Contemporary Developments in Business and Management - Essay Example

It is estimated that retails sales in the sector would go up to £137bn by 2010 although most of it will be in the convenience sector. The SWOT analysis suggests Asda has plenty of opportunity for growth if it focuses on online shopping, where Tesco has been dominating so far. Internet has penetrated the business environment and e-commerce has become common place but companies are unable to reap benefits because of the challenges it poses. In the UK grocery sector, Tesco once again dominates although its start-up costs were high.

Asda did attempt online shopping but did not meet with success. If they change their model of operation and take into account several factors like building customer confidence, assuring online security and privacy and understanding customer needs, they would be able to overcome the challenges posed by e-commerce in grocery retail. The logistics would have to be worked out as well. UK grocery retailing is dominated by large multiple supermarket chains that have influenced the overall grocery retailing sector in the UK.

The total retail sales through UK grocery outlets were valued at £120bn in 2005 out of which the contribution of supermarkets and superstores was £88bn (Defra, 2006). Retail grocery sector provides 5% of the employment in the UK and the profit margins of the supermarkets ranges between 2 and 6 percent. To achieve the economies of scale these firms operate ten or more stores and under one roof they offer the maximum number of items possible. These stores are based on the concept of self-service.

The UK grocery retail is patterned after oligopoly where few major firms like Morrisons, Tesco Sainsbury, Asda and Safeway dominate the sector. They have been able to prevent new entrants into the sector. ASDA, the supermarket chain in the UK retails food, clothing, toys and general merchandise. It 1999, it became the subsidiary of American retail giant Wal-Mart, and it now ranks second largest in UK, second to