Impact of Macro Environment on ASDA's Strategies

This article discusses the impact and influence of macro environment on ASDA and its strategies. It explores factors like political, economic, social, technological, environmental, and legal and how they affect the business strategies of ASDA. The article also analyzes the internal environment and capabilities of ASDA using the SWOT model and evaluates the competitive force of ASDA using Porter's Five Forces model.

Business Strategy
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Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
Impact and influence of macro environment on ASDA and its strategies..................................3
Internal environment and capabilities of ASDA.........................................................................6
Implementation of porter’s 5 forces model to evaluate competitive force of ASDA..................7
Strategic Planning of ASDA........................................................................................................9
PART B.........................................................................................................................................10
Strategic direction......................................................................................................................10
Recommendation.......................................................................................................................11
Monitoring strategies.................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
Business strategy deals in the actions and decisions planned by the company for reaching the
objectives and goals. This also deals in the ways in which the company or the organisations can
achieve these goals and objectives. This can help the company in decision making process
required for hiring and allocating the resources. This is why; it is also considered to be a set of
competitive moves and actions which are used by the company for attracting customers,
strengthening the performance, competing successfully thereby achieving organisational goals
(Lancaster and Massingham, 2017). This also evaluates the ways in which business must be
carried out for reaching desired ends. Al the companies develop and implement various strategies
of business according to the internal as well as external analysis of the internal as well as
external factors including the environment, competitors, strengths and capabilities of
organisation and many more. ASDA is the supermarket chain headquartered in England, UK.
The company deals in products like general merchandise, grocery, financial services etc. Also,
once the company stood second among all the supermarkets in UK by earning the revenue of
more than £6.7 billion (ASDA, 2021). The company also deals as mobile phone provider. The
company develops and implements various strategies to compete with other competitors
including Marks and Spencer, John Lewis Partnership, Waitrose, Morrison, ALDI, Tesco,
Sainsbury, Macy’s etc. The report will shed light on the internal as well as external analysis of
the company ASDA by making use of various models including PESTLE and SWOT. It will also
focus on the competitive advantage of the company which can be gained by analysing the
competitors of the country. The Porter’s Five Forces model will be used for analysing the same.
Various strategies will be devised for achieving the overall strategic objectives.
PART A
Impact and influence of macro environment on ASDA and its strategies
Factors of macro environment affect the business in various ways. This is basically a
dynamic factor which keeps changing drastically which leads to increase in competition, avenues
and complexity. The large businesses especially such as ASDA must constantly track the
changes in the macro environmental factors so that the decisions can be made appropriately and
the operations can be performed accordingly (Ruiz-Real and et.al., 2019). There are various
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models to analyse the impact of macro environmental factors on the strategies of business but the
most prominent model is the PESTEL model which helps in analysing the impact of various
factors like Political, Economic, Social, Technological, Environmental and Legal on the business
strategies of ASDA. Pestle analysis is considered to be the most important framework for
strategic planning of companies like ASDA.
Political: These factors include national, international regulations and the directives regarding
the legislation, employment, consumer rights, taxes etc. These also include the wars and the
instability which impacts the decision making of the organisation. The companies like ASDA
needs to monitor the political environment constantly. Brexit is the major political change which
affected the trade and the supplies of the company. ASDA needs to develop and implement the
strategies regarding the future proof supply chain which can help in responding to the Brexit
changes and impacts. The deals between the UK and European countries also become a kind of
hope for the country and the organisations (Pestle Analysis of ASDA, 2021). This is how; these
factors impact the company’s strategies positively as well as negatively.
Economic: These factors include cost of credit, pay level, labour supply and demand,
competitive pressures, energy prices etc. These economic factors affect the pricing strategies of
the companies like ASDA significantly. When there was economic lockdown in 2020, this was
found that many people lost their jobs and also reduced their activities of shopping. This is why;
the financial stability of the company is decided by the overall economic condition of the country
as well as its people. This can also be noticed that when the overall economy of the country is
good, then the customer base of the company can be increased.
Social: These factors include celebrity following, ageing population, healthy lifestyle etc. which
are very important for the companies like ASDA. When the company comes to know about the
social factors then this helps in introducing the new products / services in the market. This also
helps the companies in developing its segmentation strategies. This can be observed that in UK,
the demand for vegetarian, organic and vegan food is growing rapidly and also the demand of
certain ethnic foods is also increasing very fast in various countries in which ASDA operates
including UK (Phan, 2021). This is why; the company must offer various number of products
which can cater to good number of ethnic groups.
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Technological: These factors include the growth of technology which involves the increasing
use of mobile apps, mobile phones, superfast broadband etc. The ASDA Company can make use
of this growing technology in facilitating its customers and also make use of the advanced
technological services in increasing the profitability of the company. All the supermarket
companies make use of this in order to develop and implement the advanced technological
strategies such as click and collect deliveries, online payments etc.
Environmental: These factors not only benefit the company but also the environment. This can
also be observed that when the company does not use the sustainable practise and strategies,
these factors can impact the company as well as the environment negatively. These factors
include green economy, carbon footprint, pollution, hazardous waste, organic foods which
becomes very important for the companies like ASDA. The companies have a lot of pressure
regarding the ways in which they can perform operations in environment friendly manner which
is why the people are now becoming more and more aware of the impact which these operations
have on the environment. This is the reason, the companies like ASDA need to prove that it is
environment friendly company which can help in increasing the goodwill of the company
thereby increasing the profitability.
Legal: These factors include the rules and regulations of the country in which the company
operates. ASDA needs to abide by all the rules and regulations of UK as if they will not adhere
to the laws and policies of the government then the company can face punitive actions by
relevant authorities. This can be explained by the example of minimum wage act in which if the
companies do not pay minimum amount of wage to the employees then the company needs to
pay greater fines and penalties to the country and its government. Earlier also, the company
ASDA was found paying fines of more than 300,000 pounds for food safety breaches and not
following the food safety laws (Islam and Mamun, 2017).
This is how, the impact of macro environment factors can be analysed on the strategies of
ASDA. The company needs to shake the whole retailer industry through its disruptive innovation
and also become popular among the customers. The company must also enhance its online
presence so that this can help in facing the barriers due to PESTEL factors like Brexit in UK.
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Internal environment and capabilities of ASDA
Business environment, in which companies operate, is made up of internal and external
factors that may affect overall performance of companies. Some factors in internal environment
that may also affect performance or productivity of companies include: competitive threats,
weakness of companies and others (Ekaterina, 2021). ASDA can protect itself by knowing all
internal environmental factors and it can be analysed with the help of SWOT model such as:
Strength
 One of the main strength that makes ASDA able to being in the competition and
attracting customers is an improved and extensive distribution. It has around 25
distribution centres in the UK. These distributors are being used for clothing, chilled food
and other products.
 Other strength of this retailer is it provides huge range of products as customers find
easier to get numbers of products from one place (Jafari and Othman Soleiman, 2020).
 ASDA is known for its extensive and effective marketing campaign that helps it out in
attracting customers.
 ASDA has received numbers of awards for its excellent services that can help it out to
take competitive advantages and retaining customers with it.
Weaknesses
 ASDA has few global presences as compared to other giants and it is its main weakness
that can limits profit margin and sales.
 ASDA is restricted in few countries because of increasing competition from local vendors
and it can affect its performance.
 ASDA was claimed because of pricing fix on the daily products which does not facilitate
the people of all the classes which decreases the customer base.
 The company was once known for false advertising in which the company was headed as
lower prices than other supermarkets which gave a wrong image for the company.
 The quality of products of ASDA is another weakness which impacts the overall
reputation of the company (SWOT analysis of ASDA, 2021).
Opportunities
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 The company ASDA has major opportunity to expand its business operations in many
areas such as jewellery, pharmacy, photo department etc.
 The company can also increase its online presence which can help in facilitating more
number of customers who cannot visit the stores for making purchases.
 ASDA also has goal which aims at enhancing sustainability by 100% recyclable package
and also sustainably sourced fish, recycling of operational waste which can helps in
reducing the food waste. This is the major opportunity for the business growth of ASDA.
 Another opportunity for the company is that it can expand in many other countries such
as China, India and many other countries along with UK which can help the brand in
gaining more visibility (Oraman and et.al., 2018).
Threats
 The major threat to the company is that of the price war which exists between ASDA and
the other companies.
 The government policies never remain same which is why the operations of the company
need to be changed accordingly which is a key threat to the profitability of the company.
 Also, there is a price cut from the competitors like Tesco, Sainsbury, Morrison etc. which
process to be the biggest threat as the customers are attracted towards those companies
having less pricing strategies.
 The other online retailers also becomes a threat to the company as the customer feel more
facilitated by them because they provide the products at the doorsteps of customers.
Implementation of porter’s 5 forces model to evaluate competitive force of ASDA
ASDA is a British supermarket chain and operates in numbers of countries. It operates in retail
sector and from research; it is found that there is intense competition in this sector. In the UK,
retailers are striving hard for being in the competition and attracting customers. With the help of
Porter’s five forces, overall competition can be known such as:
New entrants’ threat: Threat of new entrants in this industry has weaker force because
capital expenditure is high. There is requirement of high research and development that can
increase overall cost of new entrants. Also competing with well-known retailers such as Tesco,
ASDA and others is not an easy task. Customers do not easily switch their brand and do not rely
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on new retailers (Bentham, 2018). So, it has weaker force that is good for ASDA as it can make
an improved image in the market and can increase profit margin by attracting customers to the
great extent.
Suppliers’ bargaining power: ASDA operates in the industry where there are numbers of
suppliers as compared to the buyers. So, from this, it can be said that there is less control over
prices by suppliers and it is also beneficial for ASDA (Gupta, Gupta and Gupta, 2019). By
improving relations with suppliers, it can buy qualitative raw materials and can provide
qualitative final goods to customers. It can also be said that suppliers in this industry or retailer
do not provide credible threat for forward integration into this industry where ASDA operates. It
can also be said that retailers’ profit margin is closely tied up to that of customers. By buying
raw materials at lower prices it decreases its overall cost and increase profit margin that can help
it out in taking competitive advantages.
Buyers’ bargaining power: As it is already stated that as compared to buyers and retailers,
there are numbers of suppliers which means buyers have few firms to choose from. But as
compared to ASDA, there are some well-known retailers such as Tesco, Lidl and others from
which buyers can buy products. So, accordingly, it can be said that it has medium intensity of
competition or medium force which means ASDA need to focus on providing innovative and
unique products for retaining customers with it (Adelakun, 2020). Quality of products is vital and
also plays a vital role as it is the main thing that can retain customers within business so, by
improving quality, ASDA can take advantages of this force.
Competitive rivalry: This power is very strong in case of ASDA because there is large
number of competitors of ASDA and also they have a greater market share. These competitive
firms engage in various competitive actions for gaining position and becoming the market
leaders. ASDA sometimes need to modify its strategies and also cut its prices of products in
order to compete with the competitors which lead to lesser profit margin. There are high exit
barriers for leaving this industry because the investment required is higher and also assets to
operate are high (ASDA - Porter’s 5 Forces, 2020). This makes the company to operate at low
profits also because the government regulations are also high. All the competitors develop and
implement various strategies which mean the company ASDA needs to monitor the strategic
change and implement appropriate strategy for earning greater competitive advantage.
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Threat of substitute products or services: This force is weak in case of companies like
ASDA because there are only few substitutes in the industry in which ASDA operates. There is
no ceiling on the maximum profit which can be earned by the firms in the industry. The very few
substitutes are also dealing in products of higher quality and expensive. So there will be very few
companies which deal with the products similar to that of ASDA. This is why; the other
companies can deal in greater quality products to be sold at higher prices.
Strengths of competitive analysis
 The main strength of this porter’s 5 forces analysis model is: it helps companies in
knowing the extent of competition in the market.
 It helps companies to understand all factors that can affect their profitability in their
specific industry.
Weaknesses
 It is stated that this model is too general analytical framework.
 There is lack of quantitative dimensions.
This is how; Porter’s 5 Forces Model can be used to analyse the competitive advantage
which can be gained by the Company ASDA and the level of competition the company faces in
the industry of supermarket retailer in UK and in many other countries.
Strategic Planning of ASDA
There can be various models and frameworks used for planning the strategies of the
companies like ASDA. Among them, Porter’s Generic strategies is the most prevalent and
prominent model which can help in devising strategies which can also help the company in
sustaining the market leadership position in this intensifying competition. This will also help in
increasing the market share without doing many significant efforts. There are various strategies
including cost leadership, differentiation and focus strategies which can be used to handle the
competitive pressure. These are also known as generic strategies which can be easily used by
ASDA individually or combination of all these.
Cost leadership: This deals in gaining greater competitive advantage by lowering the cost
of the products. The main objective of this strategy is to protect the market leadership position
through the use of value chain management. The major consumer segment in UK is that of the
middle class people and in order to cater to the needs of these consumers, the company needs to
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expand the market share by targeting this group (Millington and Ntounis, 2017). The company
must also focus on the affordability and high accessibility of the products. The supply chain
efficiency can also be maximized and discounts and offers can be offered by promotional
campaigns for achieving the sales targets, increasing brand popularity and encouraging
consumption.
Differentiation: This deals in making the products and services of ASDA unique as
compared to its competitors like Tesco, ALDI, Sainsbury etc. The company can adapt to this by
enhancing innovation in the products as well as services by focusing on the health concerns of
the UK people. ASDA can also invest greater in marketing, research and development, celebrity
endorsement so that ASDA can easily be differentiated from the other brands. Also, the company
can increase its online presence which can help in facilitating lot many customers and fulfill the
needs of the same (Morgan, Tallontire and Foxon, 2017). This will also help the company in
promoting its brand through major social networking sites and the established website of the
company by doing less investment. The company must also make the brand logo unique which
can help in establishing strong brand image.
Focus Strategy: This includes concentrating on the resources to expand the narrowly
targeted segments. When this strategy is adapted, the companies like ASDA serve the particular
market segments in the countries. This can be done by focusing on the low cost strategy and
reducing the prices of the products (Souza-Monteiro and Hooker, 2017). The company can also
focus on the size, taste, design of the products which can be completely matched with the needs
of the customers. The company must also revise the branding strategies so that changes can be
made regularly in them regarding the product designing and packaging so that the psychological
expectations can be met.
PART B
Strategic direction
There are different strategies which ASDA uses for the development of its business. It is
the concern of this company to achieve success with the business strategy it puts into practice.
Therefore, the strategy of the company should be such that it helps the business to identify the
strengths and generate solutions for the weaknesses. One of the strengths which has been
discussed already is that this company owns larger stores than competitors. This shows that the
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direction in which the company is going for its competitive strategy is perfect. The weaknesses
of this company are that the competitors of this company are selling products in relatively fewer
prices than ASDA (Lončar, 2017). For overcoming this weakness the company needs to utilize
the everyday low price strategy. In this strategy the company will reduce the prices of its
products by decreasing the advertisement expenses. For covering up the advertisement which it
will lose this company has decided to increase its advertisement expenses on social media which
will be cheaper.
Recommendation
Form the above analysation it has been understood that the business of ASDA has some
strengths and some weaknesses. It has been understood that for the growth of ASDA it needs to
develop its business with the help of new platforms. The aim of this company is to become
Britain's favourite retailer. For this growth the total number of small food stores of ASDA
increased from 100 to 150. This was great step towards the success of the business. For
achieving success this company needs to increase its business over social media and other online
platforms (Sharma and Jhamb, 2020). This is extremely necessary because after the pandemic
the increase in the online business has been very influential in the market. Thus, with the help of
social media and online delivery the company be able to increase its promotional activities and
introduce home delivery options to the customers.
Monitoring strategies
The strategy which ASDA will utilize is the use of online websites for providing the
service of home delivery and also social media which will increase its promotional activities. For
monitoring of this strategy ASDA can follow certain ways such as,
 It is important for the organization to make sure the revenue generation is not affected
from the implementation of the new strategy. The new strategy which is implemented is
for improving the brand of the company (Caniglia and et.al.,., 2017).
 It is important for the company to understand the issue which the new strategy may have
before it impacts the customers of the company.
 Creation of feedbacks is necessary for the company in order to understand what the
customers want and how can they change the strategy for fulfilling these needs.
 Prior to the implementation the company needs to gather all the available information
about the strategy.
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 It is important for the company to test its strategy with the help of scenario before its
implementation.
CONCLUSION
It has been summarized from the above report that strategic planning of the company
ASDA. The report also focussed on the internal and external analysis of the company which
helped in analysing the impact of various internal and external factors on the operations and
strategies of the company. The report also made use of models like SWOT and PESTLE for
doing the internal and external analysis so that strategies could be made accordingly. This can
also be observed that the competition also plays a major role in the industries so the Porter’s 5
Force model was used to analyse the competition in the industry and devise various strategies to
gain competitive advantage. Strategic planning was also done by using Porter’s Generic
strategies for increasing the profitability of the company.
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REFERENCES
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<https://prezi.com/p/w8vhohio3zmi/asda-porters-five-forces/>
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