Business Organisation Assessment: Primark in Hungary

This report provides a comprehensive assessment of the business environment for Primark in Hungary. It analyzes the country's political, economic, social, technological, legal, and environmental factors (PESTLE) to understand the opportunities and challenges Primark might face. The report also utilizes Porter's Five Forces model to evaluate the competitive landscape and SWOT analysis to identify Primark's strengths, weaknesses, opportunities, and threats. The report concludes with recommendations for Primark to successfully establish and grow its business in Hungary.

BUSINESS ORGANISATION ASSESSMENT
PRIMARK IN HUNGARY
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Contents
INTRODUCTION................................................................................................................................3
BACKGROUND OF PRIMARK............................................................................................................0
BACKGROUND OF HUNGARY’S BUSINESS ENVIRONMENT.............................................................1
PESTLE ANALYSIS.............................................................................................................................3
PORTER’S FIVE FORCE ANALYSIS FOR PRIMARK IN HUNGARY........................................................6
SWOT ANALYSIS FOR PRIMARK IN HUNGARY.................................................................................8
DATA/GRAPHS/TABLES....................................................................................................................9
CONCLUSION AND RECOMMENDATIONS.....................................................................................12
REFERENCES...................................................................................................................................13
TIME PLAN.....................................................................................................................................15
2

INTRODUCTION
This report is focused on assessing the business environment of Primark. Business assessment
helps the management to make sound decisions regarding the development and settlement of
the company (Bryman and Bell, 2015). The current scenario is focused on the establishment of
Primark’s branch in Hungary. This report is concentrated on setting up the Primark’s business in
Hungary by discussing various positive as well as adverse circumstances. The relative aspects of
establishment such as market analysis, financial conditions, respective data, development
scenarios and strategies, etc. are considered here by using pestle analysis, Porter's five force
analysis, swot analysis, etc. in this report to assess the business environment of Hungary for
Primark (Bryman and Bell, 2015).
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BACKGROUND OF PRIMARK
Primark is an Irish company dealing in accessories and clothing. It is a multinational
company and Associated British Foods’s subsidiary. The headquarters of the company are in
Dublin. The company was founded in the month of June of the year 1969 by Arthur Ryan. He
founded the company on behalf of the Weston family. The first store of the company was
opened in Dublin (Ireland) with the name Penneys. When the company tried to open up in
different countries, they skipped the name Penneys as it was already registered by J.C.
Penney. It led the company to choose Primark as its brand name to be used for the stores
outside Ireland (Gorgorni, 2017). The company opened its first store in the UK in the year
1973 and currently occupies 174 stores in UK (Primark, 2018). There are more than 350
stores in the company globally. The largest store of the company is in Manchester occupying
about 155,000 sq. ft. of retail areas spread over three floors.
Currently, Primark is offering wide product range comprises men's wear, women's wear,
kids' wear of all age groups, beauty products and accessories, food products, housewares
products, cosmetics, footwear, etc. at very affordable prices even at less than the average
market price. The company recently established its new store in Amsterdam in the
December of the year 2016 (Primark, 2018). There are about 68000 employees working for
the company globally. The revenue of the company for the year 2016 was 5954 million
Euros. The company even started selling the vegan snacks from 2018 January.
The company also achieved the leadership status in the year 2011-12 in context to Ethical
Trading Initiative. The company is focused on the work of labour rights issues from the year
2006. The management of the company also created a special website for dealing with the
issues and problems related to the Panorama programme ‘Primark: On the Rack’ (Gorgorni,
2017).

BACKGROUND OF HUNGARY’S BUSINESS ENVIRONMENT
Hungary is a European member state covering an area of 93030 square kilometres.
Budapest is the capital of the state and also a largest metropolitan city which is considered
as an important economic hub for the state. The state comprises diverse cultural groups
with a high percentage of Christians of about 52.9%. The currency for the state is Forint
(HUF). Currently, the nationalist Fidesz government is considered to gain the victory in the
April elections of the year 2018 and to gain a strong position in the state. It forecasted that
the estimated real GDP growth of 3.8% for the year 2017 will reduce to an average of 2.3%
for the years 2018 to 2022 (The Economist, 2018. Hungary). The forecasted GDP growth of
the state is 3.6% for the year 2018. Apart from this, the forecasted inflation, budget balance,
current account balance and public debt of the state for the year 2018 are 3.2%, -2.5%, 2.8%
and 71.4% respectively (Coface for trade, 2018).
Hungary’s business environment is considered as moderately good. The market is not
always available and is dependable on the evidence from the business financial information.
There are sometimes chances of inadequacies in the debt collection in the state. Sometimes
international firms have their transactions in such a way that it causes occasional difficulties
in the state but still the business environment of the state is secure and low risky (Global
Edge, 2018).
CURRENT TRENDS OF INVESTMENT, SUSTAINED CONSUMPTION AND EXPORTS
The investment recovery for the state is considered to grow a little. The government has
scheduled a public housed building program. There will be additional elections with respect
to reduction of the special tax on banks that will make it easy for banks to promote credit
for the developing companies in the state. This will directly benefit the SME sector in their
growth (Global Edge, 2018).
BUDGET CONSOLIDATION
With the declaration of the results of the elections in April 2018, the financial alliance has
promised that there will be a minimisation in the social security charges along with the
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reduction of 19% to 9% in profit taxation. Apart from this, VAT is also considered to be
reduced. The trend shows that setting up of new companies in the energy sector is almost
impossible (Global Edge, 2018).
STARTING UP IN HUNGARY
The registration fees and other costs are HUF 100,000 for the companies having limited
liabilities and the private companies having limited by shares. There will be a requirement of
following documents for setting up in Hungary:
 Tax authority statement
 Legal representative’s approval or certificate
 Payment certificate describing administration as well as disclosure fees
 Constitutional standard form
 List of members
 CEO affirmation
The companies are in need to prepare the corporate documents according to the Hungarian
laws and open a bank account in any of the Hungarian banks. Registering the company as
according to the Hungarian tax legalities is very important and after that, the company is
required to provide employees' data to the tax authorities of Hungary (Eugo, 2018).
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PESTLE ANALYSIS
It is very important for the companies to assess the external environmental factors before
developing, growing and settling down. Pestle analysis is a tool that helps the companies to
assess the place, conditions, situations for the development and it provides the results to be
used by the SWOT analysis for more accurate outcomes (Newton, 2014). The pestle analysis
in context to Primark in Hungary is as follows:
 Political factors: There are various taxes implemented by the current government in
favour of the retail industry and SME that will help Primark to establish successfully
in Hungary (Coface for trade, 2018). The government and current party believe in
supporting SME of the state. They facilitate and support the companies in form of
funding and finance. The government has also decreased the corporate tax (FCW,
2017). This shows that the Hungarian market is a good market for Primark to settle
up as it is politically stable and support for the new organizations or the opening of
new stores.
 Economic factors: The economy of Hungary is open and very small. The economic
crisis of the year 2008-09 made the state drop its economy by 6% but the year 2014
resulted in the increased GDP and growth peaked up by 3.4% which has
approximately 0.5% contribution through retail sector. There are expectations of the
European government with the economic development of Hungary in the year 2018
by 3.6%. The lower rate of unemployment in Hungary that is lower than 2% (2018)
also supporting the new start-ups such as Primark. The economic development of
Hungary is basically import driven due to low taxation and import duties (FCW,
2017). This shows that Primark will be benefited while opening its store in Hungary
by importing its goods and materials from outer regions especially from European
regions. As Hungary is seemingly growing in economic prospect, Primark can also
contribute to its economic development to gain a market share of the state.
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 Social factors: Hungary is considered as the ideal place by the companies in present
scenario for doing business. Many companies are willing to expand and invest in the
Hungarian business market due to the good purchasing capacity and adaptability of
new trends and fashion by Hungarian people. It has a rich cultural and heritage
diversity which will be difficult for the companies such as Primark to do business
there without gaining enough knowledge about the cultural perception of people.
High knowledge of Hungarian social and cultural values will make the companies to
reduce the chances of the impact of social and cultural values on business activities.
Techniques and tools adopted by the companies that are adapting according to the
diverse socio-cultural differences will result in effective results for the companies
(Communicaid, 2018). Primark will be benefited in Hungary only if it will adopt the
strategies of involving people from diverse cultures to shop with them by providing
them diverse cultural products.
 Technological factors: The country believes in supporting the scientific research. The
country believes in investing its 1.4% of GDP in research and development (Singh, H.,
2016). This shows that the country is technologically updated and people living there
believe in technologically up-to-date products and services. To develop in Hungary
successfully, the Primark will be in need to provide technologically upgraded
products and services of cosmetics and food products to attract the customer base
of the market and enhance the brand value there too.
 Legal factors: Since 1992, Hungary is one of the members of the International Labour
Convention. The focus of the country is on the development of the labour to avoid
the problems and issues they get while working. Currently, the gender pay gap in the
country is 8.71%. There are some companies in the country which are employing
labours without registering. Unregistered employment is a long problem in the
country. But still, according to a survey conducted in the year 2014, the Hungarian
workers are happy with foreign companies (FCW, 2017). This makes a way clear for
Primark to implement the labour laws successfully to avoid any labour related issues
and it will also benefit the company by employing the local population in the work
that will reduce the overhead costs and also will raise the economy of the country.
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 Environmental factors: The country is very rich in biodiversity. There are various
spices available to the country. So it may become difficult for Primark to sell its food
products like spices at this place. The problems like air pollution and water pollution
have been common in the country (Singh, H., 2016). To settle up in Hungary, Primark
will be in need to avoid the pollutants in the manufacturing. While targeting the
people and children with clothing products, there are fewer risks for Primark
environmentally to settle up in Hungary.
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PORTER’S FIVE FORCE ANALYSIS FOR PRIMARK IN HUNGARY
The five force model of porter will be helpful for Primark to analyse the competitive level of
the Hungarian market. It will be helpful in designing the strategies according to the threats
available (E. Dobbs, 2014).
[Source: https://www.cleverism.com/competitive-rivalry-porters-five-forces-model/]
 The threat of new entrants: As the Hungarian market is very welcoming; there will
be a high risk of new entrants for Primark in Hungary. The new entrants can easily
attract the Hungarian customers by offering them attractive services and offers. But
still, the low price strategy of Primark will be helpful for the company to maintain its
customer base. So the risk level is moderate.
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 The threat of substitutes: There are various clothing and accessories brands in
Hungary such as Dora Abodi, Dóra Konsanszky, Dora Mojzes, Je Suis Bell, etc. are
offering highly valuable products to customers. So the risk is high for Primark.
 Bargaining power of buyers: As the Primark is already offering the products and
services at a very low price even at less than average price so the risk of bargaining
power of customers will be low.
 Bargaining power of suppliers: There is a high chance of bargaining power of
suppliers as most of the goods are supplied by European suppliers in Hungary. This
may charge a bit high to the Primark.
 Competitive rivalry: The Hungarian organizations have high brand value in Hungary
which may result in rivalry conditions for Primark. So the threat is high.
7

SWOT ANALYSIS FOR PRIMARK IN HUNGARY
Swot analysis will be helpful for Primark to consider its strengths and weaknesses to settle in
Hungary and recognize the threats affecting the development and opportunities to be
garbed for reducing the threats (Dictionary, 2016).
STRENGTHS WEAKNESSES
 Exclusive range of products for
women, men and children
 Recognised brand
 Organised business structure
 Offers high-quality products at very
low and affordable prices
(Dimitrova, 2016)
 Poor working conditions
 Not so concentrating on labour rights
 Imports goods from its personal
suppliers only
 Not so trustworthy products
(MBA skool, 2018)
OPPORTUNITIES THREATS
 The welcoming behaviour of the
business environment of Hungary
 Highly labour concentrated laws
 Developing economy of Hungary
 Cultural diversity in Hungary
(MBA skool, 2018)
 Well-established Hungarian
competitors
 Upgrading technology
 Unregistered employment in Hungary
(Dimitrova, 2016)
The SWOT analysis describes that Primark is very strong company but still has some
weaknesses that may affect is business development in Hungary because there are various
threatening factors in Hungary and most important of them is competitors which are highly
settled. If Primark will grab the available opportunities and focus more on improving the
strengths my maintaining its low-cost products and also offering high quality will make the
company achieve the high market position.
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DATA/GRAPHS/TABLES
Figure: business environment: business start-up in Hungary
[Source: http://mecometer.com/whats/hungary/business-environment/]
The country offers very business-friendly regulations to the companies wanting to start up in
Hungary. Hungary is at 154th rank globally for making easy for the companies to do business.
The Ease of doing a business index of Hungary is 54.0.
Figure: Hungary: Business Environment: Taxes
[Source: http://mecometer.com/infographic/hungary/business-environment-taxes/]
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Any business organization in Hungary has to pay typically 12 types of taxes. A total of the tax
rate on the businesses of Hungary is about 50.3%. The country is considered to be at the
49th number for paying the tax globally (Macroeconomy, 2018).
Figure: changing GDP of Hungary
[Source: https://tradingeconomics.com/hungary/gdp]
As the graph shows, the GDP of the country in the year 2008 was very high but due to the
economic crisis, it faced a downfall and become unstable. According to the current
conditions, the GDP is seemingly developing and can be beneficial for the already existing
companies and also for the companies who are willing to settle up in the country (Trading
economics, 2018).
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Figure: comparison of sales associate of different fashion retailer companies
[Source: http://www.marketforce.com/en-gb/consumers-choose-next-favourite-fashion-
retailer]
The above-given table describes that about 21% of the selling of Primark is done by sales
associates and out of which, 65% are providing satisfactory sales results. This shows that
Primark can adopt the technique of selling its products of clothing and accessories to target
men, women, and children with the help of sales associates in Hungary. It will provide
satisfactory results in the initial stage of opening the stores. Primark is giving tough
competition to other big stores with this technique (Market force, 2016).
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CONCLUSION AND RECOMMENDATIONS
This report concludes that Primark has many opportunities for setting up in Hungary. The
business environment of Hungary is very supportive and it will help Primark to develop and
get a high market share. The upcoming elections of Hungary will result in political help for
Primark to set up there. Following are some recommendations to Primark:
 The concentration of the Primark should be focused on the labour laws as the
Hungarian labour laws are very different from that of Ireland
 Providing low price products will benefit the company but along with low price, the
company should also concentrate on the quality of the products
 As there are not many legalities to be followed by Primark, the company should
focus on basic laws more to avoid any political and legal issues
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REFERENCES
 Bryman, A. and Bell, E., 2015. Business research methods. Oxford University Press,
USA.
 Coface for trade, 2018. Hungary, MAJOR MACROECONOMIC INDICATORS. [Online
available at http://www.coface.com/Economic-Studies-and-Country-Risks/Hungary
last accessed 13th March 2018]
 Communicaid, 2018. DOING BUSINESS IN HUNGARY. [Online available at
https://www.communicaid.com/cross-cultural-training/doing-business-in-hungary/
last accessed 14th March 2018]
 Dictionary, B., 2016. Using SWOT Analysis to Develop a Marketing Strategy.
 Dimitrova, Y.P., 2016. Communication strategies for reputation management of the
company. Romanian Journal of Economics, 43(2 (52)), pp.5-13.
 E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of
industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
 Eugo, 2018. Starting up in Hungary. [Online available at http://eugo.gov.hu/starting-
business-hungary last accessed 7th March 2018]
 FCW, 2017. Foreign and Commonwealth Office. Overseas Business Risk – Hungary.
[Online available at https://www.gov.uk/government/publications/overseas-
business-risk-hungary/overseas-business-risk-hungary last accessed 13th March
2018]
 Global Edge, 2018. Hungary: Risk Assessment. [Online available at
https://globaledge.msu.edu/countries/hungary/risk last accessed 9th March 2018]
 Gorgorni, E., 2017. Primark Trivia: 25 interesting facts about the clothing retailer!
[Online available at https://www.uselessdaily.com/fashion/primark-trivia-25-
interesting-facts-about-the-clothing-retailer/#.Wqi_mh1ubDB last accessed 12th
March 2018]
 Macroeconomy, 2018. Hungary: Business Environment: Taxes. [Online available at
http://mecometer.com/infographic/hungary/business-environment-taxes/ last
accessed 10th March 2018]
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 Market force, 2016. CONSUMERS CHOOSE NEXT AS FAVOURITE FASHION RETAILER.
[Online available at http://www.marketforce.com/en-gb/consumers-choose-next-
favourite-fashion-retailer last accessed 13th March 2018]
 MBA skool, 2018. Primark SWOT Analysis, USP & Competitors. [Online available at
https://www.mbaskool.com/brandguide/lifestyle-and-retail/13753-primark.html last
accessed 13th March 2018]
 Newton, P., 2014. What is the PESTLE Analysis?.
 Primark, 2018. About us. [Online available at https://www.primark.com/en/about-
us/about-primark last accessed 12th March 2018]
 Singh, H., 2016. PESTEL ANALYSIS OF HUNGARY. [Online available at
http://www.sachdevajk.in/2016/12/19/pestel-analysis-of-hungary/ last accessed 13th
March 2018]
 The economist, 2018. Hungary. [Online available at http://country.eiu.com/hungary
last accessed 13th March 2018]
 Trading Economics, 2018. Hungary GDP. [Online available at
https://tradingeconomics.com/hungary/gdp last accessed 9th March 2018]

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TIME PLAN
ACTIVITIES TIME FRAME
1st
Januar
y 2018
15th
January
2018
28th
January
2018
5th
February
2018
17th
February
2018
3rd
March
2018
reviewing the business of
Primark
gathering information
about the business
environment of Hungary
(Graphs and Tables)
Analysing PESTLE factors
of Hungary for Primark
Considering porter’s five
force analysis for Primark
Swot analysis of Primark
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