Strategic decisions of the competitor also depend on assumption about industry, the businesses and success factor of the senior manager. The last part of the framework is resources and capabilities of the competitor. This is where competitor’s potential challenge can be identified by looking at its strength of resources and capacities: finances, brand strength, operational capacity and managerial skills. Those four forces have to be taken into account, when analysis behaviour of the competitors. There are also external forces, which can influence competitors’ behaviour, such as other competitors want to enter the market. Suppliers, who are significant in the operations and success of the company, especially when there are few suppliers, who provide with required material. Buyers or customers can also influence industry by being sensitive to price and can switch easily.
The other category of competitor analysis is competitive strategies which strongly position the company against competitors and give the company the strongest possible strategic advantage.
Key success Factors
Activities that Primark’ group performs, show that it understand customers' requirements very well, provides them with high fashion items at very low prices. It has a clear market positioning in discounted relate market and manage their costs very tightly by supplying from overseas, specially in developing economies. This is obviously critical for businesses pursuing a low-cost strategy. So far Primark has been very clever in their choices of which catwalk fashion items to copy for the mass market. Moreover time delivering “at the minute fashion” to the market has been very fast, in terms of coping design and manufacturing it.
The company has also developed computerised customs clearance, dedicated warehousing and distribution services to support the individual stores and facilitate stock control, thereby ensuring immediate sales analysis. Operating costs are tightly controlled, staff productivity is high in terms of sales per employee and store productivity is likewise elevated in terms of sales per square foot.
According to BBC news Primark results which were released at the end of 2005, “show that the annual profits up 30% and sales up 17% to more than £1b,” (BBC 2005), the result of a sharp expansion in floor space from 2.5m sq ft in 2005 to 3.5m sq ft” in 2006, (The Financial Times Limited 2006) by buying nearly 50 shops of Littlewood and Allders and opening few shop in Spain.
Suppliers
Primark and their supplier are committed to conform to applicable environmental standards, which mean environmentally friendly. Primark also is committed to full agreements with the laws and regulations in each procurement location where it conducts business, and will not intentionally operate in violation of any such law or regulation. Accordingly, we can say that Primark uses cost advantage and expansion strategies, which as far as profit and sales are concerned. Primark do business honestly, ethically and with respect for the rights and interests of their suppliers. Primark settle their “bills promptly being a signatory to the Better Payment Practice Code” and “co-operate with suppliers to improve quality and efficiency.” (Association British Food Plc Annual Report 2005) Primark uses basic principles to develop their relationship with suppliers. They work under all human rights and conditions of employment.
SWOT Analysis
Strength
- Primark is a great store with a good variety of clothing, which is of good quality and value for money.
- Most of the Primark stores are located on commercial High street in UK.
- Primark sells clothing, shoes, linen and household ware. Its clothing is available for women, men and young children.
- It also stocks every little thing e.g accessories, head scarves, belt, bags, gloves, jewellery, purses and socks.
- It regular has a reduced rail for clearance clothing.
- Company uses computerised customer clearance and dedicated warehousing and distribution facilities.
- Computerised warehousing and distribution systems are linked to computerised daily sales and stock information by size and colour for each item in every store to optimise turnover.
- Primark doesn’t tend to have sales. Most of what they sell is already as low as they will sell it for, because every one gets a low price and don’t wait for a half price event.
- Size of shop floors is increased now, which mean more customers can visit store without bumping into each other.
Weaknesses
- Clothes are displayed either in piles on wooden tables or on metal rails, due to the huge volume of customers going through the store, the items are often left in disarray.
- Store usually is a mess, because of huge numbers of customers in store at the same time. Cloths are lying and hanging all over place, which mean customers can find casual sweater in a smart cloth. This makes shopping harder for customers.
- The quality of their stock is by no means anywhere near the best on the high street. The quality is debatable and is one thing which puts a lot of customers off shopping at Primark.
- Due to the cheap quality material to keep production costs to a minimum, the clothes easily lose their shape and are prone to wear and tear quickly.
- Primark doesn’t advertise itself, at least not in the traditional sense.
- Sometimes they have clothes on sale that look cheap and seem low quality.
- Primark does not provide customers with on-line shopping facilities.
Opportunities
- E-commerce will improve the way Primark does business and lead to more opportunities for them and for their customers and suppliers. The benefit of e-commerce will be felt throughout every decision and by every person within their organisation.
- They can increase market segment to attract more customers.
- They can produce their own brand name.
Threats
- As online shopping is a favourite these days and not having an online store will put a lot of people off shopping and they will be attracted to the competitors online store which provide on line shopping and home delivery.
- Needs to check the competitors, like what other stores are selling and what items people are buying most from the other stores.
- Primark needs to do more advertisement in order to promote their goods and to increase the number of sales.
- Primark manufacture products in developing countries, which is a long distance from UK and Ireland, so they have to make sure that suppliers supply goods on time.
- Primark have to follow code of conduct and make sure that suppliers pay their employees fairly, provide them with good working conditions and do not use child labour.
- Manager needs to make sure that the right items are ordered. He can do that by looking at seasonal trends and decide what items are most in fashion and what people want to buy most.
- Competitors might increase market shares or enter the market, or expand.
Competitors
Primark competitors are primarily in the discount and variety retail industry. In the last three years Primark has got a lot of things right-some of its strongest successful competitors are T.K.Maxx, George at Asda, Matalan and New Look. Although all of them have similar market positioning, the others have different strategies to that of Primark.
T.K.Maxx
As we have already discussed, Primark compete with four main competitors T.K.Maxx, Matalan, Newlook and George at Asda. T.K.Maxx is off-price clothing and home fashion shore, operating 212 stores in UK and Ireland at the end of 2006. It was launched in 1994 by The T.J.X companies, Inc. T.K.Maxx offer family apparel, footwear, jewellery, lingerie, accessories and home fashion of designer labels, famous brands and well known names at price 20%-60% below original in specialty stores. T.K.Maxx provides customers with lower prices of items produced by luxury designers, high street designers and celebrities.
Matalan
Matalan is low price family clothing and home ware store, offering up to the minute fashion at price up to 50% below high street prices. Matalan was founded by John Hargreaves in 1985. It currently has 200 stores across the UK. The 200th store opened on 22nd September 2006 in Croydon. The store offer low price items and variety from household to clothing. It also has a huge range of stylish cloths providing something for all fashion needs. One of the weaknesses of Matalan, it does not offer on-line shopping, as well as Primark.
George
The George brand of apparel for men, women and children including school uniform is sold in more than 240 Asda stores throughout the U.K. Outside the U.K, George brand clothing is sold in nine other countries. They have extended its brand to house wear, jewellery and more. George at Asda has created its own private label brand at out of town stores. George clothing is designed by the same designer of Next clothing. George’s cloths are higher quality, than that in Primark, therefore it have higher prices.
Newlook
Newlook is low price store chain of high street shops was open in 1998 in London. Core products of the store are clothing, lingerie, shoes, and accessories. New lines were open for men and children, but not yet expand, as ladies, which is popular with ladies in 12-24 age brackets. In 2004, the image of the store was updated. The chain is also notable for the short lead time inherent in its supply chain; it is estimated that clothing can go from drawing board to shop shelves in two weeks. The chain is known for its value-based approach to retailing and its core products are clothing, lingerie and shoes. All the cloths and accessories are last minute fashion for ladies in different sizes and even for future mums.
Conclusion
In the light of above facts and figures we can conclude that Primark is using both cost leadership strategy and cost focus strategy. Even though Primark stores are located in high rent areas and they carry wide range of products, still this company enables to charge a lower price than competitors so increasing sales and market shares. Primark has plenty of competitors all aiming at the same type of customers. It is not easy to sell cheap fashion. Well established rivals such as Matalan, New look, George are struggling, while results at Primark are booming. Primark has a very clear market positioning at the cheap end of the market. That helps them avoid some of the “struck-in-the-middle” positioning problems faced buy other competitors such as Bhs and New look. Not having an online store reduces the sales to some extent but people love the experience of going in person and shopping and with a huge range of primark’s clothing it might be hard and expensive to run an online store anyway. Primark has become a highly successful store over the years and have recently opened some huge departmental stores in several main UK cities e.g. Manchester and Coventry. Over the time primark will improve their products quality and will become UK most favourite cheapest store. From the annual report we can see that Primark’s profit and sales increasing every year, therefore they can continue with their current strategies.
References
Associated British Food (2005) available on-line
[14/01/2007]
Braithwaite, T. (2006) Financial Times “Defiant Primark 'still going like a train” available on-line <> [14/01/2207]
Gelb, M. (2005) BBC “Primark - king of no-frills fashion” available on-line <> [12/12/06]
Grant, R.M. (2005) Contemporary Strategy Analysis, 5th edition, Oxford: Blackwell Publishing, p.113
Biography
Associated British Food (2002) available on-line
<> [10/01/2007]
CIAO! Shopping Intelligence (2007) available online
<> [14/01/2007]
Johnson, G. Scholes and Whittington (2005), Exploring Corporate Strategy, 7th edition, Harlow: FT / Prentice Hall
Sarah Butler (2006) Times online “ABF retains confidence in Primark despite slowdown” available online
<> [29/12/2006]
TJX companies, Inc. (2006) T.K.Maxx available online <> [14/01/2007]
Wikipedia (2007) Strategy available on-line <>
[15/01/207]
Appendix
Leading clothing specialists: Share of all clothing specialists’ sales, 2005
Source: Mintel
Source: Associated British Food Plc
Company balance sheet
at 17 September 2005
Source: Associated British Food Plc
