Primark is analyzing expanding its global strategy to India. India represents an attractive market with a growing economy and low labor costs compared to China. Primark already has a manufacturing unit in India which would help lower expansion costs. The target consumer segments in India are young adults and middle youth who are increasing spending on clothing. However, expanding to India presents risks as the market is competitive with established local brands and foreign brands also looking to enter. Any expansion plan would need to consider these risks and competitive landscape.

1. Primark
Analysis of global
Strategy plan through
the growing economy,
India
Presented to Dr. Ricardo Vecchiato
Student Id-K135939
Module –BS7575-International
Business Environment
Word Count-2917

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Table of Contents
Executive Summary--------------------------------------------------------2
Company Profile------------------------------------------------------------2
Market Analysis-------------------------------------------------------------3
Consumer Demand---------------------------------------------------------6
Competition------------------------------------------------------------------7
Company Outlook-----------------------------------------------------------8
Target Country-India-------------------------------------------------------8
Consumer Behaviour----------------------------------------------------- 10
Competition in India------------------------------------------------------ 10
Risk Factors-----------------------------------------------------------------12
Recommendations---------------------------------------------------------13
List of References----------------------------------------------------------14
Appendix-1------------------------------------------------------------------16

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Executive Summary
Associated British Food (ABF) is a variegated company having its business diversified in
the following market segments: Retail, sugar, agriculture, grocery and ingredients. The
company operates all its segments with an aim of increasing its value for the
shareholders there by closely monitoring and managing its processes. Each company
under ABF has its own strategy of decision making and holds its unique way of creating
value. Among all its business, the clothing retailing Primark is the major unit that has a
global expansion plan for 2015.Its entry point to the U.S market starts with opening
store in Boston by the end of 2015. Primark’s aim of global expansion should be
channelized to the Indian market where the retail industry growth is tremendous. India
being the home of the manufacturing unit of Primark is the key to its business
opportunities in the country. Other factors like low labour cost, FDI regulations and high
rate of expenditure on clothing contribute towards making India, a strong market for
Primark. This report will analyse the clothing market in a global perspective, the macro
factors of India and will discuss risks and recommendations of the proposed expansion
strategy plan to the new market.
Company profile
Primark, one of the largest clothing retailers in Europe, was founded in 1969 in the
Republic of Ireland. Headquartered at Dublin, it has 239 stores located in UK, Ireland,
Germany, Spain, the Netherlands, Portugal, Germany and Belgium and employs more
than 45,000 people globally. The company offers wide ranges of products: women’s
wear, men’s wear, children’s wear, footwear, accessories, homeware and
confectionaries. Primark’s business strategy is centred at its low price at high street and
up-to-the-minute fashion. This low price strategy is possible because of low investments
in advertisements, outsourcing production to low cost labour countries and by lowering
overhead costs. The apparel market share of Primark reached 0.3% in 2013 (Graph-1)
and the company had an increase of 22% in sales leading to a 44% profits (Associated
British Food, 2013).

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Graph-1 Primark’s market share
Source: Euro Monitor(2015)
It has achieved Earnings before Interest and Taxes (EBIT) of £258 million, £20 million
more than estimated. In the last 3 years, the Compound Annual Growth Rate (CAGR) of
the company is 18% more .The increase in sales and profits were driven by the like-for-
like growth, a 22% profit in their selling area, an increase in the gross margin because of
low price of raw material like cotton and a reduction of costs contribute to make the
brand the major company within the ABF group, thereby accounting 49% of the group
profits (Deutsche Bank AG, 2014). Primark’s business sense and strategy is to expand by
entering into new locations and opening new stores (Euro monitor International, 2011-
a). The company’s outlook is measured by its accelerating growth in their selling area
as the market is growing and is quite dynamic, with a forecast of 12% per annum
increase 4.5% in Germany ,3.6% in the UK and Spain, 2% in France and more than 1%
from others (Berenberg, 2014). A swot analysis on Primark displays the company’s
behaviour and operations in brief.(Appendix-1)
Market Analysis:
Global
In 2013, the global apparel retail industry had increased by 4% having the biggest
segment of 49% in women’s wear (Market Line, 2014).The Compound Annual growth
Rate (CAGR) for the market segments are displayed in the following table 1.1.
0.20 0.20
0.30 0.30 0.30
0.20 0.20 0.20
0.30 0.30
0.20 0.20
0.30
0.20
0.30
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
2009 2010 2011 2012 2013
Primark Market share
World World World

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Table 1.1 CAGR between 2010-2014 : Research Source -PR Newswire, 2014
The Americans are the market drivers for the retail industry holding 34.8% of the
market share. However, the apparel industry forecasts a growth in the CAGR in each
market in next 5 years (2014-2017) with steady increase in women’s wear of 3.8 % and
6.3% in men’s and kid’s wear (Market Line, 2014).The overall performance and
supplication of apparel industry has a deep interrelation with the economic
environment and its macro indicators which further has positive and negative
implications on the company and its environment. However, during the period of steady
economic growth, the industry also enjoys an increase in sales and profits. Nonetheless,
Primark’s business strategy of low cost fashion drives the supply of price-sensitive
demand of latest fashionable clothes. For example, in 2009, during the financial crisis in
European zone, the company profits were high by 10%. The increment in sales was
because of the customers who wanted to remain fashionable with low disposal (The
Guardian, 2010). In 2014, the Global economy continued to recover from the financial
crises predicting a global prominence of 3.7% for 2015. There is also an improvement in
economic growth in the United States with forecast of 3.5% by 2015 which will be
beneficial for the European region, Central America Mexico and few parts of Caribbean.
The overall economic recovery is shown in the following graph -2 (IMF, 2014).

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Graph 2: GDP % Annual Growth in the U.S, Europe and Latin America
Source: IMF (2014).
In apparel industry, the supply cost is majorly driven by the prices of fabric, mainly
cotton. Cotton is considered as one of the main ingredients in clothes and the prices of
this commodity has a major impact on the cost structure of apparels. The price
fluctuations in cotton will have direct implications on company’s sales and profits. In
2011, the cotton prices grew considerably higher than other years (Graph 3). In context
to this, Primark still continued its strategy of low cost clothing and refused to
implement increase in the price of its products due to which the operating profit fell by
9.4%. Though it had a negative impact on its sales which could be seen in company’s
overall profit, this strategy allowed Primark to maintain its customer loyalty and
credibility (Euro monitor International, 2011-a).

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Graph 3 Growth in cotton price from 2009 to 2014 .Source: Euro monitor International (2015)
These days, cotton is being replaced by other fabrics like Lycra. This trend is lowering
the demand of cotton and thereby increasing the pressure on its prices, which is
predicted to decrease by 3% by the end of this year which can be seen in the following
graph 4.
Graph 4 Historical price of cotton from 2000 -2016.Research Source: Cotton Price: Euro monitor
International from International Monetary Fund (IMF)
Consumer Demand
The young consumers who want to be up to date with the latest fashion are the main
target for Primark .The latest trend in the UK market is the combination of fast fashion
with high quality footwear and accessories. The companies need is to keep their stock
updated and must be quick to respond to the changing market trend else they might
lose the market share. (Euro monitor International, 2011-a). Moreover there are
2009
2010
2011
2012
2013
2014
0.00
50.00
100.00
150.00
200.00
World
Growth in Cotton Price

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consumers who look for multiple brands which can offer wide range of products under
one roof.
It could be argued that in 2013, after the Bangladesh’s Rana Plaza tragedy, where more
than 1200 people died (Telegraph, 2013), there was an articulation in the apparel
especially in the ‘cheap-fast fashion’ brands. This event saw a growth in more
‘conscious’ customers who demanded a fair and transparent supply chain of clothes and
footprints of the company. The introduction the Higg Index 2.0 in December 2013
changed the attitude of companies. The Higg Index is a standard protocol for the
garment companies for self-assessment and to maintain the environmental and social
sustainability throughout the supply chain. Companies who couldn’t adapt to these
standards might affect their reputation and even lose clients (Barrie, 2014).
Market Competition
Even though there is a trend, as a pattern of globalization, for commoditization of
products, the apparel Industry is a pulverized market. This standardization is caused
mainly due to a decline in regional clothing choice and economic growth. Few
companies are outsourcing their production to low cost labour regions like India and
Bangladesh, with the aim of achieving high efficiencies with low cost (Hilger, 2015). In
spite of this strategy, the apparel market still remains fragmented. The companies
target to customize their products to match the taste of each region and their culture,
and this is why a global simulation of fashion brand doesn’t exist unlike the sport
brands like Nike and Adidas. The companies have to dissection their analysis in each
region and need to create a platform that allows them to operate in silos. (Euro monitor
International, 2011-a).
Primark’s low price strategy is its competitive advantage. For example, Primark has
snapped M&S has in the area for which it was once most famous: knickers. A five-pack
of briefs in M&S is £12 but in Primark it is £4. According to the retail market research
group Verdict,’’ nothing in the store costs more than £17’’. Primark also operates on its
secret ingredient, THE CATWALK. Over the past few years, Primark has been influenced
by the catwalk. It offers the ‘’very recognisable from the trends you are seeing on the
catwalk’’ at student budget. (Telegraph, 2014).

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Even though different brands hold different strategies, Primark face the main
competition from H&M, Next and Zara. Primark’s like for like growth has been steadily
high with 48% cumulative growth whereas the performance of Zara is 38%, H&M is
24% and Next is -29% (Berenberg, 2014). Zara and H&M have already spread their
wings in new markets by opening stores in 47 and 88 markets respectively(Graph-5)
Graph-5- like for like sales Growth
Primark Outlook:
Primark credence on the European market and the increase in revenues has encouraged
the company to lower its dependence on the continent and create an expansion plan to
enter the US market. By the end of 2015, Primark will be launching its first store in
Boston. The company has also announced, by the end of 2016, there will be 8 stores
opening in the North east Coast(Deutsche Bank AG, 2013).Currently, Primark’s main
market is Europe but its planning to open new warehouses in the United states to
ensure and preserve their strategy of catwalk fashion at lower price(Rankin, 2014).
Target country: India
In general economic terms, India’s economy will see a stable and long-term economic
growth by 2015, driven by the profitable gains in export and policy reformations. This
will have an impact in managing the inflation rate. The year 2014 witnessed dramatic

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economic changes when the real GDP increased by 6.6% from 5.4% and this growth had
surpassed 6% since the 2010-2011 fiscal year with the Inflation of 6.4%.
The same year had growth in the real value of private final consumption by 4.5% and is
expected to grow by 5.2% by 2015. (Euro Monitor 2015).
India should be an attractive market for Primark and represents a good business
investment given the country is a growing economy with per capita which generates
jobs for the people entering the labour force, and offers a very low labour cost
compared to china and Bangladesh. India’s labour cost is 18% lower than china
(Reuters, 2014). In 2012, India was the world’s 9th largest consumer market and by
2015, India‘s consumer’s market could match that of Italy’s and will be approaching
France by 2020(Euro Monitor 2015).The Annu
al Disposal Income of the country has increased steadily at the rate of 20% from 2009.
India: Primark’s Manufacturing Unit:
Primark’s main manufacturing unit is setup in southern part of India, Tamilnadu. This
key factor will help the company to expand its business quickly and at cheaper cost as

11. 10 | P a g e
the shipment will be internal. Other than this, the customization could be easily adapted
as the labourer are well aware of the market trends and clothing material, size and
design
Consumer behaviour in India:
India has various market segments majorly comprising of the young population, age
group between 18 to 29 and middle youth which is 30 to 44 years. These two set of
consumers has a modern lifestyle who are engaged either in college or the working
population and tends to remain fashionable and spends quite decent amount of their
clothing and footwear. The following graph 7 shows the expenditure growth in India
and the growth of population.
Graph -7: Young Adults and Middle Youth Population segment in India. The consumer expenditure
on clothing and footwear in India
The population of young adults has grown from 2.6 million from 2010 to 2.75 million by
2015 and also the consumer expenditure of clothing and footwear has increased
dramatically from 2010 with 3000 million INR to 4.5000 million INR by 2015 and is still
likely to grow as the population of the young adults and middle youth will reach 2.8
million by 2016.

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Competition in India:
The Indian apparel and footwear industry had no major impact of the global economic
slowdown. The growth continued to real a double digit profit in 2013 which was
supported by the growing presence of established brands of all formats. The apparel
industry in India has increased from 2 million in2010 to 3.25 million in 2014. It is
estimated to further increase by 4.25 million by 2016(Graph-8)
Graph -8 Indian Apparel Industry
Source: IMF 2015
The Indian market is flooded with lots of established apparel brands. Companies like
Aditya Birla group and Future groups have high market strength compared to others.
The graph -9below shows the Indian market shares of different brands.Primark’s
competition will be with the other established brand like Aditya Birla group, Future
group and Biba, ITC group etc. (Financial Times, 2015) (Graph-9).
0.00
500,000.00
1,000,000.00
1,500,000.00
2,000,000.00
2,500,000.00
3,000,000.00
3,500,000.00
4,000,000.00
4,500,000.00
India
MarketSizes|RetailValueRSP|INRmn|
CurrentPrices
Years
Indian Apparel Industry
2010 2011 2012 2013 2014 2015 2016

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Graph-9 Indian Market
Source: Euro monitor International from International Monetary Fund (IMF)
India: Growing market for Foreign Brands
In 2013, the government policies were redesigned to support the growth of apparel and
footwear industry like 100% foreign direct investment in single-brand retailing and also
clearing apparel based licenses. This has encouraged many foreign brands to expand
their markets in India For example:
 US based retail shop H&M has recently got the clearance for FIPB (Foreign
Investment Policy and Promotion Board of India) for an investment of 7 billion
INR and the company is willing to open its store by this year (Fortune, 2015).
 A Japanese apparel retailer Uniqlo is investing 105 billion INR and the stores and
aims to opens the stores by 2016(Financial Times, 2015)
 Massimo Dutti aims to open 10 stores by 2017 with an investment of 100 million
INR
Risk factors:
 The Consumer Demand: The change in taste of the local consumers for the
foreign brand is unguaranteed.
 Political instability and Foreign Investment policy: India is a politically
unstable state which can impact the foreign trades and investment policies. The
import traffics might rise since the country joined the WTO there by reducing the
trade barriers.
 Return on investments: The Company might now get quick response and
return from the market. It needs to establish itself among the leading brands.
 Tough competition from local brands: Primark might face a tough competition
from the local brands like Westside, pantaloons and Aditya Birla.
0.00 1.00 2.00 3.00 4.00 5.00 6.00
Aditya Birla Group
Relaxo Footwear Ltd
Celebrity Fashions Pvt Ltd
Levi Strauss & Co
Liberty Shoes Ltd
Khadim India Ltd
Dollar Industries Ltd
Private Label
Indian Market
2008 2009 2010 2011 2012 2013

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 Primark’s strategy of less advertisements: The Indian consumers are more
biased and inclined towards the advertised products. They rely more on the
feedback of the product rather than trying themselves.
 Customization in clothing to fit Indian Consumers: The Indians come in
various sizes and structures. The sizes in Europe are different than that of India.
For example: India’s clothing size ranges from small(s) to X, whereas in Europe,
the sizes are numbered from 6, 8, 10 – 20.
Recommendations:
Short term:
 Growth in terms of expansion: The Company should target its expansion plan
by setting up its stores initially in the big metro cities like Mumbai and New
Delhi.
 Marketing and Adverting: India consumers rely more on the advertisements
and marketing. Primark should initially advertise their company even though a
low scale.
Medium term plans:
 Build a strong supply chain network: Primark already has its manufacturing
units in the south of India (Tirupur, Tamilnadu). It only needs to create a good
relationship with the local suppliers to have a smooth processing in the supply
chain.
 Customize the design and size of the clothes: Primark needs to adapt to the
local designs in order to increase its sales and profits and reach to wide
audience. It will not be a big challenge for the company to customize the changes
as the manufacturing units are in the south of India.
Long term:
 Create online shopping experience: Indian consumers are very inclined
towards online shopping. Primark should create online shopping experience for
its Indian Audiences. The following graphs shows the growth of Internet retailers
in India.

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Graph-11 Internet Retail in India
Source: Retailing: Euro monitor from trade sources/national statistics
 Involve in social causes: Primark should expand its ethics and culture in India
as well. Participating in social events will help the company to win hearts of its
consumers.
 Creating strong supply chain networks with new Suppliers will help the
company to expand it branches in other metro cities like Chennai, Bangalore
Hyderabad and Kolkata
List of References:
Associated British Food. (2014) Annual Report 2014 [Online] Available at:
http://www.abf.co.uk/investorrelations/annual_report_2013/operating_review/retail
(Accessed: 08 February 2015).
Euromonitor International (2011-a), ‘Associated British Food PLC (ABF) in apparel (World)’
[Online] Available at: http://www.portal.euromonitor.com (Accessed: 08 February 2015).
Euromonitor International, (2013- c) ‘Annual Gross Income. [Online] Available at:
http://www.portal.euromonitor.com (Accessed: 08 February 2015).
Euromonitor International, (2014- e) ‘Income: Annual Disposal Income [Online]. Available at:
http://www.portal.euromonitor.com (Accessed: 08 February 2015).
2%3%4%
6%
9%
17%
24%
35%
India Internet Retailing
2009
2010
2011
2012
2013
2014
2015

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International Monetary Fund (2014) ‘World Economic Outlook- October 2014’ [Online]
Available at: http://www.imf.org/external/pubs/ft/weo/2014/02/ (Accessed: 08 February
2015).
Josephs, L; Wexler, A (2014) ‘Cotton Futures Prices at Lowest in Five Years on Demand
Worries’ Wall Street Journal [Online] Available at: http://online.wsj.com/articles/cotton-
futures-drop-to-25-month-low-1406213540 (Accessed: 10 February 2015)
Market Line (2014-a) ‘Apparel Retail Industry Profile: India 2014’, Business Source Premier,
EBSCOhost, [Online] Available at:
http://search.ebscohost.com.ezproxy.kingston.ac.uk/login.aspx?direct=true&db=buh&AN=9
8014839&site=ehost-live (Accessed: 18 February 2015).
Market Line (2014-b) ‘Global Apparel Retail Industry Profile’, Business Source Premier,
EBSCOhost [Online] Available at:
http://web.a.ebscohost.com.ezproxy.kingston.ac.uk/ehost/pdfviewer/pdfviewer?sid=d7ae2
0ac-e2db-46ab-8068-22adcad7b34f%40sessionmgr4003&vid=6&hid=4106 (Accessed: 18
February 2015).
PR Newswire, (2014) ‘Global Children’s wear, Men’s & Women’s wear Market Size and
Forecast Reports’ PR Newswire Europe Including UK Disclose. [Online] Available at:
http://ezproxy.kingston.ac.uk/docview/1547307294?accountid=14557 (Accessed: 18
February 2015).
Rankin, J. (2014) ‘Primark to enter US market with Boston store’. The Guardian, 23 April
[Online] Available at: http://www.theguardian.com/business/2014/apr/23/primark-retail-
us-market-boston (Accessed: 20 February 2015).
Reuters (2013) ‘UPDATE 1- Indi’s hourly wages now lower than China’s-study’ Reuters, 4
April, [Online] Available at: http://uk.reuters.com/article/2013/04/04/economy-India-
wages-idUSL2N0CR1TY20130404 (Accessed: 20 February 2015).
Berenberg. (2013) ‘Capital Market , ABF. [Online] Available at:
http://www.berenberg.de/fileadmin/user_upload/berenberg2013/02_Investment_Banking/

17. 16 | P a g e
Equity_Research/Capital_Markets_Equity_Research_-_Associated_British_Foods.pdf
(Accessed: 10 October 2014).
Rankin, J. (2014) ‘Primark to open store in Boston. The Guardian, 23 April [Online] Available
at: http://www.theguardian.com/business/2014/apr/23/primark-retail-us-market-boston
(Accessed: 12 February 2015).
Foreign Direct Investment (2015) ‘FDI recent policies’ [Online] Available at:
http://www.makeinindia.com/policy/foreign-direct-investment/ (Accessed: 22 February
2015).
FDI (2015)’FDI policies’ [Online] Available at:
http://www.rbi.org.in/scripts/FAQView.aspx?Id=26 (Accessed: 22 February 2015)
Primark Manufacturing Units(2015)’Primark Manufacturing Units in India’[Online]Available
at : http://www.theguardian.com/world/2008/jun/22/india.humanrights (Accessed:23
February 2015)
Appendix-1 SWOT Analysis of Primark

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