Strategic Analysis of Primark: A Comprehensive Study of its External and Internal Environment

This comprehensive analysis delves into the strategic landscape of Primark, a leading UK retailer. It examines the company's external environment through PESTLE analysis and Porter's Five Forces model, revealing key opportunities and threats. The internal environment is explored through a value chain analysis, highlighting Primark's strengths and weaknesses. The study culminates in a SWOT analysis, identifying critical issues faced by Primark, and proposing strategic recommendations for future success.

Strategic Analysis
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Table of Contents
1.0 Introduction..........................................................................................................................3
2.0 UK External Business Environment of Primark..................................................................4
2.1 PESTLE Analysis.............................................................................................................4
2.2 Porter’s Five-Force Model Application...............................................................................6
3.0 Internal Environment Analysis............................................................................................8
3.1 Value Chain Analysis.......................................................................................................8
4.0 Analysis of the SWOT Position...........................................................................................9
5.0 Main Issues Faced by Primark:..........................................................................................10
6.0 Analyze the business unit of the organisation with any name of the strategy which the
organisation can adopt..............................................................................................................11
7.0 Conclusion:........................................................................................................................12
8.0 Recommendations:.............................................................................................................13
Reference List:.........................................................................................................................14
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1.0 Introduction
Strategic analysis is said to be the analysis of an entire organization based on various internal
as well as external factors so that the different goals and objectives that are set by the
company can be achieved. With the help of strategic analysis, the environment that the
company operates in can be analyzed. It also helps to specify the company’s objectives. The
company that has been chosen in this regards is Primark. Primark is considered to be one of
the most important retail stores of the United Kingdom. In this article, the strategic
management of Primark has been done in a detailed manner. In this article, PESTLE analysis,
SWOT analysis, Porter’s five forces as well as value chain analysis of Primark has been done
in a detailed manner.
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2.0 UK External Business Environment of Primark
2.1 PESTLE Analysis
2.1.1 Political Analysis: Britain decided to exit from the European Union in the month of
June 2016 and as a result of this, it caused a great deal of political uncertainty in the whole of
the United Kingdom. However, it can also be said that with the development of Brexit, the
entire nation suffered from a great deal of political turmoil (Zalengera et al., 2014). Due to
the Brexit factors, retail companies like Primark also faced a lot of political uncertainty due to
the fact that it operated from Europe as well. Primark however, benefitted from weak pounds
and after the saga of Brexit, the parent company of Primark also decided to leave the
European Union. The reason for such a decision was that the Brexit saga caused a great deal
of uncertainty in the financial as well as environmental market.
2.1.2 Economic Analysis: After the saga of Brexit, the pound sterling became very low and
as a result of this, there was a lot of economic turmoil in the entire country. As a result of
this, there was immense pressure on London that is regarded as the financial hub of the
country. There are various threats that the investors would be forced to pull out money from
various property funds. The company however, faces various issues that might have an
impact on the overall development of the company as a whole (Abbott, 2015).
2.1.3 Social Analysis: It can be said that Primark faces various social factors that may have
either a positive or negative impact on the company as a whole. It has been seen in some
recent study that there is a growing demand for plus sized clothes. This is because the country
faces a great mass of people that are growing in obesity as well as people are aging at the
same time. A recent study suggests that there are about 7 fat men in every 10 and there are
about 6 fat women in every 10 women. According to another recent study based on the age
group of the people, it has been observed that there are about 60% of people aged 55-65 years
that are buying clothes, with the help of online shopping (Racz et al., 2018).
2.1.4 Technological Analysis: There has been a tremendous growth of e-commerce and as a
result of this, there has been an ever growing competition in the retail industry of the United
Kingdom (Newton, 2014). The competition in the market is opening up due to the easiness of
e-commerce and its operational cost is considerably low. However, it is quite disheartening to
know as a matter of fact that Primark being one of the largest retail companies has not yet
started the use of e-commerce and as a result it becomes highly vulnerable for the company to
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face a decline in sales. The reason being that with the help of such technological
developments, the business of the company is shaped in a proper way.
2.1.5 Environment Analysis: It has been seen as a matter of fact that the company has faced
various customers, who are environmentally as well as ethically conscious of the
environment. These customers suggest the company to stop the usage of plastic bags and
instead they should start using paper backs as well as various things that could be recycled
and used time and time again. Primark has however, adopted the use of various sustainable
materials such as organic cottons and various other materials that are considered to be
environment friendly.
2.1.6 Legal Analysis: The legislation named workplace pensions was introduced in the
United Kingdom and it has an immense impact on the business operations of the retail
companies such as Primark. With the help of the workplace pension legislation, it becomes
very important on the part of the company as it allows them to contribute 3% to their
employees based on the development of the workplace as a whole.
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2.2 Porter’s Five-Force Model Application
2.2.1 Threats of New Substitutes (Low): Primark has been able to keep the threats of newly
developed substitutes at a minimum level. The products that are offered by the company are
generally related to clothing goods. These threats generally arise from the change in price of
different companies and as a result, it can be said that the demand for the company’s product
decreases to a great extent. However, Primark is safe in this regards due to the fact that the
brand name of the company is highly valuable. The prices that are charged by the company
are considerably reasonable in comparison to the other companies (Grigore, 2014).
2.2.2 Intensity of Competition (High): There are many retail companies present in the UK
market. Therefore, it can also be said that the entire company operates in an environment that
is highly competitive in nature. The retail clothing company such as Next & Gap have
entered the UK market and it has almost exploited every aspect of the market and as a result
of this, the company poses some serious threat over Primark, such as driving it out of the
market altogether. It can however, be said that the entire UK market is also facilitated with
the companies as there are no proper exit or entry and as a result of this, the competition
becomes intensified (Dälken, 2014).
2.2.3 Threats of New Entrants (Moderate): There is hardly any control that the company
exercises on the entrance of new companies in the retail market. The government of the
United Kingdom however, plays a vital role in terms of the entry of the new companies. They
are considered to be very lenient and as a result of this, the companies can easily enter the
UK market, without much of an issue. Since there is no proper entry or exit of the companies,
these act as incentives for the new entrants (Indiatsy et al., 2014).
2.2.4 Bargaining Power of Suppliers (Moderate): In case the bargaining power of the
suppliers is high, it proves to be highly detrimental for the company as a whole. However, if
the bargaining power of the suppliers is low, it turns out to be a healthy asset for the company
as a whole. Since there are many suppliers for Primark, it can be clearly understood that the
company is able to obtain their raw materials at a very cheap price and this in turn helps the
company to succeed in the long run (Nguyen, 2015).
2.2.5 Bargaining Power of Buyer: Since Primark is considered to be one of the largest retail
stores in the United Kingdom, the company has a high customer base. There are a large
number of companies like Tesco, Marks and Spencer, Arcadia Group, to name a few, due to
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which the shifting cost of the buyers is considerably low. As a matter of fact, due to the
presence of these companies offering similar quality products at competitive prices in the
recent market, the bargaining power of the buyers is very high. Buyers are said to be highly
sensitive in terms of the price that they are paying and therefore, they prefer to visit various
stores in order to ensure that the price they are paying is worth it.
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3.0 Internal Environment Analysis
3.1 Value Chain Analysis
3.1.1 Primary Activities: There are various functions that are included in the primary
activities of the company. These operations usually fall under the primary activities of the
company. Some of these functionalities are operations, inbound logistics, marketing and
sales, outbound logistics and customer service (Jaligot et al., 2016). The inbound logistics is
mainly used to store, receive and inventory control the various input methods. However, it
can be said that with the help of operations; the inputs taken by the inbound logistics are
transformed into the final output of the company. These final products are again transferred
to the customers with the help of the outbound logistics of the company. The company
depends to a great extent on the sales and marketing of their products and services that this
being offered by the company. Therefore, the company will need potential buyers for the
entire business process to commence. With the help of customer service, the company
ensures that the customers are being dealt with in a proper and precise manner. With the help
of this, the company will be able to create a strong customer base and this in turn will help
the company to develop as a whole (Savino et al., 2015).
3.1.2 Support Offering Activities: There is various support offering activities that are done
by the company. These support offering activities are procurement, technology, human
resource management as well as firm investment. In the process of procurement, the company
performs the purchasing activity that includes the purchase of raw materials as well as many
other inputs that are of immense importance as it supports the activities that are related to
value-added services (Mudambi and Puck, 2016). With the help of technology, the company
can manage their research and development process that are needed for the growth of the
company as a whole. As a result of this, the entire process of the company is enhanced. There
are various innovations done with the help of this technological development. The human
resource team also contributes to the supporting activities of the company. The human
resource team helps to recruit people and train them according to the needs and wants of the
company. The infrastructure of the firm also helps in the support offering activities in a great
way. The legal and corporate management is governed with the help of this.
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4.0 Analysis of the SWOT Position
Strengths: One of the major strength of Primark is that it employs about 50000 members
across the globe. The company has a wide variety of apparel starting from kids wear, men’s
wear, ladies wear, accessories and many more. The profit margin of the company has also
increased to a great extent. The company has made its mark by establishing companies in
about 7 countries. As a result of this, the sales margin of the company has increased to a great
extent. The company also does not make any expenses on advertisements rather they prefer
advertisement based on the word-of-mouth technology. The company has a very strong
presence in the European market (Bull et al., 2016).
Weaknesses: Despite the fact that the company does not have too many weaknesses, the
slow economic development of the European Union, the overall profit generation of the
company decreased to a great extent and as a result of this, the company faces some serious
problems. Due to excessive production of the apparels, the company might turn out to be
inconsistent and the quality of their products may decrease to a great extent (Bohari et al.,
2017).
Opportunities: There are various available opportunities that await the company. Primark
will continue to lay emphasis on opening further stores in the continent of Europe. They will
target various cities such as Madrid, Lisbon, Vienna and many more. Primark should also
look forward in order to open their stores in countries such as India, South Africa, China and
many more. As a matter of fact, it can be said that sportswear is said to be fastest growing
sector of the company and they should emphasize on developing their sports goods
(Niederwieser et al., 2016).
Threats: It is a matter of fact that since most of the stores of company are established in
Europe, the company as a whole depends to great extent on the generation of their income
from the European Union and the EU is said to be in a trajectory that is on the lower side of
income generation. There are not many emerging markets that are present. It can also be
stated that the supply chain is considerably vulnerable to all the natural calamities as well as
any other incident that might take place (Li et al., 2016).
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5.0 Main Issues Faced by Primark:
Lack of e-commerce usage: The Company does not use e-commerce. However, with the use
of e-commerce, it has been discovered that the company can make use of their technologies
and services with a lot of ease. With the use of e-commerce, the companies can ensure that
their business transactions could be made in a precise and proper manner. The company also
loses their customer base as they are not using the services to e-commerce. Due to the current
trend of online shopping, most of the customers usually prefer purchasing goods through
online stores. However, if Primark does not have e-commerce, then they might end up losing
customers. Therefore, the company should ensure that they start using the e-commerce
services to retain their customers.
Control on Production: The Company has to ensure that they exercise proper control over
the production of their goods. If the company keeps producing more and more goods then it
might happen that the quality of the produced goods might decrease to a great extent. If the
company manufacture goods of lower quality, they might lose a lot of customers and the
customer base might decrease as well. Hence, the company will not be able to function within
the desired budget and alongside this; the company will also have the decrease in their profit
margins.
Competitiveness: There is a lot of competitiveness that exists in the retail industry. Primark
is no exception to the growing competition in the retail market. Despite the fact that Primark
is one of the largest retail stores in the United Kingdom, it also faces various issues in terms
of the growing competition. Some of the major competitors of the company are Marks and
Spencer’s, Walmart, Sainsbury and many more. These are some of the companies that turn
out to produce huge competition to Primark. Primark has to ensure that they do not price their
products more expensive than their competitors. If this is the case, then the consumers will
look for other alternatives and as a result of this, the company will face a lot of economic
crisis and they will also not be able to generate more profits. However, if Primark prices their
products lower than that of their competitors then the company will suffer a great deal of loss
and they will have to suffer in the long run.
Lack of Skilled workforce: Primark faces issues in terms of the workforce that resides
within the company. The company has to ensure that they take employees and train them
properly according to the need and want of the company. Therefore, the company has to
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employ suitable human resource team in order to make sure that they recruit members based
on their skill and they train them to handle the workplace in an efficient and effective
manner.
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6.0 Analyze the business unit of the organisation with any name of the strategy which
the organisation can adopt.
Low price/Low value: Not many companies want to compete it hi particular category. The
companies have to ensure that they make it here, with the help of cost effective volume of
selling. Primark will be able to stay long in the market if they are able to keep themselves
ahead of the customers (Haselwanter et al., 2016).
Low price: The companies in this category are usually called leaders of low cost. With the
help of these companies, they are able to bring down the prices to a minimum.
Hybrids: The price of their products are comparatively low however, the give their products
at higher values. The main issues of these companies are said to be their volumes.
Differentiation: These companies usually offer high perceived value products to their
consumers. They might increase their prices or decrease it in order to gain proper market
share (Shakhshir, 2014).
Focused Differentiation: Designer products are said to be the main products; that are
manufactured by the companies. The prices of these products are very high.
Increased Price/ Standard Products: There are times, when the companies increase their
prices however; they make no change in the quality of their products.
High Price/Low Value: It is ideally a monopoly strategy. The company here sets the price
based on their desire and the consumers will purchase it if they need the products.
Low Value/Standard Price: The companies usually lose market if they follow this strategy.
If the value is low, then the price of the product is important in order to conduct the sales
(Radut, 2015).
The marketing strategy that Primark follows is ideally known as differentiation. They offer
high value products to their customers and as a result of this, they might increase or decrease
their prices based on the current market needs.
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7.0 Conclusion:
This article mainly deals with the strategic analysis of Primark. With the help of this article,
the learners will have an idea about SWOT, PESTLE and Porter’s analysis of the company.
The article spheres various aspects that may have a positive as well as negative impact on the
company as a whole. The learners will have a clear idea about the various issues that the
company faces in the retail sector and these issues have been highlighted in the article in a
detailed manner. Therefore, it can be said that Primark has been analysed in a proper and
precise manner in this article.
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8.0 Recommendations:
Based on the issue and problems identified above, the following recommendations have been
provided to Primark:
 The company faces some serious issues with employee turnover. They have to ensure that
they take employees that are suitable for the company to a great extent. If they take
employees that are not up to the mark or they do not meet the expectation of the
company, they have to be replaced with new members. As a result of this, the company
should engage their human resource team in order to ensure that they recruit members
that are suitable for the job roles and they also make sure that they employ these members
according to the work requirements.
 In order to overcome the issues related to competitiveness, the company has to ensure that
their product is better compared to their competitors. Primark should also lay emphasis on
the price of their products in order to gain a competitive advantage over their competitors.
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