Positive and Negative Impact of External Factors on Asda: A PESTEL Analysis

This report provides a PESTEL analysis of Asda and its positive and negative impact on the company. It covers the challenges faced by the company and how it responded to those challenges. The report also provides recommendations for the company to improve its performance.

International Business

Table of Contents
Introduction......................................................................................................................................3
Main body........................................................................................................................................3
PESTEL Analysis along with its positive and negative impact. ................................................3
Key challenges faced by the organisations.................................................................................6
How business organisations are responding to such challenges.................................................6
Recommendations ...........................................................................................................................7
Conclusion .....................................................................................................................................8
References........................................................................................................................................9

Introduction
Business refers to an activity or set of activity which helps in making money and living
for an individual or a group of individual with the help of producing and selling goods and
services. Business owner is fully responsible for all the debts and liabilities and if the business is
unable to pay the liability then the creditor can acquire the personal assets of the business owner
in order to recover the amount (Cortez and Johnston., 2018). In context to Asda, it is a British
Supermarket chain dealing in products and services such as Groceries, general merchandise and
financial services. The company was founded in the year 1949 by Peter and Fred Asquith and Sir
Noel Stockdale. The company is headquartered in Leeds, England, UK. Walmart acquired a big
share in Asda for £6.7 billion in the year 1919. in 2021, EG Group acquired Asda and Walmart
retains an equity share in Asda. In this report, positive and negative impact of external factors on
the company is given. The next section of the report covers the challenges faced by the company
and how it responded to those challenges.
Main body
PESTEL Analysis along with its positive and negative impact.
It refers to the analysis of external factors of the industry which can affect the
management and the workings of the company. It is generally done for the market in which the
company is going to enter but it can also be done for market in which company already exists. It
helps the company in analysing these factors beforehand so that the company can make strategies
in order to avoid any future contingency (Li., 2020). In case of Asda, the company has large
variety of goods and services to offer to their customers such as Asda mobile, Asda money,
medicines, George Clothing, etc. All the products have their separate industry and external
factors which can affect the workings of the industry. The external factors are given below:
Political factors:
It refers to the degree up to which the government can intervene in the workings of the
industry or into free market. It includes tax policies, trade restrictions, tariffs and Bureaucracy.
In case of Asda, the company has a strong presence in international market which increases the
risk for the company. Fiscal policies can be a major challenge for the company as in order to
expand the business of the company it is important for Asda to have a close check on industry
specific taxation policies.

Positive impact: Transparency in the governance structure helps in developing a business
environment which is friendly and will also give a little or no scope for corruption.
Negative impact: The political stability in UK is a beneficial factor for the companies but
with the implementation of Brexit policy, a lot of uncertainty has been created.
Economic factors:
It includes the various aspects of the economy and are also the determinants that tells the
company about the economic performance of a certain economy (Abdelzaher, Fernandez and
Schneper., 2019). It includes economic growth rates, interest rates, inflation rates, unemployment
rates, etc. In case of Asda, the company makes sure to look after the efficiency of the financial
market before entering any market.
Positive impact: The current democratic government system makes it beneficial for the
company to operate in the market and will it will also provide economic freedom to the
company.
Negative impact: Due to the implementation of Brixit, the companies of UK now have to
pay high import duties on the products that they want to buy from European Union. It will
increase the cost of products and will decrease the purchasing power of the customers due to
inflation.
Social factors:
It refer to the factors that are directly related to the norms and culture of the society in
which the company is operating. Social norms puts pressure on the workings of the company and
also helps the company in understanding the consumer behaviour(Cui, Khan and Tarba., 2018).
It includes cultural aspects ad perceptions, population growth rate, age distribution, etc. In case
of Asda, this factor helps the company in launching new product in the market and helps in
developing segmentation strategies.
Positive impact: Social factors helps the company in analysing the consumption
behaviour of the customers. It helps the company in analysing the disposable income of the
consumers which helps the company in introducing new products in the market accordingly.
Negative impact: The trends and preferences of the society are continuously changing
and it is extremely difficult for the company to change at that fast pace. It is important for the
company to have proper knowledge and understanding about the society and its norms in order
to survive.

Technological factors:
It refers to the factors that tells the company about the prevailing innovating technology
which is prevailing in the market or about the upgraded technology that the competitor possess
(García-Sánchez, Suárez-Fernández and Martínez-Ferrero., 2019). In case of Asda, the
technological advancement helps the company in adding value to their products, reducing cost as
well as in innovation.
Positive impact: The positive impact of technological factor is that it helps the company
in providing high quality products at lower prices. The company can make their processes
effective and efficient which will help in increasing productivity.
Negative impact: Up gradation of technology includes high costs and massive
investment. The company can only take benefit of innovation until it is not adopted by
competitors. Once competitors adopt the same technology it no longer serves benefit to the
company.
Environmental factors:
The scarcity of natural resources leads the company towards these factors. The factors
generally concern the impact of ecological aspects on the business. In case of Asda, the company
tries to adopt environmental friendly techniques in their workings so that they can contribute to
sustainability.
Positive impact: The adoption of techniques such as optimum utilization of resources,
waste management, recycling is extremely beneficial for the environment.
Negative impact: Increase in environmental regulations have a negative impact on the
company. The company needs to make certain changes in order to comply with these regulation
which will involve cost for the company.
Legal factors:
It refers to the rules and regulations prevailing in a certain market. It is a detailed
specification about the laws of a particular economy (Jiang and Holburn., 2018). In case of Asda,
it is important for the company to comply with these rules and regulations otherwise the
company may have to face consequences.
Positive impact: It protects companies against unfair trade practices and will make sure
that they are working without any monopoly or threat.

Negative impact: Each country have their own rules and regulations which makes it
difficult for the companies specially for those who are having presence in more than one country.
Key challenges faced by the organisations
Due to the changing environment of the company it is observed that the company have faced
some challenges. Some of the challenges are given below:
 Brexit policy: Brexit makes the market of the company uncertain. When the Brexit policy
implemented in the economy it has a negative impact on the companies specially for
supermarkets. The companies now have to pay higher charges for importing their goods
from European Union (Romero‐Hernández and Romero., 2018). Although the markets of
UK are highly stable but it creates a situation of uncertainty in the market. Increase in the
cost of foreign products will directly have an impact on the purchasing power of the
customers and will also have an impact on the sales and profitability of the company.
 Technological challenges: Technological factor plays a major role as it helps the
company in providing competitors advantage in the market. In order to upgrade the
technology, companies have to pay high prices which is not good for the company as
technology becomes obsolete overnight. Innovation in technology involves high
investment in the research and development department which works on trial and error
basis. More focus on online shopping can also have an impact on the workings of the
company.
 Pandemic: The current ongoing pandemic of COVID 19 has a severe impact on the
workings of the company. The businesses have to shut down their workings due to the
guidelines of government and the revenue of the companies were nil. The fixed expenses
have been paid from the reserves amount of the company (Safari and Chetty., 2019).
Huge losses were faced by the companies and some companies even have to shut their
business due to lack of revenues. Complete lock down in the countries made it very
difficult for small as well as large companies to survive.
How business organisations are responding to such challenges.
 Human resource: The human resource department of the company made sure that the
company is not suffering from lack of talent in the company. As many employees leave
their jobs and move towards their home town, the human resource department of the
company helps the company in recruiting new employees (Tan and et. al., 2020). The

human resource department also made sure that the existing employees of the company re
not facing any problem and are receiving their payment on time.
 Marketing: The marketing department of Asda made sure that they are effectively
promoting the online resources that the company is providing to its customers. The aim
of marketing department was to spread awareness as much as possible. They promoted
the online services of the company and tried to attract customers for the company.
 Financial management: The finance department of the company make sure that the
company is having appropriate reserves so that they can overcome their losses. They also
made sure that the company is not spending any unnecessary cost (Jafari-Sadeghi,
Kimiagari and Biancone., 2019). They help the company in saving as much cost as
possible by eliminating expenses that no longer serve the company.
 Information system: This department helps the company in analysing that the operations
and workings of the company is effective and efficient. It is important for the company to
make sure that the processes are working with optimum efficiency and if they are not
then there is need for change.
Recommendations
Some of he recommendation which can help the company in improving their performance is
given below:
 First of all, it is important for the company to improve their online presence. It will help
the company in attracting more customers. Due to the ongoing pandemic of COVID 19,
people are more comfortable in buying groceries and other products online. It helps the
company in attracting potential customers and to increase their revenues as well. Strong
online presence will serve as a competitive advantage for the company as they will be
able to attract a strong customer base.
 Secondly, it can be very beneficial for the company to have equal pay scale irrespective f
gender of employees. Asda has faced some legal issues related to unequal pay rates. It is
important for the company to understand that there is no difference between the work of
man and women and on that note they should be paid equally. It will not only help the
company in having a strong and talented workforce but will also help the company in
attracting more talent to the organisation. It will enhance the reputation of the company
which will have a direct impact on the sales and revenues of the company.

Conclusion
From the above report it is concluded that, in order to be aware about the workings of the
industry and to avoid contingencies it is important for the company to analyse the external
environment of the company. It will help the company in understanding factors which can affect
the workings of the company and will make sure that the company is making effective
strategies. Their are certain challenges that are needed to be faced by the company but if the
company have proper strategies then they can achieve efficiency and effectiveness in their
workings. The challenges faced by the company are needed to be responded effectively by the
company in order to avoid any losses. Some recommendation for the company are also given
which will help the company in implementing new workings in the company.

References
Books and Journals
Abdelzaher, D., Fernandez, W.D. and Schneper, W.D., 2019. Legal rights, national culture and
social networks: Exploring the uneven adoption of United Nations Global Compact.
International Business Review,
28(1), pp.12-24.
Cortez, R.M. and Johnston, W.J., 2018. Needed B2B marketing capabilities: Insights from the
USA and emerging Latin America.
International Business Review,
27(3), pp.594-609.
Cui, W., Khan, Z. and Tarba, S.Y., 2018. Strategic talent management in service SMEs of China.
Thunderbird International Business Review,
60(1), pp.9-20.
García-Sánchez, I.M., Suárez-Fernández, O. and Martínez-Ferrero, J., 2019. Female directors
and impression management in sustainability reporting.
International Business Review,
28(2), pp.359-374.
Jafari-Sadeghi, V., Kimiagari, S. and Biancone, P.P., 2019. Level of education and knowledge,
foresight competency and international entrepreneurship: a study of human capital
determinants in the European countries.
European Business Review.
Jiang, G.F. and Holburn, G.L., 2018. Organizational performance feedback effects and
international expansion.
Journal of Business Research,
90, pp.48-58.
Li, C., 2020. Enhancing or inhibiting: The impact of investment in political ties on the link
between firm innovation and productivity.
International Business Review,
29(2),
p.101636.
Romero‐Hernández, O. and Romero, S., 2018. Maximizing the value of waste: From waste
management to the circular economy.
Thunderbird International Business Review,
60(5), pp.757-764.
Safari, A. and Chetty, S., 2019. Multilevel psychic distance and its impact on SME
internationalization.
International Business Review,
28(4), pp.754-765.
Tan and et. al., 2020. A review of research on the growth of multinational enterprises: A
Penrosean lens.
Journal of International Business Studies,
51(4), pp.498-537.