Primark Case Study

Individual Primark Essay Primark source cheap labour in foreign countries, to minimise price and maximise profits. How have they defended this policy to their other stakeholders?

Primark are well known for selling cheap, low range quality clothing, they are able to do this by outsourcing labour and the production of these clothes to foreign countries with more relaxed minimum wage and labour regulations, like Turkey, Bangladesh, and China. Most famously was Tirupur, India which was exposed by BBC’s Panorama for its poor child labour practices in June 2008. This means they can produce stock cheaply and maximise profits.

There are many human rights groups, fair trade organisations, and NGO’s like HomeWorkers Worldwide, SAVE, and Labour Behind the Label, who boycott and campaign against Primark over their outsourcing policies and as a result of this there has been a building negative perception of Primark. As a result of this Primark have needed to assess their policies and in some cases re-evaluate them, these new positions taken by Primark need to be communication and justified to their stakeholders to get them on board and start to regain a positive public image.

Primark are solely owned by Associated British Foods (ABF), which means in a way they don’t have shareholders. This is very fortunate for Primark in regards to their outsourcing policy as it eliminates one of the stakeholder groups they need to communicate to and reassure. Associated British Foods own 100% of Primark, and as a result they are the ones who make all the decisions. This means the investor relations team do not need to communicate to them information which they already know.

Despite communication from investor relations to shareholders not being vital in this case, there are many other stakeholder groups with whom it is imperative to communicate with, not only by sharing information but also by manipulating and even in some cases withholding information which might worry some stakeholders and cause unnecessary issues. There are many people within the company with whom the information needs to be communicated to, including: Community Relations; Public Affairs; and Media Relations, however the most important group to communicate with first is Supplier Relations as they are the ones who are directly affected by any changes to Primark’s outsourcing policy.

After BBC’s Panorama expose in 2008 Primark were faced with an issue which needed to be dealt with. They had been associated with supply chains that used child labour in their factories. From an investor relations point of view they decided that being associated with the suppliers would have a significant impact on their share price and the public image of the company, so as a result Primark sacked three of their suppliers who were involved in the scandal. Although the actions taken by Primark may have been financially beneficial and the right course of action to take for the company, the way they went about it demonstrated a

severe lack in the communication skills of the company and as a result they suffered in terms of public opinion.

Aloyisuoius, Director of SAVE said, “Primark should not cut and run. There was no consultation with local NGOs or unions when this happened and this needs to change” (ethical consumer, 2008).This shows a clear weakness in Primark’s ability to communicate with its relevant stakeholders; they sacked their supplier without communicating properly with them and other relevant organisations. By not communicating with the suppliers fully Primark did manage to put as much distance between themselves and the issue of child labour as possible however after the Panorama expose the damage had already been done and so it would of been much more beneficial particularly for their public image to negotiate with the suppliers and NGO’s to reach a mutually beneficial decision.

Despite the mass of negative coverage in the media, Primark were in contrast to their communication with supplier relations actually excellent in their communication with media relations. When dealing with an issue or crisis it is important to act and communicate the facts quickly as it is better to be communicating negative information than not saying anything and allowing rumours to surface and gain momentum.

“Primark immediately denied all knowledge of these poor conditions and the use of children in their supply chain” (ethical consumer, 2008); this quote shows that Primark were excellent in their communication with their media relations and the media as they instantly put out a statement responding to the allegations and distancing the company from the issue. Another factor which shows strength in the way Primark communicated to this stakeholder is that the message they communicated was consistent across all channels which enabled them to show a united front. Primark’s initial response was to deny all knowledge of the child labour in India and then as the issue developed they repeated themselves and expanded on the reasons why they had no knowledge which not only made them consistent but also stopped themselves from seeming negligent. This skill in communication could be seen when the Head of External Affairs for Primark, Geoff Lancaster said, "It's very difficult to identify abuses particularly with subcontractors when your contract with the supplier is so distant,” (ethical consumer, 2008) which shows Primark reiterating that they were unaware of the child labour going on but also gives a logical reason as to why.

This also goes to show another element of communication which Primark excelled in, Griffin (2009, pp. 85) states that one of the most important factors “is the selection of the most appropriate company spokesperson. This is not always the chief executive.” Primark’s selected company spokesperson was Geoff Lancaster, the Head of External Affairs and as evident in this study it is he who communicates almost throughout the wake of the expose and being the most qualified communication expert in Primark it would seem that he is the best choice.

After the initial crisis period when the expose was released and Primark had communicated their position to the media the next stage is to start to defend themselves and regain favour with the media and the public. Primark did this well by communicating to their media relations team and then the media that they are

a responsible company and importantly that they are financially committed to the ethics of their supply chains. Primark’s Head of External Affairs, Geoff Lancaster did this by saying, "Unlike a lot of our competitors, we pay for the cost of auditing our suppliers and we conduct remediation programmes.” (ethical consumer, 2008).

This shows that Primark are investing their own money into their supply chain to make sure that child labour and other human rights policies are not being abused.

Further to communicating to the media that they are financially committed, they also went on to try to diversify the issue and move the focus away from Primark. This is an excellent communication strategy as it makes the issue global and not simply about Primark so the negative company image is not focused on Primark but the whole retail industry. In an interview with PR Week UK Magazine, Geoff Lancaster did this by saying, “There are problems in the developing world, but they are not exclusive to us. Most of our suppliers work for other chains as well. It's something we take seriously, but we would argue we are unfairly singled out.” (Magee, 2010).

This shows that in one statement Primark are able to show that they take the issue very seriously but are also diverting the blame and making it a ‘developing world’ issue and something that is in the whole retail industry not just Primark.

Despite the negative public image that had befallen Primark after the Panorama expose, Primark had actually increased sales although this is down to the current economical conditions and the benefit of selling cheap clothing. This shows that despite all the bad press Primark received the public were apathetic because in the recession it seems ethics and principles are luxury items which most people can’t afford. The fact that Primark had actually increased sales was great news for their investor relations; however, communicating these positive issues to their media relations and the media can be more treacherous than communicating bad news, particularly in the wake of such a public controversial issue. However Primark’s communication strategy for this was exceptional, they believed reporting profits would seem like Primark were making money from child labour and so they played down the story and again focused on their serious attitude towards the ethical matters and went on to say “'We are doing a lot of work and feel we were unfairly represented by Panorama.” (Mattinson, 2008).

Whether or not Primark took the ethical and right course of action after the expose by sacking their suppliers and denying involvement is still a controversial subject three years on; however, once they had decided their strategy their communication tactics to the media were efficient and effective as they presented consistent communications, removed themselves from the issue, diversified the blame, and focused on the things they are doing to stop something like it ever happening again.

Unfortunately for Primark in the case of the June 2008 child labour expose two of their stakeholders, suppliers and community, were the same people as the people in the communities around the warehouses were also the people working in them.

Due to this the way they communicated to the two groups was almost identical and this approach was to not communicate. As mentioned before Primark sacked three of its suppliers who were associated with the child labour claims without consultation and this left thousands of people in the community jobless, without being communicated to the reasons. This shows a severe lack in Primark’s

communication skills as they almost entirely ignore communicating to two of their stakeholder groups, whether this is because they believe it is unimportant or simply because they are prioritising other stakeholders above them, it can still be considered a weakness in their communication strategy. Hendrix (2003, pp. 151) states there are three main principles of effective communication in regards to community relations these are, “First, the targeting of opinion leaders or community leaders for communication is crucial...Second, group influence plays a substantial role in effective community relations...Finally, audience participation is highly significant. Targeted community media, leaders, and groups can be encouraged to participate in the client’s event.”

Public Affairs in an important area to communicate effectively to because they are the people who will stick with a company for years if they believe it has wronged anyone who is unable to or simply hasn’t stood up for themselves. In the case of Primark’s child labour issues NGO’s, unions, and activist groups got behind the cause of the suppliers and communities when they were sacked without consultation. As mentioned earlier Aloyisuoius, Director of SAVE said, “Primark should not cut and run. There was no consultation with local NGOs or unions when this happened and this needs to change” (ethical consumer, 2008). This quote shows that after failing to communicate to its suppliers, Primark then carried on its failure by not handling its public affairs effectively by not communication with any NGO’s or unions, this had a detrimental effect on the company particularly its public perception because as Griffin (2009, pp.50) states “They are increasingly influential, filling our airwaves and newspapers, and enjoy favourable trust ratings compared with the media, governments and business in most countries.” This shows that many of these groups have a great influence over the level of negative media coverage a company can receive when issues and crisis’ like the one faced

by Primark occur.

Primark source cheap labour in foreign countries, to minimise price and maximise profits. How have they defended this policy to their other stakeholders? In essence they don’t. As shown in this case study of Primark’s communication strategy, after the expose by Panorama, revealing the use of child labour in some of their factories in India, Primark did little to defend their position. As stated previously despite the expose Primark’s sales increased as a result of Britain’s ongoing recession, this mean that Primark’s investor relations team didn’t have to worry about the expose as it was not affecting them. This antithetical success can actually be seen as a negative for Primark as it meant the investor relations team did not communicate to community and supplier relations and public affairs as they did not see any reason to; however, as a result when Primark sacked their suppliers and the communities lost their jobs there was no channels of communication which led to many NGO’s and activist groups campaigning against Primark and their poor public perception.

The one saving grace in Primark’s communication strategy when dealing with this case of issue management was its effective media relations plan. Primark came out with instant denial in the media, disassociating themselves with the suppliers in question immediately and then in the wake of the issue continuing to build on this standpoint by explaining how it was unforeseeable, how the issue was bigger than themselves as a company, and how they would stop it happening to them again.

One of the key things from an investor relations standpoint that was communicated through to the media was to downplay the success of Primark despite the expose; if they were seen to be smug and saw themselves as untouchable then the issue could have turned into a much larger crisis.

One could argue that Primark effectively communicated with all its stakeholders simply by using the media as a channel to reach the rest of its publics. The media can be seen as an ‘umbrella’ stakeholder with whom if you communicate, then everyone else will shortly know, and as previously mentioned Primark’s media relations communication was the one area in which they excelled.

This case study into Primark’s communication strategy is an excellent example of how not to deal with a communication strategy after an issue and still end up being successful. However there is much to be learnt from Primark. Firstly, media relations can be considered to be the most important stakeholder to communicate with as they shape public opinion and can communicate to and even influence other stakeholders. Secondly, despite Primark getting away with it, you should always communicate first and most in depth with the stakeholders who are directly affected by any issue. Thirdly, Primark are actually a rarity in the retail sector as they shun PR and prefer typical marketing and as a result they do not have an in house communications team, they have one man Geoff Lancaster from their parent company ABF; this means that in issues and crisis’ like the one discussed they have to bring in an external company who were not completely familiar with Primark and perhaps the communication lapses could be seen as a loss for agency PR and a recommendation for in house communication teams. Lastly, luck and good timing can be seen to of been beneficial for Primark in this case; however, PESTLE factors will rarely be in a company’s favour so you should always take them into consideration as they can be hugely influential.

Reference List Arnott, S., 2008. Primark faces demonstration after child labour TV exposé. The Independent, [online] 23 June. Available at: http://www.independent.co.uk/news/business/news/primark-facesdemonstration-after-child-labour-tv-expos-852386.html [Accessed 19/12/2011].

Ethical Consumer, 2008.

Primark. [online] Available at: http://www.ethicalconsumer.org/CommentAnalysis/CorporateWatch/primark.asp x [Accessed 19/12/2011].

Griffin, A., 2009. New Strategies For Reputation Management Gaining control of issues, crises and corporate social responsibility. London: Kogan Page Hendrix, J.A., 2003. Public Relations Cases. 6th ed. Belmont, CA: Wadsworth/Thomson Magee, K., 2010. Corporate Reputation: The cost of being cheap. PR Week UK, [online] 13 January.

Available at: http://www.brandrepublic.com/features/977239/Corporate-reputation-costcheap/?DCMP=ILC-SEARCH [Accessed 19/12/2011].

Mattinson, A., 2008. City & Corporate: Strong Primark sales despite expose. PR Week UK, [online] 7 November.

Available at: http://www.brandrepublic.com/features/860207/City---Corporate-StrongPrimark-sales-despite-expose/?DCMP=ILC-SEARCH [Accessed 19/12/2011].

Appendix 1.1 Below is a stakeholder map for Primark which is specific for which stakeholders would be relevant when dealing with the issue covered in the essay. (An ethical issue, regarding suppliers)

1.2 “All Publicity is Good Publicity” In relation the issue dealt with in the essay, Primark would agree with the statement that all publicity is good publicity. Primark would believe this statement to be true because despite all the negative publicity they gained from the incident their sales were in fact increased, the only logical answer from this is that the public were made more aware of Primark’s presence as a cheap high street retailer and in a time of recession were happy to buy their products. This shows that negative publicity was in fact good publicity for Primark as it helped to increase their sales.

“What the public thinks does not always matter”

The case of Primark’s increased sales after the Panorama expose is perfect proof that “What the public thinks does not always matter”. After the expose there was a poor public perception of Primark, and people boycotted the retailer because of its alleged use of child labour in India. However, despite the public thinking that Primark had terrible sourcing and ethical policies, it did not stop them for buying Primark products; this shows that Primark would believe that what the public thinks doesn’t always matter, because sometimes other factors, like the recession, are sometimes more influential than what they think or believe.

“You don’t always have to tell the truth to the press” After the Panorama expose, Primark’s response was to deny all knowledge of their suppliers using child labour. Whether or not Primark were telling the truth at this point is irrelevant because the public believed them to be lying and as such a negative perception of the brand was spawned. This shows that especially in Primark’s case it is always better to tell the truth; however, unless you can prove what you are saying to be the truth then be prepared for everyone to think it is a lie.

“Shareholders are more important than customers” In the case of Primark it is safe to say they do not believe this. Primark’s sole shareholders are their parent company ABF; this means that in essence the shareholder is the company itself. The freedom of not having external shareholders to please means Primark can focus on, and give a higher priority to, other stakeholder groups, including customers and it is for this reason that Primark do not agree with the statement “shareholders are more important than customers”.