We are going to be looking at the impact of marketing on an organization's objectives and its position within a sector or market in this report and our main focus will be on marketing strategy of Asda and we will also be talking about the internal and external analysis, SWOT analysis, market targeting and marketing mix of Asda.
According to En.wikipedia.org (2019) “Asda is a British supermarket retailer found in 1949 and has it’s headquartered in Leeds. It expanded into the south of England and bought Allied Carpets. Asda was purchased by Walmart the American supermarket in 1999 for £6.7 billion. Since April 2019 it has regained its second position, behind Tesco and in front of Sainsbury's. Apart from its main supermarkets, Asda also offers a number of services which include financial services and a mobile phone provider that uses the existing EE network. Asda's marketing promotions are based on price and it has promoted itself under the slogan "Save Money Live Better". The new Asda management team agreed to reintroduce the Farm Stores brand on selected fresh food products, as part of the company's plans to return and reconnect to its core founding heritage. These products include fresh meat and produce. The Farm Stores brand was officially relaunched in 2017. Asda owns a clothing line known as George, who was created and placed in stores in 1989 and it was officially launched and put in main superstores in 1990. Walmart also sells the George brand in Argentina, Canada, China, India, Japan, Mexico, and the US. George is the fourth biggest retailer of clothing in the United Kingdom and it was the first supermarket to stock wedding dresses and it also operates a mobile phone network called Asda Mobile. Asda has a financial services division, similar to those operated by Tesco, Sainsbury's and other retailers. Asda companies, Services accessible include car insurance made available by Brightside Insurance Services, credit cards provided by creation financial services and travel money bureaux made available by Travelex. Asda has 25 distribution depots all across the UK which distribute across the network of stores. There are storehouses for chilled foods, clothing, and products, such as carbonated drinks and cereals. In August 2005, rival supermarket chain Tesco challenged Asda's ability to use the claim that it was the cheapest supermarket in the country, by complaining to the Advertising Standards Agency.”
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Segmentation types include the behavioural category which covers customer’s purchasing power, merchandise usage, consumer insights, and views. The psychographic group is made up of consumer routines and character analyses. The broad profile group comprises of customer age, gender, geographic location, and their income. The segmentation process aids companies to shape their products and services to meet market need better than their competitors and to choose segments which are aligned with their capabilities as a company. Segmentation facilitates differentiation, which in turn improve competition leading to higher profitability. According to Hooley, Piercy & Nicoulaud(2012) “ For segmentation to be useful customers must differ from one another in some important respect, which can be used to define the total market. If they were not different in some significant way, if they were totally homogeneous, then there would be no to or basis on which to segment the market”.
The market of Asda is segmented based on demographics, location, income and age of consumers.Asda has segmented the market in order to satisfy all income earners. Asda’s market target is focusing on being the cheapest and as such a focus on low-cost could obstruct the quality of goods and services. According to Armstrong et al (2012), Asda can increase its consumer base by changing their marketing strategy or differentiating their product in order to meet the needs of a broader base of consumers.
PESTLE can be used to examine the external environmental aspects of Asda in the UK.PESTLE illustrates how operations and tactics of a company are being affected. According to Lynch (2015), Asda's external environment is examined below; Political environment; Local, global and EU procedures and directions affect employment. Government policies, conflict, and uncertainty also impact organizations' decision-making. The political environment of Asda in the UK is relatively stable. Economic environment; Economic factors such as inflation, interest rates ,Total GDP currency fluctuations and exchange rates need to be taken into consideration by Asda as they can significantly affect its pricing strategies. Social environment; Social factors such as aging population and daily lifestyles are vital for Asda. Asda can introduce new merchandises and services in the shop if they have knowledge of social factors. It also eases the growth of the company’s segmentation strategies. Technological environment; fast broadband, mobile applications, click and collect and delivery services are vital for Asda due to evolving technology and also because the use of technology has become rampant. Environmental environment; as people are aware of the effect that environmental factors such as pollution, hazardous waste have on the environment, there is pressure on companies to operate in a good manner in order to avoid these factors. Legal environment; the procedures and instruction of the UK must be obeyed by Asda, as a failure to do so may lead to sanctions by authorities.
According to Porter (2004), the analysis of Asda is grounded on Michael Porter’s competitive forces theory which includes; “Industry Competitors; Asda faces competition from Tesco, Sainsbury, and Morrison which are the four major players of supermarket retailing industry, Asda’s position can be enhanced if they increase their number of stores. Tesco is leading among the companies and it’s followed by Sainsbury, Due to their sizes, cost efficiencies and financial position they pose a threat to Asda. Morrison is a threat to Asda because of the recent financial crisis of the company and ineffective operations. The threat of New Entrants; Asda faces a threat of new entrant because of the evolving retailing industry in the UK. Retailers from other countries like France and Germany are always prepared to get into the UK market. Lidl which is a supermarket chain of Germany and is opened in the major cities of the UK. The threat of Substitutes; Off license specialist, outlets and franchises chains like Londis, Budgens, cost cutters are Asda's substitute, the threats are passive for now but it has the opportunity to become a major threat in the near future due to its popularity and location. Bargaining power of Buyers; every product available in has various alternatives and so the bargaining power is quite high. If buyers are not satisfied with the product they have a chance of switching. Also, there is a factor of knowledge and information. Nowadays customers have complete knowledge about the pricing of the product and they are aware of the details, therefore, this factor also increases the bargaining power of buyers. Bargaining power of Suppliers; Up till now, ASDA has not threatened by the bargaining power of their suppliers. The reason is the in house sourcing and policies regarding the proportions of its products. However, it is a known fact that the market is continuously expanding geographically which increases the search for new suppliers”.
SWOT covers the external and internal aspects of an organisation. According to Kotler and Armstrong (2009), “Achievement and sustainability of an establishment depending on its capability to audit external environment where it functions”. The external environment comprises of the opportunities and threats of an organization while the strengths and weaknesses are internal factors.Asda’s SWOT Analysis will be explained below;
Strengths; Asda is known for good management and its economies of scale as well as their superiority in technology. Asda’s frequent originality pushes the retailer forward. Weaknesses; Asda lacks small stores like Tesco express or Sainsbury local. Asda doesn't have loyalty cards to retain customers. Opportunities; Asda has a massive opportunity to expand both in the UK and overseas, it can take over smaller and home stores which are struggling and work with them .Threats; Cheaper item prices in small retailers like Aldi and Lidl is a threat for Asda and regular cut down of prices from competitors is also a threat for Asda.
Fig 1 Value Chain Analysis of Asda
According to Porter (1985) Asda’s value chain analysis is divided into primary and support activities which are linked together to improve efficiency and effectiveness. The primary activities can be grouped into five main areas as seen on Fig 1: inbound logistics which are goods obtained from Asda s suppliers, operations are the fulfilment of the order by supplier, and with outbound logistics the goods received from suppliers are sent to distribution centres, wholesalers and retailers. Marketing mix is used to establish an effective strategy. Services are the support the organisation offers to customers after sales which include warranty and guarantee. Support activities include; Business infrastructure such as buildings and machines. Human resource management, Technology development like uniform product code, automated services. Procurement such as good bargaining power with vendors.
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Asda’s objectives focus on customer value, giving a growing discount sector Asda is now reducing the price of its product in order to retain customers. Asda’s objective is to bring old customers back into its store or attract new customers. Given the growth of retailers like Lidl and Aldi, Asda‘s strategy will have to look more on bringing new customers. Asda's marketing mix examines the company which covers 4Ps (Product, Price, Place, Promotion) and explains the Asda marketing strategy as elaborated below
Product; Asda offers unique as well as diverse .Asda offers a mobile phone network and financial services other than the supermarket which is the core. Asda sells its product both instore and online and also offers home delivery of products. Price; Asda records good growth through price strategy and is extremely popular and successful because they have understood the price target and they do not compromise on the quality of products in order to reduce its cost. Place; Asda is present in several places and as such its easily accessible for everyone thereby leading to high sales of products because everyone can get to Asda in order to get what they need at any time of the day and the products sold are affordable for most customers. Promotion; Asda focuses on discounts and schemes as a promotion. The best way for Asda to re-position itself in the market is by removing its focus on price and focusing on ethical issues which in turn may suggest quality.
Asda should focus on supplying more UK produces in stores and having dedicated shelves in its shops to local producers. The benefit here will not only be from higher sales of these goods, but also they will be supporting local farmers. A mission statement sets out the long-term direction of the organization. Asda's mission is to be Britain's best-value retailer exceeding customer needs always. Asda has a statement of purpose which enables stakeholders to understand why the business exists. Asda’s main purpose is to make goods and services more affordable for everyone.
To conclude, Asda focused on price in order to attract customers through its low prices and some people may view the product as being damaged due to its low price, this price strategy caused Asda to focus more on competition meanwhile its market may be slowing down give due to an evolving economy.
BusinessTeacher.org provide free business resources and online learning tools, perfect for helping students and professionals to develop their knowledge and gain a better understanding of different aspects of business. If you are looking for additional support and resources related to Marketing, please find more Marketing resources below:
- Armstrong, G., Kotler, P., Harker, M., & Brennan, R. (2012). Marketing: an introduction. Pearson Prentice-Hall, London.
- En.wikipedia.org. (2019). Asda. [online] Available at: https://en.wikipedia.org/wiki/Asda [Accessed 28 Jun. 2019].
- Johnson, G., Scholes, K., and Whittington, R. (2006) Exploring Corporate Strategy: Text and Cases, 7th Edition, UK: Prentice Hall
- Lynch, R. (2015). Strategic Management 7th in. 7th ed. London: Pearson Education Limited, p.24.
- Peter, J. P., & Donnelly, J. H. (2011). Marketing management: knowledge and skills: text, analysis, cases, plans, London, Pearson.
- Porter, M. (2004). Competitive advantage. 3rd ed. New York: Free Press.
- Sodry, S. (2018). Pestel Analysis of Asda. [online] Howandwhat.net. Available at: https://www.howandwhat.net/pestel-analysis-of-asda/ [Accessed 27 Jun. 2019].
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