Business Organisations and Environments: Primark in Austria

This report provides an executive summary and detailed analysis of Primark, a UK-based retail clothing store chain, and its potential expansion into Austria. The report evaluates the business environment in Austria, considering factors such as political stability, economic conditions (GDP, inflation, employment), social aspects, and technological advancements. A PESTLE analysis is conducted to assess the external factors influencing Primark's operations, and the report uses examples and statistics to support its findings. The report examines Primark's strategies for international market entry, including globalization, internationalization, and localization. It also discusses the challenges and opportunities associated with entering the Austrian market, including the need for significant capital investment and marketing efforts. The report concludes by summarizing the key findings and providing recommendations for Primark's successful entry into the Austrian market.

Business Organisations
and Environments in a
Global Context

EXECUTIVE SUMMARY
This report evaluate the concept of Business organisations and environments in a global context
for Primark a fashion clothing and retail store chain to expand its business in Austria. The
company's operation in various countries and the beginning as a retail store in Dublin. In this
report we have discussed the potential of the mentioned company to operate in the environment
of Austria dealing with all the issues prevailing in the country as well as benefiting from the
favourable conditions. It focuses on the economic conditions in the country and its development
for creating ideal strategies to start up Primark's first store in the location.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Background of business organisation.....................................................................................1
TASK 2............................................................................................................................................3
Background of the country.....................................................................................................3
TASK 3............................................................................................................................................5
Analysis of business environment..........................................................................................5
TASK 4............................................................................................................................................8
Interpretation with examples and statistics.............................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
Illustration Index
Illustration 1: Premark Revenue chart.............................................................................................3
Illustration 2: Austria's GDP per capita...........................................................................................4
Illustration 3: Austria Employment Skill.........................................................................................9
Illustration 4: Austria Inflation Rate..............................................................................................10

INTRODUCTION
Business organisation is a group of people who collaborate in order to achieve a common
goal. These are usually formed to generate profits by providing products and services to the
customers fulfilling their demands (Alshamaila, Papagiannidis and Li, 2013). Whereas some
firms which work for the welfare of the society are known as non profit organisations. The
business organisations comprises of different members, employees, shareholders, etc. For a
business to operate in any country some factors are needed to be considered known as internal
and external factors. These are the major elements which guide the working operations of any
firm as well as provide base for the future planning and strategies. The internal environment of
the organisation can be controlled by the management whereas, the external environment
includes such factors which have huge impact and cannot be controlled by the company. In the
given report, a retail company Primark of UK is taken as an example to evaluate these factors for
operating in the country of Austria (Bachmann and Inkpen, 2011).
TASK 1
Background of business organisation
Primark is an Irish retail clothing store chain started by Arthur Ryan in 1969. It was
established in Dublin with the name Penneys and is a subsidiary of Associated British Foods. It
became a huge success in the region which made it expand the company outside to other
countries. However, another store operating with the name of Penneys in Europe and being
already established in the area became the reason for the company to change its name to Primark
as now widely known. The company deals in the range of clothes for everyone, footwear,
accessories, beauty products, etc. The main factor for the success of the organisation despite of
many clothing retailers in the market is providing quality products at low costs making it
affordable for every class of people. This factor has helped the company to grow and expand
continuously even in the cut throat competition of fashion clothing industry (Caligiuri and
Tarique, 2012). There are many competitors of Primark such as Marks and Spencer Group
P.L.C., ASADA group limited, Tesco Plc. But company has marked to remain second-largest
clothing skills.
The performance of the company can be analysed through its annual reports and financial
statements. To measure the recent growth in the operation of the store a collective evaluation of
reports for the period of previous 3 years is conducted. According to those, Primark has been the
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top performer for its holding company Associated British Foods. The profits of the business have
recorded a rise of more than 30 percent and sales by 17 percent as it expands the low cost high
quality products in international markets. It has performed exceptionally well even when the
sales of some major fashion houses dipped in the years. The experts reasons this with the focus
of Primark on its physical stores more than online which have been estimated to be above 325
store across the globe. The company is also responsible for the employment of over 68,000
people all over the world. The data has been taken from the company original website. There are
many strategies for entering the international market for Primark.
Globalisation: The process of globalisation involves developing, manufacturing and
marketing of the product for its distribution in the foreign market (Farndale, Scullion and
Sparrow, 2010). Primark has used this method to capture the clothing industry in the
international market. It has located its stores in many countries and penetrated the new market
with its marketing strategies.
Internationalization: The process of internationalization includes generalizing the
product for localization. In this the product is developed according to the taste and preferences of
the public and then reintroduced in the market. Primark can use this strategy to modify its
products and provide better services to its customers.
Localization: The approach of modifying the product according to the culture and
preferences of the local region is known as localization (Garavan and McGuire, 2010). This
includes making the product more accessible and compatible for the local needs of the people to
create a brand image. Primark used this strategy to enter the local markets of Ireland and other
neighbouring regions.
The company has expanded in several countries which has raised its financial needs
higher. Primark needs to invest a large amount of capital to open its store and introduce in the
market of a new region. The situation of tough challenge makes it difficult to promote and attract
customers in new regions. Therefore, it needs to invest a huge amount in marketing strategies for
promotion and branding of the products (Gilbert, Rasche and Waddock, 2011).
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TASK 2
Background of the country
Austria is a central European country also known as Republic of Austria. It comprises of
nine federal states being a `parliamentary democracy` (Eurostat, 2016). According to C.I.A.
(2016) the surface territory of Austria covers is 83,871 square kilometres being populated by a
number of 8.711.770 residents.
It is one of richest countries in world having a high standard of living for the people and
ranked high for its Human Development Index in the world. Being a member of UN and EU it is
also a founder of Organisation for Economic Cooperation and Development. The country has a
well developed social market and high GDP rate. It has major sources of renewable energy to
produce sufficient power for the people. It has sustainable infrastructure which provides many
opportunities for various business industries (Gray, 2010).
Business environment of any company consists of the internal and external factors which
affect its working. The factors having major impact and cannot be controlled by the organisation
are the external factors being political, social, cultural, etc. Austria is a small country in the
3
Illustration 1: Premark Revenue chart
Sources 1: : https://www.statista.com/statistics/383785/primark-revenue-worldwide

European continent, but having most stable and richest economy available. Sharing its
boundaries with many countries it has a large range of business prospects for any industry. It is
considered as a hub for East and West relations (Hill, Cronk and Wickramasekera, 2013).
Having stable political and economical environment it provides opportunities for many new
ventures to be established here.
The economic stability can be measured with the Gross Domestic Product of the country
which provides a better evaluation of financial conditions of the place. GDP of a country
represents total costs of all goods and services less imports of that specific country (OECD,
2015). Austria's GDP per capita at present is more than $ 47754.6 which makes it a well
developed country.
The major population of the country has high literacy rate and skilled labour force (Low,
Chen and Wu, 2011). The major sector driving the economy is service sector which make it all
the more important to have more industries and business ventures for further development. The
other industries contributing to the GDP factor are tourism, agriculture and industrial sector.
The employment rate in the country is increasing every year being more than 70 percent
in the past years. The data is available on online website trading economics. To increase this
further more, industries and companies are required to establish. The companies have a huge
customer base to capture from a population of more than 8.7 million mostly being skilled labours
reducing the cost and adding to the productivity of a new business venture.Results of Labour
4
Illustration 2: Austria's GDP per capita

Force Survey 2016 shows that Austria`s number of employees increased from 4.148 million in
2015 to 4220 million people in 2016 (Statistik, 2016).
The inflation rate in the country recorded less than 2.2 percent increase the margin of
profitability for the companies as shown on trading economics . The decreasing rate of inflation
can be a matter of concern for the industries in Austria as a very low rate of inflation can also
have a negative impact on the profit margins of small firms. However, the large firms have
minimum effect from this. This inflation has led to rise in the administered prices and labour
costs in Austria (Mellahi and Collings, 2010). Whereas, this did not have an effect on the prices
of food, fuel and living conditions in the country. Exchange rate in Austria is has value of 1.09 as
on Mar 27. The data is available on online website focus economy. The economy of Austria at
last ended with positive value.
TASK 3
Analysis of business environment
The business environment of a country includes the political, economical, social,
technological, environmental and legal factors which have an impact on the working of a
business enterprise. These factors can be work as a determinant for Primark to plan its operations
and location of the store in Austria. To analyse these factors PESTLE analysis is conducted
which includes environmental scanning, strategic management and market research. The external
factors for Primark in Austria can be evaluated through PESTLE analysis as:
Political factor- The political factor of a country includes its government, and its policies
relating to tax, environmental laws, trade and tariff restrictions, labour law, etc. These are the
factors which guide the political stability in a country which effects the working conditions for
industries (Nadkarni and Herrmann, 2010). Austria being a politically stable country provides a
stable working environment and policies for industries to develop. The favourable policies of tax
for corporate companies create a higher profitability margin which will generate higher revenues
for Primark. The country being a member of EU provides several opportunities of trade for
Primark which will help it to capture new markets and expand further.
Economic factor- The economic factors of a country being economic growth, exchange
rates, interest rates, and inflation affects the financial conditions of the people in the country.
These factors guide the strategies and plans for the working operations of a business entity
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(Nahavandi, 2016). Primark planning to setup its stores in Austria, requires labour and machines
which are available in abundant in the region. The population consisting majorly of skilled and
literate people helps to reduce the cost of training and recruitment for the company. Balanced
inflation rate as well as developed economy provides favourable conditions for Primark in order
to enter a new market and create customer base.
Social factor- The social factors of a country includes its cultural aspects such as
population, age distribution, safety and career prospects, etc. Austria having major river port
situated in its capital adds to the facilities for trading and other business transactions. Primark
can use this factor as an advantage for its business operations (Nam and Pardo, 2011). The
developed infrastructure and living standards of people will provide better opportunities for the
company to expand in the country.
Technological factor- The technological factors in a country includes research and
development activity, changes and updates in technology, etc. These factors are crucial for a
business to operate and compete in market. Primark having a range of clothes and beauty
products requires latest technological developments to establish its brand and products in the
market of Austria. Even though it offers low cost products the quality needs to be maintained.
Legal factor- The legal factors of the external environment of a firm consists of the laws
and regulations relating to various aspects of a business firm. It can include consumer law,
employment law, health and safety law and discrimination law, etc. The country has strong
implementation of anti-corruption law to reduce corruption level as well as human rights law
guiding the policies for trade union, assembly, strikes, in the organisation. Primark can benefit
from the fixed rules and policies for these as it will consume less time to solve the disputes
(Needle, 2010).
Environmental factors- The environmental factors include country's ecology, climate,
weather, etc. which affect the working conditions of industries. To identify the type of climate
and weather in Austria is crucial for Primark as it will help to analyse the trends and preferences
of the customers in the area. Being a mountainous region, the people mostly prefer warm clothes
in most seasons which will decide the production and plans for the company (Ebert and et. al.,
2014).
The business enterprise entering a new market needs to identify the opportunities and
threats in the market industry of the country. Primark being a new entrant in Austria's fashion
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clothing market needs to assess the market conditions as well as internal strength and weaknesses
to plan operations accordingly. The company can create a SWOT analysis as follows:
Strengths Weaknesses
 Primark is an established brand in
various countries which helps it to
reduce the marketing cost in a new
market.
 It provides good quality products at
very low prices making it affordable for
many people.
 Even when other clothing companies
were unable to generate profit, Primark
made a growth in its sales and
profitability.
 Being one of the major weaknesses, the
low prices of the company creates a
perspective for customers of providing
low quality products.
 Primark was reported for having poor
working conditions in the company and
labour right issues in supply chains.
 With expansion in new markets of
Austria, the revenues will decrease with
the rise in the cost of new setup and
marketing activity.
Opportunities Threats
 Rise in obesity levels has led to change
the customers preference of brands
from other fashion clothing companies
which lack this feature.
 With expansion and growth of the
company and opening of new stores
will generate more revenues.
 The company based in UK, will have
an impact of decision of Brexit on the
operations of the firm (Oliveira and
Martins, 2011).
 The already established market in
Austria will present a challenge for
Primark to create its brand image and a
risk of failure is present.
The Porter's Five Force model describes the forces which drive the business operations
for a firm. It helps the company to determine its current position along with the future position
the company wants to reach. It analysis the level of competition for the company in industry.
Primark planning to enter new market in Austria, needs to analyse the competition and market
position to plan future strategies (Tarique and Schuler, 2010).
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New entrant: The threat of new entrant coming in the market is a major threat for already
established firms in the market. Primark entering the clothing market in Austria will pose a threat
to the established player in the country. Therefore, the company needs to plan accordingly to
present itself as healthy competitor and not a rival threat.
Substitutes: Every growing market refrain the threat of someone creating a substitute of
their product. Primark poses the same threat for the companies in Austria which needs the
company to have a agreement with firms in order to operate in the same market without
hampering their customers base.
Customer: The customers have the power of bargaining which force the companies to
keep their prices high (Wang, and et. al., 2010). Primark being a provider of low cost products
does not surrender to this factor as the customers do not need to bargain with such low price
products.
Suppliers: The suppliers of the raw material also have the power to bargain which
enables them to provide material at higher cost. Austria being a member of EU does not contain
the this factor as according to agreement the trade between European nations is done at very low
costs.
Rivalry: The business environment of a industry can be determined by the level of
competition in it. Austria being a small country does not have a large number of organisations
and Primark has a fair chance to establish its operations in the market (Module descriptions for
MA Global Management, 2016).
TASK 4
Interpretation with examples and statistics
Year (Nominal) GDP per capita Inflation Rate (%) Employment Rate (%)
2013 50500 2 70
2014 51000 1.5 71
2015 43000 1 71
2016 44500 1 72
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As per the above acquired data, the economic condition of Austria can be analysed along
with its growth rate and business opportunities. In the last 5 years, the Gross Domestic Product
for per capita income in Austria is decreased as the reason being financial crisis of 2014 in the
European Union of which the country is a member (Leadership in a Global Environment, 2017).
The inflation has also decreased with a small difference which is the effect of rise in employment
rate in the country. These factors determine the gradual growth in Austria. The data has been
taken from the online site World Bank.
9
Illustration 3: Austria Employment Skill

CONCLUSION
In the above report, the factors of a country affecting the business operations are
described. The case of a fashion clothing chain based in UK is taken as an example for starting
new stores in Austria. The economic, social and political background of the country is explained
along with the elements affecting the business environment for a new entrant for the country.
The analysis of the data for last few years is taken and interpreted for further use by the
company. Thus, providing various factors to analyse the business conditions for Primark to enter
fashion industry in Austria.
10
Illustration 4: Austria Inflation Rate

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