Impact and Influence of Macro Environment on Asda's Strategies
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This report analyzes the impact of macro environment on Asda's strategies, using tools like PESTLE analysis and Ansoff's growth vector matrix. It also examines the internal environment and capabilities of Asda using VRIO analysis and McKinsey's 7s model.
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Unit 32: Business Strategy
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TABLE OF CONTENTS INTRODUCTION...........................................................................................................................3 LO1..................................................................................................................................................4 P1 Impact and influence of macro environment on a organization and it’s strategies................4 LO2..................................................................................................................................................8 P2 Examine internal environment and capabilities of Asda........................................................8 LO3................................................................................................................................................10 Porter’s five forces.....................................................................................................................10 LO4................................................................................................................................................12 P4 Strategic planning.................................................................................................................12 CONCLUSION..............................................................................................................................15 REFERENCES..............................................................................................................................17
INTRODUCTION Business strategy can be defined as the set of activities that implements by company to gain it’s all goals and objectives within timeframe. To understand role of business strategy has an example of Asda company.It is a British supermarket retailer that runs it’s business in retail sector at wide level. It is headquartered in Leeds, UK and keeps wide product line i.e. grocery, general merchandise, financial services etc. trade it’s products and services into multiple countriesacross theworld. In this report willdiscussdifferent business strategythat is implemented by Asda to achieve it’s all goals and objectives. LO1 P1 Impact and influence of macro environment on a organization and it’s strategies There are various strategic analytical tools such as pestle analysis, stakeholder analysis that are implemented to evaluate impact and influence of macro environment on the company’s performance and it’s strategies. Pestle Analysis It is a strategic analytical technique that undertakes by organization to analyse it’s external environment in the business factors (Anwar, Shah and Hasnu, 2016). This framework comprises five factors such as political, economic, socio-cultural, technological, environmental and legal factors that directly impacts on organization’s decision-making process as well it’s strategies. Asda uses this analytical tool to examine it’s external environment. Factors are described as follows: Political factors In past few years political stability has proved quite profitable for the retail sector because all retail companies do not have to change their policies related to product and services accordingly norms. It reduces financial loss to lead change again and again in their companies like other countries. Due to high stability of political has influenced profit ratio of the Asda because it enables to sell it’s different products in the UK market effectively. But political stability has impacted organization’s growth rate as well because according to norms a particular organization
cannot trade it’s product and services into multiple countries. Therefore, Asda unable to build strong global presence in the global market. Economic factors Currency exchange rate, Interest rate, financial performance, tax rate and others are economical factors that also impact on company performance. For example, UK’s government has raised large number of job vacancies that reduce unemployment rate in UK. This initiative has improved spending behavior of UK’s people. As resultant Asda has opportunity to sell it’s advanced products at higher cost and generate high profit margin. Such initiative has brought profitability for the retail companies like Asda.But this initiative still has led negative impact on organization’s selling revenue (Baburaj and Narayanan, 2016). The reason behind is that Asda is famous for the affordable price products but UK’s people disposable income is increasing by and by which has led change in their demands. In other word, UK’s people starts to buy expensive products instead of reasonable that directly impact on Asda’s selling revenue because it posses’ all low cost products. Socio-cultural factors Asda has wide product line and sells them to customer at lower cost. But demographical change has brough negative impact on organization performance as well (Brunvall and et.al., 2016). the reason is that Asda does not have good management who can support to meet all objectives of the customer by deeply analyzing market. It causes company unable to capture high market share on it’s products in the UK market. Technological factors AdvancedtechnologyhasimpactedonAsda’sperformancesuchaswiththeadvanced technology it enables to sell it’s products and services into multiple countries and maintains wellbeing of UK’s customer as well by offering online home delivery services. Digital platform is not only supported company to build large customer base but also provide access to reach new customers and attracts them to buy affordable price products. But such advanced technologies have raised competition in the retail market as resultant company does not achieve that level profit which one it expected. Legal factors
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Asda has implemented to cost focus strategy to achieve high profit margin and become market leader. So, company practices diverse suppliers’ strategy that helps to gain high quality products at lower costs. Thus, company sells it’s product at optimum cost and in exchange generate high profit at certain products. With the cost focus strategy company often has achieved competitive advantage from it’s competitors during seasons. But the negative phase also faces by company during inflation period in the UK market. Environmental factors UK’s government become more concern for the environmental issues so they have imposed rule for all business sectors like retail sector to promote eco-friendly products instead of carbon affiliated food and products (Buzatu, Pleșea and Iulian, 2019). This policy has impacted on retail companies like Asda negatively because eco-friendly products are quite expensive as compared normal. So, company unable to sell it’s products at lower cost that impacted purchasing behaviour of it’s customers which has impacted on financial infrastructure of the company. From the above discussed points has analysed that Asda has promoted by various factors but there are some others factors as well like legal, political factors have impacted organization’s performance and it’s strategies negatively. To overcome negative impacts of such factors have beststrategyfortheAsdatofollowCSRactivitiesthatwillbuildsustainablebusiness performance in the UK market. Ansoff’s growth vector matrix `It is marketing planning framework that undertakes by organization to identify specific business strategy accordingly market situation which brings success in the company in the business market. Asda implements this model to evaluate impact and influence of business strategy on the macro-environment of the company. It comprises four business strategies options that are discussed below: Market penetration strategy This business strategy supports organization to focus on the existing market with existing products. It is cost-effective strategy because company does not have to invest high funds on the existing products for attracting it’s customer (Cox, Pinfield and Rutter, 2019). Asda has implemented this strategy to influence it’s brand presence in it’s market. Due to low cost strategy
has supported company to influence it’s customer to buy such products at lower cost in the UK market. Market development This strategy directs company to focus on entry into new market with existing products. the main goal of the strategy to influence availability of company franchises into multiple countries. It posses some limitation such as strong product line and extensive research for new market then organization can successfully established it’s business. Asda has practiced this strategy in the multiple city of UK instead of country (Hart, Sharma and Halme, 2016). Product development This strategy focuses on introducing new products in the existing market. This strategy also has followed by management of Asda plc to attract large number of customers for buying these products. As resultant company has captured large market share on it’s certain products in the UK market. Diversification It is another effective business strategy that focuses on introducing new product in the new market. this strategy is quite expensive and risk as well because company have to invest huge funds in the R&D department to bring new product and excellent managerial skills to enter int new market. Asda also has implemented this strategy within organization but has experienced huge loss due to poor market research (Haselwanter, Muskat and Zehrer, 2016). From the above discussion has examined that organization has experienced positive and negative impact on the business and it’s business activity. To influence global presence requires to keep deep market research and good financial resources by Asda as resultant will achieve large market share in it’s business sector. Stakeholder Analysis matrix It is a strategic approach that use to determine such people who plays efficient role to bring success within company. It is best approach to understand requirement and expectations of
individuals either internal and external stakeholders. Asda has applied this model in it’s organization to identify it’s valuable stakeholders. This model comprises four elements such as: Meet their needs Government, competitors and customers are external stakeholder of the Asa company that supports to achieve financial profitability. Asda concentrate on customer’s needs and expectation so that can offer such products at appropriate price which influence their purchasing behaviour and brings satisfaction for the product and services (Holotiuk and Beimborn, 2017). Apart from this company conducts marketing campaign as well to aware customer about it’s products benefits and impacts. Thus, company meets government policies. Key player Major key players are investors, staff, suppliers, local communities etc. gives huge contribution to lead success in the business and improves potential of the company effectively. Therefore, Asda plc keeps close relationship with such stakeholders and conducts conference meetings as well to understand their viewpoints for each decision. Thus, company give values to it’s key players. Least important Physical evidence of the company is quite least essential for the Asda rather than others. Show consideration Asda considers team working of management and leaders that supports to influence stakeholders to give outstanding performance in the workplace (Kabue and Kilika, 2016). Such team working shows high consideration in organization’s performance and profitability and operations. LO2 P2 Examine internal environment and capabilities of Asda VRIO Analysis
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It is also considered strategic framework that is used to identify internal resources of company that brings sustainable competitive advantage within business. This framework is applied to analyse internal capabilities of the Asda company. It comprises four type resources such as: Valuable resources The valuable resources of Asda plc are employee, patents, employees, distribution networks and local products supports company to gain competitive edge over the business market. R&D and cost structure are also another resources of Asda that supports to influence profitability and productivity of valuable resources. But such these resources are not considered into valuable resources. Rare resources Financial resources, local food products, patents, employees and distribution networks etc. also considered rare resources that supports to bring sustainable competitive advantage in the competitive market (Kitsios and Kamariotou, 2016). For example, Walmart is the parent company of Asda so it has capability to leverage the information and makes it’s firm vary rare in the business market. While Asda’s employee is highly trained and skilful that supports to achieve all short-term and long-term goals within timeframe which makes company rare. Imitable resources Distribution network, patents are quite effective resources that creates competitive advantage for the business. The reason behind is that Asda has various distribution networks as compared competitors because it is subsidiary of Walmart. Apart from this these networks are quite costly so to imitate it’s products require high cost. Employees are imitable resource of the company that can easily imitate by competitors by offering advanced salary. Organization resources The well-organized resources are financial resource and distribution networks of Asda that supports to expand business as well as demands in customers for it’s products. Patents are
unorganized resource of the Asda plc due to this it does not achieve that level competitive advantage which can be achieved effectively (Loredana, 2016). From the above point can analyse that Asda has such resources like good financial resource, distribution network and employees that brings competitive advantage but if company use patented product before expiry date then it can achieve sustainable competitive advantage in it’s business market effectively. ResourcesValuableRareImitableOrganization Financial resources✔✔✔ distribution networks✔✔✔ Local food products✔✔ Employees✔✔ Patents✔✔ Mckinsey’s 7s model It is another strategic tool that also use to determine capabilities, resources and internal environment of the business effectively. Asda plc follows this model to analyse internal environment of the company such as: Strategy: To influence purchasing behaviour of customer and gain competitive advantage in it’s business market has followed low-cost strategy. Structure: Traditional Hierarchical organization structure has implemented by Asda plc that supports to control on all function units effectively. System: Asda’s management and leaders are worked in team to take effective decision so that brings high profitability and productivity in the business Style: Situational leadership style and administrative management theory follows by leaders and managers of Asda to improve performance of company across the world.
Staff: Management of the Asda company plays number of roles like strategy formation, recruitment,training,motivationandfairtreatmentwillallstaffmemberswhich maintains their wellbeing within workplace. Skills: Asda is a retail company that requires such staff member who posses’ technical skills, effective communication skills then they can give productive customer services to the customers within workplace. Shared Value: Marketing campaign approach is conducted by Asda plc to influence customer awareness about it’s existing products and discounts on season. Thus, company influencepurchasingbehaviourof customersad meetstheirobjectiveby offering desirable products at lower cost. LO3 Porter’s five forces This framework is used to analyse intensity of competition in the business market. As know retail sector has become one of the most successful business markets among others because it leads financial profitability at high level (Omsa, Abdullah and Jamali, 2017). Due to this competition is rising in this sector so it become risky for the retail companies such as Asda to achieve high profitability. So, company uses this model to analyse functioning of the competitors so that it can achieve competitive advantage over their weaknesses. The model comprises five forces that have mentioned below: Bargaining power of suppliers (Low) Due to high availability of suppliers in the UK market has decreased bargaining power of suppliers, so with this opportunity Asda has recruited number of suppliers who have willing to work at low income. Due to high presence of suppliers has replaced some suppliers with new talented and skilful suppliers by Asda so that it achieves high quality products at lower cost. Thus, company enables to sell it’s products and services at affordable price to the customer and generate high revenue on each product. Threat of new entrants (Low) Asda has very less threat of new entrants because there are big four MNC’s company such as Tesco, Sainsbury, Marks and Spencer and Aldi & Lidl has captured large market share on it’s
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certain products (Yuliansyah, Gurd and Mohamed, 2017). So, if any new entrant establishes it’s firm in the UK market so it is mandatory to have strong workforce and good financial resources then it can successfully runs it’s business in the UK market. Apart from this, company requires to sell it’s product at lower cost then can build strong customer base. But it is not possible for the new ventures because this strategy already has implemented by Asda, Aldi & Lidl. Thus, new entrants cannot sustain in the market for long time. Degree of Rivalry (High) Competition in the retail sector is too high because there are lots of companies who sells similar products like Asda as well as operates it’s business in similar location. So, Asda have to face high price cut throat competition in the business market. Such competition has reduced selling revenue of Asda because other companies like Lidl and Aldi sell it’s product at 50% discount. Thus, company currently faces huge financial loss on it’s product. Bargaining power of buyers (Medium) Retail sector is quite broad in the UK whereas various large firms like Tesco, Primarkhave already achieved large market share on it’s product and services in the UK market and posses similar products like Asda. High presence of supermarket companies with similar products has increased bargaining power of customers. But Asda already sell it’s product at lower cost as compared others so it does not have to face bargaining issue.With low-cost strategy company generate high competitive advantage from it’s competitors and has built strong customer base. Threat of Substitutes (High) Threats of substitute is quite high in retail sector because there are lost of companies like Primark, Waitrose are quite innovative company but still does not capture large market share in the UK. So to achieve large market share and become market leader can introduce new product with good quality by Primark and Waitrose (ÖNEREN, ARAR and YURDAKUL,2017). So, Asda needs to concentrate on it’s R&D department so that it helps to brings advancement in the existing products then it can stay in the business market for long time.
LO4 P4 Strategic planning Strategic planning is referred to the process of giving strategic direction to the business. Management of the Asda plc uses different strategic tools and techniques to run it’s strategic planning effectively. Porter’s generic strategies Cost leadership Strategy It is a effective strategic option that supports organization to become market leader and gain competitive advantage. According to the strategic option company must sell it’s product at lower cost then it can enable to gain competitive advantage. It also allows to build string customer base by offering product at lower cost. Differentiation Strategy It is another effective strategic option of the porter’s generic model that allows organization to gain unique position in the business market with the support of innovative activities. The main goal of the strategic option is to differentiate brand and it’s product to the customer. In the strategic selection organization has option to invest huge capital in the R&D activities which helps to influence quality of all existing products and also helps in introducing new products in the business market. Thus, this strategy assist business in achieving effective success in it’s market. Focus Strategy It is the combination of differentiation and cost focus strategy that supports small-scale business to achieve high profitability in it’s local market. In this strategic choice company allows to gain competitive advantage by offering several products at lower costs. In addition, it also supports company to differentiate it’s brand image among others at local level. With the implication of such strategy option company enables to bring high financial profitability as well as competitive advantage at the local level.
From the above discussion about strategic option can be analysed that Asda Plc must follow differentiation strategy because it helps to build global presence in the market. Hybrid strategy Such strategies are organized to achieve competitive advantage in the business market. This strategic option supports organization to become highly competitive in it’s market. Hybrid strategy helps company to select only strategic option whether differentiation or cost leadership strategies (Zincir and Tunç, 2017). It suggests organization to implement only particular strategic option to generate highly competitive advantage instead of two strategic option. With the support of hybrid strategy, Asda can go for cost leadership strategic option whereas it can sell it’s products at affordable price that will bring competitive advantage in it’s market. On the other hand, company can go for diversification that directs company to invest funds in R&D activities that will improve quality of existing products as result will enable to achieve competitive advantage as well. Bowman Strategy Clock This model is famous as bag of the strategies because it comprise various strategic option which organization can implement accordingly market situation. Strategies are: Low price:In this strategy choice organization sells it’s goods and services at lower cost. Asda can introduce eco-friendly products at lower that will improve selling revenue of products as well as brings highly competitive advantage in the business.Hybrid:It is another strategic choice that directs Asda to follow only a strategy either differentiation or cost-leadership.Differentiation:It is another effective strategic option that permits company to increase quality of existing products with the high supports of R&D activities.Focused differentiation:Company implement such strategies based on the requirement and expectation of niche users.Risky high margins:This strategy is quite aggressive as compared others because this allows company to increase price of the product to generate high profit margin. It is risky strategy as well because it can direct impact selling revenue of the product due to hike price in the market.
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Monopoly pricing:This strategy is followed by company to provide it’s product and service to run monopoly in the business market.Loss market share:This strategy allows organization to set reasonable price of the good and service which can attract customer to buy such product and services. Strategic marketing plan Aim To improve 25% sales hike. To gain high competitive advantage in the business market. Objectives Specific: The major aim of the Asda plc is to increase growth in selling revenue for gaining highly competitive advantage in the retail sector. Measurable: High growth of selling revenue can be measured precisely. Achievable: High growth of market share can be achieved. However, company has gained 25% sales hike in last year. Realistic: To gain high growth in selling revenue is the realistic goal of the business. Time frame: Asda has goal to achieve it’s target effectively within a year. Marketing Mix Product: Asda is a supermarket company that already have wide product line and services that supports to attract and influence customers to buy it’s products effectively. Price: It follows low pricing strategy that supports to gain competitive advantage. Place: It offers it’s product and services more than 27 countries across the world. So, it is quite easy to build large customer base in other markets as well. Promotion: Traditional and digital both strategies follows by Asda to promote it’s products in the business market. Strategic formulation There are numerous strategies that will be implemented by company in this strategic marketing plan. R&D: Asda must conduct aggressive research in existing product development and
newproductdevelopment.WhereasR&Ddepartmentassistcompanyin implementing differentiation strategy for the advancement in existing products. Employees Training: It is another strategic option that will support to make it’s workforce strong and highly competent in the workplace (Razak and et.al., 2016). With this strategy company can achieve all long-term and short-term goals within timeframe. Motivation: With this strategy company can stay motivated it’s staff towards differentiation strategies in the business. Implementation Corporate strategic manager of the Asda plc delegates number of tasks into different teams for such campaign so that individual team perform their responsibilities precisely. 360 feedback strategy approach helps to follow all strategies related to marketing plan in the workplace. Control and evaluation Asda control and evaluate all strategic options that have implemented in this plan with the support of talent management team (Tukdeo, 2016). Timeframe This strategy will follow for one year only. CONCLUSION This report has summarized impact and influence of macro environmental factors on the organization’sperformance,profitabilityandbusinessactivitythroughdifferentanalytical models such as stakeholder analysis matrix, pestle analysis and Ansoff’s growth factor matrix. VRIO model and Mckinsey 7s model used to evaluate internal environment of the company. To analyse competitive environment of Asda applied Porter’s five force model in this report. in last this report has been concluded business marketing plan of Asda.
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