Analysis of U.K Supermarket Development Strategy

Part one: Supermarket retail industry introduction

Effective strategy is developed first by identifying and understanding the implications of the changing events in the business environment. Many of the events occurring currently have a wide international impact, and they may be seen to be influencing the results and responses of large supermarket retailers. The changes, or issues, that we see as important from a strategic planning perspective are:

 The growth of global companies

 Changing customer characteristics

 Innovation, format changes

 Customer loyalty

 People

 The impact of information sciences and technology(David Walters & Jack Hanrahan 2002)

1. The growth of global companies

The international expansion is a main trend in supermarket industry. After the fully development in European countries, the retailers begin to move their eyes on Asian countries. During the globalization, retailers should pay more attention to the government policies of the host countries. Planning permission is increasingly difficult to obtain, as Government declared policy is to maintain the viability of existing retailer. For example, Wal-MartЎЇs entry into the UK has been made easier by the acquisition with ASDA (Wal-Mart).

2. Changing customer characteristics

Salmon (1996) suggests five attributes that customers have always required:

 Good assortment of quality merchandise

It requires retailers widen the range of product.

 Convenience

It considers accessibility, ease of transaction and possibly home delivery.

 Reassurance

It has become reliance on retailer brand building. The stronger the brand, the more reliable the product and the less needs for reassurance.

 Service

Make sure the transactions supports not get the level causing considerable customer dissatisfaction.

 Competitive price

It requires retailers lower costs by means of advanced technologies and enhancing bargain power over suppliers.

3. Innovation, format changes

Recent years have witnessed significant developments in retail format design and size to meet different demands of customers, such as TescoЎЇ four formats. And the latest trend in UK supermarket is convenience stores.

Meanwhile, in the UK, Tesco and ASDA (Wal-Mart) have increased space productivity and profitability by adjusting the merchandise mix to include high-margin non-food items.

4. Customer loyalty

Potter (1998) suggests that because the top 5% of most retailersЎЇ customers account for 20% of total transactions and 30% of profits generated, they warrant special treatment.

So, many supermarket retailers use computer memory capacity to identify, track and respond to customer purchase behaviors, such as TescoЎЇs loyalty card.

5. People

OЎЇConnor (1996) concludes that senior management needs to have regular contact with staff at all level in supermarket industry. There also is a trend of enhancing employee involvement, development, communication and empowerment to solve the high level of employee turnover.

6. The impact of information sciences and technology

The reduction of large areas of cost, the decrease of lead times, and the increase in accuracy throughout the supply chain, have been based upon IT development, such as EDI and EPOS system, and applications such as SCM, ECR ,OR, CMI and many other systems. (David Walters & Jack Hanrahan 2002)

Part two: ASDA (Wal-Mart) analysis

A. Strategy Analysis

The largest retailer in the world, Wal-Mart, has begun to make it self a world brand, which has conquered Canada, Mexico, Latin America, Asia, Germany and UK. The Wal-Mart formula: ÐŽoÐŽ­a ruthlessly efficient computerized inventory and distribution system, no-frills marketing, and prices to beat anyoneÐŽ± (Cornwell, 1999) Cornwell also argues that Wal-Mart needs a ÐŽostrategic fitÐŽ± to be available for a successful geographical diversification because of the different macro and micro environment in different countries which generates different objectives. Consequentially, there are different strategies. For example, Wal-Mart is the leading retailer in the US, Canada and Mexico. So in these areas, the market objective is holding the exist market and beat back the rivals. But in China, there are large development and profit room for Wal-Mart. So, the market objective is building the market quickly.

In UK market, Tesco is extraordinary stronger than other companies as the below charts show.

So if ASDA (Wal-Mart) wants to survive even gain more profit, it should put itself in a challenger position with Tesco which means put the build objective in the first place. It also means the business strategy of ASDA (Wal-Mart) should focuses on business growth and winning market share from Tesco and other strong companies, such as SainsburyЎЇs and Morrison. But for Tesco, its main mission is holding its market share and making sense of the competitorsЎЇ action.

B. Marketing Analysis

It is critical and essential to set some marketing policies and methods supporting the implementation of the strategy. So, next, we will move to the analysis of marketing policies and methods adopted by ASDA (Wal-Mart)

For the sake of clear and comprehensive consideration, we will use the model of positioning for services to explore the marketing world of ASDA (Wal-Mart).

Positioning for services model (David Jobber 2004)