ASDA Business Strategy

ASDA Business StrategyASDA is the UKs second largest super marketplace chain, holding a 17.2% market sh atomic number 18 in the UK over 2013/2014 (Kantar Worldpanel, 2014). It was purchased in 1999 and became a wholly-owned subsidiary of the US public Limited Company, Walmart. In order to analyse the business environment, this essay will first consider the ASDA conclaves internal environment, including their objectives, policies, organisational structure and reputation. The second cerebrate will be the external environment first the range of competitors in the market, followed by a PESTLE (Political, Economic, Socio-cultural, Legal, environmental/Ethical) analysis, to develop a holistic summary of the external environment. Where appropriate, several(prenominal) sections of the PESTLE analysis get down been merged to create a more accurate summary of the external environment.InternalObjectives and PoliciesASDAs primary operations consist of retail of regimen, apparel, general me rchandise and other services (ASDA assort Ltd, 2013). Their strategic objectives are to provide high quality products, exceed consumer desires and reduce be (ASDA Group Ltd, 2010 ASDA Group Ltd, 2013). They pass on an additional series of sustainability objectives knowing to reduce environmental impact and reduce operating costs simultaneously.Walmart, ASDAs ultimate heighten company, are focused on the opportunities provided by the e-commerce market (Walmart, 2014). To that end, ASDA provides both online shopping and delivery services and a Click and Collect programme, allowing customers to order products online for collection from a topical anaesthetic ASDA branch (ASDA Group Ltd, 2013).ASDA have developed a growth strategy, combining expanding reach online and physically, with reduced operating costs overall. They have overly set the need for innovation and amplification into new product ranges, expanding their brand identity. As part of the Walmart stem, they benefit f rom the research and development of other Walmart subsidiaries (ASDA Group Ltd, 2013 Walmart, 2014). In 2013, in the midst of the recession, ASDA continued to expand 15 new lines and has opened more in 2014 (ASDA Group Ltd, 2013).StructureWalmart purchased ASDA in 1999, demonstrating a strategy of growth by acquisition. Following this, ASDA has used its pith competencies of providing low-cost, good-quality products to gain market share and has become the second largest supermarket brand in the UK.As a subsidiary of Walmart, ASDA is provided with certain benefits. ASDA particularly benefits from the IT expertise from its parent company, in addition to benefitting from the research and development of other Walmart group members (ASDA Group Ltd, 2013). Walmart in any case benefits by adopting best practices developed by ASDA from their online grocery shopping service (Walmart, 2014). Members of the Walmart group are also able to take advantage of intercompany loans to provide inter nal financing opportunities.ASDA has over 500 locations in the UK, ranging from supercentres down to supermarkets. This range of shopping facilities is designed to meet customer needs at different levels (ASDA Group Ltd, 2010 Euromonitor International, 2014). They have implemented a scathe guarantee, ensuring prices remain consistent across ASDA stores, regardless of their size of it this is intended to challenge other brands with higher prices in smaller, local supermarket branches (ASDA Group Ltd, 2010).ReputationASDA have also been able to leverage the reputation of their US parent company and were the first study UK retailer to introduce a Black Friday shopping event in 2013. This was repeated in 2014 by many retailers and draw many customers to take advantage of the low-cost goods.ASDAs reputation for low-cost, high-quality goods can also be leveraged in their growth strategy. Their efforts to reduce operating costs and subsequent price reductions for consumers is intended to be appealing to price-conscious consumers (ASDA Group Ltd, 2013). As detailed below, this is a growing attitude among the UK supermarket customer-base and provides a possible avenue for growth. remoteCompetitorsASDA faces direct from ALDI and LIDL, both supermarket chains who share similar core competencies to ALDI, in that they offer low-cost, high-quality goods. Unlike ASDA, however, ALDI and LIDL offer a range of limited availability products, alongside their food retail. ASDA, by contrast, offers a wider range of general products, available via their online services and in their larger hypermarkets.ASDA is second of the UKs four largest supermarkets. Tesco holds the largest UK market share with 28.7%, and Sainsburys and Morrisons are next with 16.4% and 11.1% respectively (Kantar Worldpanel, 2014). ALDI and LIDL have grown fundamentally in recent years (Ruddick, 2014), it has been predicted that the profit margins of larger supermarkets, including ASDA, will have smaller p rofit margins in the short term (Beardsworth, 2014).Political, Legal, Environmental EthicalThe House of Lords released a report in early 2014 challenging food waste in the EU and particularly in the UK (Harriet, 2014 House of Lords European Union Committee, 2014). In their report they argued that retailers, including supermarkets such(prenominal) as ASDA, bear significant responsibility for preventing food waste. Specifically, retailers have a responsibility to ensure that customers are witting of how to store food, ensure date labelling is appropriate, avoid cancellation of grown food orders after it has been produced (Harriet, 2014 House of Lords European Union Committee, 2014). Additionally, it explicitly stated It is clear that retailers must take over a far greater responsibility for the prevention of food waste in the home. Retailers must ensure that incentives and promotions offered to consumers do not transfer waste from the store to the household. (House of Lords Europea n Union Committee, 2014, p. 26).The House of Commons Business Select Committee also considered investigating reports of supermarket aggression when dealing with suppliers, using their market power to use up prices that suppliers cannot sustain (Armitage, 2014). This was motivated by reports of behaviour from Tesco, a competitor of ASDA.ASDA submitted evidence to the House of Commons Environmental examine Committee summarising their dedication to sustainability and positive in return beneficial relations with suppliers in 2011 (House of Commons Environmental Audit Committee, 2012). Additionally, they have instituted a policy of minimising food waste by sending no food waste to landfill sites. Instead, food is either given to charities or converted into alternative products.Another source of difficulty is the intellectual nourishment Standards Agencys year-long survey on campylobacter contamination in supermarket chickens. This bacteria is the most common cause of food poisoning i n the UK, however it can be killed via normal cooking processes as long as food is properly cooked.The interim findings of this survey showed ASDA to have the highest rate of contamination of raw chicken products across UK supermarkets, above the industry average (Food Standards Agency, 2014) ASDA has agreed to effectuate a new steam sterilisation technology to test the efficacy in reducing contamination.The press have publicised these contamination place in a pejorative manner, with headlines such as Asda exposed as supermarket with dirtiest chicken (Hyde, 2014) and Supermarket chickens 70% affected by food bug (BBC News, 2014). This, combined with the condemnation of consumer groups, including Which? (Which?, 2014), poses a significant threat to ASDAs reputation.This political environment could provide new difficulties for ASDA, with the need to introduce new decontamination facilities in their factories and the associated costs this entails. Additionally, the pejorative press r esponse could have a severe impact on ASDAs reputation.The House of Lords Committees criticism of supermarket promotions and incentives could also impact ASDAs retail activities. If such promotions are legislated against, ASDA would be deprived of a major means of drawing price-conscious consumers.Economic Socio-CulturalIn 2011 Mervyn King, Governor of the depository financial institution of England, announced that the global financial crisis had significantly impacted standards of living and would continue to do so for the foreseeable future (Bank of England, 2011). 2014 was the first time in 5 years that average pay increased more than inflation, suggesting a possible upturn in the deliverance (Peston, 2014). This has led to a reduction in consumers disposable income and this in turn has impacted their spending habits in stores. ASDA has been aware of this and has taken efforts to reduce operating costs to offset inflationary pressures on prices (ASDA Group Ltd, 2013).Tradition ally, supermarkets had a close link to cultural identity among UK shoppers, based on the British class system (Wallop, 2013). Supermarkets such as Waitrose and Marks Spencer were traditionally associated with upper- nitty-gritty and upper class customers, while ASDA was traditionally seen as a working class supermarket (Jeffries, 2004).In recent years however, this find of identity has been disrupted by a combination of the global recession, and the rise of the budget supermarkets ALDI and LIDL. Both brands have been widely accepted by the British middle class, and a wider cultural attitude of thrift and pride in finding savings and low-cost products has developed. In the 2014 Christmas season, Aldi and Lidl, the discount supermarket chains drew a significant portion of the market from other supermarket brands (Butler, 2014) indicating that consumer buying decisions are motivated by price over other socio-economic factors.This could explain ASDAs recent rise to the second largest market shareholder in Britain, due to its core competency in providing low-cost, good-quality products to customers. Where previously, consumers may have had a negative association with ASDAs emphasis on low-cost products, in the recession era, consumers are more concerned with product prices.TechnologicalWalmart, ASDAs ultimate parent company, have noted the rising significance of e-commerce and have begun developing this across Walmart and its subsidiaries (Walmart, 2014). In the UK, there has been a particular focus on ASDAs Click Collect service (Walmart, 2014), through which customers order products online and can collect them from a local ASDA store, widening the range of products they can access. The strategy consultants, OCC, identified Click and Collect as the probable largest source of growth in e-commerce in 2015 (Felsted, 2014). ASDAs competitor, Tesco, offer a similar service, available in over 350 collection points (Felsted, 2014 Tesco, 2014).ASDA is well-suited for t his focus on Click Collect and other e-commerce services as a subsidiary of Walmart, they are provided with IT services from their parent company, giving them access to the resources of a larger firm, with a wide range of experience in e-commerce (ASDA Group Ltd, 2013).SummaryOverall, ASDAs external environment is relatively upset UK standards of living were significantly reduced by the global economic crisis and only recently have signs indicated that this could improve. This has reduced the disposable income of ASDAs target markets. However, because of ASDAs focus on low-cost products, this could have actually benefitted ASDA, allowing them to become the second largest supermarket brand. The economic crisis has altered the UKs socio-cultural trends, encouraging a savings-focussed attitude, with customers altering their buying habits to pursue better deals.ASDA has also faced difficulties in its public reputation, particularly due to the Food Standards Agencys survey into campylo bacter contamination in chicken. ASDAs chicken stocks and suppliers were found to have the worst contamination rates among supermarkets, above the industry average. This finding was well publicised in the press in late November and its full impact may not have been identified yet.ASDA have identified the difficult external environment of UK retail and have oriented their policies to suit the situation. They have endeavoured to gain price leadership, charging the same as or less than their competitors for many household products, in order to draw price-conscious customers. Additionally, they have taken efforts to minimise their own operating costs, using these savings to offset inflationary pressures and passing the savings on to consumers.ASDA have chosen to diversify their focus beyond store-based services. They have invested significantly into technological development, particularly with their Click and Collect service. External strategy consultants OCC have identified these servi ces as having high growth potential in coming years.ASDA have chosen to capitalise on the troubled economic environment by reinforcing their core competency, providing customers with low-cost, good-quality goods, leveraging their reputation as a low-cost supermarket to take advantage of the low disposable income. They have also used this period to advance their technological development, with technical support from their parent company.ReferencesArmitage, J. (2014, September 25). MPs considering investigation of supermarkets dealings with suppliers in wake of Tesco crisis. 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