Primark

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

Executive Summary

This report consists of Primark Companys 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 .. Value for money Good supply chain management capabilities Alliances and joint venture with other firms More flagship stores and acquisitions. Brand image of Primark as compared to rivals Factors led to Global Recession .. Bubble that burst Problems Primark Faced. Critical Analysis Conclusion . External stake holders . . Recommendations.. References..

3 3 3 3&4 4 4 5 6 7 9 to 12 13 to 14 14 15 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, whos 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 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, whos 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 Spain UK The Netherlands Portugal Germany Belgium Total - 220 38 20 152 2 4 3 1

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 customers 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 Overall assessment Endorsement and advocacy ETI participation Senior responsibility Internal communication Resources Setting targets 2. Monitoring, independent verification and reporting Overall assessment Risk assessment Inspection Worker's views Verification Data management and reporting to ETI 2008 2009 2008 2009

Improver Achiever Improver Achiever Improver Achiever Improver Achiever Achiever Achiever Improver Achiever Improver Improver

Improver Achiever Improver Achiever Improver Achiever Improver Improver Improver Improver Improver Achiever

3. Awareness raising and training 2008 2009

Overall assessment Internal training Supplier guidance and training Worker awareness 4. Corrective actions Overall assessment Identifying and prioritizing issues Engaging with suppliers Follow up Termination of supplier relationship 5. Management procedures, pricing and incentives Overall assessment Commercial terms Integration of ethical and commercial criteria New suppliers Staff responsibility and incentives Critical path

Improver Achiever Beginner Achiever Improver Achiever Improver Improver

2008

2009

Improver Achiever Improver Leader Improver Improver Improver Achiever Improver Improver

2008

2009

Improver Improver Improver Improver Beginner Improver Achiever Achiever Improver Improver 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 Britains 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 retailers 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 Primarks 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 Organizations core conventions. Primark suffer in unethical activities as stated by the Bangladeshi factorys workers who are supplier of Primark, they dont allow workers even 56 leaves in emergency condition. They dont 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 doesnt 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 Primarks 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 Primarks 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 Primarks supply chains. In summary, we are delighted to see Primarks 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 Lets 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 Primarks 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:

Dont 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.

Primarks offer to the customer is one of high-quality merchandise, at value for money, backed by Primarks 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.