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The Chartered Institute of Marketing defines marketing as ‘the Management process responsible for identifying, anticipating and satisfying customer requirements profitably.’ As the market becomes more complex with globalization, increasing competition and dynamic business environment, companies turn to strategies to maintain their market share and try to explore new markets. One such strategy used is “differentiation”.
Definition “Differentiation is a competitive business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products and services relative to the perceived value of other firm's products and services” - Charles W. L. Hill, Gareth R. Jones Why Differentiate? The concept of being unique or different is far more important today than it was ten years ago. The key to successful marketing and competing is differentiation. What does Differentiation Strategy do? It is a strategy whereby a marketer offers a product/service as unique in industry by proving that it provides a distinct advantage over other products by setting it apart from other competitors’ brands in some way or the other. There are three parts of Differentiation Strategy Positioning: Have a simple idea that separates you from your competition. Trust building: Have the credentials or the product/service that makes this concept real and believable. Awareness creation: Build a program to make your customers and prospects aware of this difference. (Source: http://www.scribd.com/doc/22539598/Differentiation-Strategy) PURSUING PRODUCT DIFFERENTIATION AND COST LEADERSHIP STRATEGIES For years management scholars have debated whether firms can simultaneously pursue cost leadership and product differentiation. Most firms’ strategies contain elements of
Cost leadership results in low cost on operations and thus the company can achieve price leadership. Every year ASDA researches statements through an intranet survey. purpose and values stand for. As well as having a mission statement. ASDA has a statement of purpose. Timeline 1920s-1960s . 1960s . ASDA’s mission is: ‘to be Britain’s best-value retailer exceeding customer needs always’. These are moral statements that help to encapsulate the company’s beliefs which then determine the decisions and actions it takes in the marketplace. purpose and values. This helps stakeholders to understand why the business exists. The way in which ASDA does this is through its mission. Especially in retail industry. Mission. departments and managers see how the mission.edu/uploadfiles/1184016243_Differentiation. they are given a 25-hour induction programme called ‘Best Welcome’..The Acquisition Trail .. colleagues.sm. ASDA’s purpose is ‘to make goods and services more affordable for everyone’. ASDA’s values are: • Respect for the individual • Strive for excellence • Service to our customers. and it has been the largest subsidiary of the Wal-Mart family of companies since 1999. These statements are designed to help stakeholders understand the direction in which the company is heading.The Reign of Queen’s Supermarkets Peter Asquith and his brother Fred made contact with Associated Dairies and a new company was formed. This data helps to ensure that.both cost leadership and product differentiation. That is providing goods to customers at low prices thereby achieving customer satisfaction (Source: http://www.au. The first Asda supermarket opened under the 'Queens' name in Castleford in the early 1960s. Asquith + dairies = the birth of Asda 1970s – 1980s .pdf) Background and Overview of Asda ASDA is the second largest retailer in the UK. teams. at every level within the company. cost leadership is a way of differentiation strategy to succeed against competitors. purpose and values should power the decisions they take. ASDA also has a series of values. Purpose and Values Managers who make decisions that affect the route of an organization need to show those choices to others. To aid new colleagues at ASDA in understanding what the mission statement.ASDA roots can be traced back to a group of Yorkshire farmers who formed Hindell's Dairies in the 1920s. A mission statement sets out the long-term direction of the organization.
com. 2008 saw the launch of the non-food online business Asda Direct which is now supported by a Collect In-Store service at over 300 stores Asda Today Over 170. It provided a framework for a new organisation structure making stores the ‘heroes’ and promoting colleague involvement. . Gorge house and Asda house.000 dedicated Asda colleagues in more than 370 stores.The Foundation of George A major success of this period was the foundation of the George Davies partnership and the introduction of George clothing into 65 stores in February 1989. to motor cars! 1980s .com. It was a new dawn for Asda. and the rapid expansion of Asda Home Shopping. 1999 . Around half of total food sales at Asda are own brand. Over 18 million weekly shoppers. 1990s .During this period. The Asda Home Shopping business has over 97% coverage in UK. the business now sold everything from baked beans.. we started operations in Northern Ireland and broke the 300 stores mark.The Digital Age The end of the decade has seen the growth of Asda to over 370 stores.The Norman Conquest Archie Norman arrived at Asda in December 1991 and quickly installed the Asda Way of Working. Associated Dairies embarked upon a programme of diversification.Flexible Channels Opening of Asda Livings and introduction of ASDA. 23 depots. In 2005 Andy Bond was appointed CEO. Asda rediscovered its core values and customers returned to a revitalized Asda that had gone back to its roots. financial services and new own label brands to achieve customer’s expectations.Asda Became part of the Walmart Group in June 1999 2000s . Late 2000s .. Over one million products across Asda Direct and George. 8 recycling centers.
7 16. of Colleagues Average No.9 16. Colleagues 370 140000 2004 2005 2006 2007 2008 2009 2010 Year Year Source: Business review of ASDA 2010 .8 16.4 2004 2005 2006 2007 2008 2009 2010 Sales 18000 17000 16000 15000 14000 2004 2005 2006 2007 2008 2009 2010 Year Year Fig 1: Market Share of Asda Fig 2: Sales in £ million Fig 3: Number of Stores No. of Stores 380 175000 170000 165000 160000 155000 150000 145000 Fig 4: Average No.Asda Statistics for Last 5 years Market Share of Asda 17.1 17 16.6 16.2 21000 20000 19000 Sales (million) Market Share (%) 17. of Colleagues No.5 16. of Stores 360 350 340 330 320 310 2004 2005 2006 2007 2008 2009 2010 Avg.
Tesco is the leading retailer in UK with market share of 30. both existing and new. and power of suppliers. a company can gradually lead its way towards success.5%. Among its strongest contenders is Tesco. Porter’s Five Forces of Analysis on Asda Michael Porter introduced the Five Forces of Analysis that is considered as the assessment structure of an industry.Problem Statement With the growing influence of globalization. The concept of Porter’s Five Forces is used for analyzing the problems of Asda. Competitive Rivalry The retail market is undoubtedly competitive and the companies. with an established goal and appropriate techniques. threats of substitutes.8%.1% and Morrisions at 11. threats of new entry. followed by Sainsbury’s at 16. As of March 2009. The five forces are namely categorized: competitive rivalry. competition within businesses and markets is inevitable.4% while ASDA’s share is 17. which is considered as the largest retailer in the United Kingdom.. are trying to blend that creates a more intensified competition. However. power of buyers. That is why many firms need to do some intensive and little risky market strategy. Fig 5: Supermarkets’ Market Share Threats of New Entrants .
So as such there is no threat of new entrants. Thus. specialty stores. along with brand development that take years of establishment. but a major acquisition by foreign players can be a threat. Research Question • What is the strategy used by Asda to compete with other competitors? • • • Can product differentiation and cost leadership be achieved simultaneously in retail industry? What are different ways of product differentiation to achieve customer satisfaction in retail industry? What are the important factors which are essential for implementing product differentiation in retail industry? Objectives of Study • • To study the strategy used by Asda to compete with other competitors. . The suppliers establish relationships in different companies with the same products. suppliers are in the middle of the war of the retailers. Local knowledge is not enough in the retail business. Threats of Substitutes A number of substitutes are available for consumers. department stores. etc An interesting second substitute is the direct sales channel. Power of Buyer The power of the buyers or the consumers within the industry is high especially when there is presence of competitors that brings the same products. To study the relation between product differentiation and cost leadership in retail industry. Manufacturers like Dell who sell directly to the consumer may be a growing rival for discount retailers. Another thing that the buyers may value is the present economic stability within the country. Another is that the retail business is in an advantage in the UK which means that there is little scope for new entrants. Supplier Power The retailers like Asda are able to sale products at low price because of buying bulk goods at low price from suppliers.The entry has many barriers and the first one is that the retails need a lot of investment for its sophisticated factors within the UK. which contributes another difficulty on the side of the foreign firms. local grocery stores. principally from retailers having different formats: food-supermarkets. consumers will shift loyalties and this entitles the suppliers to become powerful. The problem arises when the supermarkets do not sell their products.
thereby the cost per unit decreases and the retailer can afford low price. as it means they can buy goods at low prices and save money. Cost leadership is achieved by buying goods in bulk from suppliers. but later after tie up with Wal-mart it has spread its wings by including clothing. customer satisfaction is achieved by innovative way of low pricing policy. Following are strategies opted by Asda in past years: • Diverse product range: Initially. Asda had only food products on their shelves. Price competition has also pushed customers to try different stores. to maintain “low-price leadership” in the local marketplace. The strap line ‘ASDA Price’ helped customers to link the store with the low prices it offered. Asda’s policy requires that store managers regulate the retail prices charged by competing retail stores in their respective market area and lower costs for highly competitive products without regard to the cost of individual items. With this we can say that to compete with other retailers Asda uses the policy of every day low price. This means that Asda provides goods that are of best quality at the lowest price.• • To evaluate the different ways of product differentiation to achieve customer satisfaction in retail industry. . this would help the organization to have competitive advantage. Findings One of the main features Asda has been known for is its pricing strategy. Consumers like price competition. entertainment items ( music. This price is often below Asda’s cost of obtaining some of these goods in highly competitive markets. always. To study the important factors essential for implementing product differentiation in retail industry. Customer satisfaction is most important criteria to achieve the mission statement of Asda to become Britain’s best value retailer. Thus. The purpose of the pricing policy of Asda is to “meet or beat” the retail prices of competitors for highly competitive. Asda has being successful in maintaining price leadership due to tie up with Wal-Mart. The term known as “Every Day Low Price” (EDLP) speaks much of what Asda is all about. home & leisure products. price-sensitive merchandise. financial products etc. Asda tries to meet or undersell local competition but maintains uniform prices except when lower prices are necessary to meet local competition. and to “attract a disproportionate number of customers into a store to increase traffic”. Consumers are prepared to travel there if they save money. But low pricing is possible only when the organization is able to achieve cost leadership. games). But in order to attend this mission statement Asda needs to have differentiation strategy apart from pricing. Thus. electrical appliances. Pursuing price leadership can be said to be one way of differentiation strategy for retail industry. movies.
• Best for New: Asda is committed to offer customers new and relevant products and great events to encourage shoppers to travel across town to visit the stores. Polish. Through Asda Direct customers can choose items from a spread of one million products just by clicking mouse button.com/assets/2010/4/15/2010_business_review_pack. ‘28 day Change Your Mind’ program for entertainment items. (Source: http://your. Asda has 5500 products under its brand name. Caribbean. To ensure that there are no wasted trips Asda has invested heavily for availability of products throughout the year. electronic items.pdf) Factors important to implement product differentiation in Asda: Achieving Low Cost At Asda saving money and keeping costs low is part of their culture. customer’s demand of local products is fulfilled by providing them with those products. optical products. Things like: • Turning lights off when they leave a room • Recycling drinks cans and other packaging at lunch • Keeping depot doors shut to avoid wasting energy . • Digital business: Millions of people can buy their groceries online at ASDA. They might seem trivial but the simple things they across the business do everyday that make difference. In Asda.asda. • Quality of products: In order to give assurance about the quality of products Asda have several policies e.g. Asda currently have stock of over 6000 local lines. • Asda Brand: Asda provides its own range of food products and general merchandise products. OTC pharmacy products etc. • Local products and world foods: Customers demand for all local and world food products is fulfilled in Asda. Halal and Oriental products in many stores catering to local communities. from over 160 stores nationwide to 97% of the UK population. • No waste trips: Customers are unhappy if their weekly shopping trip is incomplete. delivered through 1100 vans. ‘100 day quality guarantee on George clothing’. which provides a better value alternative to leading brands or solution where no brand equivalent exists. Asda recruits and train the colleagues who have the right attitude and skills to handle the customers. • Happy to Help: Customers expects help in finding the products they want. Asda offers extensive range of Asian.com. it’s the single-minded focus of everyone at Asda. ‘Saving you money every day’ isn’t a marketing slogan.
it results in reduction in absenteeism and thereby workforce is available to handle customers. Thus. Asda build a good workforce by giving them training through their program and motivating their colleagues to put forward their ideas.com/2010/7/13/how-we-keep-our-costs-so-low) Organizational structure Any individual. (Source: http://your.asda. (Source: http://www. Another example of human resource management can be hiring people of different age groups.Clearing breakages straight away to avoid potential accidents and costly insurance claims • Asking customers if they really need a carrier bag or a hanger • Treating company money as though it’s your own • And that’s true right across the company. Asda makes sure that a person is groomed properly so that he can replace person who is about to retire thereby saving time and money.com/doc/116055/Human-Resources-at-ASDA) External stakeholders exist outside an organization and some of these will be customers. Asda keeps record of notified absence. Asda can recored absence as percentage of the hours/days that could possibly been worked. unauthorized absences. Internal stakeholders: Includes management and colleagues. absence due to sickness. . For example. group or organisation that is affected by the actions of a business is a stakeholder. whether in stores. Succession is the way in which one person follows another into a particular job within Asda. With this information it can modify its working methodology or if sickness is due to working in stores or due to accidents then action with respect to safety can be taken. In Asda under the management of Andy Bond the company has been successful in achieving highest market share in 2009. suppliers and shareholders. Each of these groups of stakeholders is affected by the actions of ASDA. in warehouses or in head office. There are also some big things that have the twin benefits of cutting costs and achieving some of environmental goals. If every one of colleagues can save £1 a day it mightn’t sound a lot – but taken across the company and across a whole year it adds up to millions of pounds of savings that can be passed on to customers.docshare. Such a detailed statistical analysis enables Asda to keep an eye on where the problem lie – with an individual. A company can successfully achieve product differentiation through these stakeholders. skills. Colleagues are the employees that work for Asda. As a result of these records. with a particular section or company as whole. They have a real interest in the nature and types of decisions that the company’s managers take. Last year they saved £10 million by reducing packaging on their own brand goods by 25%. In order to attend more than 2. Good strategic framework is required to achieve product differentiation for this a proper management team is required.5 million customers it is very essential to have a good workforce.
Reasonable time frame is given to supplier to comply under the policy. . auditable and universal. which supports Breast Cancer Care and Breast Cancer Campaign. then Asda takes corrective actions.php) Towards environment Carbon Emission: Over the past two years Asda has reduced its direct carbon emissions output by 83. a 20% reduction. Wal-Mart Europe has developed Ethical Policy. Suppliers at a national level are the very large providers to ASDA. Helping people affected with Tsunami and the Pakistan earthquake appeals. emitted 66 tonnes of Carbon compared to 83 tonnes in 2007.uk/studies/view-summary--meeting-stakeholderneeds-through-community-involvement--78-216. whilst maintaining its role as the champion of the customer and challenging the supplier to support its purpose: To make goods and services more affordable for everyone. Asda undertake many such activities due to which customer is satisfied with the organization. a road safety charity that encourages children to walk to school safely and teaches them about road safety. (Source: http://www. Corporate Social Responsibility Product differentiation can also be achieved by playing an important role in helping the society and environment.thetimes100. Some suppliers may be unable to meet all the terms within a short time or in some cases they maybe constrained by national law. Overall for every £1 million sales in 2009. ASDA encourages blood donor vans to be set up in its car parks. Suppliers to ASDA must comply with this Policy. The aim of this policy is to ensure that all ASDA suppliers. Other example is the Brake Walking Bus. both direct and domestic should source or manufacture products under a minimum set of internationally acceptable conditions of employment in the areas covered in the standard. Asda is committed in maintaining Policy. Some are as follows: Towards people Under the criteria of health. ensuring the service is available to everyone in the community. If supplier fails to observe the policy. and operate in such a way that is consistent with Wal-Mart high standards of business practice and in accordance with the national laws and regulations of the supplier’s country.000 tonnes. to ensure that when customers buy from Wal-Mart they know they are buying goods produced without exploitation and in acceptable & sustainable working conditions.000 children took part last year. ASDA helped this cause break a World Record when over 50. which is designed to be ethical. ASDA stores and depots were involved in raising money for its Tickled Pink campaign. Asda aims to treat its suppliers with respect.Most important stakeholder with respect to product differentiation is supplier.co. achievable. Colleagues and customers acted as blood donors.
and by reminding customers each time they visit not to forget their bags for life.asda.Carrier Bags: When it comes to carrier bags. and to securing a future for oceans.co. They do this in a number of different ways: by giving away our re-usable ‘bags for life’. and replaced them with more sustainable options.asda. References • • http://www.thetimes100. Also. Asda is active member of the Roundtable on Sustainable Palm Oil (RSPO) – an association created to promote the production and use of sustainable palm oil.au.php . (Source: http://your. such as motion-triggered lighting and state–of– the–art boiler systems. various factors for implementing differential strategy are studied. The biggest reason people use single trip bags is because they’ve forgotten to bring bags with them – or they’ve left them in the boot of the car.edu/uploadfiles/1184016243_Differentiation. Asda is trying to change the habit of a lifetime — but not at our customers’ expense. Protecting Endangered species: At Asda.com/sustainability-policies) Conculsion Through this research we understand the differential strategy of Asda in order to be amongst top retailers in UK and to overcome competition in retail market.asda. Company aims that their estate of stores and depots to be supplied by 100% renewable energy.pdf • http://your.scribd.com/assets/2010/4/15/2010_business_review_pack.uk/studies/view-summary--meeting-stakeholderneeds-through-community-involvement--78-216.com • Business review of ASDA 2010 http://your. Renewable Energy: Asda have a comprehensive energy efficiency programme. by removing single-use bags from all checkouts and putting checkout operators in control of handing them out. This has been achieved through a programme of innovations and upgrades.com/doc/22539598/Differentiation-Strategy http://www. we get an overview of product differentiation in retail industry. The research highlights the every day low price strategy and other product differentiation strategy to achieve customer satisfaction and fulfill stakeholders’ expectations. which includes identifying renewable sources of energy to power stores and depots.sm. customers are assured a sustainable source of fish. Threatened species such as North Sea Cod are taken off fresh fish counters. and to directly help protect endangered species like the orangutan and Sumatran tiger. In existing stores they are on target to reduce our energy consumption by 20% by 2012 (compared to measurements taken in 2005). Thus.pdf • http://www.
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