Comprehensive Strategic Report: ASDA's Environment and Capabilities

This report provides a comprehensive strategic analysis of ASDA, a prominent supermarket chain in the UK. It begins by examining the macro environment using the PESTLE framework, covering political, economic, social, technological, legal, and environmental factors impacting ASDA's operations. The report then applies the Ansoff growth matrix to identify suitable growth strategies, recommending market penetration. An in-depth analysis of ASDA's internal environment and capabilities is conducted using SWOT analysis and McKinsey 7's model, highlighting strengths, weaknesses, opportunities, and threats. Finally, Porter's Five Forces model is applied to assess the competitive forces within the industry. The report concludes by emphasizing the importance of understanding both internal and external environments for developing effective business strategies for future growth and success.

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Table of Contents
Introduction.................................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1) Apply suitable framework to analyze the influence of macro environment of given organization....3
TASK 2..........................................................................................................................................................6
P2) Discuss internal environment and capabilities of a given organization.............................................6
TASK 3..........................................................................................................................................................9
P3) Apply Porter’s five forces model......................................................................................................9
TASK 4........................................................................................................................................................10
P4) Apply range of concepts and model and theories............................................................................10
Conclusion.................................................................................................................................................13
References.................................................................................................................................................15

Introduction
Business strategy refers to the plans and policies that are structured by the company in order
to ensure success in future period of time. Main aim of business strategy is to attain the set vision
of the company by putting significant efforts in an efficient manner. It is considered as a source
of competitive advantage which improves the value of brand in market place. Additionally
Business strategies can be related to internal and external environment that allows a company to
make efficient use of available resources in order to set a unique identity. For this purpose, it is
important to forecast the future conditions so that company can prepare suitable strategies
accordingly (Kouamé and Langley, 2018). For current report, ASDA is taken into consideration
that is a well-known supermarket organization of UK. It offers general merchandise and
groceries. The company was discovered in 1949 and currently working in the different domains
such as finance, groceries, clothing and more. The report will cover a detailed analysis of macro
environment using different tools such as PESTLE, Ansoff matrix and more. Further there are
suitable models have been applied in order to identify internal capabilities of the firm. These
tools include SWOT analysis, VRIO analysis and more. Further, five forces of Porter’s five force
model have also been included in the present study. At end, it will cover various tools and model
to understand the internal and external environment of the company. Moreover, the report is
based on the analysis of business strategies for future growth and success.
TASK 1
P1) Apply suitable framework to analyze the influence of macro environment of given
organization
Macro environment is the combination of different set of conditions which are present in
the economy as a whole. It is not related with a particular sector rather affect the entire economy
in an efficient manner. In macro environment, ample of elements are included such as inflation,
GDP, employment, spending and more. It also includes the factors such as Political, economical
and social conditions of a company. In addition, macro environment put a profound impact on
business. However, it is not possible for the company to anticipate and control such elements.
The impact of macro environment can be understood with the implication of suitable model. In
context of ASDA, pestle analysis of the organization is mentioned below:

Political Factors: These factors have association with government rules and regulations
that demonstrate the control of government authorities on a particular industry. Government
regulations have major impact on the functioning of the organization (Klychova and et. al.,
2019). In context of ASDA, it is working within a stable political environment with fewer
probabilities of change in the existing legislations. Positive assistance of government helps in
improving the efficiency of the company which will increase in the level of profitability and
enhance the customer satisfaction. Sudden modifications in government rules will bring
uncertainty in the business environment.
Economical Factors: It is related with the elements that affect the way in which a
company price its product in order to sustain in the current economy. It comprises different
elements such as demand, supply, cost and other such elements which are related with the
economic condition of a company. In reference of ASDA, they are affected with the ongoing
economic condition of UK. The current pandemic has a direct impact on sales and revenue of the
respective company. Here, proper understanding of economical factors help in preparing suitable
strategies for success of the business entity. On other side, uncertain economic event such as
COVID-19 can easily affect the current operations of the organization.
Social Factors: There is focus on understanding the needs and requirements of customers
so that company can offer them product accordingly. In reference of ASDA, they ensure to
produce products as per the current market trend so that they can satisfy the customers
effectively. In addition to this, understanding of recent market trends will help the organization
in meeting with the preferences of customers in an efficient manner. If company cannot meet the
expectation level of customers, it will directly affect their market reputation.
Technological Factors: This factor signifies the technological development and
advancements in current market. Technological advancements put a positive influence on the
company and help in facilitating enhancement (Shaulska and et. al., 2021). In context of ASDA,
they embark new and unique ways of working to offer different & innovative products to
customers. In addition to this, technological development helps in getting an edge on competitors
in market. On other side, company needs to spend huge amount in order to foster innovation at
work place.

Legal Factors: These factors are associated with rules, regulations and compliances
which are structured to maintain smooth functioning of business. Here, the regulations are
structured by the higher authorities to regularize the industry and its functions. In context of
ASDA, they need to follow different laws in order to ensure smooth functioning of business.
Following laws make the company enable to offer quality services to the customers which will
further formulate a positive image of the entity in market. Here, amendments made by the
government such as hygiene and cleanliness related rules in order to protect the health of the
employees efficiently.
Environmental Factors: This element is related to the impact of the activities of a
business entity on environment. In current time, it is imperative for an organization to follow
environmental friendly practices (Usacheva and Demina, 2019). In reference of ASDA, the
company ensures to follow such approaches which are favourable from environmental
prospective. Following environmental friendly practices will help in building positive image of
the entity in market place. If company ignore and does not address the environmental issues, it
might affect its image negatively.
Ansoff growth matrix
It is a tool that is often used by the company to determine whether they need to enter into
a particular market or not. This tool is applied in order to plan the growth and development of the
organization. In addition to this, it also helps to analyze the risk related to the options of growth.
Here, ASDA is a renowned supermarket chain of UK that offers quality products to the
customers at affordable price range. It is important to identity suitable growth strategy for the
company. In this context, classification of growth strategy is mentioned below:
Market penetration strategy: In this, existing product is sold in the existing market.
Main aim of this strategy is to enhance the profit without investing significant cost or efforts.
Here, company prepared such strategies by which customers get attracted towards the product. In
this, the main focus is on enhancing the existing market share (Nikolskaya and et. al., 2021). It is
possible to achieve the respective goal by reducing the price, offering discounts and more.
Product development strategy: This strategy is related to focus on development of new
product with aim to grow and flourish in market. However, the market remains same which

minimizes the probability of product failure. It is suitable for the company, has thorough
knowledge of existing customer segment. There is threat of change of perception of existing
customers regarding the brand. It requires investment and in-depth market research in order to
get success.
Market development strategy: Here, company targets a new market with existing
product. It is important to undertake detailed research in order to select a new customer segment.
It is not easy to get acceptance in a new market. For this purpose, company needs to study the
trends and condition of new market to avoid any adversities in future (Walzel, 2021)
Diversification strategy: It is a complex strategy of growth wherein product or market
both is new. In this, company enter in a new market with a different and unique product. This
strategy is crucial for growth but it requires huge investment. In addition, risk of getting failure is
also associated with this strategy. If successfully implemented, diversification can bring ample of
positive results for the company.
With the detailed analysis of all four growth strategies, it is identified that market
penetration is the best suitable growth strategy for ASDA. It is possible to earn significant
amount of profit with successful implementation of this strategy. Further, there are lower
probabilities of failure while following the market penetration strategy. It is because the market
and product both are same under this strategy. This strategy will help the organization in
attracting more number of buyers in order to get competitive edge in current market place.
TASK 2
P2) Discuss internal environment and capabilities of a given organization
To understand the internal capabilities of an organization, it is imperative to analyze the
available resources and potential of the company. Internal capabilities play a crucial role in
meeting with the pre-defined organizational goals. It distinguishes the organization from
competitors and help in getting the competitive edge.
SWOT analysis
SWOT analysis is one of the well-known tools that is used for analyzing the internal
environment of a company. It helps in identifying the strengths which can provide and edge to

the organization. Further, the tool also includes weaknesses so that entity can prepare suitable
strategies in order to cope up with the weak points (Andreev, 2018). In context of ASDA, this
tool is assist managers in identifying the strong and weak points in order to make efficient use of
available resources. The SWOT analysis of the respective company is mentioned below:
Strengths:
 Customer service: ASDA offers quality services to the customers with the help of their
motivated and proficient workforce. In addition, they also provide services such as self-
checkouts and overwhelming experience in order to maintain long-term relation with
customers.
 Affordable products: The products of ASDA are fall under affordable category so that
they are able to cater different segments of customers in an efficient manner.
 Online presence: It is analyzed that the company has presence on online platforms. Due
to this, company gain popularity during COVID-19 as people prefer to buy the groceries
and other items through online platform(Lengnick-Hall, Lengnick-Hall and McIver,
2018) .
Weaknesses:
 Public backlash: The company has been involved in various scandals due to which they
face public backlash. It hampered the image of the organization.
 Price differential: ASDA is unable to maintain same price in all its stores at different
locations. Hence, customers often prefer to purchase from rivals which affect sales of the
organization.
 Static strategy: ASDA has been witnessed failure due to the ineffective operations
management in different countries. It damages the reputation and also affects revenue
adversely.
Opportunities: -
 Expansion: It is one of the effective opportunities for the company for achieving growth
& excellence. Here, ASDA can expand the business in more countries across the globe.

 Supportive campaign: ASDA can associate with some smaller retailers through alliance.
It will help in expansion and also enlarge the current level of sales & revenue.
 Aggressive advertising: With the changing attitude of customers, the company can also
focus on online advertisements and campaigns.
Threats:
 Competition: It is one of the biggest threats for the company that has direct impact on
the performance of the respective business entity. For ASDA, there are ample of
competitors present in the market who offer similar products.
 Brexit: It has brought uncertainty in the market by introducing amendments in existing
laws and regulations in market. These regulations will affect the business operations of
the respective company.
McKinsey 7’s Model
Strategy: It refers to the strategies and plans which are prepared by the company for
future growth. In contest of ASDA, they work on the strategy of providing better and effective
experience to the customers to ensure future enlargement of business.
Structure Under this, hierarchal arrangement of different positions is taken into
consideration. In ASDA, they follow functional organizational structure wherein different
activities are performed by different departments of the company.
System: In context of Asda, a proper system is followed by company to run the business
in a smooth way.
Style: In ASDA, managers and leaders are likely to follow participative leadership style
wherein they encourage employees to participate in decision making process efficiently.
Staff: In Asda, all the employees of the company are highly efficient and competent
enough to contribute towards success of the entity.

Skills: To gain the organizational objectives, skills and competencies are highly crucial.
In Asda, highly potential and skilful individual are associated with the company.
Shared values: In Asda, all the employees are loyal towards the company and they work
collaboratively to ensure success and growth of the entity.
VRIO model: It is crucial model of internal analysis. It helps in assessing the internal
capabilities and effectiveness of a firm. In addition, this framework is used to identify such
resources and capabilities that can offer sustainable competitive edge to the firm.
Valuable: It includes the resources which are valuable for the company and has the
capability to generate positive outcome for the betterment of business entity. In context of
ASDA, financial resources of the company are valuable as they help in investing external
opportunities of business in an efficient manner (Gayle and Warner, 2018). Employees and
patent of the company are also valuable whicgh will help them in creating differentiation in
market place.
Rare: It is the second and one of the crucial elements of VRIO analysis. According to
this, resources of the company needs to rare in order to set a unique identify of business in
market place. In reference of ASDA, Financial resources are as there are only few companies in
market that have strong financial position. In addition, employees of the business entity are
proficient which enhance the efficiency of the organization in competitive market place.
Imitable: According to this, company maintains the resources in such a manner which
further become the unique identity and cannot be copied by others. In ASDA, financial resources
are costly to imitate. These resource are helpful in generating prolong profits for the company in
an efficient manner.
Organization: It is the final element of VRIO analysis as per which resources need to
organize efficiently in order to attain success in the current competitive environment. In ASDA,
financial resources of the entity are well-organized which will help the company in performing
different business functions efficiently.

TASK 3
P3) Apply Porter’s five forces model
Porter’s five forces is a widely used business model for the purpose of analyzing of the
current level of competition present in market. This framework helps in understanding the
competition level in industry with the help of different elements. In context of ASDA, they are
also affected with different forces of the model. Different forces of the model are mentioned
below:
Threat of new entrants: This is related with the barriers present in existing market
which affect the entrance of new firms (Gursel and et. al., 2019). In context of ASDA, the threat
of new entrants is higher as it is easy to enter in the retail market. However, the retail industry of
UK is already acquired by some large players hence it is not easy for a new firm to survive for
long run.
Bargaining power of suppliers: Vendors are crucial stakeholders of business as they
offer inputs, raw material for continuation of production process. In retail market, there are
numerous suppliers present in market which minimizes their bargaining power. Hence, ASDA
has an upper hand on vendors which make then enable to get necessary resources at appropriate
price.
Bargaining power of buyers: This factor is related to the power of customers to
negotiate with the company in order to get quality products at affordable price. In reference of
ASDA, customers have ample of options due to presence of other retailers in the market. In
addition to this, the switching cost of the customers is also lower that affect the revenue of the
business entity.
Rivalries among existing players: In retail industry, extensive competition is present.
ASDA is working in highly competitive environment with presence of strong competitors like
TESCO, Morrisons and more. In this situation, the organization can ensure competitive edge
through innovation.
Threat to new substitute: It refers the availability of substitute products which can be use
in replacement of existing product (Alstete and Beutell, 2020). In reference of ASDA, threat of

substitute is high due to presence of numerous competitive firms. By adding the unique feature in
products, company can easily attract more number of customers.
TASK 4
P4) Apply range of concepts and model and theories
Bowman Strategy: It is a strategic tool that is applied to know how a product can be
positioned in market. It helps the companies to evaluate their position in the market in
comparison of competitors. Effective implementation of this tools assist managers in order to
prepare suitable strategies for future growth and success.
Low Add value: In this, company keeps the price of its product as low as possible in
order to attract more number of buyers in significant manner. It is possible to grab the attention
of buyers with effective implementation of this strategy (Boyd, 2020). In ASDA, they can use
this strategy when they are launching a new product in market.
Low price: In this, company produces products in higher quantity so that they can
maintain the price of production significantly low. ASDA, uses suitable production methods in
order to produce products in large quantity and maintain the quality at the same time.
Hybrid: It is an effective strategy if value added in the product is consistent and applied
on regular basis. It allows company to focus on product differentiation so that the products
become highly valuable in the organization. In context of ASDA, they will be able to offer the
quality products to the customers by applying the respective strategy.
Differentiation: In ASDA, they can use innovative and creative approaches in order to
differentiate the product from rivals. Here, differentiation helps in gaining competitive edge that
is crucial to sustain in market for longer period of time.
Focused differentiation: In this, main focus is to develop a unique feature that make the
product special for customers. In context of ASDA, they can focus on unique and different
features of product for ensuring future enlargement.
Risky high margin: It is a risky strategy wherein the company can charge high prices for
the products. It is a strategy that might hamper the position of the company in long run (Chernev,

2020). Here, customers often look for the better quality products in the same price range in order
to get value for money.
Monopoly price: Here, the entity establishes itself as a monopoly leader. In this, they
charge a high price from the customers for the unique product they are offering. In context of
ASDA, they can easily gain an edge over competitors by adding some addition features in the
products.
Loss of market prices: It is not a position which is actually desire by a company. Here,
the company found itself unable to offer the products which can actually values by the
customers. In context of ASDA, they are required to prepare suitable strategies so that they can
maintain positive position in the market.
Balance score card: It is a tool that is used to identify the influence of major internal and
external options. This framework helps in identifying, improving as well as controlling various
functions and resulted outcomes of business. It is about measuring different aspects of business
in order to ensure future success and growth. In reference of ASDA, four major aspects of
balance score card are mentioned below:
Financial perspective: Here, main goal of ASDA is to make optimum use of investment
and earning potential amount of profit at the same time.
Customer perspective: Customers look for the value of money. They wish to get quality
products for the money they are giving (Ratynska, 2019). By keeping the perspective of
customers in mind ASDA produce quality products at lower price in order to retain customers for
longer period of time.
Internal business perspective: It is based on the internal capability and resources of the
company which contribute towards future success. In context of ASDA, the main goal of the
organization is to make optimum use of skills of the employees with an aim to provide better
quality products to the customers. To improve the employee skills a training program is run by
the company.
Innovation and learning perspective: To survive in competitive environment, it is
imperative to make improvements in the existing products or process of the organization (Yáñez