Future Strategic Direction Of Asda Assignment Sample
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Introduction
The research mainly addressed the external environment of the business with focusing on the formulation of strategies based on the business issues. Asda is recognised as the British supermarket retailer whose headquarter is located at West Yorkshire. The company has offered quality products in the field of groceries, furniture, toys, clothes and apparel products for men and women (asda, 2019). The application of digital medium shopping has emerged and raised over years which has insist the company to initiate their online medium for conducting the business process.
Task 1: Detailed industry analysis of company operation
Models for reviewing external analysis
The external environment of particular industry and company are demonstrated through PESTEL analysis which has addressed the factors that influenced the business process (Clarke, et al., 2013). It mainly includes political, economic, social, technological, environment and legal factors regarding the business operation. The PESTEL analysis of the company context is described as follows.
Political
The consistent business operation, revenue generation and profitability of retail companies are directly aligned with the policies and procedures of Government. Stable political structure of UK would assist the company management to expand the business process without facing any concern. Due to implementation of BREXIT, the retail companies have faced the issues based on the customer volatility, operations reliability, cost escalation and improved scrutiny (BBC, 2019). Moreover, the rate of taxation for import and export of the products would also affect the regular operation of companies which are addressed by the management for ensuring business consistency (Liu & Ko, 2018). As Asda has involved in dealing with the import and export the products in China and other European countries, the firm should alter the taxation policies based on the regulation of World Trade Organisation.
Economic
The growth rate of GDP of UK refers to 1.8% which has indicated stable economic structure of the country. Moreover, it has also been reflected that inflation rate of the country whose figure is characterised as 1.94%. The management of the business has also addressed the economic factors like credit cost, energy prices along with supply and demand of labours (Worldbank, 2019). The stronger economic structure of the country has allowed the customers to buy the products and avail the services due to having higher disposable income of the customers. The retail sector of UK has contributed £381 billion to the overall economic aspect of the country which has reflected the importance of processing the retail sector without any issue or concern.
Social
The social factors of the country has provided the companies an opportunity to assess the demands and needs of the customers and incline the product or service dimension into particular direction. The unemployment rate of UK is considered as 3.8% which has reflected the reduced volume of unemployed citizens. It would guide the management of the company to set their pricing policy (Covella, et al., 2017). The promotional content of the companies are also require to be added with addressing the social and cultural factors of UK. Mainly, the customers of the company belong to the elite class, established and technical middle class, traditional working class along with emerging service sector citizens (Gundala & Khawaja, 2014). The pricing policy and quality of the products and services are also inclined in that particular direction based on the preference and demands of consumers of all class. It also enabled the company management to identify target consumers and formulate segmentation strategies.
Technological
The technical development of UK is on progressive field which is reflected from the emergent application of digital platform to conduct the consistent business process. Based on the recent research, it has been interpreted that 95% of the citizens have used mobile phone and 98% among them are proficient in using the internet medium (Kremer, et al., 2019). So, the application of digital medium shopping has emerged and raised over years which has insist the company to initiate their online medium for conducting the business process. The technical up gradation has also simplified the business process for customers as they have ordered the products and services which would be delivered to the doorstep of the consumer (Gonzalez, et al., 2019). So, the technical improvement and benefits has provided the company an opportunity to expand their business process.
Environment
The environmental concern of respected countries is need to be regulated for ensuring the operational excellence of business. The companies should address the aspects of hazardous waste, carbon footprint, green economy along with organic products which has benefited the regular operations with adding proper value to the customers (Muñoz & Cohen, 2018). The companies should also address the concern of environment through being regulated with the legislation associated with pollutions which has indulged with the factors of noise, air, water and other atmospheric concern. The planning of business operations are formulated in such a direction that the environmental factors are addressed effectively.
Legal
The management of Asda must abide by the standards, regulations and rules of the operational counties for adding value to the stakeholders. Post-implementing BREXIT, the standards and rate of taxation has controlled by UK Government which provides flexibility for performing the business processes (Gov.uk, 2019). The rights and demands of employees along with workplace conditions are also regulated by the legislation which would be followed by the companies for ensuring the consistent growth of business. Moreover, due to emergence of digital medium, the companies have also followed the principles of Data Protection Act for ensuring security in the business context.
Industry scenario within market domains
The external scenario of the business are demonstrated through Porter’s 5 forces which has also provided the company an opportunity to improve the systems (Kremer, et al., 2019). The main factors are considered as bargaining power of suppliers, bargaining power of buyers, competitive advantage, threats of substitute products and threats of new entry.
Bargaining power of suppliers
Bargaining power of suppliers reflect the capability of business to communicate with diversified number of suppliers who are involved with the business process. The suppliers have not possessed credible threats for forwarding the integration into the operational industry of Asda. The company management has purchased the raw ingredients from their suppliers at lower and reduced costs after evaluating the deliverables of all the suppliers (Khan, 2016). Due to higher number of suppliers in the retail sector, the bargaining power of suppliers is higher whereas the company has also maintained close relationship with the stakeholders.
Bargaining power of buyers
The bargaining power of buyers is high in the competitive retail industry of UK due to having wide range of companies operating in same sector. The concentrated base of customers has raised the bargaining power of customers (Liu & Wei, 2013). The promotional content of the companies are also require to be added with addressing the social and cultural factors of UK due to higher number of competitors in the particular market. The price sensitivity, standardised products purchasing and higher knowledge regarding market have raised the bargaining power of buyers.
Competitive advantage
The competitive advantage between companies reflects the competitive numbers which has provided tough competition to the company (Lin, 2015). The rivalry between the firms is higher because the firms are strategically diversified targeting same market. The competitors of the firm with equal offering and size deliver the products with lower cost with that of the companies which is accepted by the customers.
Threats of substitute products
The availability of the substitute services and products has made the business environment challenging for the company and other companies. The threat of substitute products are considered as low as the switching expense of applying the substitute products are higher for rising economic costs (Gundala & Khawaja, 2014). Moreover, the customers would surely not receive same performance and quality from the substitute products that are derived from Asda products.
Threats of new entry
Asda has operated the business process over 100 years which has provided the companies an opportunity to beat the new products and services. Moreover, the firms have also developed the brand loyalty by addressing the customer relationship management. It has also developed long-term contractual relationship with suppliers and distributors for diversifying the target market.
Task 2: Internal analysis tools for drawing appropriate conclusions
Connection of mission and vision statement with aligning marketplace demand
The mission of Asda comprises delivering customer satisfaction, satisfactory living environment and quality production to the customers in the field of retail sector. Moreover, the firm has also decided to be the best value added retailer which has exceed the needs and demands of customers. The purpose of the company is to deliver the services and goods which are affordable for all the customers. The firm has also added value to the customers in the field of striving the excellence, service to the customers along with respecting the individual (Clarke, et al., 2013). The marketplace demand of the business is also addressed for inclining the business operations into that particular direction. The firm has focused on reduction in inventory costs for accomplishing the efficiency in performing the business which has enabled them to address the demands of customers. The company has expanded their services in a continuous manner through investing in the facilities that are located within the stores network for supporting higher responsiveness to the customers (Muñoz & Cohen, 2018). On the other hand, the company has also launched the supply chain strategy which has improved the current cost of retailer with following higher responsiveness of customers. The market demand of the retail sector has evolved rapidly which has provided the firm an opportunity to formulate effective strategies based on the deliverables.
Strategic capabilities and competencies
The strategic capabilities and competences of the businesses are demonstrated through SWOT analysis which has indicated the strengths, weaknesses, opportunities and threats of the business (Clarke, et al., 2013). It would enabled the management to address the potential field of improvement which is beneficial for the consistent growth of companies. The SWOT analysis of the company is demonstrated as follows.
Strength
The strengths of Asda are demonstrated through its wide range of presence across country and operation for more than 50 years. It has developed the sense of brand image in the context of customers which has provided them a competitive advantage (Kremer, et al., 2019). Moreover, the strength of company are demonstrated through diversified range of products, extensive distribution principles, parcel services for the needy customers along with excellent and improved marketing campaigns. Asda has offered their customers a diversified range of services and products to their consumers which comprises retail products, garments along with financial solutions.
The services of the company also comprise Chosen by You, Asda Smart Price, Asda Money and Asda Mobile. On the other hand, the company has also established 25 distribution centres across the country which has represented the network stores of the company (Asda, 2018). The company has also focused on innovative marketing principles which have enabled the products and services of company to reach most of the consumers. Moreover, the strengths of the firm has also demonstrated through acquisitions, different store formations, diversified services and brands, getting recognition along with following the sustainability concern. The firm has also taken the aim to minimise the environmental influence regarding the services, operations and sold products.
Weakness
The weakness of the company is evaluated by the management for incorporating suitable strategies regarding the consistent growth of businesses. The weakness of the companies are reflected through limited and partial global presence, restricted entry of the business, price fixing of the dairy sector, critics and false advertisement along with involvement of the Horse meat scandal. In 2007, the firm has convicted in the case of fixing the prices of dairy products which has caused huge loss of customers and made controversy regarding the company operations (Asda, 2019). The firm was also involved in the false advertising where ‘reduced price for every buy’ or ‘reduced prices than other markets’ has been showcased. The company has also faced the concern of reduced product quality which is also reflected as the weakness of the company. In 2013, the firm was also convicted in the case of delivering horse meet in the place of beef which has caused serious concern.
Opportunity
The opportunities of Asda also comprise new domain expansion, online presence of market, focusing long-term goals and acquiring small companies. The firm has planned to operate their business processes in the field of jewellery, pharmacy and photo department (asda, 2019). As the application of digital medium has risen exponentially, the firm has also planned to open their digital platform which is able to attract most of the customers and improve the business figures. The extensive distribution of the company also comprises the products of clothing, chilled food products along with ambient products like cereals along with carbonated drinks. It has also been identified as the opportunity for the company.
Threat
The main threats for Asda is highlighted from their competitors as their numbers have raised exponentially in last few years due to favourable conditions of the business operation. The main identified threats of the business are demonstrated through pricing over other retailers, changing policies of Government especially due to implementation of BREXIT, consistent price cut from the competitors and other retailers (BBC, 2019). The competitors operating in retail sector comprises higher number of stores in the physical field which has restricted the regular operations of the company. . Asda has operated diversified source formats which includes Asda superstores, Asda supercentres, Asda supermarkets, George Stores, Asda Essentials along with Asda Petrol. It must be centralised with one digital platforms that would ensure the consistent business growth.
Adding value to company stakeholders within market
The company has added value to their stakeholders for ensuring the business profitability and customer retention. The competitive advantage of the companies are demonstrated through VRIO analysis which has reflected the aspects of being valuable, rare, imitable and organised.
Valuable
The local food products and being involved with wide range of deliverables would add value to the customers. The firm has focused on reduction in inventory costs for accomplishing the efficiency in performing the business which has enabled them to address the demands of customers (Clarke, et al., 2013). It has also added value towards the customers whereas the improved research and development process. Moreover, the firm has operated in the retail sector for more than 100 years which has ensured the value-added service for the companies. So, the products of the firm are valuable in nature.
Rare
The company has also focused on the deliverables which are generally found in all the retail stores. The company management has purchased the raw ingredients from their suppliers at lower and reduced costs after evaluating the deliverables of all the suppliers (Covella, et al., 2017). The purpose of the company is to deliver the services and goods which are affordable for all the customers. So, the products of firm are not rare whereas the accumulation of all the products and services are highlighted as rare.
Imitable
The local food products and ingredients are not considered as imitable as the firms have invested satisfactory volume in the research and development in the company context. The promotional content of the companies are also require to be added with addressing the social and cultural factors of UK due to higher number of competitors in the particular market. The company has also focused on innovative marketing principles which have enabled the products and services of company to reach most of the consumers. So, the products of services are not imitable.
Organised
The promotional content of the companies are also require to be added with addressing the social and cultural factors of UK. The company management has purchased the raw ingredients from their suppliers at lower and reduced costs after evaluating the deliverables of all the suppliers. The company has expanded their services in a continuous manner through investing in the facilities that are located within the stores network for supporting higher responsiveness to the customers.
Based on the VRIO analysis, it has been interpreted that the firm belong to the unused competitive advantage which has provided the management an opportunity to focus on the business expansion.
Task 3: Possible strategies for defending the core business values
As found from then previous tasks, Asda needs to develop or divert its strategic direction towards protection of the business’ competitive advantages like maintaining low prices of various products, increasing number of chains, its reputation for parent company being Walmart and in addition, unlike other retail companies Asda also offers banking options like insurance, loans and other financial services. Based on this respect, strategic choice models like Ansoff matrix and competitive positioning of Asda has been used.
According to the ANSOFF matrix for Asda, marketing development strategies that the company may adopt is by promoting its exiting range of products in new regions where there is no retail store and ensures that a new store is opened where no other company has ever opened (ASDA, 2020). Its parent company being Walmart, has a strong brand image and therefore has been able to compete with other retail stores in the region of UK and is the second-largest retail store since 2019 on the aspects of sales (BBC News, 2019). Therefore, to main this competitive advantage, Asda has to keep opening new stores in different regions and locations of UK.
Again, with respect to market penetration Asda uses the methods of social media and other advertisement channels to generate awareness amongst the people of the location where the new Asda store has opened along with promotion of attractive discounts and offers (Independent, 2013). In addition, Asda’s mode of market penetration in UK has been solely on opening of new stores in new strategic locations. According to STATISTA, (2019) the number of retail stores of Asda is the highest in UK with a total of 633 stores including superstores, supermarkets, supercentres, fuel stations, and living. Therefore, through invasive mode of market penetration, Asda can maintain its strategic competitive advantage over major retail supermarkets and stores in UK.
The range of products that Asda offers through its various stores and services include household fashion and décor products, fuel stations with food to go kiosks and shopping counters, clothing and fashion items through ‘George’ brand, food and other non-food items, fresh foods and packaged products as well (ASDA, 2020). The competitive advantage that Asda has over other companies is that they are not only able to sell their products through retail supermarkets and stores but also through the gas and fuel filling stations and they are also able to sell their products using online or e-commerce and with the help of the brand ‘George’, which also has its own online stores and retail stores across UK (ASDA, 2020).
Lastly, diversification of the products is another competitive advantage over other companies in the same segment. As mentioned earlier, Asda has all types of product diversification like; groceries, furniture, toys, clothes and apparel products, fuel filling stations and even banking services llike travel insurances, personal loans and credit cards, home and car insurance, pet insurance, and money transfer options as well (ASDA, 2020; The Telegraph, 2012). This extensive diversification provides a competitive advantage of Asda over its competitors like M&S, Sainbury’s and others, because, these companies do not provide the same type or diversified number of services. Therefore, to maintain this competitive advantage, Asda has to look for new services and products to increase the level of competitive and preserves its core business.
Again, Asda to maintain their competitive advantage and preserve their core business in the retail segment of UK have to adopt strategies of growth like acquisitions and mergers or joint ventures and other methods. In this regard, Asda had partnered with George, now an online stores for garments and operating since 1989 has increased the growth of the company in garment and fashion segment (ASDA, 2020). George is also the fastest growing online garment business that in penetrating e-commerce market with sustainable, cost effective and value for money products ranging from clothes to fashion garments and others and even entered the market for home related products like curtains, sofa covers, table mats and others to name (ASDA, 2020). In addition, in 2010 Asda also acquired Netto, which is another budget grocery chain in UK to improve their sales and strategic positioning in the market (The Guardian, 2010). This was one of the strategies of growth through acquisition that enables Asda to improve its sales and maintain competitions with leaders like Tesco, Sainsbury’s and others. However, the company has recently failed to merge with a market leader, Sainsbury’s which would have made the merger and the company leaders in retail store segment in UK. Therefore, the company needs to look for strategies to merge and acquire new businesses and diversify their services and products to preserve their competitive advantages.
In addition, the theoretical model presented in the study of Roley, (2006) and Gluck, Kaufman, and Walleck, (1980) is the four-phase model evolution which comprises of phase 1 with financial planning, phase 2 with forecast based planning, phase 3 with external planning and lastly phase 4 with strategic management. According to this model, for a company to maintain and monitor its competitive position and strategies to defend its business need to first explore and monitor its operational control variables like annual budgets and functional focuses. In basic financial planning, Asda need to adopt strategies to develop expense budgets and also evaluate its financial problems through forecasting of its revenues and capital values and others financial aspects (Gluck et al., 1980). In phase 2 of strategic choices the company has to explore the number of products and markets served as well as explore and understand its trends and current processes of operations. The stage 2 is based on forecast-based planning and therefore, the company has to rely on its past data and use tools and models like regression models and trend based assessments to explore the direction the company is moving (Gluck et al., 1980; Roley, 2006). Through forecasting of the progress, the company is able to explore the positive and the negative aspects and thereby strategize its plans or diversifying its products for developing new services. In case of Asda, they may use this strategy to analyse if they need to open a new store at a new location or if they need to develop new products apart from the existing one to remain competitive in the market. Therefore, using forecasting methods it will allow Asda to improve its effectiveness of strategic decision and maintaining competitiveness in the market. Again, phase 3 is more focused on resource allocation and findings new ways to ensure that the customer needs are met and satisfied (Gluck et al., 1980; Roley, 2006). In this phase the company looks to improve the product offerings and find methods to improve the product or service life-cycle. In these phase the company needs to perform situation analyses and competitive assessments by comparing the product offering with its competitors. In addition, the findings from the phase 2 also allow the company to modify and modulate its strategies and plan dynamic methods of resource allocations. This phase allows the managers and the company to shift its strategic processes and adopt a new strategy for meeting the market demands and remain competitive. Last phase is the strategic planning and management phase where the company forms a planning framework, develops a planning process and reforms the corporate value system (Gluck et al., 1980). This phase allows the company to orchestrate all the identified resources and challenges from previous phases and create a competitive advantage in the market. This is the final phase that enables the company and Asda to maintain its competitive position and adopt possible strategies to defend its core business.
Conclusion
Asda has expanded their services in a continuous manner through investing in the facilities that are located within the stores network for supporting higher responsiveness to the customers. Due to emergence of digital medium, the companies have also followed the principles of Data Protection Act for ensuring security in the business context. In addition, the report also presented an assessment of the competitive advantage in the retail market of UK. Ansoff and others models has been presented that shows how Asda can adopt to maintain its competitive position and adopt possible strategies to defend its core business.
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