Asda Marketing Strategy Essay Example For Students

Asda Marketing Strategy Essay Executive Summary- 3 1. 0 Introduction- 3 2. 0 External Analysis: PESTEL Framework- 6 3. 0 Industry Analysis: Porter’s Five Forces- 9 4. 0 Internal Analysis- 11 4. 1 SWOT analysis- 11 4. 2 Value chain analysis- 12 4. 3 Resource Competencies- 14 5. 0 Vision, Mission, Objectives Measures- 15 5. 1 Vision- 15 5. 2 Mission- 15 5. 3 Objectives- 15 6. 0 Strategic Options- 16 6. 1 Generic strategy- 17 6. 2 Competitive strategy- 17 7. 0 Developing Strategies- 18 7. 1 Corporate strategy- 18 7. 2 Business strategy- 19 7. 3 Functional strategy- 19 8. 0 Implementation Plan- 20 References- 21 Executive Summary ASDA is one of the biggest retail supermarkets in the UK. It has 17% (in 2009) of market share in the UK retail market. The UK retail sector is highly competitive and ASDA has to act according to changing business environment and adopt new business strategies to improve its market position by increasing its market share. This document is an analysis of ASDA’s current position in the market and strategy which can be applied to improve its position in the UK retail market. The relevant theories such as PESTLE Analysis, SWOT Analysis, BCG Matrix, Porters five and Ansoff‘s matrix have been use to explain the business environment of ASDA. The new vision and mission statement has been developed and business strategy which can be used to improve ASDA’s market position in three years time is clearly defined. 1. 0 Introduction Company profile ASDA Stores Limited was founded as Associated Dairies Farm Stores Limited in 1949 in Leeds. The adoption of the ASDA name occurred in 1965 with the merger of the Asquith chain of three supermarkets and Associated Dairies; ASDA is an abbreviation of â€Å"Asquith and Dairies†, often capitalized. ASDA became a subsidiary of the American retail giant Wal-Mart, the world’s largest retailer, in 1999, and is the second largest chain in he UK after Tesco, having overtaken Sainsburys in 2003. ASDAs marketing promotions have usually been based solely on price, with ASDA promoting itself under the slogan â€Å"Britains Lowest Priced Supermarket, 12 Years Running†. As a competitor in the market, ASDA has been clearly appealing to more price conscious and frugal cons umers through their established low price strategy and value proposition. This has been invested through their savings from â€Å"Operating for Less†Ã¢â‚¬â„¢ program (Your ASDA, 2009). Still lately they have reported to have lowest growth rate among four biggest supermarkets in UK with a market slip of 17% to 16. %. (International Supermarket News, 2010) Industry analysis The report below provides an insight into the supermarket company, ASDA, with emphasis on its external environment and companys analysis of resources, competence and culture. Two future strategic options are suggested in regards to the resources based strategies. According to TNS Market Research (2009), grocery market share figures published for the 12 weeks ending 22nd March 2009 reveal that the success of the discounters is continuing. The Discounters now account for a 5. % share of Grocery Spending, higher than ever before reported, and they are also the fastest-growing sector of the market. The total gro cery market continues to grow strongly (+7% year-on-year), fuelled partly by food price inflation and also by better performance for Supermarkets than other Retail Outlets. Among the Top 4, both ASDA and Morrisons enjoyed 9% growth, ahead of the market and yielding higher shares than last year. Tesco’s growths of 7% and Sainsbury’s of 6% were still creditable but slightly behind the overall market resulting in small share erosion. Such performance is indicative of the overall buoyancy but intense competition within the Grocery Sector in the current economic climate. | | |12 Weeks to 22 March | | | |12 Weeks to 23 March 2008 |2009 |change | | |? 000s |% ** |? 000s |% ** |% | |Total Till Roll 27,906,191 | |28,605,449 | |2. 5 | |Total Grocers |20,060,291 |100. 0% |21,227,518 |100. 0% |5. 8 | |Total Multiples |18,605,858 |92. 7% |19,758,429 |93. 1% |6. 2 | |Tesco |6,185,522 |30. 8% |6,453,370 |30. 4% |4. 3 | |ASDA |3,421,940 |17. % |3,411,938 |17. 5% |8. 5 | |Sainsburys |3,239,500 |16. 1% |3,422,662 |16. 1% |5. 7 | |Morrisons |2,327,583 |11. 6% |2,495,623 |11. 8% |7. 2 | |Somerfield |715,232 |3. 6% |699,959 |3. 3% |-2. 1 | |Waitrose |795,406 |4. % |805,006 |3. 8% |1. 2 | |Iceland |343,713 |1. 7% |375,708 |1. 8% |9. 3 | |Netto |147,294 |0. 7% |150,678 |0. 7% |2. 3 | |Lidl |442,317 |2. 2% |499,544 |2. 4% |12. 9 | |Aldi |520,963 |2. % |605,635 |2. 9% |16. 3 | |Farm Foods |99,155 |0. 5% |118,442 |0. 6% |19. 5 | |Other Freezer Centres |47,741 |0. 2% |49,989 |0. 2% |4. 7 | (** = Percentage Share of Total Grocers) Figure 1 Market Shares: Total Till Roll, Great Britain consumer spend includes all expenditure through main store tills and excludes petrol in store concession (adapted from TNS Global Market Research) The food and drink retail sector represents the largest industry in the UK, providing employment for over three million people in primary production, manufacturing and retailing. In 2003 retail accounted for 9% of gross domestic product (Datamonitor, 2003). In recent years UK supermarkets have come under increased analysis over their treatment of suppliers, particularly of own-label products, yet the development of strategic supply networks has been an integral part of most supermarket strategies for the past decade. ASDA is the second largest food retailers in the UK employing over 143,000 people, and provides online services through its subsidiary, ASDA. com. The UK grocery market was worth ? 146. 3bn for the calendar year 2009, an increase of 4. 8% on 2008 (IGD, 2009), where they operates under four banners of â€Å"Convenience store, Traditional retail, Hypermarket-supermarket-Superstores and Online channel amounting 92,796 stores†. Figure 2 Grocery Market Performance (adapted from IGD Research) 2. 0 External Analysis: PESTEL Framework Political factors Operating in a decentralized environment with stores around the UK, ASDAs performance is highly influenced by the political and legislative conditions. According to Huczynski and Buchanan (2007), politics are inextricably entwined, affecting human behaviour in an organization. As for employment legislations, the government encourages retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs (Balchin, 1994). To meet the demand from population categories such as students, working parents and senior citizens, ASDA employing people from these categories. Also ASDA has been able to won their loyalty although they operate in an industry with high staff turnover. It has been proved by over 40% of their total employees been with the company for five years (Your ASDA, 2010). Economical factors Economic factors can be considered with various statistics such as â€Å"Economic growth, Inflation, Interest rates and Exchange rates†. Above factors can cause to ASDA, with their relevance to costs, prices, demand and profits. As in any economy, high level of unemployment can cause adverse effect on demand on producing goods which can be largely out of control of the company yet it would reflect on the company effort on marketing mix and performance. Since ASDA highly depend on UK market would run on the risk of any slowdown in the UK food market. Also the up-coming election also might have effect on retailers with their new legislations on tax and related laws. Social / Cultural factors Demographic changes such as the aging population, an increase in female workers and a decline in home meal preparation mean that UK retailers are also focusing on added-value products and services. With their recovery strategy, ASDA has thrived to increase their organic product line and ready meal range (The Guardian, 2006). The type of goods and services demanded by consumers is a function of their social conditioning and their consequent attitudes and beliefs and they’re becoming more health conscious too. Their attitudes towards food are constantly changing. ASDA has removed all hydrogenated fat from their own label products along with artificial colours and flavours. This has leaded to focus on value-added products and service multiplied by focus on own-label share of business mix, supply chain and related operational improvements due to minimise in costs. Modern trends indicate that British customers have moved towards â€Å"One-stop† and â€Å"Bulk shopping†, ASDA have increased their variety non-food items on sale in their supermarkets. Technological factors Technology as a macro-environmental variable, influence the development of products increasing customer satisfaction via personalized convenient shopping experience. ASDA has been utilizing technology in their operation of â€Å"In-house data analyzing, Intelligent weighing machines, Electronic shelf labeling, Electronic Point of Sales, self check-out machines†. The new technologies benefit both customers and the company. Environmental factors According to Pettinger (2002), it is necessary to consider the effect of operation on the environment in relation to all business aspects. ASDA has taken step towards their environmental obligations by having recyclable packaging, comprehensive energy efficiency programs and carbon emission. ASDA opened its newest eco-store in October last year at Bootle in Merseyside. The ? 27m, 40,000 sq ft store has energy-generating and energy-saving features such as an external bio-mass boiler fuelled with wood chips and lower-energy freezers, all of which have doors to keep the cold in. The store also has higher levels of daylight than similar-sized branches. ASDA estimated that the store’s carbon footprint will be more than 50 per cent lower than a conventional outlet (RetailWeek, 2009). Rival grocers have also invested in eco-friendly shops, including Tesco’s latest store at Cheetham Hill in Manchester, and Sainsbury’s latest in Gloucester Quays. Legislative factors ASDA shall consider of their legal environment they operate with recent legal changes which could affect operations like consumer laws, employment laws covering laying-off, dismissal, working hours and minimum wages and health and safety legislation for safe at work place. In February 2006, ASDA was fined ? 850,000 for offering employees of a newly taken over distribution depot a pay rise to give up union rights. An employment tribunal found the American-owned supermarket chain guilty of promising 340 distribution staff a 10 per cent pay rise to give up the collective agreement negotiated by the GMB union – an act which is illegal under a 1992 labor relations law. The court ordered ASDA to pay ? 2,500 to each GMB represented employee at the Washington depot (Food Drink Europe. com, 2006). 3. 0 Industry Analysis: Porter’s Five Forces Canda At War EssayIt should narrow down the diversification index and reposition the core products. At the same time, ASDA should focus improvements or get rid of Dogs. 6. 0 Strategic Options In ASDA, they’ve been backed by the psychological image for â€Å"Everyday Low Price† and their social responsibilities in supporting sustainability via people-price-planet and corporate governance through unique culture. ASDA has values which summarize their beliefs direct on their decision and actions on market and serve its purpose to the fullest as respect for individual, strive for excellence and service for their customers. The ANSOFF Matrix defines two key factors of marketing; â€Å"What is sold who it is sold to†. It therefore relates only to products and markets and gives you four alternative courses in action: Selling existing products to existing markets Extending existing products into new markets Developing new products for existing markets Developing new products for new markets These four options are set out in a four-box matrix that shows the existing and potential products against the existing and potential markets as follows; Figure 4 – ANSOFF Matrix (adapted from QuickMBA) Market Penetration – Increasing the existing share in the existing market to facilitate further growth. Market Extension – Taking existing products into new markets, for example expanding sales from purely the domestic market into the European market. Product Development – Offering new products or modifying existing products into the existing markets. Diversification – Either with related products and markets or unrelated products that are totally unconnected with the existing products and markets. In identifying alternative direction for strategic development, shall follow the ANSOFF Matrix which explicitly considers growth options where ASDA should refer to â€Å"Diversification-try† to reach the untouched markets with new products. ASDA can pursue their strategies based on, 6. 1 Generic strategy ASDA should look into its growth in terms of increasing its market share by extending the variations they offer by practicing â€Å"Differentiation Leadership† spreading into â€Å"Diversified Geographical Areas† away from current city-limits. For this ASDA, should have frequent interaction with supplier chain of the external environment. With their unique culture of operations, they should focus on increasing internal efficiencies further it helps to hold up the external pressures with their current practice of cost focus. Apart from that ASDA should look for to develop into away from Europe where potential for cost focused highly populated cities in the other continents. This would further help in promoting sustainability across the globe and it makes opportunities for making joint-ventures with current operation mass retailers in those countries. Also ASDA could focus to make savings by improving product quality of their own brand lines further to eliminate current perception which could deviate customer attention away although they meant to be the lowest in price. 6. 2 Competitive strategy With the chosen â€Å"Low-price Strategy† to compete, ASDA should be able to challenge their competitors as it’s taken as their sustainable advantage. Yet the quality offers by them has been in debatable, they should deviate their attention on differentiation strategy where they could offer improved quality products improved service at the same price or with enhanced margins-pricing slightly higher if requires. They could pay attention in developing their â€Å"question marks in non-food ranges into stars†. 7. 0 Developing Strategies Developing a cohesive business strategy usually seen as a daunting experience due influence of the environment and capabilities of organizations’ strategic position. This usually will be based on the purpose of the strategy which is followed and degree it meets with stakeholders expectations. This consist of 3 levels; â€Å"Corporate, Business and Functional†. 7. 1 Corporate strategy This provides the details of whole range of business opportunities available to grow and discussed in strategic options. After identifying strengths and opportunities, analyzing portfolio of the business, they should work towards increasing their market share by turning question marks into star. Figure 5 – BCG Matrix (adapted from QuickMBA) At the same time they should invest in increasing sales of ASDA Grocery line o stabilize in present position to increase their profit via sustainable operation through low-price strategy. This could be further backed with improving online shopping and grocery shopping delivering. Also they shall consider on their advancing ethical stand point by continuous audit on their suppliers and further investing on improving safety issues and labour sabotage. 7. 2 Business strategy In building competitive advantage, ASDA should be more competitor-oriented and improving leadership, culture, employees, performance and capabilities of having balanced organization which is difficult to replicate. This could be done by initiating radical innovation in new technology among existing products and process. This launch in new markets, enabling rapid growth by creating high return on investment. Also they could approach systematically into other vicinities like market, business, and organization. ASDA should focus on improving sustainability adapting into changing business environment through learning organizations. This provides the catalyst and intellectual resource towards sustainable competitive advantage. 7. 3 Functional strategy ASDA should diversify by creating value by improving their core process execution and enhancing their business units’ structural position. By doing so it provides viable basis to strengthen those strategic business units. This will help to create meaningful competitive advantage and difficult to imitate by the competitors. In vertical integration, will develop their customer panel by getting them involve as co-innovators by increased customer partnership in all aspects such as â€Å"Research Development, Finance, Marketing, Operations† apart from seeking opportunities in acquiring larger portion of suppliers. At the same time ASDA should be penetrates and diversify geographically by moving into rural areas in local market with smaller scale stores with upbringing their local values. Also they can merge or acquire with current small-scale operators in the rural areas and develop into new market segments. In venture strategies they should search for emerging opportunities in unknown, un-served needs of customers. 8. 0 Implementation Plan Considering the strategies discussed above, ASDA is likely to employ two strategic options that are also likely to be primary market objectives of focus on market development though partnerships and diversification through new product development. Evaluate available opportunities and carry out research to find out market attractiveness in rural areas and their expectations and possibilities of acquiring merging with local gas stations, corner shops, spin-outs plus large supermarkets operating in Asian countries European Union. ASDA should focus in Asian markets, as Asian markets are showing an increase in consumer spending and increased trend towards retailing. Joint developments Strategic Alliances by entering new markets can serve as a key growth driver of the companys revenues and expansion strategy. By entering into joint ventures or partnerships, in order to gain a larger economy of scale and larger market presence, ASDA will draw on the extensive local knowledge and operating expertise of the partner whilst adding its own supply chain, product development and stores operations skills to deliver a better shopping experience to customers. Ansoffs matrix also suggests that if new products are developed for existing markets, then a product development strategy has to be considered by the management level of a company. In expanding and diversifying ASDA’s product mix, it is also crucial to implement internal development when new products are developed. Considering the frequent changing needs of the customers, ASDA can introduce new product lines. To get this success ASDA may require more attention to R, leading to additional spending. The retailing industry is experiencing overloading and innovative services and products being the major competitive advantage. Therefore, innovation has to be a major driver for ASDA’s product development. To get successful on this implementation plan need to do a feasibility analysis by preparing a budget forecast for the â€Å"next 5 years† clearly defining funding requirements and expected profitability. Improve infrastructure of the company to carry out continuous trainings and workshops for employee development and look into their welfare facilities. Also ASDA should improve online shopping and home delivery services, where its customer’s life gets easy. References Ansoff Matrix (2007) QuickMBA, , Available: (http://www. uickmba. com/strategy/matrix/ansoff/) Last accessed: 14th April, 2010. ASDA Careers: Culture (2010) Your ASDA, , Available: (http://www. asda. jobs/why-join/culture. html) Last accessed: 07th April, 2010. 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