Strategic Analysis of ASDA

Mission, Vision, Objectives, Goals and Core Competencies

Asda is a subsidiary of Walmart operating in the UK. The company has its own business strategy. It has set out on a five-year strategy which focuses on increased employment opportunities, higher number of stores, reduced prices and more online presence. The new strategy will add 40 new conventional stores, 150 forecourt shops, 1,000 online shops, and 100 supermarkets. This strategy is guided by its mission, vision, goals and objectives, and core competencies.

A mission statement refers to the purpose or role that an organisation aims to pursue in order to serve its customers. It provides a short description of the main capabilities and activities of the organisation, its main stakeholders, and its justification.  The mission of Asda is to make goods and services affordable for customers so that they can save money and live better lives, and provide employment for more people in the UK. This mission contains a statement of purpose that informs the strategic planning process of the company. This mission statement tells the world shortly about the story of the company in order to inform them about the main activities and purpose of the organisation. This sells the company to potential customers and investors.

An organisation’s vision provides the specific direction of the organisation and enables its stakeholders to understand where the organisation intends to be in future. A vision statement guides the organisation towards success. The vision of Asda is to become UK’s best-value retailer and exceed customer needs always (Wal-Mart, 2013). This vision is needed for the strategic planning process because it inspires and provides a specific direction and purpose for the organisation. It sets a platform on which various members of the organisation can work together to achieve the organisational goals and objectives. For instance, the five-year strategy which aims at increasing the company’s presence in the UK seeks to exceed customer needs and improve its value. Enhancement of the organisation’s online stores leads the organisation towards being a best-value retailer in UK as well as enabling it to meet its customer needs.

Objectives of an organisation include anything that an organisation intends to achieve, attain or target in a specific period of time. On the other hand, goals are purposes that the organisation’s efforts are directed. The goals of Asda are to create more employment opportunities, and increase its number of conventional and online stores. Its objectives include: create 12,000 more jobs and increase online stores by 1,000 stores within the next five years. These goals and objectives are more specific than mission. The objectives are SMART because they are specific, measurable, attainable, Realistic and Time-bound. These goals and objectives directs the planning process of the organisation because they inform the organisation about what it needs to achieve in order to be successful.

Core competencies of an organisation are the strong and unique capabilities and that enable a company to meet its objectives. One of the key competencies of Asda is its strong network of online and conventional stores. The company already has a lot of stores where customers can visit in the convenience, and with the five-year strategy it will even improve its core competences better. The company also has a good communication that enables to communicate its mission, vision, goals and objectives effectively to both external and internal stakeholders. Furthermore, this strong communication enables the organisation to communicate its strategy effectively across all departments and organisational levels.

Effectiveness of BCG growth-share matrix technique for Asda

As the organisation pursues its five-year strategy, its BCG growth-share matrix technique is expected to change. Boston Consulting Group (BCG) matrix can be used to analyse the product portfolio of an organisation. The model is used to analyse the product lines of an organisation in its phases of growth. This matrix is shown below.

The figure shows that the BCG categorises the product lines into four classes: dogs, question marks, stars and cash cows. Question marks represent products with low market shares but operate in high-growth markets. They have potential but still need a lot of investments to succeed. Stars also need good investment in order to enjoy growth. Cash cows experience low growth but enjoy high market share. Dogs experience both low market shares and low growth. This technique is effective for Asda when developing its strategic business plans because it determines the specific markets of high growth and introduce products that have high market share. Asda enjoys high market share for its products. As the market of the UK starts to grow after the recovery from Euro zone crisis, its products of high market share are likely to become stars. Therefore, BCG growth-share matrix technique is effective in the strategic planning of Asda.

Environmental and Organisational Audit of Asda

The environmental audit of Asda can be conducted using PESTEL framework and SWOT (opportunities and threats) while the organisational audit can be analysed using Resource-Based View and SWOT (strengths and Weaknesses) analysis tools.

PESTEL Analysis of ASDA

PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal factors. These factors affect the external environment of the organisation.

In terms of political factors, the EU has created a good opportunity for Asda to access the European market by reducing barriers of entry into such European economies. Inclusion of China in WTO has also enabled the company to enter the Chinese market and expand its market share (IMF 2009).

Concerning economic factors, the European debt crisis that started in 2011 has led to slow growth in the UK economy and low purchasing power for consumers as people lost their jobs and organisations reduced their wages. However, as the economy grows in 2014 after recovery the company should expect a great boost in the UK market growth.

In terms of social factors, Asda faces an increased demand for organic food. There is an increasing demand for organic food as people become more informed (Scotland, 2005). This offers a competitive platform as other competitors such as Tesco increase their organic food production.

One of the technological factors that affect Asda’s strategy is online retail and e-marketing which is gaining increased prominence in UK. The company has already established a plan to increase its online stores through the five-year strategy.

Environmental factors such as environmental sustainability pressures have caused retailers to engage in environment-friendly business activities. For instance, Asda needs to develop a green packaging in order to recycle materials and enhance environmental sustainability.

In terms of legal factors, Asda is affected by UK’s business laws and taxation rules. Retailers such as Asda are subject to corporate tax rates of 26% (IMF, 2009). This increases the expenses of the company; hence increasing the chances of higher prices in the company.

SWOT analysis of ASDA

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are specific factors affecting the internal environment of the organisation while Opportunities and Threat affect the external environment of the organisation.

Strengths

The strengths of an organisation are its resources and capabilities that can be used to obtain competitive advantage in the market. One of the main strengths of Asda is brand image and reputation (Wal-Mart, 2013). The organisation has a good reputation for providing value for money to its customers as well as convenience and variety of products. Secondly, the company has a key competence in innovation and technology which has enabled it to develop an international logistics system and an online shopping experience.

Weaknesses

One of the weaknesses of Asda is that it offers low prices compared to other retailers in UK which might lead to low profits and may also imply that the company offers poor-quality products. Another weakness of the company is that it is large in size. This may cause difficulties of control and management.

Opportunities

In terms of opportunities, ASDA still has the potential to expand to other countries of Europe because it mainly operates in UK at the moment.  Due to its large size, the company can also diversify to other products and services that have not yet been exploited in UK and the entire Europe.

Threats

The main threat for ASDA is the high competition in UK’s retail industry from other retailers such as Sainsbury, Morrisons and Tesco. Another threat is the reduced spending power of consumers caused by the European sovereign debt crisis.

Stakeholder Analysis

Asda may conduct a stakeholder analysis using PI matrix. The PI matrix is a stakeholder analysis tool which prioritizes stakeholders in terms of power and influence. The PI matrix lists stakeholders of the company in four matrices. The upper left matrix contains stakeholders with low power and high predictability. Asda may prioritize its stakeholders as shown in the PI matrix below.

From the diagram, employees and shareholders have high power and high predictability hence they are the least influential in the company while creditors have low power but high predictability. The government and debtors have low power and low predictability. Customers and shareholders should be given the highest priority because they have low predictability and high power.

The company should conduct shareholder analysis because it determines the most influential and powerful stakeholders of the organisation. This enables the organisation to create value for its stakeholders.

Appropriate Future Strategy for Asda

From the analysis above, it can be noted that the company still has an opportunity to expand into the international market because there are opportunities in the international market and the company has enough resources to expand. Therefore, the company should engage in generic global strategy to increase its presence in the international market. With the increased competition in the international retail market, companies face pressure of reduced costs and low prices. Reduced costs and low prices require a company to engage in global strategy (Porter, 2008). Since Asda already pursues cost reduction and low price strategies, global strategy becomes its relevant future strategy.

Substantive Growth

Andy Clarke’s statement that Asda is a growing business shows that the company is implementing a substantive growth strategy. Substantive growth is the opposite of limited growth. It involves a fundamentally huge growth of an organisation in terms of assets, resources and human capital. Substantive growth in a business strategy like the five-year strategy of Asda covers many deficiencies through economies of scale and low-cost competitiveness.

The statement made by Clarke shows that the company experiences an exponential growth which is a characteristic of achieving substantive growth. Asda is intending to create up to 12,000 jobs, add 1,000 new click-and-collect points and increase its conventional stores by 40 within the next five years. Growth of this nature is exponential and substantive. Therefore, the company will tend to create wealth for the company and its employees exponentially. This substantive growth enhances success against competitors and enables the company to fund its projects further and enjoy a higher market share.

One of the main considerations in any business strategy is competition. In UK, retail industry is highly competitive with such retailers as Tesco, Sainsbury and Morrison. Substantive growth is an important step towards achieving success against competition. As Clarke says, Asda is a growing business which uses such a growth to obtain competitive advantage over competitors. The substantive growth of Asda can be used to increase the gains of the business in terms of human and physical resources.

The increase in number of job opportunities also indicates substantive growth that enables people to increase their income and improve their spending power. Increasing the number of employees as a growth strategy is beneficial to both the organisation and the community. The employees act as human capital that is able to bring in new ideas, innovations, and skills needed to enhance competitiveness and improved productivity.

When considering substantive growth, businesses are looked at from a larger societal perspective. The existence of the organisation is justified by its substantive growth because it enables the organisation to provide job opportunities for many people in the UK. As the company increases its online presence and conventional stores, it improves its resourcefulness and can be able to employ the 12,000 people it intends to employ in the next five years.  This shows that there is indeed a substantive growth in the company.

In pursuing this substantive growth, Clarke pursues market development strategy which involves expansion into new markets using the existing products. In this case, the company opens new stores and increases its stock and production capacity. This requires additional employees and financial resources; hence Clarke’s substantive growth is justifiable because it creates employment opportunities for people. This improves the image of the company and increases the organisation’s competitiveness.

Market entry strategy

One of the alternative strategies for Asda is market entry strategy. This strategy refers to the method that an organisation plans to deliver its products or services to a new market. Market entry strategy mainly applies to international business whereby an organisation enters a foreign market in order to obtain economies of scale and increase its competitive advantage (Forum for International Trade Training, 2008).

If Asda wants to achieve its strategy of increasing conventional stores by 40 and raising the number of employees by 12,000, it needs to develop an entry strategy into a new market in order to get increased sales, business stability and higher brand awareness. In order to develop an effective market strategy, it is necessary for the organisation to analyse its potential competitors and customers. Before entering into a new market, the company needs to consider the availability of trade barriers, price localizations, information, subsidiaries and competition in the new market (Lymbersky, 2008).

There are various market entry strategies that Asda may consider. Some of the available entry methods include joint ventures, subsidiaries, exporting, licensing and franchising. Subsidiary is not an appropriate entry mode for Asda because the company is already a subsidiary of another company (Wal-Mart). Joint ventures involve a business agreement whereby parties agree on a common entity development and contribute equity in order to acquire new assets owned jointly by the two parties. This entry method is also inappropriate for Asda because it is a subsidiary, so it cannot enter into joint ventures without the approval of Wal-Mart.

An appropriate alternative entry method for the company is franchising. This method of entry involves leasing the right to use a firm’s business model and brand to another firm for a specific period of time (Hendrikse, 2008). This strategy enables the company to increase its sales while at the same time avoiding new stores which requires investments and liabilities. Asda’s five-year strategy focuses on increasing employees and building new conventional and online stores. This requires a lot of investment and incurs a lot of liabilities. Using franchising as an entry method is less costly because the organisation will lease its business model to another firm which will use its own resources and investments to sell retail products and services.

In franchising, the franchisor acts as a supplier who allows an operator in the name of a franchisee to use its trademark and distribute its products. In return, the supplier receives a franchising fee. However, Asda needs to secure the protection of its property rights so that the franchisees do not use them for the benefit of other third parties. The secrets of the company may also leak due to franchising contracts. The Franchisor therefore needs to strictly require the franchisee to use the contract to carry out activities for which the franchised trademark is intended (Nickerson & Silverman, 2009). The franchisee’s place of work should have the franchisor’s logo, sign and trademark. The clothes worn by the franchisee’s employees should also be designed to the standard of the franchisor and all products should also meet the standards of the franchisor.

Human and other resources needed to implement the strategy

In order to implement its strategy successfully, Asda needs to take into consideration various resources. According to the resource-based view of the firm theory, a business firm will gain competitive advantage if it has specific resources that are immobile (Grant, 1991). This ensures that competitors cannot be able to imitate the resources. If I were Clarke, I would prioritize human and technological resources in the implementation process. Human resources include all the personnel and managers involved in the implementation process. Integration of business strategy with human resource management is an essential step to ensure that the growth strategy is implemented successfully.

In terms of human resources, the growth strategy implementation team should possess relevant skills and commitment to enhance effective implementation of the project. Managers should also act as transformational leaders by delegating duties, communicating the strategy effectively, setting good examples, and encouraging teamwork in the implementation process (Grant, 1991). The human resources should also be provided with sufficient training to ensure that they are equipped with the knowledge and skills to implement the strategy.

In terms of technological resources, the company should have a strong technological and research base to ensure that the implementation of the strategy meets the changing needs of customers, suppliers and the community. For instance, the implementation team should be equipped with modern and appropriate technology to match remuneration requirements of the 12,000 intended employees and their job descriptions. Furthermore, online technologies should be improved to ensure that the company meets the needs of its online customers. Technological know-how is essential in the retail industry in order to obtain competitive advantage through innovations and creativity. Financial resources are also required to fund the new stores and hire the additional staff.

SMART Targets

The company should also develop SMART targets to ensure that it has a specific direction in its business strategy. SMART goals are specific, measurable, attainable, reliable, and time-bound. One of the SMART targets that the company may develop is to increase market share by 10% within the next five years. This can be achieved by engaging in customer focused services and differentiation strategies.  Another SMART target is an increase in sales revenue by 25% within the next five years. This requires an effective management of stock and supplies as well as increased advertisement to attract new customers and retain existing ones. Thirdly, the company may target to reduce its budget costs by 12% by 2018.

SMART targets are important to the achievement of the growth strategy for Asda because they ensure that the company has a specific direction in the strategy implementation. In other words, the SMART targets enable the company to achieve its mission and vision. The company should identify SMART targets for its strategy and develop appropriate steps to get there. The SMART targets therefore create a platform on which the implementation team uses to implement the strategy successfully.

 

 

 

 

 

 

 

 

 

 

 

References list

Bensoussan, B. E., & Fleisher, C. S. (2008). Analysis without paralysis: 10 tools to make better strategic decisions. Upper Saddle River, N.J: FT Press.

Bjorn, S. B. (2013). Hybrid market entry strategies. S.l.: Av Akademikerverlag.

Forum for International Trade Training. (2008). International market entry strategies. Ottawa, Ont.: FITT.

Grant, R.M. (1991). The resource-based theory of competitive advantage: Implications for strategy formulation. California Management Review, Summer, 114-135.

Harding, S., & Long, T. (1998). Proven management models. Aldershot, Hampshire, England: Gower.

Hendrikse, G. (2008). Strategy and governance of networks: Cooperatives, franchising, and strategic alliances. Heidelberg: Physica.

IMF (2009). United Kingdom. London: IMF.

Karlöf, B. (1993). Key business concepts: A concise guide. London: Routledge.

Lymbersky, C. (2008). Market entry strategies: Text, cases and readings in market entry management. Hamburg: Management Laboratory Press.

Mooradian, T. A., Matzler, K., & Ring, L. J. (2012). Strategic marketing. Boston, MA: Pearson Prentice Hall.

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