In this report, we aim to compare and contrast the strategic planning and moves of two retail giants- Primark from Ireland and Woolworths from United Kingdom. Since both deal in the same domain and merchandise, their operation, processes and strategies provide a solid and a relevant ground for conducting strategic management studies. This will help in not only applying the theoretical concepts to some practical entity, but also in honing the skills to adopt a visionary outlook to perform future strategic planning.
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An overview of Primark
History- Primark Stores Ltd. is a clothing retail giant with its headquarters based in Dublin, Ireland (34 stores). Its operations extend to Netherlands (1 store), Spain (8 stores), Germany (2 stores), United Kingdom (125 stores) and Portugal. Primark trades under the name of Penneys in Ireland and the entire chain is an ancillary of Associated British Foods.
Products- Primark operates majorly as a clothing retailer with apparels and garments for every age, size and group. Being a subsidiary, its merchandise id specifically built and not sold at other retail counters. As such, it has been able to create a brand of its own in apparels and clothing items. Its brands include women wear, girls wear, footwear, baby wear, menswear- both formal and casual, clothing accessories, cosmetics, young and old boys wear, lingerie, cheap items, luggage, home items, night wear and beach wear also. In a nutshell, you can find garments and clothes for almost any occasion or moment.
Departments- as a logical move, since Primark deals in such a huge variety of merchandise, it has different departments in place, all under separate supervision which shows the clarity of its strategy and controlling function. The departments in Primark Stores Ltd. are health and beauty, hosiery, footwear, home ware, gift wear, menswear, children wear, accessories, women wear and nightwear. In all, there is a separate department handling an individual set of apparels.
Evolution- originally Primark was established as a clothing store by Arthur Ryan and Micaela Mitchell in 1969. With piling success in apparel business, registering huge profits and elated at elevated gross income levels, both the partners decided to expand and open up new stores in local and regional areas.
The success mantra of Primark is catering to the budget end of the market segment. Their strategy is to provide fashion clothing at reasonable prices. Their apparel designs are simple, made on simple fabric but are branded as of high quality and to fashion conscious young individuals below the age of 35.
Recognition- Primark has been ranked as the second largest clothing retailer by TNS in terms of sales volume and has also received the “Best Value High Street Fashion” by GMTV.
Primark’s business structure and management
Primark’s business structure embarks not only upon clothing but other apparel and clothing accessories, which in a sense adds on to the diversity of the retail store. Its store operations are simply and efficiently managed by a dedicated team of professionals. Each store is managed by a manager to control and oversee the business operations. There are different levels of hierarchy within store management where big stores have managers and small or medium ones have deputy or assistant manager. There are separate sales floor officers for looking after cashiers, customer’s desks and support teams.
Primark’s internal and external environment analysis
After getting involved into many unethical labor issues, Primark started emphasizing upon a simple and collaborative way of human resource management. It has defined ethical guidelines and code of conduct to be followed within the organization and in the entire supply chain. Primark Stores became a member of Ethical Trading Initiative in 2006 and defined its first trade strategy with a focus on working conditions of employees, operations at the factory and assembly and addressing necessary improvement. Primark’s strategy is focused upon shared learning and collaboration to achieve sustained growth with suppliers and factories.
Primark’s operations and business practices are governed by policies and regulations. As such, going by the governmental regulations, Primark has conformed to the policies and set standards and ethical and social responsibility demanded by global consciousness. Primark has always concentrated on the contribution of technology in business practices and marketing programs.
Primark’s strategies conforming to its internal and external environment
Primark has conformed and responded positively to the pressures of the environment by gaining a strong hold in an organized and systematic way of business organization (PEST Analysis n.d.). All the processes and operations of Primark are assigned to individuals and have proper authorities at proper positions. This gives the entire value chain a coherent way and flow of functioning.
To attract more and more people, Primark has recognized the importance of high quality and high value products since customers want value return of their investment. With its quality services, it has been able to garner a huge share of the market. However, Primark’s image was shattered when it was attacked with issues concerning labor exploitation and labor force abuse. Many suppliers including were detached from its supply chain when it was discovered that the factory workers are paid less than the minimum wages in UK.
Primark has strategized upon delivering high street quality clothes for all ages and groups, comparatively at cheaper rates. However, an unobvious defect in its marketing strategy is the absence or we may say lack of advertising campaign. Being a subsidiary unit, its operations are controlled by the parent company and so all the policies and procedures are charted at the board meetings of the group. Its inability to advertise and market its products efficiently has resulted in low awareness and communication between cross-border companies and customers.
Primark’s expansion strategy
Primark or Penneys in Ireland has been one of the largest retailers (Penneys n.d.). At some point of time, every organization is faced with a challenging question as to whether to go for expansion and if yes, then how to proceed with it. Ireland’s total market was too less to offer lucrative expansion strategy for Primark. Its growth in Ireland had been organic since it was able to open up just a few dozen stores in its domestic market. United Kingdom presented a plethora of opportunities coming along its way when it acquired the One Up chain and its market share in UK rose to 40% instantly. The deal of acquiring 16 One Up stores at a cost of £ 20 million opened up way for unprecedented growth of Primark in foreign markets.
Primark’s strategy in UK
In UK, Primark has adopted horizontal market growth strategy where it has been focusing upon acquiring retails stores that operated in the same line of business. It captures the discount clothing market sector and has responded to the highly competitive market of UK by selective targeting of store locations. This is pretty much obvious from the data that Primark had just 1 store in 1969 when it was established but a total of 86 stores in 1998.
Primark knew that in order to sustain growth, cross border expansion is essential and if nascent stores are opened up, cultural as well as financial matters could crop up since huge investment and expertise is required in new destinations. As the quickest way to expand globally, Primark opted for acquiring One Up stores which were already well established, had good locations and reputed track records in the country. Primark, after acquisition, changed the format of One up stores so that they look like an integral part of the Primark Group.
Primark’s function wise strategy
Operational- after the acquisition of One Up stores, first and the foremost important task was the honoring of One Up’s prior commitments and forward merchandise orders which Primark followed. Secondly, it went on to change the image and format of the 16 acquired stores in which, it identified 6 to be the more strategic locations which could give the speediest return to Primark on its investment. The complete changeover programme was rolled on a store by store basis with each store taking around twelve weeks to be completed. In all, the target for all 16 was set to be of 4 years.
Primark, already sued for labor issues, remained cautious and so inherited many business practices of One Up staff but also provided extra training to them in the form of seminars. Every store staff was imparted localized training and practical concepts on cash and stock control, administration, store management and change in technology were delivered.
Technology- Primark was presented with a number of barriers to overcome when it ventured in UK. The major one was the transformation of One Up’s sales and stock information into a format which is meaningful and understandable by them. It took a head start and completed the process in 4 months. The new systems were introduced in all 16 stores during non-peak trading periods since the staff has to be provided with ample training to work on those new systems.
Merchandise- instead of buying merchandise separately for individual stores, Primark operated on a centralized merchandise buying system which facilitated precise and swift predictions of sales and volume forecasts accurately.
Target audience- to promote One Up stores under the brand name of Primark, it marketed the stores on the basis of type of person and young and family groups. The conversion and the marketing plan were supported by local press and different media like radio, outdoor advertising and mailing activity. The communication strategy with the new target audience in UK was carried on with an objective of targeting as many potential customers as possible and responding to the value needs of the customers.
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Outcomes of this strategy
Primark was quick in analyzing that acquiring an established retail chain in UK will be beneficial for it to register presence where it is under-represented. The acquisition and conversion costs were exceeded by the value achieved from this expansion strategy and absorbing a retail business working in the same market niche. Had it been the other way, there would be more costs and time involved in capturing an equivalent market share of UK.
With central operating and management costs being the same and consistent, the sales of Primark was outgrown, thereby registering greater profits. Unlike Irish market where the population and consequently the number of prospective customers is low, UK presents enormous expansion opportunities in front of Primark because of 120 big cities in UK. With its successful expansion and acquisition strategy, Primark has emerged as a dominant player in the UK retail market and is not capable to counteract the competitive activities of big rivals, owing to its large size and operations. Similarly, Primark has been able to achieve greater economies of scale because of increased market share, constant costs but increased profits, eventually resulting in lowering down the unit costs for its products.
An overview of Woolworths
Woolworths carries a very topsy turvy history of its own. It was established in UK in 1909 as a retail store with children clothing as the major attraction. There were toys and stationary items also. It went with a high pace of expansion and there were new Woolworths’ stores opening every alternate week. By 2008, Woolworth’s stores reached a count of 807.
It was operating under five and dime strategy where no item was more than six pence. Another feature of Woolworths’ strategy to win customers was pick ‘n’ mix sweets and refreshment rooms offering free pots of tea to convince the customers of their new format. It provided the customers the facility of taking a round of the store rather than just walking in, making a purchase and walk out (A history of Woolies: 99 years of pic ‘n’ mix n.d.).
The company was facing stiff competition from other UK retail giants and the price inflation brought by the Second World War made a direct hit to the pricing strategy of Woolworths. One of its buildings was also destroyed and a huge loss was incurred when a V-2 rocket fell upon it, leading to many deaths and injuries. With the birth of teenagers, fab four merchandise and music lovers, Woolworths started expanding vertically into entertainment and other product categories to meet the changing needs of the customers.
Woolworths was taken over by Kingfisher Group’s forerunner- Paternoster Stores in 1982. Then and there onwards, the way of controlling changed and a different course was followed since the authority and the management was now in new hands. In 2001, Woolworths underwent a demerger with Kingfisher but after a sudden boost up in its share prices, it is being declining continuously. In all, out of all such hiccups, the financial as well as the social reputation and standing of the retail chain was shattered. Some major labor issues also cropped up since it resulted into huge unemployment and loss of jobs.
Woolworths buy out by Shop Direct group
After the shutters came down on Woolworths stores, the Shop Direct Group, along with Deloitte as the administrator (Woolworths set for administration n.d.), owned the Woolworths brand name and eventually all the physically located stores of Woolworths were closed to give it an online presence, making it an online retail shop (Woolworths to reopen online as Shop Direct buys name n.d.).
The Shop Direct Group strategizes to offer some thing new and unique in its retail store, apart from general merchandise and home ware. It is planning to focus on children’s clothing, toys and gifts and the ever popular pic ‘n’ mix sweets and confectionary.
Reasons behind Woolworths demise
The greatest drawback or we may say the shortcoming with Woolworths was with their strategy to communicate with the target audience. When a company operates as a retail chain and with various kinds of merchandise, it has to flow with the tides of time and make continuous endeavor to keep up with the latest trends in shopping habits and what the customers are demanding.
Woolworths failed in anticipating the upsurge in demand in selling chart music; instead it sold cover versions with unknown artists. Its management was directionless and had no USP (Unique Selling Proposition) of its own. It was selling every thing under the roof but had no specialty which could place it apart from the crowd. When people demanded shopping from home on internet, then too it failed to gauze the marketing trend and lost the way.
It claims to have world domination in the pic ‘n’ mix confectionary but it cannot be regarded as a very profitable business proposition. Whatever merchandise or product it sold, it had some competitor in that category that excelled the market and so Woolworths had to be satisfied with the left out margins. After its demerger with Kingfisher in 2001, it was loaded with huge debts and the worsening situation was that the stores are not owned by Woolworths, rather they are leased and so the interest rates accumulated to pinch the management.
A contrast of Primark and Woolworths
After conducting a thorough analysis of Primark and Woolworths strategic planning and implementation history, it is clear without any doubts that Primark certainly had an upper edge in the way it went of with strategic planning and a subsequent and successful implementation of its chalked out plans.
Both Primark and Woolworths were established as a subsidiary unit of some parent company but the former had set targets while the latter was devoid of any set direction (Opinion: Don’t cry for Woolworths. Its time was up n.d.). Primark was proactive in assessing the changing needs of the customers and expansion need for organizational growth and so, quickly took a head start to go for the acquisition of One Up chain. Once again, its genius was exhibited when it decided to acquire a 16 store chain already well established in UK, rather opening up new stores since it knew that the idea of new stores would not bear much fruits.
On the other hand, Woolworths remained stuck to its old and traditional theories and in a way, it was living in an illusion that its pic ‘n’ mix strategy will keep on working miracles for it indefinitely. It did not try to look out for other options to sustain growth and present a competition to its rivals. In human resource arena also, Primark excelled as it had defined positions, roles and responsibilities while Woolworths lagged behind in this essential front also which is in a way the driving force of all success factors.
Technology, which is considered as the boost up tonic, was recognized by Primark and it went for some software and technical systems but there is no sign of any technical advancement in the case of Woolworths. Primark was acquiring well established chains to expand globally while an exact opposite was happening with Woolworths which was being acquired by others and its stores were being cut short year by year (Woolworths in talks to sell Retail Empire to rescue fund for £1 n.d.).
Primark has already started compensating for the loss of Woolworths by replacing Woolworths Foregate Street store in Chester (Primark to replace Woolworths in Chester city centre n.d.). Initially, Primark had gone for the approval to purchase the ground floor of the Woolworths store. At this instance also, we can see the marvel of Primark genius since this store is in close vicinity of youngsters who are fond of fashion clothes and apparel. Thus it can be termed as a move to strengthen its position as a fashion brand providing ‘trends’ at reasonable rates.
This has served dual benefits for the Primark as a brand name. The first benefit is obvious in the form of increased sales and revenues. Another benefit arises from the fact that this step will encourage employment and bringing back the old employees of Woolworths. Thus the damage done to the image of Primark that it does not consider labor issues can be repaired by opening up job opportunities.
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