Impact of Macro Environmental Factors on ASDA

This report analyzes the impact and influence of macro environmental factors on ASDA, including political, economic, social, technological, legal, and environmental factors. It also discusses the internal environment and capabilities of ASDA using the McKinsey 7s model and VRIO analysis. Additionally, it applies Porter's five forces model to understand the competitive landscape of the retail sector in the United Kingdom.

Business Strategy

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
LO1............................................................................................................................................3
P1 Analysing the impact and influence of macro environmental factors on ASDA.............3
LO2............................................................................................................................................5
P2 Analysing the internal environment and capabilities of ASDA........................................5
LO3..........................................................................................................................................10
P3 Porter’s five forces model in context of ASDA..............................................................10
LO4..........................................................................................................................................11
P4 Theories, model and concept to understand and interpretation of strategic direction that
are available to organisation.................................................................................................11
CONCLUSION........................................................................................................................15
REFERENCES.........................................................................................................................16

INTRODUCTION
Business strategy are key actions, activities or steps that management of company
have planned in order to achieve short, medium- and long-term goals of firm. There are
number of points which are considered by manager while deciding appropriate business
strategy to use such as mission and vision statement, target customers, types of products and
services etc. Marketing manager formulate several effective strategies that could influence
customers to be part of organization for satisfaction of its needs. ASDA is British
supermarket retailers that offers varieties of products and services at highest discounts so that
customers can easily fulfil its requirements. The company was initially established in 1949,
71 years ago and now it is having approximately 165000 employees and revenue around
21,666 million. This report has discussed about various macro environmental factors that
impact business operation and strategy of ASDA. It has also assessed internal capabilities and
skills of organization by applying VRIO and Mickey 7k’s model. Porter five forces model is
used to understand competition level within industry so that effective plan or tactics can be
made so that company can gain competitive advantages in retail sector of United Kingdom.
At last, this report has included various model and theories to assist and direct strategic
direction or alternative option that are available to firm for growth and development.
LO1
P1 Analysing the impact and influence of macro environmental factors on ASDA
Company overview
ASDA is one of the largest British super market which is headquartered in England.
The organization was founded in the year 1949. Asda is now a part of Walmart which mainly
concentrates n the main business of supermarket. Along with this, the organization also
provides financial services and the mobile phone items. The Mission of Asda is to become
the Britain’s best retail service provider by exceeding the consumer’s needs. The core
purpose is to produce affordable goods and services for everyone.
PESTLE analysis
Political factors: It relates to the government policy prevailing in the country and its
impact over the business operation. UK is considered as the most powerful country in the
world. The global political factors influence the performances of Asda. It includes changes in
the tax rates, legislations and the stability in the country the business is operating (Priporas
and et.al., 2019). UK political market is stable though the negative impact of Brexit cannot be
ignored which is relatively uncertain. The organization has always shown it ability to operate

in a conducive market. Thus, the impact of this factor is moderate on the functioning of the
Asda.
Economic factor: This factor is very crucial as with the emergence of global
pandemic Covid-19 which has resulted into increase in the unemployment in the nation and
which consequently caused reduction in the disposable income. This has caused less spending
and switching more to the lower price product and services. This has severely affected the
operation of Asda and its profits as well. Along with that, the increase in the labor cost and
implementation of higher fuel tax rate has resulted into costing the organization million of
pounds each financial year.
Social factors: the organization has undertaken various initiatives for the purpose of
meeting with the changing needs and expectations of the customers. Social factors such as
ageing population and healthy lifestyle are the most crucial factors for Asda in order to meet
with the changing requirements of the business (Vintilă and et.al., 2017). This factor will help
Asda in introducing new items and services in the marketplace which will help in effectively
taking the advantage of first mover. Thus, this factor is having a significant influence over the
company.
Technological factors: With the increasing use of technology along with the
availability of mobile application has resulted into significant growth of the business
organization. Asda has already implemented various technology in its stores like AI based
check in and check out, fast billing system. This has helped in reducing the time spend on the
billing counter in a long queue. This technological factor is having a greater influence over
the working of the organization; therefore, Asda is required to upgrade its technology for
grabbing more customers.
Legal factors: Asda is required to comply with all the relevant and prevailing rules
and regulations in the country in which it is operating and any breach of the law might result
into punitive actions of the respective authority (Glowik, 2017). For instance, Asda is
required to pay the minimum wage amount set under the law. Therefore, this factor is very
important as it has the potential to affect the reputation of the company as well.
Environmental factor: the increasing awareness of the consumers in respect to the
well-being of the environment, it becomes significant for the organization to understand its
responsibilities for the betterment of the surrounding. Asda has already undertaken initiatives
for reducing the reducing the negative impact of its business operation on the environment.
Thus, it becomes essential to for the organization to demonstrate to the people the steps
undertaken by it which will create a positive brand image which will be beneficial for the

company. Therefore, this will have a moderate influence over the business functioning and
activities.
Stakeholder analysis
The stakeholder analysis is the is a process which is being used by the business
organization in order to determine the support from others. There are various approaches for
evaluating the stakeholders of the organization. Here, power interest matrix is implemented
which is bifurcated into two, power, which demonstrate the ability of the stakeholder and the
other is the interest which accounts for the size of overlap along with the stakeholders of the
organization.
High power and high interest: These are those stakeholders who are required to
satisfied and managed closely as they are having a higher level of influence over the
functioning and operation of the business (Kull, Mena and Korschun, 2016). Along with that,
they have invested huge amount in the organization. For Asda, it involves, investors and
Board of Directors who are needed to be handle with care.
High power and low interest: It include those stakeholders who are having less
interest in the organization but has potentially high power affecting the decisions of the
organization. It generally involves, credit providers, suppliers, financial institutions.
Low power and high interest: This category of the stakeholders is having higher
interest in the busies functioning but the power is low. This quadrant mainly involves the
employees and other personnel’s who work at the functional level.
Low power and low interest: Under this, the organization is required to exercise less
monitor and implement less effort over the stakeholders (Weidner, Nakata and Zhu, 2020). It
involves public and media who are having least power and interest and only interest in having
a communication in regard to the progress which the organization is undertaking.
LO2
P2 Analysing the internal environment and capabilities of ASDA
McKinsey 7s model
This tool is considered as an important framework for the purpose of evaluating the
micro environment of an organization. The McKinsey 7s model of Asda is discussed below.
Strategy: Asda has implemented the cost leadership strategy in order to undertake the
advantage of emerging methods of carrying out the business. The company has now merged
with Walmart which will help it in further expanding its reach.

Structure: The organizational structure followed by Asda is hierarchical which possess
disadvantage to the organization (Vaníčková and Szczepańska-Woszczyna, 2020). It results
into ineffective communication system, conflict of interest, time taking process for
implementing action on an immediate basis. This affects the outcome of the organization.
System: the system implemented by Asda is very good which helps it in effectively meet with
its daily business requirements and in carrying out the task in a correct manner. This system
has helped Asda in attaining long term success. It has implemented knowledge based system
for ensuring and inventory management system for effective managing its activities.
Shared values: Asda is very well-established business organization which has been built on
its core value which states that respect for all the individual and quality along with excellent
customer service (Paquibut and Al Naamany, 2019). This highlights that the company is
having high confidence which will help it in attaining its objectives effectively.
Skills: The employees of Asda have well trained and capable enough to manage the business
and meeting the needs and expectations of its customers.
Style: Asda is making use of autocratic leadership style which has hampered the creativity of
its employees.
Staff: Asda hires employees by looking at their skills and capabilities and how it will be
beneficial for the organization in attaining its desired objectives.
VRIO Analysis
This analysis is used by the businesses which helps them in exploring and protecting
the resources and the internal capabilities of the organization in an effective way. These
resources can be used for the long-term benefits as against the competitors. This table
provides a clear insight on the resources available and how it can be adequately captured.
Resources Valuable Rare Imitable Organization
Employees The employees of
eth organization
is very valuable
as the
organization has
provided then
specific and
proper training in
respect to
The staff of Asda
are very much
professional and
are experienced
which makes
them rare and
competitive in
nature. This is not
possible for the
This can be very
easily imitated by
the other
competing
organizations
through the way
of providing
greater salary,
incentives and

effectively
communicating
and handling of
the customers
which requires
incurring huge
expenses.
other organization
to have such a
great staff
(Ariyani and
Daryanto, 2018).
Asda ensures and
makes efforts to
retain them
through the way
of providing them
better incentives,
rewards,
opportunity for
growth and
development,
flexible workings
and so forth.
other reward
system which will
help the
organization in
grabbing the
employees of
Asda. Along with
that, the other
firms can also
implement
effective training
system which will
benefit it in
having highly
trained
employees.
Distribution
network
This resource is
very valuable to
the organization
as this has
resulted in
making Asda one
of the big giants
in the retail
industry across
the world
(Vargas-
Hernández and
Garcia, 2019).
This has helped in
creating value for
the organization
The distribution
network of Asda
is highly
organized which
helps it in
reaching out to
the large group of
customers in an
effective way all
across the globe.

and without it this
won’t have
happened.
Financial
resources
The financial
positioning of the
organization is
very good and
valuable for the
organization as it
will help it in
making
investment in the
future projects as
it can easily
procure funds
from the various
resources because
of its god
financial health.
The financial
resources of the
organization are
very rare as it
requires
implementing lot
of hard work and
efforts and years
of work in order
to attain this
position. Thus, it
cannot be
accomplished by
anyone.
The financial
structure of Asda
can be considered
to be very stable
and well
structured which
helps it in
capturing greater
value in efficient
manner (Buzatu,
Pleșea and Iulian,
2019). Asda
makes use of its
financial
resources in a
strategic manner
which results into
optimum
utilization of its
resources. The
availability of
resources
supports the
management of
the organization
can make use of
its in an effective
manner thus,
grabbing the
opportunities as

and when it
arises.
Patents Under this, it can
be said that Asda
is not organized
in an appropriate
manner in terms
of patents which
indicates that the
organization
might not be able
to perform well
and other
organization can
make use of it as
it does not got
patent. This is an
unutilized
resource which
can be a valued
added benefit for
the organization if
Asda start selling
its products and
services under its
patents before
other competing
firms took
advantage of it.

LO3
P3 Porter’s five forces model in context of ASDA
This model assists the organization in determining the attractiveness of the industry
and competitive edge of the organization in the market. A detailed analysis is given below.
Bargaining power of buyers-
Asda is serving millions of customers every week at the low price which is in
competition to its other competitors. The bargaining power of the customer is high as if Asda
fails to meet the demand of its customers the it might result into losing of customers as the
customers can switch to its competitors who are providing similar product at no switching
cost. Therefore, it become essential for the organization to effectively meet with changing
requirements of the customers in order to retain them (Stindt and et.al., 2017). The
organization can further reduce the power of buyer through the way of further increasing and
diversifying its customers and products as well. This can be done through introducing the
new products and services in the target market segment and market group by implementing
various marketing strategies.
Bargaining power of suppliers-
Asda is having thousands of suppliers in UK and these suppliers cannot implement
high or significant level of power as there are large number of suppliers available in the
market. Along with that Asda is a big organization and required materials or the supplies in a
large lot and therefore, negotiate hard with its suppliers in order attaining greater profit
margin. Therefore, the bargaining power of suppliers is low. This will remain in the favour of
the organization if the suppliers are not concentrated to a specific region and the switching is
also lower and the product supplies provided by the suppliers are not differentiated (Waheed
and et.al., 2017). Asda can even make its position more stronger by reducing its dependency
on just few suppliers. By creating a contractual relation with its supplier for a longer term
from various areas or the regions will result into reducing the power of suppliers along with
increasing its supply chain adequacy.
Threat of new entrance-
The threat of new rivals coming into the UK market industry is exceptionally low
especially in light of the capital prerequisites. Asda doesn't have to stress over any new
participants as it takes the advantage of economies of scale and has its own capabilities, skills
and resources. In like manner, would-be contenders might not have enough cash, access to
structured distribution system and any type of expertise to investigate the entire retail

industry in the UK for the purpose of entering into the new market requires the lot of
research, undertaking activities such as research and development, marketing, promotion
practices which requires huge amount of money which might not available so easily to any
new firm willing to enter the market. Thus, Asda faces lower threat on account of the new
entrant as there are lot of government regulations which are also required to be complied with
for entering into the market which is a time-consuming part. This threat can be further
reduced with the switching cost is very high for the customers and the existing company is
having large group of loyal customers.
Threat of substitute services and products-
The threat of substitute product is very high in the market as there is availability lot
of products which can be easily substituted because of the similar features. The competitors
of Asda sell the similar products and services which creates a threat for the organization. The
level of threat is high which indicates that the customers can make use of the other alternative
items from the other firms in the market in order to meet with their needs (Kibria, Amin and
Rifat, 2017). Other than this, the other factor that can pose threat to Asda is availability of
cheaper product and services in the market from its rivals. Along with that, the switching
costs pertaining to moving from one product to its substitute is very low.
Competition between existing companies-
Asda has various ground-breaking rivals in the UK retail industry such as Tesco,
Sainsbury, Morrison’s etc. These contenders spend richly on branding and other advertising
strategies. In spite of the fact that Asda is one of the big 4 retail giants, the pressure or risk
from the closest opponents is extreme. Similarly, the price wars created by Aldi and Lidl are
influencing Asda’s overall revenues. Other important factor is that the market is moving at
the higher rate which has an impact over the business functioning. In order to remain in the
market and attain the required market share, Asda is required to differentiate itself from its
competitors in terms of its products and services which will help in reducing the threat f
intense competition prevailing in the market.
LO4
P4 Theories, model and concept to understand and interpretation of strategic direction that
are available to organisation
On the basis of above analysis of macro environment, strength and capabilities of
firm and competition level in industry it can be stated that there numerous alternative options
or strategic direction, tactics that could be used by enterprise. Company by making use of its

strength can take advantages of available opportunities and at the same time by working on
its weakness can remove threat of increasing competition (Saleh and Watson, 2017). Porter
generic strategies and Bowman’s clock are two effective framework and models that are used
to find future strategic direction of ASDA. Such as:
Porter generic strategies: There are four strategies which have been described by Michael
porter in 1985 that could be used by organisation to expand and grow its market share. Like
cost leadership, differentiate leadership, cost focus and differentiate focus are four alternative
option which could be selected by management of ASDA to enhance its profitability and
market share.
Cost leadership strategy: In this strategy company gain competitive advantages by selling
its products and services at lower prices than the average prices charged by other competitors
in industry. ASDA have make use of cost leadership strategy to cater needs of large number
of individuals thus it have given tough competition to one of renowned company named as
Tesco. Company have focused on pricing thus always tried to reduce cost and maximise
benefits of customers that has helped it in attracting existing as well as new customers
(Fogarassy, Horvath, and Magda, 2017). Therefore, ASDA by offering heavy discounts to
customers than other competitors have rapidly grow, diversify its business in retail industry.
Differentiate strategy: It is another strategy direction in which business planned to gain
differentiate positioning by selling unique, qualitative and innovative products or services
so that they are ready to pay high prices. Due to increasing number of diseases and now a day
customers while taking decision to purchase specific products or services considered quality
more than its cost. Thus, ASDA in order to grow and sustain in future environment have to
make improvements in its products or add unique features so that they are motivated to be
with organisation for longer time frame (Xu and Koivumäki, 2019). Company by making use
of effective sales and marketing strategies can generate awareness among people about its
uniqueness and differentiates so that they can take correct decision within limited time frame.
Focused cost: It is strategy in which company focused on niche market or particular group
of people for operating its business. Such as ASDA by reducing or offering discount to
specific group of individuals can earn profit to some extend only. So, it is not suitable option
or strategy for ASDA in order to grow and sustain its business.
Focused differentiation: It is the strategy in which company can attained its objectives, key
mission and objectives by differentiating its products and services for specific group of

individuals that are living in society. Such as ASDA can manufacture organic, hygiene food
products for people that are highly concerned about their health and safety or people that
belong to high income group. So, they are ready to pay high prices for products and services
for satisfaction of their respective requirements.
Figure 1: Porter generic strategies
(Source: Porter generic strategies, 2020)
Bowman’ clock Strategy: It is another model that is used for finding options for strategic
positioning or the way company products or services will be positioned in minds and heart of
customers so that it can enjoy profit margin for longer time frame. It have provide varieties of
options on two dimensions such as perceived value and prices that could be used by ASDA to
expand its business.
Low price and low value added (Position 1): It is not effective strategy to gain competitive
advantages as customers are provided less value products at lower prices. People have
become educated and knowledge so they do not prefer products and services that are given at
lower prices for minimum value. So, this strategy would not be fruitful for ASDA to attained
its mission and vision in longer run (Rekarti and Doktoralina, 2017).
Low prices (Position 2): Company position its brand image in minds and hearts of
customers by minimising cost or prices of products so that each and every individual can
easily purchase it for satisfaction of their respective needs. Recently, ASDA have make use
of low pricing strategy to cover large market in United kingdom and across worldwide to
enjoy higher profit margin.

Hybrid (Position 3): As the name suggested, it is mixer of both low price and differentiate
products thus ASDA by pursing hybrid strategy can easily provide good value products to
end users. It is best and effective strategy that could be used by ASDA to increasing its sales
volume and market share in retail sector (Ajagbe and et.al., 2016).
Differentiation (Position 4): This strategy has emphasis on providing highest level of
perceived added value to its customers in order to build and retained strong brand image in
market. This strategy is useful for company that main motivate is to maintain strong
relationship with customers and high reputation in market so that number of individuals are
motivate to select ASDA as compared to other competitors (Brijs, 2016).
Focused differentiation (Position 5): Management of ASDA for implementation of focused
differentiation strategy needs to classify or segment, classified, target group of individuals to
whom it will deliver services. Company have to make use of unique, attractive and
innovative way to approach people of specific group for achievements of goals.
Risky High Margin (Position 6): There are some companies in market that set high profit
margin or price of products than its value that resulted in loss of number of customers. ASDA
management should effective analysis and evaluates cost and value of products before setting
specific prices so that appropriate prices can be set and customers requirements can be
fulfilled. As this strategy may be good for short run or temporary basis but may not work for
longer term for organisation.
Monopoly pricing (Position 7): This price can be only set by company that offer unique,
highly differentiate products in whole industry thus there are no other alternative or
competitors of similar products. But in case of ASDA, there are number of huge organisation
in retail sector such as Tesco, Marks and Spencer that offer qualitative products at reasonable
rates.
Loss of market share (Position 8): It is last alternative option that affects on positioning of
firm i.e., company sell its low value products at less prices may resulted in loss of market
share. So, it ASDA in order to retained its market share have ensured both quality as well as
price of products (Holmqvist and Ruiz, 2017). Company have tried to bring economic of
scale, build strong relationship with suppliers in order to get raw material at lower cost so that
maximum value can be delivered to customers.

Figure 2: Bowman’ clock Strategy
(Source: Bowman’ clock Strategy, 2020)
CONCLUSION
From the above report it can be concluded that political instability in United
Kingdom have impacted adversely on sales volume and profitability of organisation. Social
factors such as less disposable income have helped in increasing sales of company as large
number of customers wants to have products at lower prices. Company have make use of its
key internal strength like skills, capabilities and structure to take advantages of available
opportunities so that it can further expand. From porter five forces analysis, it have been
founded that threat of new entrances, power of consumers and existing rivalry is high in retail
sectors whereas power of suppliers and threat of substitute products is low. At last, from
model and concept identified strategic options could be used by ASDA in future
circumstances to grow and sustain business in retail industry.

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