Operation Strategy of Primark

Primark Stores Limited Company is a discount fashion chain company that deals in a variety of products including children’s, men’s and women’s clothing, confectionary, beauty products, and accessories. The company was opened in 1969 in Dublin under the company name Penneys. Today, the company operates more than 210 stores located in nine countries in Europe. The company intends to enter the US market in 2015 by opening its first store in the region in Boston (Primark, 2015). The company operates under the name Primark in all countries except the Republic of Ireland where it operates under the name of Penneys. The company is a subsidiary of Associated British Foods (Hoovers, 2015). This paper analyzes the company’s structures and developments and suggests a way forward to help in advancing the company’s operation strategy.

Primark is primarily a materials processing company. It retails a variety of products from numerous suppliers at affordable rates. The company meets the needs of its consumers by sourcing a variety of its products from other manufacturers and suppliers and offering them at low prices (Essential Retail, 2015). Mostly, the company has specialized in the fashion industry and offers clothes for all age groups. It has maintained a top position in the European market by offering these products at relatively lower prices compared to its competitors (Hoovers, 2015). Other products that the company sells include beauty products, hosiery, footwear and accessories.

Competitive advantage

Price

The company offers its products at lower prices compared to its competitors. This is achieved by the using its bargaining advantage over its suppliers. Since the company has a big chain of stores, it succeeds in obtaining its supplies at cheap prices. It also maintains a low cost of operations by avoiding advertisement, for example. This enables the company to offer goods at a relatively lower cost (Hopkins, 2008). The company sometimes also offers its products for the sake of attracting a larger market. By doing this, the company knows it will attract a larger market and therefore get high profits.

Value

The company insists on offering quality to its consumers. The company offers quality products to its consumers by sourcing globally for its products. By doing this, it succeeds in obtaining valuable goods for its wide array of consumers. The company also offers a good customer experience by using its human resources. The company uses a highly trained customer service team to ensure that customer satisfaction is always achieved.

Following the economic recession, the economy of European countries is still recovering. People are still on their path to absolute recovery from the recession. Consequently, there are minimal funds available for luxuries. The company’s low prices have placed it strategically as a provider of clothing in European countries (Neville, 2013). The company’s products are further known to be of high quality and are therefore preferred to the more expensive brands. The company’s clothing products have come to be known as Primarni. This is in regard to the high quality that could be easily compared to the quality offered by brands like Armani.

Company SWOT Analysis

Internal environment

Strengths

Primark is currently the second largest retailer of clothing in Europe in terms of volume. This implies that the company has been able to acquire a sizeable market of the European market. The company mainly targets the market of people below the age of 35 (Hossain, 2012). This is group comprises the larger part of any population. They are also more aware of fashion trends and have a bigger budget put aside for clothing. Its low market price is also an important aspect of attracting customers. The company acquires a lot of space in strategic locations and develops up to two stores in the same street if there is location. By doing this, the company has been able to become convenient for its customers. The company is a market leader in the UK. This enables it to dictate prices even to its own competitors as they may lose sales if they do not move with its price.

Weaknesses

The company has been accused of using child labor. As recently as June 2008, there have been protests on the company’s use of child labor (Hopkins 2008). The company has not been competent in ensuring that that its suppliers employ ethical practices to keep off child abuse. Even then, the company has shown interest in getting rid of those suppliers who use child labor. Child labor is likely to cause customer erosion in the long run (Hossain, 2012). Even with high quality goods offered at low prices, the company is likely to have a hard time getting some consumers to buy its goods. It is necessary that the company attends to this issue as soon as possible.

The company has concentrated its stores in developed countries. Today, there are very good markets in the developing countries. The country requires adopting a mechanism that sees to the entry of these markets. The clothing and fashion industry has become a lucrative in countries in the Middle East and Northern Africa (Hossain, 2012). These are all countries which are within easy reach of the company. The company invests heavily in high cost advertisements. It needs to explore less expensive advertisement methods.

External Environment

Opportunities

The fashion industry is increasingly becoming lucrative with the demand for low priced designer clothes. This offers an opportunity for the company to see tremendous growth in the near future. There are good opportunities for the company to advertise and market its goods globally. The company’s training programs are offering the company an opportunity to supply its products globally using skilled labor. With the recent global recession, a surge in the rate of unemployment has offered the company a chance to exploit cheap labor. The company has prospects of opening stores in other regions including Asia, Northern Africa and the US.

Threats

The business environment is volatile and unpredictable. There are high prospects that the company will release goods that soon get out of fashion, thereby, incurring losses in the company. The needs of consumers are gradually changing to accommodate different situations like technology. The cost of labor and raw materials is likely to rise (Hossain, 2012). This may influence the company’s cost of production and thereby requiring the company to raise its prices.

Primark and the Internet

Primark was slow in adopting the internet as way of marketing and retailing its products. This was amid its competitors having been swift to adopt the technological advancement. The internet offers a company a chance to market its products globally without opening shop in those areas. The transportation fees are often transferred to the consumer or offered as a discount to attract such consumers. The convenience of e-commerce is unbeatable as it allows individuals to receive goods at the comfort of their home or office (Ergo Group, 2015). The internet also helps in maintaining customer records. A customer’s needs are easy to predict if a record is kept. With the internet, records like age, location, profession and history of purchase help in understanding the purchasing habits of consumers. If there are promotions or certain goods are being offered at a discount, the right groups are targeted.

Recently, Primark entered into a partnership, an online fashion company to make its goods available on their site. This is a good indication for Primark even if the company has not created its own online transaction website. With the growth of the internet as a retail platform, the company is likely to benefit heavily from this purchase (Hossain, 2012). This partnership will also help the company to test the demand of its goods on the international scene.

Business Model

According to Weir (2014), Primark is one of the few companies that are seeing improved sales to date. The company currently owns more than 278 stores located in Europe as mentioned earlier. These stores occupy more than 10.2 million square feet of space. The company created 28 new stores in the financial year 2013/2014. The most recent stores were opened in Bath and Berlin. These are depictions of a company that is succeeding in its field.

Weir (2014) says that the success of Primark originates from its business model. He says that the business has been good in selecting a suitable product range, quality, price point, visual marketing and marketing mix. The company has been able to increase the number of stores they own worldwide to over 300 within a very short time (Jones, Temperley and Lima, 2009). The price of goods that was the main attraction to the customer no longer means anything to consumers. Instead, consumers are now looking after the perceived value that is associated with the company.

The company is very instrumental therefore in creating trends. Other clothing retailers should understand the change that has taken place in the retail industry over the period of time within the past five to ten years. Understanding this has enabled the Primark to be on the lead in the industry. The company has become instrumental in conducting a massive departure from traditional purchasing behaviors.

Seasonal Business

The company always takes advantage of high sales seasons. While there has been a slight departure from fashion in the holiday season that occurs in the last few months of the year amid celebrations of Thanksgiving, Christmas and New Year Holidays, Primark has always had something to show for these seasons (Dach and Allmendinger, 2014). The beginning of the year is not very good for the industry as most of the funds are diverted to education and other necessities. As the months move on, the sales rise slowly until April during Easter celebrations when there is a slight increase in sales.

It is also important to understand the trends of the fashion industry. As the company sources for new products, it has made it its policy to consult widely before making stocking decisions. Such decisions are borrowed widely by observing consumers and new trends on the streets. The management also consults with the workforce as most of these are in direct contact with consumers (Bravo, 2008). They therefore understand the needs of consumers and can help in making decisions that will lead to positive sales for the company.

The company sometimes also consults with research companies to determine which trends are likely to make it in the industry and which ones are likely to fail (Weber, 2005). This way, the company will not incur losses due to failed products.

The business model according to Spring and Mason (2010) comprises of three major elements. These are technology, market offering and network architecture (Kwarciński, 2012). Technology refers to the usage and knowledge of methods, systems, techniques and tools of organization and material products. The market offering refers to the way that companies satisfy the needs of the consumer so as to acquire a competitive advantage (Mason and Spring, 2011). This is especially in regard to the way a company interacts with its consumers to maintain a reasonable and positive relationship rather than the products themselves (Debelak, 2006). Finally, network architecture refers to the way a company relates with all its external shareholders including suppliers and partners (Lucas, 1987).

Primark has kept off technology on the larger part. The company does not advertise heavily on the internet and their sales on the internet are limited. Technology is therefore used minimally in the company (Datamonitor.com, 2015). The company however employs technology in for communication. The company has recently adopted a technological departure from traditional building to more advanced ones. In the new stores that have been opened in the past financial year, the lighting has been adopted so as to offer the company a good display of its products. The company also uses technology in simple aspects of the business like communication with suppliers and employees. The company also accepts payments in the form of credit cards and debit cards from both Visa and MasterCard.

The company has a very reliable customer care workforce. They treat customers respectably and have been on the front line and have tried various measures to keep customers happy. The company, for example, offer refunds promptly in case there was an overcharge. It also follows up on customer’s requests to ensure that such needs are met. The company creates good mechanisms for customers to make recommendations and complaints. The company has adopted various mechanisms to ensure that customers are able to reach the customer care both physically and through phones and email. This way, the company has been able to prevent customer erosion from poor service.

The network architecture of the company is not very good. The company has little contact with its suppliers. It is for this reason that the company has met with protests from its use of child labor. The company should have closer relationships with its suppliers so that it ensures that its ethical standards are followed (Jones, Temperley and Lima, 2009). The company however maintains good relationships with its partners. Its relationship with the internet marketing company has been doing well. It can however be improved.

The business model of Primark is a weak one. While the company has a strong market offering, the company is weak in regard to its adoption of technology and its network architecture is wanting. By improving these two aspects, the company is likely to improve its sales further. Failure to work on these aspects could be detrimental on the operations of the company.

Recommendations

Design

The company has been doing well over the past few years. Despite the parent company, Associated British Foods, not performing very well, the company has always lifted its profits. In early 2013, when Primark made a 25 % rise in sales volume, the parent company made a 10 % increase in revenue. This made the company to stay profitable. In January, 2013, the share price of the company was at an ll time high. According to White (2013), Primark is the growth driver of its parent company. It has been instrumental in the growth of the parent company. The company is a leader in the clothing business in Europe.

Plan and build

The company has various aspects that need to be improved. Regardless of the high profits, the company can improve them by working on various aspects of its operations. First, the company needs to embrace online marketing fully. Technology is an important aspect of most businesses today. People want to make purchases from the comfort of their homes and even receive their goods at home. The company could employ this aspect of technology to increase the sales volume (Kanungo, 2002). Moreover, this will help in reducing operation cost as physical stores require a large investment in rent or purchasing cost. By investing in the technology, the company will avoid some costs of operations.

The company also requires a stronger relationship with its entire supplier chain. The failure to do this has caused the company to be under heat over its failure to eliminate child labor. Moreover, the company if the company adopts a closer relationship with its suppliers, it will be able to dictate the ethical practice of such companies (Kwarciński, 2012). Advising its suppliers to advance their technology will eliminate their need to use cheap labor that may be unethical.

Implementation

To implement these aspects that are new to the company, the company will require consulting widely from both employees and experts. The company should consult with experts to obtain the most reliable methods of improving these aspects. For online purchasing, the company should source for a website that is safe and reliable from experts. Safety is required as online purchasing is often prone to cyber-crime. This may cause the company and its consumers to lose money. The company may also risk consumer information which may get into the wrong hands. The company should also employ personnel to man the online platforms so as to see to prompt action in case of problems.

The company needs to revise its ethical standards to eliminate unethical practices in its supply chain (Kwarciński, 2012). The company should also join organizations that help in the management and observation of suppliers hence reducing the responsibility of the company. The company should do regular checks to ensure that its standards are still in force. By doing this, the company may help to eliminate the risk of losing its consumers on the basis of the suppliers’ practices. Letting go of certain suppliers may also be required.

Refresh

Once the company has adopted a clear strategy, it needs frequent follow up to ensure that everything is going on well. The online marketing strategy should for example be analyzed on a regular basis to ensure that all sales reflect and that there are no errors that may cause losses to either the company or its consumers. The company should also ensure that consumer complaints are followed up promptly to ensure that consumers are comfortable with using any of the platforms through which the company offers its products.

If the new advancements are made in technology, the company should change its own mechanisms to accommodate these advancements. This way, consumers are going to be more comfortable working with the company.

In regard to the relationship between the company and its suppliers, the company should ensure that the principles it lays down for its employees are effective. It should also facilitate the development of its suppliers’ mechanisms to enable long term relationships between it and its suppliers. Sometimes reviewing the buying price may be the way forward for some issues. Allowing higher profits for suppliers may facilitate improved ethical standards.

Conclusion

In conclusion, the Primark has been a success in store retailing of fashion products. The company developed 28 stores that are located all over Europe in the past year. The company is among few retail companies selling clothes that have remained profitable consistently. The company has adopted a strategy of selling clothes at relatively low prices while maintaining high quality. This strategy has seen to the improvement of the company’s sales amid low sales in other companies. However, the company has also been found at fault over certain practices. The supply chain of the company needs to be regulated to eliminate cases of child labor. Moreover, the company should improve its relationship with its consumers to ensure that their operating margins are reasonable.

References

Bravo, L. (2008). The devil wears Primark. British Journalism Review, 19(1), pp.63-68.

Capoulas, M. L. L. (2012). Internationalization strategy of Shoes Closet to the United Kingdom.

Dach, L. and Allmendinger, K. (2014). Sustainability in Corporate Communications and its Influence on Consumer Awareness and Perceptions: A study of H&M and Primark. Procedia – Social and Behavioral Sciences, 130, pp.409-418.

Datamonitor.com, (2015). Datamonitor Research Store – Primark | Verdict Company Briefing. [online] Available at: http://www.datamonitor.com/store/Product/primark_verdict_company_briefing?productid=CM00206-018 [Accessed 19 Jan. 2015].

Debelak, D. (2006). Business models made easy. [Irvine, CA]: Entrepreneur Press.

Ergo Group, (2015). Primark – Ergo – IT Solutions Provider – Leading IT Infrastructure and Software Solutions Provider Ireland. [online] Available at: http://www.ergogroup.ie/case_study/primark [Accessed 19 Jan. 2015].

Essential Retail, (2015). Primark strategy paying off for ABF – Essential Retail. [online] Available at: http://www.essentialretail.com/news/article/522f047a75e29-primark-strategy-paying-off-for-abf [Accessed 19 Jan. 2015].

Hoovers, (2015). PRIMARK STORES LTD | Company Profile from Hoover’s. [online] Available at: http://www.hoovers.com/company-information/cs/company-profile.Primark_Stores_Limited.54bfa73e090643b4.html [Accessed 19 Jan. 2015].

Hopkins, K. (2008). Child labour: Primark caught out. [online] the Guardian. Available at: http://www.theguardian.com/business/2008/jun/23/primark.children [Accessed 19 Jan. 2015].

Hossain, I. (2012). Strategic Marketing Strategy of Primark. [online] Imhosssain.blogspot.com. Available at: http://imhosssain.blogspot.com/2012/08/strategic-marketing-management-primark.html [Accessed 19 Jan. 2015].

Jones, B., Temperley, J. and Lima, A. (2009). Corporate reputation in the era of Web 2.0: the case of Primark. Journal of Marketing Management, 25(9-10), pp.927-939.

Kanungo, R. (2002). Entrepreneurship and Innovation: Models for Development. Global Business Review, 3(2), pp.224-224.

Kwarciński, T. (2012). Ethics of Business or Ethics for Business? Two Models for Teaching Business Ethics. MBA.CE, 3(116), pp.42-49.

Lucas, R. (1987). Models of business cycles. Oxford, OX, UK: B. Blackwell.

Mason, K. and Spring, M. (2011). The sites and practices of business models. Industrial Marketing Management, [online] 40(6), pp.1032-1041. Available at: https://www.kth.se/social/upload/528c4a66f2765458b3ba8e53/Mason%20%26%20Spring%20(2011).pdf [Accessed 19 Jan. 2015].

Neville, S. (2013). Primark profits as it spurns internet. [online] the Guardian. Available at: http://www.theguardian.com/business/2013/apr/23/primark-internet-sales-bargain-clothing [Accessed 19 Jan. 2015].

Primark, (2015). Primark – About Us. [online] Available at: https://www.primark.com/en/about-us/about-primark [Accessed 19 Jan. 2015].

Weber, A. (2005). Data-driven business models. Mason, Ohio: Thomson.

Weir, C. (2014). Primark is a top business model, says retail expert – BelfastTelegraph.co.uk. [online] Belfast Telegraph. Available at: http://www.belfasttelegraph.co.uk/business/news/primark-is-a-top-business-model-says-retail-expert-30570922.html [Accessed 19 Jan. 2015].

White, G. (2013). Questor share tip: AB Foods a hold despite Primark growth – Telegraph. [online] Telegraph.co.uk. Available at: http://www.telegraph.co.uk/finance/markets/questor/9809400/Questor-share-tip-AB-Foods-a-hold-despite-Primark-growth.html [Accessed 19 Jan. 2015].

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