Business Essentials: Strategic Analysis of Primark's Market Position

This report provides a comprehensive business analysis of Primark, a prominent Irish retail organization and subsidiary of AB Foods. It employs Porter's Five Forces analysis to evaluate market competition, finding a mild threat of new entrants, low supplier bargaining power, high customer bargaining power, low threat of substitute products, and high competitive rivalry. The PESTEL analysis examines political (Brexit), economic (currency fluctuations), social (obesity trends, aging population), technological (e-commerce growth), environmental (sustainability demands), and legal (workplace pensions) factors affecting Primark. A value chain analysis identifies key activities such as procurement, inbound and outbound logistics, marketing and sales, and service delivery, highlighting areas for improvement, particularly in online presence and customer service. The report concludes that Primark can achieve long-term market success by optimizing pricing, demand management, and market value, leveraging the insights gained from the PESTEL, Porter's Five Forces, and value chain frameworks.

BUSINESS ESSENTIAL PRIMARK
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Table of Contents
Introduction......................................................................................................................................3
Overview of the Company...............................................................................................................4
Porter’s Five Forces Analysis..........................................................................................................5
PESTEL Analysis............................................................................................................................6
Value Chain Analysis......................................................................................................................7
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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Introduction
Organisational processes in the business environment must ensure that a company is able to earn
a competitive advantage, which can be extended in the form of more effective services to the
customers. The company can earn a competitive advantage by positioning itself in the market in
an effective manner and by providing goods and services at the competitive price structure. A
supply chain network must also be analysed to understand how responses to the market are most
effective. This assignment has used the organisation, Primark to understand how this
organisation can effectively tweak market services to achieve effective economic success over a
period of 2-5 years.
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Overview of the Company
Primark is an Irish accessories and retail organization that is a subsidiary of the AB Foods
(Associated British Foods). Headquarter of this organization is in Dublin. Arthur Ryan founded
this company’s first physical store along with his business partner named Micaela Mitchell.
Primark is specialized in providing a wider range of services and products involving new born
and children clothing, adult clothing products, various home appliances and confectionary. This
organization is a provider of various quality services and products at a low cost. Primark has
around 350 physical stores all around the globe. The largest Primark store is situation
Manchester, England. According to the current market research, this organization has gained
total organizational revenue around £5,949million. On the other hand, as one of the leading retail
market giant in UK and well-known retail brand across their domestic market, this company has
more than 68,000 employees working in their stores around the world. Primark’s code of conduct
is the support for the ethical trade and environmental sustainability program that the
organizational management of Primark wants to launch in near future (Primark.com, 2018). As
per the operations and brand value of this company, it could be said that, Primark not only
focused in getting profitability from the market but also they are interested in setting an example
of sustainable business by influencing society and customers through their business ethics and
objectives.
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Porter’s Five Forces Analysis
The framework of Porter’s five forces analysis has been used to measure the level of competition
prevailing in the market. The tool has been formed from the economics of industrial
organization, based on which the five forces have been identified that help in determining
intensity of competition and attractiveness of the market with relation to profitability
(Rothaermel, 2015). The Porter’s Five Forces Analysis for Primark has been presented below:
 Threat of new entrants (mild) - Due to free economy policy of UK, there is no restriction on
the entry and exit of firms, due to which the organisation faces moderate threat from new
entrants. However, the reason that Primark has a large customer base and strong brand value
helps it to sustain the competition from the new entrants. Bargaining power of Suppliers (low) - A business organisation needs to manage effectively
its suppliers so that its business operations are not hindered. The high power of suppliers is
highly unfavourable whereas low bargaining power is termed healthy (Nag et al., 2014). In
case of Primark, it has mass supplier base, both domestically and internationally, due to
which the bargaining power of the suppliers is low. As a result, Primark has full control over
its raw materials, acquires them at low price rates and incurs enormous profits. Bargaining power of customers (high) - Despite the fact that Primark has a huge customer
base across UK, the bargaining power of customer is high, due to the presence of large
number of clothing retailers. The price sensitiveness of the buyers compels them to visit
various shops before their purchase activity, to ensure that their demand can be fulfilled at
the least possible price rate. This shows failure of the organisation to sustain its customers
after increasing prices, resulting constant or low profit. The organisation has to stick to its
prevailing prices, even if its cost of production increases to sustain its consumers. Threat of substitute products (low) - Substitutes are products offered by other companies and
rivalries serving the same purpose and which can be used as an alternative to the current
product being offered. The organisation faces threat from substitutes due to changes in the
prices of the products. Increase in availability of alternatives increases the elasticity of
demand and restricts the organisation from increasing their prices. In case of Primark, the
threat of substitute products is low due to high brand value, implementation of reasonable
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prices and offering of discounts to customers. However, the presence of large number of
competitors, namely Top Shop, Tesco, Zara, ASDA, to name a few, pose threat to
organisation as they charge high prices for better quality. In addition Competitive rivalry (high)- The UK retail clothing industry is high competitive due to
presence of large number retailers like Next, Tesco, Zara, H&M, Gap, Marks and Spencer,
Sainsbury’s, ASDA, to name a few who have exploited the demands of the youth for
acquiring a large share in the market (Okonkwo, 2016). In addition, UK has no barriers in the
entry and exit of firms, which makes it easy for the foreign companies to enter the retail
market and conduct business operations. Due to this reason, Primark is facing high level of
competitive rivalry, resulting in decline in its market holdings. Further, as it offers products
at reasonable rates, it has to face competition from both high level and low-level brands.
PESTEL Analysis
The strategic tool of PESTEL analysis will be used to monitor the impact of the macro-
environmental factors affecting the organization (Paul et al., 2014). The PESTEL analysis of the
external factors prevailing in the UK market affecting Primark has been offered below:
 Political- Britain’s decision to leave the European Union (EU) has given emergence to
political and economic unpredictability and upheaval. The Brexit incidence has hampered
the operations of the retail organizations like Primark as well. The fall in the value of pound
has been beneficial for Primark, but its parent organization, ABF decided to leave EU due to
the unpredictability of financial market and business situations. In addition, the organization
also mentioned that Primark would undergo transnational effect in its profits and sales
incase Britain leaves EU. Economic- The Brexit incidence brought a decline in the pound sterling in comparison to
the value of dollar, creating an intense financial turmoil. Further, the fiscal status of London
has been adversely affected as numerous investors are planning to pull out their investment
from their property funds. However, the prevailing exchange rates offer Primark and other
clothing retailers’ a translation advantage.
 Social- Two factors, namely increase in the demand for plus size fashion and changes in the
ageing of the population, are the two social factors affecting the clothing retail industry of
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UK. Currently, the largest socio-cultural trend prevailing in UK is the increase the amount
of obesity and the ageing of its population. As per the records of NHS, out of 10, 7 men are
classified as being obese and out of 10, 6 women are being termed as obese (Gockeln,
2014). At times, female workers have shown ignorance towards their shopping activity due
limited range of plus sizes. Primark can acquire a strong position in the market by focusing
on plus-size customers. As majority of the population belongs to the older category, shows
an increase in rate of disposable income. In addition, majority of the population is preferring
online shopping over physical shopping. Technological- The swift rise and development of e-commerce has created a rift between
the companies practicing traditional businesses and the businesses practicing the modern
online shopping system (McCormick et al., 2014). This competition was created by
emergence of online selling brands like Boohoo, Amazon, Pureplays, to name a few. This
new medium of distribution has brought a decline in the cost of operations, due to which
even the traditional clothing retailers have started adapting to it. As Primark is still
following the traditional mode of distribution for majority of its business activities, it might
have to suffer from a reduction in its sales volume. Environmental- The UK clothing industry has shown a significant rise in the presence of
environmentally and ethically conscious customers, thereby pressurizing firms like Primark
to make use of recycled materials and adopt sustainable packaging like use of paper. Legal- The clothing industry in UK has to comply with the newly instituted law of
Workplace Pensions, as per which they have to contribute 3% of their revenue to the
employees’ pension for British workers.
Value Chain Analysis
The value chain analysis is a logical framework that assists in recognizing business activities,
which creates and provides value advantage to the business. A graph related to value chain
analysis is listed below and analysis of that graph would help in understanding the basic needs
and requirements for creating a sustainable value chain analysis of Primark.
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Figure1: The value chain Analysis
(Source: Primark.com, 2018)
The primary activities involved within the value chain analysis of Primary are listed below,
Procurement Operations: This organization in their procurement and purchasing activities take
care about sourcing the best quality services and products from many countries all around the
world. This entire process is carried out by the department of supply chain management and is
done according to the organizational code of conduct (Primark.com, 2018).
Technological development
Inbound logistics: All the products are transported to all their stores across their domestic
market and international market. This effective supply chain process is bringing together
manufacturing units of this company across emerging markets (Primark.com, 2018).
Inbound logistics: All the products are transported to all their stores across their domestic
market and international market. This effective supply chain process is bringing together
manufacturing units of this company across emerging markets.
Outbound logistics: As mentioned in the above part of this study, this organization is trying to
develop online retailing facilities for their customers, all the outbound logistics and sales are
conducted in their 250 stores and the consumers do transportation service after sale
(Primark.com, 2018).
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Service: This organization has very limited number of customer service and low numbers of
sales assistances are present in their outlets. This organization should invest time in developing
this condition as soon as possible for developing their service facilities (Primark.com, 2018).
This organization should consider customer satisfaction as an important factor to develop their
organizational profitability and performance level. If the consumer services of this organization
develop then automatically, more customers would be interested in visiting their stores.
Marketing and sales: All the marketing and sales are done in the offline marketing procedure.
As this organization has not develop a proper online marketing and selling services, all their
promotional events are doe through the offline processes. This organization should invest time
on providing two types of promotional and marketing services in order to achieve more
customers’ attention in the online as well as offline platforms. Increased customer responses
would help them track efficient level of their operations and getting customer feedback would
become much easier (Primark.com, 2018).
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Conclusion
To achieve long-term success in the market, several factors were analysed. This provided a
perspective of how market succeeds could be gained in a periodic fashion. To gain this
competitive advantage in the market, conditions of demand, pricing and market value were
analysed. It was discovered that by improving the effectiveness of such variables, this
organisation would be able to gain an advantage in the market in terms of the work they do in a
cost and time effective manner.
Essentially the learner used the value chain analysis, the PESTLE analysis and the Porter’s five
forces framework to conduct an analysis that is conducive and relevant to the markets in which
Primark operate.
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References
Gockeln, L., 2014. Fashion industry analysis from the perspective of business model
dynamics (Bachelor's thesis, University of Twente).
McCormick, H., Cartwright, J., Perry, P., Barnes, L., Lynch, S. and Ball, G., 2014. Fashion
retailing–past, present and future. Textile Progress, 46(3), pp.227-321.
Nag, B., Han, C. and Yao, D.Q., 2014. Mapping supply chain strategy: an industry
analysis. Journal of Manufacturing Technology Management, 25(3), pp.351-370.
Okonkwo, U., 2016. Luxury fashion branding: trends, tactics, techniques. Springer.
Paul, D., Yeates, D. and Cadle, J. eds., 2014. Business analysis. British Computer Society.
Primark.com. (2018). Primark - About Us. [online] Available at:
https://www.primark.com/en/about-us/about-primark [Accessed 17 Mar. 2018].
Primark.com. (2018). SETTING HIGH STANDARDS. [online] Available at:
https://www.primark.com/en/our-ethics/setting-high-standards [Accessed 17 Mar. 2018].
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
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