Primark and Ethically-Sourced Garments - Essay Example

Primark’s Ethical Sourcing Policy Module and number: Coursework title: Student name and number: Table of Contents Preamble 3 a.Introduction 3 b.Evaluation of the approach followed 4 Economic Functioning of Primark 4 Demographic Demand Pattern 5 Causes and Impacts of the Shifts of Demand and Supply Curve 5 Comparison with named Fashion Stores 7 Market failures faced by Primark 7 Impact of the Government Intervention 8 Advantages and disadvantages of Government Intervention 8 Recommendation 9 a.Firm 9 b.Government 9 Conclusion 9 Self-Reflection 10 Reference List 11 Appendix 13 Preamble a. Introduction Primark constitutes a part of the Associated British Foods (ABF) which is a diversified international ingredients, food and retail groups (Preuss, 2009). It has set up its business in Netherlands, Spain, UK, Germany, Portugal and Belgium. The annual sales of Primark contribute to a significant proportion of ABF’s profit. The target customers of the company are mainly fashion conscious. The company offers value for money by sourcing the products efficiently. The company prefers to use local fabrics and makes the clothes with simpler designs. The company aims at satisfying its customers by supplying them with quality products and also expand their business. Its main objective is to have a profitable as well as sustainable business (Goworek, 2011). Hence, the company always seeks growth opportunities in order to have a profitable growth within the organization. The company works closely with the suppliers as well as the factories which produces the goods for the company (BBC, 2015b). However, the role played by the Primark buyers is essential to support the ethical business practices. The company goes through a selection process in order to choose the new suppliers and factory in order to enhance their production process. The company while choosing new factories ensures regarding the fire safety measures and hires trained employees and also makes sure regarding the wages and benefits that they are supposed to receive (Goworek, 2011). Thus, the company focuses on the various ethical aspects that are to be followed in order to run a smooth business. b. Evaluation of the approach followed The research has been carried out on various aspects of the business set up by Primark in the international markets. It comprises of a detailed analysis of the demand, supply as well as the price mechanism within the economy. A study is carried out on the overall demand of the customers for the products manufactured by the company. It also involves the number of customers purchasing the products of the company (Carrigan and De Pelsmacker, 2009). The research involves collecting secondary data related to the annual sales of the company and the total production of garments by the company. The data is mainly collected from authentic sources such as the newspaper articles from the well known news papers like Financial Times, Economist and also from the BBC news articles. The data on the annual sales of the company are also collected from the annual reports published by the company every year. The secondary data in turn helps to determine a conclusion regarding the overall demand and supply mechanism of the company (Carrigan and De Pelsmacker, 2009). The researcher’s analysis also includes the possible causes for the demand and supply within the company and also the reasons for the shifts in the demand and supply curves due to the changes in the production levels as well as the price set by the company. The research comprises the impact of government intervention on the demand and supply mechanism followed by the company and whether the company benefits from such interventions. Economic Functioning of Primark The company has been successfully able to boost up its annual sales through the rise in demand of the customers for quality garments. It has experienced around 24% rise in the sales figures. Primark has been at an advantageous position due to the low cotton prices that contributed to the production of garments (Perry and Towers, 2009). However, the trade of cotton was hit by slightly poor winter weather but as the company opened several stores it was successful in improving its sales. Due to the low prices of the goods produced, there was a rise in the production levels in order to meet the rising demand for the goods. The company was successful in meeting the demands and hence there was equilibrium in the market (Werner, et al., 2014). The supply of garments within the economy depends on the company’s production levels which in turn depend on the demand of the customers. Thus, as the demand for company’s products rises, the supply also increases and the market reaches and equilibrium. Demographic Demand Pattern Primark aims at providing good quality products to its customers at cheaper rates. The company adopts the strategies of lowering the prices of the company compared to all other rivals such that it can attract the target customers (Perry, Wood and Fernie, 2014). Since the company produces at a low rate, it attracts large number of customers for its products and it has also gained brand loyalty by providing quality products to its customers. The company also maintains the ethical aspects such as it follows a good relationship with the customers visiting their stores and the store managers treat all their customers equally (Goworek, et al., 2012). Thus, the customers visiting their store for the first time wish to visit their stores again. An important principle of the Primark’s business practices involves providing the customers with quality garments and also following ethical standards of manufacturing. The company also allows discount schemes for the individuals visiting their outlets for the first time in order to gain brand loyalty. Causes and Impacts of the Shifts of Demand and Supply Curve The shifts in the demand and supply curves of the market depend on the production of the company as well as the prices set by it. The demand curve for a market is downward sloping and the supply curve is upward rising and the market equilibrium lies at the intersection of both the demand as well as supply curves. Figure 1: Shifts in the demand and supply curves in the international market (Source: Goworek, et al., 2012) In case of low prices, the demand for the company’s products rises and the demand curves shifts to the upward direction which shows the rise in production levels within the market (Ritch and Schroder, 2012). However, if the supply rises, the supply curve shifts to the rightward direction indicating a shift in the equilibrium level of outputs produced in the market. A positive shift of the demand and supply curves within the market is beneficial for the growth of the economy. A change in production level as well as the change in prices set by the company determines the demand and supply conditions for the market. Comparison with named Fashion Stores The comparison of Primark can be made with other fashion brands in the international market. Zara is particularly a Spanish fashion brand. However, the garments manufactured by Primark are considered to be much more affordable than Zara (Hoang and Jones, 2012). Especially in the US, the garments produced by Zara are very costly as it is positioned as a high cost brand. Nonetheless in Spain, the apparels produced by Zara are almost double the prices of the apparels manufactured by Primark (BBC, 2015a). Zara is a company that produces unique designs of the products and it has a large number of outlets as compared to Primark (Preuss and Cordoba-Pachon, 2009). Primark is said to be more focused on the European market, whereas, Zara’s products has reached China already (Jones, et al., 2010). Primark has a fast fashion chain that offers cheap clothing to the children as well as men and women, but the company is known for its untidy stores. The company can be compared to another brand named Marks and Spencer’s that produces food as well as clothing. However, Primark has set up a huge market as compared to Marks and Spencer’s. Market failures faced by Primark The company is found to serve a huge customer base by providing its garments at cheap rates. It designs garments for all types of customers but there was a gradual decline in the quality of products produced by the customers. Due to the poor quality of garments produced, the demand for Primark’s products also fell and the company was gradually losing its market share in the economy. The consumers’ feedback regarding the garments of Primark often creates controversy among the managers and the workers; this in turn hampers the production levels (Carey and Cervellon, 2014). The company has gradually lost its shares in the market due to the asymmetric information that it provides to its loyal customers and thus customers fail to get the relevant information about the product and as result makes a wrong choice (Cairns and Roberts, 2007). Further, due to the rise in demand for the company’s products, it often fails to meet the increasing demands of the customers and there arises disequilibrium phases in the market. In order to solve the problem of disequilibrium, there is a necessity of government intervention in the market. Impact of the Government Intervention The government needs to intervene in the market in order to deal with the demand supply issues. Often the company fails to produce as per the demands of the customers and there is a shortage of supply in the market (Walters and James, 2011). Further, in case the company manufactures low quality products, the demand of the customers falls and there is an excess supply in the market. Hence, in case of excess supply, the government reduces the tax imposed on the import of Primark’s products by other countries. In case if there is an excess demand, the government imposes a tax on imports in order to control the excess demand in the market. Advantages and disadvantages of Government Intervention The government intervenes in the market in order to deal with the demand and supply issues arising in the international market. The government imposes tax on the import of company’s products based on the demand and supply conditions within the economy. However, imposition of the tax can control the supply and demand, but there is a possibility that high tax imposed can reduce the imports of the products and the company gradually loses its business in the international markets (Young and Welford, 2003). Hence, the government intervention may not be always beneficial for the market. Recommendation a. Firm Primark supplies a large number of products to its customers at cheap rates. However, it has been noted that the store outlets are not clean and the customers visiting the stores do not prefer to visit their stores for the second time. Hence, it is highly recommended that the company hires efficient workers in order to maintain their outlets well organized. Further, the company fails to provide complete information to the customers and as a result of the asymmetric information provided by the customers, they are unable to make correct choices. b. Government The government intervention within the market controls the demand and supply issues but it is expected to reduce the trade within the countries. Hence the government is recommended to impose the tax on the products in such a way that it controls the excess demand and supply of products but the trade within the economies can be carried out smoothly. Conclusion The research shows that Primark has set up its garment business in many countries. The company aims at maintaining the ethical issues by providing quality products to the customers and also maintaining a good relationship with the customers who visit their outlets. As compared to other companies, Primark’s annual sales have increased to a greater extent and the company plans to expand its business further. The company has successfully gained a brand loyalty in the international markets. However, the company often faces many demand supply issues in the market for the customers when the company fails to meet the growing demands of the customers. There is a possibility of the market failure which get resolved by the government intervention within the economy. However, the government intervention often reduces the company’s exports due to the imposition of the high taxes on the products imported by other countries. Self-Reflection Through this research, I have gained some information regarding the business that is carried out by Primark over a large number of countries. It maintains an ethical relationship with its loyal customers and provides quality goods to them. It faces various challenges related to the demand and supply conditions. The company raises its production levels as per the demand of the customers. However, I have studied that the company maintains a low cost for its products in order to attract all types of customers. My research indicates that the company often faces issues related to market failure and the government intervention takes place in order to resolve the problem. The managers of the company ensure that complete information is provided to the customers related to the products such that they make correct choices of products. Further, I have learnt that the ethical behaviour of the company attract many customers to visit their outlets several times. Reference List BBC, 2015a. Primark sales set to boost performance at AB Foods. [online] Available at: [Accessed 15 May 2015]. BBC, 2015b. Primark linked to UK sweatshops. [online] Available at: [Accessed 15 May 2015]. Cairns, G. and Roberts, J., 2007. A discussion of Fashion Victims: Various responses to the report by War on Want. critical perspectives on international business, 3(2), pp. 170-185. Carey, L. and Cervellon, M. C., 2014. Ethical fashion dimensions: pictorial and auditory depictions through three cultural perspectives. Journal of Fashion Marketing and Management, 18(4), pp. 483-506. Carrigan, M. and De Pelsmacker, P., 2009. Will ethical consumers sustain their values in the global credit crunch? International Marketing Review, 26(6), pp. 674-687. Goworek, H., 2011. Social and environmental sustainability in the clothing industry: a case study of a fair trade retailer. Social Responsibility Journal, 7(1), pp. 74-86. Goworek, H., Fisher, T., Cooper, T., Woodward, S. and Hiller, A. 2012. The sustainable clothing market: an evaluation of potential strategies for UK retailers. International Journal of Retail & Distribution Management, 40(12), pp. 935-955. Hoang, D. and Jones, B., 2012. Why do corporate codes of conduct fail? Women workers and clothing supply chains in Vietnam. Global Social Policy, 12(1), pp. 67-85. Jones, P., Comfort, D., Bown, R. and Hillier, D., 2010. Sustainable consumption and the UKs leading clothing retailers. World Review of Entrepreneurship, Management and Sustainable Development, 6(3), pp. 244-259. Perry, P. and Towers, N., 2009. Determining the antecedents for a strategy of corporate social responsibility by small-and medium-sized enterprises in the UK fashion apparel industry. Journal of Retailing and Consumer Services, 16(5), pp. 377-385. Perry, P., Wood, S. and Fernie, J., 2014. Corporate Social Responsibility in Garment Sourcing Networks: Factory Management Perspectives on Ethical Trade in Sri Lanka. Journal of Business Ethics, pp. 1-16. Preuss, L. and Cordoba-Pachon, J. R., 2009. A knowledge management perspective of corporate social responsibility. Corporate Governance: The international journal of business in society, 9(4), pp. 517-527. Preuss, L., 2009. Ethical sourcing codes of large UK-based corporations: Prevalence, content, limitations. Journal of Business Ethics, 88(4), pp. 735-747. Ritch, E. L. and Schroder, M. J., 2012. Accessing and affording sustainability: The experience of fashion consumption within young families. International Journal of Consumer Studies, 36(2), pp. 203-210. Walters, D. and James, P., 2011. What motivates employers to establish preventive management arrangements within supply chains? Safety Science, 49(7), pp. 988-994. Werner, A., Becker, V., Liu, J. and Aridov, M., 2014. CSR in the Textile Sector: European Fashion Firms and the Bangladesh Safety Accord. Journal of European Management & Public Affairs Studies, 2(1), pp. 23-30. Young, W. and Welford, R., 2003. Benchmarking retailers on ethical trading. Journal of Corporate Citizenship, 2003(10), pp. 67-78. Appendix Figure 2: Revenue of Primark in Europe from financial year 2007 to 2014 (in million GBP) (Source: Young and Welford, 2003) The figure shows that the revenue for the company is rising continuously from 2007 to 2014. Read More