ASADA Main Objectives

The aims and objectives for ASDA is To provide goods and services that are cheap and affordable to consumers or the public. Reducing the cost objectives of their items/products, recycling their waste, packaging their products well and supporting voluntary services.http://answers.yahoo.com/question/index?qid=20081111011946AAHVR5H

http://ivythesis.typepad.com/term_paper_topics/2009/07/business-report-examining-asda.html

Business Report: Examining ASDA

 

Introduction

            ASDA is the second largest supermarket chain in the United Kingdom, it

offers food, and clothing and general merchandise and it is the subsidiary of the

largest retail company the Wal-Mart. (, 2006)

            According to  (2006) the company was established in the year 1965 when

the Associated Dairies and the supermarket chain of the Asquith brothers

merged. The ASDA Stores Ltd. is bound to offer the shoppers prices of the

products that are permanently low. I9n the year 1999 ASDA became the

subsidiary of the Wal-Mart company of the United States. The ASDA Stores Ltd.

has a food pledge that was launched in the year 2002 which aims to reduce fat,

salt and sugar levels in all of the food products of ASDA, at the same time,

providing the consumers the nutritional information. The company also obtains

90% of the fresh food from British farmers. And aside from the products of the

British farmers, ASDA also source local products such as biscuits and ice-

creams. The food brands of ASDA include: Smartprice, ASDA Brand, Good For

You!, Organic, Extra Special and Great Stuff. Aside from food, the ASDA Stores

Ltd. also expanded to Specialty Areas such as pharmacies, opticians, jewellery

and photo departments. Apart from the products offered, ASDA also boasts of

great service, most of the ASDA stores have restaurants and café, baby

changing facilities, pet shops and it also offers trolley for the young, old and

disabled. The organization also has its website so that people can buy their

groceries online. The main goals and objectives of ASDA includes the following:

the company is committed in decreasing the carbon emissions by 80,000 tonnes

in the year 2007, and the company have already done this by moving the freights

to rail in which it decreased the number of road miles travelled by the fleet and

the development of a £20 m import centre and the company is currently

converting the entire fleet in order to use bio diesel.

                ASDA is facing a number of controversies, according to  (2006) ASDA

Store Ltd. major issues are its exploitation of workers in the developing countries,

damaging local companies and adoption of anti-union policies. Moreover,

according to  (2006) ASDA has misses its targeted profit for the fourth

consecutive quarter.

            This paper gives analysis on the Macro-environment and Micro-

environment of ASDA Wal-Mart. It also discusses the management structure,

culture and leadership of ASDA. Moreover, it examines the competitive

environment of supermarkets in the United Kingdom and gives discussion on the

major issues of ASDA. Finally, the paper provides alternative strategies and

recommendation.

Internal Analysis      

            ASDA is one of the largest retailers in the United Kingdom which became

the subsidiary of the American retail giant Wal-Mart. The mission of ASDA is to

be “Britain’s best value retailer exceeding customers’ needs- Always.” The main

purpose of the company is “to make goods and services more affordable for

everyone.” When ASDA became the subsidiary of Wal-Mart it employed the three

core values of the company which are, respect for the individual, strive for

excellence, and service to our customers.

            According to  (1997) in the 1980s ASDA was the retail giant of Britain,

getting acquisitions of different supermarkets in order to compete with the

leaders in the industry; however during the 1990s the company was marooned

between the original position of the company which is being price-conscious and

its ambition, therefore the share price of ASDA dropped. But when  became the

Executive Chief of ASDA his strategy of the company to rise from the big drop is

he returned ASDA to its roots, which is a food retailer. The next strategy that

ASDA has done is to copy the “every day low prices” strategy of Wal-Mart in

which the company focused on lowering the prices of its goods rather than

spending in expensive advertisement. (, 2004)

Mirroring the Strategy of Wal-Mart

            According to  after re-establishing ASDA’s position in the retail market of

the United Kingdom it employed in assertive war in prices for the market share

using the ‘everyday low prices’ line. And in the year of 2001 it cut down prices of

goods by £52 million and proclaimed the Smart Price food products which are

based on the brand of Wal-Mart. Within the first five years since becoming a

subsidiary of Wal-Mart, the market share of ASDA rose from 13% to 16% without

obtaining new stores. In the bigger stores of ASDA, it still mirrored the strategy of

Wal-Mart which is raising the area of sales by getting rid of the space of the

stockroom and widening the sales area for products that are not food. Imposing a

larger scale of increase in the area of non-foods is the strategy that ASDA Wal-

Mart first used in which the other supermarkets are emulating in order to catch

up. Creating ‘specialty’ divisions such as jewellery and photo services is another

strategy that ASDA is copying and now expanding. And when the government of

Britain regulated the development of out-of-town superstores ASDA together with

the other retailers changed its strategy. And on November 16, 1999 ASDA

declared that the company is planning to open small stores which stresses foods

and drinks by the year 2004.

Stakeholders

            A stakeholder can be an individual, group or an organisation that is

affected by the actions and decisions of the business. There are two types of

stakeholder, the internal stakeholder; are individuals or groups within the

organisations like directors and employees while the external stakeholders are

individuals or groups outside of the organisation such as the customers and the

suppliers. The key internal stakeholders of ASDA are its directors, managers and

most especially their employees. The key external stakeholders of ASDA are its

customers, suppliers and shareholders. Each of these stakeholders has its own

interest in which can be directly by the changes and decisions of ASDA.    

ASDA’s Objectives

            According to the  (2006) the following are the objectives of ASDA:

One of the objectives of ASDA is to become popular for eventing and

getting mass public relations for any activity that the company does.

To raise sales in the stores of ASDA.

Involve important suppliers

And since ASDA is now the subsidiary of Wal-Mart its long-term objectives

are the same as of those in Wal-Mart in the United States which is the growth

and continual adaptation. The objectives of ASDA is both quantitative and

qualitative, quantitative objectives such as increase in sales and growth of the

company, and the qualitative objectives include becoming famous for the

activities it does, involving the important supplier and the continuous adaptation

of new technologies and technique in the business. These goals are hepful in

analysing the current issues that ASDA is facing.

      ASDA has already faced the ups and downs in business; it had its lowest

in the early 1990s but eventually rise from that situation because of Wal-Mart.

However, the performance of ASDA in terms of sales is not at par with other Wal-

Mart stores around the world. According to the  (2006) it gained negative

comparable store sales for the last quarter and year-end of 2006, in which it had

an estimated poor performance despite the assertive strategies in low pricing. 

also reported that ASDA struggled to sustain its 16.7 % market share which is

just a half percent ahead f the third largest retailer in the UK which is Sainsbury

and because of the stagnant sales last 2005 many people forecasted that ASDA

will be overtaken by Sainsbury in the coming years.

External Analysis

PEST Analysis

            According to (2006) a PEST Analysis develops an overall look at the

main external impacts on the company, PEST stands for Political, Economic,

sociological and technological, in ASDA the following external factors will have a

great effect whether negatively or positively in the near future.

Political: In the political aspect, the regulation of developing huge out-of-town

supermarkets. It has a huge effect on ASDA negatively because there are still

areas in the United Kingdom wherein there are still no ASDA supermarkets and

due to this regulation the organisation will not be able to add to their profits.

Economic: The increase on the price of fuel in the international market, and

because of the increase of prices in fuel ASDA has devised ways to reduce the

cost of delivery of the fleets at the same time saving the environment. In the long

run the measures that ASDA employs and plans will be beneficial to them

because it cuts down the company’s expenditures.

Sociological: The influx of cheap labour from Eastern Europe, this would affect

the British workers because the pay for these workers is cheaper therefore

companies like ASDA would rather employ these workers than the locals.

Technological: The usage of software for faster production and marketing,

which is more helpful and useful because it makes the job of the employees and

management easier and error free. 

Porter’s five Forces at ASDA/ Wal-Mart

Rivalry between companies: a number of classical economists have forecasted

that the rivalry between companies could propel the profits and sales to zero,

because of the substitutes, for instance, ASDA has competition between Tesco

and Sainsbury that could sell substitutes from the goods of ASDA, which drives

the prices of the products for these supermarkets.

Buyer Power: the power of the consumers also drives the prices down, example

if the products in ASDA are more expensive than Tesco, the consumers will shift

to the other supermarket.

Supplier Power: retail giants like ASDA has a huge power over the suppliers

because these companies dictate the price that they must pay to the suppliers.

Barriers of Entry: new supermarkets may face barriers that the large retailers

have imposed on them, like in the case of ASDA wherein the company have

already cornered some good, in which the smaller supermarkets will not be able

to find cheap and reliable suppliers.

Internal Analysis

BCG Matrix

            The BCG Matrix Theory is a theory wherein it determined the priorities

that must be given in the product portfolio of the unit of the business. Putting the

products in the BCG matrix will result in the 4 categories in the portfolio of the

company: (, 2006)

Stars: products that is high in growth and high in the market share. These are

the main products of the company which are the food and the non-food products.

Cash Cows: Products that is low in growth but high in the market share.

 Dogs: Products that is low in growth and low in the market share.

Question Marks: Products that is high in growth but low in the market share. 

 

Functional Analysis

Marketing. Prior to the being a subsidiary of Wal-Mart, ASDA employed

expensive marketing techniques in which became almost the downfall of the

company. However, the company changed its marketing strategy and emulated

Wal-Mart which focuses on the prices of the products and not the expensive ad

campaigns. The products of ASDA are both the non-food and food, and currently

it is creating specialty departments for pharmacies, jewellery and many more.

And aside from suppliers ASDA also has its own products for food and non-food.

In addition, according to (2006) in the retail industry, customer segmentation

plays a vital role because it offers insights on the various segments that respond

to shifts in fashion, trends and demographics, the following segments can be

used to classify the customers: Customers who respond to new promotions, who

respond to product launches, who respond to discounts and display a tendency

to buy particular products. And in the case of ASDA most of their customers

come because of the discounts and low prices sold by the supermarket, aside

from the customers who responds to discounts, the key shoppers of ASDA fall

into the category of sustenance consumers, wherein the shoppers are doing the

same routine and going to the same route in the supermarkets. (, 2005)

Production. Currently ASDA has 21 Supercentres which is 85,000 sq. ft

or above, 243 Superstores about 47,000 sq. ft, 37 smaller stores which is about

25,000 sq. ft. 5 ASDA Living Stores, 10 Georges and 24 depots.

Profitability. According to , the market share of ASDA in the United

Kingdom as of June 2006 is only 16.4% way behind the largest retailer in the UK

which is Tesco who has a 31.1% market share, and a number of people have

predicted that Sainsbury will be in second place at some point in time.  In

addition,  (2006) have reported that in 2006 the sales of ASDA were £26,800.0

mil, the sales growth for 2006 is 3.1%, the number of employees in 2005 is

134,000 and the growth is 9.8%.

Research and Development. ASDA is continuing to research and

developed innovative ways in reducing in areas that have a huge impact on the

environment such as packaging, recycling, waste management, energy and

water use, transport, and store development. (, 2006)

Human Resource Management. According to , ASDA has been often

featured as one of the best companies to work for, it even appeared in the Times

list in the year 2005, however in the same year the company has also been

heavily criticised because of the treatment of their employees in stores and

depots across the United Kingdom. And still a number of criticisms have been

received by the company from different labour groups and unions.

Management: Structure, systems, culture, and leadership

            Top Management.  In 2005,  became the CEO of ASDA after  resigned

from the post.  is best known as the person behind the growth of the brand

George. However when he acquired the position he was faced with a number of

challenges including Tesco the biggest retailer in the United Kingdom and

looking for new ways to obtain additional sales from the stores. (, 2005) The

strengths of the top management is  is a very experienced leader in terms of

growth of products just like what he have done in George’s apparel, on the other

hand, the non-food product is different from the food products and handling the

stores would be a big challenge for .

            Structure. The structure of ASDA is patterned from the Wal-Mart

structure of retail wherein the goods are sold in the lowest price possible. And

aside from the food products it also has non-food and specialty departments. The

strength of ASDA is the prices of the products, however there are issues

regarding the employment relations which can be a weakness of the company.

            Culture. The basic corporate culture of ASDA is mirrored after Wal-Mart

which is everyday low prices, wherein the all of the products that are being sold

in the ASDA stores have lower prices compare to other retail market. However,

the strategy so far has not been working because the company is way behind the

largest retailer in the United Kingdom, Tesco, which has about 30% market

share.

            Systems.  According to  (2006) have used a supply chain software which

enables it to bring the products of the company to the market faster than the

usual. And because of that ASDA was able to sell £6.8m more from its own

brand for the past 12 months. The technology is definitely an asset in the

company than a liability, however, ASDS must continue to research fro new

technological advancement to be able to cope up with the market.

Analysis of the Competitive Environment

General Environment. United Kingdom is one of the industrialised and

richest nations in the world; therefore the country has a very stable economy and

a huge purchasing power from the consumers. Aside from the fact that it is one

of the richest countries in Europe, the UK is also a very diverse country which is

composed of different ethnic groups such as the White, Asian, Black, Mixed,

Chinese and other ethnicities. The British retail industry is a huge industry in the

UK in which different retail giants are competing to dominate the market which is

currently lead by Tesco. However, the regulation of the government to create and

developed stores out-of-town makes it hard for these retailers to dominate the

market.

Business Environment. The business environment of retailers in the

United Kingdom is very competitive. With a number of supermarket retailers

competing in the UK market such as Tesco, Sainsbury, Aldi and Morrison. The

environment of the supermarkets retailers is very competitive; therefore different

strategies are being made in order to keep up, like in the case of ASDA, the

company is lowering the prices of its goods, however other retailers have

followed also this strategy making the competition even more tougher, added to

the fact that in some areas of the United Kingdom, Tesco which is ASDA’s

biggest competitor, have already been dominating because ASDA was unable to

set-up stores. And in order to be successful in the retail industry, companies

must focus on the prices of the products rather than expensive advertisement

and the companies must continue to research and developed products and

services that the market will like and at the same time be updated to new

technological advancement.

Major Critical Issues

            There are a number of issues being thrown at ASDA in the moment. The

first issue is the workers condition. A number of protests and strikes from

different ASDA stores across the United Kingdom have been done by its

employees due to disputes over pay and bargaining rights (, 2006). Moreover,

according to ASDA WATCH, the company is one of the critics in National

Minimum Wage and have been lobbying to keep the minimum wage as low as

possible. And aside from that there are complaints that the workers in ASDA are

not being treated well by the company. Another issue is that over the last months

as reported by  the ASDA had performed poorly in terms of generating sales and

way behind the leading store Tesco. And another issue that needs to be

addressed immediately by ASDA is its competitors which are Tesco and

Sainsbury, the first and third retail giants in the UK. ASDA must catch-up or at

least come near to the market share of Tesco and must be far behind Sainsbury

to avoid being the third retailer in the UK.

Alternative Strategies

            The company ever since it mirrored the strategy of Wal-Mart has been

using the low price strategy. But there are also alternative strategies in which

ASDA could also employ to boost their sales at the same time eliminate other

problems. According to  (1980) there are three types of strategies that are

commonly used in the businesses and these are:

            Cost Leadership Strategy. This strategy has been employed by ASDA

since the early 90s, in which products are produced at a very low cost and is

available for the large markets. ASDA is an expert in this strategy; however there

are pros and cons in this strategy, for the pros more consumers are going to the

supermarkets and buying products because of low prices therefore generating

sales, however, the company still encounters a number of criticisms due to this

strategy due to the fact that it hurts the suppliers in the developing world because

of cutting the prices.

            Differentiation strategy. This strategy can be used by ASDA, in which

the company develops products that are perceived to be unique and can only be

bough in ASDA. However, there are also pros and cons in this strategy. The pros

include consumers will become more loyal to the brand because it was unrivalled

and unequalled by others and it can deliver a considerable segregation from

competition, on the other hand, the products must be of superior value and

quality, plus the fact that additional research and development is costly.

Segmentation Strategy. This strategy targets a specific market. The pros

of this strategy are the company can meet the needs of the target markets at the

same time the marketing is not that expensive. The cons include that it is mostly

applicable to small firms and it will not generate incomes on a higher level

because only a specific market is being targeted.

Conclusion

            ASDA is one of the retail giants in the UK, the companies strengths

include the fact that it already experienced being on top and being in the low

therefore, the company is more flexible and can be able to surpass the incoming

problem. Another is the strategy wherein prices of the products are being priced

very low. However, the company also has its weaknesses such as it wasn’t able

to saturate the whole UK and it also has internal problems with the employees.

The threats of the company are its competitors because these companies are

also following the steps that ASDA had undertake and are more aggressive than

ASDA. On the other hand, there are also opportunities such as the expansion of

specialty department and the Georges the apparel of the company which has

been growing in sales and even expanding in other countries.

Recommendation

            The strategy of ASDA which is cost leadership is an effective strategy,

however to be able to compete with Tesco and increase its sales, the company

could also employ the differentiation strategy in which it creates products that are

unique in which other companies don’t have. But aside from employing another

strategy ASDA must first fix the issues within the company especially the dispute

over pay salaries.  

           

References:

Read more: http://ivythesis.typepad.com/term_paper_topics/2009/07/business-report-examining-asda.html#ixzz1N9f0VtK3