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Business Model Interrogation and Development: Case Study of ASDA

 

According to Rigby (2005), ASDA is a Britain company that was formed in 1965. It was as a result of three companies merging together inclusive of the associated dairies, furniture retailer and Allied carpets. It is best known for food retailing in the United Kingdom, apart from financial services, clothing and general merchandise. This retailing company is well known to have a mobile phone network despite it being a subsidiary of Wal-Mart (PR Newswire, 2004). The head office of the ASDA mobile network is based in Leeds, West Yorkshire where its operations are controlled and managed by a group of experts.

The marketing promotions of the company are mainly based on the price of its commodities, to mean that it uses the slogan of being the lowest priced supermarket in Britain with the aim of improving their brand loyalty. The low cost offered by ASDA was as a result of the demolition of the retail price maintenance that was spearheaded by the store situated in West Bridgford (Braithwaite & O’Connor 2008). The prime minister of Britain was lobbied by Bob Martin in allowing Walmart to take over the United Kingdom market but this did not happen instead they only managed to buy ASDA. The retail competition is very stiff in the UK, especially among the top four retailers with ASDA being one of them. Kingfisher struggled in acquisition of ASDA whereby, its mission was to create hypermarkets in the whole of Europe continent and sell all type of goods under one roof. ASDA’s operations are balanced between the cost and revenue with an aim of maximization on profits for the company at large. According to Yousept & (2005), there is good communication network at ASDA, which help in the smooth running of the business where they can get all the information required on what to improve to better their operations. The management team is well known for holding events where they bring their plans of the year to the notice of all the company’s stakeholders. ASDA has a colleague-focused website, which aims at giving every one opportunity to post their comments and this in turn assist the customers to be more informed on the operations that take place at ASDA. The ASDA’s operation team is well known for the responsibility of ensuring activities are smoothly handled to the success of the company at whole. The goal of the business is checked upon by the process improvement team who ensures that strategic plans are well implemented and projects carried out responsibly. In order to improve some business problems, the process improvement team works tirelessly with the trading, supply and the distribution teams to prevent failures in their retailing business.

Currently, Tesco is the market leader of the retail businesses in UK, with ASDA closely following. If other retailers like ASDA doesn’t come up with aggressive business strategies, Tesco can easily monopolies the retail market in the UK and force other retailers to close shop.  The chief executive officer at ASDA is determined to ensure that his company is to fill the gap that is potentially widened by Tesco. The company aims to achieve this by investing £1billion in their business for the next five years so that they can lower their prices and be in a position to win many customers to their business. The company plans to offer new propositions apart from the current offered on service, quality and style of their products to obtain more customers in their industry leading to high sales and returns on investment (Business Wire, 2013). The officer plan to redefine the ASDA retailing company in United Kingdom as the low prices they offer will enable them win their competitors over. On the other side, Walmart will be forced to reduce its cost to win the widening gap of its newly acquired company. According to ASDA, they prefer what they can manage despite retailing on food the same as Tesco but it’s more preferably than equivalent initiatives, which are made by Tesco on offer improvement. To retain and win new shoppers, ASDA ought to compete hard with its competitors on matters to do with store experience by employing more technologically influenced employees. ASDA tend to believe that small outlets can be more profitable than big stores following its low prices on products it will obtain more customers. In this regard, the company plans to have several small stores in strategic places across the country to improve their customer’s access to their stores. In addition, this will support their logistic operations since the company will be able to deliver goods at a short distance as many times as possible.

Strategic human resource management at ASDA helps in streamlining the space that is said to be given on white goods that sell well online. There is need to share excess space with the local communities, thus ASDA has been looking for ways of doing that to achieve its goal of success. The growth of the company in terms of its supermarkets is spearheaded through filling of gaps between itself and its competitors. The company ought to avail its services online to cater for needs of the large number of online buyers who want to be served online. Price is a big competition to many companies but to ASDA it is an advantage following their low prices, which make many people to opt shopping with them. ASDA in general executes its own strategy and provides products that they are well known in the retail market. The grocery sector of ASDA is at a world class level; since it is well at serving its customers accordingly leading to realization of more profits. ASDA has a close relationship with decision makers who assist where possible in matters of the business continuity when stuck. Rigby (2005) argue that, the giant supermarket gives a hearing to its customers and effects their needs according to their desires to retain them, bearing in mind that most of them are loyal. The retailer has a good customer relationship management scheme that ensures that they improve on their ability to enhance their customer satisfaction and improve on their brand loyalty. This implies that ASDA is a giant supermarket that is ready for change where possible for the goodness of all. Tesco and Morrison are other retailing companies known to be very competitive when it comes to online shopping and ASDA is closely following the operations of these companies.

The current organizational structure for ASDA needs to be improved to allow more efficient communication flow and decision making within the organization. The world is moving so fast in terms of technology whereby, if one is not conversant with technology he will end up losing a lot no matter how perfect you might seem to be. For the company to be the real retailing giant, it ought to employ the use of technology at a very high rate so as to move at the same speed with its competitors the likes of Tesco and Morrison grocery retailers. ASDA does not carry the online shopping as required with the claim that the online services are very expensive. To win new customers online, it ought to introduce the online shopping as soon as possible because, despite the fact that its prices are lower compared to Tesco and Morrison some customers prefer shopping online rather than walking to the shelves to pick goods for themselves. This will mean that ASDA will have to lose some of its customers who will opt to shop online with Tesco due to time consuming factor. The use of technology will help the company be at the fore front in competing with its competitors and getting the customers informed on their operations online and communicate through giving feedback where necessary. The CEO of ASDA need to recheck into the workforce provided in his company because according to him it is not satisfying. According to Pollitt, (2004) ASDA is really trying to ensure that its managers in the bottom line are empowered to better their performance; hence, improving the returns on investment. ASDA’s stakeholders have been influenced by several factors inclusive of their job security which is a key thing in their daily work. Employees with job security tend to work more perfectly since they don’t want to fail their organizations.

Advancement in technology has equal measures as the challenges that are experienced in the business. Currently, the leading retailers and ASDA’s main competitors have launched online shopping platforms, with some offering home deliveries for their products. This implies that these companies have greatly enhanced their competitive advantage in the face of stiff competition. Following that many shoppers like to shop online, ASDA end up losing some of its customers who prefer to save time by shopping online, which is very time saving and effective (Duff, 2004). The increased conveniences offered by Tesco retailing company is most preferred by many, thus they are no longer shopping at ASDA rather at Tesco. Many of the online shopping platforms are in the position of carrying out door delivery an act not yet practiced at ASDA. This in turn is a big challenge as the retailing company will by no means practice the use of technology to win their customers back as they are being snatched by other retailers. ASDA is in a position to use technology even though it is not that much advanced but through the use of technology, they have been able to disperse workforce from different parts of the world. Technology has shown a lot of impact on the management of ASDA; since, it advocates for corporation, team work and leadership in the company. ASDA’s benefit in technology will come as a result of understanding the diverse cultures of its workers and stakeholders at large. Technology plays the role of bringing management close to each other be able to corporate in their duty and share useful information to the organization. The improved technology will enhance changes of how activities and functions are carried out at ASDA.

The avenues that need to be considered to reduce the cost incurred and improve on quality will entail low outputs in the business and high returns as the profit to the company. Following that, the company offers low prices convenient to all buyers compared to its competitors like Tesco whose prices are very high to match rated at 6percent higher they will have many customers.  ASDA makes some short distance delivery very many times in a day and a lot of logistics are required to calculate the cost incurred in the trips made per day and how they can best be reduced to ensure the cost is minimized while maximizing on profit. The fuel cost used in the transportation vehicles is known to fluctuate its prices every now and then, thus this need to be highly considered to prevent incurring of high cost and less or no returns at the end. ASDA has been able to spend less on logistics and this has been a clear and a good platform to ensure their cost are always lower compared to their competitors (Hemsley, 2006).

There is still competition between ASDA and other retailers such as Tesco with the aim of controlling the UK retail market. In this regard, only strong marketing strategies will help the company to outdo competition and make reasonable profits to sustain it in the long term. Currently, the retailer has invested about one billion pounds to lower their prices and 250 million pounds to enhance the quality of their products. ASDA is also committed to enhance and widen their customer access of their stores from 53% to 70% by ensuring they develop more stores in strategic locations across the country. The company also plans to take advantage of their online sales and to increase their revenues by 3 billion pounds in the next three years. ASDA is determined to build its position as the UK leading value retailer with the aim of improving the core businesses, extending their reach, and expanding their brand into new markets. The company is fully aware that the market conditions are tough, the competition is fierce, and the customer’s budgets are under intense pressure. By reinforcing its commitment to everyday low prices, the company intends to increase their customer loyalty and improve their brand in the long-term basis. After doing their evaluation, the company realized that there are some parts of UK, where their share of the market is low (Harrington, 2002). In this regard, the retailer has plans to streamline their operations by ensuring that they occupy all parts of the market. The retailer’s online business remains a core part of their business strategy due to increase online presence which is expected to generate a lot of sales in the near future. The company is focusing on increased internet connection and increased number of smartphone users to venture into online sales. All the company strategies will be funded through their savings as well as the

The company’s performance in the capital market is impressive and is reflected by their impressive growth in the past five years. Being a subsidiary of Wal-Mart, there is a strong market confidence in the company and their products due to huge returns expected from such investments. Due to overall global market stability, the company shares are expected to trade well in the foreseeable future by yielding more returns.

With more than 230 stores and thousands of employees, ASDA needs a proper organizational architecture to survive the competitive retail industry. A good organizational infrastructure allows the company to have a good customer and employee engagement and this contributes to the overall success of the business. The aim of the company is to create an important information system that can streamline and accelerate the flow of information within the company. The retailer has a good IT platform that successfully links the main headquarters with all their retailers across the country to facilitate decision making process. Due to their continued growth, the company needs antiquated communication systems that provides effective communication and decision making process. According to Addy, (2002) the benefit of internal communications enables faster, more complete and more accurate information systems. In terms of administrative overhead, the organizational architecture allows a reduction in administrative costs associated with telephone-based inquiries from the employees, customers, and business partners. Over the years, ASDA has successfully reduced their operational costs thus enabling the company to increase their profits. In terms of their store operations, a proper organizational architecture has allowed improved stocking and replenishment capabilities of the retailer. In addition, ASDA has improved on their execution of store policies and tactical instructions and this has improved on the efficiency of the company. ASDA believes that the highest returns can be achieved through sophisticated database applications with a rapid payback.

 

Bibliography

Addy, R. 2002. ASDA reinforces work on supply chain ops. Grocer, 225.7578: 16

Braithwaite, T., & O’Connor. 2008. Asda chief hits out at rash strategy. Financial Times [London (UK):

Business Wire. 2013. Research and Markets: Asda Stores Limited – SWOT, Strategy and Corporate Finance Report.  Business Wire [New York] 15

Duff, M. 2004. ASDA Advances Stirs United Kingdom Retail. DSN Retailing Today, 43 (23) 51-52

Harrington, S. 2002. ASDA gives fresh fuel to EDLP as it works for the best value basket. Grocer, 225.7565: 5

Hemsley, S. 2006. ASDA aims to take on the no-frills retailers. Promotions & Incentives: 14-15

Pollitt, D. 2004. When Asda employees joined the Wal-Mart “family”. Human Resource Management International Digest, 12 (6) 8-20

PR Newswire. 2004. ASDA, UK Affiliate of US Retail Giant, Wal-Mart, Revolutionizes Internal Communications with 24/7 TV. PR Newswire [New York]:

Rigby, E. 2005. Asda stocks up on superstores as closing the gap on Tesco shapes future strategy: Retailer to open 15 more stores including George and Living outlets to catch its rival. Tony DeNunzio, chief executive, said Asda enjoyed a good year but remained realistic over the challenges ahead, writes Elizabeth Rigby: [LONDON 2ND EDITION]. Financial Times [London (UK)]

Yousept, I., & Li, F. 2005. Building an Online Grocery Business: The Case of asda.com. Complete Collection of IGP Information Technology Case Collection Depository

 

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