Analysis of Retail Industry and Porter's Five Forces Model

The assignment provided is an analysis of the retail industry, focusing on Porter's five forces model. The study reviews several research papers and articles related to retail industry and innovation, highlighting key concepts such as value chain models, shared value creation through green practices, and the impact of social media analytics on business performance.

Report Primark

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 5.1.........................................................................................................................................1
1. Introduction to Primark...........................................................................................................1
2. Primark Current business strategies ......................................................................................1
3. Primak Product and service ....................................................................................................2
4. Porter five force model ...........................................................................................................3
5. Porter value chain model ........................................................................................................4
6. Summary and reflection .........................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Information technology, facilitate better decision by gather and analyse the business
information and provide rational suggestion based upon it. Technology now become more
capable to help manager in competitor advantage and increased market share. Present report will
cover the background, product and business strategy of primark. Porter five force also given in
report to know about level of competitor primark facing in industry.
Lastly, Report articulate different primary and supportive services uses in Primark with
help of porter value chain, along with IT implication in these activities. Primark is one of the fast
growing fashion retailor in UK. Company possess fast growth because of its cheap product
prices.
TASK 5.1
1. Introduction to Primark
Primak is a fashion retailer company, firstly established in Ireland in 1969 by Arthur
Rayan at Dublin. Company went to expand its business UK, after received the huge success in
Ireland. But, it has to change its name from Penny to Primarks because of trademark issue.
Company open its first UK based store in Derby (1973). Currently it successfully expanded to
many countries like Germany, Belgium, Italy, Netherlands, Portugal, Austria, Spain, Germany,
United Kingdom, France, and United States. Company opened its largest store at Market Street,
Manchester, England (Arriaga and et.al., 2017). Primark renders fast trending fashion clothing
but in unbelievable pricing. It's product are inexpensive in nature because of its ability to acquire
cheap raw material from suppliers. Company's efficient supply chain enable it to remain, cost
leader organisation.
2. Primark Current business strategies
Primark is the most growing retail company in UK. It currently uses the Cost leadership.
Primark tries to cut down all unessential expenses, reduce wastage, less direct marketing option,
so that it can maintain the cost of the product. It focuses more on supply chain management as,
distribution contribute major part in retail industry (Hall and et.al.,2019.). It wants to gain
competitor advantage via reasonable pricing to buyer. Pricing of product are set in manner,
which induces the multiple purchasing. Company try to increase its profit by raise the sale
volume. It uses ‘Wide and shallow’ product strategy, in which organisation try to sale large
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volume of limited range of product. Due to globalisation and high demand, now firm eager to
bring more technology in logistic and supply chain management.
3. Primak Product and service
Brand recognized specially for its trendy, cheap and fast fashion clothing for men and
women. But it has now enlarges its product line, which contain kind and baby care product,
confectionery, beauty products and home ware (Patroni, von Briel and Recker, 2016). Footwear,
children’s wear, lingerie, accessories are offer to people. Primark services, incudes
manufacturing customer bar codes, tags and sign, tender consultant services, logistic and packing
service to small and big business units. Company more focus on women clothing as they are
more fashion lover (Weiner, 2017). Primark also has sub brands like Cedarwood estate, armoury
and Opia. Firm keeps limited edition stock as it targets selective buyers.
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4. Porter five force model
Porter five force is framework which help in determine the level of competition, an
organisation can face in industry. High Profitability, less product substitute threat, low supplier
and consumer bargain power, consider as an attractive industry to set business. Primark use this
model to know its competitive environment around it, so that it can make required changes in
business function and policies to counter its competitor (Mathooko and Ogutu, 2015). It also
enables organisation to recognise opportunities, threats, risk, anticipate trend etc.
Supplier power
90% of manufacturing units are outsources by primark in developed countries. This brand
is not depended to any one supplier for raw material and other supplies. It can switch its supplier
in case of high price demanded for material. It has many supplier in domestic and host country,
therefore firm's supplier has low bargain power.
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Illustration 1: Five Force Model
(Sources: Porter’s Five Forces: Analysing the
Competition, 2015)

Buyer power
Primark render low price product to its customer but still people can switch to other
clothings chains. Nowadays customer want better quality in reasonable price, so they visit to
competitor product too. In case buyers find suitable product from other brand, they will move on.
Primark's customer's bargain power is high. There is no switching cost for buyer to other brand.
Customer fetches information about different buyer with help of technology. Even, they can
purchase anything- anytime, because of sound and identical distribution channel of all players in
industry.
Threat of new arrival
Retail industry is very popular industry in which a person can start its business even with
small capital. So primark has high threat from new entrance as it is not a capital intensive
industry. Company can looses customer loyalty as someone offers more value to the money to
buyers. Government do not put any kind of barrier in retail industry (Esbjerg and et.al., 2016).
Also, clothing industry has high economic scale, high profitability, easy access to resources.
Threat of substitute
In fashion industry, threat of substitute is not related with cloths. Customer cannot use
anything in place of cloths. But they can switch from one brand to another brand. Product
differentiation is they key concern, when it comes to threat of subsitute to quoted organisation
Primark has high treat of substitute as there are so many brands are available which render
diverse produce. For instance Primak is providing a jacket in €25, and H&M render another
piece of jacket with more fine quality in same €25. In such case buyer would like to go second
option.
Threat of Competitive Rivalry
Primarks share market with some really strong brands like H&M, ZARA, Forever 21 and
Top-shop. They also render product similar as primark. So there is high treat from substitute.
Competitor also try to grab the customer by their marketing and promotion efforts.
5. Porter value chain model
Porter value chain model is a framework which includes all the activities, perform by
business to convert raw material into finish goods. Model help in seeing the manufacturing
process as a system, not only an activity. It describes the relation between different functional
units of a company (Hsiao, and Chuang, 2016.). In order to take competitor advantage and
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sustain success, every organization has to understand the all the component of value chain
analysis. Model involves two type of activities, namely, primary and secondary activities.
Primary activities are directly and indirectly, involves in produce and sale the product and
service. On the other hand, secondary service render support to former one.
Primary activities
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Illustration 2: Value chain model
(Sources: Value-chain-model, 2019 )

Operations
As earlier discussed, Primak is a retail clothing chain. It does not manufacture the cloth
from fabric, but it acquired finish goods from whole-sellers. Firm has many suppliers in different
countries like China, India, Bangladesh, Myanmar and many more. Company committed to the
Sustainable Clothing Action Plan (SCAP) (Savino, Manzini and Mazza, 2015). Firm provide
information about type and amount of raw material should be use in cloths, so that it can
maintain its promise with environment.
Production manager is responsible to identify most economical supplier, so that it can
render low price cloths to customer. In primrak factory, disigining, employee preform work like
check quality of raw material, alter it with customer requirement, packaging, warehouse,
assembling, logistics etc.
Marketing and sale:
In fashion industry, knowing the customer is very much essential in order to gain
competitor advantage and increases market share. Primark heavily depends on word of mouth
promotion because of excessive cost of TV, radio and print media advertisement (Horng, Chang
and Chen, 2016). Now company slowly step up in social media promotion, as they are less
expensive and high coverage area. Primark currently soaring on social media as The Primark
Facebook page, Instagram, twitter, Google plus and Pinterest profile. Marketing people are
responsible to put all the details about product, discounts, receive feedbacks, handle query etc.
Secondary activity
Human resources management
Primark has high ethical commitment with its product as well as its people. It's Ethical
Trade and Environmental Sustainability Team, monitors, whether factory outlet meets the
international standards and employee are receiving the fair treatment or not. Team has 100
experts which evaluate the compliance and T&D arrangement in production units.
Technology development
primark uses the latest technology in packing, supply chain, logistic and stores. Recently
it launches new online tool “the global sourcing map”. This tools enable, customer to avail any
information of all 1071 supplier and factories. Apart from it, firm also institute, Sustainable
Cotton Program, which force company to emit fewer chemicals in its supply chain. Integrated
information system, cloud storage, RFID, CRM, are some technologies which helps it in all
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business function (Garg,Gupta and Dzever, 2018,). Company also try to use more technology in
infrastructure, for instance it's stores are quipped with sensors, autonomous shopping carts,
digital price tags, mobile wallet etc.
Strength of Primark
Primark has wide product line and large customer base as it targets customer on the basis
of age and income. It made inexpensive product, which render it, large market size. For instance
a low to middle income group, can keep themselves trendy. Company earn stake holder's trust by
initiative the unique ethical programme. Firm able to maintain its cost by efficient supply chain
management and no fancy expenses on marketing. Its sale can remain decent even in depressive
economic phase. Organisation has strong presence across the world and supplier network.
Weaknesses of Primark
Primark is not so active on direct marketing, which render opportunity to its customer.
Also, firm has weak presence on social media. Organisation practising the ethical code of
conduct, but it cannot remain untouched with controversies. Like collapse the Rana plaza in
Bangladesh, fire in primark Belfast store. These incidents put question on safety measures in
stores. Even it is accused to use child labour in factories. Organisation still struggling with store
management, like premises are not able to handle the crowd.
6. Summary and reflection
Retail industry is highly depends upon its efficiency in procurement, assembling,
packing, cost maintenance. Actives which are earlier discussed played crucial role in Primark
fast growth in UK. Firm taken care of its people by rending them favourable work condition so
that they will feel satisfies in working with organisation. Organisation uses the cost leadership
business stargtey, which depend great efficiency in all the business function. For instance,
inefficient employees can commit mistakes, errors, defect in assembling process, which leads to
huge wastage (Ivanov, Tsipoulanidis and Schönberger, 2019). And, an organisation who is
concern with cost, cannot bear these blunders frequently (Bashir and Verma,2017). Sale and
marketing's role has been increased due to high customer awareness, globalisation and
competitor's. Now, marketing is not limited with sale the product to buyer, but it also considers
over all customer satisfaction. Nowadays a trend can be seen that, marketing also become more
personalised. People are able to get information direct from search engine and social media. In
retail industry, procurement plays same role as production in manufacturing industry.
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Primark is doing best in business, but it should use more technology in business. It is said
that innovation and technology helps in customer satisfaction. And, it is very true because
technology help in lower the cost, reduce chances of errors, record and analyse the customer data
etc (Weiner,2017). Firm can use automation in inventory management because high stock
quantity has huge warehouse cost and low inventory can slow down the sale (Zhao and
et.al.,2016). RFID not only keep the inventory level record, but it also able to make order on
manager's behalf. Apart from it Primark should can apply some innovative ideas in warehouse.
Like gather real time information in tracking the order, track the employee activities on floor,
change floor plan according with change in demand (Hall and et.al.,2019). There are many
innovative system are present to help the manager in cost saving in warehouse house system like
Wave Picking, cross-docking and Intacct or Quickbooks.
Human resource technology enable HR manager to bring most talent people in company
and nourish them with full potentiality. A happy employee always help in competitive advantage
by providing innovative idea, use their individual learning for organisation, more revenue, less
absenteeism etc. these contributions have direct and indirect advantage to cost and quality of
product. HR even measure the outcome of recruitment advertisement with help of augmented
writing technology (Arriaga and et.al., 2017). Pragmatic job advertisement, reduced the cost of
per time hiring. Corporate Wellness Initiatives Expansion, are developed to lower employee
stress by render financial wellness to them. Biasses, favouritism, nepotism can be treat by HR
tool embadded with machine learning as a service (MlaaS).
Sale and marketing become crucial to Primark as company is not engaged with direct
marketing. In such case, technology can give outstanding advantage. Apart from cost, firm has to
pay attention to marketing because, competitor really tries to influence buying decision by
promotion. Marketing automation help in optimise, analyse, automate and evaluate the marketing
measures. Firm should write more article on environment, ethics, fashion, well being and social
uses on blog, this idea can help in minimise the impact of controversial. Newsletter, Hubspot,
Automated workflows, A/B Testing, CRM are widely used tool for marketing purpose. Company
can directly know the customer need via social media interaction with buyers. Primark has to
communicate, benefit of product and service because other competitor also render the same
product.
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Primark can earn more advantage by implementing the technology in factories and stores
both. AI in designing the cloths, which uses algorithm of image, to make new design.
Augmented virtual reality can be use in store, which allow buyer to wear cloth virtually. It
should allow people to make payment in E- currency like bitcoin. As primark is concerns with
environment safety, it can move to SMART fibre in fashion. Facial recognition uses sensors to
recognise the buyer at store door and retrieve all detail about them, which can be used to make
fast payments (Bergmann, Hadgu, and Jäschke, 2016.). It can be sum-up that, any business
entities can earn competitor advantage by render value to money and better shopping experience.
And, these two requirement can be achieve with the help of technology very easily. Satisfaction
only enhance, when an individual get something desired. For this company has to know the
customer requirement and need first. Technology like artificial intelligence, internet of things are
able to produce idea, suggestion , automatic and proactive actions on the behalf of seller. But it
should be use with precaution and proper care otherwise, technology can also work as evil too.
For instance currently big organisation are threatened by Ransom attack. These cyber virus are
able to steal personal information too.
CONCLUSION
From the above study it has been concluded that cost leadership business strategy is
better than other policies, specially for fashion industry. But organisation should not loose focus
on innovation and marketing, as these elements now play important role in competitor
advantage. Information technology render multiple advantage like : improved communication,
better process, sound data and file management, low per unit cost, wide customer reach, real time
information, service personalisation, easy information store and share etc. but, organisation
should not heavily relay on technology for everything as it can decrease the employee
intelligence slowly.
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REFERENCES
Books and journals
Arriaga, J. L. D. O and et.al., 2017. Facebook in the low-cost fashion sector: the case of Primark.
Journal of Fashion Marketing and Management: An International Journal. 21(4).
pp.512-522.
Bashir, M. and Verma, R., 2017. Why business model innovation is the new competitive
advantage. IUP Journal of Business Strategy. 14(1). p.7.
Bergmann, J., Hadgu, A. T. and Jäschke, R., 2016. Tweeting in times of exposure: A mixed-
methods approach for exploring patterns of communication related to business scandals on
Twitter. In Proceedings of the Workshop on Natural Language Processing and
Computational Social Science.
Esbjerg, L and et.al., 2016. Retailers and technology-driven innovation in the food sector:
caretakers of consumer interests or barriers to innovation?. British Food Journal. 118(6).
pp.1370-1383.
Garg, P., Gupta, B. and Dzever, S., 2018, June. Analysing the relationship between social media
analytics practices, customer engagement, and business performance in the Indian retail
industry. In 23rd International Euro-Asia Research Conference.
Hall, S and et.al.,2019. The flammability of textiles when contaminated with paraffin base
products. Fire Safety Journal.
Horng, S. C., Chang, A. H. and Chen, K. Y., 2016. The business model and value chain of
cultural and creative industry. In Thriving in a new world economy (pp. 198-203).
Springer, Cham.
Hsiao, T. Y. and Chuang, C. M., 2016. Creating shared value through implementing green
practices for star hotels. Asia Pacific Journal of Tourism Research. 21(6). pp.678-696.
Ivanov, D., Tsipoulanidis, A. and Schönberger, J., 2019. Operations and Supply Chain Strategy.
In Global Supply Chain and Operations Management (pp. 81-110). Springer, Cham.
Mathooko, F. M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management. 29(3). pp.334-354.
Pantano, E and et.al., 2017. Does innovation-orientation lead to retail industry growth? Empirical
evidence from patent analysis. Journal of Retailing and Consumer Services. 34. pp.88-94.
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Patroni, J., von Briel, F. and Recker, J., 2016. How can Enterprise Social Media use facilitate
innovation? An exploratory study in the retail industry.
Savino, M. M., Manzini, R. and Mazza, A., 2015. Environmental and economic assessment of
fresh fruit supply chain through value chain analysis. A case study in chestnuts industry.
Production Planning & Control. 26(1). pp.1-18.
Weiner, H. E., 2017. Wearing your Ethics: Investigating Consumer Purchase Intention of
Ethically Produced Fashion Products.
Zhao, Z and et.al.,2016. Competitiveness assessment of the biomass power generation industry
in China: A five forces model study. Renewable Energy. 89. pp.144-153.
Online
Porter’s Five Forces: Analyzing the Competition. 2015. [Online]. Available Through
<http://nayeems.com/2015/05/28/porters-five-forces-analyzing-the-competition/>
Value-chain-model. 2019. [Online]. Available Through < https://www.smartsheet.com/value-
chain-model>
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