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Situation Analysis of Primark Stores Limited



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    Primark Stores Limited is an Irish clothing retailer. Its stores are located in various regions like United Kingdom, Ireland, and Spain. Within this area of responsibility, Primark stores outnumbered other clothing retailer business, with one hundred sixty one stores overall distributed in three major regions: one hundred twenty-five in the United Kingdom, thirty-four in Ireland and eight in Spain. The company positions itself as marketing fashionable at cutthroat prices.

    The original clothing store was established by Arthur Ryan and his collaborator Micaela Mitchell in Dublin Ireland in 1969. After various success in clothing business, great profits and gross income led them to open stores in local and regional areas. It acquired various premises in different business centers within its local and regional areas which eventually generate more profits and income. Primark is known for selling clothes at the budget end of the market. Its success is based on sourcing supply, making clothes with simple designs and fabrics and targets young, fashion-conscious individuals ages 35 below, offering them simple yet high quality clothes and apparels. Hence, these successes brought significant changes on Primark’s retail business.

    The relevance of global trends and consumers’ demands on lifestyle made Primark Store Limited reinvent its business scheme and management structure. http://www. primark. co. uk/index2. shtml 1. BACKGROUND Primark is a retail group in the value sector and operates a total of 187 stores in Ireland (where it trades under the Penneys brand),Holland , Spain and the UK. Primark employs in excess of 27,500 people. In GB, in terms of market share, TNS ranks Primark as GB’s second largest clothing retailer by volume and Verdict Research now places Primark as the leading retailer in value clothing. Primark was voted ‘Best Value High Street Fashion’ by GMTV and ITV viewers. Primark Stores Ltd. , is a subsidiary of Associated British Foods.

    Associated British Foods is a diversified international food, ingredients and retail group with global sales of ? 8. 2bn, and 96,000 employees in 44 countries. In the financial year 07/8 (September 2007 to September 2008), twelve new stores were opened for trade. Seven of the new stores were in Spain. Primark now operates from 5. 4 million sq ft of selling space. Primark has 23 stores trading from over 50,000 sq ft of which five trade from over 70,000 sq ft. Primark is successful because it offers: • Super-competitive prices (the result of technology, efficient distribution, supply and volume buying) • Mainstream market product quality • High Street locations • Superior store fit • Clear focus on the target market.

    There are two distribution centres – a 650, 000 sq. ft. unit at Magna Park in Leicestershire, and a 200, 000 sq. ft unit at Naas. http://www. primark. co. uk/index2. shtml 2. 1 Key Aims of Primark; Primark is a member of the ethical trading initiative. This is an alliance of companies, trade unions and non profit organisations that aims to promote respect for the rights of people in factories and farms worldwide. As a member of ETI, Primark has committed to monitoring and progressively improving working conditions in the factories that supply Primark’s merchandise. http://www. primark. co. uk/index2. shtml 3. 0ACADEMIC LITERATURE 1. Globalisation

    According to Hill (2008), globalisation refers to the shift toward a more integrated and interdependent world economy. Globalization has several facets, including the globalization of markets and the globalization of production. “A fundamental shift is occurring in the world of economy. We are moving away from a world in which national economies were relatively self-contained entities, isolated from each other by barriers to cross-border-trade and investment; by distance, time zones, and language; and by national differences in government regulation, culture, and business systems. And we are moving toward a world in which barriers to cross-border rade and investment are declining; perceived distance is shrinking due to advances in transportation and telecommunications technology; material culture is starting to look similar the world over; and national economies are merging into an interdependent, integrated global economic system. The process by which this is occurring is commonly referred to as globalization. ” (Hill, 2008, p. 5) “The globalization of business has placed a premium on information. A domestic company focuses its attention on the political and economic developments of a single nation. A global company must understand what is going on in a hundred or more nations. A domestic company intimately knows its local competitors. A global company has far more competitors to worry about.

    Most executives are too busy performing their internal roles within a company to read every newspaper and annual report to keep them side by side on what is going in the external business environment. ” (Feist, 1999, p. 6) 1 3. 2 Strategic Analysis. According to Boddy (2008:84) “Management takes place within a context, conformed by external and internal environment, which have to be analyse in order to do planning and strategy”. Boddy (2008) states that the environmental influences on the organization are divided into 4 groups: ? Internal, this is formed by elements within the organisation such as structure, people, Business processes; ? Micro environment which is the industry-specific environment of customers, suppliers, competitors, and potential substitute products; ?

    Macro environment which is the factors that affect all organisations such as political, economic, social, technological and legal; ? External environment which consists of elements beyond the organisation. In an uncertain changeable and competitive environment, managers must evaluate continually how products are meeting the costumers’ needs, through systematic planning in order to find new strategies to improve. According to Gareth (2008:297)) “Planning is a process that managers use to identify and select appropriate goals and courses of action for an organisation”. “Strategy is concerned with deciding what businesses and organisations should be in, where it wants to be and how it is going to be there”. ( Boddy 2008, p. 42) The planning of a company has been divided into 3 groups such as Corporate-Level, Business-Level and Functional-Level. 3. 3Supply Chain According to Turban, 2006, p. 242, supply chain refers to the flow of materials, information, payments, and services from raw material suppliers, through factories and warehouses, to the end customers. Supply chain also includes the organizations and processes that create and deliver products, information, and services to the end customers. It includes many tasks such as purchasing, payment flow, materials handling, production planning and control, logistics and warehousing inventory control, and distribution and delivery.

    The key lies in an integrated network where all members of the supply chain see themselves as mutual beneficiaries from an effective total system. Buyers and suppliers enter into negotiations with an “I win and you loose” philosophy when a ‘win – win’ is required. 3. 4Five Forces Model In the competitive environment managers are most affected by forces in the immediate competitive environment. According to Boody (2008:93) “the ability of a firm to earn an acceptable return depends on five forces” which are the ability of new competitors to enter the industry, the threat of substitutes products, the bargaining power of buyers, the bargaining power of suppliers and the rivalry amongst existing competitors.

    According to Pettinger (2007:176) “the five forces model of Porter is an outside-in business element strategy tool that is used to make an analysis of the magnetism of an industry structure”. 3. 5Just in time production (JIT): JIT is a Japanese management philosophy which has been applied in practice since the early 1970s in many Japanese manufacturing organisations. It was first developed and perfected within the Toyota manufacturing plants by Taiichi Ohno as a means of meeting consumer demands with minimum delays . Taiichi Ohno is frequently referred to as the father of JIT. Toyota was able to meet the increasing challenges for survival through an approach that focused on people, plants and systems.

    Toyota realised that JIT would only be successful if every individual within the organisation was involved and committed to it, if the plant and processes were arranged for maximum output and efficiency, and if quality and production programs were scheduled to meet demands exactly. JIT manufacturing has the capacity, when properly adapted to the organisation, to strengthen the organisation’s competitiveness in the marketplace substantially by reducing wastes and improving product quality and efficiency of production. Just in time is a ‘pull’ system of production, used to meet customers demand exactly in time, quantity and quality. This theory helps to reduce and minimize waste, as it helps in devising systems to identify problems.

    Demand-pull enables a firm to produce only what is required, in the correct quantity and at the correct time which helps in reducing waste in time and overproduction. JIT manufacturing has the capacity, when properly adapted to the organisation, to strengthen the organisation’s competitiveness in the marketplace substantially by reducing wastes and improving product quality and efficiency of production. http://tutor2u. net/business/production/just-in-time. html 3. 6Total Quality Management “Total Quality Management is an ongoing and constant effort by all of organisation’s functions to find new ways to improve the quality of the organisation’s goods and services” (Jennifer, M. 2008:612).

    This technique aims for perfect quality or zero defects in its products or services by using more rigorous inspections. According to John . L. Thompson, 1997, p. 351, the benefits of total quality management include: • Improved company image and reputation • Improved productivity • Reduced costs • Creates greater certainty in company’s operation by reducing conflicts within the operating system which improves the speed of delivery and their flexibility in response to customer requirements. • Improved morale • Committed customers Total quality management starts with the strategic leader who must emphasize commitment throughout the company.

    Quality is the responsibility for everyone in the company. The basic philosophy is that prevention ( getting things right first time ) is better than detection ( finding out through expensive inspection systems or customer complaints). The underlying aim is continuous improvement. 3. 7Planned Organisational Change (POC) According to Mullins (2008:479) “most planned organisational change is triggered by the need to respond to new challenges or opportunities, or in anticipation of the need to cope with potential future problems”. The objectives of a POC are modification of the behavioural patterns, improving the ability of the organisation to cope with changes in its environment.

    The behaviour modification is a programme of planned organisational change and improved performance, developed by Lewis, which involves three-phase process of behavioural modification: according to Mullins (2008:479), “the first step is unfreezing which means reduce those forces which maintain behaviour in the present form; the second step is movement which refers to development of a new attitude or behaviour to implement the change; the last step is refreezing, which refers to stabilising change at the new level and reinforcement through supporting mechanisms”. 4. 0ORGANISATIONAL ANALYSIS 1. Primark Operational Strategies “Primark set itself a goal to become the world’s most successful retails group. In order to achieve this, primark has focused on reasonable quality in other words a value for money strategy and in competitive terms, primark is pursuing a classic focus cost leadership 2. SWOT Analysis

    According to Robbins (2008:85), “SWOT is an analysis of an organization’s strengths, weaknesses, opportunities and threats in order to identify a strategic niche that the organization can exploit”. In a strategic level, it usually combines an analysis of external environmental factors with an internal analysis of the organisations capabilities and limitations. Real opportunities exist when there is a close fit between environment, values and resources. Similarly the resources and culture will determine the extent to which any potential threats become a real threat. (John . L. Thompson, 1997, p. 223) 1. Strengths • Primark is the second biggest retail store in UK. • Primark operates a total of 187 stores in Ireland. Primark has 23 stores trading from over 50,000 sq ft of which five trade from over 70,000 sq ft. • Affordable-competitive prices. • Mainstream market product quality. • High Street location. • Clear focus on the target market. • A strong consumer proposition has been developed for the Primark brand and embodied in the line “Look Good, Pay Less”. • 28 days refund policies. 4. 2. 2 Weaknesses • Employees overwhelmed by the amount of work to be done. • Primark purports less value on ethical matters. • Exploitation of the employees and abuse on labour force. • Poor working conditions. • The primacy of autocratic and rigidity on standard structures. • Child labour. The primacy of autocratic and rigidity on standard structures. 4. 2. 3Opportunities • Primark is a parent company for ABF. • Primark’s energy consumption in Great Britain is sourced against the green power generated and sold into the grid by sister company, British Sugar. • Primark shares many of its suppliers with its competitors on the high street. • New super stores in the pipe line 4. 2. 4Threats • Financial crisis- credit crunch. • Cheap quality product. • The primacy of autocratic and rigidity on standard structures. • Increasing competitive pressure: matalan, peacock, H & M. http://www. primark. co. uk/index2. shtml 3. PEST ANALYSIS

    According to Boody (2008:96) “PEST is a technique for identifying and listing the political, economic, social, technological, environmental and legal factors in the general environment most relevant to an organization”. There are forces in the wider world which affect management policies. According to Curtis and Cobham (2002), “the analysis of the external macro-environment that affects all firms is known as PEST analysis”. Such external factors usually are beyond the firm’s control and sometimes present themselves as threats, the purpose of PEST analysis according to Pettinger (2007:174) “is also to help organizations learn, but the material that arises relates much more to the analysis of the wider strategy situation, and the organisation in its environment”. 4. 3. 1Political Primark is a British clothing retail that promotes an ethical approach to people in factories ad farms worldwide to improve living standards in countries with vulnerable conditions such an India and Bangladesh. • Primark constantly implement training and work programmes to ensure that its follow the strict code of conduct of the company. • “Primark Better Lives Foundation” provide financial help to young people in developing countries. 4. 3. 2Economical • Primark offers to customers quality of merchandise at a affordable value for money. • Primark has a high percentage of customers loyalty. • The retail contribute to the economy in developing countries, this provide employment. 4. 3. 3Social • Primark adapts to the cultural issues in developing countries such as local attitudes, government and legal requirements. The clothing retail base its strategies on trust and transparency to the benefit of the people. • In collaboration with the community, Primark has specific recruitment programmes to reach a wider group of people such as Job Centers, Universities, local communities, also, flexible hours this brings an effective and friendly workplace. • In addition, Primark has a “home working policy” for those whose prefer to be at home. 4. 3. 4 Technology • In general retailers as Primark take risk in developing new technologies by importing and exporting technologies from abroad, as focus on quality, cost and functionality, investing huge amounts of capital in manufacturing processes and aiming at high volume production.

    This process open new opportunities in developing countries and retailers can use it effectively. 4. 4ETHICAL SRTATEGY Primark defined its Ethical Trade Strategy in 2006. In 2008 we have entered the second phase of its implementation. Implementation of phase 2 will ensure that factories making 80% of all purchases are assessed. 135,120 workers employed in these units have had their working conditions assessed, and improved where necessary. Audits are conducted by Primark’s own regional based Ethical Trade Managers and third party specialist auditors. 38% of our initial audits to date have been unannounced, and the rest take place within a pre agreed window.

    After the initial audit our Ethical Trade specialists work with the suppliers to support them through remediation. Training is offered to suppliers and their makers on particular issues and best practice, at regular intervals. Follow-up audits are conducted after 3mths from the initial audit. Primark recognises that shared learning and collaboration is one of the most successful ways to achieve sustained positive progression with its supplier’s factories. Primark participate in the ETI- supported National Home worker Group in India and are one of the founder members of the Wages Group. http://www. primark. co. uk/index2. shtml 5. COMPETITIVE ADVANTAGE   Super-competitive prices (the result of technology, efficient distribution, supply and volume buying) •  Mainstream market product quality • High Street locations • Superior store fit • Clear focus on the target market. There are two distribution centres – a 650, 000 sq. ft. unit at Magna Park in Leicestershire, and a 200, 000 sq. ft unit at Naas. http://www. primark. co. uk/index2. shtml 4. 6 CASE STUDY ON PRIMARK IN INDIA The other area of increased activity is in our supplier training programme. In September this year, 85 of our suppliers were trained in Delhi and Tirupur on our policies, including the complete prohibition of child labour, and their implementation in their factories.

    This will be followed up by individual assistance to factories by our staff and more group training at regular intervals. Primark also recognizes that it does not have all the expertise required to handle these issues on its own and has reached out to the NGOs and other partners for assistance. We are in discussions with several NGOs in India on different approaches. Since the beginning of this year Primark has been actively participating in the National Homeworkers Group, set up by the ETI, and its pilot project to test the homeworking guidelines in Bareilly, India. We contribute to discussions and strategise on the best ways to deal with these challenges with the other members.

    Primark is also a part of the Brands Group in India, an informal forum where brands sourcing from India gather to discuss core issues to ethical trade, such as home working and supply chain mapping, that are of concern to each of their brands. http://www. primark. co. uk/index2. shtml 5. 0 APPLICATION OF MANAGEMENT THEORY TO PRACTICES 5. 1APPLICATION OF JIT TO PRIMARK There is no denying the fact that Primark is the second largest retailer in UK. The fact that Primark has made success in sales is evident in the fact that various theories and approaches have been applied in their day to day business. One of the theories evident in their business is just in time approach. Primark’s approach reduces and minimizes waste, this has led to them devising systems to identify problems.

    They emphasize holding little stock, this leads to reduction in storage space and saves rent and insurance cost. As a result of this, less working capital is tied up in stock since stock is obtained when it is needed. Primark has been able to strive for simplicity, that is, simpler systems are used. This makes workers, supervisors and managers understand and manage easily and very less likely to go wrong. They(Primark) make use of simple tools to ‘pull’ products and components. Primark has been able to use Just In Time (JIT) approach effectively. There is good house keeping, thus there is ethic of work cleanliness and organisation. 5. 2 APPLICATION OF TQM TO PRIMARK Primark makes good use of total quality management in the process of their business.

    They have encouraged a strategic approach to management at the operational level through involving multiple departments in cross-functional improvements and systemic innovation process. Thus, this has provided high returns on investment by improving efficiency. They have been able to provide better quality products at lower cost and deliver them faster. This has provided customer satisfaction and resultantly, this has increased sales and profit. 6. 0CONCLUSION Primark Strategies have helped in the business development. Manufacturing in poor countries has contributed in the development in vulnerable countries and achieve a competitive price for customers.

    Primark has built various programs to constantly improve the quality standards of the clothing this allow them to rapidly respond to the market changes. Primark wide range of designs and affordable prices provide the company a sustainable profitability and a good market place over others retailers. The cost of maintaining leadership is very low as they do not have to spend in advertising campaigns, promotions and marketing. The main stores are in high streets where the brand sells for itself. Primark is making a significant offer to its customers and is growing success is proof of that achievement. Primark’s customer are enthusiastic about the brand and are more happy than not with goods and services.

    However, while budget goods may be very popular at the moment, primark may want to consider extending the quality of some goods to satisfy customers that want that little bit extra. (http://ivythesis. typepad. com/term_paper_topics/2008/07/swot-sample-the. html) 7. 0RECOMMENDATIONS • There were allegations of slave labour about primark, the company could raise wages, happiness of staff is first in virgin’s strategy that’s why primark should change strategy. • Primark should put people before profit, it is the second biggest seller of clothes in UK after Marks and Spencer. • Primark should pay good wages of staff to motivate them because it protects the company name and performance. Maintaining good relation with respect to political scientists and analysts will upgrade the changing forms of the legislation in different countries by which Primark can be advantageous with respect to its development globally. • Business solutions can be comparatively effective for the development and review of Primark with the advanced updates of pest analysis. • Innovative expansion and growth of the industry depends on the qualitative supply. • Demand increases by providing the cost effective products to the supplier which in turn gives high market value within the organization and as well as external environment. 8. 0APPENDIX The London Paper 16th. January. 2009 —Appendix 2— 4. 4Competitive Advantages of Primark |[pic] |[pic] | |Background |Primark is a retail group in the value sector and operates|‘’Matalan is one of the UK’s leading clothing and home wares| | |a total of 187 stores in Ireland (where it trades under |retailers offering quality fashion and home wares at up to | | |the Penneys brand),Holland , Spain and the UK. Primark |half the equivalent high street price. John Hargreaves who | | |employs in excess of 27,500 people. In GB, in terms of |is the founder of Matalan, discovered the out of town retail| | |market share, TNS ranks Primark as GB’s second largest |US concept that sold a range of food and non-food products | | |clothing retailer by volume and Verdict Research now |at low prices in the 1970’s.

    Matalan trades from 5 million | | |places Primark as the leading retailer in value clothing. |square feet in over 190 stores now’’(matalan. co. uk) | | |Primark was voted ‘Best Value High Street Fashion’ by GMTV| | | |and ITV viewers. | | |Products & Services |Primark targets young, fashion-conscious under 35’s, |Matalan offers good quality at prices that are simply | | |offering them high quality, fashion basics at value for |unmatched elsewhere.

    Company is buying direct from the | | |money prices. Almost half of sales are in Womenswear. A |manufacturer and having convenient out of town stores with | | |quarter of sales is dedicated to Menswear and |low general expenses, Matalan is able to offer unbeatable | | |Childrenswear, with other items constituting the remaining|value for money. Matalan offers something for all the | | |sales. Buying and Merchandising teams in Reading and |family. philosophy of matalan is more value,more style and | | |Dublin travel internationally to source and buy |more quality. (matalan. co. k) | | |up-to-the-minute fashion basics that best reflect each | | | |season’s key fashion trends. Primark’s offer to the |products | | |customer is one of high-quality merchandise, at value for |Home ware | | |money, backed by Primark’s service promise. Primark prides|Kids, women and men clothing | | |itself on its loyal customer base. Footwear | | |Products | | | |Mens clothings | | | |Women clothings | | | |Foot wear | | | | | | |Competitive |Primark provides super-competitive prices (the result of |As the retail industry become more and more competitive | |Advantages |technology, efficient distribution, supply and volume |nowadays, matalan is associated with Manhattan Associates is| | |buying).

    It also provides mainstream market product |a global leader in providing supply chain execution and | | |quality |collaborative commerce solutions. These solutions leverage | | |Located on high streets with superior store fit and Clear |state-of-the-art technologies, innovative practices and the | | |focus on the target market. |company`s domain expertise to enhance performance, | | | There are two distribution centres – a 650, 000 sq. ft. |profitability and competitive advantage. Manhattan | | |unit at Magna Park in Leicestershire, and a 200, 000 sq. Associates has licensed more than 800 customers representing| | |ft unit at Naas. |1,100 facilities worldwide, which include some of the | | | |world`s leading manufacturers, suppliers and retailers. For | | | |more information about Manhattan Associates visit | | | |www. manh. com. | —Appendix 3— 9. REFERENCES Armstrong, M. (2006) A Handbook of Management Techniques, 3rd Edition Revised Edition. London: Kogan Page Boddy, D. (2008) Management an Introduction, 4th Edition.

    Spain: Prentice Hall, Financial Times Feist, W. R. and Heely, J. A. (1999) Managing a Global Enterprise: a Concise Guide to International Operations, 1st edition, Quorum Books Grant, R. (1991) The Resource-Based Theory of Competitive Advantage. Implications for Strategy Formulation. California Management Review, 33(3). Hill, C. W. L. (2008) Global Business Today, 5th edition, Prentices Hall Jenifer, M & Gareth, R (2008) Organizational Behavior, 5th Edition. New Jersey, Prentice Hall Mullins, L & Carter, L. (2008) Essentials of Organisational Behaviour, 2nd Edition. England: Prentice Hall, Financial Times Robbins, S & DeCenzo, D. (2008) Fundamentals of Management, Essential

    Concepts and Applications, 6th Edition. New Jersey, Pearson Prentice Hall Pettinger, R. (2007) Introduction to Management, 4th Edition. London, Palgrave Macmillan Thompson. J. L(1997) Strategic Management, Awareness and change, 3rd Edition, Internatinal Thomson Business Pres, Boston. http://www. primark. co. uk/index2. shtml (27th/01/09) BIBLIOGRAPHY Boar Bernard, The Art of Strategic Planning for Information Technology, Wiley Donald. M. A, Thomas. D. H, Mastering Information Management, Prentice Hall Gerry. J, and Kevan. S, Exploring Corporate Strategy, 5th Edition Prentice Hall, Kevin. L, Strategic Brand Management, 2nd Edition Prentice Hall,

    Sadler Philip, Building Tomorrow’s Company, Kogan www. matalan. co. uk/history Turban, E. and Leidner, D. (2006) Information Technology for Management: Transforming Organisations in the Digital Economy, 5th edition, University Press www. fashionunited. co. uk |http://www. ifm. eng. cam. ac. uk/dstools/process/jit. html | | | |http://tutor2u. net/business/production/just-in-time. html | | | |http://people. brunel. ac. uk/~mastjjb/jeb/or/jit. tml | | | |http://tutor2u. net/business/production/quality_tqm. htm | | | |http://www. thecqi. org/Knowledge-Hub/Resources/Factsheets/Total-quality-management/ | |http://www. asq. org/learn-about-quality/total-quality-management/overview/overview. html | |  |

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