Submitted by: Submitted by linkinbach
Views: 307
Words: 1295
Pages: 6
Category: Business and Industry
Date Submitted: 04/09/2013 07:45 PM
To analyze Asda’s strategy, I first look at the fundamentals of strategy.
Who – In its early years, Asda focused on working class consumers that seek low prices and value for money. The company mainly concentrated in northern England and in Scotland and Wales. More recently, Asda has changed its strategy to shift toward the upscale end of the market and attempt to expand in the south.
What – Asda’s core business is supermarket chain that offers a complete assortment of grocery products, along with clothing and other nonfood items. The company has a reputation in offering low prices. In addition, Asda also offers a chain of carpet and furniture stores.
How – Asda focused on developing large edge-of-town superstores with an average store size of 40,000 square feet, substantially larger than the average stores of its major competitors. The store operations are supported by a centralized distribution system and IT systems.
A SWOT analysis (Exhibit 1) helped uncover Asda’s core competency – cost leadership that allows Asda to offer lower prices to working class consumers. The cost leadership is the core competency for several reasons. First, lower prices help create a virtuous cycle as lower prices result in returning customers that consequently improve sales volume and reduce fixed cost per product sold. As a result, returning customers allow further price cuts to reinforce Asda’s cost position. In other words, the cost leadership model is sustainable. Second, the low price model is consistent with Asda’s strength in large format superstore. As the first mover in this format, Asda had claimed many of the best sites and had clear advantage in this segment because its major competitors don’t have access to these sites. Because of the economy of scale of these large format stores, Asda can achieve its cost position more easily than its competitors. In a nutshell, maintaining cost leadership is the strategy most consistent with Asda’s existing strength.
Based on the...