Strategy, Enterprise and Innovation: Analysis of Asda's Capabilities and External Environment

This report involves the analysis of a firm's external environment and its strategic capabilities, also it includes evaluation of a firm's internal and external environment with understanding of nature of entrepreneurship recognition. In addition to that it critically examine the capabilities and internal resources that helps an organization to gain a competitive advantage.

Strategy, Enterprise and
Innovation

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Analysing organization's capabilities and its internal resources to gain a competitive
advantage.....................................................................................................................................3
Identification and Evaluation of Key Drivers of Change in External Environment that Impacts
Entrepreneurial Activities of an Organisation.............................................................................5
Porter's Five Forces framework to evaluate impacts of Competitive Forces:.............................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
SEI involves Strategy, enterprise and Innovation. A strategy means a general direction set by
managers of company to achieve desired objectives and plan according to them in future. An
enterprise is a project initiated that might be complicated and difficult. Innovation involves
developing new product or adding value to customer's perspective by turning creative thoughts
into solutions. The organization which is selected for this report is Asda. It is a British
supermarket chain founded in 1949 with its headquarters in Leeds, United Kingdom. The
company offers variety of products which includes grocery, clothing, fashion items and general
merchandise. This report involves the analysis of a firm's external environment and its strategic
capabilities, also it includes evaluation of a firm's internal and external environment with
understanding of nature of entrepreneurship recognition. In addition to that it critically examine
the capabilities and internal resources that helps an organization to gain a competitive advantage.
MAIN BODY
Analysing organization's capabilities and its internal resources to gain a competitive advantage.
Its very important for an organization to analyse its internal and external environment and
also its organizational capabilities to gain a competitive advantage in industry(Hassan, 2020).
Capabilities of organization involves human skills, technology, unique process that helps an
organization to differentiate. In context to Asda , its Swot analysis will help to examine the
strengths and opportunities and also examines the weakness and opportunities that a company
should explore.
 Strengths includes all those factors that contributes to the growth of overall organization.
Asda being in operations since so many years have served millions of customers through
various store formats with its own branded products. Its campaign and good quality
products have helped company to attract more customers.
 Weakness are the factors that creates hurdles in accomplishing organizational goals. In
context to Asda, there are various issues that turned to be a weakness of the company.
Some consumers stated that their products are not that great and up to the mark as
compare to their competitors like Sainsbury's.

 Opportunity is a positive situation which helps an organization to increase demand of
product or service because of changes in trends and technologies. In context to Asda,
there is great opportunity to secure UK market through online shopping.
 Threat is a negative situation that can affect the working of organization(Xie and Lu,
2022). In context to Asda, the company faced tough competition because of other notable
competitors. Also the company was founded breaking rules and violating legal
regulations which turned as a threat for the organization.
VRIO Framework of Asda :
VRIO stands for Value, Rareness, Imitable and Organization. It helps to identify internal
resources of an organization to gain sustainable competitive advantage. Here the resources are
summarised and analysed if they will help in gaining competitive advantage to an organization.
Resources Value Rareness Imitable Organization
Financial
Resources
Yes Yes Yes Yes
Local Food
Products
Yes No No No
Employees Yes Yes No No
Distribution
Network
Yes Yes Yes Yes
Valuable - It indicates whether a resource will add value for consumers or not(Widjaja,
2020). Asda's VRIO analysis indicates that their financial resources are high in value which will
result in more external opportunities for organization to invest in. In addition to that its
employees and products are a valuable source as it helps the consumers to differentiate product,
also the employees of company are well trained to put more effort and contribution in
organization.
Rare - Rare indicates whether the resources that are scare in nature can be controlled or
not. In context to Asda, the financial resources of company are rare as strong financial position

can be founded only in few companies. In addition to that employees are identified to be rare as
they are highly skilled and well trained which ensures that they will not leave the company.
Imitable - This indicates whether there is another similar organization resource or it has
chance of any substitute offerings. In Context to Asda, there financial resources are costly to
imitate as there are more competitors and new entrants in market. Local products are not that
costly to imitate which can give company a temporary competitive advantage.
Organization- It indicates whether the company has proper structure, process , culture
and management system(Haque, Dhakal and Mostafa, 2020). In context to Asda, the financial
resources are quite organized to capture value. Also the distribution channel is organized as they
ensure that products are available to customers at every outlet leading to a source of competitive
advantage.
Identification and Evaluation of Key Drivers of Change in External Environment that Impacts
Entrepreneurial Activities of an Organisation
PESTLE analysis is a effective evaluation technique that can be used to evaluate and
access macro-environmental factors used in external environment scanning(Sunseri and et. al.,
2020). To understand market fluctuations, business position, societal influences, legal aspects
and political environment, PESTLE analysis of Asda is given as follows: Political Factors: It refers to the government policies that have areas including tariffs,
labour law, trade restrictions, environmental laws, tax policy and political stability. Asda
benefits from a comparatively stable government policies in UK. Although, Brexit has
created a lot of uncertainty but enterprise planned for future-proof supply chain in its
response. Economic Factors: These factors consists of inflation-deflation rates, economic growth,
exchange rates, foreign currency worth and interest rates(Sunseri and et. al., 2020). It
impacts on the pricing strategy of the company therefore, Asda needs to consider
economic acpects such as cost of credit, pay level of employees, labour supply &
demand, competitive pressures, economy prices etc. Social factors: It includes various cultural aspects, population growth rate, health
consciousness, career attitudes, age distribution and emphasis on safety that affects the
working of employees in the organisation. The craving for organic, vegan and plant based

ethical foods is also high in European and many other countries where Asda operates so it
should focus on changing according to the social needs. Technological Factors – It involves overall innovation of industry and economy. Various
technological factors involves Rate of change in technology, automation, incentives and
R&D activity. In context to Asda, with growing technology the enterprise need to use
latest mobile apps and fast broadband to offer delivery services. The company is focusing
on making use of latest technologies. Environmental Factors – It includes factors related to nature which comprises of organic
foods, carbon footprint, pollution, waste etc.(Somvanshi and et. al., 2020). Nowadays,
consumers are well aware of how an organization can impact the environment and to deal
with these factors the enterprises are focusing to be more eco-friendly.
 Legal Factors – It includes all the regulations and legal laws that company need to
follow. In context to Asda, the enterprises cannot pay less than the set wages in UK. In
addition to that it cannot perform unfair practices with employees.
Impact on entrepreneurial activities-
Entrepreneurship plays an important role in economic development. There are various
factors that contribute to growth of entrepreneurship and economy. Also these factors have
negative and positive impact on activities of entrepreneurship. Political factors plays important
aspect in terms of geographical area. In addition to that these implications can have impact on
how entrepreneurs are required to function(Panadès-Estruch, 2020). Also entrepreneurs are
bounded by various laws that also affects quality of entrepreneurship to larger extent because
they requires various legal services to perform. In addition to that entrepreneurs are highly
dependent on protection of property rights. Also social factors create a major impact on
entrepreneurs as its there major responsibility to fulfil social responsibility.
Porter's Five Forces framework to evaluate impacts of Competitive Forces:
Porter's Five Forces is a unadorned but powerful utility tool that an company could use to
obtain the main aspects of competition in specific industry or sector. These Porter's Five Forces
structure are used by Asda as a method of analysing and evaluating the operating environment of
a competition for the business enterprise. Strategic analysis of Asda with Porter's five forces
framework is given as follows:

 Competitive Rivalry (Moderate): It is stirred by the potential strength and ability of
competitors in the existing environment. When high number of competitors, offers
similarity in goods and services, outcome is significant reduction in market attractiveness
of the product which company offers. Asda understands how competitors policy affects
its industry, it is able to make useful changes in its strategy to boost profitability and stay
ahead in competition. Company produces low cost products through economies of scale,
proper supply chain management, propitiatory technology and diversification of suppliers
which helps to market and specify its products. Buyer Power (low): It refers to evaluation of the ability of buyers to pilot price decrease
by their efforts(Brody and et. al., 2021). The main drivers of this are the total number of
buyers in the market, choice, loyalty or favour of every single purchaser or client to the
brand and costs incurred to switch from existing supplier to another by the consumer.
Asda have a large segment of buyers which it covers as it provides products which are
differentiated, high in quality and satisfies their pockets. Due to low cost of products, and
fixed rates the customers are unable to shift prices in their own will and they have to buy
from this company. Supplier Power (Low): It is an assessment of how simple or comfortable for sellers and
suppliers to manage the prices at which the company sells its products(Melina and
Berliana, 2021). This is propelled by the strength of suppliers of vital inputs or materials,
uniqueness in their commodities or services, comparative image or strength of the
supplier and cost that is incurred when moving from existing supplier to new supplier.
Asda purchases bulk products therefore, suppliers have to give the products at the most
reasonable prices to avail benefits of scale-sales. The company can easily switch its
suppliers because it have a wide array of suppliers but, to gain competitive advantage it
maintains close relations to suppliers to inculcate them at various working grounds. Threat of Substitution (Low): Where closely related substitute products prevails in a
industry, it rises chances for customers to switch towards the available alternatives in
consequence to price rise. Asda uniquely differentiates and offers its products in the eyes
of customers according to their specific needs so market doesn't have substitutes for its
products. People dislike low-grade products at little cheaper rates that could harm their
health, so they do not substitute company's quality products even at little higher prices.

This declines both the ability of substitute supplies along with the attractiveness of new
product to gain loyal customers of the enterprise.
 Threat of New Entry (Low): High profit markets attracts new companies, which corrodes
profit earnings of the business(Nair, Oksoy and Chen, 2021). As incumbents has high,
durable and strong barriers to new entrants like patenting, high capital requirements,
government policies or, economies of scale, the brand is able stop new entrants and
increase profit generation to a competitive ratio. Asda is a supergiant retail business in
UK, which only have competition with the strong and existing brands and need not to
worry about new entrants. The new entrants would require a huge investment and
supreme marketing strategies to threaten a company which is way beyond their reach.
CONCLUSION
In the following report there had been a analysis of firm's external environment and its
strategic capabilities. In this report evaluation of a firm's internal and external environment is
also included with understanding of nature of entrepreneurship recognition. In addition to that
capabilities and internal resources had been critically examined that helps an organization to gain
a competitive advantage. Through this assessment demonstration of abilities and strategic
analysis of capabilities and external environment is produced. Moreover evaluation of the firm’s
internal and external environment is demonstrated to inculcate understanding of the nature of
entrepreneurial recognition. At last it includes the need for innovation and creativity that could
help the organisation to explore and conquer market opportunities.

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