Principles of Management at ASDA - Essay Example

and Section # of INTRODUCTION TO THE COMPANY - ASDA ASDA is the subsidiary of the world's largest retailer Wal-mart. It came under the guidance of Wal-mart from 1999 onwards. It is the second largest chain in UK and recently beat Sainsbury's second position to itself come there. Tesco is the largest retailer in UK still. ASDA is responsible for a major chunk of profits of Wal-mart. Wal-mart itself is US based, but since ASDA is UK based, it is the largest non-US subsidiary that Wal-mart owns. ASDA believes in corporate social responsibility and it has proved this by signing the Ethical Trading Initiative (ETI), which defies all practices of business which are unethical. ASDA's values are to keep daily prices low, for which it also has a label for itself which is ASDA Smart Price. They boast that all the products under the ASDA Smart Price are the cheapest price available anywhere. EXTERNAL ENVIRONMENT Environment consists of the surroundings within which every organization operates. The world is going through tremendous changes, such changes whose impact is very far-reaching and powerful. And thus, organizations cannot operate in isolation. The environment has made them interdependent with other factors and dependent on other units within the environment. (Rayner, 2005) Every organization comes face to face with two types of environment: the external environment and the internal environment. The external environment is that environment which is outside the boundaries of the organization. But nevertheless, it affects the organization through its activities and happenings. The external environment can be further sub divides into the general environment and the task environment. The general environment is that part which affects the organization indirectly. Whereas, the task environment is that part which affects the organizations workings and productivity in a direct way. The general environment has various dimensions, like that of international, technological, socio-cultural, economic, and legal-political. Various changes in these dimensions are highly likely to affect how the company operates. (Buchanan, 2007) When it comes to recession, a lot of changes have resulted in the above mentioned dimensions. In the international dimension, the financial crisis has hit the whole globe, thus leading to a shortage of funds all around the world. The technological dimension has not been affected much since it has become more of a necessity than a luxury and thus cutting down on technology has not been made much due to recession. The socio-cultural dimension has altered since people are now cutting down on luxury items, holiday trips and other extravaganzas of life that they used to enjoy. Simple living is the talk of the day. The economic dimension is in a very messy position since the financial crisis has strained the economies of almost every country in the world, especially the big giants. And lastly, the legal-political dimension has changed so as to inculcate the financial crisis. Tax laws have changed; labor unions are concerned about getting laid off. Thus, recession has affected almost every dimension of the general environment. (Watson, 2005) The task environment consists of the groups of people with whom the organization is interacting on a regular basis. This includes the customers, the competitors, the suppliers, as well as the labor market. A common mistake is to assume that the labor market is equivalent to the employees who are working at the organization. This is not so. The labor market consists of those people whom the organization can hire, they are the potential employees. Recession has also affected these groups of people. The customers are now choosier about what to buy and want the greatest value for their money. Employees have a fear of getting laid off by the company. And suppliers now have less bargaining power as compared to their clients since clients are cutting down on production and sales. (Farnham, 2005) COMPETITIVE ADVANTAGE The competitive advantage of ASDA lies in the following strengths that the company has. The strength of ASDA lies in the fact that it is subsidiary of Wal-mart, which is the world's largest retailer. This automatically increases the brand worth of ASDA and gives a lot of credibility to the products and service of ASDA. Since Wal-mart has a great reputation for many things like value for money, convenience for the customer as well as availability of a wide range of products, it automatically tells the customer that ASDA would also specialize in having these qualities within it. Thus that becomes of the greatest strengths of ASDA. ASDA's another great strength is the fact that it makes usage of Information Technology to keep updated about its products sales as well as re-order levels. It also monitors which products are popular among customers and which are not. Thus, the efficient use of information technology is giving ASDA that competitive edge that it needs over other retailers. (Northouse, 2007) Moreover, one of the greatest strengths of ASDA lies in the human resources that it has. ASDA believes in taking great care of its employees, by training them, by giving them good compensation packages. And thus, the employees of ASDA become of one its biggest strengths. When employees are happy, they are good with the customers. And when customers are happy, they are bound to return to the store. CHANGES THAT MIGHT NEED TO BE MADE During these times of recession, ASDA will have to work on its weaknesses and show customers that it can convert their problems into intelligent solutions. One of the best changes that it can bring is to have strategic alliances with other companies. This will increase the worth of the ASDA products and also give greater convenience and value of money to the customer. During times of recession, decreasing the prices of the products of ASDA is not the right solution, since afterwards recovering the brand to what it originally was will take around 7 years, which is a large period of time. Losing the brand worth through decreasing prices is the last thing to do. Therefore, the most strategically fit change that can be brought is that clever alliances are formed with other companies and each company contributes to the marketing budget, thus making it an overall small sum for each and thus it would not become heavy on anyone's pocket. This can be done not just with the marketing budget, but with other expenditures too. (Northouse, 2007) These strategic alliances need to be in the native place as well as at an international location. This will be a great way for ASDA to reduce its costs, since it might find lower costs in some other part of the world than in its own country, UK. Moreover, other changes can be the redesign of the stores of ASDA to ensure that costs are cut as much as possible. For instance, one way this can be done is to introduce a shopping bag, which would last for as many shopping trips as 30. This would reduce the costs of a shopping bag. Introduction of loyalty cards for customers would ensure that customers prefer ASDA over other retail outlets, even in times of recession and financial crisis. (Schermerhorn, 2003) CHANGE MANAGEMENT Change is the factor which is most highly resisted by human beings and especially the workforce of any organization. The workforce likes things to be the way they have been forever because they have adjusted themselves to living this way. The biggest difficulty in bringing such a change is the dealing with the resistance to change brought about by the human resources of the company. There are a number of reasons the workforce resists change. Firstly, it is in their self-interest to do so because they believe that change will take away from them something of value. Secondly, the workforce has a lack of understanding and trust when it comes to relationships with the top management of the company. They do not trust them to do things which will ultimately benefit them in the end. Thirdly, there is high amount of uncertainty among people. They have lack of information about the future and the state which will prevail after the change has been implemented. And lastly, people have different assessment and goals. People see a certain thing in various perspectives. Therefore, they would not be able to see change as good for the organization, when they view it from their own perspective. (Dalton, 1970) Theoretical tactics have been given by books in which they have given sufficient knowledge to companies, top management and change agents by which they can easily do implementation of such change. Such tactics involve many ways such as communication, education, participation, negotiation, coercion and top management support. Each tactic has its own procedures and different times when it should be used. It is very important for the top management to inculcate the workforce within the change process. This will help the management to implement the change and when the people who will be affected by the change process will themselves be a part of it and their support will be there, the whole course of action will become easy. The theories of organization firstly define communication and education, a tactic which is most useful when the change is technical and the users need accurate information to understand the change taking place. (Capon, 2004) Then the theories define participation of the workforce as another tactic. This is useful when users need to feel involved in the change process and they don't just feel that change is been applied on them as if they are mere components, and not thinking beings. In such a tactic, the management should be careful because the users and the workforce have the power to resist such a change. They can decide to participate or they can altogether refuse. As far as ASDA is concerned, this theory will work just fine. This is because the participation of employees is essential if big strategic alliances have to be made. Alliances mean that constant work and interaction has to be done with the employees of the other company and thus employee participation and involvement is very essential. Another tactic that these theories define is that of negotiation. In this tactic, the top management negotiates with the workforce as to whether change should take place or not. The users have an upper hand over the management in this one. If the users ultimately win in the negotiation, the top management will have to let go of their idea of implementing change. The fourth tactic is that of coercion, which is used when a crisis exists and when the initiators of change have all the power. This tactic can also be used as the last straw and when other implementation techniques have failed over the others. (Watson, 2005) The last tactic is that of top management support, where the leaders take on their position and lead change in a manner where they make sure that everybody is comfortable with it. This kind of change should involve multiple departments or the reallocation of resources. Therefore, theory can be very well used to understand and analyze the organization and the changes that it is made to go through. The usefulness of the theory lies in the fact that it is built on past experience of others and tells about the pros and cons of implementation of a certain tactic in advance. Thus, companies can learn from these theories and define what suits their company the most. Managing change is a difficult job since it always breeds resistance from the workforce, especially when it is a change dealing with the way things were done in the company. But using such theories help in combating resistance to change. (Martin, 2005) EVALUATION OF POSSIBLE OUTCOME OF THE CHANGE PROGRAM The change program would include the services of a change agent, who would be responsible for the whole plan. The possible outcomes that can be achieved by using participation are happy employees and the possibility of a great strategic alliance with some other company, which would be increasing the worth of both the companies and their products. Moreover, if small changes are introduced to cut down on costs, this will increase the worth of the organization in the eyes of the customers, leading to an increase in the goodwill of the company. (Brunn, 2006) STRATEGY OF ASDA IN THE LIGHT OF PORTER'S COMPETITIVE STRATEGIES There are three competitive strategies given by Porter: cost leadership, differentiation and focus. The company ASDA has adopted cost leadership. It tried to constantly cut its costs so that it can offer the lowest prices to its customers. This is a general trend among retailers that customers prefer that retailer who offers the lowest prices, since the customers are usually buying items of daily use and thus they would want not to spend too much on these items. ASDA started promoting itself through its marketing campaigns as "Britain's Lowest Priced Supermarket", which speaks quite a lot for itself. When in 2007, Sainsbury and other retailers joined hands to go for price fixing of consumer goods; this became regret for ASDA since it believes in lowering prices for its valued customers. (Farnham, 2005) In times of recession, maintaining the cost leadership stance can get quite difficult. Nevertheless, the company has to cut down costs and live up to its value of providing the cheapest possible products to its customers. ORGANISATIONAL CULTURE ASDA will need to inculcate a great and powerful internal environment i.e. the organizational culture to ensure that survival during such times of crisis becomes easy. The usage of symbols, stories, heroes, slogans and ceremonies from time to time can make it happen. Ceremonies, for instance, can be held and hard working individuals can be rewarded in that, thus encouraging employees to not give up their productivity levels in the recession phase. (Camp, 2006) IMPORTANCE OF EFFECTIVE COMMUNICATION Communication is the process by which information is transferred or exchanged between two or more people so as to influence or lead to some kind of behavior. Communication is a very important aspect within an organization and its importance doubles when there is a crisis situation, like that of a recession phase. The leaders of the company need to ensure that the communication process is smooth and ongoing. Whether they are formal communication channels or that of informal, the manager needs to monitor both carefully and send the most important and positive information through both. ASDA needs to ensure a proper communication system, which would ensure to the employees that things will turn out just fine. This communication can be for the customers too, in the form of marketing practices. (Miller, 2006) CONCLUSION As far as ASDA is concerned, it is placed in a very competitive and challenging industry, that of the retail business. The retail business is a very high selling business, since it involves selling items of daily use. ASDA in the next 0-10 years, will be faced with a lot of new challenges. In the world of business, no organization can remain stagnant and stay where it is. Rather, it has to constantly keep on moving and face the challenges that the unstable environment has to offer. And one of the biggest challenges that ASDA is already facing is that of survival during times of recession. In such times of change and crisis, effective leadership will be essential for asda. It would have to have expert power within the company to manage the challenges that is would face. Expert power comes from the expertise possessed by the manger, and the value and need of this expertise within the organization (Bielous 1995, Salzwedel 2002). BIBLIOGRAPHY Rayner, C. and Adam-Smith, D. (2005) Managing and Leading People, CIPD Watson, G. and Gallagher, K. (2005) Managing for Results, 2nd edition, CIPD Farnham, D. (2005) Managing in a Strategic Business Context, 2nd edition, CIPD Buchanan, D and Huczynski, A (2007) Organisational Behaviour, 6th Edition, FT Prentice Hall Northouse, P. (2007) Leadership: Theory and Practice. Sage. Schermerhorn, J., Hunt, J. & Osborn, R. (2003). Organizational Behavior (8th ed.). New York: John Wiley & Sons. Capon, C (2004) Understanding organizational context: inside and outside organizations. Prentice Hall. Martin, F. (2005) Strategic management: awareness and change. Cengage Learning EMEA. Brunn, S. (2006) Wal-mart world: the world's biggest corporation in the global economy. CRC Press. Camp, R. (2006) Benchmarking: The Search for Industry's Best Practices that lead to Superior Performance. Productivity Pr Inc. Olsen, E. (2006) Strategic planning for dummies. For dummies. Drucker, P. (2007) Management: Tasks, Responsibilities, Practices. Transaction Publishers. Miller, K. (2006) Organizational Communication: Approaches and Processes. Thomson/Wadsworth. Spiker, B. (2007) Organizational Communication: Perspectives and Trends. Sage. May, S. (2004) Engaging organizational communication theory and research: multiple perspectives. Sage. Read More