SWOT and STEEP analysis of ASDA

ASDA was originally formed in the 1920s as Hindell’s Dairies. The company was established by a group of Yorkshire farmers who processed and sold meat and milk products through Hindell’s Dairies. In 1949, the company changed its name to Associated Dairies and Farm Stores Ltd. The grocer merged with Queen’s Supermarkets to form ASDA Stores Ltd in 1965.

ASDA aims to be a value retailer that surpasses the customer’s expectations in terms of product price. To this end, the supermarket chain says that it will provide customers with goods as a lower price than its competitors do. At its more than 300 stores across the United Kingdom, ASDA sells food and groceries, as well as other products for the home.

ASDA, a British supermarket chain, was acquired by Wal-Mart in 1999. The British chain also follows Wal-Mart’s strategy of making goods available at a low cost so as to attract customers. Thus, a major objective for ASDA is to be a value retailer that helps customers to save money on their purchases. Another is to source products locally in order to play a role in the local communities they operate in.

1.1   ASDA aims and Objectives

ASDA group Ltd aims is to provide goods and services that are cheap and affordable to the public.

Reducing packaging is one of ASDA’s key objectives and they consider every option to achieve this goal.

It intends to increase the amount of fresh products sold loose from boxes and reduce its range of own label pre-packed products sold in its stores across the country is key objective.

To offer quality products at low price is another aim of ASDA.

In order to cover this aim they buy products from highly competitive supplier.

They also use their own packing and brand name to reduce packaging cost.

1.2   ASDA Mission Statement

A mission statement sets out the long-term direction of the organisation. ASDA’s mission is: ‘to be Britain’s best-value retailer exceeding customer needs always’.

As well as having a mission statement, ASDA has a statement of purpose. This helps stakeholders to understand why the business exists. ASDA’s purpose is ‘To make goods and services more affordable for everyone’.

1.3   ASDA Values

ASDA also has a series of values. These are moral statements that help to encapsulate the company’s beliefs which then determine the decisions and actions it takes in the marketplace.

ASDA’s values are (Ronald, 2013):

Respect for the individual

Strive for excellence

Service to our customers

2.      SWOT and STEEP analysis of ASDA

SWOT analysis entails a distillation of the findings of an internal and external audit which draws attention, from a strategic perspective, to the critical organisational strengths and weaknesses and the opportunities and threats facing the organisation. Whereas PESTLE analysis is an audit of an organisation’s environmental influences with the purpose of using this information to guide strategic decision-making. The assumption is that if the organisation is able to audit its current environment and assess potential changes, it will be better placed than its competitors to respond to changes (Thomas, 2007).

This report will analyse the impact of political, economic, social, technological and environmental factors on Asda. It will also identify the key forces that represent both opportunities and threats to its profit. Data is supplemented with details on the company’s history, key executives, business description, locations and subsidiaries as well as a list of products and services and the latest available company statement (Julie, 2009).

2.1   SWOT analysis

2.1.1   Strengths

Asda/Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. Asda primary focus is saving money and keeping costs low (Jean and Glen, 2010). The company has a core competence involving its use of information technology to support its operations. For example, it can see how individual products are performing store by store at a glance. It also supports its efficient procurement. People are key to the company’s business and it invests time and money in training people, and retaining a developing them. Its expansion in non-food has been propelled by Wal-Mart. In the last five years the supermarket has quadrupled its non-food offer to more than 12,000 general merchandise lines (Albert, 2008). Asda recognised it was a great way to accelerate growth in the UK and has drawn on the expertise of Wal-Mart in this area. They have taken product, gone on joint buying trips, sourced globally and shared category management expertise on how to space and display (Menon, 2010).

2.1.2   Weaknesses

A key Asda weakness is its lack of smaller supermarkets and convenience stores. Britain, like many European countries, has placed sharp restrictions on construction of “big box” stores in suburbs and rural areas (Koch, 2006). While most Asda stores fall into that category, two thirds of Tesco’s outlets are small or medium stores. Wal-Mart is the World’s largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors (Hill & Westbrook, 2007).

2.1.3   Opportunities

As part of the world’s largest retailer, Asda has harnessed Wal-Mart’s enormous buying power, especially on general merchandise. Here, its ability to source materials like denim on a global scale has helped drive down the price of a pair of jeans from £14 to £4 over the last five years (Ronald, 2013). But food still accounts for the largest part of Asda’s turnover and it is here where its low pricing model has really fuelled sales.

Asda has opportunities to take over, merge with, or form strategic alliances with other global retailers, focusing on growing both its food and non-food markets. According to Andy Bond, part-time chairman of the company, set out a series of key targets for the chain, including overtaking Tesco to become ‘number one’ in non-food retailing in the UK and opening 100 smaller format supermarkets. Asda buys Netto supermarket. The move signals supermarket chain’s commitment to smaller store format, as it plans to incorporate 193 Netto stores into its portfolio (Julie, 2009). The sale, which remains subject to regulatory approval, will see Asda convert all of Netto’s UK locations into Asda stores and integrate them into its new supermarkets division for units smaller than 25,000sq ft. Asda expects the transaction, which will see it close the gap between rival chain Tesco, to finalise after approval from the Office of Fair Trading later this summer (Thomas, 2007).

2.1.4   Threats
Consumers, worried by the coalition government’s measures to rein in record debt with tax increases and public sector cuts, are also becoming more wary in their spending. Britain’s grocers are facing more moderate food price inflation and a jump in petrol prices that has left shoppers with less to spend on groceries (Jean and Glen, 2010). According to Asda, research carried out on its behalf by Cebr showed UK families’ disposable income in December is forecast to be 172 pounds, 5 pounds lower than last year. Asda’s second quarter to June 30, report shows flat underlying sales, impacted by subdued food price inflation and consumer worries over prospective tax rises and employment uncertainty. That compares with a decrease of 0.3 percent in the first three months of the year, the first fall since early 2012, and a rise of 4.6 percent in the final quarter of 2013 (www.asda.com).

2.2   STEEP Analysis

The following factors in the macro environment including tax changes, new laws, trade barriers, demographic change and government policy changes will affect the decisions of the managers of Asda. To help analyse these factors, managers can categorise them using the STEEP model (Albert, 2008).

2.2.1   Political factors

According to United Kingdom government that an across the board tax was needed to increase the costs to all drinkers. Increasing taxes has been announced as part of the Conservative’s alcohol policy, but questions have been raised about how effective it will be to find a fair formula that could be used to judge whether a product is being sold below cost, as outlined in their Green paper (Hill & Westbrook, 2007). Alcohol Concern have previously commented that increased taxes are a start, but that minimum pricing is the most effective policy and prevents supermarkets from absorbing tax increases on alcohol as loss-leaders. Asda strategic planners will be watching this closely and would want to study the impact it will have on their policy of keeping prices low (Menon, 2010).

2.2.2   Economic factors

With the budget looming and coalition economic policy still awaiting definition, the call for a new, stricter approach to competition has come under elliptical attack from both the political right and left. Asda like its main competitors Tesco and Sainsbury have been accused of tax avoidance, depriving farmers of a livelihood and functioning as modern-day monopolies that drive local businesses out of communities (Koch, 2006). There is increasing pressure on the conservative government to bring a stricter approach to competition to bring the big companies under control. This may have very serious implications for the long term operations of the supermarkets especially Asda that prides itself on keeping prices low. The question to ask is how important are grocery prices compared with long-term market competitiveness, small business ownership and the livelihood of agricultural producers? The average family spends 11 percent of their income on food, and this rises to 15.9 percent for those on the lowest incomes. There is suggestion that decreases in food prices considered in isolation over the past two decades have increased the standard of living for the poorest by approximately 2.75 percent, before inflation is taken into account (Ronald, 2013). Consumers, worried by the coalition government’s measures to rein in record debt with tax increases and public sector cuts, are also becoming more wary in their spending. Identifying markets that are likely to be resilient and potentially growing during the recession requires analysing what people and businesses are likely to do more during the recession. This leads to several general ideas that may be applicable to a wide range of business. The most evident growth potential exists in the low price segment as many consumers shift from premium brands to budget substitutes. Consumers will always need to satisfy their basic needs, and during recession they do so with tighter budgets. Evidence of successful value-for-money strategies exists in the low price section of retail sector. For instance Asda has been reporting sales growth (Thomas, 2007).

2.2.3   Social factors

Changes in social trends can affect the demand for Asda’s food and non-food products and the availability and willingness of individuals to work for it. In the UK, for example, there is a growing pool of retired workers willing to work to supplement their pensions. Asda have started to recruit older employees to tap into this growing labour pool. The ageing population also has impact on the demand for both its food and non-food products such as medicines and glasses from its optical stores (Julie, 2009).

2.2.4   Technological factors

New technologies create new products and new processes. Online shopping and computer aided design are all improvements to the way that Asda do its business. The company has a core competence involving its use of information technology to support its operations. For example, it can see how individual products are performing store-by-store at a glance. IT also supports its efficient procurement (Jean and Glen, 2010). Technological factors that have perhaps had the most impact on Asda have been the Internet. More and more people are using the Internet and a company like Asda have seen a very significant growth in its online shopping and provision of service through its website (www.asda.com). Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organisations providing the products. Technology has been used to support and realise Asda’s primary focus of saving money and keeping costs low (Albert, 2008).

2.2.5   Environmental factors

Asda supports carbon reductions in most of its stores. Asda’s stores are eco friendly 40% more energy efficient and emit 50% less carbon dioxide than a standard new build store (Menon, 2010). Over the past couple of years Asda have been working with their suppliers to reduce the amount of carbon emitted during the manufacture, growing and processing of their products something that’s known as embedded carbon. Asda is also part of the Institute of Grocery Distribution, a think tank and research organisation for the sector, working with the British Standards Institute to find a method by which all retailers can measure the amount of embedded carbon in their supply chains. If Asda did not take environmental issues seriously it could have dire consequences for its reputation (Hill & Westbrook, 2007).

3.     Conclusion

There are issues about Asda having unfair competitive advantage over other small retailers and potentially driving them out of business. It is important for managers to consider factors such as tax changes, new laws, trade barriers, demographic change and government policy changes, opportunities to enter new or emerging markets, their perceived weaknesses and competitions that can impact on the operations of Asda and rank such factors in the order of their likelihood of occurring and also rate the impact if it did. STEEP analysis will help identify policies, laws and regulations governing monopolies and competition.  This is one of the challenges facing Asda in its quest to expand its business. Consumer law helps to protect consumers by ensuring that businesses can compete fairly in the market economy and competition drive down prices and improve quality of goods and services.  Under EU law, there is concern that unfair competition or a large share of the market (dominant) can result in low quality product and services and consequently increase in prices of goods and services. Fortunately for ASDA, it is not considered to be exploitative but should bear that in mind as it continues to expand its stores. Higher the likelihood of it occurring, the greater the impact of any change and the more significant this factor will be to the ASDA’s planning. A SWOT/STEEP analyses are therefore important to the day- to-day management of Asda stores.

Published by MALI

Writer is post-graduated in Computer science, Business Administration, Marketing and Innovation. He has 10 years of business academic research writing experience.

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