Primark. Core Competencies, Pestle Analysis, SWOT-Analysis

COMPANY OVERVIEW

Primark is one of the top leading companies in the retail clothing industry in the UK. The company owns over 350 stores The company was established in 1969 in Ireland and has grown in size to great heights since it was founded. The company has a variety of clothing for both men, women and children and home products as well. The company has a strong foundation policy of offering high quality clothing for a low price which has been successful and made it popular.

The company has increased in its net worth to 378.8b British Pounds in 2016 thus possessing a market share of 7% of the clothing industry as at 2017. As of 2018 the company owned 368 stores with the largest being in Market Street, Manchester (approx. 155,000 sq. ft ). The company has also employed over 70,000 employees. The company specializes in clothing, cosmetics and housewares.

Despite its success, since its establishment in 1949 by Arthur Ryan, the company has had its fair share of controversies as well. The company has been accused of using cheap child labor and paying wages below the minimum wages which prompted an investigation by the BBC. The Savar building collapse that led to loss of lives and the SOS messages stitched in the clothes from a Chinese torture victim have also portrayed a negative picture of the company.

CORE COMPETENCIES

Primark’s success over the years has been based on strategic factors that the company has employed in its operations from country to country. Despite facing stiff competition from other clothing industry retailers like Zara, H&M and Marks Spencer the company has employed the following core competencies in its strategies:

1. Maintaining a low management cost and reducing the cost of operational processes. One of the critical contributors to having their products priced low has been due to having low operational and management costs that are factored in during costing and pricing. Costing is a crucial factor in marketing and having low priced items that are pocket friendly can be an added advantage to a brand.
2. Having low prices for their commodities. The ability to maintain low prices on Primark’s products across all stores spread across Europe has been another competency factor that has enabled the company to tower above its competitors.
3. Having low costs of advertising. Primark brand products have survived in Europe despite not been emphasized through advertising. This is unusual especially in UK where there is cut throat competition through advertising. However, the management of Primark company has maintained that the brand products should be promoted mainly by word of mouth after an experience that each individual customer gets. Thus making advert costs down.
4. Proper handling of customer complaints. At Primark, all complaints and feedback is taken seriously. This has been one of the factors that has made customers to ‘identify’ with the brand. In the book, customer feedback is crucial in establishing a brand as one is able to know and recommend solutions that customers want in order to fit in the brand.
5. Primark deals with its customers as individuals not as a mass population. Blanket addressing of customer feedback has led to the downfall of many brands. However, at Primark each client is handled individually no matter the race, nationality or language. Consequently, numerous success stories of satisfied customers have been motivation for others to purchase more of the company’s products.

PESTLE ANALYSIS

POLITICAL STABILITY

When it comes to matters of political risk, it should be known that in China, it could be difficult. China form of government has in most cases resulted into constant disagreements between the central government and the province and local governments. Further, there are constant conflicts that are caused by friction on what legal frameworks should be applied to respective disputes. Additionally, there is also no agreement on who should enforce or not enforce what law thus creating a void in the enforcement of laws. Accordingly, it becomes hard to confidently understand the laws that would be applied hence the need to understand applicable laws (Foreign & Commonwealth Office, n.d.). There is barely anything close to nationalizing the available industries. As such, a lot of risks are bound to happen including confiscation of investments, failure to allow currency convertibility in addition to risks of repudiation of commercial agreements.

There is no assurance that currency would not be devalued and inflation too may be something that should raise concerns. With uncertainty on inflation comes the worry about insurance covers. Further, employees of the company may be harmed or even kidnapped without forgetting the high risks of the establishment being extorted (Foreign & Commonwealth Office, n.d.). Despite making Xi Jinping the single source of authority, there is no doubt that some factions in the country disagree with such actions hence the possibility of a revolt. Further, the planned imprisonment of political dissenters who are in millions poses a great threat to the country’s political stability, a crucial factor in the success of a business.

ECONOMIC FACTORS

Also, it should be noted that how the western countries view China is quite unfortunate because it is based on data that is merely stage-managed (Whalen, 2019). While data shown by the national government exists, there is more data on the ground that is not shared by the central government. For instance, the information given in the year 2018 by one of Chinese senior personnel at a Monetary Research Center (Center for International Monetary Research at China’s Renmin University), Mr. Xiang Songzuo, contradicts government information on China’s viability as an economic powerhouse (Whalen, 2019). It is reported that in the year 2016 Chinese recession was in question hence the fear of a possible stalling of the global stock market. Additionally, it is alleged that there is a lot of image creation stunts being pushed for by people including the financial media reporters to sell China as a global economic powerhouse. According to the China Beige Book (CBB) a research institution that takes surveys of companies and financial institutions in China, there was a decline in for instance, the volume of sales, output and even investments and hiring. The research institution CBB claims that is actually not worried inflation but deflation (Reuters, 2019). Therefore, the narrative that China has been growing is ill-motived bearing in mind that the Chinese structural systems are in problematic.

Furthermore, the economy is seen to be drastically slowing down and the factors that have been slowing it down continue to increase (Chao, 2018). Contrary to what has been officially stated, it is believed, based on information from the Deputy Director of the Center for International Monetary Research at the Chinese based Renmin University, that the GDP has not been growing at the alleged 6.5 percent rate. Instead, the Deputy Director claims that China’s GDP is at a slightly higher rate than 1.6 percent. It is additionally said that there has been drastic drop in the confidence held by the private sector because the government has been pushing for the removal of private ownership of property and other investments (Chao, 2018). There is no certainty on the monetary policies as there has been employment of tactics such as loose fiscal policies and unrealistic scheme on regulating credit. In view of the preceding, it calls for sobriety when venturing into the Chinese economy.

SOCIAL

The political and economic fears notwithstanding, China still remains one of the best opportunities for business. For instance, one of the main reasons for the preceding is because of the vastness of the country and the dense population in China that has the effects of availing ready market. In China, the demographics play a very crucial role in the sense that they change over time thus providing stable and predictable market for goods and products. The trends of the social factors such as the distribution of age keep on fluctuating hence have the possibilities of determining product consumption. Additionally, the lifestyles of the Chinese consumers, their levels of education, religion including emigration also can affect how a business performs. Further, China has a culture that is collectivistic and this too can determine the level of consumption of a product.

As explained by the parameters established by Geert Hofstede, China is more of organized in groups that tend to do things collectively. Therefore, it would be prudent if a new entrant to appeal to the groups first, because individuals may not be easy to convince. With regards to literacy levels, a new firm ought not worry about illiteracy because most of the Chinese people are educated. Over ninety percent of the Chinese are educated thus making it easy for them to discern most activities within and beyond their country. Further, over a billion Chinese citizens have access to the internet and use online shopping platforms. TaoBao which is one of the major online shops in China can attest to this and the prediction is that the online platform would increase in the future.

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Figure 1.1. Internet usage statistics by 2013

The use of digital platforms for shopping has been on an upward trend since 2010 as reported by Jap, Walters and Kuo (2014). According to the 2017 data provided by Statista.com, half a billion Chinese shoppers used online platforms to shop.

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