Name: Jack Sheehan
Student Number: 114564277
Lecturer: Bernadette Power
Module Code: EC2017
Date Due: 30th of July 2015
Word Count: 1,040
A business strategy is hugely important in determining the strategic position of a firm. Such a strategy must ensure the growth of the company by directing it to perform at a higher level than its competitors. The business strategy will incorporate many factors both general and particular to the business and the industry. These together will produce a plan for the company to achieve its corporate objectives.
Primark Stores limited, a subsidiary of Associated British Foods (ABF) is a firm that occupies a low-cost leadership position. Their success lies in their ability to provide products that …show more content…
This represents a phenomenal success, and has led to the company being renowned for its “fast fashion and lean operations” (ref prim history). This has led Primark to achieve economies of scale due to buying inventory in bulk from suppliers. Economies of scale occur when a company grows and thus there is an increase in production. When this occurs the cost per unit decreases since fixed costs are shared over an increased number of goods. Economies of scale are a determinant of the horizontal boundaries of Primark due to the large quantity of products it produces. This has resulted in a decline in costs and an increase in its market share which is 17.7 % of cheap apparel. The company has increased the type of products it offers, by bringing in complimentary products, again aimed at its target market. While its main product is still fashion, it has expanded its line to include toiletries and cosmetics along with a wider range of accessories. This has allowed the company to achieve economies of scope by the savings created in producing a greater choice of products using many of the same …show more content…
However, Primark did not grow organically but grew through a series of additions of companies with the likes of Littlewoods, Co-Op and most also BHS. This growth method has shown to have been massively successful for Primark. According to ABF chief ‘acquisition is a route to growth for us,’ and has facilitated the assortment of Primark into new markets, most recently its European expansion. This growth strategy has created synergies which play a big part in the firm’s decision to buy other players in its industry. Synergy has been created for the firm in the form of cost reductions as Primark was able to achieve economies of scale as a result of the acquisitions. The firm has also benefited from financial synergy, but this is not credited to acquisitions, but to the ease at which it acquires capital in being under the umbrella of ABF, a major conglomerate. Due to this, capital is not as risky as there is increased debt financing. It therefore allows Primark to grow externally through utilisation of acquisitions so that it doesn’t have to invest large amounts of money in the process of building new
Student Number: 114564277
Lecturer: Bernadette Power
Module Code: EC2017
Date Due: 30th of July 2015
Word Count: 1,040
A business strategy is hugely important in determining the strategic position of a firm. Such a strategy must ensure the growth of the company by directing it to perform at a higher level than its competitors. The business strategy will incorporate many factors both general and particular to the business and the industry. These together will produce a plan for the company to achieve its corporate objectives.
Primark Stores limited, a subsidiary of Associated British Foods (ABF) is a firm that occupies a low-cost leadership position. Their success lies in their ability to provide products that …show more content…
This represents a phenomenal success, and has led to the company being renowned for its “fast fashion and lean operations” (ref prim history). This has led Primark to achieve economies of scale due to buying inventory in bulk from suppliers. Economies of scale occur when a company grows and thus there is an increase in production. When this occurs the cost per unit decreases since fixed costs are shared over an increased number of goods. Economies of scale are a determinant of the horizontal boundaries of Primark due to the large quantity of products it produces. This has resulted in a decline in costs and an increase in its market share which is 17.7 % of cheap apparel. The company has increased the type of products it offers, by bringing in complimentary products, again aimed at its target market. While its main product is still fashion, it has expanded its line to include toiletries and cosmetics along with a wider range of accessories. This has allowed the company to achieve economies of scope by the savings created in producing a greater choice of products using many of the same …show more content…
However, Primark did not grow organically but grew through a series of additions of companies with the likes of Littlewoods, Co-Op and most also BHS. This growth method has shown to have been massively successful for Primark. According to ABF chief ‘acquisition is a route to growth for us,’ and has facilitated the assortment of Primark into new markets, most recently its European expansion. This growth strategy has created synergies which play a big part in the firm’s decision to buy other players in its industry. Synergy has been created for the firm in the form of cost reductions as Primark was able to achieve economies of scale as a result of the acquisitions. The firm has also benefited from financial synergy, but this is not credited to acquisitions, but to the ease at which it acquires capital in being under the umbrella of ABF, a major conglomerate. Due to this, capital is not as risky as there is increased debt financing. It therefore allows Primark to grow externally through utilisation of acquisitions so that it doesn’t have to invest large amounts of money in the process of building new