Every organization or industry operates in a particularly environment which will in turn affect the organization either directly or indirectly. The environment will affect the way the organization functions. Environmental forces can not be controlled by the organization, however the organisation have ability to direct on how to manage environmental forces through recognizing and motoring those particular forces that have an effect on the organization. To have an effective monitoring system the organization has to predict changes in environment factors so has to develop an effective management plan to the impacts that they may be caused.
Consequently, environmental factors that affect organizations are categorized in two levels, internal and external. The internal factors include legal and political policies, technology advancements, social-cultural aspects, economic factors and demographic changes. External factors are; suppliers, customers and competitors
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This management report critically examines the analysis of internal and external influences in contemporary business and with particular regard to ASDA Stores chain of supermarkets in UK. ASDA Stores is the largest subsidiary of Wal-Mart., ASDA Stores accounts for approximately half of the organizations international sales. ASDA Stores has a work force of over 150,000 employees 60,000 of them being fulltime. The supermarket chain sells food stuff and other domestic products and it also has interests in property development. (ASDA 2007)
The study will entail a thorough analysis of the strengths, weaknesses, opportunities, and threats that ADSA Stores supermarket undergoes in line with the ever increasing ambiguity and uncertainty that may come up due to effects of globalization and ever changing business environment. This report will also discuss the feature of globalization and how it has impacted the policies and decision making with regard to business transactions of ADSA Stores supermarket. This study will also critically evaluate the effectiveness of this organization response to globalization in supermarkets industry. This management report will further outline recommendations that this company should undertake in order to cope with ever increasing changes that arise because of globalization.
Internal environment is an aspect of business environment analysis that discloses the strengths and weaknesses that may be encountered during business transactions.
The main objective of any business is to maximize profits in order to give the best feasible proceeds to owners for their funds they have invested in the company. Therefore the business organization depends on its internal aspects or components for efficient and effective operations. According to latest research an organization should critically manage and monitor the key internal elements which includes; physical facilities and equipment, financial stability, human resources, production and operations, and market capability. The above key internal elements depending on how the organization utilizes them may result to either strengths or weaknesses of an organization. (Lancaster & Massingham, 1988)
Strengths and weaknesses
Strength can be defined as a particular skill or distinctive competence that a company can do relatively better than other companies especially its competitors and which the organizations have and contributes to the achievements of the stated goals or objectives. (Michael, 1985)
ADSA Stores has a strong corporate image which helps the organization to have a competitive advantage over the other players in the field. According to latest research, the supermarket chain has investments in many other businesses, such as property management, a cloth branding line which has led to the success of the company. The company is also accredited with the best marketing network that have made the company to do well nationally and international, this is achieved by exporting products to other countries such as Germany and south Korea. The company also boosts of a large branch network has enabled it to capture a large clientele base.
A weakness can be defined as any aspect of the company which may hinder the company from attaining its objectives or goals. Usually, it covers the firm’s assets, resources, and capabilities. Latest research indicates that ADSA Stores are faced with few weaknesses which if not taken care of it may hinder the company’s success.
The company’s rules, procedures, and policies are said to be weak as in some markets they have started to perform poorly. Also the human resources, that is, the workers and the management have been performing poorly of late in their respective responsibilities. Also the company has is lacking behind in adapting to new technology especially the e- commerce technology and other new technological advancement that are associated with e-commerce. (Lancaster & Massingham, 1988)
An external environment analysis reveals the organization opportunities and threats which are either current or potential. External factors are usually divided into micro and macro environment. Micro environment is about actual and political transactions used in a firm and its environment in day to day activities of a company that include; customers, suppliers, intermediaries among others. On the other hand macro environment is about external higher order forces which do not affect an organization dealing as yet or directly but may do so in the future. External factors may include; economic, technological, competition, political/legal, and social-cultural factors. However, external environment of a company may be explicitly explained when opportunities and threats of the firm are considered. (Lancaster & Massingham, 1988)
Opportunities and threats
An opportunity in this aspect can be defined as any event, development, or a feature of the external environment which creates conditions that are favourable or advantageous to the business in relation to a particular objective or set of goals to be attained. It is an attractive venture for a company’s operations which if exploited will lead to a significant upward change with desired results such as increase in profits margins and growth. (Michael, 1985)
There are many opportunities that exist for ADSA Stores supermarket chain in relation to emerging markets all over the country and in other countries. There are great emerging markets in many parts of Britain, There is increased investment demand especially in property management and the company can maximize on it. There is significant increase in the consumer spending which creates a great opportunity for ADSA Stores supermarket chain to expand their investments.
The Company has an excellent developed financial base as compared to their rivals implying that they don’t have financial problems in opening branches in potential markets outside Britain. For example, more branches have been opened resulting to expansion of the market share of the company thus increasing their profits and enhancing growth. (Finch, 2006)
A threat can be referred to as an environmental development or event which will present problems or challenges likely to hinder the achievement of organizational objectives, for example, competition, high interest rates, government legislations, declining real income among others. ADSA Stores is now facing stiff competition from its main rivals supermarket chains such as Tesco and Sainsbury’s. Thus, there is a drop in their market share. The marketing strategies of ADSA Stores supermarkets need to be reviewed in order to cope with the increasing competition. Changing policies from the government and European Union on exports and imports also poses as a threat to the company. (Michael, 1985)
P.E.S.T analysis has been used by ADSA Stores to analyze their external business environment. The simple analysis involves understanding the organization’s political, economic, social and technological environments with reference to those who do business with the company
- Political-political factors may have a direct and indirect effect on the performance of the company. Some of the decisions made by the British government can have a positive or negative effect on the stores. Take for example restrictions on goods such as flowers or vegetables from some countries, or tax policies, which may reduce purchasing power of the British population. This have had huge implications to the company
- Economical- every business is affected by economic factors. Fiscal policy rates, interest arte policy, currency exchange rates, consumer factors, etc. It is possible that the Britain climate of the economy dictates how the consumer behaves in the society. If an economy is booming, recessing or recovering, the confidence of the consumer will automatically change.
- Social factors-Forces within the society such as media, family and friends have affected the way ADSA Stores has sold its products. Most of the customers want branded and quality products. This means that companies such as ADSA Stores have benefited heavily by branding their products. Social factors affect our attitude, opinions and interests on the way we view products from certain companies.
- Technological factors- The way ADSA Stores operates its business has changed as technology changes. The internet for example, has assisted companies such as ADSA Stores to advertise their products on the internet and create new markets. It has had a profound impact on the marketing mix strategies of many organizations. Business should keep in touch with changing technology and modernization in this ever changing world.
- Legal factors- The way the company operates in terms of operating rules of law. The company is engaged in legal business practice of selling various products and services which is permitted by law. Other on some occasion the company has been accused of unethical advertising behaviour and had labour cases with its employee the supermarket chain has moved to correct the issues and operate within stipulated frame work. (Lancaster & Massingham, 1988)
The changing competitive environment
In the modern times, trading activities has become increasingly competitive and global in some way because of the need to gather and increase the company’s financial bases. Advancement in technology including communication efficiency and better international relations has contributed to the promotion of the international trade. Competition has however become a great challenge to the success of global business management but most companies are rising to the challenge.
To take advantage of the world being global village and to achieve greater investments and better market opportunities in the international market, it is necessary that ADSA Stores should undertake primary and secondary market research to ensure that information regarding the target markets in countries desired is obtained. (Cannon, 1986)
ADSA Stores have not been left backwards in international business concept through globalization. Indeed the company has diversified in many countries because of the aspect of globalization. Globalization has led to both prosperity and impoverishment of ADSA Stores. However, the advantages of globalization in respect to ADSA Stores have outweighed the disadvantages. The aspect of globalization in relation to the company has affected the company’s policies and decision making.
The stores’ structure has been affected greatly by globalization immensely. For example because of increased in competition, the management of the company have had to come with decisions that can create a good environment for business transactions that will help the company maintain its customers and thus sustains its growth. This decision includes exporting ADSA Stores line of clothing termed as “George” to other countries and embracing online marketing. (ADSA, 2007)
Organizational effectiveness can be defined as the extent to which an organization has achieved its set objectives. ADSA Stores organizational effectiveness is reported to be fair and it is argued that the main reason to its success is because of the measures taken by the entire management in response to changes in contemporary world of business. For any organization to be effective, human resource is very crucial asset that requires much attention in an organization. ADSA Stores has been credited with building a strong human resource relationship which has enhanced the success of organization.
The company recruits its employees based on their qualifications and their competence. It is for this reason that the Human Resource Department of ADSA Stores have embarked on recruiting professionals that produces results in their activities. They have achieved effectiveness and efficiency because they have developed their staff through training and adopted proper compensation systems that have in turn motivated the employees to work. Such competent employees have been able to cope with effects of globalization and thus maintain the company’s profits level. (Cannon, 1986)
The organization has also responded well in terms of new technologies that come up as a result of globalization. The company has utilized the use of online marketing and also incorporated the use of new technologies in production and operations activities which have seen significant increase in productivity and thus attaining the company’s goals. The company generally has responded to globalization by opening new market in many countries such as South Korea, Canada and America. Thus, increasing its market share and hence profitability of the company. (ADSA, 2007)
However, there has been a substantial criticism that ADSA Stores supermarkets management has failed to be effective and efficient in its business activities because they have practiced unacceptable managerial activities of planning, organizing, directing, and controlling. The company has not ensured that the respective managers of respective departments are well equipped with human, technical, and conceptual skills that give them an opportunity to integrate the managerial activities above in order to produce results expected from their departments. The absence of such skills by managers has led to the company performance decreasing in some of its potential markets. (BBC, 2005)
Areas of improvement in response of organization:
Even though ADSA Stores supermarkets is accredited with success in its business undertakings there are various improvements that the organization needs to embark on so that it can enhance its continuity and survival in contemporary business. The company needs to understand clearly the aspect of management. ADSA Stores should integrate the planning, organizing, directing, and controlling functions of the organization in order to boost the company’s organizational effectiveness. Proper training to all managers and the employees should be conducted in order to avoid any conflicts that may arise in the course of the business activities of the stores. The respective managers with the executive officers should work together especially in the areas of decision making in order to improve the company’s effectiveness in its business activities.
ADSA Stores should also utilize opportunity of its strong financial base exploring more markets. The amount of revenue that the company collects presents an opportunity of development of unique pharmaceuticals products that will give a competitive edge of its competitors. This means that the company requires carrying out an extensive research on identifying new markets and the products that sells more in those places. (Cannon, 1986)
In order for the ADSA stores to get access to more new markets, the company should fully utilize the use of internet technology in selling its products online. Online transactions will not present a lot of difficulties to the company in terms of legislation required because the staffs need not to travel to the new markets. (Cannon, 1986)
ADSA Stores structures should be clearly defined such that the management functions within the company should be carefully designed to fit the way business is done in the company. For example the employees should know what they are expected from them in the course of their duties and who are their supervisors. Such a move will lead to reduction of conflicts between management and the employees in the company because the company structure will be clear on how things are done in the company.
The company should also come up with structures that motivate employees in the workplace. Such structures should include payment of competitive wages, house allowances, hardship allowances, and other fringe benefits that will boost the morale of the employees in the company. The company should also consider providing employees with other social amenities, for example building of swimming pools, playing grounds, and provision of television sets in the workplace among others
The company also need to take several marketing positioning measures tom beat its competitors by undertaking the following measures.
Pricing and terms of access
There are many ways by which ADSA Stores can use to price its product in Britain. A price matrix will be suitable that will incorporate factors such as demand, supply, quality and economy. The price mix will be suitable when considering the right pricing strategy to utilize which include; (Michael, 1985)
Product adoption strategy- making modifications to existing product and raising its price
Availability and security strategy- countering perceived risks by overcoming transport risks and other costs then making a suitable price for the product
Technical strategy- demonstration of superior products, In this case, issues such as shortening life cycles for manufacturing equipment will be considered and technical advice given to the customers accordingly since they might complain of high prices
Total adaptation and management strategy- it guides the company’s organizational and technical portfolios especially the development of new products for low earning persons who want to enjoy the drinks
Conformity strategy- strategizing on how legal matters, tariffs and legislation for the business will be handled without hitches such as encountering losses.
In this pricing strategy, the price for the ASDA Stores products can be set to be lower than what it is in other countries so as to gain a market share. It includes a low price strategy enables a penetration price which is necessary to allow more products to sell at first but when it catches up, other pricing strategies are adopted.
The super market chain can lower its prices to improve it sells. To implement this, ASDA Stores started Smart price products, which was launched in 1990s, smart price product consist of products that are provided at the lowest price to the customers. The prices are lower than of the competitors. (Michael, 1985)
Premium pricing is the use of a high price which indicates uniqueness about the alcohol products. This approach is applicable where a substantial competitive advantage is in existence such as for luxuries. Products such as “George” the clothing line of the supermarket can be offered at premium price. (Michael, 1985)
Opening more branches
The supermarket chain also improves its competitiveness by opening more branches so that it can reach a wider market. This will also enhance its distribution channels and be able to distribute its products quickly to its customers. ASDA Stores also continue to diversify its business in order to invest in different business venture and increase its market share and revenue. The company also has created a range of clothing line referred as George this is marketed in different countries such as Germany, Canada, South Korea and United States. (BBC, 2005)
It is clear that external and internal and external environmental factors play an important role in an organization management decisions and operations. The internal analysis facilitates the formulation of strategic plan which requires a clear understanding of the internal strengths acquired over time and any weakness that adversely impact on performance. Distinctive competencies are things that give a firm an advantage over similar businesses. Research also indicates that no matter how attractive an opportunity may be; the business must have the competencies to capitalize on it. An opportunity without the competence to capture it is no really an opportunity to the business.
There is greater need for ASDA Stores management to understand organizational behaviour in order to achieve the organizational effectiveness in the company and much attention should be directed to people, structure, technology and the environment. Organizational effectiveness can only be achieved if the management is be able to incorporate good leadership, motivation, a well defined organizational structure, forming group dynamics and setting up good structures for communicating in the workplace. The company should also be flexible in the sense that they should be ready to cope with change brought about by globalization without affecting their productivity and their productivity level.
ASDA (2007): No place like ADSA Sores; Retrieved from www.ADSA.com. Accessed on 2/10/07
BBC, (2005): ASDA made to drop low price claim.
Cannon, T. (1986): Basic marketing, principles and practice, 2nd edition, Holt, Rinehart and Winston, New York
Finch, J. (2006): Asda's new stores prove not-so-Essential in the discount market. The Guardian
Lancaster, G.A. ; Massingham, L.C (1988): The marketing environment in essentials of marketing, McGraw-hill, New Jersey
Michael J. B (1985): Marketing strategy and management, Macmillan publishers’ Ltd, London.
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