Report on Asda's Market Entry Strategy in the Indian Retail Sector

This report provides a detailed market entry strategy for Asda, a UK-based supermarket chain, aiming to expand into the Indian market. It begins with an introduction emphasizing the importance of internationalization for business growth and the challenges of entering new markets, particularly in the competitive retail sector. A literature review and critical analysis are presented, highlighting the significance of adapting strategies to local market conditions and the benefits of international expansion. The report employs PESTLE analysis to examine the political, economic, social, technological, legal, and environmental factors influencing Asda's potential entry into India. Furthermore, it utilizes Porter's Diamond Model to assess the competitive advantages and factors affecting Asda's success in the Indian market. Risk analysis is conducted to identify potential challenges, followed by a discussion of different market entry strategies. The report concludes with recommendations for Asda's successful entry into the Indian market.

Market Entry
Strategy
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TABLE OF CONTENTS
Introduction......................................................................................................................................3
Literature review and critical analysis.............................................................................................3
PESTLE analysis of India ...........................................................................................................5
Porter diamond model..................................................................................................................7
Risk analysis................................................................................................................................8
Different type of market entry strategy........................................................................................9
Conclusion and recommendation...................................................................................................11
Recommendation.......................................................................................................................12
Reference.......................................................................................................................................13
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INTRODUCTION
In the modern era, internationalization has become very important for overall growth and
success of any business enterprise. Nowadays, the competition among business operating in
retail sector of UK has become so intense that it is not easy for companies to gain high market
share and attract customers. Further, due to limited number of customers in home market and
growing competition it has become very crucial for organizations to seek opportunities for
international growth and expansion (Meyer and et.al. 2009). Entry is new market can be a risky
move for any organization as need and demand of people tends to change from market to market.
However, it can be argued that entry in new market with the most appropriate strategy can
provide several kinds of benefits to a company. For example by finding new customers in
international market, businesses have an opportunity to increase their existing sales and profits
(Uhlenbruck and et.al. 2006).
On the other hand, it can also support firm in getting competitive advantage over its
major rivals . The present research report is based on Asda which UK based chain of
supermarkets. Instead of focusing only on single product or service, the company has diversified
its range of products and also offers services related to finance and mobile phones. Founded in
the year 1949, the selected organization is now second largest chain of supermarkets in Britain.
At present Asda is facing very tough competition from market players such as Tesco, Sainsbury
and Morrision. All the above mentioned brands are trying very hard to acquire market share of
UK's retail supermarket. Thus, Asda has an opportunity to enter country such as India which is
economically growing with a very good pace. The present study, depicts market entry strategy
which can be used by Asda for India market.
LITERATURE REVIEW AND CRITICAL ANALYSIS
In the present scenario, the concept of internationalization is getting day by day popular
along with the passage of time. It can be stated that there are variety of reason due to which
companies prefer to opt the strategy of internationalization. According to the view of Das,
Roberts and Tybout, (2007) the entry strategy in new market relies upon objective of company to
a great extent. This means, in order to adopt the most effective and appropriate strategy,
businesses are first required to develop aim and objective of entering new market. However,
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Claver, Rienda and Quer, (2007) has argued that firms also have opportunities to adopt standard
market entry strategy which is most commonly preferred. The main reason behind expanding
operations into new international market is to increase sales and profits of a business enterprise.
Along with this, it also supports companies to go for innovations in existing products and
services (Global Market entry strategy, 2004). This sometimes acts as competitive advantage for
organizations and assist them in getting high market share.
As it has been already discussed that Asda is facing very high or intense competition in
market such as UK. This has forced the brand to make changes in its products and services at
regular intervals in order to attract customers.. Along with this, it is also facing problems in
attracting new customers and retain its old ones (Zott and Amit, 2008). At present the brand has
adopted for aggressive marketing strategy, in order to acquire adequate number of customers but
still it is not able to achieve its desired objective to becoming leading chain of supermarket retail.
It can be expressed that the company can expand its operations to other international markets
such as India to acquire new customers and enhance its existing financial performance (Foreign
Market entry strategy, 2013). In last one decade the economy of nation has grown really well and
it has also supported foreign investments to a great extent.
Apart from this, the large population of Indian market will support the brand to attract
large number of customers. On contrary of this, Brouthers and Hennart, (2007) has argued that
the major challenge which has been faced by foreign businesses in expanding their operations to
Indian market is related to diversified population. The nation is having very diversified
population and the need/demand of people in the market differs from each other to a great extent.
According to Klepper, and Sleeper, (2005) most of companies fail in entering market because
they do not carry out appropriate research before entering the same. Adequate research not only
support in getting aware about customer demand but it also provides businesses with information
related to the level of competition existing in the new international market.
Therefore, before expanding its operations in market such as India, it is required by Asda
to carry out market research. This will support in getting aware about the overall business
conditions and macro environment of the nation. In addition to this, by carrying out risk
assessment, the brand can gain adequate data related to the major risk associated in doing
business in new international market which is India (Abraham, 2006). The use of models such as
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Pestle analysis will help the supermarket retailer to gain adequate data related to customer trend
and the overall business environment of India.
PESTLE analysis of India
Political factors - According to the view of Naranjo-Valencia, Jiménez-Jiménez and Sanz-Valle,
(2011) the form of government which exist in India is federal and the nation is also considered as
one of the largest democracy in all across the globe. The policies, action plan and interest of
political party's has direct influence on the entire political environment of India. Thus, it can be
stated that businesses and their activities are affected by any kind of changes in political
environment and policies (Kinra, 2006).
This means at the time of doing business in India, Asda is required to take care of its
political environment at the time of carrying out its operations in the country. Apart from this,
the system related to tax are developed in very effective manner. The company will be required
to pay several kinds of taxes such as sales tax, service tax etc. however Canabal, and White,
(2008) has argued there are different kinds of subsidies and program which are conducted by
government of the nation to support businesses.
Economic factors – It can be termed as one of the most important and crucial factor which affect
operations and activities of a business enterprise. In terms of economic stability, India is very
stable and this has supported organizations to a wider extent. Some key elements which has
resulted in economic development of India includes liberalization of foreign capital, reduction in
the process and requirements of industrial licensing etc.
Thus, for a company like Asda, economic conditions of India will support in attracting
more new customers and expand operations in effective manner (Iyer, LaPlaca and Sharma,
2006). Further, increasing purchasing power of people in the market will result in penetrating the
new international market in desired manner.
Social factors- Blomstermo, Deo Sharma and Sallis, (2006) has explained that any kind of
changes and modifications in taste and preferences of customers has direct impact on sales and
profits of any business enterprise. In the modern era, offering products and services as per
changing customer demand is the best and most effective way to sustain in highly competitive
marketplace. In terms of India rising population will be the major social factor which is going to
support the establishment of Asda. The rationale behind this is that increasing population will
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help in getting adequate customers. In India, majority of population lies between age group of 15
to 65 years (Raj and Kumari, 2006). Thus, Asda will not have any kind of issues in finding
skilled and productive employee for carrying out day to day operations. However, changing taste
and preference of customers at regular intervals will be a big problem for the brand and as it will
need to make changes in its offering on the basis of the same.
Technological factors- Nowadays technological advancements and up-gradations has become
very crucial for smooth flow of operations and activities of an organization.. High rate of
technological advancements supports in development of new products and delivering more
effective services to customers. In last few years, India has emerged as one of the most effective
and strongest nation in terms of technological advancements (Bose and Mukherjee, 2006). For a
company like Asda, such kind of technology can have wider and positive implicationsof its
operations and the way services are delivered. In addition to this, adapting higher technology at
regular intervals will result in increasing overall cost of operations.
Legal factor- while doing its business operations in country such as India it is also required by
organizations to take care of legal laws and regulations. Further, by following laws and rules,
businesses are able to carry out smooth flow of operations and activities in long run. In situations
where laws and regulations are neglected firms may start facing several kinds of legal
consequences (Banerjee, 2008). In terms of Asda it can be stated that the supermarket retailer
will need to take care of Acts related to minimum wages, disability-discrimination, working
hours and recycling. This will support the enterprise to avoid fines, penalties and legal
proceeding.
Environment factors - In order to sustain in long run companies are required to take care of
environment and society under which they operate. Nowadays, activities, products and services
of businesses has emerged as a very big threat to environment. Government and pressure groups
has taken initiatives and started forcing organizations to take care of their activities. Therefore,
Asda will be required to take care of the same while carrying out its operations in India.
As per the view of Pradhan, (2008) waste disposal, air pollution, environment pressure
groups etc. are the major issues which can be faced by the brand in India. The company will
need to develop effective strategies and actions plan in order to deal with the same.
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After carrying out the above mentioned Pestle analysis, it can be expressed that the macro
environmental factors are in favour of Asda in country such as India. The supermarket retailer
will not face too much issue or difficulties in terms of establishment or operations. There are
certain factors which needs to be taken into consideration in the best possible manner. This
includes following all legal laws, regulations strictly (Kinra, 2006). Along with this, the
company also need to take care of the changing taste, need and demand of people in India.
Porter diamond model
The diamond model was developed by Michael Porter in his book named “The
Competitive Advantage of Nations”. As per the view of Riasi, (2015) the model clearly laid
emphasis on highlighting the fact that why some businesses become very effective and
competitive in some nations. It can be stated that in order to carry out operations in India, there
are six major factors which needs to be considered by Asda. The factors are below mentioned as:
Factor conditions- It includes major resources which will be required for carrying out smooth
flow of operations and activities. In nation such as India, Asda will not face any kind of issues
regrading arrangement of resources such as human, capital, infrastructure and technology.
Furthermore, easily availability of cheap and productive workforce will support in carrying out
operations in cost effective manner.
Demand conditions- It is a kind of factor in which competitive advantage is gained by
organizations in situation where people in domestic market starts demanding products and
services which are highly innovative and creative (Aghdaie, Seidi and Riasi, 2012).
Related and supporting industry- In a country like India, Asda will get adequate support and
benefit from all supporting industry. assistance from other businesses will also help in carrying
out innovations in existing products and services.
Firm strategy, structure and rivalry- The overall success of Asda in new international market
will also rely on the strategy and structure which it has employed in Uk market. By encouraging
participation from employees and considering their view, the brand has an option to develop
adequate strategy. On the other side of this, the supermarket retailer will not face intense
competition in India as compared to the one which it is facing in UK.
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Government- In last few years, the government in nation has encouraged foreign direct
investments to a great extent. This can act as very important support for Asda in terms of doing
business in India.
Chances- By delivering quality services and products to customers on time,Asda has an
opportunity to gain competitive advantage over the other market players operating in the country.
Along with this, the supermarket retailer will also need to prepare itself of all those events which
are beyond its control and have direct impact on sales and operations of the same.
Risk analysis
According to view of Abraham, (2006) doing business in India is not an easy tasks and
there are variety of risk associated with the same. Many business fails in entering new market
because they do not carry out analysis or assessment of risk before entering the nation. In
country such as India, one of the major risk which can be faced by Asda is related to consumer
market. Here, the supermarket retailer needs to become aware of the fact the demand of
customers as in India market is completely different from UK. For example in UK, people have
standard demand and need whereas in India market need of customers changes from one state to
another. Therefore, Asda will be required to offer services and products on basis of the same.
Another major risk which is associated with Indian market is of employees or workforce.
Budhwar and Varma, (2010) has asserted that many business plan to operate in India with an
objective to acquire human resources at low cost and enhance their existing profit margin. It is
very true that at the time of doing business in India, Asda will not face issues regrading shortage
of human resources. However, Khanna and Yafeh, (2005) has argued that the risk with Indian
labour is that majority of its part lives in rural areas and it is illiterate. Along with this, the
country is having very high power distance which can make it more complicated for a UK based
business to acquire desired workforce.
Here, the problem lies in situations where Asda adopts for autocratic style of leadership
and all employees will be required strictly follow rules and regulations without communicating
the reality of work to the management. Apart from this, for manufacturing units, the country has
developed very strict rules and regulations but when it comes to service sector the rules and
regulations are not that very strict. This will result in creating several kinds of consequences for a
company like Asda.
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As per the view of Lewin and Peeters, (2006) corruption, bribery and corporate fraud are
termed as the major risk which is associated with doing business in India. The number of frauds
and rate of corruption has grown with a very good pace.This has affected the overall operations
of business to a great extent. In addition to this, foreign direct investment are also affected by the
above mentioned reason. Thus, it is more beneficial for company like Asda to carry out
appropriate risk analysis for doing business in India. Other than this, the supermarket can also
face issues or challenges related to strikes, closures and unrest which is a major threat to
businesses in India.
Different type of market entry strategy
According to the view of Khanna, Palepu and Sinha, (2005) there are variety of ways
which can be used by businesses in order to enter new foreign market. Further, it can be also
expressed that there is no single strategy which can used for carrying out operations in all
different markets. Selection of right market entry strategy can results higher growth and profits
whereas wrong one can results in providing company with huge financial losses. The key
strategies include direct exporting, licensing, franchising, partnering, joint ventures, buying a
company etc.
On the other side of this, strategy such as establishing own store or business unit can be
used to enter market (Saxenian, 2005). For a company like Asda, setting up its own stores is
more beneficial and effective as it can provide several kinds of benefits to the organization. For
example, it willallow the supermarket retailer to have its own decision making. In terms of
strategy formulation, expansion and management of the same. Licensing is not suitable because
it can it will restrict the brand in terms of taking active participation. Along with this, it is also
possible that licensees can emerged as the major competitors of Asda.
The strategy of joint ventures will result in integration of two or more companies to
achieve some common goals and objectives. For this purpose, it will be required by Asda to form
joint venture with any other business which is operating in India. Here, the major drawback is
top management of Asda will not have complete kind of control over the management practises.
In addition to this, it may become almost impossible for Asda to recover the capital which it has
invested (Santhi and Kumar, 2011). The strategy of ownership is one of the best and most
effective one for company like Asda because it does not include all the disadvantages which are
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associated with strategies such as joint ventures and licensing. The suggested strategy will have
different impact on company and the effects on different areas mentioned below as:
Strategies of business - Ownership will help Asda to develop its own set of strategies without
encouraging participation from any other party. This means it will have the right to develop its
own set of strategies for attracting customers and getting high market share.
Integration of functional strategy of business – It can be stated that rather than focusing upon
selling existing products and services to India market, the company can look forward to offer
new services and products to customers. Furthermore, all the functions needs to be directed
towards accomplishment of common goals which will be to attract more customers.
Corporate culture of company- As per the view of Uhlenbruck and et.al., (2006) corporate
culture of a company has direct impact on all operations and activities. For example open and
innovative cultures helps businesses to gain competitive advantage over other market players by
offering something new and unique to customers. On the other hand, power culture results in
creating dissatisfaction among workers as the power of decision-making is concentrated in few
hands.
At the time of using strategy of ownership for long term growth and success India
market, Asda should look forward for developing open culture which has been already developed
in its stores in UK (Brouthers and Hennart, 2007). It can be stated thatrather than focusing only
upon achieving higher sales and profits, the brand should also seek for delivering satisfactory
products and services. This will not only provide long term growth but will also contribute a lot
in achieving customer loyalty which is very beneficial.
Major advertising media used in the country- In the last few years, there has been a significant
change in the way how advertising is carried out in India. Earlier advertising on newspaper and
television was carried outwith an objective to attract more and more customers and inform them
about products and services of a business enterprise. Now, the focus of companies has changed
to adaption of modern marketing tools and techniques such as emails, mobile messages and
social media. At present, companies are carrying out advertising on social media such as
Facebook and Twitter (Klepper and Sleeper, 2005).
The increasing number of internet user has resulted in developing social media as one of
the most effective platform for marketing and advertising of products and services. Promotional
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events are also carried out in the country with an objective to attract more and more people.
Therefore, Asda has wide range of alternatives available in terms of advertising its products and
services in India. For example, it can display ads regrading its products and services in
newspaper and business magazines. Along with this, advertising can be also carried out on
internet by making use to tools such as social media, pay per click and emails.
CONCLUSION AND RECOMMENDATION
From the above carried out report, it can be concluded that for a company like Asda, it
has become very difficult to gain higher market share and increase customer base in UK. At
present, the supermarket retailer has an opportunity to expand its operations in country like India
which is growing with a very good pace. The country is politically very stable and the rate of
technological advancement in India is also very high. It can be inferred that there are large
number of benefits which can be gained by Asda by carrying out its operations in India. For
example the rising population of the nation will help supermarket retailer to find large number of
customers easy. Along with this, political stability will support in establishing itself and carrying
out smooth flow of operations in desired manner.
However, it can be argued that there are certain challenges which can be faced by Asda in
doing business in the country. For example, majority of population in nation lives in rural areas
and thus it will face issues at the time of hiring qualified personnel. Another issues will be
related to understanding the diversified population of India will create problems for the brand as
need and demand of people changes from one state to another. At the time of carrying out its
operations, it will be required by the brand to identify customer demand and then deliver
products/services according to the same. From the above conducted research, it can be also
concluded that corruption, bribery, strikes and unrest are the major threats which can be faced by
Asda at the time of doing business in the country. For this purpose, the supermarket retailer will
be also required to develop effective strategies to deal with the above mentioned threats.
Recommendation
 It can be recommended that before carrying out its operations and activities in country
like India, it is required by Asda to conduct adequate market research. The research
should include key areas such as market trends, customer demand, buying behavior,
competitors and macro environment analysis. This will help the brand to understand new
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international market more effectively and attain desired results. Adequate research will
provide detailed information about the product, price, place and promotion which can be
used in India by Asda.
 It can be also suggested that among different types of market entry modes such as
exporting, licensing, joint ventures, franchising etc. the strategy of ownership is more
suitable for brand like Asda. The reason behind this is that ownership will allow the
brand to have complete control on decision-making. Joint venture will lead to distribution
of authority and decision making whereas the issues with licensing is that there are
chances that licensee may emerged as competitor. Exporting is also not suitable because
if the company does not remain focused, it may start losing its share in home market as
well. Therefore, the strategy of ownership is more effective and suitable for the brand.
 It can be also suggested that rather than offering same kind of products and services in
the new international market, Asda should introduce a new range of products as per the
culture and need of Indian customers. Along with this, it can also introduce existing
products which are successful in the UK market. This will support the brand to penetrate
Indian market more effectively and achieve all its desired results.
 At the time of carrying out its operations, it is recommended that Asda should adopt
democratic leadership style and open culture. This will encourage employees to take part
in process of strategy formulation and decision making. Furthermore, it will also result in
carrying out smooth flow of operations and activities in the new international market.
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