Company profile
ASDA Group Limited is a private limited company that operates in the UK retail industry. The firm was founded in 1949 and it operates 565 retail stores that are located in different parts of the UK, with its headquarters at Leeds. The firm ranks as the second largest retailer in the UK and it intends to position itself as the best-value retailer in the UK by exceeding the customers’ needs and expectations. Moreover, the firm intends to position itself as a retail store whose goods and services are affordable to everyone. In addition to its mission and purpose statements, the firm’s success over the years is also due to the organisational values that it nurtures. The firm’s values include providing optimal service to all customers, striving to achieve excellence, and respecting individuals.
By the end of October 2012, the firm had experienced a 6% increment in its profitability. The firm’s success is associated with integration of effective marketing practices (Wood 2012). Despite its success over the years, ASDA is exposed to challenges emanating from the external business environment. Bates (2005) argues that the external business environment can be categorised into two broad areas, which include the general and the task environment. The task environment is comprised of five main components, which include the customers, suppliers, regulators, competitors, and strategic partners. This paper entails an analysis of ASDA’s task environment with the objective of making recommendations on the marketing strategies that the firm can adopt in order to contribute to the firm’s success.
The external environment, PESTLE analysis
According to Bates (2005), changes in the external environment affects the task environment and hence the microenvironment. Consequently, it is important for firms’ management teams to understand the external environments in order to formulate marketing strategies that will contribute towards achieving high competitive advantage. The table below illustrates a summary of the UK retail industry macro-environment by evaluating the political, social, economic, technological, and legal environments.
Analysis of the task environment
Understanding the task environment is paramount in formulating marketing strategies. The task environment is comprised of different stakeholders who include competitors, customers, suppliers, intermediaries, and the labour market.
Competitors
Businesses cannot rule out competition in the course of their operation. Harrison and John (2010) outline three main types of competition that firms across the world face. They include indirect competitors, existing competitors, and potential competitors. The effect of potential competitors on a particular industry is dependent on the strength of barriers to entry. The UK retail industry is characterised by relatively low barriers to entry. Entry into the industry is dependent on the entrants’ ability to raise the required capital in order to compete with major firms such as ASDA. Increment in the intensity of competition in a particular industry due to new entrants also depends on the attractiveness of an industry.
The UK retail industry is very attractive. It is projected that the industry will grow with a margin of 1.8% by the end of 2013, which is the highest growth rate experienced in the UK since the recession. The food retail sector is expected to grow with a margin of 2.9%. The consumers’ spending on food products is expected to increase to £ 15.9 billion (Wood 2012). Considering the UK market’s growth potential, the likelihood of new entrants is high, which will culminate in increment in the intensity of competition. Notably, achieving competitive advantage in the UK retail industry is relatively easy. An organisation only needs to concentrate on a few main factors, which include efficiency, product diversity, and a high level of operational efficiency.
The attractiveness of the industry is likely to increase the degree of industry rivalry. ASDA faces intense competition from three main companies, which include J Sainsbury Public Limited Company, Tesco Public Limited, and Wm Morrison Supermarkets. Bates (2005) emphasises that it is imperative for organisations’ management teams to develop a comprehensive understanding of its competitors’ strategies. Failure to possess such market intelligence may lead to loss of customers. The firm’s competitors have established an elaborate network of retail stores in the UK. Moreover, the firms have integrated optimal marketing strategies such as low cost strategies. Consequently, they have been in a position to develop a large customer base. The four firms control 69% of the total market share in the UK.
Customers
Consumers constitute one of the most important components of a business. This assertion emanates from the knowledge that the lack of customers means that a firm will not be in a position to achieve its profit objectives. Consequently, it is important for managers to ensure that their organisations provide customers with high quality products and services. Moreover, the products offered should contribute towards satisfaction of the customers’ needs. Harrison and John (2010) are of the opinion that customers are an important determinant on the intensity of competition in a particular industry.
ASDA has adopted the integrated marketing communication strategy in an effort to create awareness of its products and services. Some of the methods used include advertising, sales promotion, direct marketing and public relations. Moreover, the firm has adopted an effective distribution strategy in an effort to enhance accessibility of its products. The firm distributes its products to both individual and institutional customers.
Customers have varied product expectations that the firm should address. Moreover, the firm faces intense competition from both the large and small retailers in the UK. Therefore, the likelihood of customers switching to products and services offered by competing firms is relatively high. Moreover, the switching cost is relatively low. Therefore, one can assert that the UK supermarket industry is characterised by high customer bargaining power. Intense customer bargaining power may adversely affect the firm’s competitiveness. Since the occurrence of the 2007 economic recession, the bargaining power amongst customers has increased significantly. The increment has emanated from the change in the consumers’ attitude and purchasing power.
Suppliers
Suppliers enable an organisation to supply the materials, workspace, and equipments necessary to engage in productive business activities. Therefore, developing and sustaining a strong relationship with the suppliers is paramount. Bates (2005) emphasises that such a relationship is critical in enabling an organisation to negotiate and enter into contracts that lead to achievement of best services and prices. The suppliers may have substantial power to influence the price at which they will sell the materials required. Despite this scenario, businesses should ensure that they provide customers with high quality products and services. Therefore, they should select suppliers who offer customers high quality raw materials.
ASDA is committed at ensuring that it offers its customers high quality products and services. In a bid to achieve this goal, the firm is focused towards developing an excellent supply base by establishing a supply chain program. The firm has formulated a number of requirements, which the suppliers are required to adhere to in the process of their undertakings. Some of the requirements relate to transit cases, palletisation, label and case printing, and delivery requirements. The suppliers are also required to ensure a high level of safety in the process of transporting the suppliers. All these requirements aim at meeting the customers’ expectations. In order to build an excellent supply base, ASDA has to develop a strong relationship with its suppliers.
The firm is commitment at providing customers with diverse and high quality products and services at a relatively low price. ASDA deals with diverse product categories, which include grocery, financial services, and general merchandise. This strategy may be affected by the supplier power. For example, an increment in the cost of production of the raw materials due to economic changes such as inflation may force suppliers to increase the price of raw materials. Despite these market changes, the firm should expand its product lines in order to meet the customers’ product needs.
The supermarket industry in the UK is characterised by a large number of suppliers. Consequently, suppliers have a relatively low bargaining power. The low supplier bargaining power in the industry is evidenced by the fact that ASDA is in a position to control its suppliers by formulating a set of requirements, which are aimed at achieving a high level of customer satisfaction. Moreover, the large number of suppliers in the industry provides large supermarkets with an opportunity to influence the prices of materials supplied. The large supermarkets can switch to other suppliers at a relatively low cost.
Intermediaries
According to Bates (2005), intermediaries act as a link between consumers and producers. The main intermediaries in the operation of a business include retailers, wholesalers, agents, business representatives, regulators, and strategic partners. In the course of its operation, ASDA is subject to a number of regulators such as food and drug administrations, the environmental protection agency, and the securities exchange commission. ASDA has to ensure that the products offered meet the safety requirements. Moreover, the firm has to ensure that its operations do not contribute to environmental pollution by operating in a social responsibly manner.
The labour market
Bates (2005) is of the opinion that skills shortage may affect an organisation’s operational efficiency adversely. The UK labour market is characterised by a relatively strong human capital base due to an effective educational system. However, changes in the labour market, for example a high rate of brain drain may limit the effectiveness of the labour market. This aspect might affect ASDA’s ability to recruit a well-experienced workforce.
Recommendation on marketing strategies
From the above analysis, it is evident that ASDA is faced by changes arising from the external and internal business environment. Thus, it is imperative for the firm to understand the internal environment is paramount in formulating optimal organisational strategies (Griffin 2012). The SWOT model can enable an organisation to understand its strengths, weaknesses, opportunities, and threats. The table below outlines ASDA’s strengths, weaknesses, opportunities, and threats.
ASDA should exploit the above strengths, weaknesses, opportunities, and threats in developing its competitive advantage.
Continuous review of the pricing strategy
ASDA should conduct a review on the price of its products and services from time to time in order to understand the level of customer perception. To achieve competitiveness with regard to pricing, the firm should consider reducing the number of intermediaries.
New and continuous product improvement
The firm should invest in research and development in order to successfully diversify its product offering. The firm should also consider venturing into other market segments. This will enable the firm to deal with the intense competition in the retail industry.
Investment in marketing communication
The firm should enhance its marketing communication by integrating the concept of integrated marketing communication.
Market growth
To cope with the prevailing market changes in the UK retail industry, it is imperative for the firm to adopt diverse market growth strategies. Some of the strategies that the firm should consider are illustrated by the Ansoff matrix below.
Employee training
In order to deliver optimal level of customer service, ASDA should formulate an effective training program. The training program should focus on various marketing aspects. One of the aspects that the firm should consider includes customer service training. Such training will contribute towards improvement in the effectiveness with which the firm offers its customers unique customer service. The firm should also ensure that its employees are satisfied. Customer service training will improve the level of customer loyalty hence increasing its sales revenue.
Conclusion
Understanding the external business environment is critical in a firm’s effort to develop competitive advantage. Despite its success in the UK, ASDA may be affected by changes emanating from the market environment. Consequently, it is imperative for the firm’s management team to understand how it can adjust its marketing strategies in order to align its operations with the task environment. Some of the strategies that the firm can consider include establishing a niche market, benchmarking, reducing the number of intermediaries, and training employees on how to be effective in their marketing processes. Moreover, the firm should review the task environment continuously in order to understand the changes that occur. Integrating these strategies will improve the firm’s competitiveness, and hence the likelihood of achieving long term survival in the UK’s competitive retail industry.
Reference List
Bates, B 2005, Business management; fresh perspectives, Pearson Education, Cape Town.
Griffin, R 2012, Management, Learning Customer Publishing, Mason.
Harrison, J & John, C 2010, Foundations in strategic management, Cengage, Mason.
Wood, Z 2012, ASDA see 6% rise in profits, Web.