AIM & OBJECTIVE OF THE STUDY

The main aim and objective of the study is to analyze the organizational behavior and
various motivation and leadership changes within the company Zara. The company is
known to be the flagship chain store. In our study we will come across various theories
of organizational behavior. We will see how these theories and models are implemented
to the company in practical life. The study will help in understanding:
 The behavior of people
 Organizational structure of the company
 Process of management
 Interaction with external and the internal environment of the company.
The study will also include the effective use of the balance scorecard by the company
which will helps smooth running of the business. Another purpose of the study is
analyze the position of the company using SWOT and POTER analysis. In the end the
study will draw conclusions and recommendations i.e. how the organizational
performance can be improved by making structural changes and changes in the
motivation frameworks.

ORGANIZATIONAL BEHAVIOUR

Organization of one form of another are necessary part of our society and serve many
important needs. The action and decisions of management in an organization have an
increasing impact on community, individuals and other organization. Therefore it
important to understand that how an organization functions and the influences which
they exercise over the behavior of the people. It is the study of knowledge about how
people, group, team and an individual behave in an organization. The organizational
behavior is mainly a narrower approach and thus does not encompass the whole of
management.
ZARA: HISTORY & BACKGROUND

The global market is a consumer-driven industry. New technology and globalization

have attracted the customers to become more keen about fashion. Zara is one of the
famous brands. Zara a Spanish company which is owned by Inditex group, came into
reality in 1975. With growing popularity in 1981-88, Zara started multiplying its store not
only In Spain but around the world. In 2003 Zara open its first Zara home store by
entering the home furnishing market. Today Zara has its stores in almost 73 countries,
having more than 1,540 stores and bringing an annual turnover of 6,824 million Euros.
Zara has successfully developed the diverse method of doing business in the apparel
industry. ( [Link]
In less than 20 years Zara has manage to open more than 800 stores around the world.
Zara owns both its retail and production units. This help the upper management to get
a better overall control. They have a strong integrated information technology in their
business. The company is regarded as the most innovative and creative in the world.
As it has the most unique style of marketing strategy. Zara has its own manufacturing
units which help to quickly respond to the customer demand in fashion trends. Zara is
said to have the ‘most unusual strategy’ because of its zero advertising policy. Instead
Zara prefer to invest its revenue in opening new stores.
Zara’s mission is,’ creativity and quality design together with a rapid response to market
demand’.

APPROACHES TO ORGANIZATION AND MANAGEMENT

In order to identify the work of an organization it is necessary to divide the work into
different approaches. The main approaches are as:

CLASSICAL APPROACH
This theory basically emphasis on purpose, formal structure of an organization,
hierarchy of management, technical requirement, and common principles of
organization.
HUMAN RELATION APPROACH
This approach gives attention to social factors at work, groups, leadership, the informal
organization and the behavior of the people

SYSTEM APPROACH
This approach is an integration of classical and human relation approach. It is
concerned with the interaction between the psychological and social factors and the
needs and the demand of the human part of the organization.

ORGANIZATIONAL STRUCTURE OF ZARA

According to Koontz and Donnel organization structure is, ’the establishment of

authority relationships with provision for coordination between them, both vertically and
horizontally in the enterprise structure’.

The purpose of organization structure is the division of work among member of the
organization and the co-ordination of their activities so that they are directed to towards
the goals and the objectives of the company. For a large organization like Zara a
particular hierarchy is needed. It describes a structure of management of the business
from top level to the lower level management. Structure is the pattern of relationships
among position in organization and its members. An efficient organization structure
helps in the economic and efficient performance of organization and the level of
resource utilization. It helps in proper monitoring of the activities. It builds coordination
of different part of organization and different areas of work. A proper structure provides
social satisfaction to its employees.
An organization structure varies to the firm’s mission, purpose and the strategy. Every
business has different structure and it varies from it’s size, environmental issues and the
technology. There are different types of organization structure such as line structure,
line and staff structure, divisional structure, narrow span, flat or tall, and span of control.
SPAN OF CONTROL
Span of control means when in hierarchy a number of employees report to one
manager. It become easier for the supervisor to have a control and operate efficiently
on its employees in an organization. It shows the relation between a subordinate and
the superior. This help in maintaining a cordial relation between the two.
There are two types of span of control:
 Narrow span of control: in this a manager is allowed to quickly contact its
employees. Manager control less employees. There is tight control and close
supervision. It is basically for tall organization
 Wide span of control: in this a manager control more employees. There is not
much close supervision and less control. It is basically for flat organization.
ANALYSIS
As Zara is big organization therefore narrow span of control can be seen in the
company. And moreover it helps in providing better communication between the
manager and its employees. It helps in building cordial relation between an employee
and employer. Proper check can be made on the evaluation of the performance of an
employee.

BALANCE SCORECARD
Balance scorecard is an innovative performance management tool which is extensively
used in business and industries, non-profit organizations and government. It helps an
organization to improve internal and external communications, moreover management
has an access to its financial and non financial information they need. This will help in
better performance of the business and successfully achieving the targets.
The four main perspectives of balance scorecard are:
 Customers
 Internal business process
 Learning and growth
 Financial factors

ADVANTAGES OF BALANCESCORECARD
 Act as a basis of compensation
 Easy communication
 Translates strategy and vision
 Financial and non-financial information
 Regular feedback to top management

IMPLICATION OF BALANCE SCORECARD IN ZARA

With these main perspective it is necessary for a company like Zara to have a balance
scorecard system in an organization. This help a company to have a focus on entire
business. This will reduce the internal and external pressure affecting it. The main four
components help in achieving the company’s objective. It helps in building more cordial
relation between the employer and the employee. By giving a proper training to the
employees regarding their jobs and how to serve a customer, the company was able to
increase its sales and was successful in retaining its customers. All these results
indicates that company had been successful in facing the competition.

DECENTRALIZATION
In this the authority of major decision and framing policies are retain with top
management and rest of the authorities can be delegated to middle or lower level. In
this the sub-ordinate get the chance to take its own decisions and enhance its skills. In
this type of structure all the operations can be coordinated at divisional level.
Decentralization help in increasing the morale of the employees.
ADVANTAGES :
 Fewer burdens on upper level management.
 Decision is more on the current information.
 Greater motivation and morale of the employees.
 Quick decision.

CENTRALIZATION
It is the process where authority f taking the decision is in fewer hands. All the
decisions are first approved by the upper level then revert to the lower level. All the
information and ideas are concentrated at the top level and then move to the lower
level.
ADVANTAGES:
 Proper co-ordination
 Full control
 Equal division of work load
 Improved supervision
 Standardized method of work
 Complete hold of authority and responsibility by top management.

ANALYSIS:
In case of Zara if take the example of stock replenishment in the store. The key
decision maker in this case is the store manager and the people at the head quarter.
Manager decides the quantity of the stock to be ordered. He then inform it to the head
quarter. Then the member at the head quarter takes the final decision keeping in view
the performance of the store. Where as in case of fulfillment of order store managers
are not at involve. This is mainly because of the type of structure followed by the
organization. The work has been completely divided and the responsibility is given
accordingly. Therefore in such a big organization proper hold and complete check is
required. This can be possible only if some authority is given to lower level
management therefore decentralization is opted by Zara.

MOTIVATION THEORIES:
There is no one theory of motivation which can be claimed to embrace the entire range
of organizational and personal circumstances. The theories emphasize particular
aspect of an individual’s need, or the goals they attempt to achieve.

McGregor’s theory X and theory Y

McGregor (1960) explicitly introduced the underlying assumptions concerning human
nature into motivation when he proposed the notion of theory X and theory Y.
according to him the manager tends to hold beliefs that would classify employees into
either a theory X or theory Y category.
 Theory X: this type of employees lack ambition, dislike responsibity, lazy, self
–centered and gullible. These people avoid all the responsibilities and think
that work should be left as it is. They are not motivated and resist changes in
the organization.
 Theory Y: this type of employees is ambitious, self motivated, self direction,
self control. The employees enjoy their physical as well as mental activities.
These are creative people and have the talent to move ahead in their life. They
are self-motivated. Their essential task is to arrange the conditions and
methods of operation so that people can achieve their own goals best by
directing their own efforts towards organizational objectives.

IMPLICATION OF THEORY Y IN ZARA

 Self motivated
 Proper delegation of authority
 Decentralization
 Performance appraisal
Ref: ([Link]
“Organizational behaviour” by “ John Martin”
MASLOW’S HIERARCHY OF NEEDS
The basic of this theory is that all individuals have innate needs or wants which they will
seek to satisfy themselves.
 Physiological needs: this include the basic needs require by a human being like
food, water and shelter. In an organizational context it include the need of wages.
 Safety needs: it include the needs that provide safety to an individual in their
normal environment. In an organizational context this would include the need for
job security.
 Social needs: it include needs which support necessary to life. Like friends,
family etc. In context to organization this include need to work as a part of team.
 Esteem needs: this include having self respect. In context to organization this
include recognition in the management.
 Self-actualization needs: it include realizing personal potential, self fulfillment and
personal experience. In an organizational context it include freedom to organize
ones job to suit personal preferences.

ANALYSIS:
Motivation is the inner state of an individual that encourage the people to move toward
the accomplishment of goals. ZARA is such a big organization. There is proper
delegation of work and authority between different departments. Employees are self
motivated to achieve the target. Zara itself has the capability to produce half f its own
product, which enable Zara to produce a new cloth line after every few weeks and keep
its customer up to date with the most current trend. This theory is particularly needed by
all the organizations, to keep a proper check on the employee performance and the
working of the organization. These theories help in putting the right person at a right job.
The whole organization work as team. Therefore if an employee is not working properly,
this will going to effect the whole of the organization.
CONCLUSION:
An organization must be able to satisfy and motivate its employees. Therefore these
motivational theories will help an organization to work as a team and to achieve the
target in given time. Zara needs more of theory Y type of manager, as it is very much
necessary for an organization to motivate its team and work hard to achieve the targets.
Managers should have the leadership quality to motivate its team members. Such
managers try to remove the barriers which hinder in the way of their team mates to
show their full potential.

Team Management and Theories

Team management means the processes, techniques and the tools for organizing and
coordinating the group of individuals that are working towards a common goal.

Bruce Tuckman in 1965

There are three steps in this theory

 Forming- this is the first step of the theory. In this the team members are
assembled and particular task is allocated to the team. Planning plays a major
role and it takes a lot of time to plan, collect information and bond the activities.
Employees are highly dependent on the leader.
 Storming- this is the second step of the theory. In this step every member of the
team starts giving their ideas. If this step is not managed properly then it may
lead to destruction. Due to this the relation between the team members may be
broken or can be made and many can never be recovered. In this step it is very
essential that the team has a strong leader.
 Norming- in this stage a strong bond is built between the team members there is
more harmony in the work. This is the stage where team reaches the
conclusions. Individual members plays a bigger role and responsibility then the
 leader. There are chances that the team may become complacent and result in
downhill.
 Performing phase- in this last step the team phase a common vision. The team
members are highly motivated toward the achievement of the common goal.

LEADERSHIP THEORIES:
Leadership is the process where an individual guide others for the accomplishment of a
common goal. Leadership basically revolves around philosophy, experience and
personality of the leader. The main theories of leadership are as follows:
Trait theory:
The significant of this approach is that leaders cannot be trained and therefore must be
selected. It also implies that successful leaders will be situation specific. A successful
leader should include the following characteristics:
 Intelligence
 Initiative
 Self-assurance
 Overview
 Health & physic
 Social background
Behaviorist theory:
This theory basically concentrates on what leaders actually do rather than the qualities
of a person. Many different pattern of behavior are observed and categorized which are
known as the ‘styles of leadership’.
Situational leadership:
This style of leadership varies from situation to situation. It may depend on different
organization or different style at different level in the same organization.
Contingency theory:
This theory is a refinement of situational leadership. This basically focuses on
identifying the situation and predict which particular style fits at a particular situation.
SWOT ANALYSIS OF ZARA
Strength:
The company has more than 35 years of experience in the apparel industry. Zara has
the ability to produce an item within less than a period of 2 weeks. It adapts quickly to
the new style and the latest trend of the market. The company has a unique business
model. Moreover they have successfully integrated information into their business
model. It has its own production house. Zara is globally connected to more than 73
countries. The company generally target the young fashionable consumers.
Weakness:
The main weakness of Zara is that it has only one production and distribution channel in
the world. The company has less decentralization of authority. They may face some
hurdles because of their current business model
Opportunities:
The company should open more distribution and production channels in the world. They
should have more decentralization of their operations. Zara should alter its current
business model. Apparel industry is a huge market therefore the company has a wider
scope to grow internationally.
Threats:
The company might face a threat because of entry of new competitors. The government
policies can also be a major threat. There is a huge possibility of natural disaster in the
galacia region of Spain. The company faces a threat from its traditional retailers like
GAP and H&M.

PORTER ANALYSIS OF ZARA

The main purpose of PORTER analysis is to measure the competitiveness of the retail
market. Zara has a unique business model and its basic strategy is produce the item
within a span of 2 weeks. The main business idea is to manufacture the clothes which
can be affordable by the general public and which give the impression of high fashion.

Threat to entry:
The company may face a threat of economies of scale which is moderate. The entry of
new competitors in the apparel industry can also be one of it. The capital requirement
also varies from market to market. Moreover market experience plays a vital role.
Threat of substitutes:
Product-on-product substitution on this market is very high. This is basically from other
apparel retailers, tailor house and designer clothes. Substitution by need is unlikely.
Power of buyers:
As there are many small numbers of buyers therefore the power of buyers on the
market is moderate. The material cost is low as in buyers are rather paying for brands.
The switching cost is almost zero and moreover there is no backward integration threat
apart from large retailers.
Power of supplier:
As in this market there is limited amount of suppliers therefore the power of suppliers is
moderate/high. The switching cost is also high. There is a large possibility of forward
integration. Moreover the supplier’s customers are not fragmented.
Competitive rivalry:
Zara faces a high competition. As there are many retailers in this apparel industries.
The big competitors of Zara are H&M and GAP. Since they offer same range of
products starting from women, children and men to accessories and beauty products.
And moreover both are globalized companies.

RCOMMENDATIONS TO THE COMPANY:

According to my study ZARA should maintain its strategic growth and to seek new
opportunities in the apparel market. Zara has the opportunity to grow its market in U.S.
and be one of the trendiest and low priced retailers that U.S market has ever seen. Zara
should try and open its second distribution channel in America to reduce its distribution
cost and to fast delivery of fashionable goods. This will allow them to spend funds in
other areas like advertisement which is very much necessary to compete in American
market.
Another idea for Zara is that they can invest in internet banking to especially to have
control on American market. Since Zara is expanding in American market internet
banking will be a boon to reach more quickly and easily to the consumers.
Another recommendation can that Zara can offer specialized product for different
geographical locations but that to in same city. This will help to increase their shopper
traffic. This will help in decreasing cannibalization for the chain.
According to my study it is recommended for the company that ZARA should also
measure the customer’s satisfaction and customer’s loyalty in accordance with
productivity or performance management. Customer retention schemes used be used
by the company. It has been studied that it is six times more difficult to retain a
customer rather than to attract a new customer. So the company should try and
maintain the return guest list.
Customer satisfaction techniques can also be used so as to measure what impact the
retailer has created on its new as well as existing customers. The company should
implement the new balance scorecard system in its organization to overcome the
internal and external pressure effecting the company. This will help getting the
employee feedback as well as the management will be aware of the employees needs
and wants. This will have n significant effect on job performance and job satisfaction of
the employees.
Performance appraisal method can also be of the measure which be can be good for
ZARA. This can help the company to measure its financial and non financial
approaches. This can be done by training the employees regarding their job and how to
serve the customer. This will help in performance appraisal of the employees. Through
this company will motivate its employees, to work more efficiently and to achieve the
targets of the company.
Moreover so as to motivate the employees the company can give more incentives and
perks to the employees so that they can stick to there jobs and help in producing better
result for the company.

CONCLUSION
It can be concluded from the above that ZARA has various opportunity for expansion in
retail market. Company is more focused and attentive in opening the stores in other
countries. ZARA is quickly internalizing their products so as to gain the sales and
market share as well in other countries. For Europeans ZARA is a trendy and well
priced face for new apparel every week. Though Inditex branch is researching and
developing new ideas for the company to remain the fresh face in the market. Moreover
Zara’s business model is becoming a wav for the future. Finally it can be concluded that
ZARA has the potential for sustainable growth as it has ability to face the challenges of
the apparel industry.

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