In the current economic climate, which is governed by intense rivalry, innovative businesses have the potential to redefine the norms to their advantage. Primark is one of the leading fashion shops in Europe and the greatest by turnover in the United Kingdom, with over 70,000 employees in fourteen nations (Statista, 2022). After two years of declining sales, the firm’s turnover increased to roughly 7.7 billion British pounds in 2022 (Statista, 2022). Primark Retail Company has chosen to venture into Abuja, Nigeria, in Africa to stay competitive. There are various market entry techniques the company can employ in the new market.
Reasons for Internationalization
The following market information shows that Primark performs better in the Irish marketplace. Firstly, 94% of fashion retail customers in Ireland know Primark (Statista, 2022). Primark has expanded progressively to become a top discount clothes brand. However, the brand’s value has decreased from almost $2.6 billion in 2020 to $2.2 billion in 20222 (Statista, 2022). In light of the preceding market statistics, Primark’s move to expand in Nigeria would allow the company to enhance its brand reputation, awareness, lower its risks and improve its profits.
SWOT Analysis
Strengths
- Product portfolio: Primark sells several goods and services that include homeware, hosiery, decorations, footwear, undergarments, and various types of clothes. The company targets different customers with its diverse product portfolio.
- High growth rate: Primark has risen swiftly, expanding from Ireland to the UK and other territories. It has 370 outlets in 12 European and American nations and is America’s fastest-growing corporation (Primark.com, 2022).
Weaknesses
- Over-outsourcing: Primark uses China, India, Bangladesh, and Pakistan for manufacturing. According to Johnson (2021), these nations offer cheap labor, and over-outsourcing has lowered commodity quality.
- Controversies: Primark has faced many criticisms over the years, as seen in 2020 when 260 chain store proprietors compensated their personnel less than the statutory minimum salary (Johnson, 2021).
Opportunities
- Sportswear: Healthy nutrition and exercise habits have made sportswear one of the fastest-growing sectors. The clothing company should diversify into sportswear to maintain up with nutritional developments.
- Market research and expansion: South Africa, Brazil, China, Argentina, UAE, and Thailand should be extensively researched by Primark. Research will enable the organization to identify its prospective commercial market.
Threats
- Vulnerable supply chain: Primark’s distribution network and products are susceptible to natural catastrophes and trade concerns. Since the retail clothes company imports Asian products, manufacturing plants, and commodity transit might have many issues.
- Competitors: Primark’s biggest competitors include Gap’s Old Navy, Macy’s, Gucci, Forever 21, Zara, JD Sports, H&M, Prada, and Marks and Spencer. Their existence on the market hinders the corporation’s growth.
Porter’s Diamond Model
Primark’s strategy, structure, and rivalry on a national approach compared to domestic competitors is to supply shoppers with fundamental fashion trends, reduce prices, and produce popular sizes. Primark’s corporate structure is a matrix in which employees administer divisions according to their functions. Primark confronts competitive rivalry in Ireland from New Look, H&M, and generic brand assets with high consumer loyalty. The factor conditions in Ireland, such as the nation’s macroeconomic policies, have made it easier for Primark to operate efficiently.
Ireland’s rising productivity and low taxes have encouraged businesses like Primark to flourish and generate employment. It is crucial to the success of a nation to boost the populace’s level of education. In 2018, Ireland spent only 3.2% of its GDP on education, which increased Primark’s market dynamics (The Irish Times, 2020). Primark’s capital base has been bolstered by Ireland’s monetary and economic sectors, which have functioned as supporting industries. The administration of Ireland has established a suitable atmosphere for foreign direct investments (FDI), allowing Primark to flourish and expand.
Internationalization Strategies
International Strategy
Companies pursuing an international approach are unconcerned with adjusting to local cultural norms or reducing expenses. They aim to market their items abroad with minimal modification. Under this strategy, worldwide business institutions function from a central or headquarters location. Instead of using affiliates or local offices, a multinational corporation maintains a single headquarters in its domestic markets (Nambisan et al., 2019). This corporate structure entails single activities, trademark centers, and minimal infrastructure spending in other nations. Moreover, an international strategy is the most prevalent among enterprises, mainly as they undertake their initial steps toward internationalization and expansion into new countries.
Transnational Strategy
A headquarter or corporate department in one country organizes regional offices in international marketplaces for multinational corporations. This corporate structure indicates a single coherent brand and command center that determines overall decision-making and logistics management, thereby maximizing the power of scale. A business employing this strategy faces the issue of establishing the most effective management techniques for generating scale savings and increasing productivity.
Global Strategy
To grow their client base and offer items in more international countries, businesses with a global strategy maximize economies of scale to grow their marketplace presence and increase their revenue. Global firms seek to standardize their merchandise and solutions to reduce costs and appeal to the broadest possible worldwide crowd (Contractor et al., 2019). These organizations typically keep a central command or headquarters, typically in their home nation, while concurrently creating numerous subsidiaries in nations across the globe.
Multi-Domestic Strategy
To implement a multi-domestic corporate strategy, a company should invest in developing its footprints in an overseas market and adapt its commodities or offerings to the regional consumer base. Organizations shift their offers and reorient their advertising methods to interact with foreign customs, cultural attributes, and practices, as contrasted to promoting foreign items to clients who may not immediately identify or comprehend them (Okumus et al., 2019). Multinational corporations frequently maintain their headquarters in their place of origin. They typically create international headquarters, known as branches that are better suited to provide global customers with region-specific variants of their goods and solutions.
From the four strategies, Primark should employ a multi-domestic approach in expanding its operations into the Nigerian market. By employing a multi-domestic methodology, Primark can tailor its items to the requirements and needs of Abuja clients. As a result, the company will be positioned to compete more successfully and expand its share in the Abuja marketplace. In addition, Primark may outsource its decision-making procedure and delegate specific responsibility to its Abuja-based Nigerian subsidiary. This can enable the unit to think critically, following Nigerian norms without waiting for Primark’s decision or policy alteration to influence company-wide changes. Lastly, organizations that invest in localization for the country they seek to reach are frequently able to build a stronger market link and better product-market compatibility. Residents will perceive Primark’s efforts to fit the traditional preferences and standards of the area, and they will frequently embrace the new establishment with greater ease.
Country Environmental Analysis
Nigeria PESL Analysis
Political Environment
Nigeria’s political position on the Index of Economic Freedom 2021 is negative, keeping it in the category of largely unfree nations. A low ranking results from an unstable political atmosphere, a dearth of reverence for the rule of legislation, and ineffective policy implementation. In 2019, Nigeria closed its land borders preventing goods movements to counter trafficking (PWC, 2022). This action is deemed to help foreign and local firms’ operate smoothly without political interference.
Economic Environment
The economic context of Nigeria for Primark’s expansion is given as explained in this paragraph. Nigeria is an excellent location for commerce based on return on investment (ROI) (PWC, 2022). It has an abundance of inexpensive labor and a massive local consumer base (PWC, 2022). Similarly, substantially low corporate income tax (CIT) rates benefit businesses. Therefore, the country’s economic situation is conducive to Primark’s operations.
Social Environment
To sustain its customer base, Nigeria’s population expansion makes it a crucial investment destination. Nigeria’s populace is expected to grow by 55.7% between 2021 and 2040, fueled entirely by natural growth (Worldometers.info, 2022). When the population rises to 329 million in 2040, Nigeria will continue to be the most populated nation in the Middle East and Africa area and the fourth most populous nation internationally, up from seventh in 2020. By 2040, Nigeria’s expanding population will be a highly alluring consumption destination (Worldometers.info, 2022). Nonetheless, disparities and poverty will persist, reducing the spending power of consumers.
Legal Environment
According to the Nigerian Labor Act, the connection between workers and managers must be in accordance (Global Legal Group, 2022). Foreigners can purchase land through a corporation or corporation constituted in the nation. Additionally, additional resources must be allocated to the court system to alleviate inefficiencies in legal proceedings. Due to the increased money laundering activities within the nation, Nigerian authorities have enacted legislation to curb the practice and promote entrepreneurial activities.
Porters Five Forces
The bargaining power of buyers within the clothing industry in Nigeria is high since the citizens prefer cheaper second-hand clothes. Consequently, the leveraging capabilities of vendors in the apparel sector in Nigeria are high since suppliers have more influence and can increase production costs and seek other trade benefits. On the other hand, the threat of substitute products in the clothing industry is low as few to no alternatives to clothes exist. However, Primark faces a higher risk of competition from local firms, and second-hand-made items flock to the Nigerian marketplace. Lastly, there exists a low threat to new entrants as the cost of operating businesses like Primark in Nigeria is low.
From the two analyses, Nigeria presents a perfect opportunity for Primark to grow its operations. Its projected rise in population of 329 million by 2040 means it will offer Primark a larger consumer base to sell its goods to. The country’s excellent ROI provides a suitable commercial environment for Primark to carry out its business activities. Moreover, its initiatives to close its borders to combat counter-trafficking would enable Primark Retail Company to function without the fear of shutting down due to illegal activities. Finally, the low threat of entry into the Nigerian clothing sector, reduced danger of alternative items, and the high switching costs of buyers provide an excellent opportunity for Primark to flourish in Nigeria.
Mode of Entry
Licensing and Franchising
Since Primark Retail Company would follow a multi-domestic business model, it would be required to spend in expanding its presence in the Nigerian market and to tailor its products and services to the local target consumers. Therefore, if Primark wishes to quickly enter the Nigerian market while assuming minimal legal and economic liabilities, it may wish to pursue distribution deals with Nigerian firms in Abuja. In compensation for royalties, an overseas licensing deal permits a foreign firm, the licensee, to market the licensor’s commodities or utilize its intellectual assets, such as copyrights and patents.
For instance, now that Primark specializes in the fashion industry in Ireland and the United Kingdom and wants to grow into Nigeria, the licensing relationship could be structured as follows. Primark Retail Company would engage in a distribution deal with a Nigerian corporation that permits the licensee to produce and distribute Primark’s designer labels in Nigeria under the Primark trademark. In exchange, the Nigerian licensee would make a royalty charge to Primark Retail Company.
A license enables a corporation in the local region to utilize the licensor’s IP. Typical examples of such property are trademarks, patents, and industrial procedures. The licensee incurs a cost in exchange for the privilege to utilize the intangible asset and, potentially, technical support (Chi et al., 2019). Since licensing requires little commitment from the distributor, it can produce a very high return on investment. Nevertheless, because the licensee manufactures and promotes the commodity, there may be a loss of potential profits from manufacturing and promotional operations. Thus, licensing saves expenses and entails minimal risk as it does not overcome the severe downsides of functioning from a distance (Chi et al., 2019). Typically, licensing arrangements impede control and generate modest benefits.
Another popular method of international expansion is franchising, in which a firm allows multinational investor permission to employ its registered trademark and offer its goods or solutions. The franchisee is accountable for all actions but agrees to follow a marketing strategy developed by the franchisor (Blackburne and Buckley, 2019). Primark’s multi-domestic approach would frequently permit it to remain its headquarters in its country of origin. It would generally establish international bases, subsidiaries, better suited to supply region-specific varieties of its goods to global clients. Therefore, the Nigerian franchiser would offer Primark promotion, instruction, and support with new products.
Since Primark sells numerous products and services, including homeware, knitwear, ornaments, boots, hosiery, and clothing, franchising would be an excellent entry strategy in Nigeria. The franchise corporation would assist the business in targeting various customers with its varied product line. The Nigerian Labor Act stipulates that the relationship between workers and management must be appropriate (Global Legal Group, 2022). Foreigners are permitted to purchase land through a domestic corporation or corporation. According to Johnson (2021), Primark experienced numerous concerns in 2020 when 260 chain shop owners paid their employees less than the legal minimum wage. Consequently, licensing and franchising will assist Primark in adhering to Nigerian economic rules governing wages and working conditions.
Issues from Managerial and Organizational Perspectives
Organizational Coordination
As Primark Retail Company strives to enhance and manage its day-to-day operations, overcoming organizational difficulties might be difficult. Some organizational challenges are more prevalent than others and difficult to manage. Primark’s Nigerian institution’s integration will encounter the issues described below. Role description entails employing the most competent candidate for a position and delegating tasks to the most qualified personnel. A lack of adequate role specifications can interrupt operations, diminish effectiveness, and impede team collaboration. Role delineation issues can arise since Primark’s management in Nigeria may not grasp the talents and special qualities of the Nigerian team. In addition, managers employ process administration to guarantee that their workforce follows the most effective and timely protocols for accomplishing their assignments. However, Primark may encounter crappy procedure management if it implements cumbersome and complex protocols in Nigeria, is inflexible and disregards staff criticism, and lacks an in-depth comprehension of the Nigerian market’s characteristics.
Cultural Issues
The paper employs a portion of Hofstede’s cultural components hypothesis to comprehend the societal diversity that Primark may face in Nigeria. Hofstede’s cultural concept is a framework used to comprehend the variations in culture across regions and to determine how business is conducted across civilizations. Expanding into the Nigerian market will present Primark with the aforementioned cultural challenges. Nigeria’s high power distance score suggests that its culture supports unfairness and power inequalities, promotes bureaucracy, and has a strong regard for authority (Iguisi, 2018). Individualism prevails in the Nigerian worker culture due to the emphasis placed on achieving personal objectives (Iguisi, 2018). In addition, Nigerian culture lays more significance on the current than on the future, focusing on short-term success or satisfaction (Iguisi, 2018). Lastly, the Nigerian culture’s hedonism shows that the population permits free enjoyment of life and amusement (Iguisi, 2018). These will affect Primark’s operations, as its belief in equality and long-term business focus conflict with the Nigerian culture.
Organization Structure
Primark uses a functional organizational structure in its corporate operations. In expanding its activities in Nigeria, using the framework would be a disadvantage as most firms utilize a hierarchical system. One of the most significant shortcomings of a functional organization is the potential for inadequate cooperation between divisions and operational challenges. Despite their high effectiveness and productivity, a lack of collaboration between operational units slows down their output. The tendency of sections to contend against one another places their department’s priorities above those of the corporation.
Moreover, there is typically low enthusiasm among personnel in functional companies, which hinders performance and causes a slip in performance. This is because upper management frequently alters processes and the workplace atmosphere without consulting personnel on the ground. This hurts staff morale and efficacy, ultimately retarding innovation. Finally, a lack of collaboration between these sections results in a rigid structure that makes it impossible to adopt transformations, inventiveness, breakthroughs, and adaptability. An operator in any area can lack intelligence about all other units. The tendency of managers to make judgments without first discussing the department might lead to complications.
Solutions
The following are some of Primark’s suggestions to counter the challenges it would experience in the Nigerian market. Firstly, Primark may adopt a decentralized institutional framework to enable increased efficiency. In contrast to functional corporations, where decision-making typically takes a lengthy period, decentralized institutions make decisions considerably more swiftly. This is because lower-level supervisors and, in many instances, normal workers have the right to act without seeking and waiting for approval from superiors. This is advantageous in instances where Primark must make prompt judgments, which are crucial to its operational performance. In addition, decentralized entities allow workers to make choices that influence their employment. This results in increased staff engagement and decreased turnover by providing Primark’s personnel with a sense of significance and belonging inside the firm.
To overcome and fit within the culture of Nigerians, Primark should consider the following recommendations. Bringing people together around a shared goal or cause may be a potent way to unite a team and ensure all its members move in the same direction. In addition, as a worldwide leader, Primark is responsible for ensuring that its team members or employees work together despite cultural variations. Primark should be cognizant of stereotypes and biases and must make a concerted effort to overcome them. It should be its priority to appreciate the distinctions between its team members and cultivate an open dialogue environment. Lastly, the only way for multicultural groups to transcend their disparities and operate well together is through clear communication. As a global leader, Primark should strive to foster an open communication culture within its organization or team.
Lastly, the first crucial condition for synchronization in improving coordination within itself and the subsidiary in Nigeria is shared goals. Therefore, Primark’s and its Nigerian subsidiary’s objectives must be clearly defined. Every employee in the company must thoroughly comprehend how his position relates to the organization’s overarching objectives. A basic and effective organizational structure is an essential means of coordination. Moreover, the chain of authority and accountability from the top to the bottom of an organization’s hierarchy should be properly delineated. Conflicts can be avoided by clearly defining the power and responsibilities of each unit and individual. Clear authority connections aid in reducing disagreements and holding individuals accountable. Similar activities should be organized collectively, and occupations should be interconnected effectively. Organizational charts, administrative instructions, and the right distribution of tasks all contribute to uniform action.
References List
Blackburne, G.D. and Buckley, P.J. (2019) ‘The international business incubator as a foreign market entry mode‘, Long Range Planning, 52(1), pp.32-50. Web.
Chi, T., Li, J., Trigeorgis, L.G. and Tsekrekos, A.E. (2019) ‘Real options theory in international business‘, Journal of International Business Studies, 50(4), pp.525-553. Web.
Contractor, et al. (2019) ‘Viewing global strategy through a microfoundations lens‘, Global Strategy Journal, 9(1), pp.3-18. Web.
Global Legal Group (2022). Employment & labor laws and regulations – Nigeria. International Comparative Legal Guides International Business Reports. Web.
Iguisi, O.V. (2018) ‘Comparative analysis of Hofstede’s culture dimensions for West African regions (WAF) and Nigeria. In Global observations of the influence of culture on consumer buying behavior (pp. 190-205). IGI Global.
Johnson, S. (2021). ‘Wage theft’ in Primark, Nike and H&M supply chain – report. The Guardian. Web.
Nambisan, S., Zahra, S. A., & Luo, Y. (2019) ‘Global platforms and ecosystems: implications for international business theories‘, Journal of International Business Studies, 50(9), pp.1464-1486. Web.
Okumus, et al. (2019) ‘Corporate-level strategies’, In Strategic management for hospitality and tourism (pp. 135-151). Routledge.
Primark.com. (2022). Primark. Web.
PWC. (2022). Nigeria – Corporate – Taxes on corporate income. Web.
Statista. (2022). Primark revenues 2007-2022 | Statista. Web.
The Irish Times. (2020). Why Ireland is a role model for competitiveness. Web.
Worldometers.info. (2022). Nigeria Population (2022) – Worldometer. Web.
