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ASDA Supermarket Business Environment

Introduction

In the contemporary business world, competition has increased and managers have been devising strategies to enable them gain a competitive edge. One of the key strategies has been the use of information technology as a tool to enhance business operations and at the same time to reach to a wider market through online stores. The following paper analyses the business environment of ASDA Supermarket and measures it has taken to gain competitive advantage by use of IT. ASDA Supermarket is a leading retail and distribution store in the U.K. It specializes in products such as grocery, clothing, general merchandise and electronics. The supermarket also offers financial services (ASDA 2012). ASDA operates in a very competitive business environment; for example, it faces competition from other large supermarkets that offer similar products and services. In addition to the supermarkets, there are small scale retailers who sell clothes and the general merchandise. This implies that there is stiff competition as there is high threat of entry due to the nature of the business.

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In order to devise measures to overcome the competition, it is necessary to analyse the macro and micro factors that affect the operations of the supermarket. Therefore, the following section provides a detailed analysis of the factors using strategic models of PESTLE and Porter’s value Chain Analysis.

PESTLE analysis

PESTLE analysis is a strategic planning tool that deals with macro environmental factors that affect business operations (Vrontis & Pavlou 2008). The tool offers an overview of the external factors that directly or indirectly affect business activities. The main fields covered by the model are social, technological, economic, environmental, political and legal factors (Team FME 2013). See Appendix 1 for a summary of the macro factors that affect the operations of ASDA.

Political Factors

The U.K. is an open market economy which has good policies to protect investors. The country has been politically stable for many years; hence, a good business environment that promotes growth of businesses. In addition, the country has been a member of regional blocks such the European Union (EU). The EU provides ASDA a great opportunity to expand to other member with the community as there are no trade barriers. However, with the Brexit, ASDA expansion is likely to be curtailed.

Economic Factors

Countries have different economic policies which affect the tax regimes, return on investments and the inflations rates. These factors directly affect the operations of ASDA. For instance, the U.K has recovered from the 2008 recession; this shows that the purchasing power of the citizens has increased. As a result, the ability to buy products from ASDA and demand for its financial services has been on the increase. However, it is important to note that the purchasing power is not solely depended on the country’s economic outlook and policies; there are international market dynamics that influence the way customers spend and the costs of the goods.

Social Factors

Social factors that affect businesses include tastes, trends and demographic factors. The changing lifestyles influence the preferences of customers. For instance, across the world, the preferences for various foods have changed and there is increased need for organic foods. Therefore, the supermarket needs to ensure that its groceries and foodstuffs are from certified suppliers.

Technological Factors

In modern society, technology has become a key element in the operations of the business. It is used to enhance internal business operations, advertising, e-marketing, and communication. Technology has enabled businesses to devise new business models that meet the needs of technology users (Chaffey & Wood 2005). As a result, the management decided to take ASDA Direct and the clothing business online. It is worth noting that IT provides a platform where businesses can interact with their customers in order to understand their needs. Therefore, to remain relevant, ASDA has to use technology to make its operations efficient and effective.

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Legal Factors

A business does not operate in a vacuum; there are laws and regulations that dictate the terms of doing business such as employment policies and tax policies. Bearing in mind that the ASDA is based in the U.K, it has to abide by the rules and regulations that govern businesses in the jurisdiction. Failure to comply with the laws may lead to hefty fines that in turn lower the revenues of the business; hence, making it unable to compete favourably.

Environmental Factors

In the modern society, customers are concerned about environmental sustainability practices. Companies that are responsive to the environment are likely to gain competitive edge. As a result, ASDA has put in place strategies that ensure environment-friendly practices. For example, throughout its supply chain process, it engages companies that apply environmental sustainable practices. The supermarket has adopted the use of recyclable materials for packaging. The disposal system is also in a manner that it complies with safety provisions.

Porter’s Value Chain Analysis Model

The model provides an overview of the internal systems within an organisation and how they affect operations of the business. For instance, the model focuses on how inputs are transformed into outputs within a system (Sheehan & Foss 2009). It comprises of supportive and primary activities. In relation to ASDA, the focus of this analysis is the primary activities. Appendix 2 is the representation of Porter’s value chain.

Inbound Logistics

The main competitive point used by ASDA is the low pricing strategy. The supermarket is one of the cheapest retail stores in the U.K. Also; it has streamlined its supply chain through an efficient ordering system that reduces unnecessary costs. This places the supermarket in a position to sell its products at reduced prices and due to the economies of scale it still makes profits.

Operations Management

Operations are determinants of success in any business as they directly influence how functions are organised within an enterprise (Scarborough & Cornwall 2015). In order to gain competitive advantage, the company has streamlined its operations by putting in place a resource planning system that enhances efficiency and effectiveness in all departments by eliminating duplication of effort within the system. For example, through an IT infrastructure, the business operations can be monitored by all concerned people; hence, any point of the system where there are inefficiencies are easily identified and corrected. The result is that customers benefit from fast services. Therefore, in addition to the low prices, efficiency and effectiveness in its system will help in attracting and retaining customers.

Outbound Logistics

One of the key successes of ASDA has been to ensure that it responds to the needs of the customers. Therefore, in reaction to the growing demand for its products, ASDA has established online stores where its existing clients and new ones can access goods such as the clothes. This saves time for the customers who cannot shop at the physical stores due to their busy schedules.

Services

The company has diversified from the groceries and the general merchandise to more products such as electronics and financial services. For example, in most of its stores, there are cafes that give the customers ample time to relax and eat. This increases the experience of the customers because they can interact with one another as they enjoy meals, soft drinks, and coffee. This has served as a strategy for retaining customers. To improve this feature of the cafes, ASDA can ensure that there is free Wi-Fi to increase the customers’ experience. Even though this may increase the operational costs, it will raise the numbers of shoppers and especially the young people. The result will be increased sales volume and profits. In addition, the store has liaised with the manufacturers of electronics to ensure that there are warranties and after sale services for some products. The strategy has been used as a measure to bolster the confidence of the customers with the supermarket.

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Marketing and Sales

There are various methods that ASDA has put in place to reach its customers. One of the marketing strategies has been positioning the supermarket as a superior brand in the U.K. The other strategy is the unique branding of the stores which differentiates its competitors. Finally, the pricing strategy allows its products and services to be cheaper. Nevertheless, the company can still enhance its marketing and sales by use of the IT to communicate with customers. For example, through its online stores, there should be an interactive site where the customer can inquire and get instant responses about services and products.

Recommendations

Competitive positioning entails measures taken by an organisation to differentiate its services and create value in order to attract more customers. It is about carving a niche in an environment characterised by competition. Technology plays a critical role in ensuring that a business gains enduring solutions to operational problems. The solutions can be achieved through an information system that integrates the people, organisation and the technology. Appendix 3 is diagram representing ways ASDA could deploy IT to increase its sales.

In order to gain competitive advantage, ASDA needs to identify gaps that relate to the internal business environment and the external factors. From, the PESTLE analysis, it was established that the ‘Brexit’ is likely to reduce the ASDA’s customers as the freedom of movement that was from other countries will be reduced. Therefore, the business can overcome the challenge by use of IT to reach more customers through the online stores. However, it will need to partner with other companies in countries where it does not have physical stores in order to make the collection of products by customers to be easy. It is important to note that in relation to the technological factors, an online marketing platform or e-stores are not a guarantee of market penetration; instead, the nature of infrastructure and the way customers are engaged matters a lot.

In line with social factors and changing lifestyles, ASDA can increase its customer base by using IT. For example, it should make use of online platforms such as the Facebook and other social media sites to assure its customers that it stocks organic foods from trusted suppliers. The social media such as the Facebook should also be used to market the store as a culturally diverse point where people from different parts of world can find products that suit their social life.

In relation to the micro environment, one of the key competitive strategies employed by ASDA is price competition. The company has been able to set up systems that have ensured close collaborations with the manufacturers and suppliers. As a result, an efficient system has been developed that reduces costs within the supply chain; therefore, products can be sold at lower prices. However, ASDA can still enhance efficiency and effectiveness within the chain supply. The other strategy has been the integration of the IT to streamline its internal operations and the use of e-commerce (online stores) in order to reach many customers. It is important to note that good e-commerce infrastructure has been essential in propelling the growth of ASDA’s online business for the past nine years. Despite the measures, ASDA needs to upgrade its IT infrastructure and ensure that entire supply chain is digitised to ease the monitoring of the movement of goods and services. This will ensure that goods within the stores are replaced at the right time; hence, customers will not miss essential products and services.

Also, there is the need for the company to integrate an IT system to monitor its entire value chain in order to ensure that environmental sustainable practices are adhered to by its suppliers. The result is that the company will gain a competitive advantage as more customers who are environmentally conscious will be attracted to the supermarket.

References

ASDA 2012, Web.

Chaffey, D & Wood, S 2005, Business information management, Prentice Hall, Harlow, England.

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Scarborough, N & Cornwall, J 2015, Entrepreneurship and effective small business management, Pearson Education, Harlow, England.

Sheehan, N, & Foss, N 2009, ‘Exploring the roots of Porter’s activity-based view’, Journal of Strategy and Management, vol. 2, no. 3, pp. 240-260.

Team FME 2013. PESTLE analysis: strategy skills, Web.

Vrontis, D & Pavlou, P 2008, ‘The external environment and its effect on strategic marketing planning: A case study for McDonald’s’, Journal for International Business and Entrepreneurship Development, vol. 3, no. 4, pp. 289-291.

Appendices

Appendix 1: PESTLE Analysis

Political factors
  • Government organisation/attitude
  • Political stability/instability
  • Regional organisations
Economic factors
  • Economic growth
  • Employment policy
  • Monitory policies and inflation rates
  • Confidence of consumers
Social factors
  • Distribution of income
  • Changes in demographics
  • Social/labour mobility
  • Lifestyle changes/health preferences
Technological factors
  • The rate of technology transfer
  • New inventions and development
  • Speed of technological obsolescence
  • Trends in information technology
Legal factors
  • Policies on tax
  • Safety regulations
  • Laws on employment
Environmental factors
  • Environmental regulation and protection
  • Management of supply chain

Appendix 2: Porter’s Value Chain

Porter’s Value Chain

Appendix 3: Using IT to gain competitive edge.

Using IT to gain competitive edge.

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StudyCorgi. (2020, December 5). ASDA Supermarket Business Environment. Retrieved from https://studycorgi.com/asda-supermarket-business-environment/

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