ASDA Market Share - Essay Example

Executive Summary This report pays special attention in the operating mechanisms of ASDA supermarkets in the fresh foods department. It is aimed at establishing the means and ways of increasing the market share of ASDA in the fresh foods distributions. The report will establish the practices carried out by the main competitors of ASDA supermarkets as well as the actions to take to out do them. The researcher will provide the necessary steps to be undertaken so as ASDA supermarket may maintain as well as increase their market share. The aim of this report is to establish how ASDA supermarket will increase it market share compared to the competitors. This report provides all the relevant information regarding ASDA supermarkets that is required for business and competitor intelligence needs. It contains the major external and internal factors that affect ASDA stores limited in SWOT and PESTLE analysis form. Conclusions and recommendations reached is based on the data collected in relation to the history, business description and the list of products and services provided by the supermarket. Table of Contents ASDA supermarket is a British chain of supermarkets dealing with mostly retail business in foodstuffs, toys, clothing and the general merchandise. The supermarket chain has also a mobile telephone network known as ASDA mobile. The head offices of ASDA chain of supermarkets are situated in ASDA house Leeds, West Yorkshire (Asda par 4 2010). ASDA has collaborated with major players in the retail industries in strengthening and increasing its market share. One such situation is when the management showed interest in Wal-mart the largest retailers in the world (Deloitte 2009 par 1), and become its subsidiary in 1999. It is the second largest supermarket chain in the United Kingdom after Tesco. The ASDA supermarket was previously at third position but managed to overtake Sainsbury in 2003. The market share of the various supermarkets in the United Kingdom is as shown below: United Kingdom’s Supermarket share Tesco 31.2% Asda 16.8% Sainsburys 15.9% Morrisons 11.4% Total Co-ops 4.2% Waitrose 3.9% Somerfield 3.7% Aldi 2.9% Lidl 2.3% Iceland 1.7% Netto 0.6% Farm Foods 0.5% The marketing promotions of ASDA supermarket have solely been based on price. The slogan for the supermarket is “Britain’s Lowest Priced Supermarket, twelve years running”. The supermarket has now been wholly owned by Wal-mart and thus is not required by law to declare its half yearly or quarterly earnings. The supermarket submits all accounts to Wal-mart’s offices each and every October. The supermarket enjoys an employee pool of 143, 126 in number thus a major employer in the region. Current Situation ASDA in 2006 introduced ASDA essentials to stock the products of the company. This positioned the supermarket in a better situation in enhancing competition with the other supermarkets. The supermarket also started an online shopping store in 1998 that stocks items in various categories like entertainment, furniture, electrical, travel, mobile phones and flowers. The supermarket also sells its own brand of clothing by the name George. To compete effectively with Tesco, ASDA opened up ASDA electrical in the year 2007. Reports indicate that ASDA is one of the best employers in the United Kingdom. The company offers a ten percent discount to staff whenever they purchase goods and services form the stores. Also in one of the days in the month of December the employees are allowed twenty percent discount on their purchases. This is in efforts to make shopping at the stores one of the most enjoyable experiences to the customers and staff. The company ensures that all the people with disability issues are well catered for and family friendly services are available at all times. Methodology There are various research methodologies used in this research. A survey was carried which consisted of straight forward and concise questionnaires. The population size was ensured to be large enough for best results. The survey was aimed at establishing the distribution of customers among the major supermarket players in the United Kingdom and on what range of products and services each provides. The researchers employed in-person surveys, mail surveys and telephone surveys in carrying out the research. The researchers also engaged people in personal interviews. The interviews included unstructured and open ended questions and lasted for about an hour with each interviewee. This aimed at establishing subjectively on the data collected. The researchers also visited the various ASDA and Tesco branches to establish the types of products available in their stores with bias to fresh products (Faculty Plattsburgh edu 2010 par 5). This sort to see the various customers services available whenever they came shopping for fresh products. The researchers used various statistical packages to analyse the data collected. In reaching at the conclusions, the researchers ensured all the necessary research techniques applied were viable in the current situation (Creswell 2003 p 57). Swot & Pestle Analyses SWOT Analysis A SWOT analysis is a model used to analyze a company’s strengths and weaknesses in a given market segment (Griffin and Pustay p. 24 2005). It is the assessment type the researchers are going to apply in assessing the internal and external factors affecting the business and the various solutions. The objectives of the SWOT analysis will be attained through identifying the organizational strengths, opportunities, threats and weaknesses than can be used in short run and long run strategic planning and in the advancement of the official action plan to realize aims, objectives and goals of the business. Organizational Strengths The company has good management that aims at team building skills and motivation to employees. This works towards encouraging the employees increasing their output. This also fosters for new technology, innovation and invention therefore raising the output and profitability of the company. The management has emphasized on good communication skills and employment of retail managers. The company has strong marketing strategies. They have embraced strong slogans that leave an image in the consumers’ minds. They have lately adapted “more for you for less” as their marketing slogan. This will emphasize the freshness and quality of the food and drink products as the low price was not working as it used to with consumers. All along from the start, the company has maintained relatively low prices. The customers have enjoyed cheap prices for products and services from the stores. The company has signed the ethical trading initiative which is a code respecting the workers rights of a living wage and freedom of association. As a multi-national company, the living wages has no great impacts to the operation of ASDA as it may influence government to set minimum wages as low as possible to stop business from shifting to other countries. The company is able to source for cheap products in order to realize its dream of maintaining low prices. Organizational Weaknesses Despite maintaining low prices for products, they have been faced with the challenge of selling sub standard goods. More than often, the consumers complain of low quality goods and services from the stores. Organizational Opportunities The supermarket chain has very high likelihood of expansion. Through its effective sales and marketing strategies, it has been generally accepted by most of the consumers as the shopping point. Through this they will expand the market base and the market share. Organizational Threats ASDA”S market share fell to sixteen point seven percent in the previous years as a result of market pressures from Sainsbury’s. There are pressures of maintaining low prices and at the same time producing high quality services and products. There are also pressures of ecommerce and there is always stiff competition during the December holidays. Pestle Analysis PESTLE analysis concerns the macro environment surrounding ASDA as a company usually in strategic analysis report. The issues may be political, economic, socio cultural, technological, environmental or legal issues (Turner 2007 p.232). Some of the political issues affecting ASDA as a business are the government’s taxation policy, the political unrest, unstable government and government education policy. The taxation policy by the government on fresh foods either works towards increasing or decreasing the profitability of ASDA as a company. Political The political unrest in the United Kingdom has been on the increase. This is due to influx of foreigners in the country. This works towards increasing the population density of the country and thus a better market for ASDA’s fresh foods. With the increase in population the firm will increase level of sales. Also the company should ensure that it carries out extensive marketing even outside the United Kingdom to ensure that every foreign national is well informed of the retail business. The government instability has negatively affected the business. The change of guard at state house has put most of the businesses at disarray with no exception to ASDA supermarket chain. This has negatively affected the source of raw materials and markets of the ASDA. The instability has also been attributed to the global recession which has made the government to interfere with the independent running of the businesses. The government education policy is towards ensuring that people stay on high education. This will have both negative and positive effects to the profitability of the supermarket. Economic The economic issues affecting ASDA in its business operations are credit crunch, high interest rates, recession, high cost of living, increased demand, increased employment and new product lines. There is increased demand resulting from online shopping putting the supermarket management on its toes. The online shopping practice by consumers leads to other services requirement like software development and maintenance for the application to be used by the online shoppers. This also leads to web maintenance personnel requirement. Also there is development of new line of products for the European Union citizens. This renders the market to be very volatile thus management has to be very careful in entering a certain products line. Also the high cost of living has greatly and will continue to greatly influence the business activities of ASDA. The high cost of living is attributed to high fuel prices. High fuel prices will push the supermarket prices higher leading to lowering of the demand of ASDA’s products. There will also be increased employment emanating from online shopping. Online shopping will demand home shopping assistants and drivers to be employed. However the high recession rates have negatively influenced the employment levels. High recession rates have led to high unemployment levels and poor performance of the retail chain. Social There is high influx of European Union citizens in the country. This leads to high demand for accommodation healthcare, welfare and education. This in turn pushes the costs of those services up. There also changes in social trends. ASDA’s population is ageing pushing the pension payment to employees up. This can also lead to an alternative source of labour for ASDA to tap into. Ageing population could also lead to unwillingness to work thus increase in pensions. Throughout the years there has been change in lifestyle. This has led to longer working hours in the supermarket thus the employees are working longer and are flexible on time management. In areas with high ethnic groups’ concentration, the goods and services are targeted towards that ethnic group (Fight 2004 p73). It is prerequisite that the management understand the various ethnic groups distribution in making decision on which fresh foods to stock in the various stores. Technological With the advancement in technology, there has resulted to various shopping behaviours like online shopping. Nowadays shoppers prefer shopping from the comfort of their homes. Also the market has embraced new product types and there is high improvement in terms of efficiency due to use of bar coding. There is cost reduction as a result of new technology introduction which leads to lower labour costs. Also technology has introduced chip and pin, and self scanning of products. Others The other issues relate to environmental factors like packaging and recycling. The legal issues that may arise when ASDA is carrying out its business activities are competition commission, employment law and trade regulations. Competitor Analysis The main competitors of ASDA are Morrison’s, Tesco and Sainsbury. Through competition they are striving to define the market structure and the shopping trends of the consumers. It is the aim of every retail outlet to have the biggest market share compared to the major market players. Tesco was established in 1924 and employs over four hundred thousand people. It enjoys the largest market share among its competitors. It is recognized as the world’s largest online grocer with a customer base of more a million people. Tesco area of specialisation ranges from clothes, electronics and telecoms to financial services, gas stations and internet services. Tesco controls over thirty percent of United Kingdom’s grocery market and now owns a store in every postcode. The core competencies of Tesco are environmentally friendly products, customer focussed strategy, quality products at low prices, improved labelling and self check out. It sells approximately forty thousand food products in its super stores (tesco.com par 3 2010). The company’s own label products are categorized as value, normal and finest and accounts for about fifty percent of the total sales. The company aims at low prices and recognising every little effort from any of the constituent partners. It also aims at reducing the lead time in the supply chain and improving its online services (tescocorporate.com par 4 2010). Tesco’s strengths include increasing market share, insurance, Tesco online, brand value and United Kingdom leadership reinforced. The major weaknesses include reliance only on the United Kingdom market, debt reduction and signs point to serial acquisitions Sainsbury mostly specializes in foodstuffs. The key strengths nector cards for customers, range of products and services and local shops. The supermarket has a range of Sainsbury banks and online shops. However the supermarket enjoys more staff. The major threats are competition from other leading supermarkets, employees turnover, government restrictions and low profits. The supermarket faces challenges of expansion due to small expansion space in the current local shops. The main strengths of Morrison’s supermarket include balance sheet strength, cash flows, perception of the products, perception of brands, advantage the company has over its competitors and the balance sheet strength. The style of management of Morrison’s is a result oriented one with emphasis on expansion, revenue growth and shareholder wealth creation. The top management style trickles down to the junior staff thus impacting on productivity. In running of the company, the customers are highly emphasized in the whole the companies operations. This requires the provision pleasant shopping experience. The company has sound and integrated internal system incorporating in house production, marketing and logistics. Morrison’s ahs core skills in the ability to provide value for money experience thus assurance of constant market share. The major threat just like the other companies is competition from other big players. The supermarket retail outlet lacks a sophisticated development and training programme that specifically targets the junior and low earning staff so as they improve well rounded skills on a continual basis. Results of the Research According to the research carried out, Tesco is the biggest retail outlet providing fresh products in the United Kingdom market. The supermarket aims at providing cheap services and goods that are of high quality. This has been the major strength that has made Tesco to dominate the grocery market. According to the research carried, to beat Tesco in the fresh foods industry is really a challenging task but with the right mechanisms put in place ASDA can dominate the fresh foods market. To beat Tesco and keep the rest of the players at bay will require the management to explore the fresh products industry and diversify their products. Introduction of affordable new products that are of high quality compared to the rest of the industry players will greatly improve the market share of ASDA. Recommendations In competing with one’s competitors, it is always good to do a swot analysis of the rival. With this knowledge, one will be able to gain grounds basing on the rivals weakest points. As unveiled the main competitor in the fresh foods industry is Tesco supermarket. To gain a bigger market share, one is supposed to carry out a detailed research on the strengths and weaknesses of Tesco supermarket and build on the weaknesses as one tries to weaken the structure and prevalence of its dominance. ASDA has weakness in provision of quality fresh products at cheap prices as compared to Tesco. This has made Tesco to dominate the market no matter the efforts by ASDA supermarket. ASDA, being a multinational retail outlet, should source cheap but quality products in countries where there is low production cost. This will ensure that it receives and provides goods and services at cheap prices without violating ethical business practices. References Asda (2010), Contact the right service tea. Retrieved on 30th July 2010 from http://your.asda.com/section-contact-asda par 4. Creswell J. W., (2003), Research design: qualitative, quantitative, and mixed method approaches (2, illustrated, annotated). London. Sage Publishers. Deloitte (2009), Wal-Mart remains largest global retailer, according to Deloitte survey. Retrieved on 30th July 2010 from http://www.deloitte.com/view/en_IE/ie/news/ie-pressreleases-en/b84fb247c4efd110VgnVCM100000ba42f00aRCRD.htm par 1. Faculty.plattsburgh.edu (2010), A Short Guide to Types of Research Methods. Retrieved 30 July 2010 from www.edu/katherine.dunham/Chapter%200.doc. Fight A. (2004), Credit risk management (illustrated), Oxford, Butterworth-Heinemann. Griffin, W. & Pustay M. (2005), International Business: A Managerial Perspective (4th ed.), New Jersey: Pearson Prentice Hall. Svsu.edu (2010), Types of Research Methods. Retrieved on 30th July 2010 from http://www8.svsu.edu/~sherlock/Module1/Methods/index.html. Tesco.com (2010), Accessibility Statement. Retrieved on 30th July 2010 from http://www.tesco.com/help/accessibility/. Tescocorporation.com (2010), Delivering on quality, value and ethics. Retrieved on 30th July 2010 from http://cr2010.tescoplc.com/en/buying-and-selling-our-products-responsibly.aspx. Turner R. (2007), Gower handbook of project management (4th edition, revised, illustrated), London, Gower Publishing Ltd. Read More