Unit 32: Business Strategy Report - Asda's Macro and Micro Environment

This report provides a detailed analysis of Asda's business strategy, examining its internal and external environments. The report begins with an introduction to business strategy and then explores the impact of the macro environment on Asda, utilizing tools such as PESTLE analysis and Ansoff's growth vector matrix to assess political, economic, socio-cultural, technological, legal, and environmental factors. The report then delves into Asda's internal environment and capabilities, employing VRIO analysis and McKinsey's 7S model to evaluate its resources, competitive advantages, and organizational structure. Furthermore, the report examines strategic planning, including the use of Porter's Five Forces to analyze the competitive landscape and strategic planning to achieve goals. The conclusion summarizes the key findings and the references provide a list of the sources used.

Unit 32: Business
Strategy

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
countries across the world. In this report will discuss different business strategy that 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
Advanced technology has impacted on Asda’s performance such as with the advanced
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

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
best strategy for the Asda to follow CSR activities that will build sustainable business
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

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.
Resources Valuable Rare Imitable Organization
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, motivation and fair treatment will all staff members which
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
influence purchasing behaviour of customers ad meets their objective by 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

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, Primark have
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.