ASDA plc is a British international grocery and general merchandising retail chain. It is the largest British retailer by both global sales and domestic market share, with profits exceeding £3 billion, and the third largest global retailer based on revenue, behind Wal-Mart and Carrefour.
1.2: Problem and Purpose
The report seeks to identify the product and service mixes of the small company’s business plans, product and service provider problem as well as recommendation to solve the problems. The following are the sequence of the report:
An introduction of ASDA.
A SWOT analysis of ASDA’S Resources Management in the following areas:
Manufacturing Operations Management
Human Resource Management – as at present more than 100 people chase one job.
Marketing Management and Strategies
Technological and Infrastructural support for all the above activities.
A holistic review of the ASDA’S Human, Financial and Technological Resources Management Strategies.
What you consider to be real problem and why, with ASDA’S procedures and business process, therefore suggesting coherent set of recommendations for possible solutions and Improvements.
Chapter 2.00: Methodology
2.1: Data Collection
We collected data from two sources as:
Primary source and
2.1.1: Primary source
We collected data from the ASDA manager directly. We did collect data by face to face conversation with store, Other Staffs.
2.1.2: Secondary source
We also collected data from the Internet, Magazine, Newspaper, Public, and other area as well as friends and senior students about ASDA.
Chapter 3.00: A holistic review and analysis the Human, Financial and Technological Resources Management Strategies of ASDA.
3.1: Historical Background of ASDA
Asda Stores Limited was founded as Associated Dairies & Farm Stores Limited in 1949 in Leeds. The adoption of the Asda name occurred in 1965 with the merger of the Asquith chain of three supermarkets and Associated Dairies; Asda is an abbreviation of Asquith and Dairies, often capitalised. For a short time in the 1980s Asda Stores Ltd was a subsidiary of Asda-MFI plc following a merger between the two companies. Other companies in the group were Associated Dairies Limited, the furniture retailer MFI and Allied Carpets. After the sale of MFI and Allied Carpets the company name changed to Asda Group plc. The dairy division was sold in a management buyout and renamed Associated Fresh Foods, meaning that Asda has since had no connection with one of the firms its name was derived from.
With stores mainly based in the North of England, the newly focused food retail group expanded further south in 1989 by buying the large format stores of rival Gateway Superstores for £705 million. This move overstretched the company and it found itself in deep trouble trying to sell too many different products. As a result it was forced to raise money from shareholders in both 1991 and 1993. It revived under the leadership of Archie Norman, who later became a front bench Conservative MP. CEO from 1991, Norman was chairman of the company during the period 1996-99, and replicated the store on the basis of United States retail giant Wal-Mart, even sending protégé Allan Leighton to Bentonville, Arkansas to assess and photograph the systems and marketing which Wal-Mart had deployed.
In 1997, The Spice Girls licensed their name and image to Asda in which they created over 40 different Spice Items for Christmas 1997 developing goods such as party supplies, official merchandise, and even Spice Girl branded kids meals in the stores’ restaurants. The Spice Girls earned £1 million for this sponsorship deal.
When Norman left the company to pursue his political career, he was replaced by Leighton. Wal-Mart wanted to enter the UK market so CEO Bob Martin lobbied British Prime Minister Tony Blair on planning issues. Asda, which at the time owned 230 stores and had planned to merge with Kingfisher plc, was purchased by Wal-Mart on 26 July 1999 for £6.7 billion.
After the takeover Asda continued to maintain its headquarters at the then newly opened “Asda House”. This building was one of the first of the new large office blocks to open as part of the redevelopment of the huge area south of the River Aire in the city centre of Leeds, in the Holbeck district, West Yorkshire.
In 2005, amid reported concerns within Wal-Mart about a slippage in market share, partially due to a resurgent Sainsbury’s, Asda’s chief executive, Tony de Nunzio left, and was replaced by Andy Bond. In 2005, Asda expanded into Northern Ireland by purchasing 12 Safeway stores from Morrisons.
In 2009 Wal-Mart ‘sold’ Asda for £6.9 billion to their Leeds-based investment subsidiary Corinth Services Limited. The deal, which took place in August, was described as part of a “group restructuring” and means Asda remains under the control of the Wal-Mart, since Corinth are themselves a subsidiary of Wal-Mart.
Asda is known for memorable famous marketing campaigns. In the “Asda price” campaign, customers tap their trouser pocket twice, producing a ‘chinking’ sound as the coins that Asda’s low prices have supposedly left in their pockets knock together. The pocket tap ads were launched in 1977 and over the next 30 years a range of celebrities have been “tappers”, including Julie Walters, Michael Owen, sitcom actor Leonard Rossiter and Carry On actress Hattie Jacques. In the late 1980s, prior to the reintroduction of the tap pocket campaign, advertising for Asda had featured the Fairground Attraction song Perfect. In 2004, Sharon Osbourne was selected to be part of a new marketing campaign by Asda; her last advert was aired in August 2005.
In the smiley face “rollback” campaign, also used in Wal-Mart advertisements, a CGI smiley face bounced from price tag to price tag, knocking them down as customers watch. The focus of these campaigns is to portray Asda as the most affordable supermarket in the country, a claim that was challenged by competitors, especially Aldi. In 2006, Asda advertising was themed around singing children and the slogan “More for you for less”, and the previous tap of the trouser pocket advertising was reduced to a double-tap on a stylized ‘A’, still producing the ‘chinking’ sound. This included an advert during the 2006 FIFA World Cup featuring the England footballer Michael Owen in an advert with the children singing Vindaloo. In 2007, the advertising campaign abandoned the rollback hook in favour of featuring celebrities including Victoria Wood and Paul Whitehouse working as Asda employees.
For Christmas 2007, Asda reintroduced the “That’s Asda price” slogan as well as the famous ‘jingle’ to some of its adverts, this can also be heard on its instore radio station ‘Asda FM’.
Starting in 2008, Asda has been returning to its roots and is now re-focusing on price with its new “Why Pay More?” campaign both on TV and in stores. Current Asda TV commercials in April 2009 focus on price comparisons between Asda and its rivals, using information from “MySupermarket” to suggest that Asda is Britain’s most affordable supermarket. The music being used in these adverts is the Billy Childish version of the classic Dad’s Army theme tune. The old Asda jingle is not included in these, but appeared in a 2008 Christmas advert. Asda returned to the traditional pocket tap adverts in March/April 2009, with the slogan “Saving You Money Every Day!”
Asda has been winner of the The Grocer magazine “Lowest Price Supermarket” Award for the past 12 years, and uses this to promote itself across the UK. 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. The A.S.A upheld the complaint and ordered Asda to stop using it, citing that The Grocer magazine survey was based on limited and unrepresentative evidence as it examined the price of just 33 products, and that the survey did not study
low-cost supermarkets such as Aldi, and that their price checker, My Supermarket, doesn’t include Morrison’s, which was mentioned a few times. As a result Asda no longer cites itself as “Officially Britain’s lowest priced supermarket”, instead using “Winner: Britain’s lowest price supermarket award”
3.3: SWOT analysis of ASDA
Economies of scale
Too much diversity
Large capital expenditures
3.4: Corporate social responsibility
Asda has signed up to the Ethical Trading Initiative (ETI) which respects workers’ rights for freedom of association and a living wage. Implementing this initiative is difficult, however, because the concept of a living wage varies between countries and the buying strategies of a major importer like Asda have an indirect impact on national minimum wages by obliging governments to set them low enough to stop businesses from going elsewhere. Industry pressure groups such as Labour Behind the Label and War on Want have argued that Asda and other budget retailers use unethical labour practices in the developing world to keep UK prices low.The National Farmers’ Union, representing UK farmers and growers, has argued that Asda and other major supermarkets have made large profits and kept consumer prices low “by squeezing suppliers’ margins to the point where many of them have gone out of business”.
3.5: Asda Smart Price
Asda Smart Price is a no-frills private label trade name. The equivalents from the three other big supermarkets are Tesco Value, Sainsbury’s Basics and Morrison’s Value.
The Smart Price brand can trace its origins to Asda’s Farm Stores brand launched in the mid 1990s, which consisted of products that were offered at a lower price than the equivalent famous name brand product and Asda’s own brand equivalent. The Farm Stores brand originally consisted of a small number of food only products, largely frozen such as frozen chips and a small range of ready meals, this range later expanded to include fresh food. In 2000 following the acquisition of Asda by Wal-
Mart, the Farm Stores products were phased out and replaced with the new Smart Price brand “based on Wal-Mart’s Great Value and Sam’s Choice”.
Smart Price products are almost always the lowest price option (known as Our Lowest Price) in a product category in Asda stores. Occasionally this difference is only a few pence, however in others it is a marked difference. For example, a box of Smart Price Biological Washing Powder costs 50 pence while the equivalent Asda brand washing powder costs £1.50 and well known name brand alternatives cost from £2 upwards.
The Smart Price label was originally a food only brand, however over the years it has expanded to cover almost every product range in the store, including clothing and furnishings with the George Smart Price brand. Like early generic products in the US some Smart Price products lack what can be thought of as ‘frills’ in the modern brand name or supermarket own brand, for example the Smart Price toothpaste has an old fashioned screw cap rather than the now more common flip cap and the Smart Price range of crisps come in traditional clear plastic bags rather than the foil bags common to most name brand versions.
3.6: George clothing
Asda has its own range of clothing known as George which was created in 1990. This is marketed as quality fashion clothing at affordable prices. Wal-Mart also sells the George brand in the United States, Canada and Japan (and in South Korea until Wal-Mart pulled out of that market). This George label was named after George Davies, the founder of Next, who was its original chief designer. He is no longer associated with the brand, although it has aimed to remain true to the high quality, low price business model that he established.
In 2005, Asda stated that the George range was a £1.75 billion business, including sales from Wal-Mart stores in the USA and Germany. Mintel estimate that George is the fourth largest retailer of clothing in the United Kingdom, after Marks & Spencer, the Arcadia Group and Next.
Asda was the first supermarket to stock wedding dresses. Part of the George line, they cost just £60 while adult bridesmaid dresses ranged between £30 and £35, at launch.
Asda originally had a “simple and fresh” store format, which under Archie Norman’s team and the focus on a Wal-Mart style strategy became even more emphasised. The stores are generally white and green, with simplistic layout but built on a Wal-Mart larger footprint format – Asda’s average store is almost 20% bigger than its rivals, but stocks 20% fewer lines.
However, the preferred large-format stores have brought problems to Asda’s growth beyond its spurts in both the 1990s and immediate post Wal-Mart era. With the UK’s tight planning restrictions, the opportunity to increase retail space via new store builds has been limited. Rather than follow rivals Tesco and Sainsbury’s into “local” format smaller-footprint stores, Asda has chosen to adapt its format to niche stores to retain longer term growth.
3.8: Asda Wal-Mart Supercentres
Following the takeover by Wal-Mart, several “Asda Wal-Mart Supercentres” have been opened, creating some of the largest hypermarkets in the United Kingdom. The first Supercentre opened in Livingston, Scotland in June 2000. The Milton Keynes store is currently the largest Asda Wal-Mart Supercentre by total floor space. The second largest Asda Wal-Mart Supercentre is located in Huyton, Merseyside. There are currently 25 Supercentres in the UK. It is also planned for a Wal-Mart Supercentre in Dundee, Scotland.
3.9: There are 346 Asda Supermarkets.
In October 2003 Asda launched a new format called ‘Asda Living’. This is the company’s first “general merchandise” store, containing all its non-food ranges including clothing, home electronics, toys, homewares, health, and beauty products. With these stores they have linked up with Compass Group who operate the coffee shop Caffe Ritazza within some of the stores. The first store with this format opened in Walsall, West Midlands, and at the time of writing has been followed by ten further stores.
3.10: George clothing stores
In 2004, the George clothing brand was extended to a number of standalone George stores on the high street. In 2008, all George standalone stores were closed due to high rental costs resulting in low profitability. The first George standalone store to open was in Preston.
3.11: Asda Essentials
In April 2006, Asda launched a new format called Asda Essentials in a former Co-op store in Northampton, followed by another in Pontefract a month later. This was modelled on the French Leaderprice chain, with a smaller floorplate than Asda’s mainstream stores. Essentials focuses primarily on own-brand products, only stocking branded items that are perceived to be at the “core” of a family’s weekly shop. This style of retailing is an attempt to address competition from discount supermarkets such as Aldi, Lidl and Netto. On 6 December 2006 The Guardian newspaper reported that further planned store openings were under review following poor sales in the existing outlets. It was also revealed that the range of branded products has been expanded. In early January 2007 it was announced that the initial trial Essentials store would close within a month after only 10 months of trading.
Asda also has 70 depots all across the UK which distribute across the network of stores. There are depots for chilled foods, clothing and ambient products, such as fizzy drinks and cereals.
4.2: Other interests
On 10 June 2008 Wal-Mart announced that it has agreed to sell Gazeley Limited Group, the property development subsidiary of Asda, to Economic Zones World (EZW), a Dubai World company. Gazeley is involved in the development of distribution warehousing in the UK, mainland Europe and China and has extended its operations to India and Mexico. Its customers include many of the world’s leading companies, third-party logistics providers, original equipment manufacturers, retailers and their suppliers. Gazeley is also a preferred developer of distribution space for Wal-Mart International, including Asda in the UK and Wal-Mart China.
Asda Financial Services
Asda has established a financial services division, following in the footsteps of Tesco, Sainsbury’s and other retailers. Asda simply attaches its own brand to products provided by other companies. Services they offer include insurance (provided by Norwich Union), credit cards (provided by Grupo Santander) and loans (provided by the Funding Corporation). The Financial Services division of the organisation does not directly sell these services in store and instead uses the supplier of that product by telephone or online/postal application. Until June 2009 selected stores had Credit Card Representatives provided by GE Capital Bank and then Grupo Santander. Marketing and management of Financial Services is co-ordinated in house and many stores have a Financial Services Co-ordinator, responsible for promoting the products and ensuring legal compliance. The Financial Services division is also responsible for Gift Cards, Christmas Saver and Business Rewards.
4.3: Loyalty card
The company does not run a loyalty card scheme, stating that “we prefer to invest the money we’d use to set up such a scheme into driving down prices for our customers”. However, the Asda-branded Credit Card (provided by Grupo Santander) offers a points scheme, though these points can be earned on all spending.
5.00: Internet operations
An Asda Mercedes-Benz Sprinter delivery van
Asda launched its online retailer service in 1998, but from the start had over-estimated demand. It began with a dedicated depot based in Croydon, South London, but this was closed with a number of redundancies shortly after as sales were lower than expected. It continued the online service, but emulated the Tesco store-based model instead.
Since the roll-out of the grocery delivery operation Asda has moved into non-food online retailing. Current categories include entertainment, contact lenses, furniture, travel, electricals, gifts, mobile phones and flowers, with more categories being launched each year.
In May 2004 it announced a major expansion of the service which would increase coverage from 30% of the UK population to 35%.The Grocer magazine reported a turnaround in the fortunes of Asda’s home shopping service under new head of Home Shopping, Richard Ramsden. More recently, Asda stepped up its commitment to home shopping, focusing on full UK coverage by the end of 2007. Andy Bond highlighted that Asda will be recruiting up to 1,800 new staff to bolster its operations and focus on competing with Tesco in the online arena.
In January 2007, Asda launched www.asda-electricals.co.uk to compete with Tesco’s highly successful Tesco Direct. In October 2008, Asda launched direct.asda.com superseding its electricals website and also selling several additional product categories such as homeware, garden and toys. This new venture is part of its online business Asda Direct, with more than 3,000 domestic and home electrical products. Asda’s long term ambition to capture 5% of the £1.9 billion market by 2012. Recently, the company sold its Durabrand 1005 DVD player for only £9, the UK’s lowest priced DVD player, which sold out in just two days from start of the promotion.
5.1: Financial performance
As of March 2009, Tesco has a 30.4% share of the UK grocery market while Asda’s share is 17.5%, followed by Sainsbury’s at 16.1%, and Morrisons at 11.8%.
According to CACI, as of 2006, Asda has market dominance in 14 postcode areas; DY (Dudley), B (Birmingham), CH (Chester), L (Liverpool), WN (Wigan), BL (Bolton), BB (Blackburn), LA (Lancaster), HU (Kingston upon Hull), SR (Sunderland), DH (Durham), NE (Newcastle upon Tyne), G (Glasgow) and AB (Aberdeen).[38
5.2: Employee relations
Asda has 150,000 employees, whom it refers to as “colleagues” (90,000 part-time, 60,000 full-time). The company has featured prominently in lists of “Best companies to work for”, appearing in second place in The Times newspaper list for 2005 (although very few, if any, employees at grass-roots level were asked for their opinion). It offers staff a discount of 10% on most items (exceptions include fuel, stamps, lottery, gift cards and tobacco related items).
On “double discount day”, in December 2005, Asda temporarily increased the staff discount to 20%, but excluded alcoholic drinks from the extra discount for reasons of “operational profit protection”. In 2007 Asda chose to allow staff up to £100 off alcohol before discounts. They were also allowed to purchase items from the George range with 20% off. However, during this “double discount day”, all edible and most non-edible grocery products and electrical items (excluding digital cameras) were not included. The GMB Union attempted to get Tesco to offer a similar discount to Asda staff as a publicity stunt and Asda subsequently included these products in the extra discount, but with a maximum spend of £100, down from £250 in the years before the alterations. While the reinstatement of the discount was intended to be a publicity stunt that improved employee relations, it resulted in further bitter feelings. This was due to the fact that in the years previously, music albums, singles, DVDs, videos and video games had been included in the discount day, but were not reinstated with the rest of the discount after Asda backed down.
5.3: Trade union relations
In August 2005, the manager of the Wakefield depot read out what were called [who?] “foreign-sounding” names over the public address system ordering them to report immediately to the manager’s office. The workers, who were all Muslims, were ordered to produce evidence that they were not illegal immigrants. At least one was threatened with the sack unless he produced his passport the next day. The highly public initiative by management, which came within weeks of the 7 July bombings in London, was followed by a spate of graffiti at the depot in Wakefield expressing hatred and contempt for Muslims and their religion.
In February 2006, Asda was fined £850,000 for offering employees of a newly taken over distribution depot a pay rise to give up union rights. An employment tribunal found the American-owned supermarket chain guilty of promising 340 distribution staff a 10 per cent pay rise to give up the collective agreement negotiated by the GMB union – an act which is illegal under a 1992 labour relations law. The court ordered Asda to pay £2,500 to each GMB represented employee at the Washington depot.
In June 2006, GMB Union members at the company’s UK distribution depots agreed to strike for five days from 30 June 2006. The two sides failed to agree on how many of Asda’s 12,500 depot workers belong to the union across its 24 depots around the UK. The GMB claimed the figure as 7,000, but Asda claimed the number was nearer 4,500. The depots affected include Bedford, Chepstow, Dartford, Didcot, Erith, Falkirk, Grangemouth, Ince George in Wigan, Lutterworth, Lymedale in Staffordshire, Portbury, Skelmersdale, Teesport, Wakefield and Washington.
Asda threatened legal action, citing flaws in the ballot process, (such as the GMB sending out ballot forms to non union members – strengthening Asda’s claim that the union quoted figures were inflated,) but after discussion at the TUC, an agreement was reached for a national level consultative body and the strike called off.
5.4: Dairy price fixing
In December 2007 Asda, Sainsbury’s and other retailers admitted to price fixing dairy products between 2002 and 2003. Asda commented, “Everyone at Asda regrets what happened, particularly as we are passionate about lowering prices. Our intention was to provide more money for dairy farmers, who were under severe financial pressure at the time.” So far in total these retailers have been fined £116 million. Tesco, Morrisons and dairy company Lactalis McLelland denied any involvement in price-fixing; however, the Office of Fair Trading (OFT) says it will carry on its investigation. It was announced that the alleged price-fixing cost consumers £260 million.
5.5: Asda Mobile Main article: Asda Mobile
Asda Mobile is a mobile virtual network operator (MVNO) in the UK, operated by Asda, using the Vodafone UK network. Asda Mobile was launched in April 2007. As of 21 August 2007, Asda mobile was available in 237 stores across the UK. Asda Mobile has won awards for being the cheapest national mobile network.
There are many phones available on Asda Direct, with all Asda mobile handsets unlocked, one of the reasons handsets are more expensive than with competitors. Asda do not sell all of them on the Asda Mobile network, making some handsets network locked. It has 99% UK 2.5G coverage, and coverage in over 200 countries around the world.
1997-present – Voted Britain’s lowest price supermarket in a survey by Grocer 33 Magazine
2001, 2002, 2003 – Voted a top 10 UK employer by the Sunday Times Top 100 Best Employers Survey, although the merit of Asda being awarded such an award is contested by the GMB
2002 Nestlé Social Commitment Award, awarded by peers in the food industry
March 2009 – Voted ‘Innovative Employer of the Year’ at the Oracle Retail Week Awards.
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