Impact of EU Policies and Market Structure on Primark's Profitability

The report concludes that Primark, a leading fashion brand, is affected by internal and external business factors. The organization has met the objectives of different stakeholders to a large extent. EU policies promote healthy competition among businesses, which benefits Primark by offering growth opportunities and aiding profitability. Additionally, capitalizing on international trade opportunities can maximize profit margins and customer bases.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Purpose of different organizations.........................................................................................3
1.2 Extent to which objectives of stakeholders are met...............................................................4
1.3 Responsibilities of Primark....................................................................................................4
TASK 2............................................................................................................................................5
2.1 Different economic system....................................................................................................5
2.2 Impact of fiscal and monetary policy....................................................................................5
2.3 Competition policy................................................................................................................6
TASK 3............................................................................................................................................7
3.1Explaining the ways in which pricing and output decisions are determined by business unit
.....................................................................................................................................................7
3.2 Assessing the ways in which market forces shape organizational responses........................8
3.3 Assessing the ways in which business and cultural factors affect the behavior of Primark..8
TASK 4............................................................................................................................................9
4.1 Discussing the significance of international trade to UK business organizations.................9
4.2 Analyzing the impact of global factors on UK business units...............................................9
4.3 Evaluating the impact of policies of European Union in the context of Primark................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment includes both micro and macro factors that have high level of
impact on the growth as well as functioning of company. In the present times, changes take place
in the business environmental aspects with the very high pace. In this regard, manager of the firm
is required to develop highly competent and strategic policy framework by evaluating the market
trend or pattern. The present report is based on Primark which is the leading clothing retailer of
UK. Such company is known for its quality products and affordable prices which in turn evolve
high level of satisfaction among the customers. In this, report will provide understanding about
the objectives of different types of business organization. Besides this, it will shed light on the
level to which Primark has met stakeholder’s objectives through the means of strategic
framework. In addition to this, report will depict the manner in which pricing strategies affect
output decision of firm. Further, it will also highlight the extent to international trade and
transactions are significant for Primark.
TASK 1
1.1 Purpose of different organizations
Primark is a leading clothing brand that offers super quality products to consumers at
reasonable price range. It is required that expectations and needs of consumers should be
identified and products should be developed on the basis of that. Purpose and objectives of
different types of organizations is as described:-
 Public sector :- The major objective of public sector organizations is to provide better
services and amenities to local community people (Baldwin and Scott, 2013.).
Employment opportunities are created by these organizations and these organizations
play a significant role in developing economy of nation in effective way.
 Charity organizations :- The major objective of charity organizations is to enhance living
standards of people by offering help to people who are in need (Dhingra and et. al.,
2016). These are non profit organizations and they work for making positive and better
changes in lives of community people.
 Co-operative :- These organizations are started by two or more people and major
objective of these organizations is to make profits and offer better products and services

to people. Members of the organization takes decisions for carrying out business
activities.
 Private sector:- Major objective of these types of organizations is to earn profit by selling
products and services to business consumers. Primark is a retail organization that works
in retail industry and offers superior quality products and services to consumers.
1.2 Extent to which objectives of stakeholders are met
Stakeholders of the organization provide necessary resources and investments that are
needed for carrying out business activities. Primark organization and various stakeholders are as
follows :-
 Employees :- Staff members are prominent stakeholders that supports for executing
strategies that have been formed by the top management of the organization (Dunne And
et. al., 2013). Positive efforts given by staff members supports for enhancing efficiency
and productivity of the organization.
 Consumers :- Products of Primark organization are purchased by consumers and they
provide financial revenues to the business consumers.
 Shareholders :- Necessary investments for carrying out business activities are provided
by shareholders. Primark provide dividends to shareholders that helps for paying
responsibilities towards shareholders of the enterprise (Lee, Olson and Trimi, 2012).
 Suppliers:- Necessary raw material for executing manufacturing and production activities
of the enterprise is provided by suppliers. Company makes it ensure that suppliers should
be paid on proper time.
 Government:- Rules, regulations and norms formed by government are followed by
organization and all the business activities are performed in legal and lawful manner.
1.3 Responsibilities of Primark
There are many responsibilities of Primark company that needs to be fulfilled so that
better outcomes can be received from the business activities. Responsibilities of the organization
are as described:-
 Environmental and ethical issues:- Company need to carry out their business activities in
effective way so that no damage should be done to the environment.

 Consumer legislation:- It is vital that authentic and reliable information should be
provided to consumers about quality and attributes of products (Johari, Weintraub and
Van Roy, 2010). No false and misleading advertising is used and reliable details are
provided to buyers about quality of products.
 Ethical responsibilities:- Equal job opportunities are provided to the staff members and
fair and transparent practices are used for carrying out business operations.
 Stakeholders responsibilities and strategies:- Responsibilities towards stakeholder is paid
properly and they are provided chance to take part in the decision making process of the
entity. Key stakeholders of business includes customers, suppliers, shareholders and
employees (Carroll and Buchholtz, 2014).
TASK 2
2.1 Different economic system
Different types of economic system are followed in countries and all the organizations
working in the nation gets affected due to it. Economic systems that are followed in the country
are as follows:-
 Cuba:- In the country command economy system is followed and allocation of resources
is done by the government. State holds control on all the business activities and price of
commodities is decided on the basis of that (Baldwin and Scott, 2013).
 United Kingdom:- Free economy system is followed in the country and government
intervention is very less in making allocation of resources. Requirement of capital and
price of products are determined by market factors that includes demands and supply.
 China:- In the country Mixed economy system is followed and government and private
organizations both play a significant role in doing allocation of resources (Carroll and
Buchholtz, 2014). Price of goods are determined by government and private
organizations that are working in the industry.
2.2 Impact of fiscal and monetary policy
Fiscal and monetary policy is formed by government for regulating market conditions
and controlling money supply in the market. Monetary policy gives impact on farming and
housing industry and activities of these industries gets affected by changes made in monetary and
fiscal policy. When high tax rates are imposed by government than due to that it becomes

difficult for taking loan. Farming activities of the enterprise gets influenced due to that and
impacts is observed on loan rates (Johari, Weintraub and Van Roy, 2010). If interest rates will be
high than it will become difficult for taking loans and problems will be faced on carrying out
farming activities. Fiscal policy also gives impact on the housing industry high interest rates on
loans also affects due to that. Moreover, monetary policy also affect the farming industry and
due to that impacts are observed on the people who are engaged in farming industry. People will
face problems in purchasing farming equipment and other material that is required for carrying
out business activities. Price of housing will increase and due to that overall performance and
revenues of the industry will be affected (David and David, 2016). Monetary policy also will
give impact on the farming industry and people who are having low income in farming sector
will get affected due to that. Moreover, changes made by government in fiscal policy will also
give influence on the loan taken by people for carry out farming activities. Business activities of
Primark organization will also be affected when government changes guidelines of fiscal and
monetary policy. Overall financial performance of the entity gets affected due to it.
2.3 Competition policy
Competition policy supports for maintaining competition in market and due to that
impact is observed on the performance of the organization. These policies are also used for
encouraging and improving the competitive process. It also helps for ensuring that consumers
feel the benefits of theseprocess. Five major competition policies and their impact on the
business functioning is as follows:-
 Competition act 1998:- Some activities have been prohibited by government which any
business organization can not perform without taking prior permission from government
(Bar-Isaac, Caruana and Cuñat, 2012). Impact of this act is observed on strategy
formulation process and diverse range of business activities gets affected due to it.
 Collusive behavior:- It gives impact on the price fixing and output related decisions of the
enterprise. It supports an organization for enhancing their existing financial revenues and
making increase in profitability of the entity. p
 More choice:- Buyers gets opportunity for selecting products from wide variety of
options that are given by the enterprise (Kumar and Siddharthan, 2013). Moreover,
impact is also observed on the meeting the need and expectations of buyers.

 Innovations:- Company can go for innovation and it will help for identifying
opportunities for making new innovations in existing services and products that are being
offered by organizations. Research and development department of Primark can take
significant steps for adding new attributes and features in existing products that are being
offered by the entity. It will provide option for offering wide variety of products to buyers
and sales revenues and profitability of the entity will be getting affected due to it.
 Better quality:- When competition increases in market than due to that it becomes vital
for organizations to offer superior quality products so that needs of buyers in market can
be satisfied. In addition to that loyalty of consumers will also be gained when they will be
provided with products that are of better quality. In addition to that it is required that
Primark company can take initiative for offering better products in market so that
consumers can be provided with large variety of options.
TASK 3
3.1Explaining the ways in which pricing and output decisions are determined by business unit
 Perfect competition: It implies for the market where large number of buyers and sellers
are available. Primark also operates in perfect competitive market in which numerous
buyers and sellers are present such as Next Plc, Debenhams Plc etc. Under this,
competitive prices are setting down by business unit due to the existence of high
competition (Perfect competition, 2017). Moreover, customers are highly price conscious
in nature and prefer to purchase apparels from the retailer which offers designer clothes at
affordable prices. Moreover, in the case of higher prices customer will switch from
another retailer.
 Monopoly: Such market is filled with only one or two retailers which offer unique or
innovative services to the customers. In this, business unit has opportunity to high profit
by charging extra prices from the customers. Moreover, customers are always ready to
pay high for unique offering or services.
 Oligopoly: This market may define as one which is dominated by the small number of
sellers. Hence, in this, level of competition is neither too high nor too lower (Auer and
Schoenle, 2016). In this, business units are not in position to charge higher prices as

monopoly. Moreover, there is possibility that customers will switch on identical products
which are offered by other retailers.
 Duopoly: Market which is dominated by two suppliers comes under the category of
duopoly. Hence, in this, marketers have chance to set higher prices for its offering and
thereby attain high level of profit margin.
3.2 Assessing the ways in which market forces shape organizational responses
Demand and supply are the major market forces that directly influence the responses as
well as decision making aspect of an organization. In the present times, demand of customers is
highly influenced from the price and income factor. Concept of elasticity demand entails that
demand of customer’s increases with the incline in their disposable income. Along with this,
customer’s demand for fashion apparel increases when price level decreases. On the basis this
aspect, Primark can enhance the level or pattern of sales by offering high level of discount to the
customers. This in turn helps company in enhancing customer base and thereby profitability
aspect.
Figure 1: Elasticity of demand\

On the other side, elasticity of supply provides deeper insight about the proportion of
changes take place in quantity supplied and price. Hence, company has opportunity to charge
high prices from the retailer when aspect of quantity supplied is lower. For instance: Primark can
charge higher prices when there are few fashion retailers which are present to meet the demand
and expectation of customers (Hashmi and Biesebroeck, 2016). In this way, both demand and
supply factors have high level of impact on the strategic and policy framework of Primark to a
great extent.
Figure 2: Elasticity of supply
3.3 Assessing the ways in which business and cultural factors affect the behavior of Primark
 Political factors: Tax as well as government rules and regulations are the major aspects
that closely influence the behavior and practices of business organization. Further,
Primark is also highly required to adhere with the rules framed by UK government in
relation to children codes of practice.
 Economical factors: In 2007-08 condition of financial crisis have negatively affected the
economy and thereby affects the purchasing power of customers. Due to this, customers
of Primark are looking for cheaper alternatives. The rationale behind this, inflation and
deflation are the major factors which have high level of influence on customer decision
making. Thus, effectual economic condition is highly required for developing brand
loyalty among customers.
 Social factors: By doing external environmental analysis, it has been assessed that in UK
34% population is over the age of 55 years. In his regard, Primark can attain success by
offering vintage and formal clothes to the customers. Along with this, now there is a
trend towards learning sewing skills. This in turn highly affects the demand and thereby

profitability aspect of firm. However, ageing population has high level of brand loyalty as
compared to young generation. Hence, by focusing on such people company can achieve
success.
 Technological factors: In the present times, with the increasing use of smart phones now
customers make focus on do online shopping. Further, customers consider online
advertisements before taking purchasing decision. Hence, for enhancing customer base
business unit is required to comply with such technological aspects.
 Legal factors: Primark also needs to consider employment laws and legislation while
developing HR policies (Pawlowska, 2016). In the absence of such aspect, government
can impose penalty in front of firm.
 Environmental factors: Now, awareness towards sustainable environment is increased
more frequently. Moreover, customers prefer to purchase clothes from retailer which
makes contribution in sustainable business environment. Hence, for building distinct
image in the mind of targeted audience Primark is required to employ latest technology
which in turn reduces wastage or pollution related aspects.
TASK 4
4.1 Discussing the significance of international trade to UK business organizations
International trade is highly significant which in turn offers opportunity to the business
organization to widen its reach by offering products or services to the large number of customers.
Moreover, when business unit operates at a global level then it may result into enhancement of
customer base and profitability aspect. Hence, after globalization it becomes easy for Primark to
take entry at international level and fulfills aims as well as objectives. There are several
developing countries in world such as India, China etc which place high level of emphasis on
FDI. In this regard, Primark can grasp the opportunity by offering highly unique as well designer
fashion apparel to the customers. In the present time, developing countries focus on raising
living standard of people. Thus, by taking advantage of such opportunity business unit can
maximize productivity and profit margin to the significant level (McGovern, 2016). Further,
international trade also enables firm to get benefits of high economies of scale. Moreover, when
company operates at large level then it gets high economies of scale. In this way, international
trade offers several monetary and non-monetary benefits to the business organization.

4.2 Analyzing the impact of global factors on UK business units
Macro environmental factors are highly differing from one country to another. Tax rates
and government rules of different countries vary to the significant level. Primark operates in the
different parts of world and business entity needs to frame strategies by making evaluation of
political factors such as tax, tariffs, duties etc (Citi, 2016). Along with this, availability of skilled
personnel is another major aspect that closely influences the operations and activities of business
unit. Moreover, in the absence of having highly skilled personnel Primark is not able to deliver
highly quality services to customers. In addition to this, competitiveness which takes place in the
global market also has high level of impact on the profitability aspect of firm. Hence, Primark
needs to frame marketing or product mix by taking into consideration the extent of competition.
Thus, business unit needs to consider technological, legal, economic and environmental factors
while developing competent framework.
4.3 Evaluating the impact of policies of European Union in the context of Primark
Policies which are framed and introduced by EU offer high level of benefit to the
business organization. EU imposes no tariff in front of the business organization when import
and export related activities take place between the member states (McCormick, 2016). Thus, if
UK leaves EU then business activities of Primark will be affected in the negative direction.
Further, EU policies place high level of emphasis on developing healthy competition within the
firms. Thus, it restricts business unit to crate monopoly at market place. In this way, EU policies
offer growth opportunities to the business organization and thereby aid in the profitability of
Primark.
CONCLUSION
From the above report, it has been concluded that organizations working in different
industries gets affected by internal and external business factors. Besides this, it can be
inferred that Primark is a leading Fashion brand that offers superior quality products at
reasonable price to its business consumers. It can be seen in the report that purpose of
different types of organization highly varied. In addition to that, Primark has met the
objectives of different stakeholders to the large extent. Further, it has been articulated that
different economic systems have high level of impact on the allocation of resources. It can be
summarized from the report that competition policy and other regulatory mechanism

provides business unit with healthy business environment. It can be summarized from the
report that by capitalizing the international trade opportunities Primark can maximize its
profit margin and customer base.

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