Primark: Analysis of Business Environment, Economic Policies and Trade

This report provides a comprehensive analysis of Primark's business environment, examining its objectives, strategies, and responsibilities within the fashion industry. It identifies Primark as a private retail organization and discusses its objectives, including customer satisfaction, competitive pricing, and shareholder wealth maximization. The report evaluates the extent to which Primark meets these objectives by considering its relationships with employees, customers, and suppliers. Furthermore, it explores the operation of different economic systems, such as traditional, command, mixed, and transitional economies, and assesses the impact of monetary and fiscal policies on the housing and farming sectors. The report also delves into competition policies and their effects, the determination of pricing and output decisions in various market structures, and the impact of the business and cultural environment on Primark. Finally, it highlights the significance of international trade to UK business organizations and the impact of European Union policies on Primark, offering a holistic view of the company's operational context.

BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Identification of type of organisation and its purpose......................................................1
1.2 The extent to which Primark meets its objectives............................................................2
1.3 Responsibilities of Primark and strategies employed by the company to meet them......3
TASK 2............................................................................................................................................4
2.1 Operation of different economic systems to allocate resources effectively.....................4
2.2 Assessing the impact of monetary and fiscal policy on housing and farming sector.......5
2.3 Competition policies and their impact..............................................................................5
TASK 3............................................................................................................................................6
3.1 Determination of pricing and output decisions of businesses in different market structures
................................................................................................................................................6
3.2 Way in which market forces shape organisational responses..........................................7
3.3 Impact of business and cultural environment ..................................................................7
TASK 4............................................................................................................................................8
4.1 Significance of international trade to UK business organisation.....................................8
4.3 Impact of policies of the European union on UK business organization.........................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment is determined as the internal and external factors that influence the
operating situation of an organisation. These factors include customers, suppliers, competitors,
government regulations, technological changes, economic factors and social trends. The present
report is on Primark, an international retailer which is a subsidiary of ABF (Associated British
Food) Groups. The company was launched in 1969 and is headquartered in Dublin under the
name Penneys (Welte and Smallbone, 2011). By 2012, the company had over 238 branches
operating across Ireland, UK and Europe. It offers a variety of products ranging from children's
clothing, men and women wear, accessories, footwear, homeware, beauty products and
confectionery. Innovation and fashion driven edge has made the company distinctive across the
globe. This report explains different types of organisation and their objectives. Further, it
evaluates operation of different economic system and allocation of resources. Lastly, it provides
an understanding of different market structures and their impact on output and pricing decisions
on the cited organisation.
TASK 1
1.1 Identification of type of organisation and its purpose
Primark is a private retail organisation operating in the business of fashion industry. The
business firm in private sector of an economy is controlled and operated by private individuals.
The company is engaged in offering wide range of products such as clothings for children, men
and women, homewares, accessories, footwear etc. The company has an competitive edge due to
its innovation and strategy to sell trendy outfits at lower price (Arasti, Zandi and Bahmani,
2014). The main focus of company is to offer quality products to its customers to enhance brand
value and customer loyalty. Following are the main objectives of Primark :
 To satisfy the needs of customers by offering them quality products and services.
 Providing quality products at comparatively lower prices to attract new customers and
retain old ones.
 Establishing healthy customer relationship to ensure their loyalty and enhance brand
image.
 Strategies are formulated that can maximize profits and wealth of the organisation which
helps in offering high dividend to the shareholders.
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 To achieve economies of scale by efficient distribution channels of products which aids
in surviving in different market conditions.
a) Public sector : Tesco is a good example of public sector company which is engaged in
the diversified business of retailing of products such as clothes, books, furniture, electronics,
toys, software and also services including financial services, internet and telecom services
(Pikka, Iskanius and Page, 2011). A public sector organisation is owned and operated by
government and engaged in providing goods or services to its citizens.
b) Charity : Charitable organisations are type of non-profit organisation which focus on
social well-being and philanthropic goals. For example – Cancer Charity UK is a cancer research
and awareness charity which aims to reduce deaths caused due to cancer. It is also involved in
research for prevention and treatment of disease and carry out campaigns to aware people about
the disease.
c) Cooperative : Cooperatives are autonomous association of people who gather to meet their
social and economic needs through a jointly owned and controlled organisation. Cooperatives
UK is an example of cooperative whose objective is to unite and develop cooperatives across all
the sectors.
1.2 The extent to which Primark meets its objectives
Primark is one of the leading retailer engaged in fashion industry. The success of a
company depends upon different stakeholders which may be internal like employees of the cited
organisation or external such as customers and suppliers. The company forms and execute
various strategies to meet its objectives and match the needs of its stakeholders. This helps in
building a good brand image and establishing long term relationships with the stakeholders
(Bryman and Bell, 2015). The major stakeholders of the company and the extent to which
Primark meets its objectives are :
1. Employees : Employees are the most valuable asset of an organisation. These are the
people employed by the company who work to achieve organisational goals. Primark
seeks to care of employees and their concerns. It provides both monetary as well as non-
monetary benefits to employees such as incentives, bonus, promotion, job security etc.
This ensures that employees feel motivated and work effectively and efficiently. This
helps in maintaining healthy environment at workplace and ensure long - term
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relationship with them. Training and development programs is also employed by the cited
organisation to develop skills and know – how of the employees.
2. Customers : The main objective of Primark is to provide quality products to its customers
at lower rates and to satisfy their needs and demands. The customers are a cardinal
element which determines the success of any organisation (Rossi, Vrontis and Thrassou,
2012). There is no existence and relevance of a business without its customers as main
aim of business is to earn profits which is not possible without its customers. The cited
organisation aims at providing trendy outfits at a lower cost to attract new customer and
retain existing ones. It tries to understand customers and then, work with suppliers to
produce goods which match their specifications. The company has also established online
customer care to address the grievances and ensure quick redressal, this ensures long-
term customer loyalty and good customer relationship.
3. Suppliers : Suppliers are the one who manufactures and delivers the products to the
company. The products of Primark are manufactured by overseas suppliers including
Asia and Europe. The company tries to maintain healthy and long-term relationship are
developed with its suppliers that ensure good quality products are offered and timely
delivery is made.
1.3 Responsibilities of Primark and strategies employed by the company to meet them
As one of the major retailer in fashion industry, Primark has huge responsibilities towards
its shareholders as well as society. When the company fulfils its obligations, it builds goodwill of
the organisation and helps in profit maximisation. Primark is responsible towards different
sectors which includes : Government – It is the duty of the company to abide and follow rules and statutory
regulations formed by the government (Christopher and Holweg, 2011). It should not
indulge in any kind of illegal activities and ensure compliance of law and timely filing of
returns and payment of taxes. To fulfil these obligations, Primark has established a team
which ensure legal compliance and monitors that company is following code of conduct
and business ethics. Customers – As discussed earlier, the main objective of Primark is to satisfy its
customers by providing good quality products and excellent services. The cited
organisation focuses in bringing innovation in its products and also on customer
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legislation that ensures production is done keeping in mind expectations and needs of
customers. Primark aims to offer trendy outfits with excellent quality to attract more
customers. The company's online customer care department is also beneficial for timely
redressal of their grievances.
 Employees : Employees of an organisation plays a cardinal role to achieve the objectives
of the organisation. Primark recruits and employs skilled and knowledgeable employees
who can work effectively and efficiently (Lee, Olson and Trimi, 2012). It also provides
training and development programs to enhance their skills and widen the knowledge base
so that they feel motivated and are able to deal with any situation.
TASK 2
2.1 Operation of different economic systems to allocate resources effectively
The system of producing, resource allocating and distributing of products and services
within a society is known as an economic system. Different countries operate in different
economic systems to attempt resource allocation effectively. The major economic system are –
traditional, market, command and mix economic system.
1. Traditional economic system : It is the ancient type of economic systems where long
established customs and practices are followed. In traditional economic systems
individual needs are not as important as community interest. This economic system is not
dynamic. Africa is an example of traditional economic system. Such economic system is
not beneficial for Primark as its operates in retail fashion industry which is taking new
shapes with ever changing trends and technology (Werther Jr and Chandler, 2010).
2. Command economic system : It is also known as planned economy where the
government controls the economy and determines use and allocation of resources.
Primark cannot operate in such economic system as it would not be able to produce high
quality products due to constraint of resources. Cuba operates in command economic
system.
3. Mixed economic system : A mixed economy possess the characteristics of both market
and command economic system. Apart from some major decisions, all the economic
decisions are made by individuals in the market. UK is a mixed economy where
allocation of resources is mainly done by market forces. Primark can operate in this
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economy but only drawback is that it may have to face government intervention
regarding resource allocation.
4. Transitional economic system : Transitional economy is the economy which is in the
process of changing from planned economic system to market economy. China is an
example of transitional economy which is undergoing structural transformations seeks to
develop market based institutions (Haidar, 2012).
2.2 Assessing the impact of monetary and fiscal policy on housing and farming sector
Fiscal policy and monetary policy are the major tools used by the Bank of England and
Chancellor of Exchequer for steering the economy in right direction. Monetary policies are
formed and implemented by the centralised bank or monetary authority. It involves changing
interest rates and affects money supply in the economy. This policy may ignite or slow down the
economy and while expanding money supply, the authority is required to monitor the inflation.
On the contrary, fiscal policy is made by government and consist of changing tax rates and level
of spending by government (Elliot, 2011). This may influence whole economy or target specific
sectors. Fiscal policy have an impact on capital expenditure, personal spending, level of deficit
and rate of exchange. Although both these policies are formed by different authorities with
different purpose yet they are complementary to each other. Housing sector : If the tax rates are low and level of government spending is high, people
will invest more and that would be beneficial for housing sector business. If the monetary
policy is favourable i.e. interest rates are low, it will induce people to take housing loans
and have positive impact on housing sector.
 Farming sector : Farming sector is influenced by monetary and fiscal policies of the
government. Farmers can avail loan for the production when interest rates are low. Also,
low tax rates and high level of government spending are favourable for the farming sector
and vice – versa.
2.3 Competition policies and their impact
Competition plays a cardinal role in the effective functioning of market. In a competitive
market, number of producers compete with Primark to satisfy demands of consumers so that no
single producer or consumer or their groups can dictate the market operations (Zott, Amit and
Massa, 2011). But businesses of different types and sizes may create an unfair competition in the
market. The most important step taken in UK to ensure fair competition is the formulation of
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1998 Competition Act. The aim of this Act is to reduce and prevent the abuse of monopoly
power. It prohibits the anti-competitive agreements between organisations and abuse of dominant
position by the businesses. Cartels are regulated by OFT (Office of Fair Trading). Cartels are a
type of anti – competitive practice which are formed to increase prices by reducing competition.
OFT works to identify and stamp out such cartels to ensure fair competition (Cavalcante,
Kesting and Ulhøi, 2011). In addition to this, as per the provisions of Enterprise Act, 2002, an
individual can be held liable for criminal offence for dishonestly involving in a cartel activity.
Such persons can be subject to imprisonment and imposed with heavy penalty. Moreover, the
role of European Commission comes into play when the cartel involves more than three member
states of European Commission. Thus, Primark is required to comply with the regulatory
requirements of these competition policies and safeguard the business from any criminal liabilty.
TASK 3
3.1 Determination of pricing and output decisions of businesses in different market structures
a) Perfect competition : A market structure having the following 5 elements is known as
perfect competition – all firms are engaged in selling similar or identical products, business
cannot control the market price i.e. they are price takers, buyers are well informed about product
and prices, firms have low market share and free entry and exit in the market.
b) Monopoly : There would be monopoly in the market when only one industry exist in
the market (Monopoly, 2017). The firm is the price maker i.e. can determine and control the
prices of its products by own motion because buyers have no other substitutes for the products
offered by monopoly firm. The entry in the market is quite difficult for the new industries.
c) Oligopoly : It is a type of market structure where few firms dominate the market. The
firms take the decisions regarding price and output but these decisions are influenced by the
existing competitors in the market. It reduces the prices of products and services offered to the
consumers. To ensure long term survival in the market, organisations should offer better quality
products from its competitors to have a competitive edge (Klapper, Amit and Guillén, 2010).
d) Duopoly : In a duopoly market structure, two firms dominate the market who take
pricing and output decisions. They survive independently in the market structure and offer their
own products.
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3.2 Way in which market forces shape organisational responses
Demand and supply are the market forces that plays a vital role in shaping the
organisational responses. Primark needs to focus on the demand of its products and its impact on
the organisation. There is an inverse relationship between price of products and its demand i.e. if
the price of a product or service increases, its demand will decrease and vice-versa (Supply,
demand and market equilibrium, 2017). The efficient distribution channels of the cited
organisation help in providing right product, at the right price and in right quantity to ensure
demands are met properly. If the organisation increases the supply of its goods or services, then,
it will have an adverse impact on the prices i.e. prices will fall down.
It is important for the cited organisation to understand the needs of customers, quality of
product and its viability in the market. Proper response should be provided by the organisation
according to demand and supply prevalent in the market to survive in the market. Product
differentiation is useful to gain competitive advantage and business should focus on providing
better quality products and services to its customers. As the company is engaged in retail fashion
industry, it is imperative for it to adopt new technologies which are effective for better
understanding of customers and competitors.
The organisation may face various difficulties due to the market forces prevalent in the
market so it is necessary to conduct research on the factors that change the demand and supply.
By matching effectively with the demand and supply forces, a company would be enabled to
achieve success and survive for long-term in the market.
3.3 Impact of business and cultural environment
An organisation uses different tools to analyse the environment in which a business
operates. The government forms various rules and policies for the business (Astrachan, 2010).
Primark is required to comply with the regulatory and statutory requirement, proper filing of
returns and payment of taxes. Also the political stability influences the operations of the cited
organisation.
There are various economic factors that affects the operational activities of the company
such as interest rates, inflation, rate of exchange etc. Economic factors can be bifurcated into two
– micro that includes income and expenditure of people and macro economic factors that covers
tax policies, government expenditure and business issues.
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The operating situation of a company is influenced by the cultural factors that includes
age, occupation, gender, health, population, education etc. The company operates in a society so
it is important for it to understand the culture and its value. Primark fulfills this responsibilities
by providing high quality products to its customers and satisying their needs and demands.
In the fashion-driven industry, it is imperative to adopt new technologies which will
provide new and fast ways of manufacturing, distributing its products and communicating with
the customers (Bovee and Courtland, 2012).
TASK 4
4.1 Significance of international trade to UK business organisation
The exchange of products, services or funds across the boundaries worldwide is known as
international trade. International trade is beneficial for the business, society, environment,
economy and whole country on a large scale but there are some disadvantages of international
trade too.
Advantages
 Cited organisation uses resources effectively between the European countries.
 It enables the company to import goods or services without restrictions from the union
countries.
 Variety of consumers are increased at the international level.
Disadvantages
 The dependency on foreign industries increases.
 It leads to unemployment of local people.
The dependency of each other products lead to environmental growth. It enables the countries to
generate revenue by outsourcing non-core activities to other industry (Welter and Smallbone,
2011). Various subsidiaries are provided by government to sell the goods at low prices. UK
organisations are able to procure funds from different ventures and institutions easily which
ensure long-term survival and increase in market capability. Cross border trade helps in overall
development of economy and increase the number of consumers over the globe and thus,
enhance brand value.
4.2 Analyse the impact of global factors
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Global factors can affect the business environment of company. It can affect external
environment of company. Global factors that influences or have an impact on business
organisations of Primark are :
 Political factors: It refers to the changes in government and government policies.
Operational business activities of business of Primark may greatly affected by political
factors (Beaumont, Whitaker and Pedersen, 2013). it includes various factors:
▪ It enhances level of bureaucracy in international affairs.
▪ Primark has to get instructed and regulated by the laws created by EU.
▪ Political factors can influence the spending habits of consumers of Primark and
for other business as well.
 Economic factors: It refers to changes in global economy that is increase or decrease in
purchasing power of consumer that is inflation rate, interest rates etc. Primark is highly
influenced by all these economic factors. The impact of this factor includes:
▪ it impact the business organisation by intensifying economic globalisation.
▪ Cost advantages will be possessed by emerging superpowers such as China etc.
▪ changes in interest rates, wage rates and inflation rate can also affect business.
 Social factors: it includes cultural factors and demographic aspect (Arasti, Zandi and
Bahmani, 2014). Social factors vary from one business to another business. it includes:
▪ Primark, in order to cater to different customers, adopts localization to attract
more potential customers in different countries by injecting different cultures
accordingly.
 Technological factors:
▪ It affects the level of global technological infrastructure.
▪ It helps Primark to reduce costs and manufacturing new clothing products. the
advancements of logistics result in lower cost of transportation.
▪ Primark is able to provide free standard shipping over a particular sum of money.
4.3 Impact of policies of the European union on UK business organization.
The EU is a politico-economic union consisting 28 members state. Member states and
business organizations operating in EU have to adopt regulations and norms that has been laid by
EU. There are two policies of EU:
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 Regional policy- It is also referred as cohesion policy which is a policy with the stated
aim of improving the economic well being of regions in EU, along with to avoid regional
disputes. The impact of regional policies on business organisation as follows:
◦ It promotes free trade between member states through imposing uniform taxes, VAT
and consumption tax (Bryman and Bell, 2015).
◦ It helps business organization to tackle and handle challenges posed by globalization,
climate changes and demographic changes.
◦ It enables the creation of job opportunities in the premises Primark and also invested
in infrastructure modernization and environmental improvements.
◦ It impact the business organization by regulating for antitrust issues, approving
mergers, working for economic liberalization.
 Cultural policy- It is the policy which aim to address and enable the promotion of
cultural dimension of European integration through relevant legislation and government
funding (Bovee and Courtland, 2012). The impact of cultural policy are:
◦ It helps in urban regeneration and also economic development of business
organisation.
◦ It supports the development of cultural activities, education or research conducted
by companies.
CONCLUSION
In a nutshell, it can concluded that business environment refers to the internal and
external factors that affects the operating situation of Primark. Stakeholders are the persons who
have interest in the organisation and it is imperative for the company to fulfils its obligations
towards its employees, customers, suppliers and government to achieve organisational goals.
Moreover, it is essential for the cited organisation to understand the market forces and match
demand and supply of its products to survive in the market. Lastly, it can be articulated that
international trade is increasing at a fast pace and company needs to form strategies to walk in
pace with changing technologies and international policies.
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REFERENCES
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