Faculty of Design: ASDA Innovation Strategy Report and Analysis

This report provides a detailed analysis of ASDA's innovation strategy, examining its historical development, current performance, and future prospects. It begins with an executive summary outlining the key objectives, which include understanding ASDA's year-wise innovation, its importance for business sustainability, and the role of management in leveraging market opportunities. The report delves into ASDA's innovation history, from its early beginnings to its expansion and collaborations. It assesses ASDA's existing innovative capabilities, including its online platform, merchandise centers, and customer-centric approaches. The analysis further explores the industry trends in 2016, highlighting the challenges ASDA faced due to increased competition from rivals like Aldi and Lidl, and the impact on its market share and profitability. The report concludes by emphasizing the importance of innovation for maintaining a competitive edge and ensuring long-term business sustainability in the retail sector, including the need to adapt to changing consumer preferences and market dynamics.

Running head: FACULTY OF DESIGN, MEDIA AND MANAGEMENT
Faculty of Design, Media and Management
Name of the student
Name of the university
Author’s note

1FACULTY OF DESIGN, MEDIA AND MANAGEMENT
Executive Summary
The project aims at studying the various aspects of innovation strategy taken by a company. It
aims at deep analysis of the year wise innovation by ASDA. It throws light on how innovation
strategy is important in maintaining the sustainability of the business. The industry trend has
been studied to see the role of management in innovative business strategy and how they use the
market opportunity. It concludes that the success and sustainability of the business depends on
how an organization adopts innovation to the business.

2FACULTY OF DESIGN, MEDIA AND MANAGEMENT
Table of Contents
Introduction......................................................................................................................................4
Discussion........................................................................................................................................4
ASDA and its innovation history.................................................................................................4
ASDA’s existing innovative performance and capabilities.........................................................6
Industry in the year 2016.............................................................................................................7
Conclusion.....................................................................................................................................10
References......................................................................................................................................10

3FACULTY OF DESIGN, MEDIA AND MANAGEMENT
Introduction
Innovation is a key element for any type of retail organization. It helps the company to
gain a competitive advantage over competitors. The innovation strategy of the business involves
generation of new ideas, concepts and processes. Company uses such ideas to improve the
existing business strategies. Innovation helps them to develop a support system to sustain the
sales of the business. Company gaining the competitive advantage through innovation assures
the sustainability of the business. The role of innovation in the sector of super markets is
significant. It shows the performance of the business for the long run. The expansion of the
business depends on how the company uses the market opportunities through innovating its
business strategies. The main work of an innovation team is to always analyses the market recent
trends and then develop the new products, any change in the existing system for designing a
marketing strategy.
Discussion
ASDA and its innovation history
ASDA is a company which has a long history of innovation since 1920. A Asquith family
used to run the business of meat. They were not a normal and satisfies business men who get
satisfied with one store. The innovative mind helped them to expand the business to other local
areas. In the year 1963, the family did another business innovation which was conversion of the
Queens cinema into a super market in Castleland. The business was further extended to more
stores. In 1965, it collaborated with Associated Dairies and connected its butcher shops to the
supermarket (Seyfang 2008). The Associated Dairies and the Asquith supermarket got merged
and the company came to be known as ASDA in the year 1965.

4FACULTY OF DESIGN, MEDIA AND MANAGEMENT
ASDA launched many supermarkets which were larger than the previous super market. It
also united with the Government Exchange Mart. Thereafter it acquired Leeds and Nottingham.
This was ASDA’s first outside the city operation. Its innovative skills were so innovative and
result oriented that within few weeks of operations, GEM’s sales increases by 100 times the
production which was used to be produced earlier (Dedaj 2017). In 1980, it incorporated many
business ideas into its business operation. It started selling petrol from its overseas store that is
GEM at a much discounted price (Charoen et al. 2016). This was made possible by ASDA when
it made a deal with NAFTA which is also a oil company. ASDA was not a store which was
going to stop after a little expansion. It again stores in the country’s like Phymouth, South wales
etc. (Benson, Murray and Taylor 2019).
The strong innovative and opportunistic business strategy helped company to take over
carpet retailer allied carpets. The continuous growth of the company can also be credited the
efforts of its managing director who named was Williams. He continuously served the company
for 10 years. John Hardman was also a renowned name for ASDA and its users. After his
appointment as managing director, the company attempted a new business strategy by launching
its own brand (Ghaffari et al. 2017). It started a new physical distribution channel which includes
starting a new warehousing facility. It wanted its new brand to be a successful. Therefore, it
launched its branded products at a very reasonable price and also focused on the quality of the
products so that customers can get a quality good at a low price. It added a competitive
advantage to the company. Further, the company entered into apparel industry in 1989 and
started a partnership with George Davies. In 2014, it became successful in receiving an award of
‘community retailer of the year’. Some of the opportunities and innovative approach of the
company are retail price maintenance, low cost stores and super market (Mortimer 2017).

5FACULTY OF DESIGN, MEDIA AND MANAGEMENT
ASDA’s existing innovative performance and capabilities.
In the year 1999, Walmart take over ASDA which was already a successful entity in creating
a huge customer base which was around 200 million in numbers. Walmart benefitted a lot from
ASDA as its performance in the market continuously improved. ASDA introduced online
platform for setting its grocery items and also started some of its new private brands. In 2009,
with the help of IPL, it introduced new merchandise centers which sold products like wines,
olives, flowers and other fresh products. This strategy helped the company to avoid the
involvement of the middlemen and make the availability of the goods at reasonable prices.
‘Chosen by you’ launched by the company to deliver customers a quality product at reasonable
price.
All the employees of ASDA including the managers follow some of the key behavioural
aspects to connect to the customers. They try to provide the best services, ensure the work to be
conducted with integrity and fairness. They always try to improve the existing product to achieve
excellence.
One of the key functions of the organization is staffing. It selects those candidates who are
talented and best among the group of candidates selected for screening purpose. HRM engages
itself in continuous screening of the organization’s requirement so that any sudden vacancies can
be filled as soon as possible by the best candidate. Internal audits are prepared to know the
requirement of the human resource. The company studies the tastes and preferences of the
consumers by conducting surveys at regular time period. ASDA leaders try to focus on
maintaining the ethical values in conducting the business operations and utilizes the market
opportunity in such a way that can be beneficial for all.

6FACULTY OF DESIGN, MEDIA AND MANAGEMENT
The Audit management of ASDA shows that the managers promote the communication so
that new ideas may reach to the management. Respect, pride, fairness at work, are the key pillars
on which management team of ASDA stands.
A new benchmark was created by ASDA in the year 2010 which created a low pricing trend
for the company. The number of ASDA operational stores increased to 180 in 2011. It was made
possible by purchasing the Netto store which provided many small stores at one place to cater to
the diversified needs of the consumers. The company launched the George merchandise in 2012
and sold the products globally which helped in increasing the sales revenue. The supply chain
was also improved by acquiring GAAT which helped the company to easily reach to group of
customers. The GAAT help in designing a middle division between merchandising center and
the stores.
Industry in the year 2016
The market share of ASDA declined in the year 2016. The percentage of decline was
11.5% approx. the company faced a tough competition from Aldi and Lidl, who have adopted the
aggressive pricing strategy and discounting model. The competition in the sector remained high
and ASDA as a super market faced tough competition and faced difficulty in repositioning itself
(Ouma 2018). The year 2016 became the company’s least profit generating financial year. The
profit of the company declined to a significant extent. The top competitors of ASDA are Tesco,
Ocado and Waitrose & partners (Di- Minin 2016). From 2015 ASDA’s strategy of low pricing is
not attracting customers to a similar extent as previous financial years. The reason behind the
low performance is the adoption of the same strategy by the competitors also (Mussa and Zhang
2016). The low pricing strategy is no longer a competitive advance as competitors are also

7FACULTY OF DESIGN, MEDIA AND MANAGEMENT
selling the products at similar prices. In addition, the company is unsuccessful in maintaining the
premium quality at the reasonable pricing (Tidy, Wang and Hall 2016).
ASDA need to look at some factors that how it can make the customers connected to the
business. The consumers want a brand story. Whenever they see ads of products, they must feel
the connection (Etriya et al. 2018). They must feel that the investment of the money is going to
give them a smile and they will realize that they are investing not in a product but for a
meaningful cause. While defining the brand story, company must ensure that the story does not
matches the story of another business because innovation and newness is the only thing from
which a customer can be attracted to a product or service (Costa Font and Revoredo-Giha 2018).
ASDAS group performance was declined as the revenue of the company declined. The
market share of the company was greatly damaged and it fell from from the 16.6 to 15% approx.
the detailed analysis of the financial data shows that the ASDA sales were improving but
improving at a very lower rates than its competitors (Kohnova and Papula 2017). The financial
reports of the company shows that that the sales has increased only by 0.5% while the operating
profit of the company decreases by 13% (Mortimer 2017). The report shows the all over
performance of the distribution centres, online operations, merchandise and clothing business,
etc. the strategin planning of the business was to lower the price and increasing the quality of the
product and service. The cash flow of the supermarket shows net cash inflow of 309 euros
(Zaefarian et al. 2017).
One of the reason why the company fails to connect a story in the brand ads is that the
lesser allocations of funds to the marketing department. Walmart is decreasing its cost of
marketing in the year since 2015. Murray, the chief operating officer of the company should try
to connect the creativity and media at the same time. ASDA to gain its market share need to

8FACULTY OF DESIGN, MEDIA AND MANAGEMENT
focus on the fact that the customers are more attracted towards online stores now. The physical
platform and the online platform should together be considered while developing an innovation
plan.
ASDA wanted to defeat its competitors in the year 2016. It works on many customer
satisfaction and demand fulfillment options. The company changed its IT approach by looking at
the need of digitalization of the current era. The company started focusing on the need of
advanced software to provide better services to its customers via e-commerce platform.
By looking the factors discussed above, company make investments at the end of 2016
which led to a reduction of operating profit again. But the decision was fruitful. In the year 2017,
ASDA won the Grocer Magazine’s Grocer 33 price award again like previous years. In the
fourth quarter of 2016, ASDA was successful in increasing the sales by 1% (asda.com 2017).
The company was successful in leaving its imprints on customers and it made the
company wins the quality food awards in the year 2017.
The conduct of innovation strategies can only be successful when an internal
management can employ the strategy successfully with the help of proper planning, organizing
and decision making. The company should never forget the core competency through which it
has been successful over the years. They must try to improve it only. The success of an
innovating strategy depends on how the organization utilizes the market information and the
existing resources of the company in getting success in the new business strategy developed.
Adoption of suitable strategy is important for making an organization successful in implementing
any innovative plan.

9FACULTY OF DESIGN, MEDIA AND MANAGEMENT
According to Peter F Drucker, for supermarkets like ASDA there are seven sources of
innovation which are listed herein below: Unexpected, Incongruity, market Structure, Necessity,
Demographics, Changing perception, New Knowledge. The following is the table which shows
comaprision of ASDA with one of its competitors in the industry. The comparision will explain
the different approaches of the company to be a successful leader in the market.
Basis of comparison ASDA LIDL
Products There are different supermarkets
Selling range of groceries of various
Brands. ASDA has living stores which
Sells range of non-food items
including merchandise. It has also
petrol filling stations. It also provides
facilities of online shopping through
mobile apps (Lu 2019).
It sells products through
marketing channels. The first
one is selling through online
websites. The second is
selling to wholesalers and
then whole sellers sells it to
retailers. The products of
LIDL incudes fresh fruits,
vegetable, food, household
products, groceries and
healthcare products (Keum
and See 2017).
Operating cost and the
operating income
The operating profit of the ASDA
stood at £803.2m with YOY increase
of 9.2% in december, 2018
(www.corporate.asda.com 2019).
The operating profit of the
ASDA stood at £1.951
billion in 2018.
Exclusive brands Good for you is the brand exclusive Although it is more than 200

10FACULTY OF DESIGN, MEDIA AND MANAGEMENT
brand, which is the successful
innovation of ASDA (Kaelberer
2017).
brands sold by LIDL, most
exclusive brands such as
Oaklands products are
successful selling products.
Pricing strategy ASDA has a wide range of products,
and thus it follows a low pricing
strategy due to mass selling. The
customers purchase products of ASDA
in large quantities, so the brand
focuses on low pricing model (Gunduz
and Alfar 2019).
It focusses on penetration
pricing. It means the
company concentrates on
discounting and low pricing
but selling more quantities of
product.
Industry focus The company focuses on the long term
objective with its mission statement. It
aims to be the best value retailer and
making goods available at affordable
prices to its customers.
The focus of the company is
to become one of the biggest
discounted superstores. The
strategy of the company is to
open new stores and cover
more market share (Menary
2018).
Structure It is a subsidiary of Walmart, ASDA is
getting IT support and research and
development support from its parent
company. The structure of ASDA
changed when Walmart acquired it.
The company shows
decentralized structure. It
shows the presence of
different departments at the
head office structure and at

11FACULTY OF DESIGN, MEDIA AND MANAGEMENT
ASDA do not show the flat structure.
It follows the decentralized structure
with the presence of different
hierarchy and departments.
the regional offices. LIDL do
not show the flat structure.
Responsibility of the
manager
The managers are responsible for
making strategic decisions and also
takes the initiative to provide training
and skills to other employees so that
they can participate in all-round
development of the company.
The managers of LIDL are
mostly giving instructions to
lower-level employees. The
superior-subordinate
relationship exists in the
company. The top managers
are responsible for making
decisions concerning the
operations and innovations
of the company.
staff ASDA employs around 10000
employees on an average every year
who are qualified and have the
required skills and knowledge.
Rewards and recognition are present to
motivate the employees to work
together with the management
(www.corporate.asda.com 2019).
The company focusses on
employing staffs which can
work overtime and according
to the instructions of the top
managers and leaders. Less
participation of employees
for sharing feedback is seen
in LIDL.