Primark

Pay less look good...........

Executive Summary

This report consists 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.

Primark specialise in low prices. 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 mark eminence. It is about slightly low but still reasonable quality

for a very very low price.

Table of Contents

Table Of contents

Introduction …………………………….. 3

Value for money…………………………… 3

Good supply chain management capabilities …………… 3

Alliances and joint venture with other firms …………… 3&4

More flagship stores and acquisitions……………. 4

Brand image of Primark as compared to rivals………… 4

Factors led to Global Recession …………….. 5

Bubble that burst……………… 6

Problems Primark Faced……………. 7

Critical Analysis………………………… 9 to 12

Conclusion ………………. 13 to 14

External stake holders …………. . 14

Recommendations………………..

15

References…….. 16

Introduction:

Primark is a department store chain that specialises in clothing for men, women and

children/babies. 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.

Value for Money:

Well as aforementioned, Primark sell at low prices and therefore sell in bulk 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.

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:

Primark had a milestone year in 1995 with the development of the UK business following the

acquisition of the BHS One-Up discount chain. As a result, 16 stores were added to the UK

business, most in the Greater London area, and all of a significant size. The next major

development occurred in 1999 with the acquisition of 11 stores from the Co-Op, including

Reading. The Reading property, after much refurbishment, also facilitated the much-needed

relocation of the UK buying offices.

In 2000, C & A retreated from the UK. Primark acquired 11 of their stores which brought

store numbers to 108, consisting of 75 in UK and 33 in Ireland.

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 2009 in that year's Drapers Record awards. Primark continues

to operate in the Irish Republic under its original name of Penney’s, 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

More flagship stores and acquisitions

In 2001, store opened in Blanchard town, Dublin. At the end of 2001, the number of stores

had grown to 109 (75 in UK and 34 in Ireland). In 2002, two major stores were opened in

Glasgow and Birmingham.

In the period of 2004-2005, 14 new stores were opened, adding over 400,000 sq. ft. of retail

space. In 2005, six stores were acquired from ‘Allders’, three of which opened in 2006. In

July 2005, the acquisition of Littlewoods stores by ABF plc which comprised an estate of 120

premises was completed, of which 41 stores were transferred to Primark.

Brand image of Primark as compared to rivals:

It was recently reported that Primark is the only retailer (even after Global Recession) to

increase their profits continuously over the last 3 years 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. In

marketing terms products are more often focused on narrow segments, Primark turns this on

its head – a rare breed indeed. (see the below: source primark.co.uk)

Wider geographic coverage:

Number of Stores Trading at 17th May 2011

Ireland 38

Spain 20

UK 152

The Netherlands 2

Portugal 4

Germany 3

Belgium 1

Total - 220

Factors led to Global Recession:

These days the most talked about news is the current financial crisis that has engulfed the

world economy. Every day the main headline of all newspapers is about our falling share

markets, decreasing industrial growth and the overall negative mood of the economy.  For

many people an economic depression has already arrived whereas for some it is just round

the corner. In order to understand what is now happening in the world economy, we need to

go a little back in past and understand what was happening in the housing sector of  America

for past many years. In US, a boom in the housing sector was driving the economy to a new

level.  A combination of low interest rates and large inflows of foreign funds helped to create

easy credit conditions where it became quite easy for people to take home loans. As more and

more people took home loans, the demands for property increased and fueled the home prices

further. As there was enough money to lend to potential borrowers, the loan agencies started

to widen their loan disbursement reach and relaxed the loan conditions.

The loan agents were asked to find more potential home buyers in lieu of huge bonus and

incentives. Since it was a good time and property prices were soaring, the only aim of most

lending institutions and mortgage firms was to give loans to as many potential customers as

possible. Since almost everybody was driving by the greed factor during that housing boom

period, the common sense practice of checking the customer’s repaying capacity was also

ignored in many cases. As a result, many people with low income & bad credit history or

those who come under the NINJA (No Income, No Job, No Assets) category were given

housing loans in disregard to all principles of financial prudence. These types of loans were

known as sub-prime loans as those were are not part of prime loan market (as the repaying

capacity of the borrowers was doubtful). Since the demands for homes were at an all time

high, many homeowners used the increased property value to refinance their homes with

lower interest rates and take out second mortgages against the added value (of home) to use

the funds for consumer spending. The lending companies also lured the borrowers with

attractive loan conditions where for an initial period the interest rates were low (known as

adjustable rate mortgage (ARM). However, despite knowing that the interest rates would

increase after an initial period, many sub-prime borrowers opted for them in the hope that as

a result of soaring housing prices they would be able to quickly refinance at more favorable

terms.

Bubble that burst…

Overbuilding of houses during the boom period finally led to a surplus inventory of homes,

causing home prices to decline beginning from the summer of 2006. Once housing prices

started depreciating in many parts of the U.S., refinancing became more difficult. Home

owners, who were expecting to get a refinance on the basis of increased home prices, found

them unable to re-finance and began to default on loans as their loans reset to higher interest

rates and payment amounts.

In the US, an estimated 8.8 million homeowners – nearly 10.8% of total homeowners – had

zero or negative equity as of March 2008, meaning their homes are worth less than their

mortgage. This provided an incentive to “walk away” from the home than to pay the

mortgage.

(source:guardian.co.uk)

Problems Primark faced :

After the owner of discount clothing retailer Primark revealed a "noticeable" slowdown in

consumer demand.

Associated British Foods said the chain's half-year sales rose 3 per cent on a like-for-like

basis - half the level achieved during its previous financial year, according to a pre-close

update ahead of next month's interim results. It is also battling against an ongoing squeeze on

profits margins since the New Year 2011 vat rise and the impact of soaring global cotton

prices. The update comes after a long period when Primark weathered the recession and

consumer down turn with forecast-beating sales growth consumers are reining in their

spending as they come under pressure from the vat hike as well as soaring petrol price

John Bason, finance director at AB Foods, said it is a trend he expects to see mirrored among

other retailers this year. "Even for people who don't feel they will lose their jobs, they will

feel they are being squeezed," he noted."It won't just be Primark, but we'll see it for number

of Retailers “.

Primark has been AB Foods' star performer in recent years as it has ridden the boom in

demand for budget clothing on the high street. (source: scoutman.com)

The tables below highlight how they performed in each category and sub-category for both

2009 and 2008.

 

1.

Commitment 2008 2009

Overall assessment Improver Achiever

Endorsement and advocacy Improver Achiever

ETI participation Improver Achiever

Senior responsibility Improver Achiever

Internal communication Achiever Achiever

Resources Improver Achiever

Setting targets Improver Improver

2.

Monitoring, independent verification and reporting 2008 2009

Overall assessment Improver Achiever

Risk assessment Improver Achiever

Inspection Improver Achiever

Worker's views Improver Improver

Verification Improver Improver

Data management and reporting to ETI Improver Achiever

3.

Awareness raising and training 2008 2009

Overall assessment Improver Achiever

Internal training Beginner Achiever

Supplier guidance and training Improver Achiever

Worker awareness Improver Improver

4.

Corrective actions 2008 2009

Overall assessment Improver Achiever

Identifying and prioritizing issues Improver Leader

Engaging with suppliers Improver Improver

Follow up Improver Achiever

Termination of supplier relationship Improver Improver

5.

Management procedures, pricing and incentives 2008 2009

Overall assessment Improver Improver

Commercial terms Improver Improver

Integration of ethical and commercial criteria Beginner Improver

New suppliers Achiever Achiever

Staff responsibility and incentives Improver Improver

Critical path Beginner Improver

Critical analysis on Primark:

Workers producing clothes for Primark face growing poverty on as little as 7p an hour for up

to 80-hour weeks. But they are helping Britain’s most popular cheap fashion retailer beat the

recession, the charity War on Want reveals .

War on Want warns that Primark is ignoring rising basic living costs as employees making

garments in the Bangladeshi capital Dhaka are now worse off than two years ago, when the

charity first exposed their hardship. War on Want contrasts the retailer’s 17 per cent profits

jump to £233 million during the 12 months ending in September 2011 with employees on the

minimum wage, £13.97 (1663 taka) a month, and all of them earning far less than a living

wage. Amid high inflation and increasing fuel costs in Bangladesh, Employees calculate a

worker needs £44.82 (5333 taka) a month to give their family nutritious food, clean water,

shelter, clothes, education, health care and transport. Yet average workers’ pay, £19.16 (2280

taka) a month, is less than half a living wage. The vast majority of employees live in small,

crowded shacks, many of which lack plumbing and adequate washing facilities.Campaigners

from the charity and Alam will then go into the annual meeting of Primark’s parent company,

Associated British Foods, to speak out against its sweatshops. The report also reveals similar

pay and conditions for Dhaka employees making clothes for Asda, Britain's second-largest

clothing retailer by volume, and Tesco, the UK's biggest supermarket fashion chain. Infact,

who toils in a factory supplying all three retailers, Though forced overtime is illegal in

Bangladesh, employees said they were made to toil extra hours, often unpaid. Workers

complained that in the fast fashion rush to produce the latest styles, many of them suffer

verbal and physical abuse as they struggle to meet unrealistic targets. Primark, Asda and

Tesco all claim to respect the rights of its garment suppliers to join and form trade unions.

But Dhaka workers said none of their factories was unionised. War on Want is demanding

that the British government introduce regulation which ensures a living wage for overseas

suppliers and allows exploited staff to seek justice in UK courts. Ruth Tanner, campaigns and

policy director at the charity, said: “Primark, Asda and Tesco promise a living wage for their

garment makers. But workers are actually worse off than when we exposed their exploitation

two years ago. The UK government must bring in effective regulation to stop British

companies profiting from abuse.” 

Labor Problems Primark Faced:

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 12

The challenge for Primark in coming years will be to consolidate progress, and to ensure that

it doesn’t lose momentum.

Areas of good practice, of which were many, recognized in the report are as follows:

- Commitment to ethical trade:

Expansion of Ethical Trading team (increased resources and size of team), with plans

for further increases to a total of 15 staff by the end of 2010

Ethical Trade Director is a member of the Primark Executive Committee and reports

directly to Chief Executive

Extensive engagement in ETI working groups and pilot projects

Extending implementation beyond first tier

- Monitoring, independent verification and reporting:

Supplier rationalization and a focus on building long-term relationships with suppliers

All factories risk assessed

Massive increase in the number of audits over 2008

Numerous aspects to verification process, including own staff, commercial auditors

and NGO auditors. Plans to expand involvement of other “on the ground” bodies to

verify inspections

Incorporate worker interviews in inspection process, both on and offsite

- Awareness raising and training:

Staff intranet acts as central portal of information on ethical trade

Conducting worker training project in Bangladesh; established Worker Education

Groups in India

- Empowering suppliers:

Focus of ethical trade programme on supplier ownership and capacity building

Held a number of supplier training workshops, with plans for more

Code of Conduct translated in to a wide variety of languages

- Integration of ethical trade into purchasing practices:

Ethical trade included as part of employee induction, including one-to-one meeting

with Ethical Trade Director

Training on ethical trade for buyers

Regular engagement between ethical trade and buying teams – for e.g., providing

buyers with information packs about ethical trading issues prior to buying trip

Plans to focus on intractable provisions of the Base Code, including plans to address

Living Wage issues in 2010

Focusing attention in risk assessments on homeworking and subcontracting

- Engaging with workers and trade unions in code implementation:

Individual worker interviewers incorporated into inspection, both on site and off site

Worker training programme for over 1000 workers (NUK project in Bangladesh),

plus rights-based training (SAVE project India)

Worker Education Groups established in India

Discussion with union in India re: verifying the findings of the main audits

Worked with NGO auditors in China, Bangladesh and India

Worked with trade unions in Bangladesh and India on remediation

Informal relationships with local NGOs

- Taking measures to focus implementation on tricky/intractable BC provision:

Leading project on vulnerable young female workers as part of Brand Ethics Working

Group (with H&M and Gap)

Initiated project SAVE in India on worker education, including gender equality and

freedom of association

Member of project in India on freedom of association training and worker education

Living wage projects in China (project sponsor) and Bangladesh (project partner)

Conclusion:

While we fully recognize Primark’s significant progress in recent years, we would like to

offer some constructive suggestions for how Primark can continue to progress its ethical

trading program me:

Build on the success of programmes started in 2009, ensuring that the ethical trade

programmes is well-anchored in the organization and not dependant on the efforts of

on person

Push further on the difficult issues in the Base Code, including homeworking and

living wage

Translate efforts and initiatives into impact on workers, to be able to demonstrate next

year clear instances of how workers’ conditions are improving across Primark’s

supply chain

Further implementation of guidelines on termination of supplier relationships

Further integration of ethical trade into commercial terms and more formal systems

for recognitions of suppliers with high labour standards

Further develop targets in terms of labour conditions in your supply chain, as other

companies are now doing, either at department level of through KPIs on ethical trade

for staff, including buyers

Ensure that information systems (including audit databases) are able to give evidence

of conditions across company supply chains, identifying issues to inform

implementation and to demonstrate impact

These measures should help Primark translate efforts and initiatives into impact on workers

and demonstrate evidence that working conditions are improving across Primark’s supply

chains.

In summary, we are delighted to see Primark’s impressive progress on ethical trade and look

forward to hearing how many initiatives and projects progress.

EXTERNAL STAKEHOLDERS

Labour Behind the Label is a non-profit organisation.  In their 2009 report Let’s Clean Up

Fashion, the organisation asked 25 leading high street retailers about their strategies and

activities on addressing a living wage for workers in factories making their products.

Their report gave Primark a grade 3 score, out of a possible top score of grade 5.  Grade 3 is

categorised as:

Can offer concrete examples of steps to increase wages in the supplier base, but

there are either significant omissions or there is no clear plan to move beyond

pilot projects.

Commenting on our specific program me on living wages, Labor behind the Label said: 

“Primark seem to have stepped up a gear over the last year 2010 as a result of media and

campaign pressure. Their multi-stakeholder involvement is notable: members of six ETI

groups and observers in a 7th , work with other brands on home working and evidence of a

number of partnerships with NGOs and trade unions. We are happy to see that Primark are

engaging on the issue of home working and developing work to improve conditions in this

area.

It is clear, however, that these plans are still at the fairly early planning stages and there are

some important omissions in the work outlined so far. For example, although an effort is

being made to increase freedom of association through projects with SAVE and NUK, the

living wage proposals for China and India have no clear plan to build in training on unions

and encouragement of union building in the identified factories.

In order to sustain the ‘negotiated approach’ long term, this work must become a

priority.  Little is said in the submission of Primark’s purchasing practices, beyond mention

of a reputation for paying suppliers promptly and some training for staff. Unless Primark is

prepared to make some real changes to its buying practices and, more importantly, its pricing,

sustained improvements are going to be difficult to obtain.

The wage projects indicate a plan to roll-out findings to the supply base but there is no clear

indication of how this will be achieved and how it will ensure living wages.

After years of little engagement, Primark will need to continue its hard work to catch up with

competitors.”

Recommendations:

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

Primark ensure that if they want to have good customer services, the business consistently

does these things:

Don’t make promises unless WILL keep them.

Listen to your customers.

Deal with complaints.

Train their staff to be ALWAYS helpful, courteous, and knowledgeable.

Take the extra step.

Throw in something extra.

Primark can easily expand and diversify, giving its rivals a competitive environment

with substantial financial power.

Primark’s offer to the customer is one of high-quality merchandise, at value for

money, backed by Primark’s service promise.

A strong consumer proposition has been developed by Primark brand and embodied

in the line “Look Good, Pay Less”.

This research can be concluded by mentioning that the UK Clothing retail industry is

facing high levels of competition between various players. But the end result shows,

the consumers are most benefited from it.