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1. Introduction
Primark, after releasing in Ireland in 1969, has owned over 270 stores in some Europe countries. For international expansion strategy, Primark has actually planned to open huge shop in United States in 2015. This paper will focus on situation analysis and competitive analysis to understand external and internal environment and understand their resources and power. Basing on these understandings, there is the idea for Primark in element of marketing techniques to build and develop Primark in US market which is the exceptional style location in the globe
2. Circumstance analysis
2.1. Internal analysis
2.1.1. Vision
Primark's vision is to provide customers items which are combined by three aspects such as the high level of quality, upgraded style and worth for worth prices
2.1.2. Mission
Primark mission statement is "To supply quality clothing at costs viewed to offer genuine value".
This brand name is the representative of Associates British Foods (ABF) and was launched in Ireland in 1969 under the first name of Cent's. With its objective of operation, Primark is thought about the typical function of fashionable fashion store in Europe due to the fact that it has actually provided the stylish clothing with the low rate.
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As specified by Conti (2014 ), targeted customers of Primark are deal hunters who wish to buy excellent items with affordable rate. Basing upon objective declaration, Primark specifies its comprehensive mission with some attributes such as the effectiveness of product outsourcing, easy design of products, the usage of local materials, the concentrate on popular size, un-heavy marketing costs.
2.1.3. Objectives (S.M.A.R.T ???)
To pursue and achieve above mission and vision, Primark defined its objectives.
The first objective is to achieve like-for-like growth through the focus on purchasing increase, merchandise and the creation of exciting places as retail stores. Secondly, to target the increasing number of customers, Primark’s objective is to increase the selling space both domestically and internationally. Thirdly, in double with the update of latest fashion, Primark focuses on offering customers the wide range of products from men and women fashion to accessories and kids (Annual report, 2013)
2.1.4. Strategies (S.T.P ???)
Customers are defined as the people who bring the revenue for the corporate and brand position is identified basing on the targeted customers. Hence, strategies to attract customers and build brand position are focused by companies. With the increasing number of corporate recently, companies have leveraged GE/McKinsey model as the tool of competitive analysis, even in consulting companies (McKinsey & Company, 2008; Chakravarthy & Henderson, 2007). This model is used to identify brand position in comparison with others.
In the situation of Primark, Primark brand position is identified in the following GE model which is considered the support for decision making basing on product portfolio and competitive analysis. In the fashion industry, internationalization and diversification strategies are identified with the understanding of the number of products and brands in the portfolio. In details, Primark has high level of industry attractiveness and strong business unit (Figure 1, p. 2)
Figure 1: GE model in Primark
Business Unit Strength
High
Medium
Low
Industry Attractiveness
High
PRIMARK
Medium
Low
According to GE model (Porter, 1982; Abell & Hammond, 1986), industry attractiveness is analyzed through some features such as market growth rate, market size, demand, the industrial profitability, competitors and international opportunities. (Table 1, p. 2) Table 1: Industry Attractiveness of Primark (this should be micro environment)
Features
Level
Explanation
Market growth rate
High
As stated by Keller et al (2014), there will be the growth of global fashion industry at two-digit percent, especially from emerging countries in the period of 2014 and 2020
Market size
High
The market size has grown basing on some trends such as
The evolution of buying power on Asian customers who have moved to middle class. Moreover, they also define clothing as the way to impress and show their lifestyle There is the increasing demand of travelling and shopping
Market size: 192,334 million of Euro in 2013 with the market size growth of 2.75% in comparison with 2011 (Fashionbi, 2013)
Customer demand
High
There is the change of customer lifestyle and the increase of demand and need of difference (Barnes and Greenwood, 2006). As the evidence, some fast fashion brands such as Zara, H&M and Uniqlo, etc have developed with the fast growth rate (Christopher et al, 2004)
Industrial profitability
High, but decreased because of strong competition which forces companies to reduce their prices as the tool of creating competitive advantages Fast fashion companies have applied supply chain to increase the efficiency and reduce operational cost. Hence, they have achieved high rate of profitability (Sherry et al, 2012; Bhardwaj and Fairheart, 2010) There is the influence of strong competition into the margin of fast fashion because companies have identified the cost reduction as the way to create competitive advantage (Lambert, 2014)
Competitors
High
There is the high number of competitors in fast fashion industry, especially when this industry has the much increasing demand
International opportunities
High
There are some reasons for the development of international presence of brands. The influence of globalization which is considered the way of maintain market share and growth when companies have achieved the peak growth in existing markets The development of IT is considered the motive for companies to develop internationally To leverage business chances from non-defined markets (citation ???)
Business Unit Growth
According to GE model (Porter, 1982; Abell & Hammond, 1986), Business Unit Growth has been shown through market share and its growth, distribution channel, production capacity and profit margins in comparison with others. The high level of Business Unit Growth in Primark has been shown in the following table Table 2: Business Unit Growth of Primark
2.2. External analysis of US retail market
2.2.1. Macro analysis – PESTLE
Political factors and Legal factors
US are defined as the most powerful ad successful country in the world. As stated by Country Analysis Report (2010), US have established its certain political policies which become the guideline of foreign retailers to expand and operate. However, there are some differences between US politics and other developed countries. In details, greater power will lie on the upper house of legislature and have wider scope of power. Economic factors (what is the economic factors ???)
Social factors
In aspect of US demographics, white American accounts for 72.4% while African American is with 12.6% and Asia with 4.8%. Mentioning to the US religion, 78.2% of population are with Christian while other religions and no religion account for 3.7% and 16.2% respectively. As surveyed by PwC (2014), US demographics will be diversified with the increase of Asian immigrant children who were born in 1990 and 2000’s (Figure 2, p. 5). Hence, there will be the shift from the heritage to the elements of shopping experience in US. As the results, retailers will focus on young people and families and multi-marketing will be leveraged by 2020 (PwC, 2014) US customers have more demand and are powerful in their shopping (PwC, 2014) Figure 2: Percent of Population by Race
Source: PwC (2014)
Technological factors
Technological development is considered the main trend in current and future global economy. As mentioned in Figure (3, p. 6), US ranks at 3rd position among regions from the growth of the number of Internet users. Under this trend, marketing activities have leveraged the benefits of the Internet and social media to attract more customers. Moreover, online shopping is considered the certain trend of global shopping. Figure 3: The Internet user in the world from 2000 - 2011
Source: Nicolate et al (2012, p. 253)
Legal factors
When companies have expanded to international countries like US, they need to pay their attention on regulation and respect the legislation of such countries. Hence, in the situation of Primark, when expanding to US, it also focuses on understanding all laws and regulations relating to retail industry. There are some laws which have influenced to US retail industry. Firstly, in aspect of advertising law, companies need to deliver true information of products and services which have been offered to customers. Or else, they will receive high financial penalties. Secondly, regarding to customer protection law, retailers are required to avoid misleading marketing programs which are implemented to boost sales. Thirdly, there are some regulations applied when retailers offer customers misleading discount while such discounts do not exist.
Environmental factors
Customers have changed their behavior which cares more about environment and health as well as want to contribute their responsibility to protect their environment. Hence, companies are required to concern more about environment into their products and services. 2.2.2. Micro analysis – 3Cs (how many segments on the industry ?)
Customers
According to Conti (2014), targeted customers of Primark are young people who are defined as the bargain hunters and want to buy the high quality products with the lower price. Moreover, with the aim of satisfying all range of age of customers, Primark has developed its wide range of products including men, women and children in home fashion, accessories and beauty products.
Moreover, with the vision of offering updated style with diversified design in short term while making sure the high quality, Primark has defined its strategy to become famous fast fashion brands such as Zara, H&M, Uniqlo, etc. In US, Primark can satisfy all ages of customers, but focus on young people from 20 to 40 years old. Moreover, with these target customers, Primark can leverage all benefits from the trend of technology development as well as e-commerce, Competition
In the global context, Primark has faced with many fast fashion competitors, especially Zara, H&M, GAP and Uniqlo (Figure 4, p. 7). In aspect of US market which is considered the destination of fashion brands in the world, Zara, H&M and Uniqlo are defined as the main competitors of Primark because of their strong development and competition in US market. Figure 4: Top 10 Global Fast Fashion Companies (2006–2010)
Source: Joon-Hwan et al (2011)
In aspect of Zara, its growth in US market is shown through the increasing number of stores and revenue in 2014 in comparison with 2013. As mentioned in Annual report (2013), Zara has the total number of stores as 548 in US in 2013, compared with 482 stores in 2012 (Figure 5, p. 8). Among these stores, Zara has also developed both kinds of stores such as under company management and franchise. Regarding to revenue, there was the increase to $2.3 billion in 2013 from $2.1 billion in 2012 (Figure 6, p. 9) Figure 5:
The number of stores of Zara
Source: Annual report (2013, p. 181)
Figure 6: The revenue of Zara
Source: Annual report (2013, p. 184)
Regarding to H&M, after its launching in US in 2000, it has owned 305 stores with the increasing number of 36 stores in 2013 (Annual report, 2013). Even though launched after Zara, H&M has built its brand image in US customers minds and has just launched its online website which is considered the new way to access more customers with the aim of increasing revenue and market share in 2013 (Dishman, 2013) Mentioning about Uniqlo, even though its late launching in US market in 2006 with the first flagship store in Soho, New York city (Fast Retailing, 2014), it has developed fast with the increasing number of big stores in prime location, for example, opening in Fifth Avenue in 2011.
At the end of December, 2013, Uniqlo has owned 17 stores in US and aims to open up to 100 stores in this country and become the Top Casual wear brand in US (Annual report, 2013) Moreover, under strong competition, Uniqlo has leveraged US market through launching online website in 2012 which is earlier than that of H&M Corporate
Associates British Foods (ABF) is considered strong and leading position in many business sectors such as Sugar, Agriculture, Retail, Grocery and Ingredients (ABF Website, 2014). The representative of ABF in retail industry is Primark, which is the fast fashion brand launched in Ireland in 1969 under the first name of Penny’s (Primark introduction, 2014).
Until now, Primark is considered the typical feature of trendy fashion store in Europe because Primark has sold trendy clothing with the low price. In aspect of distribution system, Primark has over 270 stores in 8 European countries and plans to open the first retail store in US at the end of 2015 (Julia, 2014). As shared by ABF, which is the parent company of Primark, the plan to expand into US is to build the big store with the area of 70,000 meters in Boston and will expand the large number of stores until 2016. 2.3. S.O.W.T analysis
S – Strengths
Primark is the famous brand of Associates British Food with the large distribution channel in Europe as 270 stores. Hence, Primark has much long experience in opening and operating stores in foreign countries Primark is one of Top 10 European fashion brands which are available in the list of 100 Global Fashion Brands in the world Products: High quality with reasonable price and modern design are attractive to customers, especially young people under 35 years old Be successful with cost leadership strategy to achieve high market share
W – Weaknesses
Advertising: Just focusing Word Of Mouth marketing as the tool to reduce operational cost (Primark annual report, 2011) Distribution channels: Even though having the large number of stores, Primark has not leveraged the benefits of online shopping
O – Opportunities
US is considered the fashion destination in the world with high demand of local customers and foreign tourists Opportunities to use other kinds of marketing to improve sales and develop its brand image
S-O Strategies
Offering US customers products with high quality and reasonable price while updating modern design.
Leveraging diversified tools of marketing to access customers
W-O Strategies
Diversifying kinds of marketing
Opening the chain of stores in prime location as the way to build brand image in customer’s minds
T – Threats
US fashion industry has high level of competition, especially with the availability of famous fast fashion brands such as H&M, Zara and Uniqlo which also have long term development strategies in US Difficulties on understanding customers demand and needs because their behavior have been changing under many effects
S-T Strategies
Competing rivals with cost leadership strategy
Basing on experience in operating in different culture, Primark should try to understand US customers and their changing behavior
W-O Strategies
Leveraging benefits from different kinds of marketing
Access different customers, both local and foreign tourists through distribution channels and marketing campaign
2.4. Strategic Implications and Conclusion (more critical; what implication means?) Situation analysis becomes the important part of strategic planning for companies when they have planned to develop to new markets, especially markets over borders. This analysis includes both external and internal analysis so that companies can understand their resources and power as well as market characteristics. In this section, PESTLE and 3Cs model are used for analyzing external environment from perspectives of both macro and micro analysis. Moreover, GE model is also used to understand industry attractiveness and Business Unit. After these kinds of analysis, the report also mentions Strengths, Weaknesses, Opportunities and Threats through SWOT analysis. There are some strategic findings from this analysis such as products with high quality and reasonable prices, the leverage of marketing tools and accessing customers through the large distribution channels.
Part B – Competitive Environment through Porter’s Five Forces As stated by Liang et al (2007), the importance of competitive force has been shown through its influences into organizational contest in the specific market and industry. Moreover, these competitive forces can come from both internal and external environment. Basing on the understandings of competitive forces, companies have defined their strategies and organizational activities (Low and Cheng, 2006). Porter’s Five Forces which is proposed by Porter (1985) become the important tools to find out five competitive forces for each company. The purpose of using this analysis is to integrate the understandings on industry environment and inside power of companies. Hence, with the aim of understanding customers and competitors in US fashion industry and competitive advantages of Primark, this section focuses on using this model – Porter’s Five Forces including the threats of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threats of substitute products and rivals among existing firms.
Firstly, Primark has not faced with high level from the threats of new entrants. The fashion industry has achieve high growth rate, as stated by Keller et al (2014) that the growth rate will be two –digit number. Moreover, there are some trends such as the increasing demand of travelling and shopping as well as the evolution of buying power of Asia or developing countries. These features become the attractiveness to many companies who want to put their feet into fashion industry. However, being the big fashion brand in European and in the list of global fashion brands in 2014, it is not easy for new players to compete. Secondly, the bargaining power of suppliers is moderate. The reason is that with high position in fashion industry, there are many suppliers who want to cooperate with Primark.
Moreover, with the operation in many countries, Primark has many opportunities to access suitable suppliers. Thirdly, the bargaining power of consumers is high. Because US fashion retail industry is very competitive with the launch of many fashion brands, especially fast fashion brands such as Zara, H&M, etc, they have offered the diversified products and services to US consumers. It means that customers have more and more choices of fast fashion brands. Hence, it is not easy for Primark to attract them because their power is very high.
Fourthly, basing on high competition, there are many threats of substitute products from competition brands. And lastly, mentioning about rivals in US fashion industry, Primark has met many difficulties to compete them, especially with brands which have the large distribution channels and online shopping website such as Zara, Uniqlo and H&M. In conclusion, through Porter’s Five Forces, even though Primark has strengths on high bargaining power of suppliers and have a few threats of new entrants, it have some difficulties caused by the strong competition and customers’ power.
Part C – Marketing Strategies of Primark in US market
Basing on strategic findings in Part 4, this section will use 4Ps model as marketing strategies of Primark in US market.
1. Product strategies
According to Czinkota and Ronkainen (2005), as the necessary step of internalization, companies have considered between standardization and adaption in their product strategies. Companies have four choices for this strategy. It is called as standardization which has no change in comparison with domestic products. Secondly, they can make some changes or adjustments for existing products which have been sold in domestic market in order to match with foreign customers, for example, size or colors. Thirdly, they can create new products for foreign customers completely. It means that they have developed to satisfy new customers through the adaption as new product development.
The last choice is to develop new products which can satisfy many countries and for this strategy, companies can sell such products globally. In the situation of Primark in US, because of the change of US customers’ behavior, in combination with the aim of achieving lower price through high volume of production, Primark should combine both standardization and adaption strategy. It means that Primark can adjust some existing products with suitable colors and sizes. Moreover, with the aim of understanding US customer behaviors, Primark also focuses on R&D to create new design which is satisfying customers at the high level.
2. Price strategies
To achieve the success of low price strategy, Primark has applied two strategies which are the same in the US. The first strategy is to find the best materials but low prices through leveraging the bargaining power of suppliers and to create new suppliers through seeking in new markets. Secondly, with the application of innovation in production and design, Primark can offer customers updated design.
3. Promotion strategies (too general)
Being different from other fast fashion brand such as TX Maxx which usually advertises its brand through many norms of advertising under the big campaign named “Big Labels, Small Prices”, Primark has neither advertise nor pay much money for celebrity endorses. Even Primark holds no end of seasonal campaign or big promotion for being out of stock. Promotion strategies are called marketing communication strategies which attract customers with their attention on new products and brands. According to Wood (2008), marketing communication comprises five main tools such as advertising, promotion, PR, direct marketing and Point of Sales.
The reason for integrating all tools into promotion strategies is that each tool had both advantages and disadvantages so the combination of these tools is to minimize all problems and disadvantages. As stated by Shimp (1997), Stewart (1996), Integrated Marketing Communication (IMC) is understood as the usage of all communications to deliver messages to target customers through different channels, for examples, TV advertising, PR, internet, media. For each strategy in IMC, the objectives and tactics will be mentioned and analyzed.
3.1. Advertising through paid media (too general)
3.1.1. Objectives
To build brand image (what image) in US customers in the first period of launching (how long) To reach 50,000 customers during one year after launching and such customers have visited Primark stores or made the online purchasing with the time of 4 each week.
3.1.2. Tactics
Creating the advertisements in TV Cabs
American Fashion TV Channel
Fashion One
Live Fashion
Fashion TV Latin America
3.2. Using social media such as Facebook and Youtube
Top 3 social media brands among many in the globe are Facebook, Youtube and Twitter which are ranked basing on the sales. Among these three social media, Facebook ranked at the first position, followed by Youtube and Twitter respectively (Social Media brand, 2013) Using Facebook as the tool to attract US customers
Combining with some small games in Facebook, such as Lucky Drawing to receive small gifts Post one or two updates for one day. Posts should focus on image and video relating to fashion shows or new collections
To use Youtube to drive traffic to the website of Primark
To kick of the launching advertisement with the content mentioned in TV commercials
3.3. Public Relation
3.3.1. Objectives
To implement PR Activities in 10 articles or magazines with the content focusing on the launching of Primark and the opening
Achieving the satisfaction from 70% customers at least
3.3.2. Tactics
To implement PR Activities in 10 articles or magazines
3.4. Direct Marketing
The purpose of this tool of marketing is to make the sales increase immediately (Stone and Jacobs, 2008)
3.4.1. Objectives
To reach customers with leads at the number of 24 within 6 months To make the catalogs and post them to Facebook and website with the purpose of increasing revenue at 2% per moths
3.4.2. Tactics
To create direct mail to customers: Making exciting direct mail with the picture of products and send to customers who have been surveyed as those loving shopping and casual style.
To create catalogues to increase the revenue with the use of distribution channels for such catalogs such as Website, Facebook, Direct Mail, etc
3.5. Place strategies
In aspect of distribution, Primark should leverage both offline and online channels for distributions. In the first stage, with the aim of building customers’ mind on products, Primark has opened some stores in shopping mall and department stores. And then, it has developed as street shops. Moreover, to access customers who want to buy Primark, but have some barriers to access offline stores, Primark has developed its website for online shopping Primark as street shop
Primark stores in shopping malls or department stores
Primark online shopping website
4. Conclusion
Free publicity is considered the important tool of marketing in Primark before launching in US. However, with some threats and weaknesses from strong competition as well as late launching in US, this report suggests Marketing strategies for Primark including Product, Price, Promotion and Place. In aspect of products and price, high quality, reasonable price and excellent design have been achieved. Regarding to Promotion, Primark should combine some marketing tools such as TV, Social media, PR and Direct Marketing to create the efficiency. Moreover, with the plan of launching in both department stores and street as well as online shopping, Primark will access customers who are people Primark have looked for.
References
Abell, D.F., & Hammond, J.S. (1979). Strategic Market Planning. Englewood Cliffs, NJ: Prentice Hall. Barnes, L. and Lea-Greenwood, G. 2006. Fast fashioning the supply chain: shaping the research agenda. Journal of Fashion Marketing and Management 10(3), pp.259- 271. Bhardwaj, V. and Fairheart, A. (2010). Fast fashion: response to changes in the fashion industry. The International Review of Retail, Distribution and Consumer Research. 20(1), 165-173 Chakravarthy, B., & Henderson, J. (2007). From a hierarchy to a heterarchy of strategies: adapting to a changing context. Management Decision. 45 (3), 642–652. Christopher, M, Lowson, R & Peck, H (2004) Creating agile supply chains in the fashion industry, International Journal of Retail & Distribution Management. 32(8), 367- 376. Czinkota, M. R. & I. A. Ronkainen (2005). A forecast of globalization, international business and trade: Report from a Delphi study. Journal of World Business, 40(2), 111-123 Conti, S. (2014). Primark to Launch in US. WWD. Retrieved at: http://www.wwd.com/retail-news/mass-off-price/primark-to-open-stores-in-america-7653356 Dishman, L. (2013). Fashionably Late: H&M Finally Launches E-Commerce In The U.S. Forbes. Retrieved from http://www.forbes.com/sites/lydiadishman/2013/08/01/fashionably-late-hm-finally-launches-e-commerce-in-the-u-s/ Fashionbi (2013). Fast Fashion Market Report. Fashionbi. Retrieved from http://fashionbi.com/market/fast-fashion/all Fast Retailing (2014). History. Fast Retailing. Retrieved from http://www.fastretailing.com/eng/ir/library/pdf/ar2014_en_11.pdf Joon-Hwan, L., Shi-Hyun, A. and Sun-Young, H. (2011). Fast Fashion: Out-of-the-Box Thinking in the Apparel Industry. Monthly Focus, 5 H&M (2013). Annual report 2013. H&M. Retrieved from http://about.hm.com/content/dam/hm/about/documents/en/cision/2014/01/1280856_en.pdf Keller, P. Anand, (2014). Social Marketing and Healthy Behavior. Handbook of Persuasion and Social Marketing David W. Stewart (ed.),
Primark's US Expansion: Strategic Analysis. (2016, Sep 26). Retrieved from https://studymoose.com/marketing-in-primark-essay
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