PESTLE and SWOT analysis

PESTLE and SWOT analysis

Executive Summary

The world today is endowed with many emerging technologies that are hugely and significantly impacting business organizations. The use of the internet and other technologies that have enabled organizations to automate their processes and activities has dramatically helped in catalyzing organizational growth and success. Additionally, business organizations have found it easy to plan and implement any growth and expansion plans and strategies they have through the use of these emerging technologies. Business organizations have incorporated and fully embraced the use of these new technologies to enable themselves to become global companies hence able to compete in the more massive arena with other business organizations. However, there are several problems and challenges that global organizations face and these issues must be addressed if the organization wants to become successful and competitive in the long run. Through the use of different strategies and tool business organizations have been able to conduct a thorough analysis of the internal and external factors affecting them. Among the essential tools utilized by organizations is the SWOT analysis.

On the other hand, PESTLE analysis has much helped global organization s to gather relevant information concerning a wide array of factors that can affect them as they continue with their operations. Through this information, these organizations have been able to properly plan and execute their strategies on how to conduct their business activities and processes successfully. Through the use of the above techniques business organizations have also gained critical insights that have much helped in making them successful. Lastly is that different business strategies can be used by global organizations so that they can become competitive.

Company Background

Primark is one of the most prominent organizations in the United Kingdom (Jones, 2019, p. 932). The company was fopund3d by Arthur Ryan in the year 1969. The company started its operation in the Republic of Ireland and later expanded into the United Kingdom and other parts of the world. The company changed its name from Penneys to Primark due to controversies that arose while trying to expand to the United States. Still, it was discovered that another organization was already using the name. The company is a fast-fashion retailer that has its headquarters in Dublin, Ireland.

Additionally, the organization deals with a wide arrange of products. The products that the company deals with include the following; accessories, menswear, women wear, beauty products, confectionery, and homeware, among many others. A key characteristic and advantage that the company has had are that of selling its products art affordable and low prices than its competitors. As of today, the company has over 70,000 employees, and its revenue is estimated to be about £ 7.8 billion. The company has over 370 stores in 212 countries and still plans to expand its operations to penetrate new and developing markets. Among the countries where the organization has its stores include the following; Belgium, United Kingdom, Australia, France, Germany, Poland, United States of America, Italy, among many others. Among the key steps that the company has done in its bid to improve and become better include joining the Ethical Trading Initiative (ETI) an organization that advocates for organizations doing their activities in accordance to the stipulated International labour organizations core conventions.

Section One

1.0. Introduction

It is of paramount importance for global organizations to properly plan on how they can expand their activities so that they remain competitive and thriving in the long run (Sliwinski, 2016, p. 235). Primark is an organization that has been in the global arena for long after it was established. However, there is a great need for the organization to ensure that they are flexible to adapt to the ever-changing environment and embrace the use of emerging technologies to make their processes and activities effective and efficient.

1.1. Current situation of the company

Currently, the organization dominates the United Kingdom market and some parts of Europe, including Germany, France, Italy, Poland and other countries (Jones, 2019, p. 934). However, there is a need for the organization to expand further into other countries. Bearing in mind that the European market is ever dynamic and affected by many factors, the organization needs to ensure that they establish themselves in diverse regions for their stability and continuity of operations in the long run. In Africa, there are many developing countries, and this presents the company with tremendous opportunities to take over the industry that the organization operate in. Bearing in mind that the organization sells its wide range of products at a considerably low price; this will give them a competitive edge over other companies. Additionally, in Africa, the company won’t face a lot of competition compared to other parts of the world since no many organizations are dealing with fast fashions. Therefore, the organization needs to conduct thorough market research on the African countries they may want to penetrate and come up with the right and appropriate strategy to be used to ensure that the process is successful.

1.2. The external Audit

In this section, we are going to look at the external factors and environment that affect Primark while undertaking its operations globally. In this, three models shall be used which are; PESTLE, Porter’s five forces and the Porter’s Diamond.

1. PESTLE (Political, Economic, Social, Technological, Legal and Environmental factors)

The PESTLE model is usually used by business organizations for monitoring and analyzing various macro-economic (external) business factors that affect the performance of the organization (Christodoulou, 2019, p. 6046). Most organizations usually use this framework when entering a foreign market. Primark is considering expanding and entering new markets. Through PESTLE analysis, they are going to analyze the different external factors likely to affect them, thus properly plan and come up with the right strategy to enter the market they have identified successfully.

Political factors-In this Primark ought to look at various factors like government policies. Second is that the organization ought to look at corruption levels in that country to know if they are going to have a smooth time while gaining entry into the market. The third key factor that the organization ought to look at is the level of political stability/instability in the countries they want to expand and enter. This is important since political stability is key to making business activities thrive while uncertainty makes it hard for organizations to do their operations.

Economic factors-Primark ought to look at economic factors too while entering new markets. In this, the following factors ought to be looked at (Nandonde, 2019, p. 58). First is the economic growth rate. The second key factor is unemployment policy. Thirdly is consumer confidence and lastly, the organization can look at inflation, interest rates and other monetary policies. Analyzing the economic factors helps the organization to know how they are going to perform after establishing themselves in the market.

Social factors-In this Primark ought to look at various factors too. The different factors include; income distribution, demographic changes, lifestyle changes among the consumers, fashion changes, among many other factors. The social factors will help the organization understand the ever-changing needs and interests of their customer hence know the best way to make them satisfied.

Technological factors-Primark ought to be aware of the technical factors they are likely to encounter while entering a new market  (Christodoulou, 2019, p. 6046). In this, the organization ought to look at factors like; new inventions and development, changes in information technology, the rate at which technologies are being transferred among many others. This provides excellent insights to the organization to know the right techniques to be competitive.

Legal factors –The legal factors in any country or market can either make an organization enter the market or not. The various legal factors that Primark ought to look at include; tax policies, employment laws, competition regulations and safety regulations. These factors directly affect how an organization performs hence should be taken as weighty issues.

Environmental factors-This entails the environmental regulations and policies that are supposed to be followed in a specific market  (Christodoulou, 2019, p. 6046). Bearing in mind that some organizations get involved in manufacturing and production, some raw materials they use might affect the environment if not correctly disposed of. Therefore, Primark ought to look at the environmental regulations and policies to ensure that they adhere to them while entering the market they have identified.

2. Porter’s five forces

The porter’s five forces is a tool that is used by a business organization to evaluate the market and industry at large to know about its potential and profitability in the long run (Omsa, 2017, p. 9). Additionally, the frameworks provide an organization with critical insights and knowledge concerning various issues that directly determine if they can become competitive or not. Therefore Primark can use the porter’s five forces to study, analyze and understand the forces that are likely to affect them in the new markets. Additionally, Primark can use the same framework to ensure that they are competitive, and even if they are new to the market. The following diagram illustrates the porter’s five forces.

Supplier Power-In this Primark ought to look at the suppliers in the market and their power or influence. Understanding the suppliers will help the organization to know how many suppliers are available in the market hence knowing the freedom they have to change the suppliers (Grebenshchikova, 2017, p. 51). Additionally, this element helps the organization to understand how much pressure the suppliers can have on the organization. When the suppliers are few, it means that they have more power to drive up the prices of supplies. In a similar vein, when there are many suppliers, the organization will have more power since they can shift to any supplier in case they have problems with their current supplier.

Buyer power-In this the organization gets an opportunity to know and understand their existing and potential customers in a better way (Omsa, 2017, p. 9). It should be noted that the buyers have the power to make the price of products and services low just as suppliers can affect the prices of supplies. It is therefore of paramount importance for Primark to ensure that they understand the power that their customers have and how easy they can shift to other organizations in case they are not satisfied. Therefore, the organization ought to ensure that they have a large customer base to reduce the chances of losing them to other organizations since having few customers makes the organization vulnerable.

Competitive rivalry-This element is supposed to help the organization understand how powerful they are in the market (Omsa, 2017, p. 9). If many companies are offering the same products as Primark, the organization ought to be committed to satisfying their customers to avoiding losing them to their competitors. In a similar vein if there are no companies that compete with them, they have some kind of a monopoly hence can rule the market with the prices they set on their products and services.

The threat of substitute products-In this Primark ought to be aware of the products being offered in the market by their competitors. If their competitors offer better products at low prices, then the organization risks losing its customers (Mhlanga, 2018, p. 303). In a similar vein if Primark will commit itself to offer quality and unique products at affordable prices, then they can enjoy having a large customer base and also getting a competitive edge over their competitors in the long run.

Threats of new entrants-This element help the organization to understand how easy it is for other organizations to enter into the industry or market (Omsa, 2017, p. 9). If the business is easy and cheap, then Primark is likely to face new companies frequently. This will consequently reduce the organization’s power in the market hence forced to improve on quality and decrease prices so that they can attract customers.

3. Porter’s Diamond

This is a model that is used by organizations to explain why some industries within a country are competitive globally or internationally compared to others (Riasi, 2015, p. 15). Therefore Porter’s diamond is a model designed to understand the concept of competitive advantage and how countries and organizations can increase their chances of becoming competitive and thriving in the long run. Primark can use this model to understand if their industry is competitive in other nations which will consequently help them while entering the new market. The model comprises of the following four factors; Demand conditions, factors of production, related and supporting industries and lastly is the firm, strategy, structure and rivalry. Below is a diagram that illustrates the porter’s diamond framework.

Figure 2 PORTER’S DIAMOND

Factors of production-In this the organization ought to look if a country has the necessary inputs and raw material they require for manufacturing and production. The key factors that organizations use to carry put their operations include natural resources, labour, critical infrastructure like roads, among many others.

Demand conditions-In this the organization ought to look at the domestic demand of the products being manufactured (Riasi, 2015, p. 15). It is usually speculated that domestic demand can influence foreign customers to like the product more.

Related and supporting industries-This element helps an organization to see how other industries are performing hence borrow ideas and knowledge from them (Kharub, 2017, p. 135). Additionally, if one sector thrives, then there is a likelihood of other industries thriving too.

Organizational strategy, structure and rivalry-The above are fundamental to making an organization successful and competitive in the long run (Riasi, 2015, p. 15). The strategy will help the organization to set new goals. Secondly, the structure helps in managing organizational operations, and lastly, the rivalry makes the organization to be creative and innovative hence becoming competitive.

1.2.1. Internal Impact

Some many internal impacts and benefits accrue to an organization when it goes global (Tadmor, 2016, p. 10378). Therefore, Primark will get tremendous benefits from going global and expanding itself to other markets in other parts of the world except for the ones that they are found already. Among the key benefits, the organization will get include the following.

1. Greater access to talent hence improving the human resources available in the organization. When the organization expands and establishes itself to other countries and markets, they get an opportunity of tapping and nurturing a new pool of potential employees with different and unique skills, competencies and mindsets. Through this, the organization gets a chance of finding employees that have different skills from the ones in the home country, and this gives them a competitive edge over other organizations.
2. Secondly is that the organization learns a new culture. When Primark goes global, they get in touch with different people, and also they get an opportunity of understanding things from a different perspective. Among the key issues that impact the organization in this include customer relations and stakeholders. Additionally, the organization can hire a cultural consultant that will guide them in creating marketing content that takes into account diverse cultures, and this is very paramount.
3. The third is that the organization gets exposure to foreign investment opportunities. When Primark goes global, they get a chance of investing in international business opportunities and investments, and this is very advantageous to them in the long run. Therefore, the organization ought to be keen about the prospects of investment that come and be ready to take them.
4. Fourthly is that Primark gets new revenue potential. By going global, the organization gets access to a more extensive customer base. Therefore, if the organization offers the best products and services to these new customers, then they will consequently be successful hence take them to enjoy increased revenue.

Section Two

2.0. Evaluation of findings

In this section, we are going to evaluate and explain the key factors that drive Primark to go global. Various motivating/driving forces are pushing the organization to go global, and they include the following.

2.1. Market drivers

Bearing in mind that the domestic market is becoming more saturated hence shrinking the opportunities for growth for the organization (Fariborzi, 2017, p. 16514). Therefore, Primark has resolved to go global o that they can grow and expand their operation in new markets where they can fond opportunities.

2.2. Competition

This is the second driver that is pushing the organization to go global. The countries where the organization is established, which is majorly in Europe and America the competition is ever-growing, and this is not good for the organization sometimes. Therefore, Primark has resolve3d to explore new markets as a way of dealing with the cutthroat competition.

2.3. Technological drivers

This the third factor that pushes Primark to go global. The excessive use of emerging technologies, including the use of the internet many organization, has resolved to adopt electronic ways of doing business (Fariborzi, 2017, p. 16514). The emergence of e-commerce and e-business has greatly catalyzed the process of internationalization since organizations can get in touch with customers from any part of the world.

Section Three

3.0. Growth models and options

There are different growth models that an organization can use (Epple, 2018, p. 395). However, it is of paramount importance for business organizations to consider a wide array of factors, including the external factors affecting them before going for a particular model. Among the models that Primark can use for growth include Porter’s generic forces and the Ansoff matrix. Other growth models that organization can use include; Partnerships & joint ventures, strategic alliances, Franchising, among many others.

3.1. Porter’s generic competitive strategies

The porter’s generic strategy helps an organization to know the appropriate strategy or methods they can use to peruse and attain competitive advantage (Tanwar, 2016, p. 16). The framework entails four main strategies that organizations can use, but it’s up to an organization to choose the most suitable strategy applicable to them. Among the critical strategies in the framework include; Differentiation leadership, lower cost, cost leadership and differentiation focus.

Differentiation as a strategy

Primark should use differentiation as its strategy bearing in mind that they are planning to enter new markets. Through differentiation, the organization will have an opportunity of making their products unique hence distinguish itself from the competition (Tanwar, 2016, p. 16). Additionally, Primark will get an added advantage in the market since they will be known for its unique products that customers love. In a similar vein, the organization will grow and establish itself as fast as possible since their unique products will attract as many customers as possible in the long run. The diagram below illustrates the porter’s generic framework.

Figure 3 PORTER’S GENERIC STRATEGIES

3.2. Ansoff Matrix Strategy

The Ansoff matrix is a strategy that is used by business organizations to plan on how they are going to plan successfully and implements ways of future growth (Anshen, 2016, p. 426). Additionally, the strategy is used by organizations to know the appropriate methods that can be used to make the organization penetrate various markets successfully. Another critical characteristic of the Ansoff matric is that it takes into consideration new and existing markets and how organizations can use them to devise methods of growth successfully. Since Primark is considering expanding and penetrating different markets, it will be wise for them to use the market development strategy.

Market Development

This strategy is usually applied to an organization considering entering new markets with existing products and services (Robinson, 2013, p. 265). This expansion can be in different categories, including new customer segments, regions or new geographies. For the strategy to be successful, Primark needs to ensure the following factors are considered. First is that they need to have proprietary technology. This technology is supposed to be used as leverage into new markets. Secondly is that they need to research about their consumers to know if they have disposable income. Through this, the organization will know if they are going to be profitable. The last factor for this strategy to be successful is that Primark has to ensure that the consumer behaviour in the new market does not differ so much from the existing markets. Below is a diagram of the Ansoff matrix strategy.

Figure 4 ANSOFF MATRIX

Additionally, there are various risks associated with growth options (Anshen, 2016, p. 426). However, the best thing that an organization can do is to come up with reliable and robust frameworks to handle these risks so that they can transition into these new markets successfully. The first risk that the organization is likely to face entails the new culture in the new markets. Since the organization deals with new customers and employees, it is essential that they research the culture of the customers and know how they can come up with products that go with their culture. Additionally, the organization can hire a professional to help them understand how to tailor activities and offer products that do not contradict the culture of the new environment the organization operate in.

  The Bartlett and Ghosal International growth model

The Bartlett and Ghosal model is a fundamental framework used by organizations to explore and evaluate the strategic options available for them when planning to manage their international operations (Sliwinski, 2016, p. 240). The model takes into consideration two main factors, also known as pressures. These two pressures are i) Local responsiveness and; ii) Global integration.

Multi-domestic strategy

This strategy is most suitable since it will help the organization to produce products that are tailored to individual markets and countries (Sliwinski, 2016, p. 244). This, therefore, means that through this strategy, Primark will have an opportunity of offering products that meet the dynamic needs and interests of their different customers in various markets. Additionally, the multi-domestic strategy will help the organization address key internal issues that improve the performance of the organization in the long run. Among the key issues that the strategy will address include the culture, improving the supply chain, human resources, among many others. With the above said, it will be wise if the organization adopts a decentralized structure and decision-making process so that they can promote inclusiveness and a reliable way of deliberating on the diverse cultures and customer needs.

Conclusion

In a nutshell, Primark is a big company though there is more they can do to reach out to new markets. Bearing in mind that the market in Europe and America is becoming saturated and competition is ever-growing. It is wise of them to consider establishing themselves in other countries, including African countries where they do not exist. However, the organization needs to properly plan and have the right frameworks and apply the appropriate strategies to ensure that they penetrate these markets successfully.

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