ASDA is one of the well know supermarket chains in United Kingdom. Its products range from food to general consumer merchandise (ASDA, 2010). The company merged with Wal-Mart in 1999, and became one of its subsidies. The company has numerous subsidiaries that supplied an array of products. The company has one hundred and sixty six thousand employees, and has 365 stores (Doole & Lowe, 2005). PESTEL Analysis Political factors • Trading policies – government has passed numerous laws that inhibits certain products while curtailing capabilities of the companies
• Employment Law – ASDA used to employ people well until the take over of Wal-Mart • Taxation – corporate an consumer – new laws are been expected to reduce taxation and it could be beneficial to the entire industry (Sainsbury’s, 2010) Economic Factors • Interest rates are stable and the company can borrow to expand or diversify its operations • Stage of business cycle especially retail is advanced in that only known brands can succeed in such a crowded market (Hoover, 2007). • Inflation – the rate of inflation does not change that much which means that it cannot affect the way business is accomplished
• Financial crisis and recession impacted on consumer behaviour and traditional behaviours have been changed and may affected the way consumers make purchase Socio-cultural Factors • Health and welfare – the society is becoming health conscious and they understand the threats associated with foods such as obesity. Thus, some of the consumers are changing their behaviours towards some of the foods available (Patel, 2007). • The government has also entered the healthy food market in which their are promoting healthy eating which means the supermarkets have to start stocking health (green/organic) foods
• Charities – assisting the community, the supermarket has introduced numerous initiatives that aides the community to befit from shopping in these stores. Environmental Factors • Focusing on environmental friendly strategies such as recycling • Moreover, the organisation is educating communities on proper disposal of wastes and the impact of different components towards the environment. Technological Factors • Energy rise and costs – the cost of energy is drastically increasing and thus it requires innovation to be able to introduce new means of obtaining energy
• Innovations in logistics – new means of transporting goods and inventories has lessened tasks that individuals could have done manually • Electronic point of sale – • Self-scanning Legal Factors • Frequent conflicts with trade unions • Introduction of new laws such as the Food Retailing Commission may affect the way business is accomplished. • Governments place a lot of concern on provision of licences SWOT Analysis Strengths • Good position and powerful retail brand in the market (Ranchhod & Gurau, 2007) • Has an array of products
• Low pricing strategy championed • Has an array of stores • Huge financial banking from Wal-Mart Opportunities • Huge capital base that they can use to expand their initiatives • Huge customer base and easy avenues of expanding business • Consumer demands are changing, thus ASDA can maximise on this opportunity Threats • Competition • Government legislations and new directives • Changing consumer requirements and demands for ethical and moral obligations Five Porters Forces Threat of New Entrants • UK market is dominated by four supermarkets
• These supermarkets have built reputation due to its features such as one-stop shopping, operating efficiency, and market-mix expenditure • It is difficult for entrants to raise enough capital • Differentiation and economies of scale • Better distribution and promotional activities inhibits new entrants Bargaining Powers of Suppliers • ASDA can negotiate for better promotional prices compared to smaller chains (Burch & Lawrence, 2007) • The suppliers are threatened by large supermarkets that can source their own supplies
• Competitive rivalry also affects the power of suppliers Bargaining Power of Consumers • Consumers are becoming aware of fairer trade and aspirations and expectations of Third World producers • Ethics and ecologically considerations are shaping consumer decision making Threat of Substitutes • Substitutes is common especially of product-for-product • New trends have started taking shape such as convenience stores (Wright & McCrea 2007) Bargaining Power of Competitors • High competitive market has accelerated level of development (ASDA, 2010)
• ASDA has been forced to be innovative to build and maintain market share • Frequently analysis consumer behaviour and introduction of strategies to keep up with the requirements of consumers • ASDA and other bigger competitors are focusing on value and price 4Ps ASDA Price • Low Prices Promotion • Advertising base on low prices philosophy Place • Strategically located • Conveniences Product • Comprehensive range of products • General merchandise Conclusion The supermarket industry in United Kingdom is controlled by four major stores.
These stores has huge market share that is estimated to be more than 70%. The four analysis 4Ps, PESTEL, SWOT and Porters Five Forces analysis indicates that the four companies are somehow competing with each other. Some unique factor about the industry is that it is difficult for new entrants while the government is passing new legislations and directives that guides and control the way business activities can be accomplished.
ASDA. 2010. Home. Available at http://www. asda. co. uk/corp/home. html