B122 Tma 1
In 1999 Asda became a subsidiary of the largest retailer in the world, Walmart. Asda operates within the UK grocery market and currently rank second. Asda’s main area of business falls into the food sector and boast 500+ stores nationwide. Asda is a variety retailer stretched over numerous sectors, which include, entertainment clothing and footwear. It is considered a multi-channel retailer, with a blend of store locations and growing online presence. Asda’s stores are traditionally, large purpose built units located on the outskirts of a town, much like Walmart stores in the USA.
Similarities continue throughout the UK operation, with the Walmart culture permeating through stores amongst all 143000 ‘Colleagues’. Furthermore, matching Walmart’s low-price operational strategy. My role within this retailer is a part time night replenishment colleague. Economic. The UK unemployment figures are an important aspect of the economy for Asda to watch as fluctuations can hugely effect supply and demand, impacting future sales. Higher unemployment, means Asda will see a greater demand on lower priced goods.
Asda promotes its self as being a ‘low priced’ retailer, so, it may also be fair to expect an influx of new customers increasing demand further. Reacting quickly to a change in the economic climate can increase the chance of gaining market share. Utilising their immense buying power, Asda can demand lower cost prices from suppliers, facilitating demand from an expected shift in consumer buying. Considering international manufacturers, where the GBP proves particularly strong may also be one way of achieving higher profit margins.
Social and Cultural Management considering a particular location for a new Asda store must measure the concentration of the local market and consider Social and Cultural forces. They can help determine if an area is understored and demand is present. Statistics of particular interest are likely to be, age ranges, population density, income ranges, level of car ownership and local transport links. Use of gravitational models will help determine the ‘pull’ of a store location. Huff’s (1963), is one such model and aims to predict this.
The model calculates the probability a shopper is likely to visit our new store against local intertype retailers in its strategic group. Retailers within Asda’s group are likely to be Tesco or Sainsbury’s. In addition, analysing the demographic and cultural make up of the area should provide good indication of products and services best suited for our new store. For example, if our considered area had recently had a high level of Eastern Europeans settle then incorporating a generous ‘world foods’ section within our assortment would make sense.
However, if the area had an very low level of ethnic diversity there would be little demand and focus elsewhere would prove more profitable. Technology. The introduction of Smart-phones in recent years has given customers power to access price comparison sites while in-store. Potentially this trend poses a huge threats for Asda “with these devices, customers have all of the power of the Internet at their fingertips to enable them to shop smarter” (Mobile Commerce Daily,2011) Potentially this trend poses a huge threats for Asda.
An increase in store waste, particularly of perishable goods as well as loss of sales to rival retailers. Additional pressures to control costs, namely wages, to ensure the store remains profitable despite loss in sales. Political and Legal. Asda sell a range of tobacco products as part of their supermarket assortment. These products are usually sold from individually manned Kiosks, separate from the main store. In an effort to address the problem of young people taking up smoking, government are forcing retailers to cover tobacco products out of view with metal roller shutters.
Other measures include a raise of the legal purchase age of such products and further tax increase on tobacco. Operationally, managers will need to establish good procedures which will keep inconvenience to a minimum. Other than the initial cost of installing the shutters, additional expenses relating to employee training costs should be considered. Furthermore, political and legal forces could negatively impact customer flow, which may lead to a dip in impulse buys (confectionery) and commission earners (lottery) sales.
Both are often located at the kiosk and are add-on purchases to tobacco. Ecological. Environmentalists are keen to highlight links between waste management in businesses, global climate change and weather. Business’ who manufacture, distribute and/or use products have been attributing to global warming, all processes expel greenhouse gasses which have major repercussions on the planet. According to waste legislation business’ must establish ‘a system that ensures waste producers or those handling waste follow the waste hierarchy (i. e. revention, reuse, recycling, recovery, disposal)’ ( Surrey County Council, 2012) This forces business’ to consider waste management throughout their infrastructure. Managers would have needed to assess the supply chain and identify areas where improvements can be made. There are likely to be initial expenses for man hours, new equipment and facilities. Very recently Asda has seen the effects of global climate change directly impact their business. Extreme weather has lead to mass flooding in areas in the UK. In these areas trade would certainly diminish while neighbourhoods recover from the disaster.
Stores may also have experienced damage to buildings and stock. A further example of this force affecting Asda. In order to identify Asda’s competitors, firstly I need to establish the number of other retailers and their size also operating in the same sector, food grocery. According to market share statistics, in the 12 weeks to 7 Aug 2011, based on similar sized operation, Asia’s direct competitors were Tesco, Sainsburys and Morrisons. This is highly saturated sector due to the number of large retailers operating within it. 12 wks to 7 Aug 2011 Tesco 30. 5 % Asda 17. % Sainsbury’s 16. 1 % Morrison’s 11. 7 % (guardian. co. uk[-;0], 2011) Further competition may come from retailers entering the sector. A high number of entrants may indicate the market is highly competitive, however, high levels of retailers will also leave if the competition is just too high. Kwik Save is a good example of this, ‘It struggled to make profits in the 21st century as superstore operators such as Tesco[->1] and Sainsbury’s[-;2] introduced their own budget brands (wikipedia. org,2012). Kwik Save promoted themselves as a low-priced grocery retailer.
Kwik Save are expected to make a return to the market this year and may become another threat to Asda as they previously operated by similar strategies. Establishing which of the competitors offer products most similar to Asda’s assortment will be another indicator, as the level of competition will intensify where a competitors assortment proves to be a suitable substitute to Asda’s own. All four of the major grocery rivals do offer similar products and services. Asda and Tesco offer financial services and online catalogue shopping via ‘Tesco Direct’ and ‘Asda Direct’.
Both compete highly on price and have been known to enter into price wars in order to gain market share. They have similar target markets and operational strategies. Although, Tesco has chosen to delve into the UK convenience sector and also dipped their toe into international markets both have proven a great success. In a similar fashion Asda has expanded further into multi-channel retailing opening ‘Asda Living’ stores which offer wider ranges of clothing, home ware and childcare goods. These manurers have helped differentiate the businesses.
Sainsbury’s and Morrison’s in turn offer similar products and also have an online presence, Sainsbury’s also offer financial services. Both have partnered with retailers operating in other sectors, Sainsbury’s with Homebase a DIY chain and Morrison’s with Kiddiecare. com. Although Sainsbury’s has introduced a recent price promise to be cheaper on ‘branded’ products than their competitors, they differentiate their offering through focusing on quality. Asda has counter-attacked this by introducing lines that have been modified and re-branded as superior in taste and quality, while still low on price.
How Asda might need to manage colleagues with the introduction of Climate Change Legislation. Senior Asda managers will need to establish how the legislation affects them, what changes need to be made within the business and how costly it will be. Discussions about the changes with all departments involved. HR will need to address recruitment matters, ensuring suitably skilled people are in place. This may involve recruiting from within the business and providing the most suitable colleague with specific training.
Or looking outside Asda for those who already posses adequate experience in the area of Waste Management. This may be a preferred option if the business has time constraints, although may result in higher extrinsic costs. Once a plan has been put in place, new procedures established, then information needs to be cascaded down through the hierarchy. Delivering this information via training courses which may also save on company time and money. Other benefits of this style is a number of colleagues can receive the same information at the same time, rather than individually.
It is important that everyone receives the same information and it is communicated clearly for understanding. Managers can then go on to monitor colleagues periodically through appraisals. Appraisals can help assess colleagues, making sure the new procedure is being incorporated correctly into their day-to-day duties. Monitoring colleagues performance can highlight problems and identify further training requirements. Referencing Guardian. co. uk(2011)’Supermarkets:Changing Market Share'[Online],http://www. guardian. co. uk/[-;3] (Accessed 21 June 2012)
Mobile Commerce Daily (2011) ‘Are mobile price comparison apps a threat to retailers? ‘ [Online],http://www. mobilecommercedaily. com/ (Accessed 21 June 2012) Surrey County Council (2012) ‘Important-details of future English environmental legislation and consultations’ [Online], http://www. surreycc. gov. uk/ (Accessed 21 June 2012) Wikipedia (2012)’Kwik Save’ [Online], http://en. wikipedia. org/ (Accessed 21 June 2012) [-;0] – http://www. guardian. co. uk/ [-;1] – http://en. wikipedia. org/wiki/Tesco [-;2] – http://en. wikipedia. org/wiki/Sainsbury%27s [-;3] – http://www. guardian. co. uk/(Accessed