New Business Opportunities for the Supermarket Chain ASDA - Case Study Example

Introduction The supermarket chain ASDA started the year 2009 in a bang by dropping price on 1,000 products and that included a range of staple goods for just £1. It was in the year 1999 that Asda joined the Wal-mart family and Asda was a group that was found back in the year 1965 by a group of Yorkshire farmers. (Asda–Wal-Mart Case Study)The name that was put was put forward by the merger of Asquith and Associated Dairies. The Asquith chain had three supermarkets.( Asda–Wal-Mart Case Study )Asda was trying to sell a wide product range in the year 1999 and there was a situation in the year 1993 when it had to ask the shareholders necessary finance for avoiding insolvency. The fortunes of the group was bought back to glory when the Archie Norman was recruited as the Chief Executive Officer from the Kingfisher group in the year 1991.Norman took the group back to its roots namely the food retailer and the group was trying to build the market share that was bought on the back of low prices and there was no loyalty scheme .( Asda–Wal-Mart Case Study )The loyalty scheme was the fashion or the way in which competitors tried to build the customer base.( Asda–Wal-Mart Case Study) Asda chain had 229 stores when it acquired Wal-Mart. Once the takeover has been approved, several Asda –Wal Mart super centers were opened and the model that was based was the US model.( Asda–Wal-Mart Case Study )The Wal-Mart names did appear in the UK with the first supercenter in the Bristol. There were almost 259 stores in the year 2004 and there were almost 19 depots that were mainly in the areas of Scotland or Northern England. There were 122,000 colleagues and it was estimated that the tie up would benefit both the parties as both were concentrating on the low prices and that was in tune with Wal-Mart marketing strategy.( Asda–Wal-Mart Case Study) The year 2001 saw that the prices has been slashed by some £52 million, and that would include the range over the 400 smart price food products that has been based on the Wal-Mart budget brand. The price campaign that has been borrowed from the Wal-Mart along with the smiling face rollback campaign made the position of Asda as the most affordable supermarket in UK.The claim was challenged by the competitors and the first five years after the acquisition saw that the grocery market share had increased from 13% to 16%.Asda had reached the position of second rank and that was achieved in the year 2005.Asda saw the strategy in the larger stores closely following the Wal-Mart and that meant there was increasing of sale space and that was done by removing the backroom areas and there was increasing of non-food areas and this strategy meant that the other supermarket chains were struggling to catch up. The sales in the non-food lines were growing at 25% per year and the ability to source the products that was needed with Wal-Mart meant that the new product lines were being offered at low prices that were not getting matched in UK market. That meant that the products like toasters, kettles, irons were being sold at Pound 18. The above said factors can be said as the rosy picture of Asda and all has not been rosy for Asda. There has been food price deflation in the UK and that was running at a range of 1-2 % and the market share of Asda fell by the year end of 2005.Moreover the growth rate of Asda was hovering around 2% and that was behind the industry growth rate of 3 %.There was a feeling that the business had drunk itself with success and had taken it eyes of from new business opportunities. That had sent the signal that Wal-Mart had not been able to replicate the success everywhere. The key officers Officers: President and CEO: Andy Bond COO: A. J. (Andy) Clarke Regional Manager, Operations: Mark Pollard Describe fit with ASDA brand and ASDA's possible positioning Type: Subsidiary On the web: http://www.asda.co.uk Employees: 251,521 The position is that the shoppers get everything including diamond rings. The stores have been having more than 350 stores to its credit. There has been a dozen of ASDA living and stand alone clothing stores. The primary position of the brand is that it sells groceries and apparel. The stores will be selling CD, Books, videos and housewares.There has been offering of American, Chinese, Mexican take away meals. The key numbers for the fiscal year that has been ending on the year 2008 has been sales that were reported at $35,392.9M. The food brands of ASDA can be described as follows like Smart price, ASDA Brand, Good For You!, Organic, Extra Special and Great Stuff. The supermarket has been into specialty areas like the pharmacies, opticians, and jewellery and photo departments. There has been great service that has been offered from the ASDA and that included in the form of ASDA restaurants and café, baby changing facilities, pet shops trolley service for the young, old and disabled. The ASDA has been committed in bringing down the carbon emission and that the company has Moved the freights to rail sector and that have decreased the travelling by road fleet. There has been a development of import center and there has been increased use of bio diesel.( BUSINESS REPORT: EXAMINING ASDA) Threats and opportunities of retailing and services market The opportunities: The economic down turn that has been affecting the market recently has not been seen as affecting the UK children wear market and the growth that has been forecasted for the year 2008-2009 has been 2.4%.The kids wear has been seen as the fastest growing clothing category and there has been more demand for specialists. The other opportunity that can be taken forward is to tie up with other European retail giants like the Ireland region and that can also mean an entry into China. There will be increased opportunity in the form of the continuous adaptation of new technologies and technique in the business and that will help them to increase the market share to number one position. There has to be key focusing on more environmental recycled products for Asda. Threat will include as the market share of the competitors is fast catching up and that can mean unless and until Asda comes out with innovative marketing strategies, it will lose the competitive hold over the market. The threats will also include the legal issues that the supermarket can get in and the challenge of meeting the increased working hours. There has been accusation of exploitation of workers in the developing countries, damaging local companies and adoption of anti-union policies and these can threat the brand image of the company. The other threat that will include will be the performance of ASDA in terms of sales as it cannot be compared with other Wal-Mart stores globally. The major threat can be said as the competition among rival supermarket and retail companies. The bargaining power of the buyers has been also considered as a threat. There has been threat of Amazon .com that should not be ignored. Market concentration including market share of leading players There have been numerous supermarkets and retail outlets in the UK. The market Share in the year 2006 has been as follows Tesco: 30.6% Asda: 16.6% Sainsburys: 16.3% Morrisons: 11.1% Somerfield: 5.4% Waaitrose: 3.7% Iceland: 1.8% (Tesco) ASDA has been in the Non food segment. Wm Morrison Supermarkets The company has moved the UK food chain thanks to the acquisition of Safeway Plc.The Company has become the fourth largest grocery chain in the UK region.( Morrisons) The company has been running over 375 stores that have been spread over England and Scotland. The takeover has meant that it has been able to make a victory over Tesco and Wal-Mart owned Asda. The super market has been offering a variety of food and non-food items and there has been an increase of market specialty super markets. There has been a store that has been selling gas and the purchase or takeover of Safeway has meant that the store has been transformed in to national chain with gaining of at least 10 % of grocery market. Type: Public On the web: http://www.morrisons.co.uk/ Officers: Chairman: Sir Ian Gibson CEO: Marc J. (M.J.) Boland Group Store Operations Director: Mark Gunter Tesco The other competitor that Asda has been facing has been the Tesco. Tesco has been rated as the numero Uno in the food retail sector in UK and it has been also rated as the third largest grocery retailer. (Tesco )Tesco has been seen as running more than 4,330 stores in the United Kingdom. Tesco has been seen as having presence in more than 13 countries and that will include the regions of Europe, Asia, and in US. In the United States it has been under the Fresh and Easy banner. The early beginning of the company has been in the pile and sell it cheap format and there has been a big change in the policies as the discount format has been abandoned and there has been a down market image for Tesco now. There has been an inclusion of dressier mid market formats and the operations normally included the supermarket, convenience supermarket stores and gasoline retailing under the brand name Tesco express and there has been starting of small urban stores that has been under the flagship name called Tesco Metro. There has been starting of superstores under the brand name called the Tesco Extra and there has been also an entry into financial services in the form of Tesco personal finance and Tesco.com has been rated as the Britain’s leading Internet delivery service. Key numbers for fiscal year ending February, 2009: Sales: $79,936.8M Yearly growth: (14.8%) Net income: $3,179.7M Income growth: (24.5%) Officers: Non-Executive Chairman: David E. Reid Chief Executive and Director: Sir Terry P. Leahy Tesco Tea Buyer: Paul Gregg Type: Public On the web: http://www.tesco.com Employees: 444,000 Employee growth: 7.5% The key advantage has been Environmental friendly products, customer focused strategy, quality products at low price,self-checkout J Sainsbury's The company has been rated as being in the third position behind the Asda and Tesco and the super market has been getting more sales from private label fronts. (Sainsbury) The online division has been the largest growing department and there have been more than 150 supermarkets and it has been trying to cover at least 85% of the UK English population and the firm has been operating about 290 convenience stores. There has been shops that will sell gas and the company has been into property development company ad it has been also owning the half in a 50-50 joint venture with Scottish bank HBOS and a property development company. Type: Public On the web: http://www.j-sainsbury.co.uk Employees: 151,000 Employee growth: 2.8% Key numbers for fiscal year ending March, 2009: Sales: $28,211.4M One year growth: (20.7%) Net income: $431.1M Income growth: (34.3%) Officers: Chairman: Sir Philip Hampton CEO and Director: Justin King CFO and Director: Darren Shapland Future for ASDA supermarket and recommendation The key recommendations would be including new packaging, recycling, waste management, energy and water use, and transport and store development. There has to be having a major change in the human resource department and that would include the fact that ASDA had come into the list as one of the best companies to work for, and that had appeared in the year 2005.The same company has been criticized for the treatment of employees in stores and depots across the United Kingdom. There has been increased pressure from the labor groups and unions on the company to improve the services. The key thing that the company should look into is the customer segmentation. That will play an important role as it cans deeper insight to the shifts in fashion, trends and demographic profile. There has been customers that has been responding to product launches, customers that has been responding to discounts, there have been customers that will react to particular buying of products and there have been customers that would be preferring the same thing over and over again in the same customer base. The key advantage that the retailing firm Asda has done is that it has created a barrier to entry in the form of large retailers and that means the smaller supermarkets will not be able to find cheap and reliable suppliers that will bring a change in the way retailing has been done in the UK. ASDA would have to look at the power of the consumer as there would be more competition for grabbing the power base and that would include the consumers preferring other supermarkets if the price in Asda is higher. There has been high power that ASDA has been able to influence over the suppliers and that has been the main competitive advantage. ASDA should be using technological software for faster production and marketing, and that will be using the life of the employees and management much more easily. Brief description of industry sector being researched The key points that can be said as The retail sector has been generating at least 8 % of the gross domestic product of UK and the retail industry has been employing million of people and supermarket has been dominating the UK food retail market with 56 % of the sales. The vat registered retailers has been retailers and it has been seen as the majority of retailers in UK has been from the organized sector and the rest has been in the unorganized sector. It has been estimated that the retail market in UK has been said to be increased to over 15 % and the value that has been estimated would be £312bn. The real factor will be that companies would be looking at shrinking margins and only those companies would be there. There has been instance of consumer debt, rising interest rates, inflation, house prices and job security that all will be affecting the retail shops and consumer’s .The key issue for future growth of retailing would be the customer confidence about the financial situation and if the customer feels confident will be willing to spend the money more. Julia Kollewe ,2009 has said in her article that Howard Archer of IHS Global Insight said: "At a time when consumers are increasingly cash-strapped and looking to economies, they are ever more likely to concentrate their spending when they can get the best value for their money. Once the best of the bargains are gone and consumers have got what they most want or need, we suspect that the interest in the sales will fall away quickly. Indeed, we strongly suspect that the sales effect will be temporary and that retailers will face a desperately difficult 2009." Conclusion “There have been some high-profile retail closures, but it’s not all doom and gloom,” says Anne Seaman, of Skill smart Retail (www.skillsmartretail.com).“Retail firms still employ one in 10 people in the UK.” (www.skillsmartretail.com) The retail sector has seen the main attraction eve now and there has been still demand of 50,000 jobs even now. The retail industry has been still considered as the largest private sector employer. It has been estimated that there is 291,000 businesses, three million employees and an annual turnover of £265billion. Reference Asda–Wal-Mart Case Study, adapted from case study for OU Business School assignment, 2005, Viewed on September 5, 2009, retrieved from http://www.open.ac.uk/courses/tasters/lb160/objects/d3326.pdf Asda, Viewed on September 5, 2009, retrieved from http://www.asda.co.uk/corp/home.html. BUSINESS REPORT: EXAMINING ASDA,2009, Viewed on September 5, 2009, retrieved from http://ivythesis.typepad.com/term_paper_topics/2009/07/business-report-examining-asda.html Julia Kollewe, 2009, Asda kicks off New Year price war, viewed on September 5, 2009, retrieved from http://www.guardian.co.uk/business/2009/jan/02/asda-high-street-price-cuts-christmas “Passionate about retailing”, Viewed on September 5, 2009, retrieved from http://www.skillsmartretail.com/ Sainsbury, Viewed on September 5, 2009, retrieved from http://www.j-sainsbury.co.uk/index.asp?pageid=413 Tesco, Viewed on September 5, 2009, retrieved from http://www.tesco.com/ Morrisons,Viewed on September 5,2009,retrieved from http://www.morrisons.co.uk/ Read More