This paper is a report on the business operations of George at ASDA in the value clothing market in the UK. In the current economic crisis period which is sharpened by the competitive business environment, George at ASDA has faced a lot of challenges in the market to maintain its competitive position and market growth. In this report, key strategic issues the organization is facing as a result of factors such as current economic situations, the threat of competitors, emerging opportunities, etc are discussed to provide recommendations for performance improvement and market share growth. The external environment of the organization is analyzed for assessing its impact on the operational performance and positioning of the brand in the market. The intensity of competition in the market is discussed for identifying an adoptable competitive business strategy for George at ASDA in the market.
Report on the operational strategy of George at ASDA
Key Strategic issues in the Value Clothing Industry
The George at ASDA is a well-established town-center standalone brand in the value clothing industry. The George at ASDA clothing brands is marketed through standalone George stores as well as through retail chain outlets of ASDA. In the present period of financial crisis sales growth of the brand is seriously declined and it is struggling to attain the targeted business growth. The increasing intensity of competition is a major factor that restricts the business growth of George at ASDA. The present global economic crisis has affected each business all over the world either directly or indirectly. Most of the companies are facing it difficult to exist in the market as the financial crisis affected them very badly. Moreover, the competitive element in the business is going on increasing day by day. The clothing market is showing tremendous growth over the past years. This provides the opportunity for the players in the industry to ensure better market growth and profitability. There exist emerging opportunities in the value clothing business sector also. In this context, George at ASDA should implement a competitive business strategy so that it can ensure constant business growth in the crisis-affected and fully competitive market. The present conditions in the business environment of George at ASDA are discussed through Porter’s five force model to find out the opportunities existing in the industry.
Porter five forces analysis
Porter’s Five Forces Analysis is a tool for analyzing the business strategy, making changes, and implementing it. This analysis helps an organization to survive in the competitive business world. (Cheverton 2004, p.79).
Porters’ Five Force Analysis relating to the value clothing market:
- The threat of entry: The threat of entry in the market is constituted by factors such as the growth stage of the business, profitability rate, etc. The entry of new firms into the market may result in decreasing the profit of existing firms. The value clothing industry is in the maturity stage and thus the threat of new entrants is only limited.
- The power of buyers: The power of buyers can be seen more intense in the market where there exists a large number of producers. Thus the buyers have bargaining power over the products or services. In the case of the value clothing business, buyers have strong bargaining power as there is existing keen competition between different firms.
- The power of suppliers: This can be seen in the market where the number of buyers is larger and the number of suppliers is lower. In a market where the costs of switching between suppliers are higher, the suppliers will have certain bargaining power. In the case of the value clothing business, suppliers have strong bargaining power as the switching cost between suppliers are higher in the industry.
- The threat of substitutes: The presence of substitute products is a serious threat that badly affects the profitability and marketing of branded products. Availability of substitute products restricts the pricing strategy of firms. In the case of the value clothing market, the threat of substitute products is strong and it restricts the market growth of branded products on a larger scale.
- Competitive rivalry: In the value clothing business, there exists keen competition between well-established business firms. The uniqueness of the product is a good competitive advantage in the market. Due to the strong competition, the growth rate of profitability and market share is greatly restricted.
External Environmental Analysis of George at ASDA
Impact of the economic crisis on the UK clothing industry
UK value clothing sector has a total value of £8.8 billion. It is an important sector of the UK clothing market. Due to several reasons, the growth of the industrial sector has slowed down over the past two years. The operating cost is highly increased and thus debt level is also increased. Profitability and like-for-like sales growth have declined in the market and even the market leaders are challenging to sustain their market share and growth. (ASDA expands George at ASDA ‘Fast Fashion’ range 2002).
In 2007, the UK clothing market comes around 6% of the total spending and it is regarded as the lowest in the history. One of the reasons for the low cost is the cheap import from other countries having lesser labor cost. As per some estimate, 90% of the apparels are exported from other countries like Italy, Turkey, Vietnam, and Bangladesh. Another reason for the low price is the high competition in the market. Department stores, (e.g., Debenhams), Chains (e.g., Marks & Spencer, Primark), Supermarkets (ASDA & Tesco) are in cut-throat competition to get some advantage in the market. The retail clothing market is also badly affected. Many retail chains like USC, Woolworth’s, Officers Club, Whittard of Chelsea, Adams, etc. are examples. Industry expert predicts that there will be more closure in the coming months also. “The Experian Director of Property Consultancy said, it has been the most challenging time for retailers for at least 30 yeas. Trading conditions are very tough and the collapses we’ve seen so far are just the tip of the iceberg. There is too much space in the market and not enough demand.” (Recession claims UK clothing retailer USC 2008).
A strong brand-building effort is needed to cope up with the recession, some experts predict. Building a group of loyal customers in the market will also make a change in the future. It helps to create some advantage over the competitors. But short-term strategies such as blind price cuts, will not give good results in the future. (Leroux 2008). “There is no sign of a major surge in market value, so the share of consumer spending taken by clothing and footwear is likely to continue to fall over the next 5 years from 2008 to 2012.” (Clothing and market review 2008).
The economic crisis follows George at ASDA
In the existing critical economic conditions, George at ASDA faces a real challenge. According to George Davies, the founder of George at ASDA, retailers are more being affected by the crisis attacking the present economy. The retailers with delicate balance sheets would surely undergo this crisis because the customers are not ready to make their pockets thin with this current blow of the economy. He points out the businesses that will be facing danger are the ones being exploited. The consumer, with the situation prevailing, is in search of some alternatives at affordable rates. (Donati 2008).
ASDA established a chain of George high street stores in the standalone clothing concept. ASDA Living is arranged with the concept of out-of-town format which have great potential in attaining the performance target. The standalone store concept adopted by ASDA on its George stores had not ensured sufficient returns. The main obstacle for attaining the target is the requirements of higher sales volume for repaying the rent for the prime town centre locations. (Hall 2008). Slow down in consumer spending is a major challenge facing the clothing industry.
Key business strategies of ASDA
ASDA attained greater success in the industry by following certain key business strategies. These include, pay attention to the views and needs of customers and purchasing in bulk. Through bulk purchasing, a better economy of scale in operation is achieved by them. Along with cost-effectiveness, better customer service is also ensured by the company. Thus they ensure the delivery of the product at the right place and the right price. Price competency over the rival firms, such as M& S, helped ASDA to attain the largest customer base as customers are more judicious in price and quality matters of the product. (M & S loses clothes crown to ASDA 2004). In the keen competitive retail industry, ASDA occupies the cost competency than its rivals. ASDA, being one of the greatest supermarket series in Britain, is forced to reduce the cost due to the increasing competitor’s threat in the industry. After ASDA was occupied by the American giant Wall-Mart there was an increase in their profit by 2 percentages. But it was not enough to run over the competitors like Marks & Spencer and Wait for rose. The growth has not touched the targeted performance. As the competitors and competition increased ASDA made more advanced policies to ensure that ASDA’s George brand was enriched with some attractive and high fashion. (Butler 2006).
Competitive positioning strategy of George at ASDA
ASDA invests a huge amount of funds for the promotional and advertising of products. Their annual investment in Television ads seems to be for an amount of £20 million. In-store, publications are also used by the company to inform the customers about its newer innovative products. Below the line advertising strategy is followed by ASDA. ASDA magazines have greater publicity among the women customers in the UK. Entertainment programs are also arranged for the customers as a part of its promotional strategy. (Superbrands case studies: ASDA 2004). To cope up with the recession, ASDA declared many strategies such as price cuts, discount offers, diversification to jewelry items, etc. These are discussed with details as shown below.
- Diversification to jewelry: This is a combined project of ASDA’s jewelry group and the George team. The new venture is about to hold 40 % of the company’s jewelry. The remarkable point is that they have some precise designs to attract especially ladies and children to the markets. (ASDA launches private label jewelry line 2004)
- Price Cut: Economical pricing strategy is the main strategy of ASDA. They consider they are the price leader. It is said to be the low-priced the company has ever put forward. As per the research conducted by Grocer Magazine, they have reduced the price of more than one-fifth of the items. “The Grocer said ASDA had had the cheapest basket in its weekly survey for all nine weeks of this year and has the lowest average price of the surveyed retailers.” (Seager 2009). And these strategies have well paid off. Contrary to the earlier reports, they have good sales in the season. Discount offers are another marketing strategy adopted by them.
- Finding New customers: They have some good plans for the young women during these difficult economic times, for which they are on the way to create series of clothing necessaries. There was a time when people looked more at quality than money. As the conditions got twisted value for money came a bit higher than the quality. Last year about 30 million euros was invented by George to find more quality at affordable prices. The company is focusing to give the customers real value for money by providing quality products at a reduced price to overcome the crisis period. (ASDA launches £20 suit to beat credit crisis 2009).
Critical evaluation of the Strategic resources of the organization
Strategic resources and capability of George at ASDA
George at ASDA has the business target of attaining the number one position in the clothing supermarket industry by the end of 2008. It also objects to regain its leadership position in the UK’s clothing industry by 2011. Innovative strategies are adopted by the company in the case of its George brand. Good value for money should be capable of attracting and sustaining a larger customer base. By identifying this ASDA followed them. The latest supercenter everyday low pricing policy. ASDA has two standalone George stores in the UK. Together with DELP policy, ASDA is keen on following continuous improvement in products and services. The George clothing range attained the second-largest position in the UK clothing industry with an annual turnover of £1 billion. (Superbrands case studies: ASDA 2004).
George at ASDA occupies strategic competency with the following resources.
Brand value: It has benefited greatly from the image of the George clothing brand. Brand marketing is targeted at a worldwide customer base. In the UK the brand gets £1 billion annual turnovers. Brand refocusing is adopted by ASDA in case of its George Brand, to attract and sustain the core customers. Their targeted customers include family shoppers between the age group of 25 to 45. The company identified the potential opportunity in the targeted customers for marketing of lower price clothing products with optimum product quality. To remove the complex product range, ASDA adopted a simplification strategy by eliminating two of its five sub-brands and initiating two new ones targeting the customers within the age group of over 45. In the selection of brand names of products, ASDA keeps a high rate of professionalism.
Better layout designs: Along with an attractive product branding strategy ASDA occupies dedicated feature areas in-store appealing to targeted customers. The layout designs of the retail stores are arranged to focus on providing better shopping feeling to the customers. For this purpose, simple layouts are accepted with clear navigation and signage with better customer service.
Distribution strategy: Four state-of-the-art distribution centers are arranged for the marketing of George’s clothing brand. Online marketing is also adopted by the company to exploit the tremendous opportunity in the online retailing. A dedicated standalone website is designed by the company for supporting the marketing of the George brand. The Company also invested in IT and product distribution areas for improving the operational and marketing efficiency of the company in the industry. The distribution network of ASDA is affected by limited capacity and drive volume. It is expected that investment with the object of empowering the business growth of George’s brand will contribute to the goal achievement. (ASDA wants George at number one 2008).
Small store business strategy: ASDA launched its small store strategy by launching ASDA Living. It is the place for testing the new approaches of the company in the competitive marketplace. The expansion of the super center business is complex and costly in legal terms. The required rental payment on business centers in UK power centers and main streets are huge. But it is less troublesome. Tesco is the major competitor in the primary supermarket and super centers of ASDA. Even though the quality of ASDA products is slightly lower than that of rival firms such as M&S, the price difference provides a competitive advantage to ASDA to acquire a customer base. It may be for about 50%. The advertising is based on this cost leadership. (Duff 2004).
Continuous innovation: Continuous innovation and improvement are followed by ASDA to sustain its competitive position in the industry. The human capital of the company is efficient and effective for introducing innovative business ideas and strategies for meeting the changing needs of customers and always pioneers in innovative terms. Cost savings through efficiency improvement is the basic operating strategy of ASDA. (ASDA careers: help drive ASDA forward 2008).
To accelerate the brand promotion, ASDA launched its TV channel under the name ‘Saving You Money TV’ on YouTube. As the name indicates, cash-saving tips are offered through this channel. An online forum is also established to facilitate real-time interaction with the customers. It is expected to reinforce ASDA’s value message. (ASDA hires ad guru to drive marketing strategy forward 2009).
Issues of Technology: By contracting with digital business consultancy Adera + Nucleus, ASDA, started its online shopping websites. Ecommerce business strategy is adopted by ASDA on a pioneer basis and made arrangements for facilitating the customers for ordering the via PC, ph one or DTV. With the [email protected] home service, started in 2001, ASDA attained better improvement n their customer service with maximum speed. (Adera+Nucleus leads icon convergence with ASDA @t home 2000).
Core competencies: George at ASDA is a prominent brand of ASDA in the UK supermarket retailing industry. ASDA adopted expansion strategy in its George at ASDA brand for stimulating its continuous sales growth. The time lag between design and marketing is highly reduced. Latest styles and trends are introduced within the shortest time duration from design to production and marketing. Brand values are better maintained by the company. The needs, interests, and perceptions of customers are better considered by the company before framing its marketing strategy. (ASDA expands George at ASDA ‘Fast Fashion’ range 2002).
Marketing campaigns are followed by ASDA such as the ASDA price campaign, and the smiley faces rollback campaign. Through these campaigns, they focused to expose ASDA as the most affordable supermarket in the country as the provider of quality goods at the cheapest rate. Fantastic quality and great value prices are the main competitive advantage of the George at ASDA brand. Wide ranges of clothing products are available under the brand name George at ASDA. Stylish fashions are presented with the periodical review. The key focus of the company is to deliver greater products to the customers with greater customer service and attractive pricing. Quickness in delivery is another strategy to impress the customers. A separate ASDA credit card is arranged for the customers of ASDA. George at ASDA clothing gained customer loyalty through up to the minute fashion strategy with everyday low prices. (Welcome to careers at George 2008).
Recommendations for improving the operational performance of George at ASDA
The value clothing sector is maturing and it becomes more complex. To accommodate a wider product range and sales, retailers are forced to transplant their business in more prime locations to exploit the increasing sales opportunities with wider product ranges. Through larger stores, they can increase volumes without a significant increase in operating expense. (Hall 2009).
In the concept of Michael Porter, as a part of competitive strategy, firms have to attain a higher rate of profit by either providing similar products at competitive prices or providing a differentiated product. It is termed as cost leadership advantage and differentiation advantage. (Management and organizations: shedding the frills making a success). In the current economic crisis conditions, George at ASDA has to redesign its operation strategy to overcome the economic as well as competitive pressure. The organization should follow the strategy of redesigning the organization. Another option is to concentrate on its standalone strategy by introducing better management and marketing strategy. In the matured industry, it is better to diversify the product mix, by introducing a new product range. to get a competitive advantage in the industry, value-generating activities have to be followed by the company. Better value chain management is capable of creating greater value to customers exceeding the cost of activities. Thus better profit margin can be created.
ASDA has to take steps to renovate its George clothing brand for becoming the market leader in the value clothing industry. In the case of ASDA, it can see that sales growth of the brand products has slowed compared to past years. The main reason for this slowness is complicated product ranges and pricing strategies. Due to this, the business becomes less productive even though it is profitable. to overcome this crisis, the company can adopt different options for strengthening its market position.
Future strategic options open to the organization
Market divestment options: Divestment can be considered as the best strategy for the company in light of both its internal and external factors. In market divestment, companies reduce their presence in a particular market where there is no scope for further growth and reinvest in new market places having potential growth opportunities. Divestment activities and market exit are proactive strategic decisions as they provide resources for investing in a new potential marketplace. (Fernie, et al 2005).
In the case of George at ASDA, it is better to divest from the market where there is no growth potential. It will facilitate better utilization of valuable financial resources by investing in more profitable market options.
New Market development: ASDA should expand its market for achieving a greater economy in operations. New markets having potential growth opportunities such as Asian countries like India, China has to be considered for their market expansion. For gathering the financial resources it is difficult in the present situation. In this case, it is adaptable for the firm to divest from non-profitable markets.
Product development: Cost-effective products with varying price ranges have to be developed by the company to strengthen its George Brand. Along with the product price, the design, and quality also have to be given adequate importance. As in the clothing, industry price is not the only matter for selection and thus for attracting and sustaining customers, attractive trendy designs have to be incorporated by the company in its George brand.
Strategic Alliances: Strategic alliances are an important business strategy for avoiding unhealthy competition between similar competent firms in the industry. George at ASDA can adopt strategic alliances strategy to restrict the severe threats from competitors. While selecting strategic business partners, detailed analysis about the business strength of the organization has to be made. Business policies and strategies of the partners also have to be identified before entering in a strategic business alliance. Business contracts with other prominent firms will help the company to gain access to the strategic capabilities of the allied firms. The sharing of valuable resources will give positive results to the overall performance of the business.
Supply chain management development: Supply chain management should be carefully dealt by the company. to gain competency in the value clothing market, supply chain management has greater importance. Each stage in the product transition has to be carefully dealt with with the object of getting maximum efficiency and effectiveness.
Technology systems to improve Competitiveness: To improve competitiveness in the industry, technological innovation is an essential factor. Thus George at ASDA has to reinforce its e-commerce based online marketing as a major business sector. In the value clothing market, there is a growing trend of online customers and by strengthening online marketing; the brand can regain its market position. More than an informative site, the company has to re-design its website with utmost sales professionalism. These will help the company to regain its market position with improved profitability on a long-term basis.
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Market share of different companies in the UK value clothing market
Relative cost of an average item of clothing
The Average ratings of George at ASDA
The different aspects of retailing business