- Background of ASDA
Walmart is a prominent retail store Company in UK. Wal-Mart was first opened in USA in 1962. Its aim is to enable customers to live better and save money. In 1999, Wal-Mart entered the UK market by acquiring ASDA. ASDA Stores Limited was founded in 1949 at Leeds as Associated Dairies & Farm Stores Limited. In 1965, Associated Dairies merged with Asquith chain supermarkets to form the current ASDA. The company did well since then but grew even more in 1999 when it was acquired by Wal-Mart. The acquisition has led to a vast growth of ASDA in UK, a fact which is attributed to the effective supply chain management of Wal-Mart. Currently, ASDA is the second largest UK retail supermarket with over 376 superstores and supermarkets across United Kingdom operated by more than 170,000 associates. ASDA attracts over 18 Million shoppers weekly and realizes over 20 billion pounds as annual turnover (Catalogue Shop, 2011). ASDA’s success in supply chain may also be attributed to the company’s hierarchical organizational structure. This structure has several management levels; each headed and managed by one manager.
- Introduction to the elements of theory to be used
This paper mainly uses supply chain management to assess the success levels of ASDA. It will appraise the current models of good practice in the management of ASDA so as to determine the contribution of such models in the organization’s success. The most important elements of theory to be used in analyzing the success of the company will be drawn from supply chain management theory. The supply chain of the company will be analysed so as to determine how it adds value to the company. Supply chain refers to group of organizations interconnected to each other in development of an organization’s products and services so as to add value and enable successful delivery to the customers. Value addition in supply chain relates to effective transformation of inputs from their original form to desirable end-products demanded by the consumers. It is also important to examine how ASDA manages the flow of materials and information between chains of a supply network. Literature suggests that an effective management of such flows in strings of operations within a company leads to an effective value chain which adds value to the products delivered to the consumer (Lu, 2011). The elements of theory in supply chain management which are relevant to ASDA include operations, human resource management, infrastructure issues, logistics, technology development, marketing, location decisions, outsourcing v. in-house, strategic planning and challenges, global business environment, customer orientation and purchasing and supplier selection.
- Application of theoretical principles in Supply Chain Management within ASDA
- The Value Chain
Being a subsidiary of Wal-mart, ASDA’s supply chain is highly related to that of Wal-mart. An appropriate value chain as suggested by Porter (1996) has been adopted by ASDA. The elements of an effective value chain are illustrated in Appendix 1. ASDA carries out both support and primary activities in its supply chain in order to add value to the products delivered to its customers. Apparently, not all elements of the value chain in Appendix 1 have been applied successfully by ASDA but most of them are shown clearly in the supply chain management of the company. There is no doubt whatsoever regarding the success of ASDA in managing its operations and creating a value chain that has capably added value to the products delivered to customer. This has contributed to the overall success of the company in meeting its organizational objectives.
The most important element of ASDA’s support activities in its value chain is the firm infrastructure (Li, 2007). This retail store has benefited most by its acquisition by Walmart. Walmart is a large retailer which enjoys a worldwide customer base and wide-range of financial and physical resources. Since the acquisition of ASDA by Walmart, ASDA has opened several stores in many cities across UK. The financial resources of the company are mainly contributed by the shareholders of the company. Acquisition of the company by Walmart has increased the shareholding of the company, hence increasing the equity capital of the company. Another source of financial resources for the retail supermarket is bank credit. Walmart’s size of market share and resource base enables it to acquire enough credit from banks.
In terms of human resource management, ASDA has been able to manage its human resource professionals through appropriate human resource management processes. Human resource management involves the recruitment, hiring, placement, training and development activities. These activities are necessary in order to acquire the best knowledgeable, skilled and experienced personnel who can enhance an effective supply chain management (Armstrong, 2006). Human resource activities of ASDA reflect those of Walmart, its holding company. ASDA has 170,000 associates selected through a professional and equitable selection process by the Human Resource department. The most important strategy in ASDA’s human resource management which was adopted from its holding Company is the development of hourly associates within the retail business. Most of the company’s associates begin their exciting fruitful careers as hourly associates and the best of them are later absorbed in the company’s associate team. This strategy enables the company’s management personnel to be selected from a team which has a good knowledge of the company, and whose skills, knowledge and commitment of the company has been sufficiently evaluated, proven and accepted. There are also other programs used by Wal-Mart to recruit personnel for its holding company and subsidiaries including ASDA. These programs include the Walton Institute and Merchant Development and Business Leadership series (Wal-Mart Annual Report, 2012). The “soft” view of human resource management treats a company’s employees as valued assets of the company rather than administrators. They also contribute to the competitive advantage of a successful company such as ASDA through creativity and innovation. ASDA’s training and development program has enabled its personnel to achieve the above soft view traits of employees. The soft view also recommends that employees should be proactive, trustworthy, participative and collaborative (Armstrong, 2006). These aspects are also exhibited by the employees of ASDA. The front line associates of the company are soft-hearted and they care and respond appropriately to the needs of the company’s stakeholders including customers. This has led to the success of the company in the retail market.
ASDA has also adopted computer-based technologies to improve its operations. Since the acquisition of ASDA by Walmart, the company has been improving its technologies regularly to meet the changing market requirements, trends and demand (Chopra & Meindl, 2010). Recently, check-out aisles and vendors were adopted to boost customer payments in an attempt to increase efficiency and reduce operational costs associated with other traditional customers’ payment methods. This method of payment also enables customers to avoid unnecessary queues and congestions. ASDA has also boosted its marketing by improving the marketing technologies and innovations. ASDA’s customers are now able to shop anywhere at any time because the company has merged its physical stores with online, social media and mobile technologies. The company delivers products online through multi-channel shopping. Customers can also make orders online and get them delivered at the comfort of their homes. Furthermore, customers are able to enquire about ASDA’s products through social media. This improved technology has enabled the company to eliminate unnecessary costs, attract more customers and improve the quality of service and product delivery to customers. Technology is therefore a big contributing factor in the success of the company.
ASDA is also rich in inbound and outbound logistics that drive the company’s success in meeting customer needs. Some of the inbound logistics include the use of Just-in-time inventory management system. This type of inventory management system has enabled the company to minimize inventory storage costs. This system also makes the products of the company available to customers as at when and where they need them. ASDA is a well-established subsidiary of Walmart and enjoys a great deal of economies of scale. The company uses this strength in economies of scale to obtain substantial bargaining power and minimize costs of production (Li, 2007). The main outbound logistic of ASDA relates to the shift of operations to several retailers across UK. The company distributes its products efficiently through its stores across many cities in UK. Some formats have been developed by the company to create effective customer exposure. The implementation of these formats is a logistic mechanism that beats the ordinary strategic planning of competitors. The formats designed by ASDA include ASDA Express, Superstores, Metro, Extra and Homeplus. The company further segments these formats according to the needs of target customers.
Marketing and sales also forms part of ASDA’s value chain. The company understands that information is an important tool for the customers to make rational decisions. It has therefore developed relevant marketing strategies in its supply chain to ensure that the customers are aware of the company’s products and product features. Furthermore, the company has developed effective sales and distribution mechanisms to ensure that the products of the company are delivered effectively to the customers. In this regard, an appropriate marketing mix has been developed by the company to meet customer needs and the organization’s objectives. The company uses advertising through the media to create product and brand awareness among the customers. It is also makes use of internet marketing to pass information regarding the company, its brands, its products and the features of its products. This reduces mismatch of information, hence enabling the company to gain a competitive advantage over its rivals in the retail industry (Porter, 1996). This is a clear illustration of an effective supply chain management which enables the company to deliver its products successfully to the customers and attain success in its retail business.
ASDA operates retail businesses in over 376 stores in UK. It purchases products in wholesale prices from various suppliers and then sells the products in retail prices. The company buys products in large quantities due to its economies of scale. The retail business therefore cuts costs upstream so as to reduce the prices of the products sold to customers. This increases demand of the company’s products and consequentially causes an increase in the sales volume of the company (Thompson & Martin, 2010). As a result of increased sales volume, the company will enjoy more profits and attains desirable growth and expansion in the market.
ASDA offers over 10,000 products in its shelves, giving its customers the chance to choose from a wide range of products under one roof. This increases customer loyalty, hence creating a good customer relationship and increased market share. To deliver these products, the retail company uses Every Day Low Price (EDLP) delivery system. Products are made available on the shelves of the company’s wide spread stores in UK. Customers then shop for the products by picking their products of choice from the company’s shelves. The company’s products are also offered in an online catalogue where customers search for their desired products and order them online. The ordered products are then delivered by the company to the customers.
The company’s hierarchical organization structure also enables the company to run its operations successfully. The managers of various departments the company control and coordinate activities within the company so as to ensure an efficient delivery system and an effective supply chain. Top managers pass information to the junior members and the junior members pass information to the subordinate staff. This is in line with the theories of supply chain management which assert that supply chain management involves flow information and products (Porter, 1996). The organization of ASDA relies on the principle of Every Day Low Cost (EDLC). The management of the company attempts to reduce its administrative expenses so as to achieve the requirements of Everyday Low Cost principle. ASDA also achieves low cost in operation by leveraging technology to improve efficiency.
Stakeholder approach has become famous in the management of relationships in an organization. Literature identifies relationships within an organization mainly in terms of supplier and customer relationships (Pfeffer, 2009). There also other relationships between an organization and various stakeholders. These include relationship with agents and distributors/dealers, relationship with creditors and relationship with shareholders. The most effective kind of relationships in ASDA is the relationship with customers and suppliers. These relationships have resulted in effective supply chain management.
ASDA has established a strong relationship with its suppliers through a well-managed and controlled procurement system. In this system, ASDA places orders with suppliers who have proven to honour mutual respect in business relationship with the company. The company also embraces an upstream integration to link the company’s products with the suppliers’ products. This is meant to establish a lasting relationship with the suppliers as well as reducing costs of the company (Chopra & Meindl, 2010). The company is also committed to an ethical relationship with the suppliers and avoiding unethical practices in relation to its suppliers. This maintains understanding with the suppliers and reduces the possibility of cutting ties with the suppliers. The company also acts responsibility towards its suppliers by ensuring that it has taken care of the interests of suppliers in their business relationships.
There’s also a well-established relationship between ASDA and its customers. The relationship has been mainly boosted by the company’s commitment to meet the needs of the customers through effective pricing and delivery system. As mentioned earlier, ASDA practices an effective delivery system referred to as Every Day Low Price (EDLP) delivery system. In this system, low-priced products are delivered to the customers immediately they place an order with the company. The products are also delivered through the right mechanisms. The prices are kept as low as possible for the benefit of the customer. The products are also checked for quality before they are offered for sale to the customers so as to ensure that the products delivered to the customers are of high quality. This combination of reduced prices and increased quality increases customer loyalty with the company and a good relationship is then established between the company and the customers (Cowe, Mackerron, Moffat and Douglas, 2011).
A strong relationship has also been established between ASDA and its stakeholders including the customers and the society at large through effective business ethics and corporate social responsibility. ASDA Retail Company is committed to ethical practices and corporate social responsibility which are viewed by theories as secondary objectives of a business. A socially responsible business should take care of all stakeholders including the society within which it operates (Murray, 2005). Some of the socially responsible and ethical practices include avoidance of deceptive practices such as warranty deception. A company which engages in deceptions loses trust among customers and is likely to lose a great number of customers (Windsor, 2001). ASDA is also committed to protecting the environment through environment-friendly practices such as provision of energy-saving products. ASDA also engages in education and training practices relating to protection of the environment and creation of awareness on the need of maintaining a sustainable environment. These practices have enabled ASDA to gain good public image which is regarded as an important intangible asset to any profit-oriented business.
The purpose of this report was to analyse the supply chain of ASDA and determine if the company uses the appropriate principles of supply chain to gain competitive advantage in the market. The success of any business has been linked to effective supply chain management. From the analysis, it seems plausible to postulate that ASDA sufficiently applies the concepts and principles of good practice in its supply chain management. This has led the company to gain competitive advantage in UK market and become one of the most successful retail companies in the UK retail industry. Only with a few reported cases of technological itches on some occasions in some ASDA stores, nothing significant proves an occurrence of ineffective supply chain management system within ASDA. It is also clear that ASDA has gained competitive advantage from the effectiveness of its supply chain management.
The current industry position of ASDA is desirable and only a slight improvement of the company’s operations may make it the best retail store not only in UK but also in many other countries of the world. The current supply chain is well managed by a hierarchical organization of operations which has proved to be successful in creating a competitive advantage for the company. ASDA has applied Porter’s principles on value chain to create an effective supply chain management. The company used the principles of value chain to form an effective human resource management, firm infrastructure, technology development, logistics and operations. The company also established a good relationship with the company’s major stakeholders and the society at large. This was done through corporate social responsibility and ethical practices. A strong relationship with customers has also been attained by the company through provision of quality products as well as good pricing and delivery system. Indeed, application of concepts of good practice is an effective way to achieve competitive advantage.
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Appendix 1: Porter’s Value chain
Source: Porter, 1996.
Additional Model/outcome Explanation
- The shapes such as rectangles and triangle show the linkages among the elements of the value chain
- Acquisition by Wall-mart, many stores in UK, shareholders contributions (financial resources), equity capital, bank credit, market share and reputation.
Human resource management
- Recruitment, hiring, training and development; 170,000 associates, Walton Institute and Merchant Development and Business Leadership series, training and development program
- Computer based technologies, check-out aisles and vendor’s technology, marketing technologies; online social media and mobile technologies.
- Just-in-time inventory management system
- Shift of operations to retailers
Marketing and sales
- Media advertisements, internet marketing.
- 376 stores in UK, Economies of scale, over 10,000 products, Every Day Low Price (EDLP) Delivery system, hierarchical organization structure, EDLC system.
Appendix 2: ASDA’s Organization structure