Market Planning in a Global Environment

Take-Home Assignment: 1

Purpose of PEST analysis in global marketing strategy

– The case of ASDA Stores Ltd

Submitted to: Dr. Sushil Mohan

Submitted by:

Anna Zvarikova -090012475

Md. Nazmul Hasan -110000703

Calum Fraser - 110000740

Date of Submission: 4th March, 2011

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ACKNOWLEDGMENT

We are thankful to our supervisor, Dr. Sushil Mohan, whose support and supervision from

the preliminary to the concluding level enabled us to develop an understanding of the topic.

We tender our regards and blessings to all of those who supported us in any respect during

the completion of this assignment.

The Group Members

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Contents

ContentsPurpose of PEST analysis in Global Marketing Strategy..........................................................3Political......................................................................................................................................4Economical.................................................................................................................................5Social..........................................................................................................................................6Technological.............................................................................................................................8Annexure....................................................................................................................................9References................................................................................................................................12

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Purpose of PEST analysis in Global Marketing Strategy

In recent times, goods and services are being marketed in ways that were not possible in the

past. Global business leads to greater competition for companies in both domestic and

international markets. Increasing competition between companies force them to fight for

capturing the better market share.

The concept of global marketing begins with the belief that the world has no centre. The

‘borderless’ global marketplace includes the contribution of all countries—not only the

industrialised and the newly industrialised nations, but also the developing economies in

international competition. (Baker p. 144).

A marketer has to consider that the market is all about the people not about the products.

Marketing environment around the world has been changing over time. Government,

legislation, trade policy, foreign direct investment, labour policy, taxation policy, bilateral

relation between countries, business cycles, stock exchange, new technology, consumer taste

and trend –all these are continuously changing from time to time in different countries.

Marketers doing business in different countries have to adopt these changes. No marketers

can rely on one fixed policy to survive in this competitive global market. A global company

should take consideration of the Political, Economical, Social and Technological (PEST)

environment of each and every market before making a global marketing strategy. This

analysis helps the marketer to find out the threats and risk associated with doing business in

any particular market. These four global marketing analyses actually set the foundation of

SWOT analysis for a company which means finding out the Strengths, Opportunities,

Weaknesses and Threats of a market. (Lee & Carter, p. 6).

In order to be able to develop successful customer-driven global marketing strategies,

organisations need to take into account shifting consumer demographics and outlooks.

Changes in global consumer demographics, technological expansion in different countries,

government legislation and other elements of PEST analysis that help the company to get

information which is important to set marketing strategy appropriately.

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Political

Political instability and civil unrest of a country can affect businesses to a large extent. A

good example is ‘concerns that the instability in Egypt could affect shipping in the Suez

Canal and disrupt oil supplies from the Middle East caused oil prices to rise further’ (The

Economist, vol. 398). As crude oil is a commodity of large significance, an increase in oil

prices might bring many economical effects – an increase of transportation costs, increase in

prices, or decrease in demand.

Legislation is another factor that has enormous effect on marketers’ decisions. This includes

trading policies, tax laws, employment laws, competition laws, environmental laws and

position of trade unions in a country. The growing importance of the European Union means

‘there are now few areas of economic or commercial policy-making where the EU does not

enjoy at least a measure of involvement and several areas where its supranational institutions

have established exclusive competence.’ (Mercado et al., 2001, p. 76). Article 81 bans cartels,

price-fixing and other forms of collusion, where such has the effect of restricting competition

within the common market. (Mercado et al., 2001, p. 166). ASDA had to sell 47 of 194 Netto

outlets, which were bought from Danish company Dansk, to rivals to ensure that there is

sufficient competition. (Economist, accessed February 2011). Furthermore, The Office of

Fair Trading found evidence of collusion by 10 firms during 2002 and 2003. ASDA had

admitted price-fixing of milk and cheese. Having admitted liability in principle; it faced

smaller fines as a result. (BBC, accessed February 2011).

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Economical

As the world is globalised this means that ‘geographical distance is of declining relevance,

and that territorial boundaries are becoming less significant’ (Heywood, 1997, p. 140),

businesses are affected by economic trends, business cycles and decisions of governments

which take place in different countries.

As ASDA operates in the British market, its operations are a subject to ‘an increase in the

standard rate of VAT from 17.5 per cent to 20 per cent effective from 4 January 2011.’

(HMR & Customs, accessed February 2011).

The attitude of local authorities and citizens towards foreign companies represents another

factor to consider when moving to a new market. ‘Foreign companies are often seen as

intruders in a country, threatening the political or economic sovereignty of the host nation.’

(Boddy, 2002, p. 108). Interest in local development can play a very significant role. ASDA

has this covered in the company’s policy which includes the investment programme that

consists of three objectives. These are:

• Contribute to economic growth with innovative development projects

• Regenerate sites in towns and cities

• Create jobs and increase local economic activity (ASDA, accessed February 2011).

The list of ASDA’s projects concerning local development schemes can be found in the

annexure. Through these activities, ASDA is establishing a picture of the company that plays

an active role in the life of local communities.

ASDA's business model is based on scale and low cost. (Economist, accessed February

2011). Clothing range George is an example of how ASDA saves its costs. ASDA buys fabric

and fastenings in huge quantities, not just for ASDA, but also for Wal-Mart and it runs

efficient and low-cost stores. (Spindler, accessed February 2011).

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Social The retail industry in UK is entangled greatly with social factors like culture, demography,

beliefs, education, consumer trend, taste, religious factors and publicity. Every culture has

some social factors some of which are core and some are secondary. Marketers can affect or

to some extent change the secondary belief of the consumer but the core belief of the people

remains unchanged. Previous studies showed consumer taste, social system and class, buying

attitude, family size and culture affect their buying behaviour and every marketer has to take

these under their consideration irrespective of whether the company is operating nationally or

globally. As ASDA is operating in the British market which is now a part of multicultural and

diversified social system, it is taking various steps to satisfy customers from all segments.

A good labour policy is one of the core criteria of modern business. Doing business with

ethics is becoming more important in today’s world. ASDA is installing cameras in two

factories in Bangladesh where clothing is made for its George range. Customers can observe

the situation of the workers producing garment products. ASDA is one of three supermarkets,

along with Tesco and Primark, that has come under pressure in recent years to improve

standards for workers abroad, after a Guardian investigation in 2007 revealed the long hours

and low pay of Bangladeshi garment workers who supply them. The Guardian reported that

workers were being required to work up to 80 hours a week for as little as 4p an hour, a

revelation that forced ASDA into an instant investigation about its suppliers.

ASDA has been spurred on by the country’s changing demographics to recruit older people

as their diverse workforce policy. Almost, 40 per cent (National Statistics Labour Force

Survey - autumn 2003, Great Britain) of the UK population is aged 50 or over and that figure

is set to increase. ASDA has gone to great lengths to look out for older employees - even

attending tea dances and bingo nights to find potential recruits.

A large percentage of ASDA products are food items, including all kinds of meat. ASDA is

one of the very first retailers to understand the requirements of thousands of Muslims and

other ethnic groups living in the UK. They have developed Halal meat to fulfil the demand of

Muslim consumers. Similarly, they are offering other ranges of foods, such as Chinese,

Kosher and Jamaican.

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In the food market, increased international travel and sensitive awareness of healthy lifestyles

have raised the demand for fruit, organic produce, yoghurts, fresh foods and prepared

produce. Reflecting the consumer needs ASDA is focusing on selling organic and natural

products. This trend will boost the innovative profit margin following in the footsteps of

Sainsbury’s. Also, after the popularity of the Make Poverty History campaign and rising

interest in organic, fairly-traded products, ASDA jumped on the Fairtrade bandwagon.

(Taylor, accessed February 2011)

One of the major changes of ASDA was launching their Social networking site named ‘Your

ASDA’ to get customer feedback through a blog section. The site also has 'The Green Room'

which is designed for employees to share news and content between stores as well as putting

their points across to ASDA’s management.

TechnologicalExternal technological factors can help to improve the customer’s shopping experience.

Expansion brings ASDA stores closer to customer’s homes as new stores can be constructed

more rapidly due to new technology and better communication. Technology enables a

customer to shop without leaving their home.

Should ASDA decide to expand globally they would have to consider how technology could

reduce costs and lead to innovation. Technology can be used to ensure the expansion and

refurbishment of supermarkets is cheaper and faster than ever before. Using technology to

monitor consumer buying habits would be very important to ASDA in a new market. ASDA

would want to ensure the correct products were being delivered to the appropriate

supermarket on time. Furthermore ASDA would attempt to innovate in order to attract new

customers by lowering prices or by proving that they have lower prices than competitors.

Environmental factors would also have to be considered. In a country which has

unpredictable and possibly severe weather ASDA would have to consider how products

purchased online could be delivered without delay. Finally production costs could be

reduced by saving materials this would also help to promote the company’s ‘green’ image.

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This section documents the technical developments and environmental factors which have

been implemented and affected ASDA.

ASDA worked with Kajima Construction Europe (UK) Limited in the year 2000 on an

ASDA superstore in Wrexham, Wales. Although project deadlines were tight the new

Superstore opened a day early. This was largely due to the impact of BIW’s information

channel. According to (BIW, accessed February 2011) ‘project collaboration and supply

chain integration’ are assisted by the information channel. The BIW information channel

enables access and exchange of information amongst team members. In addition, (BIW,

accessed February 2011) claims ‘using a standard web browser and with no need for any

specialist software’ information can be accessed and exchanged amongst team members.

ASDA has continued to use the BIW information channel on a further 30 projects. (BIW,

accessed February 2011)

Redeye technology has been used by ASDA to monitor customer online behaviour.

Innovations in this technology has enabled ASDA to target a customer by using ‘in- store

marketing’ at a customer’s relevant store. By monitoring online behaviour ASDA can evenly

distribute deliveries amongst its stores ensuring a customer will be able to pick up the product

they want (Redeye, accessed February 2011).

Environmental concerns have also prompted technological changes as ASDA attempts to

assert itself as the leader in the quest to reduce needless wasting of materials, carbon

emissions but become more adept at recycling.

ASDA claim to have reduced their production costs by a staggering £10 million which was

achieved by reducing packaging on their own brand goods. Technological innovation led to

a 25% weight reduction in ASDA’s own brand coffee jar. In addition ASDA have introduced

‘lightweight’ wine bottles and as a result 300 tonnes of glass is being saved each year.

Perhaps ASDA’s greatest achievement is the creation of the unique ‘watchstrap’ design of

cardboard utilised on ever popular ready meals. This has resulted in the company’s 32%

reduction in cardboard consumption. In some cases cardboard has been completely

eliminated. (Your ASDA, accessed February)

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Annexure

Asda – Company Profile

History

The company was founded in 1965 following the merger of two separate companies;

Associated Dairies and Queen’s supermarkets. ASDA became a subsidiary of the World’s

largest retailer Wal-Mart in 1999. (asdasupplier, accessed February 2011)

Mission and Values

The company’s mission is ‘to be Britain’s best value retailer exceeding customer needs

everyday’. ASDA claim to offer ‘Britain’s best value weekly shop’ and supply products

ranging from fresh food and grocery to clothing, home and entertainment.

(asdasupplier, accessed February 2011)

The company promotes a strong community image by liaising with local suppliers and raising

money for charity. (asdasupplier, accessed February 2011)

Market Share

ASDA boasts 350 U.K stores and employees over 160,000 people. It is currently the 2nd

largest company in U.K grocery. (http://www.asdasupplier.com, accessed 19/02/2011) As of

March 2009 ASDA had a 17.4% market share whilst leader Tesco had a 30.4% share.

(tnsglobal, accessed February 2011)

Marketing

ASDA is well known for its famous ‘pocket tap’ TV commercials which first appeared in

1977 and had featured various celebrities for 30 years. The commercials were dropped in

2007 before being re-introduced in 2009.

(guardian, accessed February 2011)

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Innovation

In 2009 ASDA was named the U.K’s most innovative employer. ASDA received the award

for its ‘comprehensive suite of strategies and people innovations’. ASDA’s ‘commitment to

colleague health and its reward and recognition schemes’ were praised by judges.

(ASDA, accessed February 2011)

Loyalty Card

ASDA have so far chosen against employing a loyalty card scheme. They claim that the

money is better invested in maintaining low prices.

(ASDA, accessed, accessed February 2011)

Investing in Communities (ASDA, accessed February 2010)

ASDA Feltham

Part of a £100 million redevelopment, which includes affordable housing. By attracting new

retailers to the town, this has become an exciting regeneration scheme for developers, and

now includes a new library, community centre, medical centre and children’s day nursery.

ASDA Huyton

The town’s largest brownfield redevelopment project in over 20 years. ASDA invested £25

million on what is our first purpose built two–level supercentre.

ASDA Milton Keynes

The investment of ASDA encouraged further development in the part of Milton Keynes. The

whole development created over 700 jobs for local people and ASDA alone generated 586

positions.

ASDA Poole

The store has now linked a prominent brownfield site in the town to the harbour. The first

phase incorporated two residential developments, including 32 affordable homes for key

workers.

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ASDA Romford

ASDA Romford is one example of our approach to working in partnership with public and

private sector bodies to enable major urban regeneration and deliver new housing.

ASDA Shaw

An eco–friendly design: a major step towards sustainable development. The store also has a

north facing, saw tooth designed roof which captures natural light, but not heat. A natural

ventilation system ventilates the store when outside temperatures rise above 15°C, reducing

the dependency on air conditioning, which in turn reduces energy consumption.

When Technology fails to beat the Weather

During adverse weather conditions it can be impossible to deliver the customer’s product.

Unfortunately the UK usually has its worse weather around the Christmas period. This is

when customers most eagerly await deliveries. However if a product is not delivered on time

the result is a disappointed customer. In the run up to Christmas in 2010 ASDA had to stop

taking orders for in store collection and could not deliver large items such as furniture. (BBC,

accessed, February 2011). Online shopping can often seem like a fantastic innovation but if

delivery is not completed on time a customer may seek to find an alternative shopping

method.

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References

ASDA (2009) Why don’t we have a loyalty card? Here’s the reason, August 18, [online]

http://your.asda.com/2009/8/18/why-don-t-we-have-a-loyalty-card-here-s-the-reason

(Accessed 25 February 2011).

ASDA (2010) How do we keep our costs so low? It’s all about the ASDA culture, July 13,

[online] http://your.asda.com/2010/7/13/how-we-keep-our-costs-so-low (Accessed

February 10 2011).

ASDA (2009) Retail development – Investing in communities across the UK, 19 March, [online], http://retail-development.asda.com (Accessed 19 February 2011).

Bachelor, L. (2010) ‘Asda's Bangladesh workers to go on webcam’, Guardian, April 1, [online] http://www.guardian.co.uk/business/2010/apr/01/asda-bangladesh-workers-webcams (Accessed 25 February 2011)

Baker, J. (1992). ‘Major Implication of Demographic Changes’, in Baker, J., Marketing

Strategy and Management (2nd Edition), London, The Macmillan Press

BBC (2010), Tesco and Sainsbury's halt online orders in Scotland, 13 December

(http://www.bbc.co.uk/news/uk-scotland-11980827, (Accessed February 19 2011).

BBC (2007) ‘Supermarkets admit mild price fix’, 7 December, [online], http://news.bbc.co.uk/1/hi/business/7132108.stm (Accessed 22 February 2011).

BIW, Case Study: Project extranet cuts time and cost for ASDA,

(http://www.biwtech.com/cp_root/storage/documents/Kajima%20Asda%20Wrexham

%20PDF.v2.01.05.pdf, (Accessed February 24 2011).

Boddy, D. (2002) Management- An Introduction, Essex, Pearson Education Limited

Businessballs (2011) Pest Market Analysis Tool [online], http://www.businessballs.com/pestanalysisfreetemplate.htm (Accessed 22 February 2010)

Dibb, S. et al (2006). ‘Marketing in International Markets’, in Dibb, S. et al, Marketing Concepts and Strategy (Fifth European Edition), Boston, Houghton Mifflin Company

Foster, C. (2004) ‘ASDA - valuing the over-50s’, Michael Rubenstein Publishing, July 1, [online] http://www.eortrial.co.uk/default.aspx?id=1052017 (Accessed 23 February 2010)

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Hegarty, R (2010) ASDA 'guarantees' lowest prices with online shopping tool, The Grocer,

28 April, http://www.thegrocer.co.uk/articles.aspx?page=articles&ID=209067

(Accessed February 24 2011).

Heywood, A. (1997) Politics, London, Macmillan Press Ltd

HM Revenue&Customs (2010) Change of the standard rate to 20 per cent. [online], http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-rise-guidance.pdf (Accessed 20 February 2011).

Lee, K. & Carter, S. (2009). ‘Changes and New Challenges’, in Lee, K & Carter, S., Global

Marketing Management (2nd Edition), Oxford, Oxford University Press

Marlow, C. (2009) ‘Response by ASDA Stores Ltd to the report ‘Say no to ASDA - The views opposed to ASDA and its activities’, Gorseinon Development Trust, March 27, [online] www.gdt.org.uk/image/news/ASDA_response.pdf (Accessed 26 February 2010)

Mercado, S., Welford, R., Prescott, K. ( 2001) European Business, Essex, Pearson Education Limited

RedEye, How ASDA use data to make a difference in offline operational decision,

(http://www.digitaltrainingacademy.com/casestudies/RedEye%20and%20Asda%20case

%20study.pdf, Accessed February 24 2011).

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Spindler, A. (2006) ‘ Asda chic with a clear conscience’, Guardian, 8 September, [online], http://www.guardian.co.uk/lifeandstyle/2006/sep/08/shopping.supermarkets?INTCMP=SRCH (Accessed 19 February 2011).

Supermarktes (2010) ‘A giant supermarket experiments with being small’, Economist, 28 October, [online], www.economist.com/node/17363369?story_id=17363369 (Accessed 21 February 2011).

Taylor,K. (2006) ‘Fairtrade in fashion‘,Guardian, March 7, [online] http://www.guardian.co.uk/environment/2006/mar/07/fairtrade.guardianletters?INTCMP=SRCH (Accessed 23 February 2011)

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The world this week (2011) ‘Business’, Economist, vol 398, number 8719 , p 7

Wood, Z. (2008) ‘ASDA expands online’, Guardian, 5 October, [online], http://www.guardian.co.uk/business/2008/oct/05/asda.direct.website?INTCMP=SRC (Accessed 20 February 2011).

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