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Assignment 2 Primark Introduction Primark is an Irish clothing retailer with operations in the UK where they have 372 stores, France, Germany, Italy, Spain, and Ireland (operating as Penneys) and recently the USA. It is a subsidiary of Associated British Foods after being acquired in 2005. With global turnover totaling £5.4billion for the year ending 2015, Primark has enjoyed tremendous success in the last couple of years. Primark’s value proposition of low prices has ensured it becomes the lowcost leader in low-priced, “disposable” fashion. This has attracted a lot of customers especially following the 2008 financial crisis and subsequent recession as cash strapped consumers flocked to it due to low prices. As a result, the Primark has enjoyed successive revenue growth and profitability since 2007

What is PESTLE Analysis? A PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a framework or tool used to analyse and monitor the macro-environmental factors that may have a profound impact on an organisation's performance. This tool is especially important when starting a new business or entering a foreign market. This analysis can give a business an edge when entering a new market if the research is carried out properly. This may increase the probability of the business succeeding.

Political factors The current critical party is conservative, since their rein they introduced sick pay, increased the living wage, brought in more holiday time, as well as decreasing the tax on the wealthier demographic in the UK. These changes would have meant that the company would have had to firstly pay staff more for their work, as well as giving them more holiday time throughout the year, sick pay would have meant the business has to pay staff even when they aren't at work on various occasions. Another point to make is that hat lowering of tax would affect the higher ups in Primark, possibly meaning they don’t need to take so much money out of the business profits to cover tax, simply meaning the business has more money. all taking its toll on the company's overall profits. There are multiple supports given to businesses by the government, the first one being good network routes, accessible to businesses across the country such as air, rail and by lorry, if these routes were slow and not consistent, JIT (just in time delivery) would not be applicable. This may mean business may run slower because raw materials and finished products as well as staff getting to shops etc get from A to B much less efficiently, therefore having good network routes is very beneficial to the UK and businesses within. Another support the government offers businesses is education and training, by the government

offering students good education tailored to specific businesses needs they create potential employees for the business meaning that the company can source workers from local areas instead of having to source them from abroad, all because they are trained and have the skills to work properly, saving money and time, and benefiting businesses. Corporate tax, also called corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities. Corporation Tax is a tax that is payable from all taxable profits of any company that is based in the UK, no matter where in the world the profit was generated. This type of tax is harder to counter as it comes out of the earnings of a business, thus the more one is to earn, the more tax they must pay. Therefore the less money they earn, earning more is still better though, even if you have to pay more in tax. No one can escape/avoid this sort of taxation, unless they are willing to undergo some illegal tax evasion, there are ways to pay less tax, like not declaring certain payments, specifically through cash payments. However VAT IS quite different, In the United Kingdom, the value-added tax was introduced in 1973, replacing Purchase Tax, and is the third-largest source of government revenue, after income tax and National Insurance. Like an income tax, it is based on the increase in value of a product or service at each stage of production or distribution. A business will increase the price of their product to cover the VAT they pay, therefore it is the customer, the buyer who pays for VAT, Rather than the business.

The EU The European Union (EU) is another form of trade association. The EU promotes itself as ‘the best way to realise our global future’. Being a member of any trade association gives credibility in the eyes of the customer, just as you would expect a gas fitter or service engineer to be Gas Safe registered. It can be seen to open doors to opportunities that are closely guarded or seen as exclusive. As the UK is due to leave the EU sooner rather then later after the recent vote, many companies who source raw materials from foreign parties will now pay more in tariffs, tax and product alone too. As this means that companies will be losing money from their profit or maybe even be just breaking even, they will up their prices to counter this increase in production cost so they retain a good percentage of profit and continue to make shareholders happy. Companies will have to pay more for things like raw materials, the plastic for their packaging or, the staff uniforms most likely shipped in from somewhere like china or other mainly massproducing large-scale manufacturing countries. They will pay more on import tax especially from counties still within the EU, cheese from Italy will be more expensive with new taxes only then projecting on the price of the product potentially affecting customer, for example they favourite foods may become more expensive, and although it is unlikely this could have a toll on the more phycological side of things and for some maybe even decide they don’t want to shop

there anymore. A more likely effect that isn’t so far reached would be that customers whom come to Primark for nice clothes that before may have been within their budget however no longer are will look elsewhere for more affordable clothing etc, Primark stated that within the whole Brexit deal they will absorb any the extra cost imposed by the weak pound, this should greatly increases Primark’s appeal, however I don’t see this as a realistic idea as they are then losing more money, which isn’t ideal for any company big or small As this will not please Primark’s shareholders. However maybe they wish to set them selves apart from the rest. Exchange Rates may change as well as production/sale costs, the foreign exchange market determines the relative values of different currencies, the price of a currency is practically a reflection of what the market thinks about the current and future condition of a countries economy compared to another. Thus, the pounds price is certainly going to change as people predict their views within the market by buying or selling sterling against another currency, for example GBP/JPY. Exchange rate will particularly affect a business if they are selling products worldwide, which isn’t such a deal for Primark as they are primarily based here in the United Kingdom, however if they were to sell abroad, any purchases made would have to be converted back into sterling, meaning depending on how the pounds price changes, they may lose money, however this goes both ways, this is unrealistic however because the value shouldn’t change drastically and any changes will be extremely minor, yet it does add up. International sales will change also, as cheaper trade will now be more difficult with countries within the EU, there is certainly opportunity to be indulged with other countries, the UK will have to negotiate new trade deals with the countries within the EU, this may take time, meaning businesses will have to wait until they can export/import to those specific countries, this will mean the companies lose out on selling or buying opportunities with customers and suppliers. This doesn’t really apply to Primark as I don’t believe they source or sell much to countries withing the EU, they source most of their clothes and products from countries where labour is cheaper, like India, china, and Nepal.

Economic

The current unemployment rate is 3.8% in the UK, this is the lowest level since the mid 1970’s, this is a good thing for businesses like Primark as there are more potential staff to employ for work in stores, depots and warehouses as well as management roles or any other jobs Primark need staff for. Meaning they should never be short on adequate staff, If employment rates were to continue to rise (unemployment decrease) they may have more staff to pay, but on the other hand there should be more productivity and work being done, therefore benefitting Primark hugely. However if unemployment rates increase, Primark may begin to lose staff members, meaning they are undermanned, this might lead to a variety of issues, like rushed and agitated staff in stores, over worked and often tired employees in warehouses, and these are just a couple of examples, and I’m sure its clear to see why these problems will most likely only bring on more and more problems just adding for example more bricks onto the tower in a game of Jenga, and we all know what happens at the final stages of a game of Jenga. The base interest rate in the UK is 0.75% however loan sharks, banks, shareholders, payday loan company’s and anyone else that lends money can add what ever they like onto that number, if the number is higher then Primark would have to pay back more of what they borrowed, for example if they were making some large aesthetical changes to their stores they might need funding from exterior entities. If they had the base interest rate of 0.75% and Primark borrowed £50 million to be payed back on a short term pay basis, they would have to pay an extra £375,000. The price would vary from lender to lender and could have drastically bug changes on Primark, they would need to find a suitable lender that they are sure they could pay off within the time on the contract. If this isn’t done properly, the company could be looking at serious potential issues, like bankruptcy.

Inflation is a quantitative measure of the rate at which an average price for a product increases over a said time. Regularly projected as a percentage, inflation might indicate a decrease in the purchasing power of a county’s currency. The Uk’s average inflation rate was 2.48% in 2018, (view the graph to the right to view inflation rates for the past 11 years)

The impact inflation might have on Primark could be, firstly they have to charge more for their products, possibly pushing some away from future purchase, secondly things like energy bills may cost more too, not to forget the cost of borrowing, that’s right, inflation effects the majority of the economy. If things like bills cost more, and shop lights are on all throughout the day, expensive bills to management are only going to get pricier, this takes a subtle but important tole on the business’s profits at the end of the month. The business cycle is as follows,

The business cycle, also known as the economic cycle or trade cycle, is the downward and upward movement of gross domestic product around its long-term growth trend. The length of a business cycle is the period of time containing a single boom and contraction in sequence. Recessions the majority of the time occur when there is widespread drop in spending in a country, this may be triggered by multiple things like an external trade shock, financial crisis, an adverse supply shock or the bursting of an economic bubble. This would effect Primark as less people would be buying products and creating business for them, obviously effecting profit, but not so obviously causing issues with supply changes and JIT delivery, if that’s the type of delivery Primark use, if current stock isn’t selling and taking up storage space, yet more is coming in as they predicted it to sell, not only will they have an addition of new stock that might not sell either, its all going to need somewhere safe to be stored, costing Primark money for storage units etc.

Social In the UK there is a large and growing number of people immigrating from their home countries, to take advantage of the better paying, safer and more clean environments/jobs, we have all these benefits as the UK is much more developed compared to other countries and our economical hub is gigantic. Enticing business, tourism and much more. The first change in the population, is that ‘lower earning’ individuals and families come over to earn more money, Primark targets the ‘lower earning customers as they sell affordable products, therefore, theoretically the more lower earing immigrants should give Primark more business. Secondly as a larger and again, growing number of the UK’s population is of the teenage demographic, they are generally known to be more into fashion and stereotypically are known to impulse buy more clothes, yet again, creating more business to fashion retailers like Primark. If the majority of the avid shoppers Primark sells their products to are teenage or young adults, Primark need to stay on latest fashion trends, have wide variety and offer the correct sizing as teenagers come in all shapes and sizes. This is not to say that the company don’t need to pay attention to the older shoppers too, by having an appropriate and maneuverable store layout, any customers will automatically find more ease locating products, especially the people of the older ages who may be saved looking about for too long and becoming fatigued. The company doesn’t want such a reputation that their stores are untidy, hard to locate specific product, or are even hard to get around efficiently as this may steer people away from Primark and towards competitors with more aesthetically pleasing stores as well as a more practical layout. As everyone likes an easy shopping experience. If Primark find more of their regular customers as being of the older age demographic, they would do well to stock in more older appropriate/favorable items, maybe like scarfs, low-cost trainers and comfy reliable shoes, ‘older styles’ of coats and jackets etc. This is a great idea, as Primark must aim to offer a wide and appropriate range of products to the aging population who also don’t take so much pride in expensive clothes, unlike many teens. Consumers taste and preferences are changing all the time, this change is inevitable and is why company’s need to keep up with current trends. A current trend and something making a comeback are candles, if you’ve ever been to Primark, and I’m sure you have, you’ll know they don’t just sell clothes, they also have things like blankets, bed sheets, ornaments and they stock a fairly large variety of candles, scented or otherwise. They are selling candles because there is a huge market for them at the moment, they make good gifts to others or even yourself, its clear to see why they are coming back into fashion, all because the UK has run out of electricity and Us Brits need a relaxing atmosphere because our kettles don’t work and we can’t make tea, I’m joking, candles are known to set a nice atmosphere all while making the surrounding area smell pleasant, this destresses and sooths many and can have a huge phycological effect on a person

therefore people like to keep the around, since there is such demand for candles, Primark have decided to take part and jump into the market too. Primark have sourced dozens of different scented types, allowing them to most likely sell more as there will be a higher probability that there is something each customer likes. There are also a wide variety of sizes and prices ranging from about £1.50 to £6. The change in consumer taste affects Primark because they often will have to find new suppliers for different products like candles for example that runs the risk of them being inconsistent and unreliable, Primark could also decide to be apart of a certain trend, spend money on suppliers, production, in store layout and advertisement, for the trend to then fade into non-existence and for people to be onto the next big thing, this could cost a company millions and have no return at all. This is why its important for them to keep up and analyze trends and predict which ones are good and which ones are worth the money and effort. Primark are very respected, reliable and popular in the United Kingdom therefore, might not need to spend millions on advertising, However Primark are exceptionally good at maintaining their current market share by having a combination of sales promotion, advertisements and competitive pricing strategies. Thus enabling them to maximize sales as much as possible

Technological factors The accelerating development and growth of e-commerce is continuing to open up more competition for traditional brick and motor businesses in the UK clothing retail as evidenced by the emergence of online Pureplay such Amazon, Asos, Boohoo and others. This new channel of distribution is opening up the competitive space due to its relative ease and low cost operational base. The fact that a traditional Brick and Motor clothing retailer like Primark doesn’t operate an e-commerce website makes it vulnerable to a decline in store sales as such technological developments continue to shape the retail environment (Mintel 2015).

Environmental factors Recent trends that are influencing UK clothing retail industry include the rise of ethically and environmentally conscious consumers who continually demand firms to adopt practices such as paper packaging and use of recycled materials. Some retailers like H&M have already launched sustainable clothing lines made from organic cotton, and other environmentally friendly materials. Many retailers are also faced with government pressure that demands proper waste disposal.

Opportunity, delivery vosts don’t allow primark to sell omline, loyalty schemes...