Archie Norman at Asda

ASDA, one of the largest five grocery retail stores once known for its low price and one-stop shopping convenience, is on the verge of bankruptcy by the time Archie Norman (AN) stepped on the post. Needless to say, this is a do-or-die situation that needs a radical transformation. The stakes are high for AN.

The Chronologies:

Since ASDA’s inception through the 1960’s, ASDA has historically focused on running large scale superstores in out-of-town areas. The Company was able to execute the strategy well and quickly grew the scale to become one of the leading grocers in the UK.

Starting in 1970’s, ASDA embarked on a program of diversification, in light of a slowing core market. In the meantime, management decided to move away from low price strategy to selling higher margin products and accelerate store openings, many in the city-center areas.

By 1991, ASDA, having just let go ~2,000 staff members, is left with a demoralized work force, plunging sales (the only grocer among top competition that delivered negative same-store sales growth), declining profits, and one billion pounds in debt. Stock lost 70% of its value in this year alone.

Diagnosis and Analysis:

ASDA’s first fallacy was its loss in strategic focus which translated into loss of identity that over time turned away loyal customers. Emerged in an increasingly competitive industry, ASDA’s market leadership was challenged by not only large-scaled national leaders who offered diverse product offerings such as Safeway, but also fast growing discounters who compete on price such as Kwik Save and William Morrison. Despite an emerging trend of shifting from city-center to out-of-town stores, where ASDA has significantly larger footprint than competitors, management failed capitalize on this opportunity; instead, under Fletcher’s leadership, they transformed the Company to capturing high-end customers.

Another major strategy change was diversification through acquisitions. While the Company...