SWOT and Accounting Analysis of ASDA

Table of contents

Introduction

BACKGROUND OF ASDA

ASDA stores limited was founded as Associated Dairies and Farms Limited in 1949 and it is basically an abbreviation of Asquith and Dairies (ASDA). In 1965 ASDA gets merged with the Asquith chain of three supermarkets and Associated Dairies. ASDA introduced its first concept of the superstore in 1965. In the mid of 1980s, ASDA started to expand its warehouse stores to face the fresh food selection sets by its competitors. In the late 1990s, the ASDA had its 220 superstores in Britain which helps ASDA to become famous and popular. The basic origin of the ASDA is that it was formed by the English dairy farmers to protect themselves from the falling milk prices after the first world war. After First World War when the price of milk gets in control a dairy farmer from Yorkshire named J.W.Hindell made Hindell Dairy Farmers Limited which deals in a both wholesale and retail outlets of milk. In March 1949 it becomes a public company as Associated Dairies and Farm Stores Limited. Includes some 26 farms, three dairies, two bakeries, 42 retail shops, and pork-butchering facilities (referenceforbusiness.com).

Product of ASDA

ASDA stores deals in almost every product which comes under daily life. The products of ASDA are highly trusted in quality. ASDA sells food item which includes milk, fruit, vegetables, meat, frozen foods juice, music CDs, pharmacy and drinks. The quality of their products is the best in the entire market of UK. ASDA has also included electronic product like laptops, music players, mobile phones, and other electronic gadgets. They also sell jewelry item. Its product is available at low price from the market which makes ASDA a leading grocery store globally. Competitors

ASDA has many competitors in the market such as Tesco, Safeway and Sainsbury are the main competitors of ASDA. ASDA has still maintained its status in the market by maintaining the quality of the product and the lowest price which makes ASDA on the top list of the UK market. They maintain their status so well that they didn’t change the quality of their products. They believe in giving 100 % customer satisfaction and they even don’t take it lightly.

Process

ASDA only deals in supermarkets not in the manufacturing of products. The company buys the product from the farmers directly and sells those products in its stores by maintaining their quality. The customer selected the product which is placed in the food stalls, and take those products to the cash counter for payment. If the customer is not satisfied with the product he can replace it at the same store. ASDA not only deals with food items they sell textiles, from where they earn the majority of their revenue, they basically out sourced their textile products from Pakistan, India, and Bangladesh. ASDA also does produce their own valued item in foods and confectionery.

Policies

ASDA Company had policies that follow the law and regulations. Their laws and regulations are very strict in the terms of quality of their product. If the customer is not happy and satisfied with any product which they brought from ASDA like home and leisure, grocery, fresh or frozen items they can return the product and they will offer a full refund or replacement of their product. The receipt or proof of purchase is preferred but not essential in ASDA stores. There are some more rules and regulations applied for their different products like Electrical products, entertainments items (music, Films, and games), fashion items range and in pharmacy also. If the customer is not happy with these items they have to return these items in 20 days from the date of purchase (your.asda.com).

Management Accounting Techniques:

Methods and techniques

There are many methods and techniques in which we understand management accounting some of them are as follows.

Activity-based costing

Activity-based costing is basically used for measuring activities and the cost of consuming resources. Activity-based costing is an activity that is generally based on the capacity of the manufacture. It is used to calculate the unit price of the product, cost of activities in the terms of variable and fixed cost.

ASDA is good in calculating its Activity-based costing which helps in calculating cost at each activity such as supply chain cost, warehouse cost, etc. which ultimately helps in minimizing cost at each activity and helps in maintaining overall cost.

Budgeting

Budgeting is a very important technique that organizations adopt for their management accounting, whether it is a small or big organization in terms of planning, coordination, motivation, coordination, control, communication, and performance evaluation. It helps organizations to control their expenses and cost. It is very helpful for the company to make a rough comparison between the income and expenditure of the company on monthly basis. For the budgeting manufacture of the ASDA, they include production, administration, and sales budgeting. Budgeting is prepared in two ways (David Hobbs; Management Accounting).

  • Periodic budgets
  • Continuous or rolling budgets

Periodic budget:

Periodic budget is those which are made for a period of time, that period can be of one year, or either for quarters, it depends on how big the organization is and how vulnerable its sales figures over the year.

Continuous or rolling budget:

Continuous or rolling budgets are those budgets in which there is a master budget, which is usually for a year, and after each quarter or four months the budget for the next quarter is added into the master budget (David Hobbs; Management Accounting).

As far as ASDA is concerned ASDA adopts the continuous or rolling budget, where they maintain the master budget for a year and to be competitive with other major competitors rolling budget should be revolved around their master budgets which helps in maintaining the plans according to change.

Job Ordering Costing

The job order costing method is basically the production in each time period. It is calculated by dividing the number of units in a job by the total cost of a job.

ASDA is a big organization where job ordering costing doesn’t apply as much they are basically supplying products in large quantities.

Recommendations for ASDA (Budgeting):

ASDA adopts the budgeting technique which is explained above their major focus is on rolling budgeting, which helps in estimating costs for each quarter. Budgeting is that one tool that makes relevant information and estimation about each department. It also creates a motivational factor among all the stakeholders.

Budgeting has an internal and external influence on the growth of an organization and it helps in overviewing their plan to grow in the international market such as in South Asian countries (Pakistan or India).

Rolling budgets help analyze financial control decisions and help in estimating overall cost for the whole year which can be changed according to sales figures of last quarter.

A job order is the least demandable for the ASDA because the allocation of prices to every single thing is difficult such as overhead costs, direct costs.

According to the ASDA continuous growth showing to us that the job ordering costing system is excellently managed by ASDA.

Activity-based costing (ABC)

Activity-based costing is a useful technique that is used to allocate cost according to product and services which helps in planning and monitoring.

ASDA should follow (ABC) because it is a new system for allocating prices to products and services. The usual accounting system is now obsolete and nowadays ABC is now mostly adopted as it has good control over pricing and costing.

A capital investment decision is also least concerned for ASDA because in its financial planning it is already settled and as proof of the ASDA’s balance sheet is showing continuous growth for the last 3 years. ASDA has overall managed its budget quite well because its continuous expansion and growth showed the credibility of the budgeting system. Budget is the key element for ASDA to manage its global operations.

SWOT analysis:

SWOT analysis is used for identifying potential strengths and weaknesses for the organization. SWOT analysis is done accordingly.

This report is overall based on the personal reflection which I obtained from data related to ASDA which was easily accessible to be. This report doesn’t only deal with fact and figures related to ASDA but give the recommendation relating ASDA management accounting technique. The major focus is on the budgeting technique that how ASDA is implementing budgeting technique to it its company and explains why the rolling budgeting concept applies to ASDA and why it is the point of focus.

The other major technique which was considered for management accounting of ASDA is Activity-based costing and how it helps an organization to maintain its costing. It also does explain why Job order costing does not apply to ASDA.

The weakness which one might think about this analysis is the resources were quite limited and all consideration was made on personal observation and knowledge which I possess. The job order costing could be implemented but as my scope was limited so, I didn’t able to job order costing, and it’s also not applicable for big companies like ASDA.

References:

  1. History of ASDA group plc; Reference for Business, http://www.referenceforbusiness.com/history2/77/ASDA-Group-plc.html [Accessed on 26th May 2011]
  2. Exchange and Refunds; Your ASDA, http://your.asda.com/2010/7/7/exchanges-and-refunds [Accessed on 26th May, 2011]
  3. ASDA Direct; http://www.asda.com/ [Accessed on 26th May, 2011]
  4. David Hobbs & Hugh Coombs; Management accounting: principles and application (book), 2005 SAGE Publications Limited [Accessed on 25th May, 2011]
  5. Peter Atrill & Eddie McLaney; Management Accounting: An active learning approach, Blackwell Publishing 1994 [Accessed on 25th May, 2011]
  6. ASDA History; http://www.nowthen.org/asdas-history [Accessed on 25th May, 20

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