Business Strategy: A Critical Analysis of ASOS.com

This research project critically evaluates the business strategies and functions of ASOS.com, a leading online retail shopping sector based in the United Kingdom. The project analyzes the impact of the macro environment on ASOS.com using PESTLE analysis, assesses the company's internal environment and capabilities through SWOT analysis, and applies Porter's Five Forces model to evaluate the competitive landscape. The research also explores the application of strategic management theories, including resource-based theory, resource dependency theory, and institutional theory, to understand and interpret the strategic directions available to ASOS.com.

Business Strategy
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Table of Contents
Introduction........................................................................................................................3
LO1: Analyze the impact and influence which the macro environment has on an
organization.......................................................................................................................4
LO2: Assess an organization’s internal environment and capabilities.............................7
LO3: Evaluate and apply the outcomes of analysis using Porter’s five forces model to a
given market sector. [P3, M3, D1].....................................................................................9
LO4: Apply models, theories and concepts to assist with the understanding and
interpretation of strategic directions available to an organization...................................12
Conclusion.......................................................................................................................15
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Introduction:
For any organization to thrive there needs to be a specific set of ideas and objectives
which the company needs to address. The principle idea of a business strategy is
presenting a set of objectives, strategies and plans by which the company can enhance
and amplify the business process and functions. Every organization has a detailed plan
which determines the growth, efficiency, performance, position and reputation along
with the strategic backups. It is necessary for every organization to install necessary
strategies and by which the sales and market value of the company can be improved,
along with this the business strategies also include better employment relations and
business position.
In this research project we have considered asos.com for critically evaluating the
business strategies and functions of the company. Asos.com is an online retail shopping
sector based in the United Kingdom and in this project, critical evaluation and analysis
of the business process of the company is discussed (www.asos.com 2018).
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LO1: Analyze the impact and influence which the macro environment has on an
organization. [P1, M1, D1]
Macro environment of a business can be defined as the external parameters that have a
notable impact on the business process and functions. The macro environment includes
parameters which cannot be influenced by the policies and procedures of an
organization. The external factors that affect the business of an organization are the
political influence, economical fluctuation, demographical and geographical changes,
legal modifications, environmental influence and alterations and technological
advancements and improvements (Mukher 2018).
The macro environment and external factors that affects the business functions of
asos.com can be analyzed by a medium of evaluation known as PESTLE analysis.
PESTLE analysis is the process by which the external factors that affect the business
functions and policies of an organization are analyzed (Newton 2014).
PESTLE analysis of The United Kingdom that affects the business process of
asos.com:
Area of Analysis Analysis
Political factors The United Kingdom functions under a
parliamentary system:
Positive:
 The political scenario of the country
has been stable.
 The functions and responsibilities
are distributed among the
participating nations and local
authority.
Negative:
 In the recent past, the country has
faced severe corruption issues
inside the system.
 Introduction of BREXIT has had a
grave impact on the business and
the other organizations (Van
Reenen 2016).
Economic factors The United Kingdom has a notable position in
the economic market.
Positive:
 As of 2017, the Gross Domestic
Product of the country is the 5th
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largest in the globe and 2nd in
Europe.
 As the population of the UK is quite
large, the opportunities for smaller
markets are much more.
 Private sectors can grow in the
system because of a diverse
financial system.
Negative:
 In 2008, The United Kingdom has
faced an alarming decline in the
economy and the revitalization is
taking time more than anticipated
(http://www.legislation.gov.uk/
2018).
Social factors Social factors also affect the business process
of a company because of its effect on the
country.
Positive:
 The population of the United
Kingdom has been rising and this
could help incorporate diversity.
 The standard of living in this country
is quite high
Negative:
 There have been issues with
migration and other issues related
to religion and community.
 The expenses for education have
had an startling increase.
Technological factors The United Kingdom is considered to be a
More Economically Developed Country
(MEDC) and hence technological
advancements and modifications affect the
business process.
Positive:
 Innovation and implementation in
the field of Science and Information
technology.
 Easiness in the business because
of incorporation of technological
advancements and improved digital
media.
Negative:
 The development and
advancements of technology is
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comparatively sluggish compared to
the United States of America.
Legal factors There are certain policies and legislations that
the government of the United Kingdom has
presented which has affected the business
process (https://www.gov.uk/ 2018):
Positive:
 In 1996, the government had
presented the Employment Act
which protects the rights of the
employees.
 The Equality Act of 2010 dictates
that the in any business
organization there needs to be
equality and no discrimination can
be done with respect to gender,
caste, community or race.
Negative:
 There could be certain swift
legislations that the government
could present and this might affect
the business output of a company.
Environmental factors Environmental factors are unpredictable and
can have severe impact on the business
functions:
Positive:
 The weather of the country is one
of the principle factors for tourist
attraction.
Negative:
 Natural calamities like floods,
storms and tornados which cannot
be predicted can hamper the
business process of the country.
Table 1: PESTLE analysis of United Kingdom
Source: (Created by learner)
Asos.com needs to consider both the factors that either acts as a aid or has a negative
impact on the business process. The stable government can help the company to
participate in risks. However, after introduction of BREXIT the country has faced an
economical downfall and so the business process of asos.com might be affected. With
one of the highest GDP in the world, asos.com can take advantage of the fact and can
enhance the business revenue. As the country is densely populated, there is diversity in
culture and the company can present products that will attract people from all
communities. Technological advancements in the business process will accelerate the
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efficiency and quality of the trade, especially for an online market sector. As of 2017,
The United Kingdom is one of the prevalent economies and stands in the 5th position
with respect to GDP. In 2008, the country has faced a decline in its economy and is
battling to overcome the downfall. With depreciation in currency the product prices have
increased and this has affected the business procedures. In 2017, the rate of inflation
was about 3% and there is an exponential increase in the inflation rate which is difficult
for the industries and companies to handle that kind of shift. In these kinds of situations
asos.com can focus on business outside the country. Business in other countries will
generate more revenue and it will help the company to balance the business process.
In 2016, the population of UK was about 65 million and the natality rate far supersedes
the mortality rate. With increase in population the company has an opportunity to
present more brands and products in the market for the customers. Since, the country is
rich in diversity; the company can present a diverse range of products and services in
order to attract maximum consumers. The United Kingdom is one of the foremost
countries to implement technological advancements. The country has invested about 30
billion pounds in technology which securing first position in Europe. Asos.com can take
advantage of this opportunity by implementing technological and digital advancements
in order to minimize traffic in sites and for better customer satisfaction (Sam Ashe-
Edmunds 2018).
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LO2: Assess an organization’s internal environment and capabilities. [P2, M2,
D1]
For a company there are certain internal parameters that determine the business
functions of the organization. The internal factors that influence the business process
include the company’s idea and objectives, the vision, the structure and work setting of
the organization, culture and employment relations. Internal factors affect the business
setting and the process. The primary idea and objectives of the company is necessary
in order to present a firm structure of the functions and duties of the company. The
model that an organization follows along with the work culture and employment relations
also determines the business functions.
In case of asos.com the internal factors that affect the business can be assessed by
SWOT analysis. SWOT analysis is the method by which the internal factors that
determines the business development and progression is analyzed. The strengths,
weaknesses, threats and opportunities are analyzed and evaluated in order to
determine the current business scenario of the company and the possible changes the
concerned organization needs to address for improvement and better business
efficiency (Bull et al .,2016).
SWOT analysis of asos.com:
Area of Analysis Analysis
Strengths  Asos.com is one of the largest
online shopping platform in the
United Kingdom
 The company has about 4000
employees and deals with almost
900 independent brands.
 Asos.com has been able to expand
its business all around the globe.
 The company has its own supply
chain sector known as ASOS’
international supply chain.
 The company has expanded its
business in over 200 countries.
 There has been a huge extension,
growth and development in
business in both international and
national sectors.
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Weaknesses  Asios.com provides a free shipping
policy and this affects the overall
business output, about 100 million
pounds per annum.
 It has been observed that about
31% of the products dispersed are
sent back to the company which
demands additional charges.
Opportunities  With the introduction of mobile
platforms, shopping has been
comparatively easier.
 Since the company deals with
almost 900 brands, the company
addresses diversity and the people
are interested in trying out diverse
products.
 With globalization, the company
reaches out to a wider base of
consumers (https://www.gov.uk/
2018).
Threats  There has been severe competition
from other online retailer giants.
 In certain cases the economy and
financial stability of the country
changes which might affect the
overall business process.
Table 2: SWOT analysis of asos.com
Source: (Created by author)
Internal environment of an organization determines the overall business outcome.
Asos.com trades with almost 900 brands and has its own brand as well. This approach
of marketing helps the company to magnetize a wide spectrum of consumers which will
eventually have a positive impact on the business process. Asos.com is one of the
largest online retail markets in the United Kingdom and hence the possibilities of worthy
competitors are minimum. One of the principle medium of marketing is the social media.
The company addresses the masses and the general public via social media services
like Facebook, Twitter, YouTube and Instagram. This approach enhances the marketing
opportunities, the promotions and advertisement. The users from all around the world
are able to witness the products and services the company presents and because of the
company deals on an online platform can the general public can shop from anywhere in
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the world. With over 4000 employees working for the organization, the trade and other
business process can be simplified. A clear work process will enhance the efficiency of
the work force and hence the business output. Since, the company’s policy dictates free
delivery the company spends over a 100 million per annum. However, with the
introduction of the global supply chain, the ASOS’ international logistics the process has
been easier and this also acts as a source of promotion and advertisement. The
company faces a huge blow because of its free delivery policy because there were
many instances where about 30% of the products dispersed were sent back (Armstrong
Bull et al .,2015). Asos.com faced additional expenses because of the shipping charges
and with zero profit. The company needs to incorporate policies like limitation in
exchange and return policies so that the damage can be minimized. Though, asos.com
is one of the online retail market brands in the United Kingdom, there has been severe
competition from other E-commerce giants like Amazon, Tesco , Marks and Spencer
and eBay. In such a case the company needs to present more distinct and innovative
products and ideas so that the consumers are inclined towards the company. Since UK
is open to technological advancements and is one of the highest investors in this field,
the company can take measures by which the website can be improved and frequent
traffic and bugs that the websites face can be eradicated. There has been a population
boom in the United Kingdom and this might help the country to reach out to the masses.
With such diversity in culture asos.com can address a huge amount of consumers with
their diverse and varied array of products. In the recent past, introduction of cellular
phones the idea of online shopping has drastically changed. The users can explore a
wide range of products and services that the online retail marketing sectors provide.
Asos.com can introduce an application which enables the users to visit the store via
cellular phones. This approach is simplified, effortless and flexible for the users and will
help the company to increase its customer base. With immense competition from other
online retail market giants, asos.com needs to concentrate on evaluating and analyzing
the parameters that has affected and can affect the business revenue and output of the
company and present necessary solutions and implement ideas and strategies in order
to stay at par with the other competitors in the concerned field (Scholes 2015).
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LO3: Evaluate and apply the outcomes of analysis using Porter’s five forces
model to a given market sector. [P3, M3, D1]
In order to evaluate the competitive forces of the organization, Michael Porter’s five
forces model will be helpful. Porter’s five forces model analysis will help the company to
enhance their productivity and identify the threats that can hamper the goodwill and
affect the customer base. The analysis will also help the company to create a marketing
strategy that will be helpful to develop competitive advantage within the business
(Dobbs, 2014). Porter’s five forces will actually help the company to identify the five
forces that either influences or hinders the company productivity.
Figure 1: Porter’s five forces model
Source: (Dobbs, 2014)
Porter’s five forces model consists of the five factors, which are:
Threats of new entries
Threat of substitutes
Threat of rivals and competitors
Bargaining power of customers
Bargaining power of suppliers
The threat of new entries for ASOS plc is huge. This is because new entries come
up with innovation and identifies new ways of doing business. The new entrants
establish better value propositions among the customers. It is very important for ASOS
plc to develop barriers that will help the company to function in the market and guard
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the competitive edge of the company. The measures that can help ASOS to take control
over new entry threats includes bringing innovation in the company’s culture, develop
economy scale, which will help the company reduce their per unit costs (Jordan, 2016).
The new entries will never try to be a part of the company that has companies
redefining their work standards on a regular basis. ASOS needs to invest more on
developing their dynamics and this will reduce the number of new entries to enter the
market.
The bargaining power of suppliers is high in ASOS. This is because the existing
suppliers of the company implements negotiating power and gains more prices from the
company. This high bargaining power of the suppliers affects the profit-gaining factor of
the company. In order to overcome the threat the company needs to enhance
connection with various suppliers and built-up an effective supply chain (Jordan, 2016).
The company can also start to design their products with different materials to continue
their production even after the suppliers increases the price of the raw materials.
Furthermore, the bargaining power of the customers of ASOS is high. This is
because of the existing competitors, which provides various choices to the customers.
Every customer has the tendency of buying the best products at a cheap price. The
customers of ASOS want to avail more discounts and gifts from the company’s end. If
the company is unable to provide them more discounts, the customers have open
choices to shift to any other company that has low pricing strategy and more offers. In
order to streamline of manufacturing and sales department of the organization, reducing
the bargaining power of customers’ is very important. To reduce the bargaining power of
customers, ASOS needs to increase their customer base by providing offers that will
enhance company profit and even make the customers happy. The other factor that will
help in reducing customer bargaining power is innovating new products (Fernie et al.,
2015). This is because new products will attract the customers and they will not focus
on offers while buying those products.
The threat of substitutes in ASOS is moderate and will be high if the substitute
product provide more value to the customers and establishes their uniqueness.
However, ASOS can still incorporate measures that will help the company to compete
with future threats of substitute products. The measures include practicing service
orientation with the business, understanding the requirements and preferences of the
customers and even by switching the product costs.
The rivalry among the existing competitors is not a concern for ASOS because;
the company has already positioned itself in a better rank in UK market. Even if
the company is operating in a huge competitive market, still it is not so effective to affect
on the profitability and productivity of the company. In order to practice intensive rivalry,
the company can build up a sustainable demarcation in the market and shed light on the
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uniqueness of the company’s products (Tsiavos and Τσιάβος, 2015). ASOS also needs
to generate a better economical scale, which will be helpful to compete in a better way.
Another factor that will help ASOS keep up their productivity is merging with other
competitors and increasing their market size.
With the help of this Porter’s five forces model, it will easier for the company to
understand about their present position in the market. With the help of this analysis the
company can focus on developing innovative trends to hold on their existing customers
and at the same time create new customer base. ASOS can also plan to shape the
identified threats towards their favor in the coming years.
The strategies that will help ASOS improve their competitive edge are enlisted
below:
 Identifying the business operations and strategies as well as understanding the
present relationship among the customers and management, as this will shed
light on what amendments are required to enhance the competitive edge
(Rothaermel, 2015)
 Identifying key features of the business operations and determining ways to
maximize the customers’ appeal towards products.
 Identifying the opportunities to introduce more success in product selling and
analyzing the target market to ensure the amount of sales
 To maintain a proper competitive edge, it is important for ASOS to shed light on
the competitive and survival power.
 Analyzing the market competition and developing survival strategies will also
help the company to enhance the competitive edge
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LO4: Apply models, theories and concepts to assist with the understanding and
interpretation of strategic directions available to an organization.
P4 Apply a range of theories, concepts and models, interpret and devise strategic
planning for a given organization.
Every business organization has own targeted goal to achieve. The business
organization needs to plan some of the strategies for the sake of the process. Strategic
management is a generic process of developing the policies, programs, objectives,
paradigms of the organization. The base of the strategic planning basically depends on
three stages; those stages are development of the strategies, implication of the
developed strategies and after that evaluation of the strategies.
Figure 1: Corporate Strategy Model
(Source: Cameron and Green, 2015)
In order to make the business organization named Asos.com developed the strategic
management evaluates the current position of the business organization. After
observing the present situation of the organization, the management will definitely plan
the future strategic plan for the organization. Though there are several theories and
models of strategic management is being used to achieve the targeted goal. Those
theories are resource based theory such as institutional theory, resource dependency
theory are applicable for the sake of the business organization named Asos.com.
Resource based theory
Business organizations have various types of resources and capabilities for the
business. Now the resources and abilities are made up with the man power of the
organization, the financial stability of the owner and some of the intangible assets. The
business organization has the capability to use all the resources’ as the strategic
advantages of the company, as per as this are the main strategic assets the
organization have, this is why they have to utilize all this things and give a productive
outcome towards the business organization. There are four of the business attributes of
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the resources which the organization has. This theory of the strategic management is
applicable to Asos.com. Those are mentioned below;
 The resources must be able to neutralize all the opportunity and threats of the
firm.
 The advantage of being in a constant competition
 The factors should be imperfectly imitable
 The strategies should be equivalent substitutes for the sake of resources (Bratton
and Gold, 2017).
Resource dependency theory
The theory of resource dependency theory states that the resources and the capabilities
in order to survive without interacting with the firms and the individuals beyond the
boundaries of the organization. The company is going to take the control of the critical
resources; it can be both internally and externally. After seeking some of the chances of
survival through the process of adaptation are going to be smooth in the work
environment of the company. This theory of the strategic management is basically a
mixture of the cooperation and competition. It is very important for a company to have
the proper knowledge about the factors that what are the competitors are doing, in
which way they are evaluating the process of the promotional events and making a
mark of their own in the market. As per as this theory states about the factor of
competition and cooperation, it is applicable for the sake of making the organization
named Asos.com more cooperative and competitive (Wheelen et al., 2017).
Institutional theory
The institutional theory states the impact in the forms because of the factors like
normative, cognitive and regulative structures makes the firm to be into certain kind of
boundary. Another thing is there of this kind of firms that is it provides a lot of
sustainability to words the actions, culture of the work environment and routines of it.
This particular theory also focuses on the factors of change, that what kind of affect this
strategic management plan leaves towards the market impression of the business
organization. It is important for the sake of various contexts of the organization named
Asos.com. That’s why this strategic management theory is applicable for the sake of
this business organization (Trigeorgis and Reuer, 2017).
Strategic management plan
The business organization has own targeted goal to achieve. The business organization
needs to plan some of the strategies for the sake of the process. Strategic management
is a generic process of developing the policies, programs, objectives, paradigms of the
organization. The base of the strategic planning basically depends on three stages;
those stages are development of the strategies, implication of the developed strategies
and after that evaluation of the strategies.
There are few of the steps to make the strategic management plan. This plan is a
constant collection of the gathering of the activities and the processes of the
organization through which the mission and the vision of the organization becomes
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clear of an organization. The steps of the strategic management plans are mentioned
below:
 Analysis or the assessment of the understanding of the current developed
variations of the internal and the external factors of the business organization.
Even an understanding on the factors what are the areas that have been
changed after this factor (Scarborough, 2016).
 The strategic plan of the calculated formulation, where the high level strategy
have been developed for the organization, but the primary strategic plan of the
organization needs to be documented, so that they be able to have a fare idea
about what are the areas the business organization has thoroughly developed
and what are the areas where they still need to work on.
 The third stage of the operational planning is quite an important factor for the
sake of the good outcomes of the business organization. The operational
planning gives a structural framework towards the dimension of the work
scenario of the organization.
 The fourth step is of the strategic management is a mixture of the cooperation
and competition. It is very important for a company to have the proper knowledge
about the factors that what are the competitors are doing, in which way they are
evaluating the process of the promotional events and making a mark of their own
in the market (Goetsch and Davis, 2014).
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Conclusion
An Organization to thrive there needs to be a specific set of ideas and objectives which
the company needs to address. The principle idea of a business strategy is presenting a
set of objectives, strategies and plans by which the company can enhance and amplify
the business process and functions. The business organization needs to plan some of
the strategies for the sake of the process. Strategic management is a generic process of
developing the policies, programs, objectives, paradigms of the organization. There are
few of the steps to make the strategic management plan. This plan is a constant
collection of the gathering of the activities and the processes of the organization through
understanding the mission and the vision.
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