Organisations And Environment
PEST Analysis On Primark Stores Ltd
Introduction 1 Economic Factors 1-2 Technological Factors 2-3 Social Factors 3-4 Political Factors 4 Conclusion 5 Bibliography 5-6
This report will look at the macro environmental factors affecting Primark which operates in the high-street retail clothing sector. Primark offers chic clothing on the cheap through a number of department stores throughout the UK & Ireland, Holland and Spain. With its main target market being fashion-conscious under-35-year-olds, it is the second largest clothing retailer in the UK. The business environment is ever-changing, and it is crucial that all organisations analyse the environmental factors accurately to allow them to adapt to changes that may arise. If the environment is not analysed correctly, or if not enough attention is paid to observing environmental changes then the organisation could miss vital opportunities and fall under massive threat. This report will focus on a PEST analysis; a PEST analysis is a detailed environmental analysis that allows organisations to implement strategies that will respond to all environmental factors that they are faced with. A PEST analysis consists of four factors; Political, Economic, Social, and Technological. Primark, like all organisations will have to deal with all these environmental factors in some way. This report will now go into detail considering how each of these factors affect the high-street retail clothing sector, in particular Primark, and how they have or could respond to such issues.
The biggest economic factor that has affected Primark in recent times, as with most businesses is the recession. This will definitely hinder Primark’s performance, as the recession means that their potential consumers will have less disposable income, and therefore will be less likely to spend vast amounts of money on clothes. However as Primark is certainly at the cheaper end of the high-street retail clothing sector it has a much more inelastic income elasticity of demand than some of its clothing competitors; meaning that it could have a huge advantage over some of its higher priced competition. This is because consumers will have less money to spend. But fashion-conscious women will still want to look good; and with Primark offering chic clothing for cheaper prices, many of these women may see Primark as an attractive option for their clothing purchases. The second economic factor to be talked about is the price of fuel. In the summer of 2008, the price of oil reached $147 a barrel (the highest it has ever been). Primark will have noticed huge increases in their transportation costs when the price of oil was this high. Primark relies very heavily on transportation as it has only two distribution centres, one being located in Leicestershire, UK and the other being located in Naas, Holland. As it distributes to all over the UK & Ireland, Holland, and Spain it will experience heavy fuel costs, and heavy shipping costs. Therefore, the high price of oil will increase costs and cut into Primark’s profit margins. Unless it decides to pass the cost onto the consumer, in which case it would experience a decrease in sales. Another important economic factor to look at is the lowering of interest rates by the Bank of England. ‘The interest rates...
Bibliography: Dhariwal, N. (2009) Primark Linked to UK Sweatshops [Internet], BBC News. Available from: <http://news.bbc.co.uk/1/hi/uk/7824291.stm> [Accessed 7 April 2009]
M2 Presswire. (2006) TelecityRedbus: Online retailing is only half the story when it comes to UK internet activity; 35% increase in UK internet shopping sales since July 2005; Online shoppers are expected to reach 24.9m in 2010; Figures from TelecityRedbus demonstrate the UK 's growing dependence on a wide variety of online services, including government services, banking, travel and bill paying as well as a range of entertainment services [Internet], M2 Presswire. Available from <www.lexisnexis.com> [Accessed on 7 April 2009]
Monk, D. (2009) Low interest rates cost Notts councils £7.6m; While mortgage payers are celebrating the lowest interest rates in the history of the Bank of England, Notts councils will lose £7.6m on their savings next year. Nottingham Evening Post, 17 February, p.10.
Primark Stores Ltd. (2009) Primark [Internet]. Available from: <http://www.primark.co.uk> [Accessed 7 April 2009].
Smithers, R. (2008) National: Fashion: Ethical concerns left at home as demand for cheap clothes surges: Primark and Asda lead way in reaching out to masses keen to wear latest designs. The Guardian (London), 30 January, p.9.
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