Primark is an Irish fast fashion retailer. The company runs a chain of clothing retail stores for babies, kids, women, and men. Primark offers home and beauty products in Europe and America. It is a major retail group and was established in 1969. It is the mission of the company to offer with great class, style basics at value for money price. The company aims at under 35s for clothing. The purpose of the company is to offer safe, wholesome, reasonable food and clothing which is excessive value for money. It contributes to the better living of the people. This report evaluates the scale and latitude of the purchasing function within Primark Plc. The report also evaluates how the purchasing function adds value to the Primark Plc and precise ranges of the operation. Finally, the report critically evaluates the potential influences which influence the purchasing function.
The scale and scope of the purchasing function
Primark has a purchasing department as a part of routine functions. The purchasing department provides a service which is the backbone of organizations. The scale and scope of the purchasing functions within Primark Plc are:
Procuring materials: It is the purchasing function to procure necessary requirements required for the daily operations of the company. It includes the raw material needed for the sales team.
Evaluating price: It is the function of the purchasing department to evaluate whether the company is getting materials at finest promising prices in order to exploit profitability. The staff of the purchasing department is required to connect with the sellers, convey better pricing for bulk orders and investigate the possibility of obtaining cheaper materials from the alternate sources as a part of the routine activities (Baldwin and Lopez?Gonzalez, 2015).
Bookkeeping and accounting: It is the purchasing function to manage all the paperwork. It certifies the timely distribution of materials from sellers, produces and tracks purchase orders (Karmarkar, Shiv, and Knutson, 2015). It also functions along with the accounts payable department to make sure that assured deliveries are acknowledged in full and are being compensated on time.
Policy acquiescence: It is an important purchasing function to make sure that Primark is obeying with all the policies. The purchasing department makes sure that it gives attention to the proper procedures for purchase and budget endorsement. It also ensures that items are acquired in accordance with the complete obtaining policy of the Primark (Parker and Wang, 2016).
There are some suitable methods of stakeholder analysis which are used to focus the levels of significance and probable influence on the procuring operations.
The Kraljic matrix is used to advance a purchasing strategy for the products and services Primark consumes. This matrix helps to eliminate supply susceptibility as long as possible and to exploit the latent buying power. The Kraljic Matrix enables Primark to work in a smarter way with the supplier’s company already have. It includes four quadrants given below:
Source: Toolshero, 2018
Strategic items: These items have a great financial impact on the company. Primark is required to spend a great amount of money on the items which are directly connected to the company’s disparity and profit. These are scarce and contain a high value.
Leverage items: The leverage items also have a great monetary impact on the Primark. These items are plentiful in supply due to the great fiscal impact and are significant to the organization (Montgomery, Ogden, and Boehmke, 2018).
Bottleneck items: The bottleneck items have a low fiscal influence on the company as there is a great supply risk. For instance, a new supplier supplying new material. There purchasing power used here is twofold. It is because; on the first side the company needs to ensure that there is continuity of supply. On the other side, Primark is required to develop plans to reduce dependency on such suppliers by investigating alternative products and suppliers.
Non-critical items: There are some items in the company which have a low financial influence and are abundant in supply. Such items are though interesting as the cost of conduct can offset the cost of the product (Jaradt, 2017). Thus, the purchasing strategies for these items emphasis on decreasing administrative costs along with the logistical complexity. The Kraljic matrix also includes what suppliers think of the company. It is basically a function of past dealings with the supplier and their size.
The external environment of the Primark is assessed by the Pest analysis.
Political factors: It is more problematic for the Primark to keep its prices low for the consumers. The company is identified as one of the inexpensive traders of the UK. The rising VAT affects Primark’s competitors but the company also need to worry about it. The company aims to be the cheapest in the market (Brandenburg, Govindan, Sarkis and Seuring, 2014).
Economic factors: The consumers have a smaller amount of money to spend on the spending supplies like clothes in the recession. They have stirred to the down market. The company gets the buyers who are stirred to the down market from the up-market by reducing the price of the clothing chain.
Social factors: The curreent recession played a significant role in social flexibility within the UK. The redundancy levels have gone up advanced due to the recession. It can even affect social mobility. People are anticipated to live longer which indicates a number of increasing customers (Steenkamp, 2017). It means people are likely to spend more money during their lifetimes.
Technological factors: A massive number of people are present by making use of social networking sites. The company makes use of Facebook to generate a fan base in order to retain customers updated about promotions. Primark has almost 152984 fans on the Facebook page. It can build a great prospect for the company. It permits the company to reach a large number of the segment (Arriaga, Andreu Domingo, and Berlanga Silvente, 2017).
The Porter’s value chain analysis is a group of activities which are accomplished by the Primark to produce value for its customers. It adds worth to the competitive advantage of the company and a higher profitability.
Source: Toolshero, 2018
The Porter’s value chain analysis includes the steps given below:
Identification of the sub-activities for each prime activity: The sub-activities are determined for each primary activity which creates specific value for the Primark. The categories of the sub-activities are:
Identification of the sub-activities for every support activity: It includes how provisional activities like firm infrastructure, HRM, technology development and procurement can generate value within the prime activities of the Primark. For instance, HRM creates value to the inbound logistics, advertising and sales, and service. It is done for the other support activities (Thompson and McLarney, 2017).
Identification of the links: It is a time-consuming phase as it is all about finding the links between the identification of the additional value. This step focuses on the increasing competitive advantage from the value chain (Estelami and O’Connor, 2018). For instance, an expansion within a CRM solution has a connection with the growing production and sales volume through assured investments.
Solutions to optimize and create value: It is significant to define the activities which are to be enhanced in order to generate additional value. It is all about the qualitative and quantitative investments which add to the customer base, competitive gain, and viability of the Primark (Touboulic and Walker, 2015).
The purchasing function adds value to the organization and it can be understood with the help of the Porter five forces.
Primark has made an exceptional performance in the last few years. Porter’s five forces identify the reasons behind the success of the Primark:
The threat of new entry: The new entrants convey new capability to the industry as they aspire to attain market share and justifiable resources. The prevailing companies are quite unwilling to welcome any new entrant in the same industry (Heckmann, Comes and Nickel, 2015) Primark has attained economies of scale which is very exclusive and difficult for the other new entrants who wish to come into the clothing industry. The economies of scale enable companies to offer inexpensive products in the market.
The power of buyers: The buyers are supposed to be powerful when they demand cheap prices. There are no switching costs in the retail industry but prices make up the observance of the customers. Primark is one of the inexpensive clothing retailers in the UK and no other company offers low-cost prices like Primark.
The power of suppliers: The suppliers supply the material which is required by the company to produce products. The names of the suppliers of the company are not stated but it is realized that cut-price fashion chain Primark has dealers in India, Bangladesh, Vietnam and other countries (Gonzalez-Padron, 2016). Primark can easily control the costs and can further expand its margins.
The threat of substitutes: The threat of substitutes is high due to the number of competitors in the market. The customers like to go for the cheap alternatives. Primark is cheaper than others so it is successful in maintaining its position (Thanasuta, 2015). But the company is required to observe its participants who come up with some alternatives.
Modest rivalry: Primark considers its competitors not only who offer the same price clothes but also the premium price companies. Primark is doing far better than its competitors.
The continuous improvement management aims to improve opportunities, implement phases and tasks to meet performance goals, track progress and measure success. Such improvement initiative contains:
Primark makes use of the strategies to improve its management on a continuous basis.
Super competitive prices: The company operates in the market by undertaking a range of measurements like product, structures, quality, pricing, marking and delivery channels. The company is successful in gaining a competitive advantage by offering customers great value by means of lower prices or providing bigger benefits. It lets the company charge advanced prices and generates profits (Alotaibi, 2016).
Market product quality: The quality of the Primark is related to the price and dealers that deal with the Primark. It is the best excellence price ration in the marketplace. For instance, the ABF group attained this correlation by making use of the basics rules to attain the best profits (Cooper, 2017). The company tries to attain opportunities by making the finest connection between quality, price, location, speed and more.
High street locations: The company has a good location policy, For instance, the company has a store in London on the Oxford Street and the opponents are also found on the same street. There is a massive amount of no-frill fashion stores in the UK high street. It indicates that Primark has a lot of opponents that have the same kind of customers (Wang, Gunasekaran, Ngai, and Papadopoulos, 2016).
Clear attention on the target market: Primark has a better consideration of the need of the customers. The company mainly segments to the fashion conscious people under 35s. The company has chosen a cost leadership strategy to attain cost privilege over competitors. The company has even its own buyers who travel all over the world to perceive fashion trends.
Primark is focusing on the efforts to manage waste in the stores. The company keeps cost low to reduce the environmental impact. It has even invented a precise tactic to attaining products to the stores. It is intended to minimalize packaging and waste at all the stages of the process from packaging to sale in-store. For instance, the company asks factories to use one plastic cover for the whole set of t-shirts, as an alternative of wrapping separately (Papargyropoulou, et. al. 2014). An initiative is also taken by the Primark to practice the same trucks which convey products to the stores, to assemble waste and take it back to the delivery centers. It helps in reducing the number of trucks on the road along with the amount of the onsite waste assemblies from the stores (Wieseke, Kolberg and Schons, 2016).
As an international player, Primark has an accountability to act and trade honourably. It results in to be a force for good. The company makes sure that trading encounters the company’s values and ethical morals. The code of conduct of the Primark certifies that all the workers of the company are preserved decently paid a fair wage and work in the good operational conditions (Camilleri, 2017). Primark has a responsibility towards its workers, customers, and shareholders. It makes sure that the products are made in the virtuous operational conditions. For instance, the HER project in Bangladesh pursues to make optimistic changes in the lives of the dealer workforces (Eriksson, Strid and Hansson, 2015). This project makes use of the learning as a key instrument beside all the inter-related complications. This programme objects to mend the health of the female workforces by education and training. The company also offers the tools to take safekeeping of their personal and working lives. This responsibility in turn passes on to the families and supports to improve the whole societies (Dach and Allmendinger, 2014).
The probable influences of the purchasing function with affection to the development and delivery of the organizational strategy can be:
Primark can learn from the 3aaa company which was subjected to the fraud investigation three years ago. The fraud of the 3aaa company distorted into administration put 500 jobs and 4500 internships at risk. 3aaa stands for aspiring, achieve and advance was placed into the instant direction as soon as the education department pulled all of its funding. This collapse of the biggest internships provider left 4500 trainees at companies comprising Virgin, Volkswagen, and Ocado at risk of deteriorating to complete their courses. The department of education passed on the outcomes of an investigation to the police officers at action fraud and confronted that its primacy was to protect the trainees and ensure the slightest disturbance to their learning. The department is going to source high-quality alternate endowment as soon as potential and maintenance learners and employers in order to empower them to endure with the internship programme. 3aaa made a £2.5m post-tax loss and was told to terminate all the contracts with the company. It affected the employees, trainees, and clients who have a relationship with the company and to determine whom they wish the apprentice learning should take place in the coming years.
Conclusion
The purchasing function is associated with the buying of goods and services required by the Primark. The main objective behind this function is to buy materials in the right eminence, quantity, distribution at the appropriate place at the appropriate time and price. The purchasing function at Primark has efficient scope due to the tasks like obtaining materials, assessing price, book-keeping, accounting, and policy passivity. The Kraljic matrix is used by the Primark to advance a purchasing strategy for the products and services. This matrix helps to eliminate supply vulnerability as long as conceivable and to exploit the latent buying power. It enables the company to work in a smarter way with the supplier’s company already have. The external environment of the Primark is evaluated by the Pest analysis. It permits the company to reach a large number of the segment. The Porter’s value chain analysis helps Primark to perform activities which create value for its customers. It adds value to the competitive advantage of the company and leads to higher profitability. The purchasing function adds value to the Primark which is made possible with the help of the Porter five forces. The company tries to continually improve management with the help of efficiently managing waste and corporate social responsibilities. The purchasing function is critically evaluated with regard to the organizational strategy.
References
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