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The objective of this paper is to categorically examine the retail giant Primark which operates in the UK and several other countries from the perspective of its advantages, disadvantages, business structure, business model and understand the scope of the improvement for the organization. The objective of undertaking this inquiry is to understand the factors that affect the success of Primark contemporarily and will in the future as well. The paper will be structured in the following way; first a PEST analysis of the business will be done. Second, there will a discussion on the the approximate Value Proposition Canvas of the business to see how well it aligns with the needs of the individual. Thirdly, a business model canvas will be developed to examine the areas where the company can develop. A SAF analysis of the business will be done in order to understand wha strategies the company needs to use in order to progress fastest and have a competitive advantage over its competitors in the UK and globaly. Lastly, the findings will be concluded in the conclusion chapter.
The analytic understanding of a company is not just an exercise which is undertaken in order to maintain records of an organization. Rather it is an exercise which evaluates the performance of a company holistically and assures the investors and stockholders that they are investing their money in the right place. It defines and redefines the characteristics of the company and makes the company management and stakeholders aware of the risks involved in the company and its functions. This section will deal with the analysis of the retain giant Primark, starting with a brief background of the company and where it originated from.
2.1 PEST Analysis of Primark
Political: Primark is classified as a ‘fast production’ company which produces cheap and fashionable clothes which are meant to be bought and discarded not very long after buying. Hence, their sale depends on constantly adapting their style and keeping the customers coming into the store. Most recently, in Germany, outrage was caused when interviews with garment makers who supply garments to Primark discovered that the workers are working in pitiable conditions for minimum wage, and that decades of service won’t still increase wages for the workers (Derek Scally, June 12 2019). Economic: The present scenario presents a challenging situation for the retail giant, owing to the fact that the present pandemic has economically disadvantaged businesses. The lockdown imposed by the pandemic has caused customers to not visit their brick-and-mortar stores. UK consumers are increasingly moving away from the experience of shopping in stores and have expressed overwhelming interest in staying at home and working post-pandemic too. Hence, it may see a relative loss with regards to its physical stores. However, Primark has quickly acted to cancel orders worth 250 million pounds which it couldn’t fulfil without losses, and gave 68,000 workers unpaid leaves of absence to break even in the year 2020. Social: The popular perception of Primark in the UK is that the clothing they provide is trendy and cheap, making it easy for the younger generations to access fashionable clothing. While fashionable is frequently disassociated with cheap and accessible, Primark has managed to carve out a consumer base within the UK for its fast and fashionable clothes. Moreover, there lies more scope of the advancement of Primark in the UK. Everywhere in the world, brands specifically target the young populations in a bid to increase their sales. With the case of Primark, this is also true as young adults between the ages of 16-30 needs to form the basis of profit for Primark. This is because this generation will be the one which will shop the most. Technological: Technological advancement for Primark is especially important in the current situation as most customers are now shopping online and not visiting the physical stores because of the pandemic. Pre-pandemic, however, one of Primark’s main forms of advertising is through the social media. Primark, in a bid to promote its clothes has established deals with reality TV stars and Youtube personalities who promote their merchandise on their channel and Instagram page. One of the greatest disadvantages that Primark currently faces is that it doesn’t have an operational online store. The website of Primark will allow the consumer to see and browse through the catalogue of the clothes, shoes and accessories available under the brand, however, one cannot directly buy the goods from the website. In order to buy, they will still have to visit the physical store. Legal and Environmental: Primark has had no legal issues with expanding in different countries. However, in the past, it has fallen in public disfavour after an undercover BBC investigation that found that one of its cloth suppliers was paying its workers wages well below the minimum wage. It was postulated that they were also being lied to about the number of hours that these workers were working (John Russell, 2 March 2009). Ethically, Primark has been in the middle of its fair share of scandals in the past decades, but the devastating fire in Rana Plaza in Bangladesh is an incident for which it still draws ire from environmental and human rights group.
Value Proposition and Business Model Canvas of Primark
The purpose of a value proposition is to ensure that the price that the business is putting on their products and services matches the price that the consumers are willing to pay. A concept initially developed by Dr. Alexander Osterwalder, who also developed the Business Model Canvas, the purpose of a value proposition is to achieve that sweet balance between providing their customers with a bargain price which is unmatched by their rivals while at the same time not being completely unprofitable. The profits of Primark lie in the fact that it has managed to construct a value proposition model which gives it a competitive advantage in terms of price to its customers while still retaining a healthy profit. Below, a value proposition has been done of the company. Based on the data collected and the facts that is already known, Primark is a primarily clothing company and its main attraction is the fact that it sells very cheap and fashionable clothing. One of the biggest gains of the company is that it sells fast fashion and it is an established name in the world of fashionable clothing. One of the main disadvantages that the business faces is that it doesn’t have a working online store presence.When people are working in the relaxed environment of their home, it is likely that they will be more interested in browsing through online stores while they are working, to chase off boredom. Primark has an intricate understanding of their customer base and they keenly understand what kind of people avail their services. Robin Lewis (October 12, 2015) reports that one of the first things that one sees when they enter a Primark is an overwhelming array of trendy and colourful clothes which prominently display their cheap prices.
Business Model Canvas
Every organization has a business model, the function of which is to clearly and transparently define and outline the key aspects of the business. Such an endeavour could be something which represents the objectives of the business and the resources it has in its disposal. It outlines the ideas that went behind making of the project and presents a coherent picture of the business in order for all the connections of the particular project or the business to be seen holistically instead of part-by-part. Based on previously published sources, the following business canvas model for Primark can be made. The key points that can be taken away from the canvas is that Primark not just operates a business to sell retail clothes, it operates a whole network of supplying and resource gathering, which all culminates into the store clothes that we see on the racks. Therefore, holistically speaking, any developmental plan which is to be contextualised in the whole operations of Primark, needs to take into consideration all these factors. For example, if the strategy of the management is to cut costs in the contemporary situation of the pandemic, it will be wiser to cut back on the transportation costs as sales have dropped and so not an excessive amount of clothing will move between the store and the storage areas. Hence, costs will be saved in the salaries of the transportation officials, fuel and transport vehicle maintenance charges. Additionally, the company could promote its gift cards facilities because the festive season is near and people could gif their loved ones gift cards online which they can later use in the store.
From the above, it is clear that Primark, as a whole, possesses some key strengths in its management. They can be summarized as follows: It is the third largest retail clothing business in Europe and hence it has a good hold on the manufacturers and suppliers and can afford to have several suppliers. It has tapped into the market of providing average quality clothes at a low price by sourcing its materials from countries like India and Bangladesh where cost of material is relatively lower. It has also tapped into the influencer clout market by having various influencers link up with them in order to make their own line of clothing. Introduction of ‘Primania’ whereby customers can use the tag to show off the way they have styled Primark clothes. It is also evident that in order to topple companies like Zara and H&M, Primark needs to up its game with influencers and the social media. While it does do a lot of social media marketing, it tends to play it safe when it comes to having partnerships with Instagram celebrities and Youtube influencers. It needs to rope in bigger names in order to completely influence the younger generations. In the current situation of COVID restrictions, the company needs to rethink if it needs to employ the number of people that it is currently employing. A good strategy to ensure that the workers remain safe and the organization also cuts back on cost is to implement the policy of rotational working where workers work in rotation with a fractional docking of their pay. In the long run, it is also advisable that it provides its workers with a viable health plan as it is seen to have a good effect on the health of the workers, reducing absenteeism.
A SAF analysis is the analysis which companies undergo in order to devise a strategy for the actions which the company must take in order to progress. The job of the analysis is to do a thorough check-up on the internal and external aspects of the business in order to completely understand which way the business needs to move in order to be profitable. Currently, Primark faces several challenges, but also sees several opportunities to expand further. This SAF analysis will expand a little bit more of what those challenges are and how can Primark overcome it. The following section will cover the three main areas of SAF that has been elucidated by Johnson et al (2009) as being the three central tenets to a functioning SAF analysis which will aid in building the perfect strategy for the concerned company.
Suitability: It is frequently understood as the most important aspect of the start of strategy making of an organization. Suitability dictates that the internal and external situations of the organization needs to be in par with the organizational goals in order for the goals to be achievable. In the case of Primark, the resources it has with its labour and fabric supplies is unmatched. Since the fabric supplier that it uses also supplies fabrics to other retail giants like Zara and H&M, Primark could be in a better position in terms of gaining monopoly with respect to these suppliers. However, one opportunity which Primark is still not taking care of is the opening of an online store. This is an especially big problem as the environment suitability of the sustenance of an online store for Primark is very high. What more, they could save money by shifting some its focus to only business and making a few workers work from home in exchange for reduced pay. This is one opportunity which will come up if Primark is to conduct a SWOT analysis as a part of its SAF analysis. This is a key waste for Primark as the principle of suitability dictates that a company must make adequate use of its resources in the best way possible. Currently, the company has vested interests in toppling brands like Zara and H&M in sales. However, it is postulated that the projected increase in sales that had occurred in the first half of 2020, as opposed to the last year, may decrease in the UK because business have been overall suffering. The very profitability of the brand depends on how many people visit the store and buy their products. If the current situation doesn’t improve, chances are that the next quarter for the profit rates of the company will drop steeply.
Acceptability: Acceptability deals with the reaction of the consumer, shareholders and stakeholders in the analysis and it evaluates how a particular strategy will sit with the stakeholders in practice. A very important question that acceptability answers is ‘acceptability to whom’? At the very outset, the goals set by Primark needs to answer whether they are setting a strategy for the benefit of the consumer or for the stakeholder. Several times, the conditions for acceptability of the shareholder is the same as the conditions for acceptability by the customer. A 2019 article on Primark reported that the parent company of Primark, Associated British Foods, declared that the absence of a transactional website of Primark has not hindered the brand. Rather, its has turned it into a profit (Chloe Rigby, 5 November 2019). The thinking behind such a strategy could be that their research showed that people are more likely to buy more things if they physically visited a store, as opposed to if they are shopping online. In the case of that, the goals were set keeping in mind the acceptability of the company owners and the shareholders. Even though the company has an extensive transportation system which sources raw materials and finished garments from a variety of nations, from Mexico to Vietnam, they do not see profit in providing for shipping to their consumers presently, either in the UK or outside the UK.
Feasibility: Feasibility refers to the financial capability of a company to carry out the plans it has drafted. Primark has a large purse when it comes to opening stores in newer locations and so far all of the new locations which it has opened up has turned into a profit. In 2019, it opened a store in the Birmingham area of the UK, which cost the management about 70 million pounds. While it was one of the biggest stores that Primark has ever opened and most probably won’t be opening a store of this size again very soon, it is a significant investment strategy in that particular area of the UK. This particular action was taken after thorough research into the buying patterns of the consumers who visit the store. Retail analysts and reports have found that as opposed to other stores in the area, customers rarely left the store empty handed and it has been discovered that the per store sale of Primark is almost five times the per store sale of H&M, seven times higher than Zara and almost double the sale of Marks and Spencers. These are all stores which have a very high turnover in the UK and are among one of the most popular stores in the UK. The question, then, remains; what is lacking in the strategy of the company which has such a high rate of sale within the physical stores but is still unable to top the sales of stores like Zara and H&M in the UK.
The following paper was an categorical and critical introspection into the workings of the company Primark in the UK. The purpose of this report was to intimately look at the history of the growth of the brand in the UK and world-wide and to understand what are the factors which led to its rise. The purpose of doing this was to understand in which areas the brand is lacking and what are its scopes for improvement. From the above analyses, it is clear that the brand needs to continue with the service it provides to the consumer base it has created for itself; fashionable clothing as reasonable prices. To increase its prices by either creating luxury items or changing fabric materials and/or garment manufacturers would not be a profitable action as Primark has worked well in the sector of providing economical and fashionable clothes at a reasonable rate. Furthermore, the only reason it has higher in-store sales but still cannot topple brands like H&M and Zara is because it has not made its website transactional. Primark needs to invest in its website and needs to develop it from being a mere catalogue of the store to being a full-fledged store in itself, allowing the consumers to shop at their will online. This action comes at a very important time when online sales are swelling extraordinarily and Primark needs to take advantage of this particular situation, if it wants to capture the market completely.
Word Count (excluding references): 3007 words.
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