sim 336 strategic management assignment

Sim336 Strategic Management: Business Assignment Answers

You are required to write a report, which can be based on an organization or idea of your own choice. The strategic analysis must be related to a recognised aspect of business policy, strategic management or the philosophical underpinning of a particular methodology within the public or private sector strategic management domain.

To analyse a business policy or strategic management topic, to carry out individual research or evaluation of an organization.

Introduction

ASDA is a subsidiary company of Walmart operating in United Kingdom and was established in the year 1949 (Corporate.asda 2018). The total number of locations, where ADA works is 642 and holds second in UK grocery market share after TESCO (Corporate.asda 2018).

Though the company is known for the retail marketing but the company also offered services like mobile network providers and financial services (Corporate.asda 2018). ASDA also provide high quality products to their customer in order to retain their customer brand but the brand always lack behind the leader in the retail industry that is TESCO. Thus, this strategic report analysis thus focuses on ASDA’s initiatives for gaining comparative advantages and aims for becoming the leader in the UK retail market. The PESTEL analysis will be carried out to measure the external environment and to assess the internal firm activities Value Chain Analysis will be considered. The competitor’s analysis with TESCO will be evaluated through Porter’s 3 Generic Strategies model and to evaluate the strength, weakness, opportunities and threat of the company, SWOT analysis will be carried out, in which the sects of opportunities and threats will be utilized to recommend more strategies through which the ASDA can improve their operational functionalities to attain effective competitive advantage.

Discussion 

External environmental analysis- pestel analysis .

Yuksel (2012) stated that PESTEL is used for analyzing the external marketing environment or the macro environmental analysis that can affect the progress of the organization. Theaker (2017) furthermore stated that this analysis helps an organization to choose effective strategies to position their brand or incorporate aspects that can allow the company to attain competitive advantage.

The external factors that should be considered in the political factor are government policies, taxations, political stability, global trade agreements and industry regulation (Cipd.co.uk 2018). The main reason for the suffering of the progress of the retail industry in UK has been started when the decision of leaving the EU has been taken. The impact of the Brexit put a significant impact on the trade restrictions in Europe. This will also affects the terrorism threats which lead in footfall of the profitability in the shopping malls and retail industry. s

Mkude and Wimmer (2015) stated that the important factors that should be considered in economic case are exchange rates, economic growth, globalization, cost of living, interest rates, labor cost and the consumer buying behavior. The importance of the retail industry is medium to high as the exchange rate conversions remain volatile due to Brexit and affects negotiations with suppliers (Cipd.co.uk 2018). This is the main reason for the fall of 3.9% in the market which is worse than Tesco, Sainsbury's and Morrisons for the years 2015 (Theguardian 2018). In the same year all the retail industry made loss and the number is 2.9% at Morrisons, 1.9% dip at Sainsbury’s and 1% in TESCO (Theguardian 2018). Another aspect in this case is that due to the country-specific demand and supply, when most of the people intend to buy the thing from online. Andrei and Prisecaru (2014) furthermore stated that maintaining an inventory and warehouse is costlier in UK and thus a huge portion of the profitability should be allocated for the same purpose.

Marketers focus on consumer trends, buying habits, career attitudes, work life balance and population demographics (van Wijngaarden et al. 2012). Retail organization like TESCO and ASDA emphasized on healthy lifestyle and desire to introduce new products/services in the market. However, investment is required towards a more inclusive approach (Cipd.co.uk 2018). Since the people living in the locality are health conscious and are working people, retail shops like ASDA is the solution for them to buy products. Constantinescu and Nistorescu (2012) moreover stated that community people also prefer products and services that is suited with their age and thus the retail industry should put all the products for all age group people.

Technological 

Goncharuk (2016) stated that if considered technological advancement adopted by UK companies, they emphasizes more on the automation, innovation, robotics, artificial intelligence and online presence. ASDA developed e-commerce site in order to attract more customer base. According to the report of CIPD, 20-40 year olds people also prefers to buy things from online (Cipd.co.uk 2018). Thus ASDA opted for a well presentable online shopping site for them.

Environmental

Company in UK should focus on environmental restrictions imposed by in-country governments, corporate social responsibility, ethical sourcing, procurement and Sustainable resources (Cipd.co.uk 2018). Retail industry should put light on carbon footprint, environmental pollution, development of organic foods and green economy n order to diminish global warming and carbon emission.

Khan et al. (2015) highlight that especially for the retail sector, they have to maintain the fair pay regulations and provide a healthy working environment to the working personnel. The managing authority cannot ask an employee to leave the job without any proper justification. Moreover, according to the report published by CPID, retail industry should focus on employment law, local labor law, common law and health and safety regulations (Cipd.co.uk 2018). The retail industry should follow their employment with the Modern Slavery Act and also include (Cipd.co.uk 2018).

Internal environmental analysis

Swot analysis .

Sohel et al. (2014) depicted that when a marketer evaluate the internal activities of the business or organization for evaluating business competition and developing project planning, SWOT is used. Yuan (2013) on the other hand argued that SWOT analysis does not always measures internal analysis but also evaluates eternal analysis. Thus, SWOT can be used for assessing both the macro and micro environment of the business.

• The store has currently 140,000 employees working at over 500 stores
• Effective marketing campaigns to make people aware of their services
• Efficient two-way communication system with the customer to take feedback
• Limited global presence as ASDA is only operating in UK but its parent company Walmart operates globally
• No loyalty card yet to retain customers
• Past history of inefficient supplier relationship
• Dissatisfied customers due to sudden pay cuts and job loss when company incurs loss
• Backdated technology used in the inventory and warehouses

Opportunity

• Incorporating new automation technology in the stores and warehouses
• Effective entry in pharmacies, opticians, jewelry and photo departments to create a monopoly
• Developing partnerships for venturing in new counties like India, China 
• Pressure of maintaining low prices
• Monetary fluctuations due to political instability in host countries
• Incorporating modern technology in the retail functions and maintaining lower cost with quality

Value Chain Analysis

Gereffi and Fernandez-Stark (2016) portrays that through value chain analysis, an organization helps in finding the most suitable strategy that can help them to attain competitive advantage. Fearne et al. (2012) furthermore stated that this model also indicate the internal activities that transforms the input approaches into effective output. The value chain analysis comprise of two main categorizations that are primary activities and support offering activities.

Primary activities

Soosay et al. (2012) stated that many marketers conclude that primary activities directly add value to the production process. However, Darmawan et al. (2014) argued that support activities to accomplish these primary processes are more important. In recent times, these activities can be occurred through the advancement in the technology that is used to enhance the rate of the production. de Souza and Márcio de Almeida (2013) highlight that some of the organization invest in the Research and Development (R&D) department so that new technologies and products innovation can be introduced for attaining more advantage with the competitive organizations. Firm's Primary Activities comprised of five factors- inbound logistics, operations, outbound logistics, marketing and sales and services.

Inbound Logistics- ASDA’s inbound logistics are less complex than TESCO and the resin is that ASDS does not have to operate their function outside UK but TESCO have to create a single inbound logistic model for maintaining the international store also. ASDA also invests a lot fir increasing the capacity of the inbound logistics so that they can maintain the delivery process timely through all of their 631stores across UK. ASDS has a history to treat their supplier poorly due to the fact that the payment delays. The history also illustrates that ASDA has negative implications on putting unnecessary and unjustified fines that is imposed on the suppliers.

Operations- ASDA has three different segments operated under their brand- retail, Asda Mobile and Asda Money.

Retail: ASDA has total of 631 stores and out of which they has several types of stores like 339 ASDA Superstores, 206 ASDA Supermarket, 33 ASDA Living, 32 ASDA Supercenters and 21 ASDA Petrol Fueling Station (Statista 2018). ASDA Superstores has a huge range of the food and daily use items and only can be operated within 5pm; whereas ASDA superstores are 24 hour trading stores. Moreover, ASDA Living has no-food products and offer home, fashion and general merchandise and target people who can afford higher range of products.

ASDA Mobile: ASDA mobile belongs to telecommunication centers and uses EE network. This service is currently available in over 360 stores across the UK. They also have SIM card facility that can be purchased separately or within the ASDA Mobile Handsets. There are three SIM Card facilities available in ASDA - Standard, Micro or Nano SIM (Corporate.asda 2018).

ASDA Money: This department of ASDA offers travel money, travel insurance, credit cards and money transfer facility. Recently, in the year 2017, ASDA launched a new personal loan tool that offer the  borrowers to see whether or not they are eligible for the loan at in what rate of interest.

Outbound Logistics- ASDA focuses on the flexibility and cost-effectiveness of deliveries for their outbound logistics operations. The supermarket offers free home delivery for retaining many customers if they purchase from their online website. The free home delivery option at TESCO can also be opted through different plan that they have like Free Next Day Click + Collect plan, unlimited free grocery delivery for one month of Delivery Saver plan. This will help customers to witness their innovation and strategies to retain the interest on the brand.

Marketing and Sales- ASDA emphasized on the competitive prices, wide selection of products along with the price and quality balance. However, when compared to the competitor like TESCO, the later organization implement plan for restoring stakeholder trust to avoid commercial income scandal and ethical supplier relationship issues.

Services- The services offered hampered due to unsatisfied staffs as they have to face redundancy or a dramatic cut in their working hours as the company incurred loss in their profitability. 18 superstores faces staff cuts in the Halifax, Broadstairs and Basildon Eastgate branch. This resulted in declination in the customer base which furthermore resulted in decrease in profitability.

Support Activities

Firm Infrastructure- ASDA also claims high sales rate by 5.3pc over December in the years 2018 which is higher than Morrisons, Tesco or ASDA (Telegraph 2018). ASDA shows a growth in the sales in the UK economy by 2.3% which was 2.2% in the last two months (Statista 2018).

Human resource management- ASDA is careful in terms of hiring efficient employee, who are knowledgeable of the retail industries and its operations. They strategically plan for workforces of the organization, recruitment and selection, appraisal for the employees, providing them training and recognize their effort to motivate them to retain in the organization. ASDA also have a plan for recruitment process and comprised of five steps- job analysis, job description, attracting the applicants, selection process and provide them induction.

ASDA also offer their young employees first 3-year BA Honors degree in retail and distribution, George retail foundation degree and accredited apprenticeship scheme (Corporate.asda 2018).

Technology position- ASDA incorporates the online website technology that provides the opportunity to target those customers, who are unable to go to the store. A more streamlined technology service is incorporated so that all the 11 of Walmart’s websites can be monitored. This technology also helps the company to identify the faults in the websites 5 times faster than at present. However, when compared to other leading retailer, those companies utilize the automation technology in the warehouse and inventory and also introduced a robot assistance in their store.

Procurement- Effective procurement and regulation have been followed like fair pay, employee discrimination act. ASDA focuses on maintaining an ethical workplace environment. Moreover, procurement for greener business operation is also made

Porter’s 3 Generic Strategies 

Fearne et al. (2012) stated that the implementation of the Porter’s 3 generic strategies is used to assess firm’s profitability whether or not it is above and lower the industry average. The profit level if above the industry margin, the company is said to have sustainable competitive advantage. Soosay et al. (2012) depicted that there are two categories through which the organization can attain competitive advantage- low cost and differentiation. Macfadyen et al. (2012) also depicted that the above two mentioned advantages when combined with the scope of activities leads to the third generic strategies which is ‘focus’.  

Cost Leadership

Hilman and Kaliappen (2014) portrays that in this case, the organization emphasizes more on the lowest cost of their products and services compared to the other competing organizations. Stankevici?t? et al. (2012) on the other hand stated that, this factor cost advantage varies on the structure of the industry. ASDA opts the strategy of focusing on all the customers and provide all products based on their target audience. This is the reason that ASDA can provide their products a lowest cost than TESCO. Birjandi et al. (2014) moreover depicted that the problem arise when the target audience are more concerned about the quality of the products and not on the price that the company charges for the products.  

Differentiation

The aspects identified in the above section that is what necessary steps can be done if customer agrees to pay higher amount and do not want to compromise with the quality of the product. Macfadyen et al. (2012) suggested that the solution is to provide high range of products with all price ranges. Moreover, the products should different from and more attractive that the products that is offered by the competing organizations. Retailers can induce additional features of the products or offer other product free with the desired products. Hilman and Kaliappen (2014) also stated that the company needs to do good research and innovate their products. Retailers now a day incorporate technology to gain the trust of the purchasers like including QR code that can be scanned through mobile phones and the genuine information regarding the products can be found out. Kurt and Zehir (2016) depict that the sales and marketing also plays a crucial role in developing the service of the products.

Rothaermel (2015) stated that in this case the marketer focus rests on the choice that can provide a narrow customer base for the company. The marketer also segments the industry and group of segments to the exclusion of others. Hilman and Kaliappen (2014) furthermore stated that retailers targets all the group people but targeting younger millennial and offers products of their choices helps the organization to retain such customers, who can shop from them for longer years, motivates their known people to experience their service once and also shop for their family members which also represents that he company targets all the target audience indirectly.

Recommendations on ASDA’s retail unit’s strategic business unit

Inclusion of effective technological advancement- ASDA opted for technology to maintain the database of the inventory and warehouses but they can also offer automation in their business function so as to reduce the inaccuracy of the calculations. Robotic assistance should be implemented in the business. However, ASDA should also implement drone robots for faster delivery to their premium clients.

Focus more on quality- ASDA suffers from the problem that they offer regular and frequent price cut in order to compete with TESCO but the aspect that ASDA should consider is that people like quality and compromising on the same results in lower customer base.

Offer more benefits to the customers- The SWOT analysis shows that ASDA does not have any loyalty card yet to retain customers and hence they should offer regular discount and gift vouchers so that the customers can purchase next time from their organization.

Strict recruitment policies- The analysis also shows that one of the main reason for the dissatisfied customers is that eh employee do not provide them effective and accurate services. This problem occurred as in the selection procedure, the candidates are selected only based on the performance of the interview. However, this problem can be overcome if the apart from interview, situational assessment in the selection process can be included.

Conclusion 

It is concluded that external environmental analysis through PESTEL Analysis, where it is found that the external factors that should be considered in the political factor are government policies, taxations, political stability, global trade agreements and industry regulation. Moreover, the importance of the retail industry is medium to high as the exchange rate conversions remain volatile due to Brexit and affects negotiations with suppliers and marketers focus on consumer trends, buying habits, career attitudes, work life balance and population demographics. The technological advancement adopted by UK companies, they emphasizes more on the automation, innovation, robotics, artificial intelligence and online presence. It is also found that company in UK should focus on environmental restrictions imposed by in-country governments, corporate social responsibility, ethical sourcing, procurement and Sustainable resources. In addition to that, for the retail sector, they have to maintain the fair pay regulations and provide a healthy working environment to the working personnel. The internal environmental analysis is carried out through SWOT Analysis and value chain analysis. The value chain analysis comprised of primary activities and support activities. Lastly, Porter’s 3 Generic Strategies is considered that comprised of cost leadership, differentiation and focus.

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