Zara has over 1700 retail stores worldwide and continue to increase
exponentially which makes it difficult to tell how many stores they own in a
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given period. Though it has most of its factories in Spain, it has strategically
positioned some of its factories in China, Brazil, and India for easy access.
Zara also has other companies with Inditex as its parent company.
#2: Is the organization internationally diversified? Yes
If yes, where are they currently? Who are their major competitors? What markets
should they expand to?

Combined with all its other companies, Zara has over 6000 stores worldwide
and is still growing exponentially. They have most of their stores in China
and keep increasing in number.
In no, why not? Should the company plan for expansion? Where should they go?
Why? N/A
If the firm is local, do they export out of the state? To whom? Should they consider
exporting or expansion? Why/why not? N/A
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#3: How complex and unpredictable is the organizations environment?
High
Complexity
5
Turbulen
t
Varied
4
3
Low
1
2
4
5
Unpredictab
ilityHigh
2
Calm
1
Locally
Stormy
Low
Complexity: measured as the number of factors in an org’s environment and their
interdependency (Reliant on each other (e.g., supplier/buyer or strategic alliance).
Environmental complexity increases as the number of factors increases and/or the
interdependency increases. Ex/ If a firm has two major competitors it faces low
complexity; numerous conditions – competitors, prices, labor pool, new productshigh complexity.
Unpredictability: lack of understanding or ignorance of the environment in terms of
the nature of the factors and their variance; greater variance means less
predictability. The higher the environmental unpredictability, the less accurate the
forecasts are and the more uncertain management can be about the future. Ex/
Recent financial crisis in the US has made the US market less predictable.
Which environment does your organization exist in?
Zara exists in a Turbulent environment (volatility of the fashion industry and more
so fast fashion) but due to its creativity, innovation, and its ability to meet the needs
of the consumer, it continues to thrive in its industry.
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#4: Does your organization’s strategies and goals fit their environment?
Circle one of the types in the following categories that you have found your
company to portray: environment, strategy type, and organizational goals.
Yes Zara’s strategies and goals fit its environment.
Type 1
Calm
Reactor
Type 2
Varied
Defender
Type 3
Locally stormy
Prospector
Organizational Neither
goals
Efficiency
Effectiveness
Environment
Strategy types
Type 4
Turbulent
Analyzer with
innovation
Efficiency and
Effectiveness
The following are definitions of Miles and Snow’s strategic typology:
Reactor: Neither an explorer nor an exploiter of the firm’s opportunities. Tries to
adjust to the situation after it is possible to capture any opportunities that may have
been present. There is no innovation. Ex/ Digital Corporation missed PC market –
parts now in HP
Defender: Focus on exploitation of resources and current situation, but low on
exploring anything new or being innovative. Executives are focused on keeping the
organization’s position in the market. Less emphasis on product development, and
more on maintaining market share or profitability. Ex/ Coca-Cola
Prospector: High on exploration of its opportunities but low on exploiting its
current situation. Focuses on innovation perhaps to the detriment of being efficient
on existing opportunities. Searches continuously for new market opportunities and
experiments regularly. Ex/ Google
Analyzer without innovation: Strong focus on exploitation and weak focus on
exploration, similar to the defender except it has passive innovation strategy. Looks
at what other firms are doing that are successful and imitates. Ex/ Fashion industry
Analyzer with innovation: Strong focus on both exploitation and exploration.
Exploits its current position of resource utilization and market position, adopts an
active innovation strategy of developing new products. Goes beyond what others do
and surveys technology and market changes to look for additional opportunities.
Ex/ Xerox
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#5: Did your organization align across environment, strategy type, and
organizational goals? Yes
If yes, where do you think the organization should go now? Do you predict changes
in their environment? The fast fashion industry is not static it continually changes;
nonetheless, Zara has been proactive in researching and using technology to meet
the ever changing needs of its consumers. Zara should keep on doing what they do
best, creativity and innovation.
If no, should the organization align on these factors? If so, how should they do it?
N/A
References
http://www.forbes.com/global/2001/0528/024.html
http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-theworlds-largest-fashion-retailer.html?pagewanted=all&_r=4&
http://finance.yahoo.com/blogs/daily-ticker/zara-co-founder-increaseswealth-22-2b-2012-182819240.html
http://www.inditex.com/en/press/press_releases?action=view
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