Competitive Strategy - Assignment

Competitive strategy
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Contents
Introduction.................................................................................................................................................3
Company background:.............................................................................................................................3
Pestle analysis:............................................................................................................................................4
Political factors....................................................................................................................................4
Economic factors.....................................................................................................................................4
Social factors...........................................................................................................................................5
Technological factors...............................................................................................................................5
Environmental factors.............................................................................................................................5
Legal factors............................................................................................................................................5
SWOT analysis:............................................................................................................................................6
Porter’s five forces model:..........................................................................................................................7
Conclusion:..................................................................................................................................................8
References...................................................................................................................................................9
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Introduction
The borderless market facilitates businesses to expand their operations across the national border and it
has intensified the competition in the market. PESTLE analysis helps to evaluate the factors that affect
the business activities, whereas SWOT analysis assesses both the internal and external environment of
the environment with a view to finding out the strengths, weaknesses, opportunities, and risks. Porter’s
five forces model reflects the degree of competition from different types of competitors that has to be
faced by the business organization (Kotler and Keller, 2016). To understand their practical implications,
the following section is going to apply these three selected models on Primark.
Company background:
Primark is the second largest fashion retail brand in the UK that was originated in Ireland operating as a
subsidiary of Associated British Food. It was founded in 1969 and for a half-century, this retailer is
gradually ruling the industry focusing on cost leadership strategy with clothing, cosmetics, and
houseware. Primark is serving in the UK as well as other countries of the European Union with 78,000
employees, in 373 locations. Recently, the brand has crossed the European continent and expands its
operation in the USA establishing 9 shops. To assure fair pricing, the brand promises to provide quality
fashion at value-for-money. Its revenue in 2019 was 7,792 million that was 7,466 million pounds in the
previous year and the adjusted operating profit is 913 million pounds (Primark.com, 2019).
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Pestle analysis:
Pestle analysis is the tool to assess the macro-environment of the business organization that is high with
the strategies and techniques (Kotabe, et al. 2018). The organization has to adjust it is business and
operational strategies to responding to changes in this environment. However, the macro-environment
comprises political, economic, social, technological, legal, and environmental factors and the following
discussion is going to audit these factors for Primark.
Figure 1: PESTLE analysis
source: (Kotabe, et al. 2018)
Political factors
TheGlobalEconomy.com, (2019) has shown that the UK is the 80th politically stable country of the world
scoring 0.25 reflecting the congenial business-friendly environment. The Brexit referendum is the major
political issue now in the UK and affecting each and every global and local business in the UK and the EU
countries exiting from the agreement of the single economy. The memorandum is going to be imposed
on February 2020 after being postponed thrice. Thomson and McLarney (2017) have illustrated that it
has an adverse effect on the business environment shrinking the profit margin increasing the cost
logistics with import duty. Hunt and Wheeler (2017) argued that Primark and other companies that have
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been established in the UK will be facilitated with the implication of Brexit as the global giants like Zara
and other creative brands will face a slow growth because of hard Brexit.
Economic factors
According to the World bank. in 2018, the GDP of the UK has experienced a fall in the growth rate and it
is 1.3% (it was 1.7% in 2016). The slow growth of GDP expresses the growing economic insolvency of the
population that is going to create an opportunity for the cost-focused brand to attract the new
prospects serving them with the best quality according to the price charged following value pricing
(Cuadros, 2018). Brexit is affecting the economy of the UK as well as the EU with the increment in
logistics cost by custom duty, in human resources management by labor migration imposing more tax on
the EU employees (Dhingra, et al. 2018). It has an opportunity for domestic organizations like Primark as
the decentralized supply chain of Primark is mostly dispersed in Asian countries without any personal
manufacturing unit. The complication in the international logistics will be weighed replacing them with
the local raw materials and employees in spite of its high initial cost (Palit, 2019).
Social factors
The target market of Primark is the price-sensitive but trendy population that comprises 68% of the total
population who belongs to medium to high income. 55% of the total population are from 18 to 54 years
old who are the major concern of the retail brand (Hayter, 2019). But the high concern of the substantial
market segment prefers highly differentiated dresses that are unique with the option of customization
that causes difficulties for Primark.
Technological factors
The booming expansion and acceptance of e-commerce are changing the buying process of the
consumer in the clothing retail industry. Hodges and Link (2018) studied that 73% of the consumers
prefers to collect information about clothing in the online store. Tidd and Bessant (2016) illustrated the
trend of augmented reality with virtual fitting room and mirror have accelerated the in-store experience
of the consumers.
Environmental factors
Installing the ERICC system in 100 stores of the UK, the retailers are trying to minimize their
environmental footprint with efficiency in energy usage and the reduction of plastic by 39% has
contributed to such exercise (Primark.com, 2019).
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Legal factors
Complying the employment act of the UK, Primark maintains its HR policy to assure diverse and inclusive
workplaces with fair treatment establishing equal employment opportunities for all the employees. It is
also following the consumer's right act of the country to assure fair pricing and higher quality of goods
as well as its responsibility to the suppliers.
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SWOT analysis:
SWOT analysis assesses the internal and external environment of the organization considering the
micro-environment that affects the business activities of the organization directly and the controllable
tools of marketing can minimize the threats (Hollensen, 2010). However, the following table is going to
show the TOWS analysis of Primark.
Strengths
The second-largest clothing
retailer in the UK with a 7.1%
market share (the Guardian,
2019)
4.1% growth rate in sales in
2018
Strong efficiency in managing a
decentralized supply chain in 37
countries from more than 1000
suppliers
(Logisticsandsupplychain.com,
2019)
Weaknesses
The target population does not
consider it as a trendsetter
High environmental footprint
because of using plastic as
packaging for cloths
Weak digital presence and
being laggard in adopting Omni-
channel strategy of marketing
(Retail Dive, 2019)
Opportunities
Strong opportunity in expanding
market in Bangladesh,
Myanmar, and other South-
Asian growing economies
The opportunity of assuring
just-in-time and efficiency of
Omni-channel in collaboration
to online and offline stores
Alliance with creative boutique
will avail to offer one to one
marketing
SO
Expanding market in South-
Asian countries with
standardization and cost
leadership strategy
Investing in integrating
marketing channel utilizing the
efficiency of decentralized
supply chain
Creating an alliance with
creative boutiques to avail one
to one marketing
WO
Integration of the channels will
improve the efficiency of the
online stores
Expansion in South-Asian
countries will contribute to be
more responsible for the
environment
Alliance with creative boutique
will increase its brand image as
a trendsetter
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Threats
The increasing demand for
differentiation and the
acceptability of the boutique
brands intensifies competition
Brexit will hinder the strength
of the brand in the EU countries
(Breinlich, et al. 2016)
Strength of H&M and its brand
equity will demine the cost
efficiency of Primark
ST
Minimizing the competition
with consistent sales growth
Avoid the effect of Brexit with a
strong market position in the
UK
Decrease the competition with
H&M with decentralized supply
chain
WT
The image of Primark as a raw
provider will hinder its growth
with the intensified competition
The weak digital presence will
reduce the strength of the
brand further in the EU
countries
The strong position of H&M in
responsible marketing will
cause a failure of the
organization winning the
customer’s heart
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Porter’s five forces model:
To understand the intensity of the competition from different competitors in the marketing
environment of the business organization, Porter’s has suggested a five forces analysis model that also
help to understand intrinsic lucrativeness of the market considering the neat threats from the
substitutes and new entrants, the bargaining power of the buyers and suppliers, and the competitive
rivalry.
Figure 2: Porter’s five forces model
source: (Kotler and Keller, 2016)
The clothing industry of the UK is perfectly competitive in nature with the minimum establishment cost
where the concept of e-commerce has broadened the threat as the creative designer can open his store
without having a physical existence. Brexit has increased opportunity for the boutique shops to
strengthen their market position with a high quality product at a reasonable cost. Therefore, the threat
from the new entrants is high here. There is no strong substitute of clothing and it is a generic need of
human being; considering the retail type, the supermarkets, departmental stores, and other high street
shops can be considered as the substitute of specialized retailers (Greco, 2018). But the strong brand
image of Primark and its cost efficiency tackle the threats that emerged from the substitutes. Because of
the strong position of Primark in the UK as a cost leader, the buyers prefer Primark over the prestigious
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brands often but the huge options for them often confused them to choose the retailers; therefore, the
bargaining power of consumers is moderate. The decentralized supply chain mitigates the bargaining
power of the suppliers as 98% of the suppliers of Primark also produces the competitors’ product; the
bulk purchasing has decreased their bargaining power further. The competitive rivalry in the clothing
industry of the UK is very high with strong competition from M&S, Next, Morrison, Burberry, Tesco,
George, and H&M (Ashby, 2018).
M&S Primark Next Geroge Burberry H&M
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
Market Share
Series 1
Figure 3: Market share of the major UK clothing retailers
source: (Butler, 2019)
Primark is struggling to create a competency in introducing differentiation and mass customization but
its focus on cost leadership is hindering the efforts to be successful.
Conclusion:
The businesses have to comply with fierce competition from all sorts of competitors from the domestic
market as well as international giant enterprises. Some organizations are trying to make competition
irrelevant with blue ocean strategies but no blue ocean is perpetual. Therefore, the businesses require
to monitor the environment continuously in order to identify the changes and drivers that generate risks
and opportunities. Applying PESTEL, the factors generated from the macro-environment can be
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understood; SWOT helps to audit the microenvironment, and Porter’s five forces model helps to
understand the intensity of competition in the market.
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References
Ashby, A., 2018. Developing closed loop supply chains for environmental sustainability: Insights from a
UK clothing case study. Journal of Manufacturing Technology Management, 29(4), pp.699-722.
Breinlich, H., Dhingra, S., Sampson, T. and Van, J., 2016. Who Bears the Pain?: How the costs of Brexit
would be distributed across income groups. BREXIT 2016, p.54.
Butler, S. (2019). Primark primed to overtake Next as UK's No 2 clothing retailer. [online] the Guardian.
Available at: https://www.theguardian.com/business/2018/jan/18/primark-primed-overtake-next-uk-
no-2-clothing-retailer#:~:targetText=Primark%20is%20on%20track%20to,strong%20sales%20over
%20the%20winter.&targetText=Sales%20rose%204%25%20at%20Primark's,because%20it%20kept
%20prices%20steady. [Accessed 10 Dec. 2019].
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Greco, L., 2018. Industrial Redundancies: A Comparative Analysis of the Chemical and Clothing
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Palit, A., 2019. Brexit and India-UK Free Trade Agreement: Context, Prospects and
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