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This report discusses and analyses how the five forces of competition - buyer power, supplier power, threat of entry, threat of substitutes and industry rivalry - have all driven competition in the UK clothing and accessories industry and the impact on Primark's operations. The five forces of competition are a useful framework for organizational managers determining the factors that are driving competition in their industry and whether it is still attractive to compete in. The findings from a five forces analysis can be critical in determining whether to reinvest profits in certain markets or divest when faced with very strong five forces. While the five forces are important in helping organizational managers decide whether to invest or divest, they simply provide a starting point and are more powerful when used in conjunction with other frameworks such as Pestle, Swot, BCG or Ansoffs in helping firms like Primark decide whether to merge, acquire rivals or increase advertising spend in an effort to neutralise increased competition.
Primark Strategy Case Study
Key Learning Outcomes
- Use Porters five forces model to analyse an industry on the basis of the five competitive forces.
- Analyse the UK clothing retailing industry and how the five forces have affected Primark and rival firms like Next, Marks & spencer, Zara, H&M etc. and the impact on industry structure, attractiveness, and profitability.
- Understand how Primark manages to defend against intense competition from bitter rivals both offline and online and the strategies it uses to create 'blue oceans' that are defensible, helping it capture market share and maintain competitive advantage.
Primark or Penny as its known in the Republic of Ireland is an Irish clothing and accessories retailer, and a subsidiary of ABF Foods. It launched in the UK market in 1975 and currently has atleast 350 stores with the largest store in Market Street, Manchester England (Primark.com). Primark retails all types of clothing including women’s wear, home wear, men’s wear, children’s wear, footwear, beauty products and accessories. Operating in a fragmented clothing retail sector, Primark's key competitors as of January 2018 included market leader Marks & Spencer with 8.9% market share followed by Next with 7.1% and Primark with 6.9% ahead of the Arcadia Group, and others like TK Maxx, Matalan, New Look, H&M, Zara, River Island etc (Mintel 2017; Statista 2018).
Primark is the only British clothing retailer that has seen market share rise for 11 consecutive years beginning 2007 and trends show it is likely to overtake Next in 2018 as the second biggest clothing retailer in the UK (Statista 2018). It has also enjoyed successive revenue growth and profitability since 2007, a trend driven by the 2008 financial crisis and recession when cash trapped consumers flocked to it due to its very low prices (See Primark Pestle and Swot analysis).
This report discusses and analysis how the five forces of competition have driven competition in the UK clothing and accessories industry and the impact on Primark’s operations.
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