Analysis of Internal Capabilities & Environment of ASDA

This report discusses the internal and external factors that impact the operations of ASDA, a British multinational retail company. It includes an analysis of the macro environment using PESTEL analysis and an analysis of internal capabilities and environment using the VRIO analysis and McKinsey 7s framework.

Business Strategy

Contents
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................3
P1 Macro Environment................................................................................................................3
P2. Analysis of internal capabilities & environment of company by applying appropriate
strategies.......................................................................................................................................5
P3. Porter’s Five force model in relevance with organisation....................................................9
P4 Strategic Planning.................................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategies are the tactics or the methods which are used by the organization so to
achieve their goals and objectives which they have decided for themselves. Business strategies
are made after evaluating or analyzing the internal and external environmental factors. The
internal factor may include mission, vision, objectives of business, employees, suppliers,
stakeholders and so on. All these factors are in control of a company. But in the case of external
factors, all these factors are out of the control of any organization. These factors mayinclude
economical, political legal, and technological and so on. These external factors do affect the
operations and activities of any organization. In the present report, ASDA is taken into
consideration.. ASDA is a British multinational company which deals in a retail business which
sells groceries, clothes, sanitary items and so on (Anwar, Shah, and Hasnu, 2016). The company
was established in year 1949 by Peter and Fred Asquith.
This report discuss about the internal and external factors which put impact upon the working of
ASDA. In external analyses PESTEL analysis is performed, whereas in internal analyses SWOT
analyses are performed. The report also includes the Porter’s generic model of ASDA.
TASK 1
P1 Macro Environment
The macro environment is concern with the factors which are independent in them and
does into get in control by any organization. These factors also called external factors which do
put impact upon the operational activities of a business. Some of the external factors may include
political, environmental, legal, technological, and economical and so on. These factors are out of
the control of any organization and they do bring risks into the company if these factors are not
followed up properly. The company has to consider these factors before taking any decision.
Macro environment is analyses through the evaluation of PESTEL analysis. It is a framework
which enables the organization or the user to analyze the external factors which affects the
working of any organization. PESTEAL stands for political, economical, technological, social,
environmental and legal factor. The PESTEL analysis of ASDA is as follows:

Political factor: This factor is concern with the rules and regulation which is been formed by the
government itself. If the government of the country keeps on changing the rules into the state
will also get change which could create instability into the operations of the business.
Impact and influence: As UK has the stable government, its rules and regulations which
are formed are also very much stable that works as an advantage to the company. The company
now does not have to bring change into their system and can focus on their other operational and
important activities.
Economic factor: The economic factor includes the factors which are concerned with the
economic growth and condition of a nation. For example: GDP, employment rate, disposable
income, lifestyle and etc. ASDA takes the factors such as creditability rate, relaxation rates,
rebates, taxes and so on under account. As UK is a financially stable country, the people living
there also are capable of living a good standard life.
Impact and influence: The companies establish in UK are very much wealthy and
profitable into their business. The company ASDO is also running successfully into UK.
Although the company did get affected by the Brexit law in 2016 which causes some loss to the
company also. As ASDO has many competitors like Tesco, Sainsbury and etc they has the
burden to perform economically well by bring required strategies.
Social factor: This factor considers the lifestyle, attitude, ideas, perspectives, behavior and etc of
the targeted market. This factor helps the organization in ascertaining the perspective of their
target market on a particular topic (Ghemawat, 2016). Any changes in the lifestyle of targeted
market put direct impact upon the products which the company serves. Over the years the
company has invested too much upon market search in which they conduct the survey for
acquiring the information about the taste and preferences of customers.
Impact and influence: This activity has helped the company in a lot way as they gets an
idea about which they can cater the market by providing the products and services which is
according to the need and desire of the customers.

Technological factor:This factor is related to the technology awareness and advancement. The
more technology brings more comfort into the operations of organizations and in people lives.
ASDO has update its technology used through the introduction of KSU products. Through this
the company can now maintain the stock very appropriately. This has brought comfort into the
operations and working of organization. The ASDO Company also has adopted the system
through which it can saves the data and information through which they are able to cater their
customers properly. They also can have advanced supply system which helps the company in
gaining the competitive advantage through saving cost.
Impact and influence: The ASDO has operated at both online and offline platforms. They
have their own products lined up the their own site for the company www.adsa.com . Apart from
this the company also operates at offline platforms through opening of the stores. The company
is performing well at both the platform (Ghosal, 2015).
Environmental factor:Environmental factor is related to the laws for environmental well being
and awareness. These are the laws which are being stated by the government and the
environment protestor to protect the environment. ASDA comes into the companies which are
supporting the carbon reduction. ASDA’s stores are eco friendly also they are 40 % more energy
efficient. Apart from this the store produces less than 50% of carbon into the environment. From
the past years also the company is working in providing the eco friendly manufacturing process
or procedure which enable them in reducing or eliminating the harmful gases or substance into
the environment.
Impact and influence: It is also been said that the company does not takes its corporate
activities not so seriously as it expected to take. They always lacks behind in performing their
duties in relation to the responsibilities towards society and environment.
Legal factors: Legal factors are related to the rules and regulations which are formed by the
legislations. These rules are regulations are mandatory for the organization to follow to operate
into the business market. These legal laws are obligatory to meet by the industries or companies.
In UK there have been many changes into the legislation which also has affected the ASDO
Company and has forced them to act accordingly to the implement change. These changes may
include the equality and diversity law, the discrimination act, laws related to the minimum

wages, and so on. ASDO has followed all these law and has adopted them into its system. The
company also has the laws which are related to employee safety and fundamental laws. As the
company is expanding to the various parts of different countries, they have to obey the laws of
the country into which they are entering it(González-Rodríguezand et. al.,2018).
Impact and influence: Before entering into the different markets the company analyzes its
legal laws and regulation and plans the steps according to which the company will make it moves
to enter into the same. Hence, ASDO follows all the obligatory policies stating into the countries
or regions.
Here, through the Pestel analyses it has been observe that the company ASDA has stability into
its operations because the UK government is very much stable. As the government is stable, the
rules and regulation forms by the government does not get change so often which enables the
company in become constant into their operational activities. The company also fulfills all the
laws and legal formalities which are obligated by the company to follow. Through this the
company has successfully gained the thrust and confidence of the customers and also of the
government. ASDA also promotes the sustainable development by supporting the activities
which does not produce any harm to the environment. The company also has adopted the
manufacturing activities which is eco friendly.
Structure conduct performance model: This model is used to analyze the eternal factors and
the macro impact upon the company. The model is consisting of 3 components which are:
Structure: In this the organization structure of the company is taken under account. In the case
with ASDA the company has a tall structure in which the top level management, middle level
management and lower level management hierarchy is present. In that the company has many
departmental and functional heads.
Conduct: It refers to the code of conduct of the company employees and the company with
others. The conduct for ASDA Company is both standard and flexible. The employees are very
much satisfied with the company’s environment.

Performance: It refers to the accomplishment which the company has achieved into market.
ASDA is a big large scale company, its achievements are very huge as their market growth and
size both are increasing.
P2. Analysis of internal capabilities & environment of company by applying appropriate
strategies
It is significant for an organisation to gain an insight about its internal capabilities &
environment as well as it help in taking better decision which has positive impact on productivity
as well as profitability of an organisation. For this, the top level management of Asada make use
of Mckinsey 7s model and VRIO analysis model (Granados and Gupta, 2013). This models is
defined below in context to chosen company:
VRIO analysis:
Analysis is a tool that is used for understanding different aspects related with the resource based
view of aorganisation to understand what type of resources are valuable rare and have to be kept
organised at can help Organisation in getting a sustainable competitive advantage for a longer
duration of time period. In the present scenario there is discussion of the analysis of ASDA.
Valuable:
All the resources are helping Organisation in their smooth functioning but there are some
resources that are very valuable as they help in development of a competitive advantage. In case
of ASDA are four identified major resources that are providing it a competitive advantage it can
be both tangible and intangible resources. In case of tangible resources it includes the available
financial resources, differentiation products and the technology integration (Helms
andWhitesell, 2013). In case of intangible resources it includes a competent workforce.
Rare:
All the resources that are possessed by organisation may or may not be there. That is there can be
situations that such resources are difficult to be found and developed in an organisation. In the

present scenario of ASDA, the major resources that are very rare consist of competent
workforce, Technology integration and differentiation product that have been developed with
the course of time. These are some of the rare resources that are difficult to find in a retail
organisation (Hinkelmann and Pasquini, 2014).
Imitability:
It refers to the quality that all other competitors may not be able to adopt the resources
organisation in short period of time. In case of ASDA, the resources that are difficult to be
imitated by other competitors concept of the high Technology integration and the competent
workforce that have been developed in the long run by this organisation and helping them in
achievement of certainly down objectives.
Organization:
For every organisation it becomes a necessary requirement to keep all the resources organised to
provide them long term competitive advantage (Zucchella and Previtali, 2019). In ASDA, there
are some resources that have to be kept highly organised so that it can help them in achievement
of Sustainable competitive advantage and higher market share in the coming period of time.
This resource of technology integration that is Asda is using technology in all their functions
such as they have implemented enterprise resource planning in the year 2010 to achieve
effectiveness (Hittmár, Varmus and Lendel, 2014). Apart from their physical stores they have
also created E-commerce website so that their customers can approach them online. More than
25% of employees are engaged in research and development department of working towards
creating higher value to their customers. All such aspects contribute towards higher sustainable
advantage for ASDA.
Resources Valuable Rare Imitability Organization: Competitive
Advantage
competent Yes Yes Yes No Temporary

workforce competitive
advantage
Technology
integration
Yes Yes Yes Yes Long run
and
sustainable
competitive
advantage
Differentiation
product
Yes Yes No No Temporary
competitive
advantage
financial
resources
Yes No No No Temporary
competitive
advantage
From, the above made analysis of the resource based view of ASDA it can be said that the
resource that is going to provide them long run competitive advantage in the external
environment is the advanced technology integration.
Mckinsey 7s Framework
It is analyzed that all the business entities include of hard and soft values, that has direct
influence on productivity as well as performance of employees. It is essential for companies to
determine their internal strength and capabilities as it help in taking better decision and enhance
productivity of employees in an appropriate manner (Liao and Tsai, 2019). This model mainly
involve Mckinsey’s 7s model that is give below:
Strategy: For attracting large audience & enhance productivity level, it is essential for
companies to develop effective strategies and implement them in an effective manner. with
reference to Asda, it adopt cost leadership strategy that aid business entity to provide goods at

lower prices without affecting on quality. Along with this, it aid an organisation to enhance its
sales and raise level of profit in an effective manner.
Structure: It is analyse that Asda is making use of hierarchal structure, which include layers
of management that is board of directors, manager, chief executive officer and many more.
System: Asda is a big supermarket & it is determine that, it is based on the system of daily
basis which assist in maintain a balance among demand and supply of market in an effective
manner.
Shared values: It is determine that values shared by Asda are innovation, culture, empathy
and employee safety as well. It is essential for top level management of Asda to undertake all
such values as it help in maintain positive culture of working and increase productivity of
employees in a best manner.
Staff: One of the main reason of success of company is its employees that offer on-time as
well as quality service to customers that help company to enhance their loyal number of
customers and maintain its sales. The managers of Asda ensure that requirements of its
employees is satisfied as it make them feel valued to be part due to which they can work with
full potential in order to attain objectives and meet with the targets effectively.
Skills: In order to increase skills, competencies as well as knowledge of staff members,
Asda provides training and development session to staff members as it help them to deal with
customers and develop a good relationship with customers in an appropriate manner.
Style: It is determine that leadership style that is used by top level management of Asda is
participative leadership style (Niman, 2014). It motivate staff members as using such style allow
employees to give their ideas and share their thoughts to managers at the time of decision
making. In addition to this, it make employees feel important and valued that leads to raise in
sales and profitability of company.
Critical evaluation of internal environment and the capabilities
It is essential for companies to evaluate internal capabilities and environment for taking
better decision and improve their performance in an effective manner. For this, different models

is use such as Mckinsey 7s model and VRIO analysis, which is used to attain success and attain
competitive advantage at market place. Along with this, such frameworks help company to
develop long-term strategies and attain leading position at marketplace. Moreover, analysis of
internal environment and capabilities help an entity to know about its valuable resources that aid
in gaining higher growth and success in the market.
P3. Porter’s Five force model in relevance with organisation
This model is adopt by company in order to determine level of competition prevailing at
marketplace. It allow company to develop effective strategy that has positive influence on
efficiency and profitability of company In order to determine the level of competition and factors
impact on its performance, the managers of Asda make use of Porter’s five force model. This
model consist of five competitive forces that is given below in context to chosen organisation:
Threat of substitute: It is determine that there are lot of companies offer same product as
Asda in market. It raise chance of customers to switch to another brands in a convenient and easy
manner. Thus, it is analyse that threat of substitute is high for company (Park and Mithas, 2020).
It is important for Asda to focus on fulfilling requirements of customer and develop effective
relation with them. It will help company for customer retention and maintain its sales and
profitability level. In addition to this, it also assist company to enhance its customer base and
strengthen its market performance in an effective manner.
Threat of new entrants: In order to establish such type of organisation as Asda, it requires high
investment, time and brand image as well. It is determine that this threat is low as it is not easy
for an individual to open such type of organisation. It is important for managers of Asda to
develop a positive mind set of customers so that they did not think of switching brand and
remain loyal with company (Park and Mithas, 2020). It help company to develop loyal customers
and enhance its profitability level in an effective manner.
Competitive rivalry: In the market, there are many competitors of Asda such as Walmart,
TESCO, Sainsbury’s and so on. It is essential for company to provide quality products at
reasonable price for attracting large audience and increase their level of sales. In addition to his,
it is significant for company to focus on fulfilling requirements of customer in order retain them

for longer time and higher growth and success at marketplace.This also help company to fight
with their rivals and attain competitive edge at marketplace.
Bargaining power of buyers: Herein, the buyers have options to switch another brand if they
find quality and price factor differ from competitor. Therefore, the bargaining power of buyers is
high for company. It offer large variety of products that help company to attract more number of
customers towards brand. It is determine that company make use of competitive pricing strategy
in order to offer customers products at reasonable price and attain success at marketplace.
Bargaining power of suppliers: In the sector in which Asda deals, there are more number of
suppliers that provide raw materials in a proper manner. This threat is low for company as they
have the chance to shift to another supplier that provide raw material at lower price. Along with
this, it help organization to increase its revenue level and strengthen market position in an
effective manner. Moreover, the company can develop good relations with suppliers in order to
get good deal and ensure availability of raw materials and regular supply in an appropriate
manner.
From the above analysis, it is determined that company is required to maintain quality of
the product and provide something innovative in market as it help them to retain in market for
longer time period. In addition to this, it also assist company to attain competitive advantage at
marketplace that leads to higher growth and success as well. It is identified that Asda uses
competitive pricing and innovative strategy that help company to fight with its rivals and attain
competitive advantage at marketplace.
Appropriate strategies to improve competitive edge and market position
In order to make improvements and gain competitive advantage at marketplace, Asda can
make use of some strategies that is given below:
The company can make use of promotional methods like social media applications, which assist
in reaching more audiences within short span of time.(Fraser, 2019).It will help company to raise
its sales level & strengthen market position in an effective way (Quenum, and et. al.,2019).

 Another strategy can be used by Asda is to conduct market research as it help company to
gain understanding about customer needs and market trends, which will assist in fulfilling
customers requirement and attain competitive advantage at marketplace.
 By making use of porter’s five force model, the company gain knowledge about its
threats and opportunities that leads to make improvements and enhance productivity of
company.
P4 Strategic Planning
Porter’s generic strategies
Cost Leadership:
The cost leadership refers to the situation in which the organization gains competitive
advantage through lowering their cost of the production and the cost of the product as much as
possible. This is the strategy which is been used by the company in a majority basis to target
their market.
 The main purpose of us8ing this strategy is to gain the strong leadership position into the
market place. This would enable the company to have maximum percentage of sharing
into the market place.
 The company, ASDA, targets the middle men group which consists of the largest
population. They target them through providing the good quality unique product with low
price. This feature attracts the customers and pushes them to make purchase of their
product.
 ASDA also has succeeded in establishing themselves as a brand which is easily available
and accessible. The company has successfully created its brand awareness. Through the
good brand awareness and easy accessibility has helped the brand in the growth of their
sales.
 Apart from this the company also brings up the discounts and offers which help the
company in attract the more customers. This activity also helps in eliminating the
competitive company as ASDA provides the better products at a discounted prices and

offers. The promotional activities and campaigns have helped the company in creating
the more brand awareness and popularity.
The generic strategy has unable the company in gaining many advantages like spreading the
awareness of the product, expansion of the base of the customers, attaining the sales target,
encouraging more purchase of the products. All such merits and advantages the company gained
through cost leadership strategy (Tsai and Liao, 2017). This strategy is best suited for the
company.
Through the analyses it has been observed that the company uses the cost leadership and
differentiation activities for sustainable competitive advantage. This has enabled the company in
expansion of their market and customer base.
Differentiation
Differentiation refers to the adoption of the strategy where the company tries its best to
bring the different and the unique product for their customers. Their main focus is to bring the
different and unique product into the market which makes them different from all the available
competition. The company ASDA brings the differentiation through:
 The company understands the market taste and brings up the unique features into their
products. That is the reason behind the expansion of their customer’s base.
 The company has studied much and has done a lot of research upon the behavior so that
they can learn about the taste and preferences of their customers. Through such research
and study the company brings the required innovation which suits to the needs and wants
of the customers. Here the company brings both the cost leadership strategy and
differentiation strategy. They introduce the products which gains the advantage for cost
leadership and the strategy for differentiation also.
 Asda has held a string position into the market through the use of differentiation strategy.
By this they have hold a different position into the market place which has helped them in
gaining the competitive advantage into the market. It has also unable the company in
reduction of burden to get competition from the other companies. Apart from this the
company has also done heavy investments upon advertisements by endorsing the big
celebrities into their advertising ads.

ASDA has acquired a different place into the market through the proper use of innovations
into their product. They have provided the variety of flavors and choices to their customers
and has delight the customers by providing the products of their taste and preferences.
Focus
Organizations that utilization Focus strategies focus on specific niche markets and, by
understanding the elements of that showcase and the exceptional needs of clients inside it, grow
particularly ease or very much indicated items for the market. Since they serve clients in their
market interestingly well, they will in general form solid brand faithfulness among their clients.
This makes their specific market fragment less appealing to contenders.Focus is the third generic
serious strategy that urges organizations to focus their assets on extending the barely focused on
sections(Zucchellaand Previtali, 2019).
 Here the company ASDA seeks the focus strategy through targeting upon a niche market
where it provides the products or the services at a lower price and simultaneously
provides the best value for the product. The best value for the product is pertain through
knowing about the taste, preferences, sizes required, needs and etc of the targeted
customers. By getting known about all these factors the company can cater the needs of
their target market properly and can earn profits.
 The company has tries its best to bring the continuous change into their packaging and
designing of their product. Such activities of change satisfy the psychological
expectations of the customers and it also helps the company in bring the value for their
products offered.
Vertical or horizontal integration
Vertical integration is said when the company gains growth by acquiring any other company
which comes into the line of their supply chain. As in the case with ASDA the company
gain’s vertical integration by purchasing the companies which are indulge in supplying of
raw materials as because of this they can reduce their cost for product.
Horizontal integration is said when the company acquire or get merge with the other
company which operates in the same business, competitors we can say. ASDA has acquired

many small scale stores in UK to grow their own business. They also have purchase the
Netto UK chain for supermarket through which they can control the major chains for retail
market.
CONCLUSION
From the report presented above, the macro analyses of ASDA are performed through
PESTEL analyses. From the analyses it has been observed that the company is more focused at
political factor and forms the business strategies in accordance with that. The internal analysis is
also performed into the report through SWOT analyses where the qualities and weakness is been
mentioned. Some of the qualities are strong brand name, quality products, reasonable prices and
etc. Whereas weakness includes the lack of technology used, financial management and etc. The
report also include strategic planning of the ASDA where it is been noticed that the organization
concentrate mainly on Cost leadership by cutting the cost as much as possible.
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