2.3.2a Managing the Provision Process
Primark v Peacocks
Primark and Peacocks are two similar types of clothes retailers, both operating at the discount or lower price end of the market. In 2011, and into 2012 Primark performed strongly, recording a 16 per cent growth in sales in the sixteen weeks to 7 January 2012.
An announcement in January 2012 stated that Peacocks was going into administration with half of the Cardiff headquarter staff losing their jobs as a result of the business being unable to restructure debts of £240m. On 22 February 2012 administrators announced that Peacocks had been sold to Edinburgh Woollen Mill, saving 6,000 jobs but 3,100 staff would be made redundant.
Edinburgh Woollen Mill also announced that 224 stores would close with immediate effect. Those areas heaviest hit would be those within close proximity to successful Primark and Matalan stores. It was hoped that once the supply chain got moving again that Peacocks would re-assert itself as one of the leading High Street fashion and clothing retailers.
The stores that have been forced to close are those with performance issues and overhead pressures. Whilst exact details for each store closure have not been released it is known that whilst Primark is achieving sales, on average, of £420 per square foot of its shopping space, the figure for Peacocks was only £200 per square foot. Clearly there is a large gap between performance levels.
An article in the Guardian in March 2012 compared visits to Primark’s and Peacocks and gave Primark’s a slightly higher rating, although the visit to Peacocks was on the day after it came out of administration and the stock issues (lack of) may have been down to uncertainty regarding the future of the store visited.
The Guardian conducted a poll, asking readers to choose between Primark, Peacocks, or ‘other’ for shopping, produced the following results:
The article in the paper drew comments from 53 respondents. Generalising, these comments appeared to fall into two camps – those, who because of low budgets, were delighted to buy such cheap clothes, despite the untidy nature of some of the stores, and those who worried that a tee shirt could be bought for only £3. The implication behind these sorts of comments was that sweatshop labour may have been used.
(Sources http://www.bbc.co.uk/news/uk-wales and http://www.bbc.co.uk/news/business)
1. Explain one reason why the evidence suggests that capacity utilisation is higher in Primark stores than in Peacocks. (4 marks)
2. Analyse which aspect of the design mix is likely to be more dominant in the product design at stores such as Primark or Peacocks. (6 marks)
3. Much of Primark’s clothing range is manufactured abroad. Analyse two reasons for this. (6 marks)
4. Assess the need for Total Quality Management (TQM) at clothing retail stores at the lower end of the price range. (10 marks)
5. What recourse do consumers have if they find that purchases made at Primark’s or Peacocks are not fit for purpose? (4 marks)
6. Evaluate the need for lean management techniques such as Just in Time in the retail clothing industry. (14 marks)
1. Capacity utilisation is usually measured by expressing the capacity currently being used (as in floor space or machine usage) against the possible total capacity. This result is usually expressed as a percentage. (1 knowledge mark) The evidence notes that Primark are achieving sales, on average, of £420 per square foot, whilst Peacocks are achieving sales of £200 per square foot (1 application mark). This would suggest that Primark is utilising its floor space more expertly (1 app mark). This would support the view that Primark is performing more efficiently than Peacock’s and offers an explanation of how sales are growing at Primark (1 analysis mark).
2. The design mix consists of 3...
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