The Key Strengths and Weaknesses of the ASDA - Case Study Example

Analyse The Strategic Capability ASDA Using Appropriate Strategy Tools And Identify The Key Strengths And Weaknesses Of The Firm Table of Contents Task 1 Internal Analysis 3 Company Overview 3 Strategic Resources of ASDA 4 Core Competencies 6 Strengths of ASDA 7 Weaknesses of ADSA 7 Company’s Financial Status 8 Value Chain Analysis 9 Cultural Analysis 12 Task 2 New Strategies 12 TOWS Matrix 13 Sustainability 15 Feasibility 15 Acceptability 16 Power Interest Matrix 17 Strategies for Change Management 18 18 References 19 Task 1 Internal Analysis Company Overview ASDA is a well-known online supermarket set up in England. The company has been carrying out its business in the areas of retail food processing, garment manufacturing, toys, monetary services and every day usable. This supermarket mainly aims towards providing its varied stocks of finished products to its customers at affordable rates. Apart from all these, the company being the sub-brand of the United States retail giant Wal-Mart has a huge growth perspective both in terms of domestic and global markets. Besides, this supermarket holds the rank of being the second largest food outlet after Tesco. Within the domestic market itself, ASDA operates in excess of 540 products and service outlets (Hoovers Inc., 2014). These outlets are mostly supermarkets, supercentres, living stores and superstores. This sub-brand also manages its ecommerce section in terms of adding up additional reputation and revenue through online sales. Through its e-commerce part, the company mainly aims towards effective selling of non-food materials, apparels, entertainment utilities, housewares and kitchenware among others (Hoovers Inc., 2014). Apart from all these above described aspects, this sub-brand also implements multiple price war strategies with the intention of retaining its stance in the current market. One of such aggressive strategies followed up by this sub-brand is the ‘price-rollback ‘strategy. The details of this strategy along with multiple other strategies have been explained in the further continued sections (Hoovers Inc., 2014). Strategic Resources of ASDA Since being a part of the parent brand Wal-Mart, this sub-brand has got a substantial availability of resources both in terms of cost and easy access. These resources have been subsequently described hereunder: Human Resource One of the crucial resources for this retail business brand is in terms of human resource. Through this resource, the brand effectively controls its employees. Since being a retail brand and being majorly involved in the business-to-customer type activities, it is vital that this brand maintains a skilled and effective employee force with the prime intention of countering every possible type of product sales related challenges which might emerge depending on the current marketing scenario (Business Case Studies LLP, n.d.). Moreover, this sub-brand also uses its effective human resource force for carrying out multiple audit and recruitment processes as a measure of this brand’s work as well as monetary performance. A diagrammatic representation of how the company undertakes its recruitment process in terms of continuing its expansion has been provided as under (Business Case Studies LLP, n.d.). Source: (Business Case Studies LLP, n.d.) Resource In Terms Of Diversified Products ASDA offers a huge line as well as mix of products to its customers at affordable rates. This sub-brand of Wal-Mart provides multiple unique product types which include clothing, food and non-food products, electronics, sanitary products, beauty products and furniture among others. All together this can be stated as a vital resource for this retail business unit (ASDA, 2014). Resources In Terms Of Technology Adding up to the above two resources, this sub-brand has successfully implemented information technology within its operational structure. ASDA has got its own ecommerce website through which it carries out its online business process. The website helps in terms of promoting the diverse product category of this sub-brand through which the customers can easily choose their required product types and make online payment as well. ASDA also successfully links up multiple social media with its website and participates in multiple social media promotions such as Facebook, YouTube and Twitter (ASDA, 2014). Core Competencies Previously, ASDA went along with its strategy of ‘Everyday Low Pricing’ (EDLP). This strategy to a significant extent was successful in terms of helping this company in attaining higher retail market share within the United Kingdom. However, with time this strategy perished gradually. Nonetheless, by taking into consideration the current retail market of the UK, this sub-brand in the present scenario seems to be focusing more with regard to improvising its product quality and promoting it accordingly (Vizard, 2014). The brand has also strategized in terms of investing an amount of £1billion with the intention of bringing about improvisation to its dropping sales figures. One strong competency which this brand seems to have inculcated is regarding its merger with Wal-Mart. Through this merger, ASDA has enjoyed every benefit of being a part of a well-known global retail brand. It has significantly helped ASDA in terms of attaining high market share and customer preference. Besides, the key core competence of ASDA lies in its elevated leadership position in the food retail segment. Moreover, ASDA has concentrated on a lucidly defined segment of the market in relation to food as well as non-food segment with key uniqueness including home delivery and online shopping (Corporate Watch UK, 2004). Strengths of ASDA It has been ascertained that ASDA after undergoing a business merger with Wal-Mart has attained multiple strength factors. A few of these factors are explained hereunder: The first strength factor which this brand has attained is regarding a strong market share. Currently, ASDA holds about 16.8% of the United Kingdom’s grocery market. Besides, this retail brand has also attained superior financial support and market recognition due to the higher market reputation of its parent brand Wal-Mart. Apart from these two strengths, ASDA also implemented the concept of sustainability within its work process (Grocery News, 2014). The company supports the concept of utilising environment friendly and biodegradable materials in terms of product manufacturing and packaging. Furthermore, due to the current plan undertaken by this company regarding expansion, it has been hiring a huge number of effective and trained workforces which can also be considered as a strategic advantage for this brand (Grocery News, 2014). Weaknesses of ADSA Since being a subsidiary of Wal-Mart, this brand cannot undergo rapid product line and product mix expansion as there will be a greater chance for this retail company to lose its brand name. Moreover, the threat level from competitors such as Tesco and Sainsbury’s also seems to be gradually rising within the domestic market of the UK. The other weakness is regarding the huge operational cost which this firm has to undertake and which further effects the company’s revenue earning. The brand also tackles multiple risks in terms of threat due to massive employee force strikes (Grocery News, 2014). Company’s Financial Status The financial status of ASDA can be understood depending on the outcomes obtained from the ASDA income tracking tool. In 2012, this brand projected a hike in its annual profit earning by 6% despite the fact that a majority of its new chain retail outlets were running into significant amount of losses (Wood, 2012). The brand has also planned in terms of pumping in an amount of worth £700m into the economy of the UK through subsequent investment within its online and other retail outlets Adding to this, ASDA also projected a hike in sales from about £21.8 billion to £22.8billion in the financial year 2012 (Robinson, 2013). Moreover, this retail business company also attained a dip in the amount of payable tax from £194.4 million to £164.4 million during the period of 2012. The accounts report also projected ASDA to have added 23 new stores in 2012. All together, the total coverage area amounted to about 640,000 square feet. This total establishment included 13 new supermarkets, five new superstores and five new garment and home stores (Felsted, 2013). Value Chain Analysis Value Chain Value-chain analysis is a systematic procedure which describes about every single step within complex business functionality. This process mainly aims towards analysing the level of effective raw material utilisation along with the maximum amount of value attained by the customers regarding products or services at least possible cost. The entire value chain can be differentiated into two main parts. Primary Activities Inbound Logistics: In terms of inbound logistics, ASDA projects effective materials, products and service management activities. This management can be explained in term of effective maintenance of the store warehouse, in store product arrangement based on search criteria and multiple more. Through this way the company tends to provide values to the customers through ease of product and service availability (Asda Stores Limited, 2014b). Operations: The operations within this company play a vital role. This role can be described in terms of effectively procuring the necessary product stock depending on the level of inventory stock. The operations part also includes effectively labelling the products and pricing them accordingly so that the customers can easily find them out while evaluating the retail stores (Asda Stores Limited, 2014b). Outbound Logistics: The outbound logistics for this retail company is also quite complex. Excluding the shipping part, ASDA has to pay significant focus in terms of effectively packaging out its store products, selecting a target group of customers and fulfilling their products and services needs accordingly (Asda Stores Limited, 2014b). Marketing and Sales: This forms the most vital job process of ASDA. Since being a retail based company, it primarily depends on marketing and selling of products and services in terms of earning its revenue. Adding to that, this company provides value to the customers in terms of selling products and services to its customers at lower prices. The brand also lays significant focus in terms of effective handling of customers for attaining their loyalty and preference (Asda Stores Limited, 2014b). Service: In terms of services, this brand provides its customers with a wide of financial and discount related services. The brand also sells its own line of products starting from consumer durables to electronics (Asda Stores Limited, 2014b). Supportive Activities Firm’s Infrastructure: In terms of infrastructure, the company has been continuously performing huge investments in terms of establishing new infrastructure in the domestic markets of UK. This brand is ranked amount the top retail outlet brands in UK and has been significantly contributing in terms of stabilizing the nation’s economy. Adding to that, the brand also shares the benefits of being a sub-brand of a retail giant Wal-Mart (Asda Stores Limited, 2014b). Human Resource Management: The brand has been a source of employment for a large workforce. In terms of managing such a workforce, the brand possesses an effective human resource team which helps in terms of effectively coordinating the employees regarding their work roles and performance (Asda Stores Limited, 2014b). Technological Development: The technological advancement has significantly contributed towards the success of this company. The company has been using it in terms of effectively operating its online websites through which, the company is offering its customers with the ease of ordering online. Adding to that, the company has also been using this technological part in terms of product labelling and billing counters and procurement management (Asda Stores Limited, 2014b). Procurement: Carrying out an effective procurement management is vital in terms of keeping the product warehouse replenished. The company has to keep a close watch on its inventory levels and keep on filling them depending on the needs of the customers and stock exhaustion rate (Asda Stores Limited, 2014b). Cultural Analysis In terms of organizational work culture, the company believes in the fact that every employee working within the organisation must respect one another and provide prior importance to the customers. In context to the culture web concept, the scenario prevailing in the work culture of the company can be addressed based on the dimension of symbol. This is due to the fact that the employees working the organisation are provided specific dress codes with the prime intention of representing them as a part of the company. Moreover, the company also promotes itself as a brand and possesses a specific logo (Asda Stores Limited, 2014a). Task 2 New Strategies SWOT Matrix Strengths Weaknesses 1). Huge size of the UK market 2). Recognition for being a sub-brand of Wal-Mart 3). Huge workforce 4). Oligopolistic nature of market 5). Capability of supplying products at low rates 1). Operating under a major parent brand 2). No control over the external environment 3). High inflation rate and unemployment rates Opportunities Threats 1). Developing stage of US economy 2). Preference to sustainability concept within the market 3). High level of customer preference due to provision of low priced and quality goods 4). Government support in terms of tax reduction 5). Increased customer focus in terms of making online purchases 1). Strict legal implications (Competition Law) 2). Threat from new entrants 3). High level of competition from the market giants This matrix has been constructed depending on the findings obtained from the above mentioned aspects and the provided assignment. The strength and the weakness factors have been described in the provided SWOT matrix. Based on the above mentioned points, it can be said that in the current scenario, the retail market of the UK seems to be favourable for carrying out business processes. This is mainly due to the fact that the UK government has subsequently helped in multiple possible ways for promoting the business processes of these brands. The prime intention being that, the successful functionality of these business processes will gradually help in terms of improvising the economic status of the UK. TOWS Matrix The below section contains several strategic directions for the company for the period of 2013-2018: Strategies for Advancement (SO) Strategies for Overcoming Weakness (WO) 1). Bringing down the cost of production 2). Decentralization of the work process 1) Focusing in terms of bringing about product and service diversification Strategies for Avoiding Threats (ST) Strategies of Avoiding and Overcoming (WT) 1). Maintaining a competitive stance in the market in terms of price leadership and quality. 1). Keeping production cost low and substantially providing the financial benefits to the customers. Aiming towards attainment of customer preference and market reputation and overcoming the competitive challenges In the provided context, the strategies are required to be formulated based on three major criteria which include the suitability, feasibility and acceptance. In context to the provided TOWS matrix, two pertinent strategies can be chosen. The first strategy will be regarding bringing down of the product manufacturing cost. In the stabilising economic state of the UK, it is vital that the company maintains a lower cost of production with the prime intention of generating marginal revenue and providing goods to the customers at lower rates. This strategy can be easily related to the company’s strength factor since ASDA till date has been successful in terms of providing products and services to the customers at lower rates. The second strategy which the company needs to implement is regarding bringing about decentralising within its operational process management. This strategy will gradually help in terms of systematising the background process of the company and bringing about efficiency within their day-to-day work process. It will add up to its opportunity factor of getting an edge over competitors and attaining customer preference. The elaboration of each of the two strategies with the three aspects of sustainability, feasibility and acceptance has been provided as under. Sustainability In terms of fortifying its sustainability, both these strategies can be stated as equally important. By taking into consideration of the various aspects described by Michael Porter, It can be said that he paid much more emphasis in terms of combining the environment concept with organisational development. Moreover, multiple reports have also projected those nations with tighter environmental regulations often end up attaining high level of industrial competition (Guardian News and Media Limited, 2014). Adding to that, the two strategies will significantly help ASDA in terms of reducing its consumption levels regarding energy saving, cost cutting, use of environment friendly materials, low product cost and multiple more (Guardian News and Media Limited, 2014). Feasibility Strategic feasibility helps with regard to analysing the capabilities of the laid down strategies in terms of the ability to fulfil the desired organisational objectives (Scribd Inc., 2011). Correspondingly, these two suggested strategies will put significant pressure on the management in terms of coming up with new methods of bringing down their expense levels and simplifying their work process. Adding to the bright part, these two strategies will also help in terms of bringing about further efficiency regarding the management of their inventory. Through this way, the brand can subsequently attain a balance between the rising demands and supply (Scribd Inc., 2011). Acceptability In terms of acceptability, ASDA has already attained high level of customer acceptance due to its interactive and customer preferred service and product type. Adding to that, these two above proposed strategies will further help ASDA in terms of providing additive financial, quality and price benefits to its customers. Thus, the strategies can be termed as acceptable for the period of 2013-2018. Through these two strategies, the brand can also support the concept of sustainability in an effective manner. This will help in attaining customers’ preferences and thus add up to the acceptance factor (Asda Stores Limited, 2014c). Power Interest Matrix The power interest matrix can be considered as an interactive tool in terms of determining the stakeholders who will be effective and who will interfere in terms of carrying out the company’s activities. In the case of ASDA, three essential stakeholders can be considered. The first is Wal-Mart, the second being the customers and the third being the raw material suppliers. On evaluating Wal-Mart based on the above matrix, it can be ranked in the category of ‘manage closely’. This is due to the fact that Wal-Mart is the parent brand of ASDA and does possess high interest and power towards the processes of ASDA. In terms of customers, it can be said that they lie in the category of ‘keep satisfied’. This is due to that fact that the entire business is based on customers and moreover the customers possess high power and less interest towards the operations of the company. They always look forward in terms of safeguarding their own interest. The third stakeholder i.e. the raw material suppliers also lie in the similar category of Wal-Mart. It is necessary that ASDA closely manages its raw material suppliers otherwise it can be a huge liability for the company (Mind Tools Ltd, n.d.). Furthermore, only one of the three stakeholders might oppose the above mentioned strategies since it’s going to hamper their business. This stakeholder can be deemed to be the raw material suppliers. The other two stakeholders’ i.e. Wal-Mart and the customers will fairly accept it since it will enable them derive financial savings in the long run. Strategies for Change Management In terms of change management, the first proposed strategy i.e. bringing down of production cost is a crucial constituent which require change management and which the brand must implement within its operations. This is mainly due to the fact that, even if the implementation of this strategy might cost the company now but it will financially benefit it in the long run. For implementing this strategy, the brand will have to bring about changes within its work structure, machinery, raw material selection, revised revenue and pricing plans among others. Furthermore, bringing about such changes is not an easy aspect and might get subjected to lot of restrictions. For instance, the potential risk associated with bringing about such kind of change is regarding opposition from labour union, instability issues from the raw material suppliers, considerable risk in terms of investment made for altering production setups among others. References Asda Stores Limited (a), 2014. Making Asda A Better Business. Sustainability. [Online] Available at: http://your.asda.com/sustainability [Accessed May 02, 2014]. Asda Stores Limited (b), 2014. Asda Set To Invest Over £500m In 2012. Press Centre. [Online] Available at: http://your.asda.com/press-centre/asda-set-to-invest-over-500m-in-2012- [Accessed May 02, 2014]. Asda Stores Limited (C), 2014. Asda Welcomes Ministerial Acceptance of FSA Proposal for a Ban on Six Suspect Food Colourings. Press Centre. 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