Analyzing ASDA's Market Position and Strategic Options

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UNIT 32 BUSINESS STRATEGIES
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Contents
Introduction................................................................................................................................3
TASK 1......................................................................................................................................4
1. Carry out an environmental audit for the company incorporating PESTLE analysis and
Porters five force analysis......................................................................................................4
2. Using your previous analysis describe the position occupied by the organisation in its
particular market (e.g. the retail market for Asda) in terms of, for example, size, growth,
profitability, market standing, product development, potential.............................................7
3. Consider why it is important to carry out external analysis when developing a business
strategy using your chosen organisation as a reference.........................................................8
4. Critique and interpret your findings to recommend valid strategic directions which will
inform planned objectives and tactical actions to be developed further in assignment 2......9
TASK 2....................................................................................................................................10
1. Examine what you consider to be the core values of your chosen organisation. What...10
2. Is there a vision for the company? Is there a Mission Statement?...................................10
3. What are the objectives of your chosen organisation at the present time? How do you
think the stakeholders in the company have shaped these objectives?................................11
4 Carry out an organisational audit using some techniques such as SWOT, value chain
analysis, BCG growth-share matrix, McKinsey 7S.............................................................12
Conclusion...............................................................................................................................14
Reference.................................................................................................................................15
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Introduction
Macro Environment includes the unmanageable factors that are majorly external, and still
manage to influence an organisation’s decision making. They have an overall effect on the
organisation’s performance as well as strategies. These factors mainly include technological
changes, demographics, legal as well as political and social conditions etc.
These factors certainly do have a notable impact on the success of the campaigns and thus
considering these will improve the standing as well as the reputation of the brand in the long
term. While consumer staples are less affected by these, they have a major influence on the
cyclical industries.
ASDA is one of the UK's largest Supermarket chain that sells basic merchandise, electronics,
clothing as well as food along with a plethora of other things. In 2014, according to the
Kantar World Panel, it held a 17.2% market share in the UK. Later in 1999, It was purchased
by the US Public Limited Company, Wal-Mart. Recent news has talked about a possible
merger between Sainsbury and ASDA.
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TASK 1
1. Carry out an environmental audit for the company incorporating PESTLE
analysis and Porters five force analysis.
ASDA is currently standing in the economy to scrutinise the importance of taking macro
environmental factors into consideration, PESTLE analysis with reference to ASDA, Porter’s
Five FORCE Analysis and ASDA’s Market position to draw up a conclusion as to why
external analysis in context with business strategies is important (Aithal, 2016).
PESTEL Analysis
PESTEL Analysis is one of the most important frameworks used by strategic planners to
study in depth, the macro-environmental factors that influence as well as affect business.
PESTLE stands for Political factors, Economic factors, Social factors, Technological factors,
Legal factors and Environmental factors. Below is the PESTEL analysis for ASDA in the
context of the UK:
1. Political factors: National and international directives as well as regulations,
legislation, taxes etc. definitely have an impact on ASDA, just like any other business.
The UK, as a whole, has a relatively stable political environment, and hence ASDA
benefits from it. In the European markets as most of the trade barriers have been
removed, ASDA has a good opportunity to expand.
2. Economic Factors: Just like every other economy, economic factors are one of the
main reasons behind the progress and collapse of the UK `economy. The recession
that hit the UK economy in 2008 had many businesses struggling, in spite of it, this
recession was said to have favoured ASDA, as stated by the Daily Mail and Murchie.
It was because the company increased its revenues, because the customers who
usually shopped at other high-end brands, were left without a choice and were forced
to opt for the cheaper products provided by ASDA. It was later in 2014, when for the
first time in 5 years; the average pay rose to the extent that it was more than inflation,
that the economy faced a possible upturn. ASDA figured out a way to concur these
inflationary pressures by working towards minimising operational cost. Thus it has
been paying attention to the economic factors and making significant changes in its
policies to consider the economic factors.
3. Social Factors: Social factors like, a population that is ageing, celebrity following and
a healthy lifestyle are important for ASDA. As consumers have become more and
more informed, there is a striking rise in the demand for organic foods, implying that
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ASDA needs to ensure that they provide organic goods in order to meet the dynamic
needs of the customers. Initially, ASDA was considered to be a working middle-class
supermarket compared to the upper-class stores like Marks & Spencer, but much has
changed due to the global recession. In this era, as consumers are more concerned
with product prices, it works out in ASDA's favour as it is providing low cost for
high-quality products.
4. Technological factors: ASDA had easily widened its access to a range of products by
inhibiting both the ‘Click and Collect' program and as well as the online shopping
facility. It too has to like any other brand, adopt various technological innovations to
stay ahead in the game.
5. Environmental Factors: With Wal-Mart wanting to sell ASDA, and the constant news
of mergers between the two top supermarket brands to improve their margins, it is not
a surprise to see that there will be a well-maintained pressure on the suppliers thus
creating unrest. There is a lot of instability caused by the proposed merger and it
points towards a price war among the brands in the grocery market (Bull, et al., 2016).
6. Legal Factors: ASDA has to abide by the rules and regulations of the country in
which it operates. For instance, in the UK, ASDA cannot pay an employee less than
the minimum wage. Similarly, they cannot dismiss an employee without a fair reason.
They must ensure they abide thoroughly by them to avoid being fined.
Porter’s Five Force Analysis
Porter’s Five Forces is an extremely useful and powerful tool for analyses required to
understand the competitiveness of the business market and environment and the right strategy
that ensures profitability. The five forces include- Competitive rivalry, bargaining power of
buyers, and bargaining power of suppliers, Threat of substitute products and the threat of new
entrants.
 Competitive Rivalry: When rivalry is extreme, the companies resort to aggressive
price cuts and high impact marketing campaigns or even mergers. ALDI and LIDL
are two supermarket chains with similar prowess, i.e. they offer good quality of
products at a less price, are two of the biggest competitors of ASDA. However, ALDI
and LIDL, have a very limited variety of products as compared ASDA. The
competition though, seems to be still on a high as the UK market is reaching its
saturation. When it comes to rivalry in terms of market share, Tesco and Morrisons
are some of ASDA’s rivals but with the planned merger ahead we need to wait and
watch the dynamics change.
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 Bargaining power of buyers: The ASDA customers make purchases as individuals in
small quantities as compared to the buyers that buy in bulk and can have an impact on
the seller’s sales terms. From the perspective, the ASDA buyers have said to have low
bargaining power.
 Bargaining power of Suppliers: ASDA’s suppliers are said to have low bargaining
power, as products are supplied according to various different supermarket terms. The
bargaining power is supposedly high usually in situations where there are only a few
suppliers in numbers.
 The threat of substitute products: ASDA has a threat from various convenience stores
commonly known as corner shops, and shops that sell products at a low cost without
licenses. However, the threat is considered to be low since they do not provide a wide
range as compared to ASDA and customers need to frequent supermarkets like
ASDA, to fulfil their requirements.
 The threat of new entrants: In reference to ASDA, the threat caused by new entrants is
relatively low as it would require any entrant a huge capital investment as well as a lot
of time to build up and establish a presence in the market as well as to be placed in the
same league as ASDA.
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2. Using your previous analysis describe the position occupied by the organisation in its
particular market (e.g. the retail market for Asda) in terms of, for example, size,
growth, profitability, market standing, product development, potential.
 Size: ASDA is one of the largest retailers in the UK, one of Wal-Marts’ largest
subsidiary since 1999. ASDA has around 321 stores in the UK and North Ireland,
around 29 depots and almost 148,000 colleagues.
 Growth: ASDA has always been on the top radar, but if the merger goes ahead, the
new chain will be one of the largest even overtaking Tesco.
 Market Standing: ASDA owns about 15.3% of the market shares in the UK, grocery
market. There is a proposed merger between ASDA and Sainsbury.
 Product development: ASDA benefits from its parent company’s technological and IT
prowess. ASDA has seen an increase in the involvement of their colleagues with the
local communities to raise money to help out charities. This involvement has helped
ASDA to improve its mission, purpose and values (Dobbs, 2014).
 Potential: The merger with Sainsbury is a desperate attempt of both the companies to
maintain their margins. Their proposed merger might be able to help them allocate
£1.6 billion and allow them to make their customers happy by giving £1 billion
savings to customers.
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3. Consider why it is important to carry out external analysis when developing a
business strategy using your chosen organisation as a reference
ASDA has and will continue to face significant changes due to macro environmental factors.
As the competition rises, ASDA no more is the only supermarket providing products at the
cheapest prices. Online markets have seen a major increase and are becoming popular with
the masses due to busy schedules. Due to these changes in the external environment, ASDA
needs to develop and come up with new innovations and strategies to retain its customers and
survive in the market. Along with focusing on their core competency to provide a low cost
for good quality goods, they need to still keep in mind the diverse effects of these external
forces (Fleisher and Bensoussan, 2013). Though they have used the technical support from
their parent company for technological advancement, it has been noted that Tesco has been
the market leader since the beginning in the retail supermarket, with so many options to
choose from and so many stores to visit, customers have become less loyal. If looked at from
that perspective, ASDA needs to implement a clear business strategy that will ensure that it
takes the lead in future and distinguishes its stores from the others.
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4. Critique and interpret your findings to recommend valid strategic directions which
will inform planned objectives and tactical actions to be developed further in
assignment 2.
Due to the constant changes in the market, be it environmental or political, ASDA has to
come up with new strategies that help them survive the competition without actually giving in
by reducing the prices to the extent that they swim in only losses. Since they tend to produce
a wide variety of products, they should pay attention to their flexibility and make certain
innovative changes with time (Vigani, et. al., 2015). They can branch out to bigger mediums
like entertainment and theatres to create a better standing in front of the public. The
upcoming merger would be a good step in ASDA's future as a whole as it will be taking over
the competition, but it can turn fatal if the company loses sight of what is their initial mission
and vision. It still needs to improve the quality of its products and much is needed to be done,
if it wants to retain the new customers that it’s managed to win over.
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TASK 2
1. Examine what you consider to be the core values of your chosen organisation. What
Influence would these have on the company’s strategic direction?
ASDA up until now is still very much a part of Wal-Mart family; their core values consist of
goals that they use to guide their work.
 They make sure they are supplied by 100% renewable energy.
 Their main and most important goal is to minimise waste.
 Production of goods that play a role in assisting people and the environment.
2. Is there a vision for the company? Is there a Mission Statement?
Vision Statement of ASDA
ASDA’s vision is to strengthen its place in the market by expanding at a quicker rate. If its
plan with the Sainsbury merger is considered, it might overtake and rule the market along
with its merging partner. ASDA also has an aim to create as many jobs as possible by
opening new branches and stores which will in turn increase their profit and double the jobs
in the market while reducing the unemployment rate.
Mission Statement of ASDA
ASDA has been set up on a mission since the start with it being – ‘To be Britain’s best value
retailer exceeding customer needs always. The purpose of this statement is to provide high-
quality goods to everyone at a more affordable price.
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3. What are the objectives of your chosen organisation at the present time? How do you
think these objectives have been shaped by the stakeholders in the company?
ASDA seems to have objectives which ensure that every colleague, team, manager and
department make it a point to respect every single human being, they undertake the aim to
deliver excellence and serve their customers with the utmost loyalty.
The people that are affected by every decision of the firm or organisation are referred to as
the stakeholders (Fozer, et. al., 2017). There are two types of Stakeholders-
 Internal- The ones that are included within the organisations.
 External- The ones that are related to the organisation and exist outside it.
They all mainly consist of all the people who purchase, supply and hold a certain number of
shares of the company.
Events such as raising amounts to support Breast Cancer and encouraging blood donation are
some of its attempts to motivate their stakeholders. Many such and more programmes are
managed by ASDA to draw in stakeholders and maintain their trust in ASDA. With this the
customers gain a whole lot of advantages, a recent survey/campaign by ASDA called ‘We’re
Listening’ suggests, the colleagues felt that, working for ASDA was more than just a way of
income but also working towards helping others. This means, they were willingly ready to
achieve their targets and have the full freedom to work towards it without being forced or
coerced into doing it (Igliński, et. al., 2016). When Internal Stakeholders feel important and
valued, their efficiency increases and the company always profits from increasing efficiency,
which manages to keep the external stakeholders happy.
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4 Carry out an organisational audit using some techniques such as SWOT, value chain
analysis, BCG growth-share matrix, McKinsey 7S.
SWOT Analysis is the study of an organisation, to find out its internal strengths and
weakness, while at the same time keeping in mind the external forces/ opportunities and
threats that it can or already does face.
It helps evaluate an organisation and in finding out the right strategy to maintain its
competitive position or enhance it. ASDA’s strengths, weaknesses, opportunities and threats
are as follows-
 Strengths: ASDA's capacity to deliver over a wide geographic region is one of its
biggest strengths. ASDA not only delivers good quality products at a low rate but also
pays attention to the efficient delivery of the same. It already had made its mark in the
grocery market and has been maintaining a leading position. Paying attention to every
detail and trend in the market, ASDA tries to change its products according to the
need of the people. Strong parent company being Wal-Mart is of help to increase the
business (McDONALD, 2016). One of its major strength is always being in contact
with the stakeholders and its customers, through the means of networking sites, which
helps them to stay at the top with the problems, faced by them and correct them.
 Weakness: As compared to its competitors, ASDA has a restricted global presence.
The competition is at its peak in the UK market and the declining revenue of ASDA
does not help its case.
 Opportunities: ASDA definitely has opportunities to look forward to, by upgrading
their online services, which will allow them to bring new things to the table for the
customers and meet their ever-changing preferences. As customers are becoming
more and more informed and are willing to try out new things, it leaves ASDA with
an open market to try out new innovations and experiment with their products (Moro
Visconti, 2016). As the market is seeing an increase in the regulations put forth by the
government, they are not making it easy on the local players in the market that do not
have a strong brand name yet and hence ASDA has a chance to win over these
customers too. ASDA is already expanding in every area possible, be it opticians or
even pharmacies. They are slowly trying to enter the growing markets like India as
well as China.
 Threats: Competitiveness in the industry is at a full time high, with every brand trying
to deliver at a cheaper rate. One of the major threats that surround ASDA strategies is
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