The Pestle Analysis Of Primark

RETAIL THEORY AND
PRACTICE

Table of Contents
INTRODUCTION...........................................................................................................................1
Introduction to Retail..................................................................................................................1
Introduction to company.............................................................................................................1
PESTLE Analysis........................................................................................................................2
Changes within Micro environment............................................................................................4
Suggestions.................................................................................................................................6
Recommendations.......................................................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Retail industry is growing and developing on fast speed and it refers to the activity of
buying and selling of goods and services to the end customers through various channels of
distribution. Every business organisation aims at bringing effectively analysing its business
environment so that it can formulate effective business strategies that fits with the changing
business environment. Primark is an Irish fast fashion retail company and its headquarter is in
Dublin. The Primark company was founded in the year 1969 and there are 368 locations of
Primark around UK, US, Austria, Italy, Spain, Germany, France and many more. The fashion
retail company Primark provides employment to approx 70000 people. The present report is
based on key relevant changes in the UK fashion clothing market. Some strategies and tactics are
discussed which are used by retailer for responding with the major changes occurring in the
fashion clothing market.
Introduction to Retail
Primark is a fashion retail company that have large product line and offers diverse range
of products. It includes clothing for new born and children, women's wear, men's wear, foot-
ware, accessories, home-ware, confectionery and beauty products. Primark operates its business
in departmental stores and operates in the low cost end of market.
Primark company is based on lower retail margins and high sales volume therefore, it is
able for offering value to customers at low prices. The Primark company enjoys its operating
scale or also known as economies of scale (Morcol and et.al., 2017). Physical form refers to
departmental stores that aims at selling wide range of products and also merchandising. The
Primark departmental stores are arranged by categorizing products in to different sections.
Operating methods of Primark mainly focus on store designs, customer service, display
placement, money handling, shoplifting prevention, staff management, inventory optimisation,
maintenance of premises and also dealing effectively with supply chain. There are 368 locational
store of Primark or departmental store. Company does not have any factory outlets but it does
telesales and vending.
Introduction to company
Retail clothing refers to the process of involving in buying clothing products,
merchandising them and then selling them to final customers (Benzo, Mohsen and Fourali,
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2017). Retail marketing refers to the process through which retailers aims at providing awareness
and interest of their products and services and promotes their brands as well in the markets in
order to generate sales. Primark aims at adopting various approaches and marketing strategies in
order to promote their brand and generate sales effectively. The net worth of company is on
increasing rate annually and it is 378.7 billion pounds, therefore, it is considered as the one of the
UK's leading retailer of clothing. The market share of Primark is 7% in UK markets. The
physical bricks and mortar store refers to the physical presence of organisation in building or
other structure.
The distribution channels are considered as the chain of different intermediaries through
which products and services reaches to the end customers. This may include retailers,
wholesalers and distributors. Today's business environment is very competitive and its changed
the traditional concept of distribution and marketing. In 1950s the manufacture was considered
as the king of the market, but, it changed as 1960s the consumer was known to be the king of
market. Then the competitive business environment lead to bring further changes and trade
became the market king in 1970s. Market emphasis became important in 1980s and in the era of
2000s importance is given to ethical, societal, relational influences on retail businesses. The
retail businesses uses various marketing and distribution channels such as online, multi-channel
and blended channel.
The Primark company aims at using multiple-channel distribution system and it means
that company decides for distributing their products strategically to end customers via multiple
channels. Examples of multiple channels distribution may include physical stores, online selling
or using another retail chain (Sandberg and Jafari, 2018). But, Primary faces issues and problem
in managing control over the multiple channels. The more the channels of distribution, higher are
the chances for conflicting of channels for competing for sales and customers.
PESTLE Analysis
Retail clothing is also known as fashion retailing that includes buying, merchandising
and selling. The retail business environment gets affected due to changes in its micro and macro
environment. The Primark company aims at analysing its macro environment through PESTLE
analysis, which is explained in details as follow:
Political Factors: This factor includes policies related importing and exporting, social
policy, political instability of a country, taxation regulations, rules of emigration, refugees
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regulation and various economic agreements. The Brexit saga has put great impacts and lot of
uncertainty for for Primark and other business organisation who were operating in EU markets.
Parent company of Primark has decided to exit the EU markets which lead to create uncertainty
in financial markets and business environment.
Economic Factors: This includes inflation rate, exchange rate, disposable income of
target customers, unemployment rates, interest rates, taxes on imports and exports and economic
growth of country (McArthur, Weaven and Dant, 2016). The decision of parent company of
Primark to leave the EU markets has greatly impacted the business. Because following Brexit,
the pound sterling drop to lowest against dollar and this leads to bring impacts on the London as
the EU's financial hub that have many investors like those in assets who threaten to pull out the
money from property funds.
Social factors: Dimensions of general environment such as demographic factors are
referred as social factors and it includes population trends, career attitudes, age distribution,
safety emphasis and lifestyle attitudes. The population of UK and its labour dynamics are being
drastically altered by the ageing population. The Primark is fashion clothing retailer that gets
affected due to the ageing population of country as per their behaviour, taste, preferences and
choices leads to affect the business products and services. The fashion and clothing industry gets
greatly impacted due to changing taste and preferences of its target customers (Fernie, Fernie and
Moore, 2015).
Technological Factors: Today's competitive business environment ensures that
organisation comes up with innovative and new technology and techniques so that company can
gain competitive advantages. The developed and innovative technologies leads to bring changes
in the business operations and activities. E-commerce business is continuously growing and
developing on accelerating speed that makes to open up greater competition for traditional brick
and motor business and on Primark company as well. Primark does not operate E-commerce
website that brings negative impact on its sales and market share.
Legal Factors: The laws and regulations lead to bring impacts on every business
organisation and it includes consumer protection regulations, anti-trust law, discrimination law
and employment laws. Changes in various rules, regulations and regulatory frameworks lead to
bring impact on the Primark business activities (Moloney, 2015). For example, Primark gets
impacted due to the changes in Pension legislations as it makes compulsory for every
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organisation for contributing 3% for employees pension for all eligible British workers.
Increasing pollution has brought up many regulations that needs to be followed by every
business organisation and this also leads to bring impact on the Primark.
Environmental Factors: These factors have come to forefront in relatively recent years
due to increasing population, pollution and uncertainties. Environmental factors are important to
be considered due to increasing pollution targets, scarcity of raw materials and carbon footprint.
Business organisation needs to fulfil their Corporate Social Responsibility and this may bring
impacts on the Primark business (Banerjee and Mishra, 2017). Trends that affects the clothing
industry of UK involves rise pf environmental conscious and ethical behaviour. These trends
demands for firm to adopt ethical behaviour and practices such as using recycled materials and
paper packaging.
Changes within Micro environment
Micro business environment needs to analysed by business organisation as this helps in
identifying the strengths, weakness, opportunities and threats of business. Primark makes use of
SWOT and Porter's five force for analysing its micro business environment.
Strengths
 The core strength of Primark company is that it offers cheap clothing products which
enables it to overtake the Arcadia Group and became the third largest footwear and
clothing retailer in UK (Benzo, Mohsen and Fourali, 2017).
 The company enjoys tremendous success due to its value preposition of low price
products that ensures it to become low cost leader in a low-priced disposable fashion
industry.
 Primark company aims at attracting customers and through offering low-priced products.
 Key objective of Primark is to focus on rights of employee and goods production and also
work labour right matters.
 This leads to attract lot of customers following after the financial crisis of 2008 and
subsequent recession of cash strapped consumers flocked to low prices products. And
from this Primark enjoyed successive revenue development and growth since then.
Weaknesses
 The Primark faces the weakness that perception of consumers for its business that it is
unethical. It is the result and reflection of the 2013 Rana Plaza disaster in which Primark
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and other brands were implicated in death of 1138 workers (Berry, Broadbent and Otley,
2016).
 The consumer perception is that Primark is a basic brand and it does not offer
trendsetting and stylish clothings. This impacts Primark to lose market share and profits.
 The company relies too much on UK markets which limits the profitability and market
share for company.
 Primark does not offer online service and E-commerce facility to its customers which
acts as a weakness. Because, the online presence of business is fastest developing and
growing channel in UK retail markets.
Opportunities
 The ageing population of UK represents great opportunity for Primark clothing and
fashion industry. The company can focus on serving the ageing population and achuieve
greater benefits and increase its market share and profitability (Fernie, Fernie and Moore,
2015).
 Entering into E-commerce business will help Primark to achieve great sales opportunities
and helps in increasing market share. The online presence can serve the current existing
and new customers in better way.
 The rising obesity level in UK presents a major gap in market for Primark company to
cater for plus-size customers.
Threats
 Parent company of Primark took decision to leave EU markets that leads to create
uncertainty for business environment and for financial markets as well (Hagberg and
Kjellberg, 2015). The British exiting from EU brings great impact on Primark business
and it acts as a threat as this cause ample uncertainty.
 The Brexit brings cause unfavourable transactional effect on the profit margins for
Primark fashion retailer business.
 Zara, Tesco, Matalan, Marks & Spencer, ASDA, Costco and many more are great
competitors of Primark who can bring great impacts on its business (Hayes, 2018).
Porter's Five Force Framework
Threat of substitutes: Primark aims at managing risk of substitute products to minimum level.
This can be attributed as it is considered as a valuable brand (Hristov and Reynolds, 2015). The
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company charges reasonable and low prices compared to its substitute products, therefore, it has
reduced its the threat of its substitutes and it is relatively low.
Threat of new entry: The UK government facilitates lenient policies for encouraging free entry
and exit in the markets. This makes business entities to take entry in UK markets and it leads to
increase the threat for Primark. Therefore, threat of new entry in markets is relatively high for
Primark (McArthur, Weaven and Dant, 2016).
Competition Intensity: There are many retailing industries within UK. The retail and clothing
market is very competitive in UK markets in which Primark operates. The competitor Next &
Gap has fully exploited the demands of clothing specifically for young people and this leads to
posses great threat for Primark. Therefore, threat of Competition intensity is relatively high.
Bargaining power of Suppliers: In order to gain great benefits and success, organisation needs
to manage the supplier's bargaining power. The high bargaining power of suppliers is considered
as negative impact on the company's success, whereas, low bargaining power of suppliers is
considered as healthy impact. Primark company operates wide base of suppliers, in both
domestic and foreign markets. Therefore, Primark has relatively low threat for bargaining power
of suppliers as it can switch to new suppliers at low cost (McDONALD, 2016).
bargaining power of Customers: Primark has large customer base as it deals in the retail
industry in UK. But, there are many other retail organisation in the retail markets, therefore,
threat of bargaining power of customers is relatively high for Primark.
Suggestions
Primark retail organisation needs to focus on complying with various laws and
regulations so that it does not face any legal issues on its business environment (Moloney, 2015).
Policies and regulatory framework relating to emigration, importing, exporting and various
taxation rules needs to be followed in order to meet the political factors.
The issues and challenges of social and cultural factors can be resolved by effectively
analysing the current market trends and also analysing the taste and preferences of target
customers. The fashion retail business Primark needs to focus on identifying and meeting
demands of customers in order to effective resolve the social factor challenges.
The legal factor issues and challenges can be resolved by effectively following the laws
and regulations provided by the government on the retail fashion industry. Primark needs to
focus on identifying the recent changes being made in the regulations and accordingly
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formulating the business and marketing policies so that it does not get impacted due to It (Morcol
and et.al., 2017).
The Primark fashion industry can resolve the technological challenges by adopting to
recent developments in techniques and adopting to technological trends. E-commerce trend will
lead to help Primark to resolve the issues related to technological factors.
Micro business environment factors can also impact the Primark's business environment,
therefore, company needs to focus resolving these issues. Weakness of Primark business is that it
is limited in UK markets and it can be resolved by entering in new international markets and
increasing its market share and profitability (Perera, Auger and Klein, 2016). The company can
resolve the problem of negative consumer perception by providing them with better quality of
product and services.
Recommendations
Primark needs to focus on effectively identifying the needs and wants of its target
customers so that it can provide them satisfaction and gains benefits of improved brand image
and also build customer loyalty. The fashion retail company needs to focus on meeting various
rules and regulations and providing safety to its staff and workers so that it does not get engage
in any further incident and accident at workplace. Primark retail busienss needs to enter in the E-
commerce markets as it is increasing in today's era and it will also help in increasing market
share and profits for the company (Sandberg and Jafari, 2018).
CONCLUSION
Business organisation needs to effectively analyse the micro and macro business
environment in order to identify its market position, strength and weakness and various other
affecting factors. There are micro and macro factors that leads to bring great impacts on the
working of business which needs to be appropriately analysed by business. PESTLE, SWOT and
Porter's Five Forces models are used in the report in order to analyse the market position and
business environment. The report also provides some recommendations that guides and directs
business organisation to meet various business challenges effectively.
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REFERENCES
Books and Journals
Banerjee, M. and Mishra, M., 2017. Retail supply chain management practices in India: A
business intelligence perspective. Journal of Retailing and Consumer Services. 34.
pp.248-259.
Benzo, R., Mohsen, M. G. and Fourali, C., 2017. Marketing Research: Planning, Process,
Practice. SAGE.
Berry, A. J., Broadbent, J. and Otley, D. T. Eds., 2016. Management control: theories, issues and
practices. Macmillan International Higher Education.
Fernie, J., Fernie, S. and Moore, C., 2015. Principles of retailing. Routledge.
Hagberg, J. and Kjellberg, H., 2015. How much is it? Price representation practices in retail
markets. Marketing Theory. 15(2). pp.179-199.
Hayes, J., 2018. The theory and practice of change management. Palgrave.
Hristov, L. and Reynolds, J., 2015. Perceptions and practices of innovation in retailing:
Challenges of definition and measurement. International Journal of Retail &
Distribution Management. 43(2). pp.126-147.
McArthur, E., Weaven, S. and Dant, R., 2016. The evolution of retailing: a meta review of the
literature. Journal of Macromarketing. 36(3). pp.272-286.
McDONALD, M.A.L.C.O.L.M., 2016. Strategic marketing planning: theory and practice. In The
marketing book (pp. 108-142). Routledge.
Moloney, N., 2015. Regulating the retail markets. In The Oxford handbook of financial
regulation.
Morcol and et.al., 2017. Business improvement districts: Research, theories, and controversies.
Routledge.
Perera, C., Auger, P. and Klein, J., 2016. Green consumption practices among young
environmentalists: a practice theory perspective. Journal of Business Ethics. pp.1-22.
Sandberg, E. and Jafari, H., 2018. Retail supply chain responsiveness: Towards a retail-specific
framework and a future research agenda. International Journal of Productivity and
Performance Management. 67(9). pp.1977-1993.
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