Primark: Marketing Strategy, Total Integration - Essay Example

Primark: Marketing Strategy -Total Integration ment of Objectives: To study the overall corporate strategy of Primark To identify and explain the reason driving the success of Primark To study the role 'marketing concepts' played in the process Introduction Total Integrated campaigns involve synchronised working of different departments of the organisation like HR, Marketing, Production, Procurement, Supplies etc. Such campaigns involve devising strategies in such a manner that all these components complement each other. In such an approach companies use one set of strategies for everything. But how the sets of strategies are devised depends upon the nature of company's product or service orientation. Piercy (2001) states that no perfect solution exists for all situations and a lot of things need to be taken care of depending upon the sector the requirements of the business. Piercy places great emphasis on the brand identity of the company in integrating marketing and communication campaigns. Total integration involves; Integration of processes and procedures involving different types of activities like preparing marketing communication plans, establishing brand equity etc. Coordinated approach in Procurement of materials Training and development of workforce to make their best possible contributions Maintain good Industrial relations i.e. the employees unions must be taken in confidence Integrated marketing which includes marketing communication and management of the sales network Today Primark has established itself as one of the competitive retail store chain in UK, Ireland and Spain with a total of 173 retail outlets at strategic locations. Employing more than 25000 people the company has been in value clothing for well over 35 years and has also been voted as 'Best Value High Street Fashion' by GMTV and ITV viewers1. This study is an effort to look into the practical implementation of the theoretical aspects relating to marketing strategies, HR support, marketing communication, brand equity proposition, strategic alliance etc. which have been instrumental in the success of Primark. To evaluate the strategies adopted by Primark, while using various tools like Porter's five forces analysis, SWOT, PEST, Ansoff Matrix etc. an effort would also be made to compare the performance of Primark with some other retail companies like Topshop, Prada, Asda, Tesco etc. and how Primark has been able to beat the competition. One of the key weapons in the armoury of Primark has been its ability to come out with items at rates cheaper than the rivals. It will be quite interesting to learn how the company has been able to come out with such lower prices. Retail business is at the base of running a retail store, trying to earn the loyalty of customers, while at the same time trying to grab attention of newer customers. Piercy (2001) has also pointed out the desires of many company executives some of the issues as prerequisite towards being more customer friendly. The issues pointed out are like; Value of the product or service in achieving a successful strategy in taking on the competition. This is also concerned with customer relationship management. Mele and Colurci (2006) provide distinctive paradigms for value as such. It is stated that the term 'value' can be defined in different ways according to the adopted perspective of analysis; it is possible to determine a 'customer value', a 'firm value' and a 'stakeholder value'. Online presence of the companies to cater to customers spread across a larger area and keeping in mind the convenience of the customer Total integration of company's resources and capabilities to deliver a product which is able to fulfil the needs of customer. Consideration of effective planning, strategizing and creativity as the key to come out with effective performance. From the strategic planning point of view, competitor analysis is very important for any company's long-term survival (Kotler, 1972). The first step towards such an analysis begins by identifying the strengths and weaknesses of the company. David (1999) defined strategy as 'the match an organisation makes between its internal resources and skills and the opportunities and risks created by its external forces'. This assumption forms a crucial component while planning for future. For such planning, the TOWS (Threats-Opportunities-Weaknesses-Strengths) and SPACE (Strategic Position and Action Evaluation) Matrices prove to be very helpful tools. Piercy (2001) states that the formal mechanism of total integration strategy involves the following; Reallocation of design of facilities: This involves making the arrangements in such a manner that the spatial proximity encourages communication and cordial exchange of information between people resulting in reduction of conflicts. Personnel movement: This involves optimum job design. Job design typically includes three methods: job enrichment, job enlargement, and job rotation. Job enrichment attempts towards making the job more rewarding in such a manner that worker-manager and worker-organization relations become much more cordial and productive. Job enlargement involves redesigning the work to include more variety, autonomy, task identity and feedback for the employee. Job rotation in turn involves moving employees from one job to another to enrich their experience and prepare them for multitasking functions. Rewards: It is widely believed that the behaviour of a person is primarily determined by the external situational factors, called the stimuli and the reward's associated with one's response. By bringing about a change in these factors the behaviour can be redirected and moulded accordingly. Formalization of procedures: It is very true that in today's market oriented world, at times the market demands certain types of reactions in response to the strategies of competitor, market situations etc. but in general if the integration plan is transparent to everybody in the organisation and the steps and procedures are formalised to some extent, everyone can see that there is no partiality in favour or against anyone, the workforce will be better motivated to perform well. SWOT analysis This is one of the tried and tested tools of modern management gurus towards planning strategies for a company. For Primark the element of SWOT can be explained as; Strengths: 1. A well established brand identity and a leading fashion brand in UK 2. Good international market with strong position in UK, Ireland and Spain 3. Well diversified portfolio of products 4. Price leadership in a range of products by offering super competitive prices2 5. Successful acquisition of other retail outlets like 'One Up' 6. Formidable financial performance under the active stewardship of Associated British Foods 7. Location of retail stores at strategic locations 8. Associated with ETI (Ethical Trading Initiative) since May 2006 Weaknesses: 1. Fluctuating cash flows from operations, 2. Accusations of poor working conditions at some of Primark's locations, particularly the stuff coming out from its factories in Bangladesh 3. Overdependence on manufacturers outside UK 4. Not much market cap in fields other than cloths 5. Yet to venture out of its strongholds in UK to burgeoning market areas like China and India in a big way. 6. Lack of a strong online presence, while the competitors like topshop, Tesco etc. have a strong e-business portal which helps in spreading the reach of their products in areas not covered by physical street corner stores. Opportunities: 1. Increasing fashion awareness amongst the under 35's, the prime target group for Primark. 2. Changing with the times, company has come out with a strong consumer proposition embodied in its "Look Good, Pay Less" phrase. 3. Wider acceptability of the company in providing customised products. 4. Wider acceptability of the company in providing customised products. Threats 1. Growing influence of cheaper Chinese products in the international markets 2. Shrinking margins in the retail sector 3. Rising raw material costs 4. Competitors might try to overexpose the charges of exploiting poor Bangladeshi labour 5. Increasing labour wages in UK PEST Analysis A number of factors influence any company, a sector or the overall business environment. For example the production methods, marketing chain, HR policies, the technology being used by the company, the industrial disputes law etc all determine the business environment. To analyze the macro-environment the industry has been making use of PEST analysis. PEST includes Political forces, Economic forces, Socio-cultural forces, and Technological forces affecting the business environment. For Primark and the retail industry in general the PEST factors include; Political Factors: Today the world is divided into many blocks based on political differences, WTO regime, globalisation, regional considerations and a host of other issues. The retail market in general requires the support of respective governments, as there are a number of issues involved. Economic: The economic policies being pursued by the government also determines the retail sector. For example, if the country has an open economic policy, pursuing the globalisation and liberalization policies, that indicates more rivalry amongst the competitors, increased earnings levels of the residents resulting in increased spending levels, which in turn bodes well for the retail market. This will in turn encourage the retail companies to go for more varieties and better bargains. Socio-cultural: The society in general has a big influence on any business and the retail sector is not an exception. UK has the distinction of being home to many communities and races, including migrant population from many countries. Therefore, retail companies have to take into account the interest and preferences of these segments as well, besides of course, the people of British origin. Though Primark, picks up a big chunk of its consignment from the Asian region, but the company does not offer a big variety tailor-made for the Asian population. Technological: Impact of technology can be seen in almost all walks of life today. 21st century in particular is dominated by the technology. Though retail business cannot be said to be technology intensive as such, but the display techniques, manufacturing techniques, e-procurement, etc. are a prerequisite to total integration and require good technological support for being relevant with the times. Primark is not known to have a technological edge as such, but the company has been able to have an eye for the latest trend. The Sunday Times, Style Magazine in its 24th July 2005 edition wrote, "Primark got an eye for a trend and that, coupled with its rock-bottom prices, has made it a destination for every style-savvy girl." Customer holds the key for total integration of business. The Customer Relationship Management (CRM) is supposed to play a key role in managing and retaining the customer as the customer has become very demanding, and resorts to bargain prices before doing the actual purchases. For effective CRM, the retail store staff requires to be well trained in the art of making the customer feel at ease. But Piercy (2001) has another story to tell on this front. He says, "The retail business in Britain routinely promises service and value to its customers. Customers find a slightly different realty all too often". Citing a survey conducted in the retail sector Piercy (2001) states that 'most of the retail staff will look into the customer eyes, but without passing on a pleasing smile'. The potential of retail market in UK is projected to be one of the best in the coming years. Datamonitor (2006) comes out with the projection that by 2010, the global hypermarkets and supercenters sector is to have a value of $1,179.7 billion, an increase of 24.3% since 2005. Therefore it become all the more crucial for the key players in the sector that they remain in contention with socially relevant and acceptable policies by integrating the business needs with the needs of the customer, the employee, the marketing principles and the nations policies. Curt W. Coffman and Gabriel Gonzalez-Molina (2002) say, "Great organizations know how to chart a course through the worldwide competitive maze to keep their customer relationships not only intact but also thriving. They do this by connecting to their customers on an emotional level". Porter's Five Forces Porter's Five Forces have become a yardstick for assessing industry profitability. This helps the retailer in consistent performance and planning. The five forces are; Buyers'/customers' power Suppliers' power Rivalry among competitors Threat of new entrants Threat of substitute products Threat of New Entrants Bargaining Power of Bargaining power of Suppliers Buyers Threat of Substitute product Suppliers: Retailers like Primark have the overwhelming advantage over the small shopkeepers - at times, they tend to dictate the price they pay the supplier (while the small shopkeeper has to make adjustments as demanded by suppliers) If the supplier does not reduce the price, they will be left with no retailers to sell to, Primark and the other large supermarkets will have all the customers. Primark too takes the supplies from a number of places, including some from outside UK, from places like Bangladesh where labour is quite cheap. The main suppliers in turn buy the raw materials for their products from a variety of other suppliers, producers, growers or farmers and then process the product in some way to produce the finished product that Primark sells. So, Primark does not buy directly from any primary producers, growers or farmers. But the company needs to take care of the last point as well, in order to avoid bad publicity, as is going on in some quarters now a days. Threat of New Entrants: Holding a formidable position in the retailing business in UK for quite a while a now, giving good competition to brands like Topshop, Prada etc. Primark has started feeling the heat of growing competition from other retail giants. And with increasing completion, the customer too starts becoming more demanding. But, it is worthwhile here to mention that Primark has the potent weapon of unbelievably low prices in its armoury, which has so kept the competitors guessing. This has made it extremely difficult for new entrants to make a foray into the retail market and take on Primark. Power of Buyers: It is now widely accepted that the most influential members of the marketing chain in the retail sector are the customers. After liberalisation policies came into full force, the bargaining power of buyers has indeed gone up by a few notches. This calls for strategic planning on the part of the company to blend the buyers' demands with organisation goals. Mintzberg (1994) too, while talking about the changes that have taken place on the strategic planning front, emphasizes the importance of strategic planning. Availability of Substitutes: In principle it can very well be assumed that the items being offered by Primark can easily be substituted by similar products from any other retail chain like Prada, Tesco etc. There are indeed plenty of unbranded, lesser known brand substitutes as well in the market. This factor keeps the retail companies always with an eye on the pulse of the market. Therefore there are indeed plenty of substitutes available in the market. Competition: The retail industry is one of the highly competitive industries. The high cost of competition takes its toll on the earnings. The industry could take solace from the fact that it is not an investment intensive business, and manageable profit levels could be attained by the companies in the business. But nonetheless, the tight level of leverage on profits and revenues makes it a challenging task to sustain in the industry. But going by the hysteria that Primark could generate with 8 jeans and 2 bikinis, it could be reasonably assumed that Primark has indeed taken good lessons on managing the competition (Freeman, 2007). Ansoff's Matrix: A Strategic tool for Total Integration Risk Ansoff Matrix a 2 x 2 matrix developed in 1957 proves to be a valuable tool in preparing and executing a comprehensive marketing plan for any company. Providing strategic options is the key role for a marketing plan. With growing demand for trendy wear, fashion wear, Primark can focus toward the segment dotted by fashion conscious youngsters. In fact, the prime focus of the company is the youth. Primark is ideally positioned to capitalize on this growth, as it already provides a number of offerings in this area. For example, the company products are a big rage in the ladies wear segment. Moreover, the company is quite clear in its approach that it can achieve market penetration with its strategy of 'Look Good, Pay Less'. This line communicates Primark's value based offering in a precise manner to its core target audience. The imagery of all advertising is young, modern and dynamic (Primark, 2008). Such an aggressive approach has been able to get good returns to the company in the form of a loyal segment in the market, which in turn provides the company enough time and scope for developing the product/s into formidable brands. This has been proving to be a peerless corporate governance initiative on the part of Primark. Shleifer and Vishny (qtd Doidge et al, 2004) state that corporate governance has to deal with the mechanism ensuring that investors as well as corporations get good returns on their investments. Organizations with better corporate governance models facilitates in accessing the capital markets on favorable terms, which enables them to mop up funds at attractive rates (Doidge et al, 2004). Primark seems to be working as per the script, writing a success story, gaining loyal customers, establishing itself in the market and gaining a reputation amongst all stakeholders. References: 1. Ansoff's Matrix - Planning for Growth, available online at, http://www.marketingteacher.com/Lessons/lesson_ansoff.htm (March 3, 2008) 2. BBC (2008). 'Primark sales boost ABF prospects'. Available online at http://news.bbc.co.uk/1/hi/business/7262489.stm (March 2, 2008) 3. Coffman, Curt; Gabriel Gonzalez-Molina, (2002), 'Follow this Path: How the World's Greatest Organizations Drive Growth by Unleashing Human Potential', Warner Books. 4. Datamonitor (2006). Global Hypermarkets & Super Centers-Industry Profile. Datamonitor Europe, London. 5. David, F.R. (1999), Strategic Management: Concepts, 7th ed., Prentice-Hall, Englewood Cliffs, NJ. 6. Doidge, Craig; Karolyi, G. Andrew; Stulz, Ren M. (2004), Why do countries matter so much for corporate governance Available online at http://ssrn.com/abstract=580883 (March 2, 2008) 7. Freeman, Hadley (2007). Primark's 8 jeans and 2 bikinis cause stampede. The Guardian, Friday April 6 2007. Available online at http://www.guardian.co.uk/uk/2007/apr/06/fashion.topstories3 (March 2, 2008) 8. Kotler, Phillip (1972) 'Marketing Management' 2nd Edition, Prentice Hall Inc. 9. Mele, Cristina and Colurci, Maria (2006), 'The evolving path of TQM: towards business excellence and stakeholder value', International Journal of Quality & Reliability Management Volume 23 Number 5 10. Mintzberg, Henry (1994). The Fall and Rise of Strategic Planning. Harvard Business Review. January-February 1994. 11. Piercy, Nigel F. (2001). Market-Led Strategic Change: A Guide to Transforming the Process of Going to Market. 3rd Edition. Elsevier Butterworth Heinemann. 12. Primark (2008). Look Good, Pay less. Available online at http://www.primark.co.uk/index2.shtml (March 3, 2008). 13. Sunday Times (2005). Style Magazine dated 24th July (quoted in Primark Brochure). Read More