ASDA’s Responses To Changes In Its Business Environment

ASDA Group (ASDA) owned by Wal-Mart group company, is a grocery and general merchandise retailer in the UK. In 2008, ASDA recorded a profit before tax of £520.4m, down slightly from £532.7m but exceeding arch rival Sainsbury’s. ASDA’s sales hit £18.57bn, up from £16.7bn, in ranking the chain third in the supermarket hierarchy after ASDA and Sainsbury’s.

There have been many changes in ASDA’s business environment over the last 65 years. ASDA is usually conducting research to identify changes in the business environment and responding to the customer needs its research identifies. One of the research models is PESTE (STEEP). The PESTE model uses the five headings of sociological, technological, economic, environmental and political factors. Factors in the macro-environment such as tax changes, new laws, trade barriers, demographic change and government policy changes affect the management decisions at ASDA.

Sociological (gender roles, age of consumers, the extent of local migration/mobility, patterns of consumption, culture of a population, out of town shopping/car usage, busy people/working more hours)

One of the sociological factor is dietary habits. Nowadays, people want to try different and new foods. ASDA has responded by increasing its range of foreign foods such as Mexican, Indian and Chinese. Likewise, the large ethnic populations that have moved to the UK have made ASDA respond by increasing its range of foods. For example, there is a full aisle of Polish food in ASDA in Boston, Lincolnshire. This is not extraordinary, considering that in this little city (30,000 citizens) almost 50% is Polish. Another factor the ageing population also has impact on the demand for non-food products such glasses from optical stores. ASDA have its own ‘ASDA Opticians’. This is example how ASDA responds to changes in sociological environment and the age of customers factor.

Technological

Technology is an area where there have been a lot of advances. The example of this is the mass use of microwaves. The Company launched a range of microwaveable foods. Welcomed new technologies, ASDA has implemented online shopping and self service checkouts which make easier shopping for customers. Furthermore, new technologies enable improvements to the way that ASDA does its business. The company uses information technology to support its operations. For example, it can see how individual products are performing store-by-store at a glance through data collection. ASDA appears to have responded well in this area.

Political – Legal changes (laws on foods, competition laws, rate of unemployment, tax policies, price regulations etc)

Planning permission is heavily regulated in the UK. ASDA is aware of planning permission regulations. Store expansions goes ahead to comply with planning regulations. ASDA identifies relevant planning laws and comply with them to reduce any disruption to its store expansion programme by local people’s dissent or the local authority refusal. This supports the successful opening of a new store in an area. An example is the development of huge out of town ASDA Superstores which have huge car parks. This was made possible by the government allowing them planning permission to build.

The UK is a member state of the EU so ASDA has to abide by EU laws e.g. competition laws. ASDA is restricted from growing too large. To overcome this they have started to offer more services such as financial services . There is ‘ASDA money’ (ASDA FINANCIAL SERVICES LIMITED) which offers credit cards and insurance. In addition, it provides mobile phone network. The ‘ASDA mobile’ is the cheapest supermarket mobile network with a cheaper overall tariff than rival Tesco.

Environmental/Ecological (more focus on organic, recyclable, less waste, environmental regulations etc)

A is the one of the biggest threat to a natural environment. The cause of global warming is the emission of carbon dioxide. To meet these challenges, ASDA supports carbon reductions in most of its stores. ASDA’s stores are eco-friendly, 40% more energy efficient and emitting 50% less carbon dioxide than a standard new build store. Over the past couple of years ASDA has been working with its suppliers to reduce the amount of carbon emitted during manufacture, growing and processing of their products — something that’s known as embedded carbon.

Many people now do not want to eat food that has been grown or reared using chemicals, they want natural food. ASDA has responded by introducing a wide range of organic food ranges. For example, ASDA have launched the Organix brand which helps people to find organic food on storefront shelves.

Economic (recession, competition, inflation, taxes etc)

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. ASDA has grown enormously and has forced many small retailers out of business; they have received a lot of criticism in this area and appear not to care. They have also been criticised for the low prices they pay UK farmers for their products , which in same cases has forced farms close.

In addition, ASDA has been criticised for not responding to the needs of some shareholders, such as UK farmers. As we see this economic factors are where ASDA has problems responding positively to changes in business environment. It could have negative influence for its clients. Some people could change their preferences and to go shopping in a competitor supermarket due to a bad publicity.

Conclusion

It is important to respond accurately to factors such as tax changes, new laws, trade barriers, demographic change and government policy changes. This evaluation has considered how ASDA has responded to external changes. In evaluating how well they have responded, they have responded well to external changes concerning their customers but not so well in areas of economics. Some of these wrong responses has influence for negative public relations, especially force many small retailers out of business and the low prices they pay UK farmers for their products. In other hand, to take responsibility for natural environment by carbon reductions policy is really impressive.