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Pestle Analysis and Internal Analysis of Asda

Essay by   •  September 10, 2011  •  Case Study  •  1,564 Words (7 Pages)  •  7,417 Views

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1. Introduction

ASDA Stores Ltd was first established in United Kingdom in 1965. It is one of the largest food retailers and supermarket in the country while its first idea was originated from Hindell's Dairy Farmers Ltd in 1920. The company opened its first outlet in Leeds and later on buying out the whole supermarkets. ASDA is a supermarket chain which mainly focusing on selling fast moving consumer products like foods, clothes, toys and also mobile phones. It became a subsidiary of Wal-Mart in 1999 and launched its first ASDA- Wal Mart store in Bristol, Yorkshire (ASDA 2011).

The following report is discussing about the insight of the company by examining its micro and macro environment factors. ASDA uses the low- price strategy which is Smart Price range to attract the consumers. The report will also consider the PESTLE Analysis which is Political, Economical, Social, Technological, Legal and Environmental factors that utilised by company. Recommendations are proposed to ASDA in order to assist the company to boost its market share.

Throughout the period, ASDA also launched other services such as introduced its online stores (www.asda.co.uk), property trading, and other services with a view to expand its business enterprise and competes with other competitors. Eventually, ASDA took over its competitor, Sainsbury's market share and becomes the second largest grocer after Tesco (Surridge & Gillespie 2009, p.328). According to Baker Report (2010), ASDA owns 16.7% of market share, while its main rivals Tesco have 30.9%, Sainsbury's is 16.2% and Morrison is 12.0%.

2. Internal Factors (Micro- environment)

2.1 Low price strategy

ASDA utilises the smart price range, which introduced the low price strategy for its products and services that it sells to help to attract more consumers. Low price strategy is mainly focusing on gaining the price sensitivity market and seeks to achieve a lower price and low cost than its competitors' price by approximately 10%, while providing the same quality of products and services to create barriers of new entrants and avoiding competitive pressures (Johnson, Scholes &Whittington 2008, p.227). By using this strategy, it helps to growth the company's market share and size in order to stand out in the industry.

2.2 Move to South of England

In 1985 Hardman Era, ASDA realised that it had lost the way that concentrate on superstore. Hence, the company has made the decision to strengthen emphasis in South of England to cover more regions and to refocus on the superstore business (Seth & Randall 1999, p.81). Another drive to move to South of England is that ASDA thought that the consumers in South of England have high purchase power and so can increase their sales. However, the current business of the company still mainly focuses in North of England.

2.3 Concentrate on superstore business Dairy/ MFI

ASDA was initially selling English Dairy products and then merge d with MFI (British Furniture Retailer) which caused the low performance and disappointed sales volume to the company. It then changed its strategy to expand its selling products to cover wider area like financial services, insurance, property and so on. It aims to take over its competitors' shares and sales with the aim to become more outstanding in the industry. However, ASDA has still concentrating on being a superstore which sell more on Dairy and MFI products.

ASDA is categorised as horizontal integration by joining with other firm. Eventually, it was taken over by Wal-Mart and so that have earned more market shares and increase its competitiveness. The effect is that the market shares of ASDA- Wal-Mart have increased and replaced Sainsbury's to become the second largest superstore.

ASDA's future main objective is to overcome the recession by using Zoe Wood Handout as it losing share of market 16.3% from 16.7% June 2011 figures. It facing the threats new competitors like Aldi and Lidl (Clew 2011).

3. External Factors (Macro- environment--PESTLE)

PESTLE analysis is examining the macro environment that affects the company strategies and how it works with the company itself. It is used to help plan future strategy.

3.1 Political Factors

Government changes in political and legislative policies will bring huge impacts to all industries and so as ASDA. Policies change on taxation will affect the selling price of the products and sales. Political factor also influences ASDA in the area of purchasing the land. All the superstores are tough in getting the approval of planning permission to develop land and to build the store. (...)

In addition, there is political unrest that caused by a huge number of foreign nationals in the country. So, the Government has tightened the Immigration Rules in order to control the foreigners' number and to prevent certain foreigners to take up employment

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