ASDA Company Analysis

Asda was formed by a group of farmers from Yorkshire (North of Britain) in 1965. It expanded south in the seventies and eighties, in the process of expansion bought rival chain of superstores Gateways superstores in 1989 for £705m.

This move unexpectedly went against the company because it was very hard for the company to sell too many different products. It was almost at the brink of disaster and to cop it up had to raise money from shareholders in the years 1991 and 1993.

In the year 1991, Asda recruited Archie Norman from Kingfisher as the new chief executive, and that addition returned to its roots as a food retailer, and the strategy to be cheaper highlighted it than its three large rivals. For achieving this Asda concentrated on keeping the price low rather than involving in loyalty schemes (described in detail in Asda Approach).

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“The Road to Wal-Mart I have long been an admirer and I went on a pilgrimage to Wal-Mart’s headquarters in 1994, I came away thinking they had something we have got to have. In many ways I think this is coming home.” Archie Norman, former CEO Asda.

That was what the new chief executive, Archie Norman observed form Wal-Mart and applied to outstand, first of all Asda had the advantage that it had larger stores than its rivals. Next to that, ‘Everyday low price’ strategy was copied, by focusing on keeping the prices low rather than putting more money on expensive advertising and promotions. This was achieved by the ‘Roll-back’ campaign, this idea was also taken from Wal-Mart.

Take over by Wal-Mart

Wal-Mart bought Asda or in other words (as the company focus on) ‘became part of the Wal-Mart family’ – on 26 July 1999 for $10.8 billion. Since then, A gain of one million new customers was claimed by Asda. Even after buying Asda, it was decided the name Asda would stay.

Wal-Mart is a giant U.S. retailer and has a large form of superstore, named as Wal-Mart’s Supercentre, which is also applied here as ASDA-Wal-Mart banner. In July, 2000, Wal-Mart name first appeared, when the Asda-Wal-Mart super centre opened in Bristol. Two more Asda-Wal-Mart super centres opened in 2000.

As the Asda applied approaches from Wal-Mart, it was already following and copying Wal-Mart practice to get rid of its crisis through most of the nineties. So it was not a very big transformation for Asda, and that’s why the planning to make hypermarkets and Wal-Mart style supercentres was started but it was not very easy in the UK. The reason was the barriers from the government and law

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Introduction

Asda is the second largest supermarket chain in the UK with a 16.8% of the grocery market. Which is also offering food, drink, clothing and general merchandise. It also provides a range of financial services, sold both in the supermarkets and online all over the UK.

 Asda is an abbreviation of ASquith and DAiries

The company is famous for providing the most economical products as compare to others and is known for its two famous marketing campaigns; the first one is “Asda price” campaign and the other is smiley face “rollback” campaign. [1]

Asda Approach:

Asda, as it made it’s strategy emphasis on low prices and highlighted its popular no-frills ‘Smart Price’ range. As a result, Asda was crowned “Lowest Price Supermarket” by The Grocer magazine for the past 11 years. [1]

It you go through the current strategy of Asda, which is also described on their official website in a section ‘your Asda, How we do business’, very clearly defines the Asda culture:

“At Asda saving money and keeping costs low is part of our culture. ‘Saving you money every day’ isn’t a marketing slogan; it’s the single-minded focus of everyone at Asda.

When we’re asked what it is that we do differently from other retailers – what it is that gives us the ability to keep costs low and pass that on to customers in lower prices – we don’t point to a handful of major initiatives. We talk about everything we do – all of the little things that when added together make a big difference.” [3]

Market share

As mentioned earlier, Asda the second largest supermarket chain in the UK. Lead by Tesco and followed by Sainsbury and Morrisons

Current Situation

Fueling recessionary concern Asda yesterday reported through Wal-mart a second quarterly drop in like-for-like sales, 0.4% lower in the three months to end May 2010 as figures show that Asda’s market share amonst supermarket rivals Tesco, Sainsbury and Morrisons, has slipped below 17%.

New store openings limited growth this year as also Asda indicated that promotions and lower prices for main food products did not have expected effect on turnover and profits as customers reigned in spending.

Asda acquired Netto UK stores last year, with the addition of Danish discount supermarkets operators existing UK oulets taking its number of Asda to 377 stores.

Asda itself was acquired by Wal-Mart in 1999, although it was decided to stay with the Asda brand name in the UK and the figures released were are part of the second quarter results from the giant US retailer.

Asda added that tax increases and cuts in government spending would make the next 18 months challenging for the company and it UK customers whilst Asda indicated that it expected that UK family’ disposable income would decline in the period.

Tesco TSCO grocery market share fell to 30.8%, according the Kantar World Panel market share data. J Sainsbury SBRY remained in third spot with a market share of 16.1%, up from 15.9% a year earlier. Morrison MRW edged up to 11.6% from 11.4% previouly.

Kantar monitors the household grocery purchasing habits of 25,000 demographically representative households in the U.K and also indicated that discount retailers Aldi, ex-Netto and Lidl held a combined market share to 6.1% compared with 6.0% a year earlier.

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Grocery market growth slows – Sainsbury’s and Morrisons outperform

2011/03/04

The latest grocery share figures from Kantar Worldpanel for the 12 weeks ending 20 February 2011 show that the market is subdued as shoppers watch their pennies.

Overall market growth slowed slightly this period to 3.9% compared to 4.2% last month. However, both Sainsbury’s at 5.2% and Morrisons at 4.5% outperformed, growing ahead of the market.

Sainsbury’s market share moved up to 16.5%, compared to 16.3% a year ago, which continues their strong run, gaining share every month since March 2009. Morrisons maintains its 12.3% market share from the same period last year. Tesco and Asda performed slightly behind the market, with share now standing at 30.3% and 16.9% respectively.

Fraser McKevitt, Retail Analyst at Kantar Worldpanel commented: “Waitrose followed the market trend of slightly slower growth this period, but still posted increased sales of 6.6% compared to a year ago, taking its market share to 4.4%, the highest ever recorded by the retailer.

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Asda’s market share falls again

Asda, the Wal-Mart-owned supermarket, saw its market share slip for the fifth consecutive month in March, as the low-priced retailer continued to suffer at the hands of rivals with more premium ranges.

Comment

The chain saw its market share fall from 16.9pc to 16.8pc over the 12 weeks to May 16. The monthly rolling data put Asda’s year-on-year growth at 2.5pc, lagging the overall market’s growth of 3.3pc. Earlier this month Asda appointed a new chief executive – Andy Clarke – to help turn around the chain.

“Asda’s focus on value may be working against the company with the latest figures showing that consumers are continuing to shop at the premium end of the market,” said Kantar Worldpanel, which publishes the monthly figures.

While Asda suffered, upmarket rival Waitrose maintained its strong run with an increase in market share from 3.8pc to 4.1pc. It saw year-on-year growth of 12.5pc – nearly four times the total grocery market growth of 3.3pc. Meanwhile, Kantar said that Tesco’s premium Finest Range continued to perform well.

A spokesman for Asda said that the chain is addressing its under-performance: “We know where we want to be, we know what we need to do, and we’re doing it.”

J Sainsbury saw its market share grow by 4.4pc, while Wm Morrison saw its share grow by 6pc. One analyst said that over the last four weeks there has been a “convergence in the sales performances of the ‘big four’.”

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