Macro-Environmental Factors Influenced Primark’s Performance

What macroenvironmental factors have influenced Primark´s performance during the last few years (please focus on: demographic, economic, natural, technological, political/social and cultural forces)?

Many were the macroenvironmental factors that influenced Primark’s performance:

Demographic factors:

As the case study analyses mainly the UK market we shall take a deeper look into their demographic evolution.

We know that life expectancy has increased. However, this does not affect the company, as they target a young public: “young, fashion-conscious under 35s”1 (so, mostly people born after 1971).

“Official figures from the Office for National Statistics show that the fertility rate – the average number of children per woman in England and Wales – rose steadily over the past decade following a slump in the 1960s and 1970s and a plateau throughout the 1980s and 1990s.”2.

This means that the natality rate from the 70s onwards has been rising (and remaining constant somewhere in between) after an abrupt fall. After that it fell in 2009. If the natality rates increasing it will be great for the company, as that means the number of potential clients (if the same ages keep being targeted) will increase. However, if it decreases they will also see their future potential clients decrease.

Economic Environment:

We can observe that for a long time disposable income has increased. However, in about 2010 it has started diminishing (figure 2). This phenomenon, caused in part by an increase in value added tax, higher food and gas prices (figure 3); allied with “harder-to-get” credits and concerns about unemployment led to a change in the consumer pattern: they are now buying less (as their income was reduced and they now focus on the most essential products) and look for the highest value-for-money purchase. Primark presents good quality and fashionable goods at a low price which creates the perfect opportunity for consumers to acquire the latest fashion and still have money in their pockets by the end of the day.

It is also noticeable that the targeted segment reaches the ages in which women have higher income (25-34) and men have relatively high incomes (comparing to women), which means their segment has a considerably high purchase capability.

Natural Environment:

The cotton prices sky-rocketed in 2010 and continue doing so in the first quarter of 2011. This meant a huge increase in Primark’s cost structure. They decided to support this cost by not increasing prices. However, that was not the adopted practice by most of the clothing industry, as the clothing prices in the UK followed the cotton price increase (figure 6). By doing so Primark sacrificed its short-term profits but remained the cheapest brand on the high street.

“A consumer price index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households. The CPI in the United States is defined by the