PRIMARK

PRIMARK
Pay Less Look Good

MBA 4B

Shahid Ishaq 152

Nafees Akram 113
Shahid Rashid Rana 154
Waheed Zafar 194
SanaUllah 147
Waqas Nayer 179
Sadia Rafaqat 138
Sana Altaf 145
Aun Naqi 166
Zainab Naeem 199

Submitted to

Sir Adil Paracha

Contents
Executive Summary .................................................................................................................................... i

Introduction.................................................................................................................................................. 1

Swot Analysis .............................................................................................................................................. 6

Porter‟s Five Forces ................................................................................................................................. 14

Driver of Change ...................................................................................................................................... 23

PESTEL analysis ...................................................................................................................................... 29

Key Success Factor ................................................................................................................................. 32

Scenario Planning .................................................................................................................................... 42

Internal Analysis ....................................................................................................................................... 54

TOWS ........................................................................................................................................................ 67

S PACE Matrix .......................................................................................................................................... 71

QSPM ......................................................................................................................................................... 78

Competitive Strategy ............................................................................................................................... 83

DIVERSIFICATION STRATEGIES........................................................................................................ 86

References ................................................................................................................................................ 93
 PRIMARK

Executive Summary
This report consist of Primark Company‟s Strategic aspects. It contain detail analysis of
Primark policies and future aspects. All strategies are derived accordingly the current
market situations and competitive environment. So to round things off, Primark overall
are not all bad but not brilliant. It's all very well having good value but if getting to the
stock itself is such a deterring and unwelcome challenge then there is little point.
Personally, I like to shop with very few other people around and I tend to drift around
quite quickly since I'm not a shopping fan; another impossibility in Primark.

So our final advice is simply this. If you're a big fan of buying as cheap as possible and
you don't mind fighting your way through and spending time then Primark is most
certainly for you. Otherwise, do check it out on quiet days by all means (best to head
there early) but don't bother with it apart from that.

Also, avoid the store at weekends like the plague - even if it is the only chance you get
to shop because you'll waste a lot of your time standing within a tomb of other bodies,
on the floor in a pile of special offer cardigans or in a long queue to purchase the pair of
socks you eventually found in the right color.

i
 PRIMARK

Introduction
For those of you not in the know, Primark is a department store chain that specialises in
clothing for men, women and children/babies. They also include a home section and
ladies...ahem...err...yes. Unmentionables, in other words. They have been operating for
several years and they are currently buying out the Littlewoods stores, several of the
best of which will be turned into Primarks and the rest sold for a tidy sum to other
retailers. It's a good move that should see the chain expand its empire to reach more
customers across the UK.

PRIMARK: THE MARKET

Primark specialise in low prices. Please note that when I say low, what I really mean is
INCREDIBLY LOW. A ladies fashion belt for £2, a pair of mens fashion jeans for
£8....you're getting the idea. In order for Primark to make a decent enough profit after
paying its work force and all its other expenses at these sorts of prices, it needs to sell
sheer volume. Bulk sales, in more confined terms. In their method of bulk selling lie
several advantages and several disadvantages but be well aware from the start that
Primark is not about high price and top notch quality. It is about slightly low but still
reasonable quality for a very very low price.

V IS FOR VALUE

So what is Primark like as a store then? (I hear you ask). Well as aforementioned,
Primark sell at low prices and therefore sell in bulk (do remember this point because it
will be returned to later). The quality of their stock is by no means anywhere near the
best on the high street. You will find better in Marks and Spencer, BHS or Debenhams
for example, no question. However, it's not always all about quality - it's also about
value and value is quality compared to price. This is where Primark swim into the lead.

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Their quality, while not being the best is still reasonable but their prices are simply
unbeatable. Nowhere else could you find cheaper socks, jeans, t-shirts, belts, pillows,
bras...and so it goes on. To give you an idea, I bought a pair of brown bootcut cords and
a thick winter top from Primark which formed a nice, slightly smart winter outfit for £16
(£8 per item). Now that's good. The cords have a seam down the side which indicates
lesser quality but the point is, they look good and they last easily long enough to merit
the price ticket.

BHS, on the other hand were selling a very similar jumper, only a bit better quality but
for the princely sum of £12. Marks and Spencer did the same deal for £15. This is just
on the jumper, do note - not the cords. This is where Primark come into their own you
see because you don't need to shop around for the right price when you have one of
their stores near you because you know they've won the battle before the first punch
has been thrown.

IT'S GOT THE LOOK

When it comes to fashion, Primark aren't half bad. If you were 16 then you wouldn't
necessarily boast to your piers that 65% of your wardrobe comes from the cheap as
chips, dark blue and white themed chain store but then you wouldn't cringe at their more
trendy offerings either. Many lines that they produce are not too dissimilar to lines that
can be found in fashion stores such as Zara and Top Shop/Top Man. Sure the quality
hasn't quite caught up and they don't look quite the same but it's not far off by any
means and remember that the prices are second to none.

As a young male of 19 years, I would say 1 in 8 or so items I buy come from Primark.
It's usually just t-shirts and underwear but I did touch on an outfit previously - a good
find. if you're on a very strict budget and want to look pretty cool then Primark won't
upset you - you'll find some good stuff to strut about in and there are always a few gems
to be snapped up.

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FIGHTING THE HIVE TO REACH THE HONEY

So does its great value make Primark a great store? Well to be perfectly frank, no it
doesn't. True enough, Primark have the value nailed but there are more concerning
issues at stake. Lets start by returning to the point I asked you to make a note of earlier.
Primark sell in bulk in order to make their money. That means they sell to a large
amount of people and their stores are usually heaving with people. If you make a trip on
a saturday or sunday then you can expect to average a speed through the store of
roughly 1 metre per minute. This is more then off-putting to a potential buyer. You see a
rack of what might be (probably is) decent gear and it's smothered in vulturous
customers, like wasps swarming around a dropped ice cream on a hot day. When you
reach the rack itself, half of the stock is on the floor, half of it is dirty due to being on the
floor and all the hangers are mixed up.

This highlights the first gripe. Primark stores are on the whole very messy. usually, a
good sixth of the stock is on the floor and here's the thing. On a weekend day it is not
uncommon to see customers rummaging through stock while its on the floor, digging
through to find their size. It's a very off putting and deterring sight and I'd be damned if I
was going to jump into the fray just to see if there's something I like. So surely Primark
need more staff then to clear up?

Time for grip number two. In our Primark at least, there is large force of staff - on a
weekend day, at least 40 - strong. While a few of them swan around by the tills, the
remaining staff members stand about chatting to each other as if they're in a quiet pub
around lunch time while around them is total carnage and mountains of clothes on the
floor and off hangers. Also, should you approach one of these sales zombies with a
query, you are subsequently passed to various different bearers of the responsibility of
assisting you before one of them finally takes you on board and then reveals that they
havent a clue what you're asking about. It's more frustrating then your computer
crashing just as you're about to break a new high score on solitaire and makes one
wonder why Primark employ such workers. I'm not judging all Primark staff under this

3
ruling but this is the experience in my local store (a newly built large Primark) and it
really sends out a negative impression.

Also noticable is the problems with the fitting rooms. Gripe number...oh I think I'm losing
count. No thats right, number three. Yes, the fitting rooms. Over crowded, messy, hot
and unquestionably off putting. On a monday morning, you'd probably be fine but for the
most part, their fitting rooms boast a long queue, a half asleep attendant (if there is one)
and a climate hotter then the sahara at midday. Needless to say, I do not try things on in
their store. Fortunately, you can always return goods if need be.

The last thing to note is that Primark don't tend to have "sales". Most of what they sell is
already as low as they will sell it which is a good thing because everyone gets a low
price but don't wait for a half price event because it just doesn't work that way.

PRIMARK'S GOOD BITS

So there are the main problems with Primark. Untidy, messy, crowded, hot and
generally a very tiresome, hot and bothered shopping experience but lets not over look
their redeeming features. As I've said before, excellent value is their hallmark and their
clothing is mostly quite reliable. Most of it wont last forever but it'll last long enough to
suit your needs and make a good dishcloth at the end of it. Also, they are very good
with refunds and returns

In our store, there is no time limit for a return, just the usual expected reasonable
amount of time and reasonable condition. This means you needn't venture near those
awful fitting rooms (which are about as welcome as a hornet on a nudist beach) but you
can try things on in the comfort of your home and return them at your convenience.

STORE WARS

So when it comes to pitching Primark against its competitors how does it fare? Well let
me cast my critical eye over some of its main contenders.

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BHS - 4/5. Good fashion lines, good value but not the best. Friendly staff.

MARKS AND SPENCER'S - 4/5. Now lower prices and good quality lines, though some
fittings in certain lines are a little iffy. Great food section.

JOHN LEWIS - 4/5. Good quality and good guarantees. Not the cheapest store and
their "Never Knowingly Undersold" policy is not always true but most of the time it is and
a great range of goods.

PRIMARK - 3/5. Fantastic value and low prices but slightly unhelpful staff and very
messy and hard to shop in.

These are the main department stores listed here. As you can see, I have given Primark
a lower rating though that doesn't mean you should only look in the other 3 stores -
Primark at least have their rightful place as cheapest of the lot.

5
Swot Analysis
Strength

 Good supply chain management capabilities

Since the mid 2000s, Primark has emerged as one of the UK's most successful high street
chains, now the country's second largest clothing retailer by volume according to TNS, and the
single largest in the value sector, having overtaken Asda's George in 2007. It was named as
Value Retailer of the Year in that year's Drapers Record awards. Primark continues to operate in
the Irish Republic under its original name of Penneys, and there is a growing estate of stores in
continental Europe. The business is the last UK retail interest controlled by diversified
conglomerate Associated British Foods, who’s other divisions are involved mainly in packaged
foods and ingredients manufacturing.

 Alliances and joint venture with other firms

just a few months after purchasing Dialog Information Services, Thomson Corp.
(http://www.thomson.com) has shown that it's still determined to add to its electronic
information resources via acquisition. The company has announced a merger
agreement under which Thomson will acquire Primark Corp. (http://www.primark.com)
for $842 million in cash (for Primark stock) and assume $235 million in Primark debt
adding up to a $1.1 billion purchase. (For comparison, the Dialog purchase only cost
Thomson $275 million.) But Thomson has deep pockets and will have even more
available resources after it sells off the 130 newspapers it now has on the market.

If you're trying to recall the Primark name, you may find its key brands to be more
familiar to you. These include A-T Financial, Baseline, Disclosure, DataStream, Global
Access, GlobalTOPIC, IB/EIS, MarketEye, PIMS, WEFA, World scope, and Vestek.
Primark is a global provider of financial, economic, and market-research information
and, according to the company, serves "financial, corporate, and government decision
makers in 61 countries through 86 offices in 24 countries."

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 corporate social responsibility

We aim to make our employees, suppliers and local and wider communities part of our
success by working with them in every way we can. This means that: employees have
equal opportunities based on merit suppliers are treated fairly local communities are
respected and supported by Primark the company takes its environmental
responsibilities seriously

Ethical Trading Initiative

Our membership of the Ethical Trading Initiative is testament to our determination to

succeed on our own merit and not at the expense of others.

Local community support

Primark supports many local charitable organizations, community projects, families and
individuals across the UK and Ireland throughout the year. Requests for contributions
are received on a daily basis and we try to support as many as we can including those
involving children, education, people with disabilities, healthcare and the elderly.

We also work with Job Centre Plus, which provides help and advice on jobs and training
for people who can work and financial help for those who cannot.

Packaging Waste Regulations

Packaging Waste Regulations are designed to reduce the amount of packaging that
goes into landfill. The Packaging Waste Regulations work on the principle of Shared
Producer Responsibility - encouraging producers to take responsibility for their
environmental impact. The Regulations require obligated producers to pay a proportion
of the cost of the recovery and recycling of their packaging. The level of obligation
depends on the stage of the chain at which the packaging is brought into the country.

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  Brand image of primark as compared to rivals

It was recently reported that Primark is the only retailer to increase their profits
continuously over the last 6 months as all the other retail brands made losses. Primark
has taken a position that appeals to image conscious celebrities and fashion is the who
provide the budget brand with legitimacy for cash strapped middle-class consumers,
giving them permission to shop down market.

Primark achieves an outstanding win – providing the budget solution for shoppers on a
budget and manages to turn off the snobbery of those who would never be seen dead
shopping on a budget.

Like the positioning of Harry Potter that transcended age segmentation, Primark
transcends socio demographics. If this has been a considered strategy it is genius. If it
is a happy accident, a consequence of timing and converging circumstances, Primark
benefits uniquely from the current economic mayhem.

If you are lucky enough to find a position with a broad appeal that is also
uncompromising you can make a killing. In marketing terms products are more often
focused on narrow segments, Primark turns this on its head – a rare breed indeed.

 wider geographic coverage

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 Better product quality/price as compared to rivals

Primark is successful because it offers:

• Super-competitive prices /.
• Mainstream market product quality.
• High street locations.
• Superior stores.
• A clear focus on the target market.

“Look good, pay less”

 Primark poaches rival's top buyer

DISCOUNT clothing giant Primark has poached a key director from top rival Matalan, as
it prepares for a surge in growth.

It is the highest profile appointment yet made by chief executive Paul Merchant, who
has drawn up a five-year plan to dominate the British discount clothing market and
expand overseas.

Matalan's buying director, John Lyttle, will become chief operating officer at Primark,
effectively second in command to Merchant, who was appointed a year ago.

Industry sources said Lyttle was expected to replicate Matalan's improvements to

product quality and factory standards since it was bought by the founding Hargreaves
family from the London Stock Exchange four years ago.

 AMOUNG THE TOP TEN MOST INFLUENTIAL RETAILERS

In the age when the internet has become another out let for shopping and retail ,it is
easy for multiple departmental stores and independent boutiques to get in lost shuffle
,however 10 retailers maintain global prospective and innovations ,fresh strategy and
most desireable merchandise Primark is one of them .It is originally known for cheaper

9
clothes ,basics ,it now produces cut edge ,fashion that is coveted by shoppers world
wide ,make no mistake ,Primark is a slick business that perfect trends with new
competitively priced stock rolling

 Economy of scale as compared to rivals

primark owner Associated British Foods said in a trading update today (13 September)
that like-for-like sales growth of 6% was expected for the full year, driven by "a very
strong performance in continental Europe and continued good growth in the UK".

Sterling‟s relative strength against the US dollar in the first half benefited the cost of
goods sourced in dollars and sold in the second half, easing the pressure on gross
margins experienced earlier in the year, Primark said.

Economies of scale, as revenues increase, have also contributed to an improvement in

operating margins in the second half and margins for the full year will be higher than last
year. Higher cotton prices and freight costs and the increase in VAT, implemented in
Spain in July and planned for the UK in January, will put pressure on margins next year
though, it added.

 Superior technological skills

The value chain approach was developed by Michael Porter in the 1980s in his book
“Competitive Advantage: Creating and Sustaining Superior Performance” (Porter,
1985). The concept of value added, in the form of the value chain, can be utilized to
develop an organization‟s sustainable competitive advantage in the business arena of
the 21st C. All organizations consist of activities that link together to develop the value
of the business, and together these activities form the organization‟s value chain. Such
activities may include purchasing activities, manufacturing the products, distribution and
marketing of the company‟s products and activities it is not easy to fallow the value
chain technology only two uk firms are following this technique one of them is Primark
and another is M&S...

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 Primark advertising?
Never before has a Jacker seen a Primark ad, they barely need to what with column
inches galore in the press and every fashion is worth her stripes knowing
they‟re the place to go to when it comes to a bargain. But word on the street is they‟re
about to up their game, with billboards displaying the below spotted here and there.
Like Pizza Express before it-word of mouth until the heat was turned up and they
released a strong advertising campaign a couple of years ago-it seems Primark are
following similar brands such as Matalan and Boohoo and letting the world know they‟re
out there. See if you can find one.

Weaknesses

 No clear direction?
Primark scored the lowest of all leading clothing chains in the UK - at just 3.5 out of 20 -
on an ethical index that ranks criteria such as workers' rights and whether they do
business with oppressive regimes. The figure was contested by Primark and Ethical
Consumer released a statement indicating that marks had been skewed due to its
position in a wider company group.

In 2006, Primark joined the Ethical Trading Initiative, a collaborative organization

bringing together businesses, trades unions and NGOs to work on labor rights issues in
their supply chains. ETI members commit to working towards the implementation of a
code of conduct based on the Organization‟s core conventions.

Primark suffer in unethical activities as stated by the Bangladeshi factory‟s workers who
are supplier of Primark, they don‟t allow workers even 56 leaves in emergency
condition. They don‟t give more facilities to their labors while their compotators are
giving more facilities to the suppliers

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 Resources that are not well watched to the industry‟s key
success factor?
Primark has biggest suppliers in china, Bangladesh and India but many child labors is
workingthere. They are not properly adjusting their recourses up to the mark.

 High over all unit cost relative to key competitors

As its competitors like Spencer has 850 out lets and Philip green retailer has 2500
outlets. They purchase the bands and products in bulk so they achieve economies of
scale. While Primark has 27500 employees while product line depth is too much narrow
as its competitors so high over all unit cost as compare to its competitors.

 A product or service with the features inferior to rivals?

Primark is known for selling clothes at the budget end of the market. The company's
success is based on sourcing supply cheaply, making clothes with simple designs and
fabrics, only making them in the most popular sizes, buying stock in huge bulks and
varieties and not advertising.

 loosing market share?

As with the passage of time its competitors are rising like British retailer with stores.
Mark & Spencer with 895 stores, Philip green retailer, and arcadia group 2500 outlets
etc.

 Internal operating problems or obsolete facilities?

Primark management consist of chief executive officer, group finance director and group
product director, group property director. They manage the Primark business. But as
much as they are taking packages they are not operating well internal problems even
CEO receives up to 7, 98000 Euro

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 Behind rivals in e commerce capabilities?
Answer: Primark can get benefits by operating activities in NEW ZELAND where they
can target through e marketing they are not providing such e commerce facilities to that
located country. They can also target to the different eurpeon countries through on line
receipts and payments.

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Porter‟s Five Forces

1) – COMPETITIVE PRESSURE FROM SUBSTITUTE PRODUCTS IS

WEAKER WHEN:

In Porter's model substitute products refer to products in other industries. To the

economist, a threat of substitutes exists when a products demand is affected by the
price change of a substitute product. A product's price elasticity is affected by substitute
products - as more substitute products become available, the demand becomes more
elastic since customers have more alternatives. A close substitute product constrains
the ability of firms in an industry to raise prices.

Due competition substitute products & services are available. Substitute products are
products that come from other industries. When substitutes become available, demand
is reduced and prices and ultimately profits are squeezed. Primmark is having brand
name which is valuable, but substitutes are also available like Tesco, Asda, Manchester
United, Zara and Top Shop.

Good substitutes are not readily available

Due to technological developments and wide interest in and adoption of the Internet
customers have and will accept e-shopping methods more and more benefiting from the
development of credit systems, improvement of issues related to security and privacy as
well as changing life styles such as less time for shopping. E-shopping for clothing
goods particularly deserves attention in terms of price competition among traditional
retailers.

However traditional fashion retailers such as Next have generally integrated online
shopping models in supporting their traditional operations and as such substitutes have

14
become part of their competitive strategies. This characteristic itself causes challenges
to other clothing retailer in the industry especially Primark

a) –Highly priced Substitutes relative to the performance

Consumers expect Primark goods in their weekly shopping trolley to be very reasonable
priced. In some cases they have become used to seeing prices fall on a regular basis.

Substitute products may be lower priced. Alternative suppliers may be able to offer
larger discounts. Those consumers who are comfortable with using online retailers may
find better deals with these 'e-tailors‟. However, the emerging new substitute products
made by the competitors like River Island, Tesco, Next and M&S are comparatively high
priced.

High Switching Costs:

There is always the possibility that the customers cannot readily change. Where close
substitute products exist in a market, it increases the likelihood of customers switching
to alternatives in response to price increases. Substitution can reduce demand for a
particular „class‟ of products when customers switch to the alternatives bearing low cost.
The alternatives came from Tesco and Sainsbury as they acted on providing added
value clothing. These alternatives provided threat to primark which is the UK small
clothing retailer as compared to competitors

2) – SIGNS THAT COMPETITION SBSTITUTES IS STRONG

Faster Sales of substitutes than sales of industry being analyzed

15
Primark operates in a very competitive environment. Its competitors are more
customers orientated price friendly and more in tune with the needs and the demands of
the customers. Such as on cloths sector, Next & Gap have exploited the demand for
young people and in food sector, Tesco and Sainsbury have developed its ranges of
ready cooked meals.

In UK there are no exit or entry barriers but the market is mature and therefore there is
no bounce for a new company, or a company from abroad to come and compete in
these markets. In contrast Primark experienced Exit barriers when under the Ireland
law they were not permitted to close their Ireland stores and make their employees
redundant with just a week's notice.

Primark has been through a lot and faced a lot of struggles. Troubled in recent years
and suffering from slipping market share, the company had divested itself of non-core
and overseas interests and had begun to show signs of improvement.

b) - Producer of substitutes is moving to add new capacity:

Porter explains that there are five forces inherent in a market, which will jointly
determine the intensity of competition and profitability of Primark and the food retailing
industry. The first is the threat posed by new entrants, the high capital expenditure and
confidence of customers represent significant barriers to entry and the market is also
sensitive to reputation.

The another force is the threats from the bargaining power of buyers, this is strong
for both Premark and the entire food retailing industry with a large number of alternative
suppliers, hence, the aggressive pricing strategy. This results in a very strong
competitive rivalry in the industry. This is intensified as a result of little or no
differentiation in the basic product offered. Finally the threats from the suppliers
bargaining power, this is fairly low in the food industry, due to dual sourcing strategies,
using a range of alternative sources of supply for products.

16
In the retailing clothing sector Primark faced a competition both in the higher and lower
ends of its market. ASDA with its own brand name George and Matalan are offering
high quality clothes at low prices. Both companies' clothes have a classical style, which
attracted UK consumers who were traditional customers of Primark In addition, stores
like Gap, Oasis, Next BHS, Top Man & Zara offered high quality clothes of latest
fashions that attracted the fashion orientated younger customers. Furthermore, Tesco
and Sainsbury offer their own high quality range food that was a traditional market of the
Primark

c) - Profits of producers of substitute are on rise:

Primark profits were declining from 1998 until 2000. This indicates that Primark did not
have a healthy sign of its level of cash availability which made Primark to stop its
expansion programme in Europe and America. But in general Primark has satisfactory
financial resources.

 B COMPETITIVE PRESSURE FROM BUYERS BARGAINING POWER

Primark clothing bargaining power increases because the quality and the price of the
products are high therefore they cannot hold the customers as Tesco, Asda and Top-
Shop do so they have come up with quality products with cheaper prices to attract the
customers, thus Primark is becoming more price sensitive.

a) Importance of buyers for the Sellers point of view

Primark is the largest retailer store of UK. There are large number of buyers, and
providing premium products, although the prices are high. Bargaining power of buyers

17
increases because the price of products is high. Although prices are low but the
company retaing their customers and buyers are still ready to buy.

b) If buyer demand is weak and sellers are scrambling to secure extra sales:

As Primark are offering high quality products to their customers and charging high
prices, as compared to TESCO, ASDA, SAINSBURY etc. In clothing side NEXT,
RIVERIRLAND etc. Primark‟s products are luxury products, they are targeting to the
lead class, and buyers may switch to the competing brand.

c) –credible threat of backward integration for buyers

If it is not feasible for buyers to pursue backward integration, and their only choice is to
buy from particular sellers, they are not a threat to those sellers. Hence, the bargaining
power of the buyers is low but some buyers pose the threat of integrating backward.
Primark have rejected backward integration, they have a rigorous insistence on forward
integration, in that they control all their retail outlets and trade only under their own
name. They see that customer is the key element of their competitive advantage.

SIGNS THAT COMPETITION SBSTITUTES IS STRONG

a) Faster Sales of substitutes than sales of industry being analyzed

Primark operates in a very competitive environment. Its competitors are more

customers orientated price friendly and more in tune with the needs and the demands of
the customers. Such as on cloths sector, Next & Gap have exploited the demand for

18
young people and in food sector, Tesco and Sainsbury have developed its ranges of
ready cooked meals.

In UK there are no exit or entry barriers but the market is mature and therefore there is
no bounce for a new company, or a company from abroad to come and compete in
these markets. In contrast Primark experienced Exit barriers when under the Ireland
law they were not permitted to close their Ireland stores and make their employees
redundant with just a week's notice.

Primark has been through a lot and faced a lot of struggles. Troubled in recent years
and suffering from slipping market share, the company had divested itself of non-core
and overseas interests and had begun to show signs of improvement.

b) - Producer of substitutes is moving to add new capacity:

Porter explains that there are five forces inherent in a market, which will
jointly determine the intensity of competition and profitability of Primark and
the food retailing industry. The first is the threat posed by new entrants, the high
capital expenditure and confidence of customers represent significant barriers to
entry and the market is also sensitive to reputation.

The another force is the threats from the bargaining power of buyers, this is strong for both Premark
and the entire food retailing industry with a large number of alternative suppliers, hence, the aggressive
pricing strategy. This results in a very strong competitive rivalry in the industry. This is intensified as a
result of little or no differentiation in the basic product offered. Finally the threats from the suppliers
bargaining power, this is fairly low in the food industry, due to dual sourcing strategies, using a range of
alternative sources of supply for products.

In the retailing clothing sector Primark faced a competition both in the higher and lower
ends of its market. ASDA with its own brand name George and Matalan are offering
high quality clothes at low prices. Both companies' clothes have a classical style, which
attracted UK consumers who were traditional customers of Primark In addition, stores

19
like Gap, Oasis, Next BHS, Top Man & Zara offered high quality clothes of latest
fashions that attracted the fashion orientated younger customers. Furthermore, Tesco
and Sainsbury offer their own high quality range food that was a traditional market of the
Primark

 Profits of producers of substitute are on rise:

Primark profits were declining from 1998 until 2000. This indicates that Primark did not
have a healthy sign of its level of cash availability which made Primark to stop its
expansion programme in Europe and America. But in general Primark has satisfactory
financial resources.

 C COMPETITIVE PRESSURE FROM SUPLLIERS BARGAINING POWER

a) - Readily available commodity from many suppliers at going market price:

Primark major divisions are Clothes, Food & House wares. The Raw material is
available to almost many suppliers & in U.K there are home suppliers & overseas
suppliers working together. So Primark is putting pressure on the British suppliers to
lower their prices because Primark suppliers have already lesser prices than local
suppliers. So bargaining power of supplier will be low.

b) – Whether few large suppliers are primary source of a particular item:

There is large number of suppliers for Primark. Primark don‟t have to rely too much on
the single supplier for any particular item and recently they cut the number of suppliers

20
& ask the remaining manufacturers to reduce the prices because of immense
competition in the market.

c) –switching to other suppliers

Primark don‟t have any problem to switching to the other suppliers especially to
overseas suppliers because they are already have low prices than British suppliers so
switching to other suppliers will not need an extra cost.

Industry member are major suppliers

Many Primark suppliers have their own suppliers, who are in turn supplied by others. It
would not be possible for Primark to control the working conditions of each person
within this vast network, the company is determined to do what it possibly can to ensure
adherence to the principles that they believe in. Hence, Primark has published its
company-wide Global Sourcing Principles.

Primark very carefully selects companies who supply them directly with goods and
services and those with whom they aim to build long term partnerships. Right from the
beginning it requires each supplier to implement their Global Sourcing Principles, which
sets a minimum acceptable entry standard.

h) - Backward Integration

In backward integration a consumer of raw materials acquires its suppliers, or sets up

its own facilities to ensure a more reliable or cost-effective supply of inputs.

Advantages:-

o Generates cost savings only if volume needed is big enough to capture efficient
suppliers
o Resource requirements are easily met can produce a differentiation-based
competitive advantage when it results in a better quality part.

21
o Potential to reduce costs exists when suppliers have sizable profit margins.
o Item supplied is a major cost component.

22
Driver of Change
1) - DRIVERS OF CHANGE
1) Increasing globalization of the industry:
Online sales at Marks and Spencer rose by almost half over the summer, figures
released today show.

Directs sales rose by 49% in the 13 weeks to October 2, the retailer said today. In
a second quarter trading statement the company said it had made progress rolling out
its multichannel ordering service, Shop Your Way. The service, which allows customers
to order clothing, beauty and homewares in store, online or over the phone for delivery
to home or store, is now available in 434 shops and, said the company, “continues to be
very popular.”

At the same time, Primark reported a 6.5% improvement in group sales, while like-for-
like UK sales rose by 5.3%. General merchandise was up by 7% and food by 3.7%.

2) – Changes in who buy the product and how they use it:
Consumers changing tastes plays an important role on the development and success of
any product. To keep up with this issue, Primark will be changing its services according
to their needs and to match their requirements, that is why the estimation of the services
is not fixed to exact.

There are different levels of buyer‟s readiness stage. Which are awareness of the new
product (promotion of the product will help in that), knowledge of its
features and benefits, Liking (an average customer who love PRIMARK will be most
likely to product

3) Product innovation:
Primark ‟s new packaging offers product safety equal to that of the plastic tray since a
protective barrier preserves the product‟s quality and taste. The packaging was
developed in a joint project between primark , Billerud and Flextrus. Billerud

23
manufactures the unique paper and Flextrus both prints and applies an advanced,
tailor-made barrier solution and sealing properties to the paper.

4) – Growing buyer’s preferences for differential products:

In response to the growing popularity of ready-to-wear men's clothing, dry goods stores
featuring men's apparel sprang up throughout the country. These early experiments in
retailing were the predecessors of the modern department store and shaped the
direction of the modern retail industry

The challenging economic conditions of the early 2000s have resulted in some shifts
within the industry. Traditional department store retailers, such as J.C. Penney and
Sears, have long been the biggest market source for men's wear. However, as
consumers trade down in value, discount superstores, including Target, Wal-Mart, and
such hybrids as Kohl's, are commanding a larger share of consumer attention.

Consumer behaviour plays an important role in the imaging of the new product as he is
the one who buy or use that service. Basically the variables that influence the individual
behaviour are

past experience of individual with Primark internal physiological requirements: what a

customer believe in and how much he values the product external environment that
effect consumer behaviors i.e. income level physical social future expectations with the
product i.e. discount on services.

5) - Reduction in uncertainty and risk:

As the textiles and clothing sector is fully integrated into the WTO/GATT, those
countries and companies which adapt first to the challenges of the new market will be
better placed to secure their market position. Pure economic performance and well-
managed competitive advantages will count more than ever before.

Some observers predict that by 2005-06, major textile and clothing buyers will reduce
by half the number of countries they source from. The challenge for countries and
companies is to remain an important source for these buyers.

24
Primark wrote that climate change was 'an important societal risk though not one that
would be considered relevant to future earnings' within typical business planning cycles.
This is a risky business; building a new business system around smaller scale local
sourcing and huge reductions in disposable packaging is a huge challenge. With his
extraordinary reputation for understanding his customers, Stuart Rose is clearly taking
the view that people will change their behavior, even at some cost, and will tolerate the
many problems that PRIMARK is likely to have in achieving its targets.

Pesticide bans

Primark is committed to phasing out what it calls „hard chemicals‟ before they are
officially banned. It wants to reduce operator and consumer health risks and
environmental impact risks. Primark will look to phase out any pesticide it identifies as a
priority for risk management.

Most of the pesticides on the Primark banned list are not used in the UK. A total of
12 are approved for use and a further 14 are being phased out by the government
under policies that are administered through the Pesticide Safety Directorate (PSD), an
executive agency of the Department for Environment, Food and Rural Affairs.

Residue targets

Primark wants to have targeted reduction in identifiable residues on its conventional

produce. The long-term aim is to sell residue-free produce. The latest industry figures
provided by Primark highlight the scale of the challenge – 47% of all fruit and
vegetables contain pesticide residues.

6) Growing use of internet and internet application

Online sales at Marks & Spencer grew by 27% to £413m in its latest financial year, as
the retailer increased its focus on multichannel service.

According to Primark “consolidated all of our shopping channels in order to become a

seamless multichannel business, providing customers with the same high quality
service every time and whichever way they choose to shop with us.”

25
Developments in its online service include a new Shop Your Way click and collect
service which allows customers to order at home or in store and have their goods
delivered anywhere they like. The service, now available in more than 300 stores, is
scheduled to be in all stores by the end of the year. There is also a trial in some Simply
Food stores.

7) - Changes in long term industry growth rate :

Across the board most big retail firms announced that first quarter drops were lower
than predicted. Sainsburys recently announced that its sales rose by 7.8%, drawing it
closer to supermarket giants Tesco and Morrisons. The announcement of Primark ‟ first
quarter and other companies helped rally the FTSE, providing further speculation that
the UK economy is back on the road to recovery.

In the last few months Primark have reported that their first quarter sales are not as low
as they had predicted, in fact the clothing giant suggests that the drop is significantly
lower than previously thought. The company had expected their first quarter sales to
drop by an estimated 2.5%, but instead their sales dropped by only 1.4%. Executive
chairman Sir Stuart Rose argued that this showed renewed consumer confidence and
hinted that the lack of a bigger drop suggests that economy is beginning to stabilize at
last.

8) Marketing innovation:
Marketing through online change the shape of competition. Companies must manage
their brands carefully. First the brand positions must be continuously communicated to
consumer. Major brand marketers often spend the huge amount on advertisement to
create brand awareness and to build preference and loyalty.

For Primark to continuously communicate to consumers they need to be heavily

into advertising, which they are. They have celebrity icon Myleen classes the Face of
primark

Developments in its online service include a new Shop Your Way click and
collect service which allows customers to order at home or in store and have their

26
goods delivered anywhere they like. The service, now available in more than 300
stores, is scheduled to be in all stores by the end of the year. There is also a trial in
some Simply Food stores. These market innovations have increased the sales of
Primark

9 ) - Technological change:
Products could be ordered online since since the mid 2000s this was a major
technological change in Primark , in response to some like Tesco launching their
pioneering Tesco.com home shopping delivery service in the early 2000s. Both Tesco,
Primark and others are expanding rapidly in to this new niche market.

Primark have many technological advances they have their own audio and I pods, CDs
and DVDs players, camcorders, domestic appliances, home cinema, home phones and
mobiles, sat navigation and televisions.

10 ) Changes in cost and efficiency:

Although the industry is notorious for its aversion to trends and shifts in fashion, men's
apparel is offered in a wide variety of retail formats, including upscale design and
specialty shops, department stores and retail giants, and discount men's clothing stores.
Casual attire continues to be khakis and a polo shirt, but the suit is beginning to make a
comeback. However, the return of the suit may not be of significant help to the lagging
industry until the economy stabilizes. Men are more likely to pull an old suit out of their
closet than invest in a new one until consumer spending rebounds.

Owing to an increase in the overall fashion consciousness of UK men, the industry

experienced a rapid growth stage during the 1960s. The nature and intensity of
competition in this industry has varied considerably since then. During most of that
decade, rising demand for men's clothing and accessories encouraged new entrants. By
the 1970s, however, the number of menswear stores was decreasing. Competition
increased during the 1970s as department stores and specialty retailers battled for
market share in a declining market. Demand picked up again in the mid-1980s resulting
in a rapid increase in the number of stores.

27
Last year Primark took decisive action to give us the strength and flexibility we needed
to navigate the recession. As a result we have emerged in a stronger position and
delivered an improved performance, with

ASSESING THE IMPACT OF DRIVERS OF CHANGE

Assessing the impact of drivers of change

PRO WT * COMPETITION
PRO WT * DEMAND

PRO WT * IND PRO

S.N
O
Driver change

Competition

Profitability
Demand
Weight

(-5,+5)

(-5,+5)

(-5,+5)
(1-10)

9 27 36
Growing use of
1 9 1 3 4
internet

2 Technological change 10 3 3 4 30 30 40

3 Industry growth rate 4 1 2 2 4 8 8

4 Product innovation 7 1 1 1 7 7 7

5 Globalization 8 1 4 3 8 32 24

6 Marketing innovation 6 2 3 4 12 18 24

Buyers preferences for 2 8 6

7 2 1 4 3
differential products

8 Uncertainty and risk 5 0 2 3 0 10 15

9 Customer preferences 3 0 2 -2 0 6 -6

10 Government policy 1 2 2 -2 2 2 -2

TOT 65 125 140

AL

28
PESTEL analysis
Political Analysis
pertains to the ability of the organization to adopt or follow on the different governmental
initiatives that might affect the performance of the entire firm. The policies established
by the government might divert the local priorities of the companies. The government
contributes in forecasting the success of downfall of the Primark. The government
gradually acts in the changes of monetary and fiscal policies in a degree on how the
economy reacts. Government also holds the regulations that should be part of the
business‟s cycle. The health and safety act, sex discrimination act, disability
discrimination act, data protection act, sales protection acts, consumers‟ protection act
and so on are the several examples act that the organization needed for compliance. In
deeper sense, the organization should react in the impact of an increase or decrease in
taxation or in the impact of the acts in their business.

Economic Analysis
is where the impact of the different economic trends or market changes might appear
that usually creates risk in the organization. A strategic decision is mostly assumed in
the presence of the uncertainty. Most of the analysis helps the business answer the
increase / decrease in interest rates and its impact on businesses or how a recession /
boom in the business cycle can affect businesses. The issues that often involved in the
economic analysis are the monetary policy and fiscal policy. This measures the strength
of the policy to support the business cycle and in the matter of recession. Also, Primark
is also recognized as one of the strong business that can contribute a lot in the
country‟s Gross Domestic Product or GDP. To make the organization able to stand in
different economic changes, there should be a strong monetary fund that holds in the
effects of recession as much in low exchange rates made by the import and export
operations.

Social Analysis
is focused on the demographic changes that might affect the influence of the product in
the new buying perceptions of the market. The social changes is a strong force for the

29
organization to conduct further research, develop their processes, and craft another
product that will earn the trust of the market. In this area of analysis, the taste and
preferences of the buying population is on the priority of the business. It there is a
newly-marketed product, the organization will surely finds another way to enhance their
own creation and be on the leading market once again. This answers the capability of
the Primark in different social changes and challenges especially when there are
presents of competitors.

Technological Analysis
is the ability of the organization to adopt and to use on the latest technological
innovation that usually has an idea in helping the performance of the business. There
are different technological innovations that might improve the quality of the products or
the efficiency of every transaction‟s processes. Technologies typically provide help in
the nature of the business. Through the use of the technology, the uncertainties that
appear in economic and social changes will be minimized. For some other reasons, the
technologies can also lessen the different unethical working behavior such as fraud,
shoplifting, misconducts, and so on. Through the inventions of different high definition
cameras and advanced software, the Primark‟s leaders can have the sense of security.

Legal Analysis
is the effort of the organization to comply on law such as in terms of tariffs, trading
policies, taxation, insurance policies, wages and salaries, and so on. The organizations‟
finds the legal aspect connected to the political because most of the laws are created by
the government. In terms of legal analysis, there are other issues that the organizations
should answer. Most of the revolving issues is the overuse of the labor and maximizing
their strength to produce more product which is definitely against the law. Another is on
the issue of the consumer protection. Since the business is committed to produce and
deliver the demands of the customers, the business should give importance to their
rights as buyers. In the legal terms, it emphasizes the importance of the employee-
employer relationship, supplier-producer relationship, and the customer-organizations
relationship.

30
Environmental Analysis
can be considered as part of the corporate social responsibility of the organization
because the organizations should commit in environmental issues. The environmental
issues may be also in the relation of ethics. Environment typically correlates in the
action of the business‟s usage of resource or how the wastes are dispatched. Policies
are created to protect the environment such as limiting the use of the resources to avoid
exploitations which is a big dilemma for the business especially when there are number
of competitors

31
Key Success Factor

MANUFACTURING RELATED SUCCESS FACTORS

An estimated two-thirds of the value of the UK clothing market is imported, a percentage
that is increasing as more countries with low-cost labor join the supply chain. Traditional
sources, primarily Hong Kong and India, are now facing competition from countries such
as Morocco and Romania.

There is, however, some variation across the product sectors. Germany, Italy and Hong
Kong are principal sources of women's, girls' and children's jackets. Men's suits and
jackets come primarily from Italy and Portugal. Hong Kong is a significant source of
imports of both men's and women's overcoats and raincoats, although in the case of
men's coats, the Netherlands is the most important.

Hong Kong is by far the most significant exporter of men and women's trousers to the
UK, and of women's dresses and skirts. Many British companies are transferring
production overseas. Much of the recent growth in value of imports into the UK can
therefore be attributed to British companies, and their subsidiaries. In UK almost all
companies import and outsource their products to those countries were cost of
production is less compare to UK. In importing goods prefer those countries where trade
barriers are less.

LOW COST
Pay less and look good is the business strategy of Primark .Primark buy different
products from abroad countries to reduce their cost like from Israel they buy different
products. They are producing women garment in Srilanka to reduce their cost. Marks &
Spencer buy grocery items from different part of the world that includes Africa, America
& other countries in Europe. These are operations is done to low their cost & provide
complete range of products to their customer inside Europe & all over the world. One
the major outsourcing of their product for women garments they have established a
plant in Thurulie, Srilanka.

32
CUSTOMIZED PRODUCT
Primark is not producing customized products for the consumer because they produce
items on a mass level to target many customers in the market so that their market
share improve & the company can achieve Economies of Scale. One of the major
reasons for not producing customized product is that they have jump in to many
industries like clothing , food & home wares so it became very difficult for them to cater
the customized product customers.

MARKETING RELATED KEY SUCCESS FACTORS

CUSTOMER SERVICES
Good customer service is the unique feature of Primark . You can offer promotions and
slash prices to bring in as many new customers as you want, but unless you can get
some of those customers to come back, your business won‟t be profitable for long.
Good customer service is all about bringing customers back. And about sending them
away happy – happy enough to pass positive feedback about your business along to
others, who may then try the product or service you offer for themselves and in their
turn become repeat customers.

Primark provide their customers online services their products could be ordered online
since the mid 2002s, in response to some like Tesco launching their pioneering
Tesco.com home shopping delivery service in the early 2000s. Both Tesco, M&S and
Primark are expanding rapidly in to this new niche market

Primark ensure that if they want to have good customer services, the business
consistently does these things:

 Don‟t make promises unless you WILL keep them.

 Listen to your customers.
 Deal with complaints.
 Train your staff (if you have any) to be ALWAYS helpful, courteous, and
knowledgeable.
 Take the extra step.
 Throw in something extra.

33
FAST AND ACCURATE TECHNICAL ASSISTANCE
Matalaine and Primark both view their supply partners as worthy of investments to
advance their strengths. Since every item Primark buys it offers to its customers
,Primark gives technical help to each supplier that needs it.

Primark‟s top priority concern is the quality of goods across its entire product range.
quality standards are higher than at other higher street chains. To sustain these
standards, over the years an enormous technical inputs has been provided to help
suppliers improve their quality. This has ranged from complete plants down to specific
machinery.

FULFILLING THE BUYERS ORDER

Primark is very careful in fulfilling the buyers demand. Manage Orders displays a list of
orders that have been placed in the last seven days by default. This list is updated with
every order created through Primark You can view specific orders by creating a
custom time range or using one of the options already created for you.

CLEVER ADVERTISING
Positioning a company entails choosing the best strategy that is viable in the long-term
and able to face competitors and maximise long-term revenues. Every retailer including
Primark has to choose between two strategies in order to position its company:

1- Differentiation: Building a brand name via massive advertising in order to get the
loyalty of the customer: this strategy concentrates on advertising and it rarely uses
promotions to sell its products since promotions only attracts one-off customers who are
searching for cheap bargains, customers who are looking for cheap bargains are not
Marks and Spencer customers because they are not prepared to pay for the brand and
for the fashion.

34
2- Cost leadership: This strategy involves selling products at discount prices in order to
encourage customers buy more and attract new customers who are looking for cheap
bargains; this strategy is followed by H&M, M&S and Primark strategy was trying to
follow the first model of strategy (differentiation); Primark did not differentiate itself by
embodying fashion and the contemporary spirit in the clothes, that is why Primark is
failing.

CUSTOMER GUARANTEE & WARRANTY

The term “guarantee & warranty” is most of the time associated with electronic
appliances industry. Where the products are sold with a warranty for a specified time
period during which in case of any malfunction company is responsible for services and
repairs. However, in case of clothing retailer like Primark and other like Tesco, ASDA,
Sainsbury, guarantee and warranties are not offered. In fact, the retailers focussed on
quality and put a lot of efforts to deliver high quality products (clothing) that customers
demand. Primark also have the objective of gaining market leadership.

SKILLS AND CAPABILITY RELATED KEY SUCCESS FACTORS

SKILLED WORKFORCE
Priark depends upon the skill and experience of motivated employees throughout all
levels of the business. It is part of Primark strategy to have a range of alternatives to
attract, motivate and retain high calibre individuals to accelerate the transformation of
the business and deliver improved performance. The Board considers the principles of
good governance when deciding the remuneration strategy, and recognises that the
level of remuneration and benefits offered is key to supporting this objective and
maintaining our market position as an employer of choice.

35
PRODUCT INNOVATION
The retail industry is generally a very dynamic, fast changing sector. It constitutes one
of the main sectors in the economy, in terms of transactions and turnover; as a
consequence, it is a highly competitive and sophisticated industry. The lowering of
international barriers has led to a considerable increase in the number and type of
products available to the consumer.

Consequently, retailers have to be as creative and innovative as possible, in order to be

in the position to supply their customers with products, that present new and interesting
features, all the time. Retailers have to keep a close watch to demographic changes, in
order to better understand and predict consumer behaviour.

Currently, UK‟s top retailers are: Tesco (1st in the UK and 2nd largest in Europe, after
France‟s Carrefour); (Retail Industry; Marketing Prof) Asda; Waitrose; Morrisons;
Sainsbury‟s; M&S. Primark is emerging Retailers of Uk but require a lot of time to
compete the rivals in that industry

In recent years, retailers have been confronted with intense competition from their
counterparts and, a few of them have somehow lost momentum; e.g. Primark ,s market
share has increases in 2006%, from 8% to 11% (Annual Report 2006).

Currently, Primark are planning to inject the business with new, fresh ideas and
products, especially in their clothing segment - both women‟s and men‟s range. Some of
the actions being taken, as outlined in their 2004 Annual Report (Chairman‟s
Statement), are as follows:

 Improving the management team.

 Improving their supply chain.
 Divestment of less profitable businesses.
 Stores refurbishment.
 Plan to make their special foods more available - opening ‘Simply Food’
stores.
 Re-branding of their financial offer - introduced the &more credit and
loyalty card.
 Centralisation of their marketing function.

36
DESIGN EXPERTISE
The fashion apparel business is traditionally characterized by intense competition and
short product life cycles. Retailers are beginning to assume a central role in the
configuration of supplier networks, being operators who act globally either in terms of
market seeking or resource seeking. These new trends seem to have a significant
impact on the upstream relation in the supply chain, due to vertical integration in some
industrial functions (designing, sourcing, quality control) by retailers.

Primark stock up to 15,000 own brand products and the private-label goods alone
represent a very large investment in packaging. The head of design says (Jeremy
Lindley). 'In common with any brand it is important to us to control the way goods are
presented to the customer,' he says. 'We hold ownership of what the brand looks like to
our customers, but we encourage suppliers to have input within the limits and standards
we set.

STRONG E-COMERCE CAPABILITIES

Online commerce is seeing rapid growth in the United States and Europe, with year-
over-year increases of 21% and 37% respectively. Retailers cannot afford to ignore e-
commerce sales because the sums are huge and continuing to grow. In Europe,
consumers spent an estimated $197 billion in 2007, and strong growth is forecast
through 2011, when online sales will surge to $406 billion.

Approached by UK supermarket chain Asda to create a new range of clothing, in the

1990s Davies produced his second household-name brand, George at Asda. Asda
brand had officially become the UK's biggest selling clothing retailer, taking over from
Primark with a 10% UK market share.

Tesco is one of the high street retailers, which generated £136m in profit from online
sales last year, is looking to lead the fledgling mobile commerce sector, which is seeing
investment from rivals Asda, Ocado and Waitrose, while Amazon has also launched an
online grocery service.

37
Primark is working with Bazaarvoice to add social commerce capabilities to its online e-
commerce site – wwwPrimark .com.

The UK‟s largest clothes retailer has been developing the e-commerce platform using
Amazon‟s technology since the collaboration was announced in April 2005.

The website will need to deliver greatly increased online sales quickly.

At last November‟s half-yearly results presentation, chief executive Stuart Rose said
that online sales had to double from £100m to £200m a year within a short timeframe.

While Primark has concentrated on its recovery since Rose became chief executive in
2004, its online operation has been overtaken by some of its competitors.

Last week, Next announced that its online sales for the year to the end of January had
exceeded £350m

OTHER TYPES OF KEY SUCCESS FACTORS

OVERALL LOW COST

According to Michael Porter‟s theory there are two basic types of competitive
advantage: the cost and the differentiation. Cost advantage happens when a firm
provides the product or services that are similar to its rivals but at a much lower cost.
Differentiation advantage happens when a firm provides product or services that exceed
the quality of competing products. Therefore, competitive advantage prods the firm to
provide superior value for the customer and superior profits for its business. These
advantages are also called as positional advantage because they determine the rank or
position of a particular firm in the industry as a leader in either cost or differentiation.
The competitive advantage inevitably leads to creation of superior value output through
the firm‟s utilization of its resources and capabilities.

Primark low prices through its differentiation strategy. In fiscal 2005, Primark was the
less expensive when compared with its competitors such as Debenhams, Next, BHS
and Matalan. It was marginallyless expensive e relative to the average of this group.
Primark competitors, such as TK Maxx, Matalan and other „high-street‟ names took

38
away their clients and offered them a much better, cheaper product which would carry a
brand name and would be known by the other public.

CONVENIENT LOCATIONS
During recent time, large format grocery stores have experienced significant change.
One big example is Tesco, which instead of clearing acres of land to put in a 100,000
square foot mega-store, retailers are seeking out small community corner lots in order
to put in smaller, approximately 15,000 square foot stores to attract larger number of
customers by having small community stores at favourable locations.

NEXT retailers are also adopting strategy to attract larger number of shoppers by
having stores at locations where the customers could reach conveniently and at ease.
Moreover, Next launched their web home shopping portal on the Internet to greater
enhance their phenomenally popular Next Directory products and services by offering
24 hours a day every day of the week access to their entire product range for customers
convenience. As part of the Next Directory service it enables UK online customers
shopping and next day home or store delivery of all available Next catalogue items
currently in stock as standard. The Next online catalogue enables both Next clothing
and home wares shopping without ever needing to leave the front door - so you can
shop whenever and wherever is convenient for you.

Integrating the in-store and online activities has been the focus of the multi-channel
business strategy adopted by Debenhams, during 2010. Their aim is to provide the
flexibility for customers to shop in the most convenient way for each
purchase. However, the Debenhams stores are mostly located in supermarkets & city
centres. So they are beyond every single customer‟s reach.

Primark have 144stores across the UK – in a wide range of convenient locations – from
high streets to retail parks, train stations to airports. Over the past four years they have
transformed these stores into bright and contemporary destinations with a range of

39
hospitality options. Sainsbury one of Primark ‟s rivals also scored highly for the
convenient location of its stores, the excellent design and layout, and their customer
service.

AFTER SALES REPAIRS & SERVICES

This is not a key success factor for a clothing retailer like Primark because repairs are
mostly associated to technology industries or the ones dealing with or selling home
wares or appliances and are offered as “warranty”. But does not apply to clothing
industry due to the fact that clothes are sold under the features of “quality” and
customers always want to spend their money where there is a assurance to get quality
product. So the issue of guarantee & warranty remains no more in case of clothing
retailers.

Primark vision is to set a standard against which all others are measured. Their mission
is to make aspiration quality accessible to all at low price and their core values are
quality, value, service, innovation and trust.

A STRONG BALANCE SHEET & ACCESS TO FINANCIAL CAPITAL

Primark outlines its core business as clothing and Food. Its financial objectives are to
deliver shareholder value in terms of increase returns, but also in terms of increase
sales and market share in retailing.

Primark showed a significant improvement in its performance in the year 2006. The
share price of Primark surged as compared to 2005. Primark is a financially semi
strong company with a global presence and has a well-established market position. It
faces a challenge from its rivals; however, the financial results of the year 2006 prove
that Primark is growing fastly be sidelined by its competitors since it has generated

40
better returns for its shareholders. An investor considering investing in Primark stock
should not hesitate since the company is fairly priced taking its P/E ratio into
consideration. Furthermore, the beta of M&S shows that it is not a volatile stock and has
the potential to withstand any stock market downturns.

Primark is into food, clothing, household items, and financial services business located
in the UK with some wholly-owned and franchised operations worldwide.

Matalian competitor of Primark reported a net profit of £1.57 billion for the year 2006.
Total sales enjoyed a surge of 31.9% at £1 billion. Non-food sales grew by 13%,
clothing sales grew by 16% in a difficult market. Tesco Personal Finance reported an
operating profit of £205 million, a growth of more than 50% over last year. Matalian is in
very good financial health, so could very well afford to pay for expansion plans
incorporating marketing programmes.

41
Scenario Planning
SCENARIO PLANING:
Priorities with impact/uncertainty matrix on environmental rank chart

Most Certain

Internet

Changes in who buy the product and how they use it Increasing globalization

Product innovation

Technological change

Buyer preferences

Life styles

Least Impact Most Impact

Growth rate

Marketing innovation

Changes in cost and efficiency

Government policies

Least Certain

42
IMPACT OF POLITICAL AND ECONOMIC FACTOR

This analyses the impact of external and internal. It is important for companies to follow
government policies, From the PESTEL analysis & Driver of change; the most important
factor for PRIMARK is to Economic Factor and Government policy. PRIMARK
Enhances Customer Service Across Multiple Channels.

1. Political and Legal

The political environment is good. The government is stable and reliable, even if Britain
fails to achieve total agreement with some EU policies from time to time. At the present

43
no EU directives are known which will have a direct effect on the UK clothing retail
industry in the near future.

Due to the EU membership a trend can be seen towards stricter environmental

protection legislation. This may have a direct or indirect effect on NEXT or his suppliers.

It is important for companies to follow government policies and global organization

systems, such as World Health Organization, while they make marketing plans.
Governments, especially in the developed countries, consider ecological environment
and human life. Governments set up policies and organizations to monitor firms and
their products, such as energy saving policy and genetically modified food control.

The UK government has introduced energy saving organizations, such as Climate

Change and Green Tax on energy use to reduce CO2 by 2010 by 20% against 1990
levels, and supplied subsidies to improve its policies (PRIMARK, 2002). PRIMARK has
claimed launched an incentive scheme where stores can keep the value of 10% of any
savings the make over and above budges (PRIMARK, 2002). This scheme helps
PRIMARK saving around 5% of its energy saving (PRIMARK, 2002).

2. Economic

Looking at the economic environment, it is somewhat tricky since on the one hand there
is the strong sterling compared to the Euro. Euro land encourages imports and
endeavors to hold domestic prices at an attractive level. But on the other hand it is
difficult for the UK to be competitive outside its boundaries because of the high pound
sterling exchange rate against the Euro. As NEXT sells about 96% in the UK
marketplace, this may currently only have a limited effect, but could be more important
in the future when thinking globally.

44
Economic factors have affected companies to extend their business or retrench its
business, such as close loss-making operations and sale their non-core business. For
example, the 11th September 2001 accident in USA has caused many companies to
face the recessions in North America and European countries.

The 11th September accident in USA caused economical crisis in North America and
other countries. It caused consumers to change their purchasing habits, and retailers
were seeing sales decreases (BBC News, 2001). In fact, PRIMARK lost its profits
around 8.6 million pounds between 2001 and 2002 from its international retailers
(PRIMARK, 2002). PRIMARK has closed its loss-making operations in Continental
Europea and sold its non-core exported or imported goods can seem expensive or
inexpensive, dependent upon currency exchange rates. There are many other ways,
however, in which government decisions will affect organizations both directly and
indirectly, as they provide both opportunities and threats.

While economic conditions and government policy are closely related, they both
influence a number of other environmental forces that can affect organizations. Capital
markets determine the conditions for alternative types of funding for organizations. They
tend to be a subject to government controls, and they will be guided by the prevailing
economic conditions. The rate of interest charged for loans will be affected by inflation
and by international economics and, although the determining rate may be fixed by a
central bank, as it is the case with the Bank of England, that will also be influenced by
stated government priorities.

The labour market reflects the availability of particular skills at national and regional
levels; this is affected by training, which is influenced by government and other regional
agencies. Labour costs will be influenced by inflation and by general trends in other
industries, and by the role ad power of trade unions. Business in North America
PRIMARK, 2002).

45
Economic conditions affect how easy or how difficult it is to be successful and profitable
at any time because they affect both capital availability and cost, and demand. If
demand is buyout, for example, and the cost of capital is low, it will be attractive for
firms to invest and grow with expectations of being profitable. In opposite circumstances
firms might find that profitability throughout the industry is low.

Economic conditions are influenced by political and government policy, being a major
influence affecting government decisions. The issue of whether European countries join,
or remain outside, the single European currency is a case in point. At any one time
either

Scenario 2
INDUSTRY GWOTH RATE & GOVERNMENT POLICY

46
HIGH INDUSTRY GWOTH RATE, STABLE GOVERNMENT POLICY
When the whole industry is growing and growth rate is handsome and the government
intervention are not too much then the whole industry of fashion or clothes confidently
perform their function and try to expand their business and try to increase their profits by
making different strategies and apply them. PRIMARK try to expand their operation
more and open their stores where they still not cover it. When industry growth is high
and government policies are stable like taxes, interest rate and companies know that
government continue the existing polices then companies like PRIMARK just make
polices to graph the opportunity of industry growth and increase the profit and operation
of company.

PRIMARK extensively advertise their products to increase the number of customer and
take advantage from the growth of industry. PRIMARK freely make their polices
because they now that government will not change their tax rate and regulation
regarding running the business and they focuses on exploiting the potential chance of
growth.

LOW INDUSTRY GROWTH RATE, STABLE GOVERNMENT POLICY,

When there is low industry growth rate or zero growth rates and government policies
are not too certain or stable then company or PRIMARK follow the same strategies that
they are implemented currently. PRIMARK try to retain their loyal and existing customer
and try to satisfy the needs and wants of existing customer, because there is no growth
in the industry and company find difficult to attract new customer so the best strategy is
to focus on the existing or loyal customer. The government policies are stable then
PRIMARK not making strategies of future changing government rules. Because they
know government policies are not going to change. And they focus on fulfill the needs of
the existing customer.

47
LOW INDUSTRY GROWTH RATE, UNSTABLE GOVERNMENT POLICIES
When there is a low industry growth rate and most certain of the government polices
then PRIMARK has to make the future plan and strategies how to deal with the
government regulation for example when there is no growth in industry and government
increase the tax rate or then how the PRIMARK deal with the situation. The company
should focuses on the existing customer due to low or zero growth rate and change in
the government policies. If government levied or imposed restriction to import raw
material like cotton from developing countries, and domestically cotton is expensive
then PRIMARK cost is increased but they are not in this position to increase their prices
because industry growth rate is zero and PRIMARK has to relay on their regular
customer. They cut their profit margin to cater the government regulation.

HIGH INDUSTRY GROWTH RATE, UNSTABLE GOVERNMENT POLICIES

When there are high growth rate in the industry and government policies are
continuously changing or uncertain, then company have to develop strategies or plan on
regular basis they make more than 1 plan what to do if government change their
regulation like change the taxes rate , interest rate, tariff. PRIMARK have too thing on
both sides, how to exploit the growth rate and deal with the government policies.
Company first thing about the future government policy and forecast or predict
government future policies and then make their plan for businesses, and strategies for
growth of their business.

Scenario 3
In this scenario most growth rate of industry and most cost efficiency. The following are some factor
which affect the both variable.

1. Technology Change

48
The first thing is technology and it will effect more industry growth and more cost
efficiency cost because the reason is that the more good technology will reduce the cost
and it will also increase the growth rate of industry. So the PRIMARK also change the
technology with time to time.

2. Use of internet

The use of internet is also effect the most growth rate industry and more cost efficiency
because the through the internet they give their message and information to customer
easily and it is very low cost so its means that they are used cost more efficiently.

3. Differentiated Product

As we all know mark and Spencer target the alit class of society. So there product is
different from their competitors and they also change the product with time to time. So it
is in more growth rate and most efficient cost use.

In this scenario most growth rate and least cost efficiency.

1. Globalizations

In this the mark and Spencer most growth rate in industry and may be least cost
efficient. The reason is that because if the company globalize than may be a chance
raw material is expensive, labor is expensive so the cost is increases and company is
least change in cost efficiency.

2. Recession

In this case the company lies in the more growth rate industry and the least cost
efficiency because the reason is that in recession the company profits goes downward
and there cost are increases and customer less buy their products. So to improve cost
efficiency company higher the highly skill labor, improve the technology. The company
tries to make a some new product because iPod is the best example which was very
successful product in the time of recession.

49
 IDENTIFY DRIVING FORCES
1- Growing use of internet and internet applications:
This is the stage which is most Certain & Most impact. Now a day online purchases are
growing & Company‟s like PRIMARK is doing online business to cater their customer.

2-Increasing globalization of the industry:

This is a very important factor for the industry so it is most certain & Most impact on the
industry. PRIMARK is working in many countries to expand their business. Because the
company brand Name is popular it easily accepted by any individuals around the world.
3-Changes in long term industry growth rate:

Industry growth rate can be change in the long run which has the most impact on the
industry but no one knows exactly what will happen in the future so it will be least
concern for the industry. Company set their goals & tries to maintain their growth rate
but due to so many factors like government instability, Inflation rate can decrease the
growth rate of company.

4-Changes in who buy the product and how they use it:

It is most certain for the company that how the customer can buy the product through
them but least impact on the company that how customer will use the product because
PRIMARK is producing on a very large scale & quality is very good of their product so
they least concern about preference of their customer usage of those product.

5-Product innovation:

For any industry it is important that they should improve their product time to time so
that the customer can be remaining royal to the company. Like PRIMARK in food items
has launch its new packaging offers product safety equal to that of the plastic tray since
a protective barrier preserves the product‟s quality and taste.

6- Technological change:

50
Technological change is most certain & Most impact for the industry like PRIMARK
because of the reason they can catch new customer & can attach with the existing
customer to show them the company is creating easier way for the customer like in mid
2000,s PRIMARK has launch their online shop so such type of technological change
can be benefit for the Company.

7-Marketing innovation:

Market innovation will be least certain for the company because competitors can bring
new innovation but the impact in the company will be most because it reduce their
market share just like the U.K market many competitors are reducing the share
PRIMARK.

8-Growing buyer preferences for differentiated products:

Consumer behavior plays an important role in the imaging of the new product as he is
the one who buy or use that service. To attract the customer PRIMARK do produce their
new design in the clothing industry, As well as in the food & other items they improve
their product packaging taste & design so that customer stick with them so it most
certain & has most impact on the company

9- Changes in cost and efficiency:

Cost has the most impact on the company with different point of view like for PRIMARK
they charge high price from their customer in the clothing industry because of their
brand popularity in the market so for customer & company prices will be least certain.

10-Changing societal concerns, attitudes & life styles:

It is most impact on the company to be updated customer attitude & lifestyle. It is also
most certain that customer demand should be recognize by the company

51
Select two driving forces:

Let select two variables from above, these are Growth Rate (y axis) and Changes in
cost and efficiency (x axis)

1- Growth rate
In the UK Market the Growth rate of the company‟s are slow because og
the following reasons

So many competitors are competing in the market. High growth can be achieve if new
innovation come in the market by PRIMARK to capture the market share

Prices are high in company like PRIMARK so People divert to other brands which are
low in cost which ultimately affect the company

2-Cost and efficiency:

In the past we have seen that PRIMARK have charge very high to their
customer. it has the most impact on the market because other competitors are selling
the products at low price. These companies reduce their cost from by having suppliers
from different part of the world. In the past PRIMARK was stick to the British suppliers
so their cost of producing the goods were also high and the sell at a high price on which
now a day competitors are selling at low price & But it will be most cost & efficient for
PRIMARK.

52
Most Growth Rate in Industry

Least Most

cost & cost &

Efficiceny Efficiency

Scenario will be held in this area

Because of high prices charge by the

Can result in low gowth rate of the

company

Least Growth Rate in Industry

53
Internal Analysis
Whether company is achieving its stated financial and strategic objectives?

Sales and profits are growing more quickly at copycat fashion chain Primark than High
Street rivals like Marks & Spencer. The store has become known as Primarni for its
controversial tactics of taking ideas from the world's catwalks and creating budget
versions for the masses.

Primark saw sales grow by 20per cent in the year to September 12, taking the total up
to £2.3billion. At the same time, it achieved an operating profit of some £252million for
the 12 month period, which was up by 8per cent on the previous year. The rate of
growth in sales and profits has far outpaced those of Next and M&S, which are due to
update shareholders on their own trading record later this week. However, Primark still
lags way behind both of these mainstream rivals in terms of annual sales and profits.
Primark's success has come despite concerted attacks from the fashion industry, who
feels the chain effectively operates as a parasite on their ideas and trends.

The boom in sales has been helped by extraordinary sales of a number of 'must have'
products.

This year they included a £6 'It' bag, which bore an uncanny resemblance to a £700
Chanel design. It was described as the 'definite High Street hero-bag of the year'.

In May, the Cheltenham-based Superdry clothing label won an out-of-court settlement

from Primark, which was accused of copying its Brad leather jacket design.

The trendy coat, which cost £175, was made famous when David Beckham stepped out
in it. Subsequently, Primark turned out something similar, but of inferior quality, and
charged customers about £20. At the time, Superdry director, Theo Karpathios said: 'It's
an ingenious design and one of our bestsellers. We won't put up with our designs being
copied.'

54
Primark, which was known for its super-cheap clothes long before the arrival of the
credit crunch, has seen strong expansion in the UK and Spain in recent years.It opened
a new distribution centre at Thrapston, Northamptonshire, in order to support growth.
The fashion chain is actually a subsidiary of AB Foods, which also owns the brands
Twining, Ryvita and Kingsmil. The parent company posted underlying profits of £655
million for the year, which was an increase of 4per cent on a year earlier. Primark
opened 12 new stores during the year bringing the total to 191 with selling space
increased by 9per cent. There are plans for a further 11 new stores.

It also plans to speed up its push into continental Europe with stores in Spain, Germany,
Holland, Portugal and Belgium. However, the success of the brand was criticised by
charities, which said it is only able to achieve such outstanding financial results by
exploiting overseas workers.

War on Want claimed employees in three Bangladeshi factories toiled up to 80-hour

weeks for as little as 7p an hour. Senior campaigns officer at the charity, Simon McRae,
said: 'Primark is booming by keeping clothes prices so low at a terrible cost to its
garment workers' living standards.

'Letting the retailers police themselves has failed to ensure workers decent pay and
conditions. Now Gordon Brown must act to stop this abuse.' In a statement Primark
said: 'Sourcing from developing countries carries with it an obligation to ensure that
workers making garments are treated fairly.' It said its record on ethical trading was
subject to close scrutiny and that it had contributed to industry-wide efforts to improve
labor standards.

'Primark offers good quality fashion at low prices because it purchases very large
volumes and has low mark-ups, minimal advertising and low overheads. Primark's
success is also a result of its ability to respond quickly to changes in the marketplace,' it
said.

Mary Portas, arguably the UK’s foremost authority on retail and fashion, has criticised the rise of
'fashion supermarkets'.

55
She told a conference last week: 'With the rise of value chains like Primark what hope is
there for the quality retailer? 'Unless we give a voice to (independents) and change
consumer habits, the supermarkets will take over and we will lose the heart and soul of
independent shopping.'

Retail research firm, TNS World panel Fashion, has revealed that independents saw a
fall of 0.6per cent in their market share over the 12 weeks to the end of June, taking it
down to 7per cent. By contrast, fashion chains, including the budget stores, saw their
share rise 1.6 percent to 27per cent over the same period. Which is 40 years old this
year, said its overall takings were up 20 per cent at £2.31billion while operating profits
rose eight per cent to £252million.

The impressive financial performance, expected to outstrip rivals Next and Marks &
Spencer which are also announcing results this week, has been helped by extraordinary
sales of a number of "must have" products.

This year they included a £6 "It" bag inspired by a £700 Chanel design. It was described
as the "definite High Street hero-bag of the year". It opened 12 new stores during the
year bringing the total to 191 with selling space increased by nine per cent. There are
plans for a further 11 new stores including one in Wood Green in north London on 12
November.

But the results were criticised by charities, which said that Primark was only able to
achieve such outstanding financial results by exploiting overseas workers. War on Want
claimed employees in three Bangladeshi factories toiled up to 80-hour weeks for as little
as 7p an hour. Simon McRae, senior campaigns officer at the charity, said: "Primark is
booming by keeping clothes prices so low at a terrible cost to its garment workers' living
standards.

"Letting the retailers police themselves has failed to ensure workers decent pay and
conditions. Now Gordon Brown must act to stop this abuse." In a statement Primark
said: "Sourcing from developing countries carries with it an obligation to ensure that
workers making garments are treated fairly. Primark takes this responsibility seriously
and has contributed to the industry-wide efforts to improve labour standards."

56
Primark said it had committed to undertake more than 1,000 audits of its factories in
2009, nearly doubling the number of last year.

2- Whether the company is above the industry performance?

M&S remains the market leader in menswear with a share of 11.3% in 2010. Though it
has improved menswear ranges, particularly in formalwear, it has been impacted by
advances by grocers on entry price point merchandise and clothing basics, causing its
market share to decline in 2010. Clothing market shares. The performance of the UK
children swear market, which comprises clothing designed for under-14 year olds. The
market was valued at £5.29bn in 2008, following a mixed growth performance. The
main sectors of the children swear market are: girls‟ clothing (ages 2 to 14); boys‟
clothing (ages 2 to 14); and infants‟ clothing (for under-2 year-olds).

The development of sales in the children swear market has been aided by the rising
birth rate in recent years, which has boosted the size of the under-5 year old population,
although older age ranges have declined in numbers. Other influences, such as the
increase in the age of parents and smaller family sizes, have been positive factors in
increasing per capita spending on children‟s clothes.

The positive influences on the children swear market have been countered by changes
in UK clothing retailing as a whole since the end of the 1990s. The rise of discount
retailers such as Primark and Matalan, together with the growing market share held by
supermarkets such as ASDA, Tesco and Sainsbury‟s, has exerted a downward
pressure on prices, particularly entry-level price points for children‟s clothing. In the
school uniform market, there was a great deal of price competition among retailers in
2008, with ASDA eventually offering the cheapest school wear, at just £4.

The UK children swear market is very retail-driven, with retailer brands accounting for
the greatest share of sales. Major players include Adams Kids, Mother care, Marks &
Spencer, Debenhams, ASDA, Tesco and Primark. The economic downturn, and the

57
recession that began in the UK in 2008, sharpened the retailers‟ focus on price;
however, despite the difficult economic climate, retailers have continued to invest in
their brands across all price points.

With the child population continuing to rise, the outlook for the children‟s clothing market
is positive. Key Note expects that price influences will dampen growth in 2009 and
2010, before the market begins to show better growth between 2011 and 2013. Design
elements, ethical developments and brand investment will drive future growth in the
industry

Primark new challenger to Big Three specialists.

Menswear market shares

M&S stronger in menswear

Winners and losers

Primark continues to march onwards

River Island enjoys best growth

Value players outperform on sales growth

Space growth

Primark adds further menswear space

Primark continues its success

Basic couture allow attractive prices
sales growth slows, but stays of more than 10.0% UK
switches aggressive overseas expansion

Child sales growth declines

Make changes as it expands

58
3- Whether the firm’s sales are growing faster slower or about the same pace

Fast fashion chain Primark is getting used to posting double-digit sales increases, and
the first half of the current year brought no exception. Primark banked a 19% revenue
increase to GBP1.26bn (US$1.93bn) for the six months, while operating profit surged
18% to GBP144m in April 2010. Primark's performance in these six months as more of
the same. The margin is better than it was anticipated. Like for like sales up 8%.
Exceptional growth from the Spanish stores." Furthermore, Primark is keen to grow
square footage during the coming year in a bid to capitalize on the flight to value in
Europe. Primark opened five stores during the first half of the year, including its first
store in Belgium. “It is expected to open six stores in the second half; three in the UK
and three in Spain,”

4- Whether the company is acquiring new and retaining existing customers?

Like-for-like sales increased by 6% in the last 12 months, compared with 8% at the half-
year stage. The firm said there was a 4% rise in the fourth quarter, down from nearly
10% in the same period last year 2009. Britain's love affair with cut-price clothing shows
no sign of waning according to Primark, which yesterday reported underlying sales
growth of nearly 10 per cent.

Primark, owned by Associated British Foods, also revealed total sales (including new
openings) rose 19 per cent in the four months to January 2. The surge was all the more
impressive because Primark was one of the few high street retailers that was reporting
strong sales growth a year ago and did not have the advantage of being flattered by
comparisons with Christmas 2008 like many of its rivals. Primark sale are increasing
faster.

5- Weather firms profit margins are increasing or decreasing and how well its profit
margins compare to rivals firm?

59
Primark reports strong profit growth

Clothing chain Primark has continued to perform strongly with profits up 18% to £144m
in the past six months. Discount clothes chain Primark has continued to shrug off the
recession and reported "exceptional" sales and profit growth. Operating profits at
Primark rose 8% to £252m in the year to 12 September, with revenue up nearly 20% to
£2.3bn. Like-for-like sales - which strip out the impact of new stores-, grew 7%.

The results helped Primark's owner, Associated British Foods, to report a 4% rise in
adjusted annual pre-tax profits to £655m. Primark has continued to expand in the UK,
and last year also opened new stores in Spain and its first outlets in the Netherlands,
Germany and Portugal.

6- Whether the firms overall financial strengths and credit ratings are improving or on decline?

Sales and profits are growing more quickly at copycat fashion chain Primark than High
Street rivals like Marks & Spencer. The store has become known as Primarni for its
controversial tactics of taking ideas from the world's catwalks and creating budget
versions for the masses. Primark saw sales grow by 20per cent in the year to
September 12, taking the total up to £2.3billion. At the same time, it achieved an
operating profit of some £252million for the 12 month period, which was up by 8per cent
on the previous year. The rate of growth in sales and profits has far outpaced those of
Next and M&S, which are due to update shareholders on their own trading record later
this week. However, Primark still lags way behind both of these mainstream rivals in
terms of annual sales and profits. Primark's success has come despite concerted
attacks from the fashion industry, who feels the chain effectively operates as a parasite
on their ideas and trends. Discount fashion chain Primark is committed to remaining
"the best value on the high street," the company told just-style today (9 November),
even though it has warned rising cotton prices are set to hit profit margins in the coming
year.

60
7- Whether company demonstrate continuous improvement in such a internal performance measures
such as

Days of inventory

Inditex and Primark are both relatively new. Thanks to hyper-efficient inventory control,
they are able to get whatever is hot onto the shelves faster than competitors lumbered
with old-fashioned systems and supply chains. That gets the pulses of even increasingly
poor consumers racing.

For Inditex, sales in established stores rose by 1pc in the first half – and expansion
continued. The Spanish giant should prosper in tough times. Its solid cash flow could
give it the financial strength to trample struggling smaller rivals. Geographic
diversification should help limit the damage, although these days all geographies are
suffering.

Unit cost

Primark, which is a subsidiary of Associated British Foods, most recently posted a 21%
rise in sales in the 16 weeks to 20 June, as it continues to buck difficult trading
conditions in the UK clothing sector. Its purchasing on bulk so per unit cost is low.

Delivery times

The company will take the methods used at its four "eco-factories" ...accessories and
footwear, Primark and M&S shared 37 factories globally. ... Delivering such promises on
a huge cross-border scale.

8- How share holders view the company based on stock price and trend in stock market?

Free share price, company information and discussion board for ... Looks as if
the market finally came round to the ABF story after a shaky start. ..... Smart, accurate

61
indicator of a stock's price trend. .... IMO as I have posted before, I think Primark spin
off would be good for share holders so I...

9- Firms image and reputation with its customers?

Cheap and fast delivery

So many people dress well in London. Not classic like the Parisian‟s or polished like the
New Yorkers, but here people are trendy. The 13 year old girl and the 55 year old
woman are all dressed in the latest fashions (although sometimes the women dress a
bit too young…)

Ever since I arrived in London I‟ve been trying to figure out why everyone here is
wearing the latest fashions, while most of Vancouver can barely manage one great
trendy item, let alone a complete look. It took me a while to figure out why, but then it
dawned on, it is obviously because they can access the latest fashion at a very low
price. The British High Street is the best fast fashion shopping in the world, because it
has all of the best international brands and a ton of incredible British
brands. Topshop,Miss Selfridge, New Look, Primark, River Island, Oasis, and Marks
and Spencer are some of the British brands that sit next to the likes
of Zara (Spain), H&M (Sweden),Uniqlo (Japan), Bikbok (Norway), Mango (Spain) and
more. Every store is packed with the latest styles at amazing price points, although
that‟s not necessarily a good thing. I can understand why there is so much criticism here
about people buying too many clothes, since there are so many clothes readily
available, and extremely cheap.

I came here intending on hitting all the departments‟ stores, but then I realized I am
more excited about the high street clothing, which is cheaper, and a lot more fun. Plus I
can afford more of it. I am trying to buy things I will wear for a while, not super trendy
pieces (well, not all super trendy pieces), although a lot of the very trendy stuff probably
won‟t be in fashion in Vancouver for at least another season or two, so I‟ll get a longer
life from most of it.

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10. How well company’s position against rivals in following attributes?

Marks and Spencer (M&S) is no longer Britain‟s most popular fashion retailer. Shoppers
seeking bargains amid the economic downturn means Asda‟s George and discount
clothing retailer Primark are the nation‟s first and second favorite clothes shops.

The budget fashion chains are luring shoppers away from the more expensive retailers
and this was highlighted last month after Primark reported a 9% rise in sales. The
results came as Marks & Spencer, Next and Sweden‟s Hennes & Mauritz (H&M)
reported declines amid the recession. Meanwhile, according to figures from the TNS
Worldpanel Fashion show, Asda‟s Geroge recorded its highest ever total volume market
share for clothes sold at 10.1% in the 12 weeks to August 17. Primark was a close
second with 9.9%, while M&S was third at 9.8%.

Earlier this year, Asda director George Thompson vowed to take the volume market
share top spot by 2011. Following this achievement, Mr Thompson said Asda now aims
to improve value for money. Meanwhile, Primark recently announced it was expanding
overseas and has opened stores in Ireland, Germany, Portugal, Barcelona and the
Netherlands. It is also planning almost a dozen new stores, including a branch in
Belgium. Factors that is relevant to the buyers in choosing a product

Why consumers love Primark: 'So cheap, you can almost wear it and throw it'

Customer service as well newly developed products to market

Customers at Primark's Oxford Street flagship store were ignoring fears over the
economy and continuing to spend today. They told why they keep visiting the shop and
boosting the company's profits as other big names on the high street struggle to attract
customers. Helen Seery, 46, an accountant from Hounslow, said: 'I've brought my two
13- and 14-year-old nieces down from Peterborough because they were so desperate
to go to Primark. 'I think it's the cheapness and variety that attracts youngsters and
people like me.' Nancy Driscoll, 41, a beauty therapist who was shopping with a friend,

63
said: 'We have come down from Suffolk because it's so cheap. You can almost wear the
clothes and throw them away. The quality isn't amazing but you get so much for your
money. If you spend £100 you walk out with five full bags.

ASSESSING COMPETITIVE STRENGTH

 Make a list of industry KSF

 RATE the firm and its rivals on each factors from 1st to 10
 Give importance (weight) to each factor against its competitors
 Multiply firm rating on each KSF with its importance

RETAILER
SPENCER
PRIMARK

BRITISH
MARK &
KEY SUCCESS

GREEN
PHLIP
FACTORS

Marketing related 6 9 8 7
Fast technical assistance 7 7 6 9
Filling buyers orders 8 5 7 6
Clever advertisement 4 8 9 8
Customer guarantee 8 6 5 5
warrantee
Skill work force 6 9 7 7
Product innovation 9 5 9 9
Design expertise 7 7 6 6
e commerce capabilities 5 9 8 8
Other KSF 8 4 5 5

64
KEY SUCCESS WEI PRIMAR PRIMAR MARK & M&S BRITISH M&S PHLIP PG
FACTORS GHT K RATES K (R*W) SPENCER (R*W) RETAILE (R*W) GREEN (R*W)
(W) ® RATES R RATES RATES

Marketing 12% 6 0.72 9 1.08 8 0.96 7 0.84

related

Fast technical 9% 7 0.63 7 0.63 6 0.54 9 0.81

assistance

Filling buyers 13% 8 1.04 5 0.65 7 0.91 6 0.78

orders

Clever 11% 4 0.44 8 0.88 9 0.99 8 0.88

advertisement

Customer 12% 8 0.96 6 0.72 5 0.6 5 0.6

guarantee
warrantee

Skill work 9% 6 0.54 9 0.81 7 0.63 7 0.63

force

Product 7% 9 0.63 5 0.35 9 0.63 9 0.63

innovation

Design 9% 7 0.63 7 0.63 6 0.54 6 0.54

expertise

e commerce 8% 5 0.4 9 0.72 8 0.64 8 0.64

capabilities

Other KSF 10% 8 0.8 4 0.4 5 0.5 5 0.5

TOTAL 100 6.79 6.87 6.94 6.85

%

65
Which KSF is important to the firm (strength weaknesses?)

PRIMARK has an advantages in Design Expertise as compare to other its brand

provide the customer satisfaction with a low price but at the same M& S,s brand is
customized same like other competitors. With the credit crunch squeezing every
household in Britain, experts predict Primark will topple legendary stalwart M&S next
year. While M&S has used expensive marketing campaigns with stars from boy band
take that to models Twiggy and Jade Jagger, Primark has relied on word of mouth for its
outstanding success. Former Tatler editor Jane Proctor said: "It's either Prada or
Primark nowadays. The above table is also indicating that the primark figure is approx.
6.8. the KSF which is more contributing to its success is product innovation is product
innovation which means that the primark has a competitive advantage in product
innovations over its compititors.

66
TOWS
STRENGTH WEAKNESSES

Strength opportunities strategies: opportunities weaknesses

strategies:

Firm internal strength to take improving internal weaknesses by

taking
OPERTUNITIES
Advantage of external opportunities Activities of external opportunities

Strength threats strategies: weaknesses threat strategies:

Use firm strength to avoid or reduce Are defensive tactics to reduce

internal

The impact of external threats weaknesses and avoid external

THREATS
threats

Strength pportunities strategies PRIMARK could expand its Basildon store to three
storeys of shopping if plans are pproved. The global clothes retailer has applied to
Basildon Council for a revamp of the store next to the Eastgate Centre which would
involve converting part of the warehouse space on the second floor into an extra
shopping area. Basildon Council is considering t he new proposals.

67
A statement with the application said: “Primark are currently in the process of
upgrading and improving their stores in the UK and have identified Basildon is a store
suitable for investment. “There is a large second floor which was formerly used as a
trading floor by previous occupants, but which is currently utilised as a large
warehouse space. “While the store is clean and functional, it does not represent the
current design and branding of Primark stores and so is in need of a refit. “Primark
stores proposes to open up the second floor for trading, giving the opportunity to update
the store.

Primark took over the premises from the Co-op in 1999 and the building has seen little
major update since. The application is also for new shop front and signs, plus a new
glazed lobby area at the entrance. This is needed because the front doors currently
blow open in high winds, causing cold drafts in the shop. New stock areas will have to
be created on the first and second floor and a new air and heating system is required.
Inside the store will be new escalators and lifts. The statements added: “It is proposed
to improve and update the look of the store by replacing all of the existing shop front
glazing, doors and stone cladding to match the latest Primark standards.“New signs to r
eplace existing will be used to finalize the refurbishment.”

Mike Horton, spokesman for the Eastgate Centre, which is next door to Primark, was
delighted with the news. He said: “It just goes to show that Primark must be doing
exceptionally well in the town centre to want to expand the store. “It is great news that
such an important store, which has an entrance from the Eastgate Centre, is doing so
well when the economic slump is still officially on. “This will make Basildon an even g
reater place to shop in.”

Opportunities weaknesses strategies:

Cut-price clothes chain Primark is poised to steal the crown from Marks & Spencer as king of
High Street fashion. The store with throwaway chic is closing the gap on M&S after sales soared
by 25 per cent in the last six months. Dubbed the People's Prada, Primark's catwalk-style outfits
at low prices saw profits leap by 22 per cent. It now means that £1 in every £10 spent on clothes
goes into a Primark till. One of the chain's recent best sellers has been its nautical range. Lat
est figures show that the store has increased its share of the clothes market by two pe r

68
cent. It now has 10.1 per cent of the action, just 1.3 per cent behind M&S. which has a
n 11.4 per cent share on the High Street.

With the credit crunch squeezing every household in Britain, experts predict Primark
will topple legendary stalwart M&S next year. While M&S has used expensive
marketing campaigns with stars from boy band take that to models Twiggy and Jade
Jagger, Primark has relied on word of mouth for its outstanding success. Former Tatler
editor Jane Proctor said: "It's either Prada or Primark nowadays. I don't see the point
of shopping anywhere in between." A Primark spokesperson said: "We have achieved
this position despite tough trading conditions." Mirror Fashion Editor Amber Morales
said: "Primark has the ability to take a catwalk idea and run with it at very affordable
prices. So M&S watch out."

Threats strength strategies:

Primark has become the latest retailer to warn of rising commodity costs as it vowed to
fight the soaring price of cotton and transporting its goods. The value retailer said it
would do "whatever it takes" to keep its prices down, including taking a cut in its profit
margin, said George Weston, chief executive of Primark's parent company Associated
British Foods. "There's no question of us surrendering any price leadership," he said as
he warned that cotton prices had nearly doubled in recent months. Earlier this month fa
shion retailer next warned that the spike in cotton prices could cause clothes prices to r
ise by up to 8%. Mr Weston's comments came after

Primark released an "outstanding" set of results for the 53 weeks ending September
18, with sales up 18% to £2.7 billion and operating profits up 35% to £341 million. The
retailer opened 13 stores over the past year, including its first in Belgium, and would
open a further 14 over the next year. Its like-for-like sales increased by 6%. Primark's
performance helped ABF to post a 10% increase in sales, helping it break through the
£10 billion barrier for the first time.

69
 Analysts at Patmore Gordon predicted Primark's margin will be squeezed next year
from 12.5% to 11.7%, undoing some of the increases in its profitability over the past y
ear.

But Mr Weston said Primark had other options as well as sacrificing profitability - it also
benefited from increased economies of scale, the weakness of the US dollar and
decreasing prices of some artificial fabrics, all of which would help it to mitigate the r
ising price of cotton, he added.

Weaknesses threat strategies:

Primark scored the lowest of all leading clothing chains in the UK - at just 3.5 out of 20 -
on an ethical index that ranks criteria such as workers' rights and whether they do
business with oppressive regimes. The figure was contested by Primark and Ethical
Consumer released a statement indicating that marks had been skewed due to its
position in a wider company group. In 2006, Primark joined the Ethical Trading Initiative,
a collaborative organization bringing together businesses, trades unions and NGOs to
work on labor rights issues in their supply chains. ETI members commit to working
towards the implementation of a code of conduct based on the Organization‟s core.
Primark can avoid the threat by doing right these weaknesses.

Conventions. Primark suffer in unethical activities as stated by the Bangladeshi

factory‟s workers who are supplier of Primark, they don‟t allow workers even 56 leaves
in emergency condition. They don‟t give more facilities to their labors while their
compotators are giving more facilities to the suppliers

70
S PACE Matrix

Fin ancial strength (FS) Environmental stability (ES)

Ma rket Capital 4 Technological Changes -5

Re turn On Equity 6 Rates of Infaltion -2

Sh are Value 3 Demand variability -4

G ross Profit Margin 3 Competitive Pressure -6

Competitive advantage (CA) Industry strength (IS)

Market Share -1 Growth Potential 6

Supply Chain -1 Profit Potential 5

Website Quality -2 Financial Stability 3

Technological Know Ho Ease of Entry into the

w -1 Market 1

Re asoning

71
Market Share

Primark expects the soaring price of cotton to "erode" some of the uplift in profit
margins the discount fashion retailer delivered in its last financial year.

Primark's operating margin jumped to 12.5 per cent from 10.9 per cent, but the c
ompany said it expects some of this margin improvement to be

"eroded in the coming financial year due to higher cotton prices and freight costs",
as well as increases in VAT.

72
Website

Poor Designing, no proper catalogue to display and even the title of page is set as Home instead of
company name.

73
Financial Analysis

74
Growth

UK Clothing Retail Market to Grow by 18.6% by 2013

Says New Report

75
76
Supply Chain

Technology
The recent introduction of body scanning technology in Brooks Brothers' flagship store on New York's
Madison Avenue realises a vision a long time in the making. Billed as the "ultimate evolution in men's
custom clothing," the vertical retailer's digital tailoring method melds 19th century tailoring with 21st
century technology. And so far the customers are coming out in droves. Bobbin recently met with
Brooks Brothers executives at the flagship store to learn more about its body scanning initiative and
the sales infrastructure and supply chain supporting it.

77
 QSPM
QUANTITATIVE STRATEGIC PLANING MATRIX
SWOT weights ATTRACTIVE SCORES FOR ALTERNATIVE
STRATEGIES

marketing & promotion

Entry in Indian market

Targeting women &

Strengthen low cost

younger generation

provider strategy
Spend more on
STRENGTHS

Strong brand image 15% 4 .60 3 .45 4 .60 2 .30

Highly differentiated 11 % 3 .33 4 .44 3 .33 4 .44
products
Strong financial position 14% 4 .56 3 .42 4 .56 3 .42
Superior technological skills 12% 3 .36 4 .48 4 .48 4 .48
Innovative capabilities 13% 3 .39 4 .52 4 .52 3 .39
Wide geographic coverage 10% 4 .40 3 .30 4 .40 1 .10
Strong advertisements 13 % 3 .39 4 .52 4 .52 3 .39
Good supply chain 12% 4 .48 2 .24 2 .24 2 .24
management
TOTAL 100% 3.51 3.37 3.56 2.76
WEAKNESSES
Lack of marketing strategies 20% -4 -.80 -4 -.80 -4 -.80 -4 -.80
No customer focus 22% -2 -.44 -4 -.88 -3 -.66 -3 -.66
Losing market share 18% -3 -.54 -3 -.54 -3 -.54 -3 -.54
Poor customer services 15% -3 -.45 -4 -.60 -4 -.60 -3 -.45
No wide knowledge about the 25% -2 -.50 -4 -.100 -2 -.50 -1 -.25
market for younger generation
TOTAL 100% -2.73 -2.92 -3.1 -2.7
OPPERTUNITIES

Global expansion 22% 4 .88 2 .44 3 .66 3 .66

Focus on core market 17% 4 .68 4 .68 3 .51 3 .51
Online sales 19% 3 .57 3 .57 4 .76 2 .38
Introducing wider ranges such 24% 3 .72 4 .96 3 .72 3 .72
as Per Una, Autograph and
Classic collection to stores
Use younger more 18% 3 .54 4 .72 4 .72 2 .36
contemporary models to attract
younger generation.
TOTAL 100% 3.39 3.37 3.37 2.63
THREATS

78
Increased intensity of 20% -4 -.80 -4 -.80 -4 -.80 -4 -.60
competition among rivals
Decline in market growth 17% -4 -.68 -3 -.51 -4 -.68 -3 -.51
Potential new entrants 19% -4 -.76 -3 -.57 -4 -.76 -4 -.67
May lose youth market due to 16% -3 -.48 -4 -.64 -3 -.48 -4 -.64
competitors substitute products
Adverse demographic changes 15% -4 -.60 -3 -.45 -3 -.45 -3 -.45
Restrictive trade policies 13% -4 -.52 -2 -.26 -3 -.39 -1 -.13
TOTAL 100% -3.84 -3.23 -3.56 -3.0
GRAND TOTAL 0.33 0.59 0.27 -0.31

REASONING FOR ATTRACTIVENESS SCORES

STRATEGY I: ENTRY IN INDIAN MARKET

 Among Strengths “strong brand image” has the most impact on PRIMARK
strategy to enter the Indian market. As the Indian customers are becoming brand
conscious, and a brand with strong global recognition can successfully penetrate
in a new market like PRIMARK.
 “Highly differentiated products” is reasonably attractive for PRIMARK strategy to
enter the Indian market. Differentiation could come both in terms of features as
well as prices. And PRIMARK low price strategy could easily sail through the
battle of conquering Indian retail markets.
 “Strong financial position” has the most impact on a firm‟s strategy to enter in a
new market. As a lot of expenditure is needed to enter a new market and only the
firms with healthy capital could achieve this objective. PRIMARK enjoys this
strength as the company has a sound financial position.
 “Superior technological skills” has the reasonable attractiveness for entry into
Indian market. Because when a firm enter into a new market residents of that
market are attracted by the product quality and features offered. And this is
possible due to high skilled labour and use of technological resources. And
PRIMARK have this advantage.
 “Innovative capabilities” have the reasonable attractiveness for this strategy
because people everywhere became fed up with monotone and want and
appreciate change.

79
 PRIMARK capabilities to introduce innovative products like “Organic T- shirts” will
more likely attract the Indian customers.
 PRIMARK strategy to enter in the Indian market is highly impacted by “Wide
geographic coverage”. Because it helps the firms to avail the tactics of entering a
new market. As PRIMARK have already penetrated in many countries besides
UK.
 “Strong advertisements” has reasonable attractiveness for this strategy of
PRIMARK. Because to enter and succeed in a new market for the first time
needs a lot of promotion to attract the customers.
 “Good supply chain management” has a greater impact on the success of a
business and in building brand loyalty. In case of PRIMARK to enter in Indian
market this has the most impact for the survival of new business.
 Among Weaknesses of PRIMARK, “lack of marketing strategies” has the most
impact on this strategy. People in any country are attracted toward a brand either
because of brand loyalty or effective promotions used by the brand. When
PRIMARK is going for a low cost strategy then there is a need to promote it to
become famous among the people. However, lack of marketing strategies would
have a negative impact.
 “No customer focus” is reasonably attractive in case of PRIMARK this strategy
because when PRIMARK is going for a low cost strategy it must be aware of the
customers‟ needs and preferences and also about their spending power so that it
may offer the prices that would be in customers reach.
 “Losing market share” in reasonably attractive for this strategy. As if the firm is
already losing market share it might be because of people switching towards
others brands with comparable products at much cheaper rates. So, PRIMARK
must cut down the prices so that people won‟t be attracted towards other brands
only because of price.
 “Poor customer services” has the reasonable impact on PRIMARK strategy to
have the low cost leadership. PRIMARK should cut down the prices of its
products to retain customers as well as attract new ones and meanwhile

80
 minimize its weakness of poor customer services provider by winning the hearts
of customers through affordable prices.
 “No wide knowledge about the market for younger generation” has least
attractiveness for this strategy of PRIMARK because the firm is planning to cut
the prices of whole range of clothing not only the clothes designed for younger
generation.
 Among Opportunities, “Global expansion” has the reasonable impact on
PRIMARK strategy. Because it means that firm is already enjoying the advantage
of brand recognition. And this will contribute successfully towards the PRIMARK
strategy to lower down the prices of its products.
 “Focus on core market” has the reasonable impact. Because PRIMARK could
only win the customer satisfaction regarding its brand by focussing on their
needs and preferences. And also to lower the prices keeping in view the
spending power of its customers. However, a lack of knowledge of the segment
will impact negatively.
 “Online sales” is somewhat attractive for this strategy of PRIMARK because it is
not too mush related to this strategy of PRIMARK.
 “Introducing wider ranges such as Per Una, Autograph and Classic collection to
stores” has reasonable attractiveness for PRIMARK strategy to provide low cost
advantages. It is more of importance when PRIMARK will offer wider range of
products yet at low prices.
 “Use younger more contemporary models to attract younger generation” impact
this strategy of PRIMARK reasonably because promotion and advertisements is
the most effective way to attract the customers. And people like to see their
favourite celebrities in ads. And they attach their preferences with the models
depicted in the ads. So, this would have a positive impact on strategy to enter the
Indian market.
 Among Threats, “Increased intensity of competition among rivals” has the most
impact on PRIMARK strategy to enter in the Indian market. Because there are a
number of leading brands that are doing retail business around the globe like

81
 PRIMARK. Increased competition among rivals will pose a threat to PRIMARK
entry in Indian market.
 “Decline in market growth” also has the most impact on PRIMARK strategy to
enter the Indian market. Market growth has stalled and M&S recently announced
that total sales have slipped. So the entry in Indian market with a decline in
market growth would impact the image of the firm negatively in eyes of
customers.
 “Potential new entrants”, this threat factor has the most impact. Any new
business in a new market is very sensitive to the competition of other rival
brands. So, the brands already leading in the Indian market as well as the other
new entrants will pose threat to PRIMARK entry in Indian market.
 “May lose youth market due to competitors substitute products” impact the
strategy reasonably. Because PRIMARK lack of focus on younger generations
preferences, will drive the customers towards substitute products of other brands.
 “Adverse demographic changes” has the most impact. Demographics represent
the people‟s attitudes and lifestyles. So a firm has to keep pace with changing
attitudes and preferences of buyers for the survival of its business. Same is the
case with PRIMARK as here it is penetrating in an entirely new market. So it
must walk step to step with the buyers‟ moods.
 “Restrictive trade policies” has the most impact on this strategy of PRIMARK.
Trade restrictions in the form of tariffs and quotas limit the firms trade beyond its
boundaries. And will impact the PRIMARK entry in the Indian market

82
Competitive Strategy

Competitive Strategies

A competitive advantage is an advantage over competitors gained by offering consumers greater value,
either by means of lower prices or by providing greater benefits and service that justifies higher prices

Michael Porter suggested four "generic" business strategies that could be adopted in order to gain
competitive advantage.

The four strategies relate to the extent to which the scope of a businesses' activities are narrow versus
broad and the extent to which a business seeks to differentiate its products.

Differentiation is not something hatched in marketing and advertising departments, nor is it limited to
the catchalls of quality and services. Differentiation opportunities can exist in activities all along an
industry’s value chain.

83
Scope of a businesses' activities

204 Stores

All types of Men, Women and Children Cloths

As the Era of E-com, Market is not limited

Degree of Product Differentiation

Working in Fashion Industry

Complex Value Chain

A cost leadership strategy is a perfectly sustainable strategy

low cost strategy is not a cheap strategy for a company to pursue.

high levels of investment in the latest technology

warehousing & distribution

point-of sale

Supply-chain is a term that describes how organizations (suppliers, manufacturers,

distributors, and customers) are linked together.

Supply-chain management is a total system approach to managing the entire flow of

information, materials, and services from raw-material suppliers through factories and
warehouses to the end customer.

84
Think globally…build regionally…operate locally. The best performing supply chains are managed with
centralized planning, regional approaches, and local operations

Primark should Invest/reinvest in supply chain information technology to manage flows

end-to-end. IT should support both planning, analysis, and execution and
Invest/reinvest in supply chain knowledge, people, skills, and learning. Supply chain
practice is relatively new. Change is a constant, with innovations and problems always
occurring. Organizations must invest in ongoing training, mentoring, education, and
feedback systems.

Risk assessment & contingency plan for PRIMARK

Primark must plan for risks around its strategic choices; there are risks in terms of cost
focus strategies in the target segments. The competitors are more using the niche then
compare with the Primark so here there might be possibility that the competitors can
provide the brand with the same price as offered by it. Furthermore, it may be easy for a
broad-market cost leader to adopt its products in order to compete directly, hence,
ASDA, all of which have the same portfolio of products. Primark must have a
contingency plan in terms of cost leadership and also to differentiation strategy , to
counter the growing rivalry from other supermarket chains.

85
DIVERSIFICATION STRATEGIES
What is Diversification?

A collection of businesses under one corporate umbrella.

Diversification Motive

Purpose to minimize the risk

Decrease the competition

Primark is in a position to expand the business as his market growth is more positive
then compare with its competitors then it must use the diversification strategy for future
growth and for minimizing risk.

DIVERSIFICATION AND CORPORATE STRATEGY

A company is diversified when it is in two or more lines of business. Strategy-making in
a diversified company is a bigger picture exercise than crafting a strategy for a single
line-of-business

A diversified company needs a multi-industry, multi-business strategy

A strategic action plan must be developed for several different businesses competing in
diverse industry environments

DIVERSIFICATION AND CORPORATE STRATEGY

A coherent corporate strategy can best be thought of as how, in pursuit of a vision, the
corporation aligns its goals and objectives, organizational structure, systems and
processes, and choice of industries and strategies to build and leverage the unique
resources to give it a corporate advantage.

It is through these actions that the corporation will create value and so justify its
existence as a multi-business entity.

As the Primark slogan is “PAY LESS LOOK GOOD” they have lot of experience in retail
industry so they should expand their business to the North European markets as they
are opening a new store in the Germany.

86
WHY AND WHEN DOES A COMPANY DIVERSIFY?
Four factors that’s why company should diversify

Technology and product similar

Key success factors

Diversifying cause low cost

Brand name

PRIMARK has its brand name as usual retail store use the recourses (financial strength)
to expand which is necessary, it will impact on the low cost of the Primark.

FROM SINGLE-BUSINESS TO DIVERSIFICATION

STAGE 1: Most firms begin as small single-business enterprises serving a local or regional
market

STAGE 2: Geographical expansion

STAGE 3: Vertical integration

STAGE 4: As growth slows, strategic options include:

Take market share from rivals

Focus on diversification

WHEN YOU CAN INCREASE VALUE BASED ON THREE TESTS

Attractiveness Test- The industry must be attractive

Cost of Entry Test - Cost has to be reasonable

Better off Test - Diversification results in a competitive advantage and creation of value.

87
In case of new setup the company has to bear huge cost.

If the company purchases an existing firm then its mean they will bear the low cost in
comparison. If they hire a new well brand name company then the more cost will have
to bear.

STRATEGIES FOR ENTERING NEW BUSINESSES

Acquire existing firm in target industry

Start new company internally

Form joint venture

ACQUIRING AN EXISTING COMPANY

Most popular approach to diversification

Advantages

Quicker entry into target market

Hurdling certain entry barriers

Technological inexperience

Gaining access to reliable suppliers

Being of a size to match rivals in terms of efficiency & costs

Getting adequate distribution access

PRIMARK cannot acquire the firms because of the above describing hurdles. PRIMARK
cannot acquire the well brand name company like ASDA and Tesco because they are
not in a position to afford the premium price at large scale.

DIVERSIFICATION VIA INTERNAL STARTUP

More attractive WHEN:

88
Ample time exists

Incumbent firms slow in responding

It involves lower costs than acquiring existing firm

Firm already has most of needed skills

Additional capacity will not adversely impact supply-demand balance in industry

New start-up does not have to go head-to-head against powerful rivals

PRIMARK can diversify through a new starting new carpet stores strategy through
opening the new Carpet stores in the Europe as they have already the brand name and
lot of retail store industry experience so they should use the strategy by starting of
opening a new carpet stores in the Europe.

DIVERSIFICATION VIA JOINT VENTURES

Good way to diversify WHEN:

Uneconomical or risky to go it alone

Pooling competencies of two partners provides more competitive strength

Foreign partners needed to surmount

Import quotas

Tariffs

Nationalistic political interests

Cultural roadblocks

PRIMARK can start a new venture with the ASDA and TESCO and other firms because
of the above reasons the M&S wants to compete Primark and its competitors in ASIA so
Primark should make a joint venture strategy with the TESCO.

89
DRAWBACKS OF JOINT VENTURES
Raises questions about -

Which partner will do what &

Who has effective control

Requires precise agreements

Related Diversification

Are the businesses that we are divesting into related to one another and if so, how?

Strategic Fit

Exists among different businesses when their value chains are sufficiently similar to
offer opportunities

Offers competitive advantage potential of

Lower costs

Efficient transfer of Strategic Fit

Key skills

Technological expertise

Managerial know-how

Use of a common brand name

Presence of strategic fit in a diversified firm‟s portfolio, along with corporate

management‟s skill in capturing benefits of the interrelationships makes related
diversification capable of being a 2 + 2 = 5 phenomenon

PRIMARK can get the benefit from the strategic fit. Suppose if strength and the
technology they already hold should impact on another. It will decrease the cost and
increase the strength of the common brand name.

90
TYPES OF STRATEGIC FIT
Technology Fits

Operating Fits

Distribution & Customer-Related Fits

Managerial Fits

Several lines of business with a strategic fit that becomes a strategic advantage. If one
company brings any change the impact of one will lie on another.

RELATED DIVERSIFICATION & STRATEGIC FIT

STRATEGIC FIT can be based on

Common distribution channels

Common suppliers & raw materials sources

Similar operating methods

Similar kinds of managerial know-how

Ability to share common sales force

Customer overlap

These are the strategic benefits for the industry to get benefit. The PRIMARK will
benefit from the above strategic fits if start a new start up in the industry. If the
PRIMARK open a carpet retail stores then they will get benefit from the above strategic
factors because they will diversify to same industry.

Value of Related Diversification

Allows a company to enjoy economies of scope

PRIMARK can benefit if they open the carpet stores in Europe and cost will reduce
because of the same suppliers and same distribution channel.

UNRELATED DIVERSIFICATION
If the businesses we diversify into aren‟t related to each other, what‟s the point?

91
Financially driven rather than Strategically driven

Strategic fit, value chain relationships or strategic theme are not important

Profitability and size are key.

Look for a bargain

undervalued assets, financially distressed, turnarounds, bright future with limited capital

Go into any business where we can make a profit

Referred to as conglomerates

No unifying strategic theme

There are also three cases

Acquire existing firm in target industry

Start new company internally

Form joint venture

PRIMARK has a retail shop expertise so there is also a choice to unrelated diversification of
opening new FOOD stores in Europe. As in Europe the people are brand conscious so it
will be better for Primark to start up new Primark food stores.

92
References
^ About us (retrieved 18 May 2010)

^ Primark oldie’s golden touch, The Times, 22 April 2007. Retrieved 28 January 2008.

^ [1]

^ a b http://www.primark.eu

^ Primark joins Ethical Trading Initiative - Press Release - ETI

^ http://www.wiaronwant.org/campaigns/supermarkets/fashion-victims/inform/16360-fashion-victims-
ii

^ McDougall, Dan (2009-01-11). "Primark in storm over conditions at UK supplier". The Guardian
(London). http://www.guardian.co.uk/business/2009/jan/11/primark-ethical-business-living. Retrieved
2010-05-22.

^ "Ministers pressed on child labour". BBC News. 2008-06-22.

http://news.bbc.co.uk/1/hi/business/7467846.stm. Retrieved 2010-05-22.

^ http://www.dowjones.de/site/2009/07/primark-founderceo-has-no-plans-to-leave-executive.html

^ http://www.saarbruecker-zeitung.de/aufmacher/lokalnews/Saarbruecken-Iren-Sinn-
Leffers;art27857,3482748

^ http://www.styletoday.nl/fashion/nieuws/1743/primark-nijmegen-opent-in-2013-haar-deuren-

^ a b http://www.mirror.co.uk/news/city-news/2009/11/04/marks-and-spencer-to-start-selling-top-
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^ a b http://www.ausfoodnews.com.au/2010/10/19/marks-and-spencer-may-cut-sales-of-name-
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^ http://www.thefamilygp.com/M-and-S-trials-plus-fit-schoolwear-for-overweight-children.htm

^ http://health.virginmedia.com/M-and-S-trials-plus-fit-schoolwear-for-overweight-children.htm

^ http://www.lewishamilton.com/news/2009/09/mandslaunch09

^ http://www.lewishamilton.com/news/2009/09/mandswestfields09

^ http://www.brandrepublic.com/news/995553/M-S-supports-clothing-range-Lewis-Hamilton-Jenson-
Button/

^ http://www.marketingmagazine.co.uk/news/rss/995553/M-S-supports-clothing-range-Lewis-
Hamilton-Jenson-Button/

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^ http://www.socialshopping.com/Marks-and-Spencer/News/M-S-Living-the-Dream-Photoshoot-Video/

^ http://www.marksandspencer.com/Lewis-Hamilton-Biography-Living-Dream-E2-84-A2-
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^ http://www.bbc.co.uk/news/business-11531677

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