Asda's Market Entry Strategy into Poland: A Business Report

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Business Organisations and Environments in a
Global Context
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Table of Contents
Introduction......................................................................................................................................3
Overview of Asda............................................................................................................................4
Overview of Poland.........................................................................................................................5
Analysis of the business scenario....................................................................................................6
PESTLE analysis of the Polish market........................................................................................6
Porter’s five forces.......................................................................................................................8
Demand Supply Forces................................................................................................................9
Conclusion.....................................................................................................................................10
Reference List................................................................................................................................11
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Introduction
Globalisation has integrated the national market with the international market and aided in the
profits of the organisations. Due to globalisation, many domestic companies are expanding their
operations in the global market to increase their presence and customer base. This has increased
the availability of the products and services in various countries. Market penetration is another
objective and vision possessed by businesses as this increases their share in the market and
makes them a leader in their industry. This report will study the market entry process of Asda in
to the Poland retail market. The expansion strategy will be related to the Foreign Direct
Investments (FDI) for entering into the market of Poland. The external business scenario of the
new market will be analysed and accordingly the organisation will develop an entry strategy.
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Overview of Asda
The organisation has been operating in the UK market since its launch and has many stores in
various areas along with online stores. However, the reason for its expansion in the Polish
market is to gain the leading position in the retail sector industry and become a global
organisation. By expanding into the new country, the organisation will be able to utilise the FDI
in different forms such as direct outlets, franchisees and so on. Furthermore, with Brexit, the EU
market has also been affected and expanding in the EU nations will lead to development of the
country along with boosting the profitability and revenues of the organisation.
Asda is in the second leading position in the supermarket sector in UK and is based in Leeds,
West Yorkshire. Fred and Peter Asquith established the organisation in 1949 as the company
owned by the Asquith family went into a merger with the Associated Dairies, an organisation
based in Yorkshire. As of 30th April 2019, it operated in 633 locations in the UK market. It deals
with general merchandise, grocery and food items along with offering mobile network services
and financial services. The marketing and promotional campaigns and activities emphasise on
the prices of the goods offered by Asda and it follows the slogan “Save Money. Live Better”
(www.asda.com, 2019).
The products offered by Asda are of optimum quality but at reduced prices so that a large
number of customers can afford it from different income ranges. Walmart, based in USA, now
owns it and their annual earnings are submitted to the US Securities and Exchange Commission.
In the international division of Walmart, Asda has more autonomy than other organisations.
Apart from this, Asda and Sainsbury’s were supposed to get into a merger which was later not
allowed as it was predicted that there are chances of increasing the prices of the goods and
services offered by the merged organisation. The workforce comprises of 145,000 employees
and the customer base is more than 18 million (corporate.asda.com, 2019).
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Figure 1: Percentage change in sales at Asda in Great Britain compared to a year earlier
from September 2014 to March 2019
(Source: www.statista.com, 2019)
The growth statistics of Asda is being shown in the above figure and it can be observed that there
has been a consistent growth of the organisation providing it with the opportunity to expand into
new countries. By assessing this growth, the managers of the organisation will be able to
understand the growth opportunities for Asda in the new market. They can develop strategies to
gain a wider customer base and give stiff competition to the rivals in the new country. The gap
can be identified by the authorities in its operations and they will try to reduce them when
establishing their organisation in the new market.
Overview of Poland
The retail market of Poland is growing steadily and rapidly given the increase in the number of
organisations and emergence of many small companies. The average rate of growth of the retail
market is 4% since 2014. Many new companies are expanding their business into the country as
it has many growth opportunities. There are no major supermarket chains in the country and the
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largest supermarket retail chain is Biedronka, which is a local supermarket chain operating in the
country. The nominal GDP per capita of the country as of 2018 was $586 billion and the
purchasing power parity of the country was $1.212 trillion. It can be observed that the
competition is not stringent and this gives Asda an opportunity to gain a large market share and
make it a leading organisation in the Polish retail market. The GDP is also favourable for
business opportunities in the supermarket sector. The national economy of the country is
growing at a steady pace (www.property-forum.eu, 2019).
The culture of Poland has evolved over the years and is an integration of history and traditions
along with modernity. The countries surrounding Poland has also contributed to the development
of the Polish culture. The culture has originated from the Slavic culture. Most of the people in
the country are Roman Catholics and attending church regularly is one of the major aspects of
the culture of the country. The people have a proper standard of living according to their income
level and this offers a huge prospect to Asda to penetrate into the market as the customers will
prefer buying from supermarket chains offering quality products at low prices.
The political scenario of the country is considerably stable, it has a representative democracy,
and the president of the country is the head and is in charge of controlling the state of affairs.
Poland is one of the top countries falling under the category of most peaceful countries across the
globe. The trade segment of the country is operated under the trade regulations in the country
apart from following the import and export regulations set by the European Union (EU)
(www.fas.usda.gov, 2019). Moreover, the government regarding the selling and packaging of
food and grocery items has implemented extensive guidelines. Poland is the biggest economy in
Eastern and Central Europe and among the member states in EU, it is the fastest growing
economy where the GDP growth rate was 4.6% in 2017. This has opened up many new
opportunities for the country as foreign organisations are investing in Poland. The business is
concentrated domestically and there is huge scope for FDIs (www.ebf.eu, 2019).
Analysis of the business scenario
PESTLE analysis of the Polish market
Political- Poland is ranked as one of the most peaceful countries across the globe and has a
stable political scenario. This has opened up opportunities for Foreign Direct Investment (FDI) in
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the country. Moreover, the FDI in the country has faltered over the past few years and the stable
political condition will attract more investors in the country. Thus, Asda will be successful in its
venture as the investment will yield high ROI (return on investment). Hence, the government
will encourage FDI from the UK market due to the investments being in pounds. However, the
bureaucratic system is perceived to be corrupt which can act as a hindrance to foreign investment
(www.d.umn.edu, 2019).
Economical- The banking sector of the country is significantly stable and dominates the
financial sector. There has been an increase in the revenue of the banking sector along with an
increase in the GDP of the country. The nominal GDP was reportedly $586 billion in the year
2018 and this has increased the disposable income of the population. Asda can earn high profits,
as the customers will be able to purchase the products at the prices set by the organisation.
Opportunities for FDI have also increased due to the increase in the GDP growth rate
(www.d.umn.edu, 2019).
Social- The Polish government has reformed the policies of pension in the country in order to
reduce the debt of the state arising from pension funds. As Poland is located near UK, there is
reduced cultural disparity between the two countries (www.ceicdata.com, 2019). Most of the
people are Roman Catholics and possess similar food habits and hence the potential market will
be feasible for Asda. They do not have to make many changes in the type of products and
services that are being offered to the customers. The entry of Asda into the market will increase
the employment rates in the country that will boost the rebates received from FDI from the
national government and European nation (www.d.umn.edu, 2019).
Technological- The ICT market of the country is highly developed as it uses advanced
technology in the various operations undertaken by the country. However, it is weak in its
innovation capabilities as the research and development is weak in the country. Apart from this,
the technology adopted in the retail sector is not advanced and Asda might bring in advanced
technology increasing the scope of business. Using advanced facilities for transport and
communication will boost the profitability and sales of the business. Asda should incorporate an
online market as well to reduce their inventory and transportation costs (www.d.umn.edu, 2019).
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Legal- The Polish government has incorporated a deregulation package to manage and simplify
the business operations in Poland. Under the policy, the organisations have to “issue, send and
store” the invoices generated electronically which does not require a signature. Another obstacle
in the trade of the country is the trade unions that create a hindrance in the privatisation of
different businesses. This is done to safeguard the jobs of the members belonging to the union. It
is also necessary to develop and implement policies regarding easy entrance of FDI into the
country (www.ceicdata.com, 2019).
Environmental- The use of renewable resources of energy have been increased by the
government. These include wind, biomass and water energy. By 2020, the government has
planned to increase the usage of renewable energy by 15% in the country’s gross energy balance.
It is necessary to reduce the wastage produced by the retail organisations and Asda must take the
necessary steps to reduce their wastes along with enhancing their waste disposal methods to
contribute positively towards the environment (www.d.umn.edu, 2019).
Porter’s five forces
These forces study the external competitive forces that can enhance or create a hindrance in the
performance of an organisation.
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Figure 2: Porter’s five forces
(Source: Eskandari et al., 2015)
Threat of new entrants- This force has a weak impact on the industry as Biedronka, a domestic
organisation in the supermarket sector, dominates the market. New entrants into the market
would require high investment to open up an organisation similar to the size of Asda. However,
Asda has high revenues, which can be utilised for establishing the business in the new market.
Bargaining power of buyers- The bargaining power of the buyers will be medium as there are
very less alternatives in the market. Moreover, Asda will be a multinational corporation and will
be able to provide high quality commodities at cheap and affordable prices. The switching costs
will be almost zero and hence the buyers will not face any negative consequences of switching to
Asda (Eskandari et al., 2015).
Threat of substitutes- There are hardly any substitutes that can offer similar products at similar
prices. Hence, the threat of substitutes is low for the organisation. Being a multinational
corporation and one of the leaders in the home country, Asda will be able to provide its products
at cheap prices, which might not be feasible for the organisations already operating in the
country (Eskandari et al., 2015).
Bargaining power of suppliers- The supply chain of Asda is considerably well maintained and
they have long-term relationships with its suppliers. The suppliers are also under contract with
the organisation and the cost of switching will be high. Hence, the bargaining power of the
suppliers is predominantly low. The suppliers in the new country will be domestic and they will
try to form cordial relationships with the organisation (Burns and Dewhurst, 2016).
Competitive rivalry- The competition in the market is not stringent as there is a lack of
companies in the retail sector. The competitors might not be able to offer their products at the
same rates such as Asda. This increases the opportunity for the organisation to increase their
profits and boosts the sales volume (Burns and Dewhurst, 2016).
Demand Supply Forces
In order to expand in the Poland market, it is necessary for the company to assess properly the
supply chain demands and forces of the country as well. According to the statement of Soosay
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and Hyland (2015), supply chain includes the entire process from obtaining required raw
materials to delivery of the products in customers’ hands. Like many other countries, there would
be two types of demand supply forces, push and pull. The supply chain strategies would
determine about the process of product fabrication, delivering these to the centres of
distributions, and making the products available in the entire retail channel.
Evidence suggests that the pull supply-demand chain would include the approaches of just-in-
time inventory, through which the organisations focus on last-second delivery of the products,
after justifying the customer demands. On the contrary, push supply chain includes some
strategic thinking about the future market demands, based on which the companies assume what
would be the necessity of consumers in the upcoming times. Based on the statement of Fahimnia
et al. (2015), the pull and push supply chain process are just opposite in characteristics, however,
in Poland, both types of supply chain strategies are seen according to the previous industrial
report. Therefore, Asda requires incorporating both types of supply chain forces in their
operations.
Technically, the supply chain of Asda could be confined as a hybrid between the above two,
however, most of the time, the company provides their preference towards the push supply chain
forces. Since they are situated at the second leading position, therefore, based on the market
demand and brand reputation, they need to maintain their stocks as well as inventory, as
according to the report of Ayers and Odegaard (2017), the requirements of customers could not
be null any time in a year. On the other hand, the company generally prioritises the pull supply
chain, during different seasonal or occasional events, as at those times, customers automatically
provide extensive orders, which eliminates the significance of stock or inventory management.
Conclusion
Based on the above discussion about the target market of Poland, it can be stated that there are
some mutually connected outcomes for the organisation. For example, the organisation can start
their initial processing of expansion in the Poland market, as they would get a properly stable,
structured, and organised political structure, along with higher GDP rates. Along with this, the
Porter’s 5 forces represent that the company would not face any strong adverse point from the
competitors, suppliers, or buyers, as the retail market of the country is still developing under
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certain conditions. Therefore, the company would proficiently expand in this comparatively
advantageous market of Poland. However, it is necessary to improve the technological and social
support for flourishing in the retail sector, as this would help the company in obtaining more
financial benefits.
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Reference List
Asda.com. 2019. Asda.com - Online Food Shopping, George, & more. [online] Available at:
https://www.asda.com/ [Accessed 28 Jun. 2019].
Ayers, J.B. and Odegaard, M.A., 2017. Retail supply chain management. CRC Press.
Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan
International Higher Education.
Ceicdata.com. 2019. Poland Foreign Direct Investment [2000 - 2019] [Data & Charts]. [online]
Available at: https://www.ceicdata.com/en/indicator/poland/foreign-direct-investment [Accessed
28 Jun. 2019].
Corporate.asda.com. 2019. Company Facts - ASDA Corporate. [online] Available at:
https://corporate.asda.com/our-story/company-facts [Accessed 28 Jun. 2019].
D.umn.edu. 2019. [online] Available at:
http://www.d.umn.edu/~jvileta/documents/MarketLinePoland.pdf [Accessed 28 Jun. 2019].
EBF. 2019. POLAND - EBF. [online] Available at: https://www.ebf.eu/poland/ [Accessed 28
Jun. 2019].
Eskandari, M.J., Miri, M., Gholami, S. and Nia, H.R.S., 2015. Factors Affecting The
Competitiveness of The Food Industry by Using Porter's Five Forces Model Case Study in
Hamadan Province, Iran. Journal of Asian Scientific Research, 5(4), pp.185-197.
Fahimnia, B., Tang, C.S., Davarzani, H. and Sarkis, J., 2015. Quantitative models for managing
supply chain risks: A review. European Journal of Operational Research, 247(1), pp.1-15.
Fas.usda.gov. 2019. Poland: Poland Retail Sector | USDA Foreign Agricultural Service. [online]
Available at: https://www.fas.usda.gov/data/poland-poland-retail-sector [Accessed 28 Jun.
2019].
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