Environmental and Organisation Audit - Case Study Example

Table of Contents Introduction 2 Company Overview 3 Mission, Objectives and Values (Task I) 4 Environmental and Organisation Audit (Task II) 6 PEST Analysis 6 Five Forces Factor Model 7 Value Chain and Capability Analysis 9 The Future (Task III) 10 Conclusion 11 References 12 Bibliography 13 Introduction In the present world of today, the only constant thing is assumed to be the word ‘change’ itself. With significant developments in the arena of information technology and communication process, the tricks of the trade in almost all sectors of business are fast changing. The influence of globalisation also has enormous effect on the businesses all across the globe. With few click of the computer mouse, the citizens can know every minute detail of almost all ranges of products. The free flow of information has provided huge power in the hands of the consumers as they are the undoubted king of the market. It is high time for the business houses to develop efficient strategy, aligning with the changing scenario, so that they are able to sustain the changing times effectively. Primark has been a global name of repute in the clothing industry functional in Europe. Company Overview It was in the year of 1969 that the first store of this leading clothing brand was inaugurated at Mary Street of Dublin in Ireland. The success of the first store led to establishment of four more stores with in a year with in the periphery of Greater Dublin. By 1971, the company had more than 15 stores in Ireland. In 1974, the group expanded to Great Britain with two high street stores in Derby and Bristol. By the end of the year 1984, the group had 44 stores, half of which were in Ireland and the other half in the United Kingdom. 1984 had been a remarkable year for the budgeted clothing group as it witnesses first multiple acquisitions by the group in lieu of five Woolworth stores (Primark, n.d.). A subsidiary of the Associated British Foods, Plc, Primark also have many other acquisitions, takeovers and mergers in its credit. In the year 1995, it acquired BHS One-Up Discount Chain and Co-Op which also included Reading Property. Among other notable acquisitions by Primark includes that of Littlewoods and six stores from Allders. Apart from the number of stores being opened in the Ireland and United Kingdom, the company ventured in to other European nations too. In 2006, Primark opened its first store in Madrid (Plenilunio) of Spain. It moved to Netherlands (at Rotterdam) in the year of 2008 and this year it has also entered in to Portugal (Lisbon) and Germany (at Bremen). Mission, Objectives and Values (Task I) Mission statement of a company defines the real motto of the organisation. In fact, it emphasises the very reason of existence of the company along with its future course of action. The mission, the vision and the objectives of the company also enables the share holders and other stake holders to be certain about the intentions of the company. It is much essential for the customers too as they ought to know the company with whom they trade with. A significant point to be noted in case of Primark is that the company does not explicitly define their mission and vision statements. Though one might perceive it to be a negative attribute for the company but the reality is in place of the mission and vision, the company has the ‘core values’. The core values of the company put importance on two major factors namely values for the customers and values for the employees. The company achieves to create an environment of sustainable development for all its stake holders through the core values. Few of such values are as follows: Offering best value of money Continuous product improvement Continuous zeal for effectiveness in various processes Treating customers at par with the company management and executives Ethical practices Mutual respect Contribution towards health and safety of the employees as well as the environment (Primark, 2009). The company takes pleasure to define its culture as fast-paced, customer-focussed, commercial and dynamic. The values of the business also include passion, enthusiasm, commitment and excellence. The reason for having such values might be identified as to fight ever increasing competition that the brand is facing now and then. Primark basically deals in the segment of fashionable clothing at budget prices. The company has several cost-cutting measures in place so that it can cater to their target customers at the lowered prices. The above discussed values are extremely essential to lead in such segment. The subsidiary (Primark) has been the face of the Associated British Foods, Plc in the retail segment. With more emphasis of its core values the brand can definitely expect to take forward its market reach and profitability. In today’s industry, stake holders form the most important part of any business group. It includes the valued customers, the esteemed suppliers, the human capital, the management and all other relevant parties of the company. With more stress on the core values like treating the outside parties at par with the members of the group or an environment of mutual respect for all the parties would definitely help the brand to create long and mutually benefiting relationship with the outside entities. Importance on the values like providing best value for money and continuous research on the products would help the company attain newer segments of customer as well as also it would help to retain the existing customers. Environmental and Organisation Audit (Task II) To understand the strategy of any business, the environmental audit and the organisational audit are the best measures to be followed. The environmental audit and the organisational audit include the analysis of the internal and the external factors related with the company. Few of the various models and theories included within these two audit procedures are the PEST analysis, Five Forces Factor model as suggested by Porter and value chain and competitive analysis along with the analysis of the competitors. PEST Analysis The PEST analysis of any company deals with the external environment of the company. The four important constituent are Political, Economical, Social and Technological factors. The analysis in case of Primark is as follows: Political – The political environment where the brand operates is definitely conducive of business and growth. The political conditions of Europe especially those of UK and Ireland are stable. But the company should also be aware of the political situations in few of the supplier countries like India and Bangladesh. Economical – The company deals in the budget market of the fashionable clothing and therefore this factor is of price importance to the brand. Due to the worldwide financial meltdown and turmoil, the company should be cautious about its pricing as any hike can affect the target group of customers. Social – The company should lay due importance upon the social factors related with the company. Primark has time and again made newspapers headlines about the oppressive trading practices, more specifically for the inhuman working environment in the suppliers’ factory at India and Bangladesh. The company should take due consideration of the fact and indulge more into the ethical trading as they have already initiated the procedure. Technological – Technology has been one of the most influential factors in modern trade. The onus lies upon the company to use technology in its benefit. The company should emphasise upon online shopping and other similar measures like card payments or availability of the product range on the inter-net. Five Forces Factor Model The Five Forces model was prescribed by the leading management thinker, Porter. The model basically emphasises upon the importance of external audit of a company for its long term success. The model can be discussed as follows with Primark as the background: Bargaining power of customers – If the customer segment of a company is concentrated and company depends upon a particular segment of the customer for its revenue, it is then referred as high bargaining power of customers. Such a condition is not desirable for a company because in such situations, customer tends to dictate terms. To avoid such happening, Primark has successfully created many brands which cater to the various customer segments. Also, it has more than 100 stores situated in many countries of Europe. Bargaining power of suppliers – Primark should initiate proper measures to keep the bargaining powers of suppliers low. In order to do so, the company should essentially have dispersed set of suppliers. The company basically outsource its materials from Asian nations. To keep the suppliers under pressure, the company should also put due emphasis upon the working environments in those factories as there have arose numerous issues like child labour, from time to time. Threats of new entrants – The market in to which Primark caters is highly sensitive as it deals with fashion. The products, once launched are expected to have short expectancy of life and fade out. There is always considerable threat of some new player to get into the industry. Therefore, the company should have proper policies to retain the trained and groomed work force. Also, it should be able to attract the best of the industry talents. Threats of substitutes – Threat of substitutes are also looming large in the present scenario of financial recession. As Primark deals in the budget sector of the fashionable clothing, any increase in the prices might shift the customer groups to some other brand. Therefore, to retain the share in the market, the group should focus on competitive pricing. Rivalry among firms – According to Porter, rivalry among the existing firms of the industry should be minimal as it depletes the valuable resources. Rather, the companies should have corporate tie-ups and deals along with mergers and save resources and create added value to its product range. The companies should cut down cost on promotional activities and invest in research and development. Primark follows the same as it does not have any advertisement cost and strive for continuous product innovation and efficiency in its processes. Value Chain and Capability Analysis Value chain analysis has also been prescribed by Porter. It consists of primary activities and supporting activities. Primary activities include inbound logistics, operations, outbound logistics, marketing & sales and services. The supporting activities comprise of the firm’s infrastructure, human resource development, technology development and procurement. As per the model, efficiency in all the factors leads toward the profit margin. Primark has taken care of the inbound logistics which are generally outsourced to various vendors of developing nations. The other primary factors have also received proper importance as it has been directly reflected in to the increasing profitability of the company. The company has entered in to many of the European nations with state of the art shop places. It has efficient training and development modules in place for its work force. Also, due importance has been laid upon the technological front which implies that the company also fulfilled the needs of the supporting activities of the value chain model. The Future (Task III) The management of Primark is definitely successful in increasing the wealth of the company. As the company observes its 40th birthday this year, it has increased its revenue to £ 2314 million in 2009 from £ 1933 million of 2008. Also, the adjusted operating profit increased by £ 19 million in 2009 over 2008 (Associated British Foods, Plc, 2009). The company has been on expansion mode in terms of geography as well as product ranges. It has created numerous popular brands like Active, Early Days, Girl 2 Girl, Primark Home, Young Dimensions and Essentials to name a few. The company, being a subsidiary of ABF, Plc, can look forward to create certain strategic business units. It can do so on the basis of geographical location of the stores or upon the product ranges. The company can well have different divisions like ‘Menswear’, ‘Womenswear’ and ‘Childrenswear’. It would help the brand to reach the market more effectively with wide range of products (Primark, n.d.). The Primark also should emphasise on its core competency of value retailing to enhance their market share. According to a survey, from 11% in 1998, the value retailing has engrossed 25% of the market by 2008 and is expected to rise in recent future. Conclusion Primark has been an indispensable name in the economy market of fashion clothing. The financial figures of the company ratify the effective performance of the company. Employing over 27,800 people, the company should implement strict ethical guidelines among the factories of the vendors in outside nations. This efficiently managed fashion brand of ABF, Plc, is all set to lead the market of the value prices, as it has very loyal customer base. References Associated British Foods, Plc, 2009. Annual Report and Accounts 2009. Primark. [Online] Available at: www.abf.co.uk [Accessed 01 December, 2009]. Primark, No Date. Company History. About Us. [Online] Available at: http://www.primark.co.uk/page.aspx?pointerid=eb44df4565934edca627dac6ec12145a [Accessed 01 December, 2009]. Primark, No Date. Values. Ethical Trading. [Online] Available at: http://www.primark.co.uk/Ethical/Values [Accessed 01 December, 2009]. Primark, No Date. Products. Fashion at Primark. [Online] Available at: http://www.primark.co.uk/Our_Products [Accessed 01 December, 2009]. Bibliography California State University, No Date. Porter’s Five Forces. Database. [Online] Available at: http://www.csun.edu/~jmf20042/Porter.doc [Accessed 01 December, 2009]. McLean, E. R., No Date. The Value Chain. Georgia State University. [Online] Available at: www.cis.gsu.edu/~emclean/Porter's%20Frameworks.ppt [Accessed 01 December, 2009]. Purdue University, No Date. PEST Analysis Template. Subject of PEST Analysis. [Online] Available at: http://web.ics.purdue.edu/~pbawa/421/PEST%20Template.htm [Accessed 01 December, 2009]. Read More