Before we dive into the PESTEL analysis for Asda, let’s take a closer look at its business. In addition to its headquarters in Leeds, West Yorkshire, England, Asda is also known as Asda supermarkets. A name that is an abbreviation of “Asquith and Dairies,” Asda was founded by the Asquith family and the Associated Dairies company in 1949. This supermarket chain competes with major retailers such as Tesco, Sainsbury’s, and Morrison’s in the UK.
In addition to groceries, general merchandise, clothing, financial services, and online shopping, Asda also offers a wide range of other products and services. With an emphasis on value-for-money and low prices, the retailer is known for offering a wide range of products. Private-label products are also part of Asda’s product portfolio, including its popular ‘Smart Price’ and ‘Extra Special’ ranges.
After being acquired by Walmart in 1999, Asda expanded its footprint across the UK and continued to grow. A private equity firm, TDR Capital, and the Issa brothers agreed to purchase Walmart’s majority stake in Asda in 2020. Asda became an independently-owned British business in February 2021 following the completion of the deal.
Asda’s strategic priorities
Among Asda’s strategic priorities are:
Through the reduction of plastic waste and the support of local communities, the company also aims to reduce its environmental impact and promote sustainability.
Including supermarkets, superstores, and convenience stores, Asda operates more than 600 stores across the United Kingdom. In addition to its strong online presence, the company offers grocery home delivery and click-and-collect services that continue to grow in popularity among customers.
PESTEL analysis of Asda
Organizations and industries use a PESTEL analysis to examine the external macro-environmental factors that can affect them.
Political Factors
A political factor is any factor relating to government or the political environment that impacts a business. Asda is impacted by a variety of political factors in this section.
Asda is a chain of supermarkets that sells both local and imported items. In addition to regulating imports, the government also makes import policies.
To improve the country’s current account, the government decides to ban imports. Asda will be unable to sell imported goods in that case.
Asda’s sales will suffer from this, and the supermarket company’s revenue will decrease. Furthermore, supermarket chain sales are dependent on political stability.
Protests and riots will occur if there is political instability. It would be impossible for people to leave their homes in such a chaotic political environment. This would result in a drop in Asda’s sales. As well as that, protests can damage the supermarket chain’s infrastructure.
During political instability, the market is also uncertain. During times of uncertainty, people tend to reduce their consumption in order to save money. Therefore, as a result of political instability, Asda’s sales will decline, and it will experience losses.
A government’s fiscal policy includes tax policy, which is one of its main components. Retail companies may be subject to high direct taxes from the government. Consequently, Asda’s profit would fall, and the company would suffer.
Furthermore, indirect taxes will increase the price of products, reducing their demand.
Economic Factors
In addition to global economic conditions, countries’ economic conditions also play a role. We will discuss how Asda’s performance is affected by different economic factors in this section of the PESTLE analysis.
Asda is greatly impacted by inflation as one of the economic factors. The rate of inflation is defined as the difference between the current year’s price of commodities and the base year’s price of commodities.
An inflation rate of more than 5% means that the price of commodities is rising rapidly. There is an inverse relationship between inflation and consumption. People minimize their consumption whenever inflation is high.
In times of high inflation, Asda is negatively affected. A high inflation rate causes Asda’s demand for products to fall, which negatively affects the supermarket chain.
Asda is also negatively affected by interest rates. Because interest rates are inversely correlated with consumption, Asda is hurt by interest rates. Banks tend to receive deposits from people as interest rates rise.
This results in a decrease in their consumption. Since high interest rates result in lower demand for Asda’s products, Asda is negatively impacted.
Asda is also significantly impacted by exchange rates. Exchange rates impact Asda’s demand for imported products since the retailer also sells them.
The GBP depreciates against the USD, for example. This would result in a decrease in demand for US-imported commodities. Asda’s operations are therefore affected by exchange rate fluctuations.
Social Factors
The social and cultural factors that influence business operations are called social factors. Take a look at how Asda is affected by different social factors.
The methods of shopping vary from society to society. The first brick-and-mortar stores were opened because people used to shop at markets.
Online shopping has become more popular as technology has progressed since many people find it more convenient.
The shopping methods in the UK are changing rapidly; Asda is being impacted since it will have to close the majority of its stores if most people shop online.
The self-service model of Asda contributed to its popularity as well. Asda still operates according to the same model. Nevertheless, there is a possibility that people will begin to disapprove of self-service and will ask workers to get their products for them.
Asda will be forced to hire more workers as a result of a change in consumer preferences, increasing the company’s operating costs.
Technological Factors
Taking the example of Asda, technological factors refer to technological innovation. This section will discuss the impact of technological innovation on Asda.
Businesses have become increasingly dependent on data analytics. Businesses can gain insight into consumer habits and consumption patterns by utilizing data analytics tools.
Asda also uses data analytics to forecast sales and identify target audiences for upcoming marketing campaigns, which contributes to the success of the supermarket company’s operations.
In addition, now that online shopping is quite common, people prefer to do their shopping online. Now businesses are shifting online, revolutionizing the retail industry.
Asda also faces a great deal of competition from online shopping. The Asda online store allows consumers to place their orders as online shopping increases. Businesses are becoming less dependent on conventional stores as a result of online shopping.
A conventional store has far higher operating costs than an online store. Furthermore, businesses have begun to use social media as a marketing tool as the internet has penetrated the globe.
In addition to social media platforms, Asda also uses them for marketing purposes. Asda has benefited from increasing its reach by doing so.
Legal Factors
In a country, legal frameworks and laws play a significant role. Check out how Asda is affected by different legal factors.
Businesses all over the world are affected by labor laws in any country. Unfair labor practices and discrimination against laborers are strictly prohibited in the UK.
Due to its UK operations, Asda must be careful to ensure that its workers are treated fairly and get the right wages. A heavy fine may be imposed on the supermarket chain otherwise.
Furthermore, quality assurance laws are strictly enforced in the UK. In order for Asda to sell high-quality products, it must make sure they don’t contain harmful chemicals. The company may be banned if the quality assurance laws are not met.
Asda must also ensure that consumer data does not leak, or else it may be subject to lawsuits in the UK because of strict consumer protection laws.
Environmental Factors
A PESTLE analysis discusses the impact of environmental factors on business operations. The purpose of this section is to examine how Asda is affected by environmental factors.
People are becoming more aware of global warming’s causes as the world acknowledges the problem. Businesses are urged to install windmills and solar panels in order to consume renewable energy.
A major supermarket chain in the UK is Asda. In the same way as any other business, it must consume renewable energy. It is likely that Asda will have liquidity issues if solar panels or windmills are installed on its premises.
In contrast, people might boycott the supermarket chain if it does not adopt renewable energy.
Furthermore, as natural disasters have become more frequent, road blockages have also increased. Asda often suffers from these disruptions in its supply chain due to these road blockages.
A natural calamity can disrupt the internet connection, affecting sales from Asda’s online store.
Conclusion
In addition to Aldi and Sainsbury’s, Asda is the third largest supermarket chain in the UK. There are more than 600 Asda stores throughout the UK, which employ more than 145,000 people.
Asda, however, began as a dairy shop in 1920 by a few farmers. From 1949 onwards, Asda grew to become the world’s largest grocery retailer.
A supermarket chain has developed effective methods to increase customer base over the years. The company diversified its product line and improved customer service, for example.
Besides acquiring smaller supermarket chains, the company also increased its market share by acquiring large ones. After joining Walmart in 1999, Asda continued to grow under the Walmart umbrella.
