Theory and Practice of Business ASOS

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Introduction

In every single organisation, the marketing of its products require organising, implementing, and controlling the business theories and practices in order to handle and develop its current market position. The market positions, today, are changing frequently making it uncertain in every moment; that is why; every organisation must take proper decisions for itself. The decisions of the organisation may not be suitable for the operational and marketing of its products or services in global and local markets. However, effective decisions and strategic management implementations, like PESTEL, SWOT, Porter’s five forces model, etc. should be practiced in real organisational situations to know about environmental effects, major strengths and potential weaknesses, size and distances of forces of the organisation. After that, proper strategic implementations would be possible for that organisation along with appropriate recommendations and conclusions. For this essay, ASOS.com is selected for proper analytical measurements in practical and theoretical applications for different methods and tools in the business applications.

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Company Overview

“ASOS”, which stands for “As Seen on Screen”, provides online supply of outfits and designer goods to its customers, starting from normal college going girls to celebrities of the UK. In online fashion retailing, ASOS.com is a renowned name and it is the market leader in UK, with the basis of Camden Town in North London. It was established in June 2000, and within 10 years, it becomes one of the largest and independent online fashion retailer. It is recognised as own label and branded outlet and designer goods with latest fashion in the market. For this reason, turnover of this company raised at £165m per annum with 22,000 products ranges on its websites and updated 1,000 new products for men, women, and children’s collections. (ASOS PLC, 2010)

Value Chain Analysis of ASOS.com

Value chain analysis is a combination of primary and support activities of ASOS.com, which would give a clear knowledge about organisational activities to achieve its profit margin, which would show with the help of following figure:

Support Activities

There are mainly four types of support activities in every value chain analysis, which are discussed according to ASOS.com.

Firm Infrastructure

Hitt, Ireland, & Hoskisson (2001) and Molla. & Licker (2001) stated that there are three criteria and these are financial management, organization, and culture.

  • Financial Management- Positive: Financial management and its success are depending on the inventory control and ordering costs of distributing its products by ASOS.com. As a market leader, the solvency ratio and liquidity position of this organisation is better than its competitors. The main costs of this organisation has been occurred in operational activities, rather marketing activities, because, it has to be updated according to time and customers choices. From the Annual report of 2009, it focused that, net profit of the organisation raised up to £165 million (ASOS PLC, 2009)
  • Organisation- Positive: To manage the business of ASOS.com successfully, it has to maintain different optimal options to know the unpredictable losses for the organisation. As it is said before that, only within 10 successful years of business in the market, it has gained potential and existing markets in online and established itself as market leader. It is also maintaining its organisation as capable to challenge not only UK market, but also in global market (Chopra & Meindl, 2008).
  • Culture- Positive: ASOS.com is maintained latest fashionable goods and outfits for all kinds of people. With the culture of fashion, it is also having good relationship with its employees and customers. Therefore, cultural attitudes bring positive attributes to the value chain analysis of this organisation (ASOS PLC, 2010).

Human Resource Management- Neutral

ASOS.com is mainly successful as online retailer of goods and outfits, so to being committed to customers’ satisfaction, this organisation does not maintain strong human resource management for its activities. It is maintained neutral HRM to manage operational and technological activities for ongoing retail business.

Technological Development- Positive

ASOS.com is established its brand name in the market as online retailer of latest and fashionable outfits and goods. For this reason, the organisation has to manage and adopt technological advancement comparing to other online retail stores in the market. Technological adoption is needed to achieve first mover advantages with the support of R&D sectors of the organisation.

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Procurement- Positive

The goods and outfit collection for potential customers are updated and fashionable. These are collected from designer and other branded show rooms or own branded goods for the further procurement or selling to the end customers. These goods and outfits are marketed and promoted to the all types of people in the market.

Primary Activities

According to primary activities of, there are five issues must be discussed for ASOS.com, which are:

Inbound Logistics- Positive

The development of goods and outfits according to market needs and fashion’s demand of customers increased day by day, which makes ASOS.com more successful in its business. For logistical support, ASOS is depending on mainly outsourcing, which is build up with the help of maintaining strong agreement with its partners.

Operations- Neutral

The estimated operating costs of ASOS.com are occurred about 34.9% in 2009, which are mainly on payroll, warehousing, marketing, production, and depreciation costs. So, operational activities are expensed mainly on outsourcing and promoting of goods and outfits.

Outbound Logistics- Positive

Customers’ satisfactions are main motto of ASOS.com, so the organisation has been ensuring its outbound logistics as perfect as possible with extensive communications network with its partners, assemblers, advertisers, suppliers and end customers.

Marketing and Sales- Positive

Marketing and sales are increased the brand value of ASOS.com so high, because as it is an online based retailers, the main budget is spent on promotional and technological development.

Services- Positive

After sales services and delivery services are main for ASOS.com, because it is maintaining 24/7 customer care services and next day delivery facilities to the customers.

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PEST Analysis on Current Market Position of ASOS.com

Shin, N., (2001) stated that for strong market position establishment in the competitive market, every organisation has to analyse different factors of this environment:

Political Factors

  • Governmental Policies: ASOS.com is maintaining proper laws and regulations of UK government for continue its business in UK market.
  • Political Trends: With the proper provisions and regulations, ASOS has maintained political trends to obey the system of government and other governing bodies.
  • Modernisation: With the objective of UK government, this is to encourage every organisation to move forward with innovativeness. Therefore, it is being positive attitudes for ASOS to maintain modernisation in UK and international market.

Economical Factors

  • Growth of Economy: High domestic demand of ASOS with its goods and outfits, which is also helps to grow economic growth of UK, comparing with consumptions to wage growth in UK market in fashion world. Therefore, the domestic growth of economy will be remaining strong with the help of ASOS.
  • Taxation: The tariff rates of government to goodies and outfits in UK are up to 12%, and foreign companies are being separately calculated. So, overall combination of tax rates will be added to the value of economy of UK by ASOS.
  • Market Size: Considering 12% of UK market size of ASOS.com, it has maintaining large competitors and space in the market.
  • Economic Recession: As US is falling in deep recession, which had a major impact on UK market. Therefore, economic recession was effected on ASOS.com earlier, but very soon, it is recovered.

Socio-Cultural Factors

  • Target Population: In UK, from 16-45 years old people and kids are potential and existing target group of customers of ASOS.com. So, satisfying all groups of people is needed by this organisation.
  • Demography: UK’s population growth rate is small in context of other countries. Age distribution is characterised by small youth group to older people and ASOS.com is targeting the entire demographic group of people.
  • Trend Alert: UK’s people are concerned about the fashion and being trendy of themselves, so ASOS has right place to market its goods and fashion items.
  • Advertising and Publicity: High advertisements and promotional activities are used to aware people of UK about ASOS.com in last 10 years for establish themselves in highly competitive market
  • Living Standards: Living standards of UK’s people are higher considering the people of other countries. However, after recession, the standard is being downward. Therefore, ASOS also maintains the standard in its goods and outfits.

Technological Factors

  • Distribution: As an online retailer, ASOS is maintained chain supermarkets and retail chain shops for providing and distributing its goods to the ultimate customers.
  • Internet Facilities: Availability of websites on internet is controlling total business of ASOS, which is according to policies of UK government.
  • Media: Effective brand communication can uses symbols and targets local and other population of UK as promotional tools of the organisation.
  • Other Improvements: Online shopping, bar coding and computer design are used to improve better technologies, which attract and benefit customers.

SWOT Analysis of ASOS.com

For internal analysis of ASOS.com, SWOT analysis is appropriate to know the strengths and weakness, and which is implemented in opportunities and threats. The following figure of SWOT would be discussed further:

Strengths

  • Efficient Growth: ASOS.com is presenting their websites so attractive that customers’ would enjoy visiting its websites so frequently. In addition, frequent visits are increased the growth of organisation efficiently.
  • Successful History: Within 10 years of business life cycle, ASOS has established a renowned step in the competitive market. Successful histories are making the organisation more successful and effective to achieve 2nd position of the international market (ASOS PLC, 2010)
  • Quality and numbers of Goods: ASOS.com is maintaining high quality of fashionable goods with more than 30,000 options in the market, so in UK market; it can be easily popular by the reputation of quality products.

Weakness

  • Costs: The costs of distributing and manufacturing of different branded products are not easy to get, so ASOS.com has been incurred much more high costs in UK than local market.
  • Price and Volume: As product and manufacturing costs are high in UK, so price would be higher than local market, which will cause high prices of sales of goods in UK market.
  • Ignorance of current environment: There are many risky strategies taken by ASOS.com, but within current economic environmental conditions, which are not suitable. For this reason, sales declined from 104% to 52% within 13 weeks

Opportunities

  • Communicating & Networking: ASOS is maintaining very good networking in with its partners, suppliers, retailers, and customers. Therefore, it can also build networking in international market also with UK market.
  • Providing Satisfactory Services: ASOS.com is providing latest fashions with number of different collection of goods, cloths, accessories and outfits, which would attract more fashion aware customers than before.
  • Internet: With the help of spreading internet, ASOS offers more customers in more and new areas about fashion goodies in UK market also, which is enlighten brand name in more better position in customers’ minds.
  • Training of Staffs: To attain more target markets in after sales services and delivering services, ASOS always maintain proper training systems for their staffs. Therefore, to capture more target markets, training is more important for this organisation.

Threats

  • High Competition within Brands: Most of UK customers are being more loyal to their current and local brands, which is harmful for ASOS to spread themselves more in market.
  • Changes in Attitudes: Customers’ attitudes towards fashionable goods are being changed so frequently in customers comparing with other goods in markets.
  • Huge Costs of Promotion: ASOS is only depending on promotional activities, for this reason, to attain more customers; more costs of advertisements would be needed for ASOS, which will incur more expenses in financial activities.
  • Availability of Cheaper Brands: There are various cheaper brands are available in UK market comparing with ASOS.com.

Analysis of Porter’s Five Forces Model

Industrial analyses of fashionable goods are much known to all, but ASOS.com is online retailer, so it has different situations in the market, which is described according to below figure:

Low Entry Barriers

UK market is very difficult to entry as new entrants in business, it is more impossible for fashion world. Therefore, ASOS.com has positive attributes on low entry barriers of others.

High Competitive Rivalry

With more than 50 brands, ASOS.com is holding 12th position in the market. Therefore, it is very difficult to keep its position stable and to move forward in these positions in high competitive environment.

High Bargaining Power of Suppliers

ASOS.com is running its business with the help of more than 20 branded products and accessories in target audiences. These combinations of partners of 20 brands are possible for supply chain network, which has very high bargaining power in the industry.

Low Buyers’ Bargaining Power

ASOS.com is very attractive websites for customers and consumers, and most of the recent customers are being loyal to ASOS. Therefore, bargaining power of customers is being lowered in the market.

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High Availability of Substitutes Products

There are number of goods and outfits of different brands and non- branded are available in the market. As a result, substitute’s products are making more choices to ASOS’s customers.

Implementation and Recommendation of Strategic Model

After analyses of different models, ASOS.com has to develop strategic implementation for further development of the organisation. That is why, Porter’s generic forces model would be appropriate to describe different strategies:

  • Focus: For ASOS.com, target customers and volume of high-ranged products should be main focus of the business to successful in competitive market.
  • Differentiation: This organisation should be different in terms of various concentrations, which make it different from competitors. So, it should be emphasised on “Differentiation”
  • Costs: As customers always want to minimise the costs of having products, so this organisation can also consider this factor to keep their customers.

Various differentiation strategies can make ASOS more different and unique in the market, which are:

  • Product Differentiation: ASOS.com can introduce new ranges of goods in their lists before other competitors. Therefore, it can make product differentiation by these.
  • Channel Differentiation: Proper selection and design of channels are competitive advantages of any business and for ASOS also. It must ensure suppliers and distributors to spread their products in UK and international market.
  • Image Differentiation: ASOS.com can bring themselves and their products with different brand images to consumer’s mind. Image differentiation must be attractive and catchy, which is another advantage of differentiation in competitive market.

Conclusion

ASOS.com is an established brand in the UK market, thus, it has to apply strategies that are more appropriate to move forward and sustain in the competitive environment. From different strategies, differentiation is emphasised and is focused with three different areas. Therefore, ASOS.com should be structured strategically, according to its success factors, and this would be helpful for achieving competitive advantages.

References

ASOS PLC. Annual Reports and Accounts 2009. Web.

ASOS PLC. (2010) About ASOS. Web.

ASOS PLC. (2010) Highlights & Summary. Web.

Chopra, S., & Meindl, P. (2008) Supply Chain Management. 3rd ed. New Delhi: Pearson Prentice Hall.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2000) The Internal Environment: Resources, Capabilities and Core Competencies. Web.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2001) Strategic Management. 4th ed. South-Western Thomson Learning.

Kotler, P. & Keller, K.V. (2006) Marketing Management. 12th ed. Pearson Prentice Hall.

Molla, A. & Licker, P. S. E-Commerce Systems Success: An Attempt To Extend And Respecify The Delone And Maclean Model Of Is Success. Journal of Electronic Commerce Research, VOL. 2, NO. 4, 2001. Web.

Pearce II, J.A. & Robinson, R.B. (2006) Strategic Management. 8th ed. London: McGraw-Hill.

Porter, M. E. (2004) Competitive Strategy. Export Edition. New York: The Free Press.

Robbins, S.P. & Coulter, M. (2003) Management. 7th ed. New Delhi: Prentice Hall of India.

Shin, N., (2001) Strategies for Competitive Advantage in Electronic Commerce. Journal of Electronic Commerce Research, Vol. 2, No. 4.

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