Asda Case

[Introduction]

Asda had its beginnings in 1920 with a group of dairy farmers in Northern England. The company went public in 1949 under the name Associated Dairies Ltd. In 1965, Asda Stores Ltd. was formed as a subsidiary of Associated Dairies. From the beginning, Asda’s strategy was cost leadership. Asda also promoted one-stop shopping through its large size stores by offering a complete assortment of grocery products, along with nonfood items, and petrol sold from Asda-owned stations in the parking areas outside its stores. Between 1970 and 1980 Associated Dairies’ sales grew from ￡50 million to ￡1 billion. Ultimately, Associated Dairies became Asda Group Plc.

Asda had been involved in acquisition of a number of businesses related to food and nonfood, such as clothing design, petrol, and travel services. Between 1977 and 1984, Asda purchased Wades, a high-end carpet and furniture chain; and Allied Retailers, a group that included a chain of carpet stores. In 1985, Asda merged with MFI, an industry leader in the manufacture of assemble-it-yourself furniture. In 1987, Asda formed Gazley Properties Limited, an Asda-owned property development company that acquired and developed Asda store sites. In 1989, Asda purchased Gateway. Unfortunately, these businesses caused several problems because they did not complement each other well and so on. Asda sold Wades in 1985 and de-merging from MFI in 1987. Unable to sell Allied Group, Asda invested in it and expanded the division with the purchase of Maples.

Asda’s organization and culture had become more bureaucratic and hierarchical since the mid-1980s. Top executives became isolated from the rest of the company and did not care what was happening to the business. The vertical communication was poor and communication between departments was minimal and made coordination activities particularly difficult. In December 1991, Archie Norman would begin work as chief executive of Asda Group PLC, which was on the verge of...