Business Environment Report: Primark's Internal & External Analysis

This report provides an in-depth analysis of Primark's business environment, focusing on its organizational structures, encompassing sole traders, partnerships, and public/private entities. It explores the size and scope of different organizational types, using examples like Susan M. Alexander Accountant, Weightmans, and NHS UK to illustrate key concepts. The report examines the relationship between various business functions such as HR, operations, finance, and marketing, and how they contribute to Primark's objectives and structure. Furthermore, it identifies the positive and negative impacts of the macro-environment, including political and economic factors like Brexit and inflation, on Primark's operations. The analysis also highlights how Primark's strengths and weaknesses interact with external macro factors, providing a comprehensive overview of the company's position within the UK retail market and its potential as a client for NatWest.

Business environment
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Table of Contents
Introduction......................................................................................................................................5
P1 Different types and purpose of organizations as well as their legal...........................................5
P2 The size and scope of different types of organizations..............................................................6
P3 Relationship between the various functions and how they relate to objectives and structure....7
P4 identify the impacts (positive and negative) of the macro environment upon the business.......8
P6 explain how strengths and weaknesses interrelate with external macro factors ......................12
Conclusion.....................................................................................................................................13
References......................................................................................................................................13
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Introduction
Business environment is the sum total of all the surroundings that has a direct or indirect
impact on the overall functioning if business in a positive or negative manner. These are
inclusive of clients, competitors, suppliers, governmental bodies, socio culture factors, laws,
technology among others (Margea, Hurbean and Artene, 2014). The present report has thus laid
focus on making a study on business environment of one of the potential client of NatWest
which can be Primark in the near term future. Focus will be given on internal and external
analysis of Primark so as to assess its business operations in a better manner.
P1 Different types and purpose of organizations as well as their legal structure
An organization can be defined as social unit of individuals that is structured as well as managed
in such a manner so as to meet a set of collective goals and objectives. There usually exists
different types of organizations such as sole traders, partnerships, public, private and voluntary
firms (Amit and Zott, 2014). The below mentioned section gives emphasis on varied types of
organizations as well and also discusses there advantages and disadvantages.
 Sole trader – It is also known as sole proprietorship where an individual runs as well as
owns the entire business entity. This type of organization is very simple to setup and
there is full control over assets and business decisions. But the presence of unlimited
liability presents a threat that all personal assets may go at risk if things go wrong. It also
provides very little chances for tax planning as an individual is personally liable to pay
tax on all income that comes from business.
 Partnership- it is a form of business arrangement where 2 or more persons share profits as
well as liabilities of a business setup. This type of business is easy in terms of
establishment and has low startup costs (Barnes and Hunt, 2013). There is also a presence
of more capital availability for business but the partners have unlimited liability for debts
of business. Moreover, there is often a chance of disagreements and friction between
partners as well as management.
 Private – These are the ones that are run by a single person or a firm in comparison to a
governmental body. The private firm shows the presence of restricted ownership that
further has a presence of objectives that aid in its successful running. The sector is
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advantageous due to presence of limited liability, continued existence even after death of
owner and also enjoys tax breaks (Foss and Saebi, 2017). On a negative note, such firms
cannot sell their shares publicly which somewhere limits the growth. As shares are not
sold on stock exchanges hence these companies are able to raise a limited amount of
capital.
 Public – These are the ones whose ownership and management is in hands of
government. These firms can be partially or completely owned by center or state and are
under a separate ministry. Some of the firms are also set by special act issued by
parliament. These firms offer better access to capital and liquidity. They further have
increased opportunity for acquisitions and also own a prestigious profile. However the
firms have more regulatory requirements over them and are also required to maintain
high levels of transparency (Belas and et.al., 2015).
 Voluntary – these are the ones whose working is based on improving the society and
creating social rather than materialistic wealth. These firms have their own set of
advantages such as public recognition and trust, tax relief and funding benefits. However
they face restrictions on the type of work that can be carried out or funded. Moreover,
these firms cannot raise equity investment and the board is often unpaid unless charity
commission authorizes for payment.
P2 The size and scope of different types of organizations
The size and scope of sole trader is very limited however it serves a lot of purpose such
as creating opportunities for self-employment and making productive use of funds. It further
encourages independent and honorable living where the trader is free to take all decisions. Also
sole trader serves the consumer in a better manner as he is in direct contact with them. It further
serves the purpose of equitable distribution of wealth. There is a presence of many sole firm in
UK that have been providing varied kinds of product and service offerings. One such is Susan M.
Alexander Accountant that provides accounting related services within UK. Its working is based
on the purpose of providing quality services by being in direct contact with the client (Susan M.
Alexander, 2017).
The partnership firms also have a presence limited size and scope but it is more than sole
trader firm where the members in whom partnership is formed can go up to 20. Further the legal
business structure of such firms is also very simple. Weightmans is a partnership firm in UK that
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provides legal services to its client. It is held by two partners being Dan Cutts and John Schorah.
The firm has employed more than 1300 employees who work in different offices that are present
all over London. Its working is based on the objective to provide results for the consumers and
success for the employees who work for it. The firm has further been awarded as Top Employer
accolade for the tenth year (Weightmans, 2017).
The private and public sector firms have a huge size and scope as they can move beyond
geographical boundaries. There legal structure depend on purpose as well as operations of
business however, there working is quite different in terms of the purpose that is served by them.
The main purpose of private sector firm is to aid in maximizing the profit for shareholders and
also ensure towards transparency in financial reporting. The purpose of public sector firm is
however to maximize the overall shareholder value by generating maximal amount of profit
(Doh, McGuire and Ozaki, 2015). The firms have further made an attempt to balance primary
objective with social and environmental ones that assist in pacifying shareholders so that profit
can be attained. National Health Service is public health service provider of UK that is spread in
England, Scotland and Wales. It was launched in the year 1948 and as of now NHS in England
deals with more than 1 million patients every 36 hours. Further it employs around 1.5 million
people which make it amongst the top five workforce of entire world (NHS UK, 2017). Primark
is a private sector company that deals in retail clothing and accessories. It has around 320 stores
that are present in 11 nations of Europe and USA while the employee number is more than
70000.
P3 Relationship between the various functions and how they relate to objectives and
structure
The client selected for NatWest are Primark and Holiday Inn UK which has presence of
divisional and matrix structure respectively. Various functions are required to be carried out in
both types of structures so as to successfully run a business. These are inclusive of operations
department, marketing, HR as well as finance. These are most needed for the proper attainment
of goals and objectives of any business (Foss and Saebi, 2017).
Firstly the human resource department of Holiday Inn as well as Primark serves the
purpose of selecting, recruiting, training and providing appraisals to the employees. Their main
work is to select dedicated and talented workforce for any company and ensure that they are able
to deliver good performance that is beneficial for sales and profitability of business (Palmer and
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Hartley, 2011). The Hr. team thus screens the candidates and trains them so that they are able to
tune themselves with overall working of both the firms. They further ensure to appraise them as
per there performance and also adopt strategies by which the overall turnover of employees can
be reduced. In this way, the department is able to attain the objective which is to maintain overall
sustainability of the business over a long course of time (Menychtas and et.al., 2014). This
further favors the presence of divisional structure in Primark as every branch is in need of staff
members who can carry out the functions in a proper manner. While matrix structure of holiday
inn UK helps in teaming up the employees that perform varied function.
Operations manager is the one that trains, monitors as well as supervises the overall
performance of employees. He or she also keeps the staff members motivated so that they are
able to give best efforts to both Primark and Holiday Inn company. In this way, the objective
related to sales, profitability and overall market share of business is achieved (Fleisher and
Bensoussan, 2015). The matrix as well as divisional structure followed in the firms’ aid in
maintaining the overall efficiency of operations team.
Finance department in Primark as well as Holiday Inn organization plays the role of
providing right and accurate data about the overall performance of company which then puts an
impact on the decisions that are taken by any business entity. It further ensures to maintain
transparency in the accounting and financial statements which aids in delivering quality product
and offering to consumers at a very reasonable cost. This can aid in attainment of business
objectives of firms such as being the number one organization in their area; providing value for
money offerings to the buyers amongst others (Scott and Walker, 2017). Matrix structure in
Holiday Inn thus aid in linking the finance department with other functional areas of the firm
while divisional structure. The divisional structure on the other hand aid in bringing a proper
control on the employees of finance department.
Marketing department is also a major functional area of any company irrespective of its
type. This functional area assists in maintaining the overall brand image, value of firm and also
promotes the products or servicing offering to the potential consumers (Forsgren and Johanson,
2014). Hence the need is that marketing department should play its role in a proper manner so
that objective of good brand image and consumer loyalty can be maintained.
P4 identify the impacts (positive and negative) of the macro environment upon the business
operations
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There is a presence of varied macro environmental factors in UK economy that puts
positive as well as negative impact on overall business operations of Primark which can be the
potential consumer of NatWest.
Political – Several factors have rocked the clothing industry of UK in the year 2016 and 2017
that has put positive and negative impacts in its operations. The terrorist attack in London in the
year 2017 has reduced the flow of tourists to some extent which has led to a decline in sales. The
brexit issue is another one in form of Britain’s voting out of European Union has impacted its
overall operations in a negative manner. However, the presence of free trade agreements has
positively affected the growth of entire retail clothing industry as well as that of Primark.
Economic – UK economy has been facing inflation due to fall of pound on account of Britain’s
exit from EU. This had brought a decrease in demand for clothing in retail industry which has
also affected the sales of Primark. The presence of decreased wage growth has made the
consumers reduce their buying capacity (Amit and Zott, 2014). But UK is still regarded as a
fashion hub hence this is most likely to give a boost to overall operations of the company in near
term future. It is also true that in spite of the uncertainties being faced by the economy, Primark
has not raised its overall pricing structure which has helped it to attain an edge over competitors.
Social – the presence of affordable clothing by Primark has brought a change in taste and
preferences of consumers hence they have started flocking in large number to the outlets. UK in
terms of food eating habits has been regarded as fat man of Europe. The rising obesity has thus
favored by the operations of Primark as it offers plus size clothing to men and women. In the
same lines, ageing population of UK has put a negative impact on its staff number but it may
benefit the company from consumer side as old people have more disposable income in hand
which is most likely to be used by them in spending (Foss and Saebi, 2017).
Technology – With the increase in overall growth of ecommerce, the retail fashion industry as
well as Primark has got new sales opportunities to sell their products to new and existing
consumers. This can be past the geographical boundaries so that clothes can be sold to larger
consumer segment (Quinn and Kristandl, 2014).
Environmental – There has been a rise in consumers who are trying to adhere with ethical as well
as environmental friendly norms. This is most likely to give rise to new trends in fashion market
such as use of organic cotton and clothes made from recyclable material. Primark is further
required to showcase itself as a brand that keeps its carbon footprint low which can act as a good
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marketing strategy for the company. It must also start investing in environmental firmly
packaging so as to garner increased consumer base.
Legal - Primark is required to adhere with health and safety, antitrust, consumer rights
legislations which may impact its operations in a positive or negative manner. For example, the
consumer rights laws will need it to become more responsible towards product and service
offering in terms or pricing, quality and advertising. It will further be essential to take adequate
health and safety measures for its employees. In the same lines as per the new norms of data
protection act, Primark management will be required to be stringent in the manner they handle
the data of consumers (Allison, 2016).
P5 Conduct internal and external analysis of firm to identify strengths and weaknesses
Internal analysis
Strengths
 The company has enjoyed a huge success in last few years due to its brand image for
providing clothing at fairly low prices. This has made the company a cost leader in low
priced as well as disposable fashion.
 The company has a strong presence in Europe and American nations.
 There is a presence of more than 70000 employees who cater to varying consumer needs.
 Primark is a part of ethical trading initiative.
 It has got a presence of organized business structure (Barnes and Hunt, 2013).
 It enjoys strong consumer loyalty because of its value for money offerings.
 Good investment in customer experience and service.
 It provides clothing for all ages and gender as well as home accessories.
Weakness
 The consumers consider Primark’s brand to less stylish and fashion oriented in
comparison to competitors.
 Primark has kept too much reliance on UK market which generates more than half of its
global turnover (Amit and Zott, 2014).
 Primark lacks an online ecommerce presence which is now that fastest growing channel
in UK retail market.
 Lack of innovation across store outlets which should be in form of visual merchandising.
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Opportunities
 It can cater to the needs and requirements of plus sized consumers as half of UK
population is predicted to get obese by 2050.
 It should focus on overseas expansion in nations other than Europe and USA
 Primark is required to focus more on advertising than just relying on word of mouth
publicity.
 Improve merchandising in its stores.
 Develop a new line of clothing which targets to needs and requirements of aged
consumers.
 It requires to match itself with unique needs of consumers in terms of fashion and
uniqueness
Threats
 Brexit issue caused a lot of uncertainty for Primark’s business especially in the European
region.
 Competitor firms like Zara, Hand M, Marks and Spencer, ASDA, New Look are posing
as a threat for the company.
External analysis
In terms of competitive intensity, the UK retail clothing industry has got a presence of many
retailers that makes the scenario a highly competitive one. This is mainly from brand like ASDA
that only offers low priced products but also of better quality than Primark. Other than this,
ZARA, Marks and Spencer have clothes in latest design that is enough to attract young
generation.
Primark has got a little control over new entrants in the market as UK government offers lenient
polices and encourages free entry and exit options. This also explains the fact as to why there
are too many players in UK retail clothing market. Supplier power is low for Primark as it has
got a presence of wide supplier base and does not demand much from single one (Amit and Zott,
2014). This aids the company in getting raw materials at low cost which also gives rise to huge
profit for the company. The bargaining power of buyers is relatively high for Primark due to a
presence of large number of players in industry. In terms of threat to substitute, it is also high as
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Primark and other competitor firms are offering similar kinds of products which make it easier
for consumer to switch from one to other brand.
P6 explain how strengths and weaknesses interrelate with external macro factors
Primark has got strong brand image consumer loyalty as well as a good presence in European
and US market which has led to strong consumer loyalty that signifies the social factors.
Moreover, it also benefits the firm in political and legal front as it is lily to face any issues if it
wants to expand in international markets. This is as the government of the nations is well aware
about its business and hence will welcome its entry into their country. The presence of ethical
trading initiative that has been undertaken by the company ensures that it gets the needed
political support for its functioning (Barnes and Hunt, 2013). The consumers also consider it an
eco-friendly friendly company which thus interrelates to environmental factor of macro
environment. The firm has also invested a lot in consumer experience as well as service and also
provides clothing for all ages as well as gender which ensures that buyers are attracted towards
the brand. This thus integrates with socio cultural factor so that overall brand value of the
company is maintained. All this influence the decision making of firm as the management is now
required to maintain its brand value as well as market share so as to ensure towards long term
sustainability (Foss and Saebi, 2017). Moreover, the company can further focus on providing
clothes to old aged people and plus size consumers as well so as to garner a competitive
advantage over the rival firms. The good presence in Europe and America can make the
company think about the decision of expanding in other markets as well that share the similar
kind of economy and political stability as Europe and USA.
It is further true that the company has got its own share of weaknesses that interfere with macro
factors. As per its major weakness, the firm has kept a very small business area which of
European and US markets. This has got a crucial link with economic factor in form f inflation
rate, currency fluctuations which are there in Europe. If the trend continues for a long period of
time then it may decrease the overall sales and profitability. Hence the company in thus required
to take a decision related to diversifying its area of operation (Amit and Zott, 2014).
Another weakness is the lack of ecommerce presence and huge dependence on word of mouth
publicity which has a clear link with socio cultural factors. This is consumers these days prefer
shopping from those firms that have online shopping options and also gain awareness through
advertisements etc. The absence of above mentioned activities may result in absence of any new
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consumer base. Hence the company should decide to generate revenue through ecommerce
medium as well (Barnes and Hunt, 2013).
Conclusion
From the above report it can be concluded that Primark who is the potential client of NatWest
has got a strong presence in UK market. Hence it can give a lot of business to NatWest and must
be considered if approached. However the company has laid too much emphasis on UK hence
can be disdavntageous for Primark if the economy suffers from inflation. It is further required to
make its online presence and advertising strategies stronger so as to garner consumer base.
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References
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Foss, N.J. and Saebi, T., 2017. Fifteen years of research on business model innovation: How far
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Margea, C., Hurbean, L. and Artene, A.S. 2014. Electronic Services for Business Environment.
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Menychtas, A. and et.al., 2014. 4CaaSt marketplace: An advanced business environment for
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Palmer, A. and Hartley, B., 2011. The Business Environment. 7th Ed. Maidenhead: McGraw-
Hill.
Quinn, M. and Kristandl, G., 2014. Business information systems for accounting students.
Pearson Education Ltd.
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Scott, P. and Walker, J.T., 2017. Barriers to ‘industrialisation’for interwar British retailing? The
case of Marks & Spencer Ltd. Business History. 59(2). pp.179-201.
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Allison, P., 2016. What the EU’s new data protection laws mean for UK industry. [Online].
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November 2017].
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