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University: Bucks New University
It is an explanation which is being associated with all the critical analysis for the methods and all concepts which are opted in the business within sales and also the marketing aspect.
Romania is an European country where Primark has not yet opened any branch. Here, customers are much influenced by the latest trends and the demand for fashionable clothes in market at affordable rate is very high. Therefore, it is chosen to be best location for opening.Aim of the report is to enter in the market of Romania, where there is no Primary retail store and the natives has a taste of fashionable clothing’s. As it is a new market therefore it has to make certain strategies which will help Primark to enter and sustain in that market effectively. Primark is known to be one of the leading retailing companies in many countries which provide a good range of clothing at affordable prices. They have low cost pricing strategy which tends to target lower and middle level of customers that contribute the larger segment of market.
With the decision of opening up store in European countries such a Romania, it needs to analyse all the factor which can influence their marketing strategies which can be external factor. Apart from this strong establishing strategies are required by them to gain advantage over other competitors (Barney, 2017). The major aim and objectives of Primark is to establish theme in the market of Romania along with this develop a huge base of customers. Some of the best strategies which can be opted by it should be segmentation and better positioning in accordance to their preferences. Assessing all the external factors which are influencing that market.
Higher Management Team
Date: 2nd August 2018
Subject: Environmental analysis of Primark
Pestle analysis is recognized as macro environmental tool which includes external factors that influence the functioning of Primark. There are several factors which has been identified that have potential to effect Primark strategies at various level. These factor are discussed as below:
Political factors- Political stability is the main point of doing any business in Romania. When it comes to Primark, it can greatly affect the investor as well as consumers . There has been a rising political instability in the retail sector of business in Romania. Various changes in the political stability of the country can have the implications for investment, consumption and economic growth in the retail business. But with the time the situation of political instability has been improved due to the business environment reforms. The rise in political instability has also paused the growth potential of retail business in Romania. It can even affect the Primark after the expansion to the country (Barney, 2017).
Economic factors- Economic environment is that where, there is an impact of various economic changes and market trends may appear and can creates the risk for the firm. Declining levels of economic growth and the average availability of mortgage in Romania has a severe impact on the retail market industry. FDIs (Foreign Direct Investment) as there in the increase of inflows to Indonesia by 66.5%. The interest rate of loans for mortgages are normally adjusted by the central bank in order to influence the inflation. There is a change in interest rate from 4 to 6% within the year can even lead to 50% of increase in the monthly repayment needed for the mortgage holders in Romania. There is a great availability of loans, therefore Primark can easily make the decision of expanding the business in Romania as the loans can easily be granted and no financial crisis the firm has to face.
Social factors- In modern times, Primark has been highly viewed by the society which means the organisation should act ethically. On the website also their ethical strategy has been shown. There will be the spread in trade of Primark in Romania as there are the changes in the global market supply chain of Romania which requires the great collaboration of various types of organisations in the retail sector . The another social trend of Romania which can be looked by Primark is that to implement on the growing trend of organisations which requires to be more social in order to achieve the success in the current business culture (Bettis and et.al., 2015).
Technological factors- There is a strong growth in online activities for Primark in Romania, so if it is planning to emerge as the best retail stores in terms of technology then Romania will be the best venue for its expansion. The store can avail the benefit of up-gradation in security equipments to make it safe for the increase in customer base. Romania is a great platform for online and social media marketing as the customers over there is highly updated with the latest technology and it can be one of the biggest opportunity Primark Stores can get to reach the people directly . The changes can be easily made on the website of Primark regarding to the stores in Romania and customers can easily find out about the store they are searching for (Strategic Management, 2018).
Legal factors- Legal factors are those external factors which shows that how the law affects the operations of any business and behaviour of the customers. The employment law of Romania tells that there is a medium wage rates and the national minimum wage increases yearly. Therefore, it will be very easy for Primark to hire the workers at medium wage rates and can make the high profit. There are most of revolving issues like the over use of the labour and working in the organisations more than their actual standards which is totally against the law (Bettis and et.al., 2015).
Environmental factors- These factors are a part of the corporate social responsibility for an organisation. It can be related to the ethical issues as well. The main issues caused by the industries and firms in Romania are air and water pollution. The manufacturing facilities of the country, chemical and power plants highly depends on burning fossil fuels which results in emission of greenhouse gas in high levels. In the view to expand the business in Romania Primark has to take care of these environmental issues and should not do any such activity which can increase this (Barney, 2017).
Threats- There many weakness of Primark which has the potential to harm the organisation in many ways:
Solutions which can be adopted for overcoming these threats can be opening up online store for targeting those customers who shop online with various promotional offers. Some strategies must be made for future crisis due to no political stability which will be very beneficial for them. Working condition of employees must be improved by introducing structures which can provide a good surrounding for working.
Every company wants to expand its business over the boundaries of the countries. There are various ways in which a company can enter in international market. There will be a number of factor which will influence the entry mode. Expansion or entry of company in international market can increase the operating cost but the sales will also increase which can offset the increasing cost. In this report the three main mode of entry is discussed and the most appropriate mode for Primark Ltd is recommended with justification of the mode.
Exporting-The sale of domestically produced goods and services to other country is known as exporting. Exporting can be direct , indirect and on cooperative basis.
Franchising- It is a foreign market entry strategy where the semi-independent company uses the the franchiser's company trademark and sells its product or services. The franchisee has to pay the fees or royalty to the franchiser. Franchising is commonly used for the expansion of the product in the foreign market . The contract between the two specify all the terms and condition of franchise. It is most common way to enter the foreign market in America. It is most successful method, the main advantage of franchising is it already capitalizing an successful strategy,but it has to follow all the policies by the franchiser like conducting of business,staff etc. the franchisee has to pay a specific amount of profit to the franchiser For example, McDonald, pizza hut, subway are foreign organization which are successfully using franchising in foreign market. It gives rapid expansion of business in foreign market than any other mode of entry (Wheelen and et.al., 2017).
Joint venture- It is a form of partnership where two company involves and create the third independently managed company. Two company agrees to work together in a particular market and profit or loss would be share between them accordingly. Recent example of joint venture is Singapore airlines which entered in a joint venture with Tata groups. Joint ventures allow the organization to access the new market which they are not able to do previously. Joint venture helps to enhance either of the two company and management skills. it is very easy mode to enter in new market like if a Japanese company wants to enter the Indian company it needs to source any Indian partners.
Merger & Acquisition- it is an important entry strategy to enter in international market. Merger includes when two companies come together and become one company, as one company completely merges with other company. Acquisition is where one company overtake full control of other company with the mutual consent of both companies with the growth of companies value. merger and acquisition helps to acquire new technology, new product line, and to gain expertise and intellectual property. most of the time this mode gives the “win-win” for both the companies (Hill, Jones and Schilling, 2014).
After analyzing the different mode of entry on international market, the best suitable mode for Primark ltd is merger and acquisition. The retail market in Romania is characterized by high volume of entry of new brands. There is lot of opportunities for Primark to acquire any retail business in Romania and established itself in Romania market. The following point will give a better idea of merger and acquisition is the best way for Primark to enter in Romanian market. It will lead to increase their base of customers that will lead to generate a huge profit and provide them an effective capturing of retail market (Rothaermel, 2015).
Market segmentation can be defined as segregation of customer on the basis of homogeneous characteristics which can be related to demographical, behavioural, geographical or phsycographical aspects. It is done in order to provide a base for formulating effective strategies to target them in order to increase their sales by providing effective promotion . These segment are further targeted according to which related tactic are developed to satisfy their needs and requirement (Meyer, Neck and Meeks, 2017). The two major segmentation which the company does are given below:
Psychographic Segmentation- This Market Segmentation provides the division of group on the basis of life style, Social class and personal characteristics. Under this segmentation, Primark has lead the customers to be divided in the category of lower class, middle class and Upper class. They focuses on lower level and middle level customers a their prices are much reasonable and provide an effective range of prices for different type of apparels. They are the people who does not focuses much on current trend and are very price conscious and value the cost of product more as compared to quality . They can also be individual who is fashion forward. This lower and middle segment covers larger part of market, it provides them an opportunity to earn profitability by attracting these buyers and increasing their ale in market. With the adoption of Penetrating pricing strategy it lead them to provide an effective advantage over other retail store (Hill, Jones and Schilling, 2014).
Behavioural Segmentation- It includes division of buyers on the basis of knowledge, attitude, response or usage of related product. Primark offer product of cheap quality which attracts both types of customers which are regular as well as occasion apart from this new buyer can also get influenced to buy the product. Some of the customers can be price sensitive, opening up of large store can encourage them to buy products in volume. The brand name of the store can change the attitude of several customers towards them. This segment is mostly related to the attitude and behaviour of the customer toward the products and services of Primark. By opening store in Romania it would lead them to provide a brand which has a name in other countries that will be definitely be welcomed by customer of that (Hill, 2017).
This strategy provides an basis for regarding how Primark can pursue their competitive advantage across the opted market scope. There are four type of strategies which can be used for accomplishing the aim of getting superiority in market can be cost leadership, differentiation, focusing on low cost or differentiation. It can be regarded as a primary determinant of the company' s profitability. The major strategy which can be applied by Primark in Romania can be cost leadership strategy and differentiation strategy.
Cost Leadership strategy- One of the major problem which is associated with retailing companies is their high prices which tend to focus only on the customers that belong to upper class level. The range of prices is so high that it cannot be afforded by middle as well as lower class level buyer. Therefore, the penetrating price policy of Primark attracts major part of the segment by providing them apparel at affordable price thus creating a cost leadership in market. This strategy is majorly opted for resisting other companies in the market of Romania and providing them popularity over them. This strategy would lead to provide the firm to serve affordable prices by reducing the cost associated with logistics and production. The lower price of the clothing will attract more buyer from the market. The quality aspect of the clothes must be up to the remark which will boost up this strategy and will provide an advantage over rivals. For this there is an requirement of quality raw material for production.
With the usage of innovative tools related to information technology and operations they are able to make their productivity more efficient that does not include much cost for producing products. There is an issue related with the adoption of this strategy which is the psychological one which tends to change the attitude of customer who seek for product instead of price, as with a lower price they make perception related to poor quality product which are made for lower class customers. This attitude tends to decrease the customer of this segment which can create loss for the company. Therefore, firm should focus on deciding the range of price starting from lowest to highest which can attract high society as well as middle society people. The result will be more availability of products in the situated stores of the organisation (Hill, 2017).
Differentiation Strategy- It is very important to set a different image in the mind set of customers in order to gain advantage over competitors and provide a good base of customer that will lead the company to earn more revenue. Differentiating products can create exclusiveness that is needed to make every customer convinced for choosing the product over other exiting one in market. There can be several tactics which can be adopted for making the store much differentiable such as making the customer serving technique to be much unique which can satisfy every customer's expectations . Apart from this the processing of product delivery can be made in much sorted way that can lead to provide an advantage over others. The adoption of uniqueness can lead to attract more customer providing them several benefits (Hitt and Duane Ireland, 2017).
It has been concluded that for establishing a company in any areas requires many measures which are needed to be adopted in order to successful entrance in a new market. There are various external factors which tends to influence the functionality of Primark such as political, social, economical, environmental, legal as well as technological Apart from these, Primark has analysed the threat and opportunity which can make their strategies more effective at practical level and providing them desired result that includes increase of the customer base and a great profitability. Along with this there are many strategies which are adopted by the company to attract customers and gain competitive advantage which is cost differentiation and differentiation from the competitors which are available in the market. These include keeping the low prices in order to attract lower as well as middle class customers which can provide them a source of good earning and would lead to make them better as compared to high pricing strategies of competitors.
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