Critical Evaluation of Business Ethics and Sustainability Issues faced by ZARA

ZARA is one of the famous luxury fashion brands, which is headquartered in Spain and have various foreign segments in different market locations. Zara is owned by the Inditex, a textile company of Spain (Joy et al., 2012). In regard to its operations in global apparel industry, there are certain business ethics and sustainability issue that are faced by ZARA. The issue of low per-capita income affects the purchasing ability of the customer, and thus, it affects the business sustainability of the company. The trends that dominate the apparel industry show that Europe contributes 34% of the market capital, Asia provides 23%, and the United States of America contributes 29% of the total market capital (Ghemawat and Nueno, 2006). The difference in the share of market holds in the different regions accounts for the fact that the low per-capita income significantly decreases the margin of profit of the company. The studies show that per capita spending on the apparel tends to grow slowly in comparison of the per-capita income. Per-capita spending is also affected by the factors such as the price of the product and the level of competition in the market of a particular country (Ahlstrom, 2010).

The global chain of apparel consists of the mechanism implemented by the buyer, wherein brand marketers, retailers, and branded manufacturers serves as strategic brokers to coordinate with the factories situated in other countries. The upstream manufacturers instruct and control the chain driven by the producer instead of the small intermediaries. ZARA produces approximately 40% of its apparels and the rest two-third of the total shipment is outsourced to different manufacturing units of other countries. There is a severe risk of flaws in the quality of the final apparel, which is manufactured in a different country. ZARA implements extra infrastructure to check that the final product matches the quality standards of ZARA, which increases the cost of the product by 15-20%. ZARA has long-term relations with many suppliers and due to this; ZARA has less contractual commitments with many suppliers (Ghemawat and Nueno, 2006).

The centralised logistics model can result in the diseconomy of the system. This means that the system, which was built considering 1000 stores may work well; however may fail if the store network is spread up to 2000 stores. International widespread retail operations and advances in the technology have accelerated the concept of Quick response in ZARA. ZARA made policies considering factors that can improve the speed of production in accordance with the shifting trends of the market. The idea of quick response reduces the time cycle of the production and accelerates the concept of fashion cycles of short time (Teece, 2010).

• It is inferred from the case study that factors affecting the business of ZARA are low per capita income of the customer, absence of contractual commitment with many suppliers, and centralised logistics model, which can lead to diseconomy and use of advanced technology. ZARA should sign a formal legal contract with its suppliers and manufacturers to increase accountability in them. ZARA should focus on manufacturing in the country, wherein they are selling rather than outsourcing the work. This will improve the quality and profit margin of ZARA. ZARA should implement and use advanced technology at every step from manufacturing to marketing and sells.   

Recommendations to Improve Local and Global Issues

• The consumer’s income per capita affects the sustainability of the business as it accounts to low revenue generation and can drive the organisation towards extreme loss. There are a few recommendations that can be implemented in order to raise the income per capita of the consumers. The provision of appropriate and quality education among the citizens plays a vital role in the Gross Domestic Product (GDP) that in turn effects the income per capita of the consumers. It helps in the growth of the economy that drives the GDP and enhances the income per capita (Lorek and Spangenberg, 2014). The growing consumption of the apparels by the consumers can drive the entire economic output that can raise the income per capita. In order to increase the per capita income it is necessary to encourage the consumer spending. Actions such as discounts, incentives, as well as tax breaks can drive the GDP and the income per capita. The GDP is calculated by adding up all the exports per year and the exports are the products that are sold to other countries. The increase in export can result in increase in GDP, which ultimately increases the income per capita as discussed (Whelan and Fink, 2016).
• Maintaining Strong Relations With all the Suppliers

            The issue of least contractual commitments with other suppliers of Zara can be eliminated by managing the suppliers appropriately. In order to maintain strong working relationships it is necessary to choose the suppliers meeting the specific requirements and offering the quality of services. The quality of suppliers can be checked by a numerous national as well as international certification bodies for checking the supplier’s quality. Building good relationships with the suppliers is also necessary according to the business ethics. This can be achieved in various steps such as, meeting the supplier on regular basis in order to check the business operations of the suppliers (Govindan et al., 2016). Place the orders frequently to gain the supplier’s trust and build strong relationship with the suppliers. The key suppliers can be helped by making coordination between the Zara’s schedule of production and the suppliers production schedule and carrying out discussion to explore the ways in order to reduce the overall costs with the help of order size and order times. Utilisation of the technology in order to in order to connect effectively with the suppliers can help in bridging the gap between the suppliers and Zara. It can also help in examining the real time records regarding market trends, sales, and orders.

Implementing Decentralised Logistic Model

            There are multiple issues with the centralised logistic model such as economic losses, as the authorities and decision making focusses on the top most management tier. The decentralised logistic model approach can be implemented by Zara in order to overcome the loops and flaws of the centralised model of logistics (Pan, Trentesaux, and Sallez, 2017). The decentralised logistic model is capable of making faster as well as appropriate decisions as well as helps in adapting to the demographic production area. The decentralisation of the logistics in Zara can benefit to alleviate personal leadership of the individuals.

Decentralisation of the logistic system also leads to enhance the uniformity of the actions taken for the supply chain management of Zara. Decentralised logistic model integrates and unifies all the operations of the organisation. This model is robust and efficient in handling the emergencies as well as taking quick and effective decisions. The decentralised logistic model overcomes the flaw of centralised logistic model that is the decision making is absolutely independent, the responsibilities and authorities are connected so it sometimes hampers the growth of Zara. The top managements are unable to determine the weak centres and profit centres. The decentralised logistic model can support the staff and divides the task equally among all the employees and mangers that in turn, eliminates the overburden of the tasks.

Adopting eco-friendly technologies to save the environment

            Fashion industries are facing significant issues due to the involvement of technology in manufacturing. These issues can be reduced by use of eco-friendly manufacturing technologies such as polyester-eating microbes, which is a type of fabric that is used to manufacture clothes. This fabric uses petroleum as a raw material and hence, it is difficult to recycle it if the quality has to be kept intact. The new microbe is able to eat the old apparels and break down their polymers back into the raw material. This raw material can be given back to the polyester manufacture to utilise it in manufacturing new clothes (Heuer and Becker-Leifhold, 2018).

This process can also work on the fabrics such as polyester and cotton. The waste of orange juice, for example the peels and seeds can be turned into such raw materials that can be spun into yarn. This yarn can further be used in manufacturing clothes that are recyclable and are not harmful to the environment. The algae-based fabrics can be useful in manufacturing the apparels because a limited amount of water and efforts are required to grow algae. Cotton can also be turned into new clothes by using environment friendly solvent in order to dissolve the traditional cotton clothing into new cotton-like fabric. This material can be spun into yarns to manufacture new apparels. This can help in reducing the waste, as well as the associated problems of growing cotton.

Implications of Government

There are various implications for government in order to reduce the issues in fast fashion industry. Federal government can lower the tax rates to make the consumer purchase more goods and services via their credits. The government can increase the Gross Domestic Product of the country by increasing the spending and expenditure among the population of the country. The money invested in government programs, subsidiaries, and infrastructure has a significant role in raising the GDP, which, in turn increases the income per capita. The government can also take other initiatives such as making it mandatory to use eco-friendly technology for manufacturing of the apparels by the fast fashion industries.

Strategic and Operational/Practice Dimensions Involved in Implementing the Recommendations.

            There are several strategic operations that are involved in implementing the recommendations for the issues that are identified above. The income per capita of the consumers can be achieved by implementing effective strategies such as reaching to the masses and managing affordability. The consumers have faced limited selection and closed economies in the emerging markets but at the present era of high income, free trade, and economic liberalisation, the consumers look forward for the quality products that are worth spending. Reaching to these masses and keeping the prices affordable are the basic strategies that can be implemented in the fast fashion industries (Caro and Martinez-de-Albeniz, 2015). There are numerous operational strategies that can be implemented for managing the supplier relations such as, understanding the value and cost of the supply chain (Christopher, 2016).

Strategic and Operational/Practice Dimensions Involved in Implementing the Recommendations.

The narrow understanding of the supply chain that is unawareness about the costs of the process between the raw material and the end product, as well the supplier value can deprive the supplier evaluation. The strategies to maintain supplier relations should be made by considering the supply strategies (Caniato et al., 2015). The request for orders from the suppliers should be planned thoroughly by accepting the accountability. Equal duration of time should be spent in balancing the penalties as well as incentives. The operational strategies to make the utilisation of technology in the fashion industries eco-friendly are, utilisation of the colours that are natural and does not make use of toxic chemicals in dying and texturing of the clothes. The colour mechanism can be shifted to siphon pigments by plants, molasses, micro-organisms as well as sugar in order to reduce the use of heavy metals, solvents, and acids to minimum.

The machines for washing the clothes should be used to minimum and the manual washing of the clothes should be followed. The fashion and clothing industries are moving towards petroleum synthetics but sheds microbes as well that is extremely harmful for the environment.  Green logistic strategies in supply chain can help in eliminating the issue of inappropriate models of logistics. This can be defined as the strategy of logistics that helps in planning and implementing green transport, green packaging, green storage, green recovery, green circulation processing, and other green activities. This helps in eliminating the environmental risks between the raw material processing to the production of end product. This is a field of reverse logistics that is also referred to as closed-loop supply chains. Implementation of green logistics in supply chain management leaves a positive impact on the environment (Fernie and Sparks, 2014). It increases the energy costs, climate change, global alarm on the emission of green house gases, government agency regulations, and the regulations of environment protection agency are the drivers of the green logistics.

There are several strategic operations that are involved in implementing the recommendations for the issues that are identified above. The income per capita of the consumers can be achieved by implementing effective strategies such as reaching to the masses and managing affordability. The consumers have faced limited selection and closed economies in the emerging markets but at the present era of high income, free trade, and economic liberalisation, the consumers look forward for the quality products that are worth spending. Reaching to these masses and keeping the prices affordable are the basic strategies that can be implemented in the fast fashion industry (Caro and Martinez-de-Albeniz, 2015). There are numerous operational strategies that can be implemented for managing the supplier relations, for example, understanding the value and cost of the supply chain (Christopher, 2016). The narrow understanding of the supply chain, unawareness about the costs of the processes between the procurement raw material and the end delivery of product, and negligence towards sustaining higher supplier value can deprive the supplier evaluation. The strategies to maintain supplier relations should be made by considering the supply strategies (Caniato et al., 2015). The request for orders from the suppliers should be planned thoroughly by accepting the accountability. Equal duration of time should be spent in balancing the penalties, as well as incentives. The operational strategies to make the utilisation of technology in the fashion industries eco-friendly are, utilisation of the colours that are natural and do not make use of toxic chemicals in dying and texturing of the clothes. The colour mechanism can be shifted to siphon pigments by plants, molasses, micro-organisms, as well as sugar in order to reduce the use of heavy metals, solvents, and acids to minimum. The machines for washing the clothes should be used to minimum and the technique of manual washing of the clothes should be followed. The fashion and clothing industries are moving towards petroleum synthetics and sheds microbes, which are extremely harmful for the environment. Green logistic strategies in supply chain can help in eliminating the issue of inappropriate models of logistics. This can be defined as the strategy of logistics that helps in planning and implementing green transport, green packaging, green storage, green recovery, green circulation processing, and other green activities. This helps in eliminating the environmental risks associated with the processes between raw material processing and obtaining end products. This is a field of reverse logistics that is also referred to as closed-loop supply chains. Implementation of green logistics in supply chain management leaves a positive impact on the environment (Fernie and Sparks, 2014). It increases the energy costs, climate change, global alarm on the emission of green house gases, government agency regulations, and the regulations of environment protection agency are the drivers of the green logistics.

The opportunities and challenge faced by the companies considering the issues of sustainability and ethics in the industry.

Per capita income of the consumers in a region affects the business sustainability in that region. High per capita income implies high purchasing power of the customers in that region. Trends show that the region where the per capita income of customer is low the companies profit ratio is also low in that region. The region where per capita income of people is low companies have opportunities to expand their market in that region. The companies should low their prices and profit margin in that region and focus on increasing the sale of the product in that country (Markusen, 2013). Suppliers provide services and good that a company will need for business to run and grow. They can also provide information, advice the company and help in providing funds for the company. In order to cultivate business in the different region of the world a company should maintain a good relationship with the suppliers. The company should make a legal agreement so that both the supplier and the company ensures the long-term business with each other. The suppliers are located in different countries so they can face a difficulty of fund transfer in that country. To avoid these type of issues the company should clear the dues of the suppliers before the deadline.

The centralised system has many flaws associated with it and it can result in financial loss to the company. The decentralised system overcomes the flaws of the centralised system by outsourcing the different process of supply chain to different firms. The challenges associated with the decentralised system is to make proper policies and route for production and exhibit control on the process. Lack of communication between the company and the suppliers is also a critical issue and it can be overcome by creating and maintaining the proper channel of communication between the suppliers and the company (Andersson and Ostrom, 2008). Environmental issues are very critical in attaining sustainable development. The company should make its policies considering the factors that will conserve the resources and save the environment.

The luxury brands suffer from the problem that sometimes there cannot sell their full stoke and as the season change the stock become out of fashion and company to have to discard that stock. This poses a great threat to the resources and the environment. The company should schedule its process in such a way to ensure minimum wastage and harm to the environment. The government policies and regulation also affect the business of a company in a country. In order to promote local industries government posses some trade barrier on the companies that do not belong to their country. This is a very big challenge in spreading business in other countries. The company can form a joint venture with a local company in order to grow our business in that country. Formation of joint venture takes huge opportunities to the company as the local people get faith of local company and luxury of the foreign company that will increase the profit of company in the foreign country.