ASDA Stores Limited: Business Environment Analysis

This assignment analyzes the business environment of the retail sector focusing on ASDA Stores Limited as a case study. It examines different organizational structures and sizes within the retail industry, delves into ASDA's organizational structure, objectives, and functions, and analyzes their interrelationship with external factors. The report also explores how organizational structure is linked to organizational objectives and evaluates the influence of both internal and external factors on decision-making processes. Furthermore, it identifies ways to leverage strengths to overcome threats and capitalize on opportunities presented by the business environment.

Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 and P2................................................................................................................................1
P3 Functions of ASDA Stores Limited and relationship between its structure and objectives. .1
TASK 2............................................................................................................................................3
P4. Impact of macro environmental factors on business operations and their effects...........3
P5. Internal and External analysis of ASDA Stores Limited and its influence in decision-
making process.......................................................................................................................5
P6 Relationship between internal factors: strengths and weaknesses with external factors.. 7
CONCLUSION...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment is aggregate of all conditions of economy, politics, technology, or
legal environment of the country. These factors create opportunities and threats for the
Organisation. Businesses are based on three type of approaches social, creative and system.
Under system approach the business has different products and services to offer. Another
approach is social where the business works for welfare of public, stakeholder or government
(Elearn, 2008). Business environment has great importance in distinguishing the opportunities or
threats forthcoming in the market. Also, to formulate effective strategy for the business the
analysis of environmental factors is necessary. Creative approach business faces the challenges
in the market by availing opportunities in the market. With this report, the profound sensibility of
retail sector can be amplified. ASDA Stores Limited is one of the leading British supermarket
retailer, holding number one position in markets of the world. Holding headquarters in Leeds,
West Yorkshire, founded in 1965. Dealing in Grocery, general merchandise and financial
services. ASDA is operating is whole of UK with about 631 stores as in 2017 and having the
operating income of close to £1 billion with 180000 employees working. ASDA beside having
the retail stores in UK are also engaged in financial services and in mobile phone company using
EE networks. ASDA is a wholly owned subsidiary of Walmart so there is no requirement to
declare its quarterly and half yearly incomes and expenditures.
TASK 1
P1 and P2
Encl. PPT.
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P3 Functions of ASDA Stores Limited and relationship between its structure and objectives
Illustration 1: Organisational structure of ASDA store
 Functional areas of ASDA Stores Limited
ASDA Stores Limited is running in retail industry not a single function can be defined as
the company's sole vital. Organisation is the effort of all the departments, mainly it has
operations management, financial management, marketing, IT, Human resource department or
PR department (Organisational Structures. 2017). Operational department ensures that company
has dimensions in cost effective, efficient and cost-effective ways. While the customers are
demanding the quality products and services. To assure quality products the company not only
have to follow the cost-effective methods, but also have to ensure good financial position.
Marketing department has to select best and appropriate strategies for promoting the
products and services in the market. Analysis of current market is also dependent upon the
marketing managers.
Finance department is responsible to manage the payrolls of the employees. It reports the
profits and losses during the financial period to the manager (Hamilton and Webster, 2015).
Information technology department works in all departments because this department in ASDA
Stores Limited is aimed to look for new and innovative ways to do business and run its
operations.
Human resource department offer training to employees of all other departments. Also,
helps in recruitment of key managerial personnel in the organisation. PR department works very
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close to media, bring new stories that are being made in name of the company. The objective of
this department is to ensure that the name of ASDA Stores Limited is seen in positive light.
Sales director is responsible to make sure that right prices are paid for right products.
This department's employees are divided in teams so that they need to focus only on the area
they are allotted. Rest areas in the sales department are looked upon by other departments.
Such type of functional distribution helps the organisation in each team to run their own
areas and work upon them. Research work is also performed in all areas the company is engaged,
they are done in their own departments only. Such that new trends across the globe can be found
out and launched by the company at first in retail sector. Company is able to offer best deals with
their products and services to their customers. Also, it can sell the best quality products and
services to its customers
 Structure of ASDA Stores Limited
Structure of ASDA Stores Limited is foundation of the Company integrated in management
system for smooth operations of organisation. Organised structure plays important role in
constructing strong employee personality. ASDA Stores Limited follows hierarchical structure,
resulting in less communication in the employees and each group work separately (Ferreira and
et.al., 2012). Also, lower level employees are less satisfied with their jobs because they are not
actively engaged in decision-making process. To minimize the loopholes, present in the structure
company is recommended to follow communal structure. His culture creates positive
environment and lead to higher productivity from employees.
Common goal is to increase the level of commitment by employees. Because this culture
gives better and positive working environment. The relationship between this structure and
culture is accepted by workforce, providing common motive of better performance.
 Relationship between structure and objectives
Hierarchical structure means there would be fewer people at the top-level management of the
company to manage the business operations. This will allow the managers to take the big
decisions for company about which step to be taken next. These decisions are essential and
should be taken by top executives of the company as they require special skills and intelligence.
This structure helps ASDA Stores Limited to accomplish their roles by having a Director
who is going to be responsible for every segment of business. Illustration for this: customer
service department is very important for the company so one person come through the team in
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Head-Office. As the structure and objective are all related as each and every department is
having their own goals which they need to accomplish. The departmental goals are all set with
the alignment of organisational goals and objectives. It is the duty of the head of the company to
see that both organisational and departmental goals are achieved in time being.
TASK 2
P4. Impact of macro environmental factors on business operations and their effects.
Retail sector is reshaping because of new trends and market forces that have power to
affect business operations. These forces are macro environmental factors that affect the
businesses and their operations. They are broadly discussed in detail as Political, Economic,
Social, Technological, Environmental and Legal. (Pestle Analysis of ASDA Stores Limited Inc.
UK.,2017)
Political and technological factors have the highest influence on the retail sectors.
Political factors are generally the governmental policies, laws rules, regulations that re imposed
upon the retail industry to run the business operations. Also, the retail industry has to face many
difficulties due to such imposition by governmental, they have to implement the new changes in
their operations. Tax policies, consumer protection, employment regulations to protect the
employee rights and for their safety purposes such laws are implemented (Khatib and et.al.,
2012).
Environmental factors affect the industry due to use of different forms of energies being
used by them. Such use of energies affects the business operations. The products offered in retail
industry are affecting the environment because they are produced in environment only. Thus, the
changing trend are leading to health issues. Government has banned the use of various sprays
and or gases over the food products to avoid the issue. Use of chemicals over food products has
lead to emission of various diseases. Like, other sectors, retail sector also has some sustainability
concerns like packaging or renewable energies etc.
Social factors are mostly referred to as consumer preferences of products, and their belief
or faith towards some ethics they follow. Their demands and desires are to be considered while
designing the products. Since, they are the ones who consume the products they are most
influencing for the organisations in retail industry. Demographic and changing consumer
preferences have deep impact on the industry and its operations. Consumers are demanding more
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personalised services so, retailers are recommended to change the way they serve to their
customers.
Technological factors have totally changed the way businesses are operating. The
automation has led to new innovations and techniques being used to run business. Buying,
selling, and even weighing the products can be done using technology. Products can be used to
customers using online websites and their specifications and quality can be described in detail.
Client can visit then site and compare the products, and select according to their choices and
preferences.
Legal forces like Employment laws, labour laws are big pain for the industry and
particularly for those who maintain low prices to be a part of industry (Aras and Crowther,
2011). There are so many frays with laws relating to labour related issues or product packaging
laws. Overall, the scenario is complex because a single violation may lead to hurt the brand
reputation and end up being charged with huge fines.
Economic state of the industry determines the turnover in the industry. Growth in
economy can be seen in people' tend to spend more on shopping. (Clapper, Lewin and Delgado,
2011) However, during recession the company maintained impressive turnover. In 2015, retail
sector alone had 20.8 trillion dollars turnover. Looking forward to current scenario the sector is
expected to reach 28 trillion dollars by 2020.
ASDA Stores Limited’s operations are affected by external factors (taxation policies,
trade barriers, governmental policies or demographic change). To assess the impact of these
factors PESTLE analysis of the company is conducted.
 UK government is stable and influencing all the organisations in the retail industry
including ASDA Stores Limited. Maintaining different laws and customs for the
business, government has a good impact on the Company. ASDA Stores Limited is now
Britain's 3rd biggest supermarket retailer. Risks that can influence the politics like
terrorist’s attack can affect the organisation as well, such as ISIS (Islamic state of Iraq
and Syria). EU regulations and directives affect the employment or consumer rights.
 Social changes like ageing population, health conscious people are major points that the
company has to keep in mind. Company has to develop segmentation strategies for issues
like people willing to work after attaining their retirement ages, to supplementing their
pension.
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 Superfast growing technologies has led to online shopping of retail products also, it is
important for the company to make best use of technology. All big supermarkets are
already working upon efficient procurement of Information Technology.
 Environmental factors are not affected by ASDA Stores Limited’s trade, it supports eco-
friendly stores, 40 percent energy efficient and 50 percent less Carbon dioxide. The
company has been working upon the reduction of less carbon dioxide being produced
during process of manufacturing, growing or processing.
P5. Internal and External analysis of ASDA Stores Limited and its influence in decision-making
process.
To look into detail of the Strengths and Weaknesses (Internal), opportunities and threats
(External) of ASDA Stores Limited SWOT analysis is been done. SWOT critically examine the
organisational internal factors. (Khattab and et.al., 2012.)
Strengths: First step of SWOT analysis of retail industry is entailed identifying the strengths of
organisation concerned. Possible strengths may be its financial backup, amount of capital the
company owns and its liabilities. One of the major strength of nay retailer can be cheaper rates
offered. Company should make list of all of its strengths v/s its competitors (Fine, 2009)
Strengths of ASDA Stores Limited are:
Its wide range of product along with the financial services it offers. It is also known for its
amazing market campaigns.
 Company is socially responsible conducting CSR (Corporate Social Responsibility)
activities (Ulutaş Duman, Giritli and McDermott, 2016).
 The strong management of ASDA Stores Limited.
 Constant touch with customers via social networking- obtaining customer feedbacks,
conducting competition.
 Has over 175,000 employees at over 525 UK stores.
Weaknesses: Organisation should start with it most self-evident weaknesses, from market
research. With this research, the retailer may discover its brand positioning v/s its competitors.
The retailer may lack its identity due tom some practices being followed like cheap and
expensive brands
Threats that the company currently faces are:
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 Extreme competition from small retailers such as Lidl and Aldi.
 Consistent price reduction from rivals like TESCO is also a threat.
 Weaknesses that company faces are its limited global market presence compared to other
retailers. Company failed to develop loyalty card, like TESCO has Club-card and Sainsbury's has
Nectar Card.
Opportunities: Another step of retail SWOT is identifying key opportunities in the market. There
are number of opportunities for a retailer, through its sales forces and market research. Online
business sites can be an opportunity for the organisation.
 Unsatisfied customer needs may result as opportunity for an organisation.
 Expansion in new industries like, jewellery, opticians, pharmacies and photography.
 Online market is an opportunity for the company, because today most of the consumers
prefer online shopping. It has also opportunity to develop foreign market share, last year company announced its
plan to invest in 17 new supermarkets and revamping 62 more with 600 million.
Threats: Threats are the unfavourable conditions that retail market faces. It can include a
decrease in consumer demand, price wars or recession period in the economy. Increasing
competition is also a threat to economy. Consumer buying habits majorly affect the sales, due
change in their preferences or tastes.
 Price War with retail Chain Brands.
 Pressure of maintaining low prices.
 Fluctuating policies of various central government.
 Non-availability of space for big box stores in United Kingdom.
In decision making process SWOT addresses the following issues:
 Staffing issues, if the staff is unaware of product details and the offers it is not a strength
for the company
 Technology management is another responsibility of decision maker, to manage day-to-
day operations of ASDA Stores Limited stores' manager needs technology.
 New product development is a key area of concern for the company, its viability and
chances of success in retail market.
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 Organisational structure can be improved after determining the weaknesses and strengths
of the company.
 Advertising and promotional strategies are also developed after conducting the SWOT
for the retail trader.
 Costs of acquiring raw materials are inter-related to costs of production. Cost driven
down through efficient business operations gives a company the competitive edge.
P6 Relationship between internal factors: strengths and weaknesses with external factors.
Market analysis is conducted through TOWS matrix, it puts emphasis on external market.
SWOT helps to generate number new ideas before going to more complex TOWS matrix (Fine,
2009). To interrelate the internal environment with the external environment is main idea this
analysis follows. TOWS Analysis of ASDA Stores Limited supermarket.Strengths and Opportunities
(SO): Strong brand name and wide range of products can be used to enter into EU
market. Customer loyalty and high number of stores can be used to grab opportunity to
increase the market share. Weaknesses and Opportunities (WO): ASDA Stores Limited can change the customer
mind sets towards company by introducing new high-quality product range. Also,
company can follow its competitors like TESCO by offering new range like mobile
phones and banking facilities. Strengths and Threats (ST): ASDA Stores Limited should go for advertising campaigns
to gain customers and their reliance on the brand. During the period of recession
company can cut off some stores until the economy recovers. Weaknesses and Threats (WT): Company should reach new suppliers and provide for
contingency plans to avoid possible drop in supply. To avoid economic downfall should
address the lack of diversity and work to rectify it.
Relationship between the micro and macro environment of ASDA Stores Limited.
EU regulations are to be followed by all retailers of the United Kingdom, ASDA Stores
Limited has strength in good customer branding and wide product range, thus, can easily enter
EU market. Company follows CSR (Corporate social responsibility), having eco-friendly stores
in UK, 40 percent energy efficient and 50 percent less Carbon dioxide. Thus, the environmental
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factors and policies are followed by the company. To avoid the competition from small vendors
the company can use the innovations in new technology to level up in the industry and maintain
the number of customers (Craig and Campbell, 2012.). The rapid changes in governmental
policies can be used as opportunity because the organisation has policy to maintain contingency
reserves and it has number of suppliers for raw material procurement. Technologies have lead to
online shopping by customers and this can be an opportunity for the company and also overcome
the weakness of lack of space for stores in UK. Hence, customers will be able to come online and
compare the availability of wide range of products.
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CONCLUSION
After going through this report, business environment of retail sector can be
comprehended in detail. The different type of sizes of organisations and their extent are
explained by ASDA Stores Limited, a supermarket retailer. Through ASDA Stores Limited’s
organisational structure, objectives and its functions their inter-relationship with external factors
are analysed. And how organisational structure is linked with organisational objectives are
discussed in detail. Also, the influence of internal and external factors of business organisation in
the decision-making process are evaluated. Relationship between internal factors and external
factors to identify that in what way threats are to be overcome and opportunities be grabbed by
using strengths of the company.
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REFERENCES
Books and Journals
Aras, G. And Crowther, D., 2011. Governance in the Business Environment. Emerald Group
Publishing.
Craig, T. and Campbell, D., 2012. Organisations in the Business Environment. 2nd Ed.
Routledge.
Elearn, 2008. Business Environment. Routledge.
Khattab, A. and et.al., 2012. Executives' perception of political‐legal business environment in
international projects. International Journal of Commerce and Management. 22(3).
pp.168-181.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University
Press, USA.
Klapper, L., Lewin, A. and Delgado, J.M.Q., 2011. The impact of the business environment on
the business creation process. In Entrepreneurship and Economic Development. pp. 108-
123.
Ulutaş Duman, D., Giritli, H. and McDermott, P., 2016. Corporate social responsibility in
construction industry: a comparative study between UK and Turkey. Built Environment
Project and Asset Management. 6(2). pp.218-231.
Fine, G. L., 2009. The SWOT Analysis: Using Your Strength to Overcome Weaknesses, Using
Opportunities to Overcome Threats. CreateSpace Independent Publishing Platform.
Ferreira, S. P. and et.al., 2012. Framework for performance measurement and management in a
collaborative business environment. International Journal of Productivity and
Performance Management. 61(6). pp.672-690.
Online
Pestle Analysis of ASDA Stores Limited Inc. UK. 2017. [Online]. Available through:
<https://www.ukessays.com/essays/marketing/swot-and-pestle-analyses-of-ASDA Stores
Limited-marketing-essay.php>
Organisational Structures. 2017. [Online]. Availabile through:
<http://businessstudiesjesschambley.blogspot.in/2013/06/organisational-structures.html>
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