BMG872: Global Strategy Report - Primark's Romanian Expansion

This report provides a comprehensive analysis of Primark's global strategy, specifically focusing on its planned expansion into Romania. The report begins with an introduction to global strategy and then delves into the reasons behind Primark's international expansion, including an evaluation of its historical performance, product range, market share, and competitive position. It then explores the reasons for choosing Romania as a target market, highlighting the opportunities offered by the country. The report utilizes Porter's Diamond Model to analyze the Romanian market's competitiveness. Various strategic choices for market entry are examined, including direct exporting, joint ventures, and strategic alliances, along with their respective advantages and disadvantages. The report also discusses potential organizational and managerial problems that Primark might encounter when operating internationally. Finally, the report provides strategic advice for overcoming these problems, offering insights into how Primark can successfully navigate the challenges of international expansion and achieve its goals in the Romanian market.

Global Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Reasons for International expansion............................................................................................1
Possible strategic choices for the parent company......................................................................2
Reasons for the choice of location...............................................................................................5
Strategic methods of entry...........................................................................................................6
Problems of operating internationally..........................................................................................7
Strategic advice for the overcoming of problems........................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Global Strategy refers to the various types of plans which are prepared by an
organization which helps in ensuring that the implementation of various types of
strategies can be done in a highly effective manner within the organization (Arnaud and
et.al., 2016). This report is based on Primark. It is looking forward towards expansion in
Romania. In this report, detailed analysis will be made on reasons for parent company's
international expansion, possible strategic choices for the parent company, reasons for
the choice of location, strategic methods of entry and possible consequences, potential
organizational and managerial problems. Additionally, specific analysis on strategic
choice for the subsidiary to overcome the problems will be discussed as a part of this
assignment.
MAIN BODY
Reasons for International expansion
There are various types of reasons due to which Primark wishes to expand its
operations in Romania. Some of these reasons are-
Evaluation of the company's historical performance- In 2019, Primark generated
a revenue of 7.79 billion pounds. However due to the impact created by the COVID-19
pandemic the overall profits of the company have taken a hit. This has resulted in the
reduction in the level of revenues as well as profits effectively and efficiently (Collinson,
Narula and Rugman, 2017).
Products/Services Range- There are a wide range of products and services
which are offered by Primark to its different types of customers (Cuervo‐Cazurra, Doz
and Gaur, 2020). The range of products and services which are offered by the company
to its customers are baby and children's clothing, womenswear, menswear, homeware,
accessories, footwear, beauty products and confectionery. Thus in this way, it can be
said that a diverse range of products and services are provided by the company to its
different types of customers in the market.
Share of the market- Before COVID-19, Primark had an overall market share of
13% in the market. After the reopening of its stores, the share is down to 8%. Thus it
can be said that due to the impact of the COVID-19 pandemic the overall market share
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of the company has reduced. This has created an impact on the level of revenues and
profitability in the market of the company.
Competitive Position within the industry- The different types of competitors of
Primark are Mothercare, Select Fashion, M&S, New Look, Hansae, Pimkie, M&Co.,
Loavies, Crew Clothing and Terranova. Thus it can be said that due to the use of
appropriate strategies and techniques Primark has been able to make sure that it
acquires a superior position over its different types of competitors within the market
(Cuervo‐Cazurra, Mudambi and Pedersen, 2019).
Thus it can be said that Primark is a company which has been able to ensure
that it has maintained a superior position over its different types of competitors within
the market (Solodova and Golubyonkova, 2017). This has created an overall level of
impact on the profitability and revenues of the company. Thus the company is looking
forward to expand into Romania. This is so because Romania is a country which offers
plenty of scope to the businesses because of the attractive offers made by its
government to these businesses thereby enabling them to be able to ensure that they
are able to enhance the overall level of profitability and revenues in the right manner.
Thus Romania is a country which offers the right opportunities to the businesses so that
they are able to make sure that they can attain their wide range of goals as well as
objectives quite effectively and efficiently. In this way they can progress in the market
and can make sure to acquire a much-required strategic and competitive edge over the
competitors in the market (Wall and Minocha, 2015).
Therefore, after the study of the data it can be determined that Primark is a
company which can strategically expand its wide range of operations within the market
and therefore can attain the specific goals and objectives in the future. Thus, it can be
said that by using the strategy of Internationalization, the company will be able to make
sure that the attainment of the goals and objectives can be done in Romania which will
help in maintaining its own level of efficiency and effectiveness (Agarwalla and
Mukhopadhyay, 2017).
Porter’s Diamond Model is a model which can be used to focus on the
explanation of why certain industries in a particular nation are competitive internationally
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whereas the others are not that competitive (Albino‐Pimentel, Anand and Dussauge, 2018).
The explanation of this model is as follows-
Chance- It means factors like random events, natural disasters, Scientific
breakthroughs etc. It is important for Primark that it focuses on them so that it is able to
ensure that these factors can be considered while framing its strategy in Romania which
will help it in becoming successful in the market in the future (Biermann, Kanie and Kim,
2017).
Firm Strategy, Structure and Rivalry- It mean factors like Company strategies,
Structure of the organization, Managerial system etc. For a company like Primark, it
becomes quite important that it is able to consider them which will help in entering
Romania (Bouclier and Passieux, 2018).
Factor conditions- It means factors like Natural resources, Human resources,
Capital resources etc. Therefore, it is crucial for Primark that the consideration to these
factors is give in Romania which will be helpful for it to be able to attain the success in
the Romanian market (Cesnik and et.al., 2016).
Demand conditions- It refers to the factors like Size of the domestic market,
Sophisticated and demanding domestic customers. In the context of Primark, it is
important that appropriate consideration is given to them which will be helpful in
attaining success in the Romanian market (Chaban and Holland, 2019).
Related and Supporting industries- It means factors like Presence of
competitive related and supporting industries and Domestic suppliers that are strong
global players themselves. For Primark, it is important that the consideration to these
factors is given so that the company is successful in Romania (De Zamaróczy, 2017).
Government- It means the factors like Government policies, Industry regulation
etc. In the context of Primark, it is necessary that it ensures compliance with them so
that it can becomes successful in Romanian market and earn higher-level of profits
there which will help it in attaining a much-desired strategic and competitive edge over
the competitors in the market (Dell’Acqua and et.al., 2018).
Analysis- Thus, through making the use of Porter’s Diamond Analysis an
organization like Primark can make sure that the overall assessment of the market can
be done by it in a proper manner which will thus lead towards the enhancement in the
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overall level of efficiency and effectiveness. Therefore, it becomes quite important that
Primark makes its use to thoroughly understand the market in which it is operating.
Possible strategic choices for the parent company
There are various types of strategic choices which are available for Primark to be
able to extend its operations effectively and efficiently in the region of its choice (Tocci,
2017). Some of the options which the company can consider in order to extend its
operations are as follows-
Direct Exporting- It is the option in which an organization can make use of either
the intermediaries or can provide its products directly to the different types of customers
in the market (Cui and et.al., 2018). Therefore, In this way Primark can make sure that it
is able to provide its products to the customers in Romania in the right way.
Advantages of Direct Exporting-
 In this option, there are higher chances of making profits for the company which
can offer it an advantage (Vietor, 2007).
 This option allows making the use of Improved and Faster Communication so
that the interaction with the customers can be made in the right manner.
Disadvantages of Direct Exporting-
 In it, additional expenses may be incurred by the company which can create an
impact on its overall profitability level.
 In it, there is a requirement of making a lot of effort so that a strong customer
base can be built which is quite time-consuming.
Joint Venture- It is a method in which the organizations can make sure that they
are able to combine their available resources in the right manner in order to successfully
enter the market so that they can enhance the overall level of profits effectively and
efficiently in the right manner (Daniels, Radebaugh and Sullivan, 2019). The use of this
strategy can be made by Primark so that it is able to successfully enter into the market
of Romania where it can effectively and efficiently target different types of customers so
that the attainment of higher-level of profitability can be made.
Advantages of Joint Venture-
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 Access to new markets and distribution networks can be provided in this
particular strategy so that the company is able to ensure that it can penetrate the
market of the country in a better way (Wheelen and et.al., 2018).
 There is an increase in the capacity in the use of this strategy because by
making its use the company can make sure that it is able to attain higher-level of
goals and objectives in the future in the right manner.
Disadvantages of Joint Venture-
 There can be problems related with communication in this particular strategy
because if the communication between the companies in Joint Venture is not
great then this can create an impact on the overall level of operations.
 Sometimes there is no equal distribution of the work and the resources in Joint
Ventures which can create an impact on the organizations in Joint Venture
thereby hurting their prospects in a new country.
Strategic Alliance- In it, two companies come together and pool their resources
so that they can take a project which is mutually beneficial for both of them (Gupta and
et.al., 2019). Thus this strategy can be used by Primark in Romania so that the
attainment of the various types of strategic goals as well as objectives can be done in
the right manner. This will help in ensuring that a higher-level of profitability can be
attained in the right manner within the companies.
Advantages-
 Entering into new business territories can be made possible through the use of
Strategic alliances which help in ensuring that the overall level of profits can be
enhanced (Wild, and Wild, 2020).
 Entering into Strategic alliance ensures that the reduction in the level of risk can
be done in the right manner. In this way, the attainment of the various types of
goals and objectives can be done effectively and efficiently (Wei and Nguyen,
2017).
Disadvantages-
 Lack of proper communication between the various types of partners can create
a disadvantage for the businesses which are in Strategic Alliance.
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 The allocation of the work and the resources is not done equally sometimes in
such an alliance.
Further, the use of following strategies can be made for the purpose of
Internationalization-
 Transnational- It is a business strategy in which the business organizations aim
to make sure that they can guide commercial transactions which are taking place
in different countries (Haq and et.al., 2020).
 Multidomestic-It is a business strategy in which the needs of a local market are
taken into account instead of making a global approach (Li and et.al., 2017).
 Global- It refers to the plan which can be used by an organization through which
the growth can be targeted beyond the borders. Therefore, it can be said that the
use of this strategy can be helpful in the attainment of the goals and objectives
(Mariotti and Marzano, 2020).
 International- It means a strategy in which the focus is on the exporting of the
products and services in the foreign markets so that the overall goals and
objectives can be attained (Mintzberg, Etzion and Mantere, 2018).
Justification- Direct Exporting should be chosen as a preferred entry option by
Primark in order to enter into the market of Romania because by choosing this option
the company will be able to make sure that it can directly provide its various types of
products and services to the customers effectively and efficiently. This will lead towards
ensuring that the company is able to attain its wide range of goals as well as objectives
quite effectively and efficiently in the new country which will lead towards ensuring that
the overall level of profits can be enhanced by the company. Primark is recommended
that it should make the use of this particular option because by making its use it will be
able to gain the entry into the market of Romania and will be able to make sure that it
enhances its overall level of profitability there in a proper manner.
Reasons for the choice of location
There are different types of reasons for choosing Romania as a preferred choice
of expansion of business by the organizations (Vogelmeier and et.al., 2017). Some of
these reasons are explained as follows-
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 FDI- Romania is a country where there is a higher flow of FDI i.e. Foreign Direct
Investment (Hamilto and Webster, 2015). Thus in this way it opens up attractive
business opportunities for the different types of companies who want to consider
investing here for the purpose of targeting maximization of their overall level of
profits. Thus this also offers Primark an opportunity to be able to ensure that its
use can be made so that the company is able to invest in the right manner in the
country to boost its chances of enhancing profits.
 European Union Funding- In Romania, European Union Funding is available
which can be quite helpful in ensuring that the businesses are able to receive
their funds in the right manner (Hartman and et.al., 2017). Thus this helps them a
lot to be able to ensure that they can set higher-level of goals and objectives for
profits and use the right methods and techniques for attaining them. This also
offers Primark an attractive opportunity which can be used by it so that it is able
to ensure that it can attain its higher-level of goals and objectives in the future in
the right manner effectively and efficiently.
 Attractive tax rates- In Romania, the government has set-up attractive tax rates
which offers plenty of incentives and advantages for the different types of
customers in the market (Hill and Hult, 2018). Thus, In this way it can be said that
these tax rates are helpful in order to ensure that companies like Primark can
consider investing in the country for the purpose of targeting the expansion of the
level of operations which will offer an opportunity to enhance the overall level of
profitability in the right manner.
 Booming economy- In Romania, the booming economy offers plenty of
opportunities to be used by the businesses so that they are able to target an
increase in the overall level of profits (Hill and Hult, 2019). In the context of
Primark, it can be said that this booming economy can offer different types of
opportunities to the companies so that they are able to target the enhancement
of profits in the right manner effectively and efficiently.
Country Analysis-
PESTEL analysis-
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Political factors- Romania have political stability and thus this factors acts in the
favour of the company.
Economic factors- Romania has a booming economy and thus this can help in
ensuring a higher-level of economic growth quite effectively and efficiently in the
future.
Social factors- Romania have a society which accepts the entry of foreign
companies in the market which can benefit Primark.
Technological factors- Romania has good technological infrastructure which
can benefit the company in the long-term.
Environmental factors- Romania has strict environmental rules and regulations
which are required to be followed by Primark.
Legal factors- Romania has strict laws which are required to be followed so that
the companies are able to conduct their business activities and thus Primark is
required to follow them.
Thus, from this analysis it can be concluded that Romania is a country in which
all of these factors create a high-level of influence and thus it becomes
necessary that these factors are taken into account while taking important
decisions. Based on this analysis it can be said that Romania offers attractive
opportunities for the purpose of investment.
4 P’s of Marketing-
Product- Primark provides a wide range of fashion products to the customers
which help in enhancing their satisfaction level.
Price- Primark has a price range of goods which have a low price and the goods
which have a high price.
Place- Primark has its stores which are located in the different countries of the
world which provide a variety of products to the customers.
Promotion- Primark makes the use of promotional methods and techniques
which will help in ensuring that it is able to attain the goals and objectives in the
future in the right way.
Thus, from this analysis it can be concluded that Primark has to make the use of
marketing strategy in a highly effective manner so that the attainment of the
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marketing goals and objectives in the future can be done effectively and
efficiently.
Therefore, in this way it can be said that Romania is the right choice for Primark
because it offers it a wide range of opportunities and therefore this can be quite
helpful in ensuring that the company is able to make a rapid progress in the
market of Romania thereby enhancing the overall level of profitability.
Strategic methods of entry
There are various types of strategic methods of entry which can be used by the
organizations in order to make sure that they can enter into international markets. The
different types of methods which can be used by them are as follows-
 Franchising- In this strategy, the organizations allow another company to run
their business in an international market in the exchange of a fee (Hunger and
Wheelen, 2014). This can be quite helpful for them so that they can ensure that
they are able to manage their business in a highly effective manner. For Primark,
this can be a useful strategy which can be used to enter the market of Romania
so that the different types of goals and objectives can be attained.
Possible consequences of using this method- If Primark makes the use of this
particular method then this can lead towards setting up of various types of franchises in
the different countries. Therefore, If Primark makes the use of this particular strategy in
Romania then this can lead towards ensuring that the company is able to progress
further towards the attainment of various types of goals and objectives highly effectively
and efficiently (Stadler and et.al., 2018).
 FDI- FDI refers to Foreign Direct Investment. In it, the businesses invest their
money in the international markets by identifying a particular foreign company or
the foreign assets which can be used for the purpose of investment (Johnson
and et.al., 2018). In the context of Primark, it can be said that this can be used so
that the company can enter into the market of Romania in a highly effective
manner. This will allow it to access the opportunity to be able to enhance the
overall level of profits.
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Possible consequences of using this method- When the organizations make the
use of this method this can help a lot in ensuring that they are able to invest directly in
the different assets in the foreign countries so that they are able to maximize the overall
returns on the investments quite effectively and efficiently in the right manner. Thus, In
this way Primark will be able to ensure that it is able to attain higher-level of goals and
objectives (Tacconelli and et.al., 2018).
Primark will make the use of Franchising method in Romania as it will allow
Franchises to use its Brand Name in the market. This will allow it to target a higher-level
of growth in the country which will be helpful in ensuring that the use of this particular
strategy can be done so that the overall goals and objectives can be attained.
Problems of operating internationally
There are different types of problems which can be faced by the organizations
when they begin to operate internationally. Thus the various types of problems which
can be faced by Primark when it is operating in Romania are as follows-
Managerial problems-
 International Company Structure- When a company starts to operate its
business internationally it has to follow an International Company Structure
(Johnson, Scholes and Whittington, 2017). This can help it a lot to be able to
ensure that it is able to follow the international rules and regulations in the right
manner effectively and efficiently. The organizations face problem in this regard
because some companies do not follow this type of structure.
 Foreign laws and regulations- An organization needs to make sure that the
various types of Foreign laws and regulations are followed in the right manner
(Kunisch, Menz and Cannella, 2019). This can lead towards ensuring that the
company is able to follow all of these laws and regulations so that it is successful
in operating its business internationally.
 Higher-level of financial requirements- In an organization, there may be
higher-level of financial requirements when it starts to operate internationally
(Larik, 2018). Thus the company may face this problem when it is operating
Internationally because entering into an International market requires the
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