Our Asda PESTLE Analysis highlights what external environmental factors impact the grocery chain's operations, such as economic, technological and social ones.
Imagine it's Sunday morning in the UK. You get out of bed and head towards the kitchen to eat, and suddenly you realize that you are out of groceries. What would you do?
If I were in your place, I would immediately rush to my nearest Asda chain to grab the essentials. If you are wondering what Asda is, Asda is one of Britain's most renowned and trusted supermarket chains.
Millions of people in Britain buy groceries from Asda. Today, we will be discussing the history of Asda. Then, we will discuss how the grocery chain evolved from a single store to hundreds of them over the years.
After that, we will conduct an Asda PESTLE Analysis to see what external environmental factors impact the grocery chain's operations. So, without further ado, let's proceed further and discuss the history of Asda.
You might be wondering if Asda would have been launched by opening a single big retail store, and now it has multiplied over the years. However, that wasn't the case.
In 1920, a few farmers opened a dairy company in the UK, which later became Asda. The company initially sold dairy products such as butter, milk, and cheese. Over the years, the company evolved and was registered under the name of Asda.
In 1949, Asda opened its first self-service store. Self-service stores weren't common then, so when Asda opened them, they got much attention. Asda diversified its products and started selling all the necessary grocery items.
People started shopping from Asda because they could find everything in one place. Moreover, the Asda stores were big and considered modern, due to which many people were attracted to the supermarket chain.
In the 1960s, the company expanded through mergers and acquisitions. The brand acquired several small supermarket companies. By doing so, the competition in the market was minimized, and Asda's profits were maximized.
The supermarket chain grew and started using cost-cutting techniques to increase its profit margins. Although the profits were rising, Asda didn't compromise on quality and ensured its products' quality remained high.
As Asda kept expanding in Britain, supermarket chains across the globe started noticing Asda. In 1999, Walmart acquired Asda and first moved to the European market.
Walmart had already become a giant in the US. Hence, Asda got the opportunity to use Walmart's business techniques and resources, which helped Asda grow further.
Under the wings of Walmart, Asda soon became the biggest supermarket chain in the UK. It diversified its products to target more customers and started offering clothes, home goods, and electronics.
This further increased the customer base of Asda, and the company's revenues kept on growing. Currently, Asda is one of the biggest supermarket chains in the UK. It has almost 634 stores in the UK.
Supermarkets require a lot of labor to operate. This is why Asda has hired 145,000 employees to manage all its branches. In 2022, the total revenue of Asda was recorded to be 20.4 billion pounds.
Now that we have discussed how Asda got established and evolved over the years let's proceed further and discuss what a PESTLE analysis is.
PESTLE analysis, based on PEST analysis, is a technique used to analyze the external factors that impact the operations of a business. It considers how different political, social, environmental, technological, legal, and economic factors impact a business.
Now that we hope our readers are aware of what PESTLE analysis is, let's move ahead and discuss what political factors impact the operations of Asda.
Political Factors Affecting Asda
Political factors are various factors associated with government and the political environment that impacts businesses. In this section, we will discuss how various political factors impact Asda.
Asda is a supermarket chain that sells local and imported products. The government regulates the imports, and the import policies are also made by the government.
Suppose the government decides to impose a ban on imports to improve the situation of the country's current account. In that case, Asda won't be able to sell imported products.
This will impact the sales of Asda negatively, and the revenue of the supermarket company will fall. Moreover, political stability is important for smooth supermarket chain sales.
In case of political instability, there will be riots and protests. In such political chaos, people would avoid leaving their homes. Hence, the sales of Asda would fall. Besides that, the infrastructure of the supermarket chain can get damaged during the protests too.
Furthermore, there is uncertainty in the market during political instability. When uncertainty prevails, people tend to save money by reducing consumption. Hence, during political instability, the demand for Asda products will fall, and the company will experience losses.
Governments are also responsible for developing fiscal policies, and one of the main components of fiscal policy is tax. A Government may impose high direct taxes on retail companies. This would cause the profit of Asda to fall, and the company would suffer.
Moreover, the imposition of indirect taxes on the products will make the products expensive, and the demand for products will fall.
Economic Factors Affecting Asda
Economic factors relate to both global and a country's economic conditions. In this section of the PESTLE analysis, we will discuss how different economic factors affect Asda.
Inflation is one of the economic factors that greatly impact Asda. Inflation is the measure of change in the price of commodities of the current year compared to the base year.
If a country experiences a high rate of inflation, it means the prices of commodities are rising at a high rate. Inflation and consumption have an inverse relationship. Whenever there is high inflation, people minimize their consumption.
Hence, Asda is affected negatively in the eras of high inflation. The demand for Asda products falls whenever there is high inflation, and the supermarket chain suffers.
Other than that, interest rates also impact Asda negatively. Interest rates hurt Asda because interest rates have an inverse relationship with consumption. As interest rates rise, people tend to deposit their disposable income in banks.
By doing so, their consumption falls. This impacts Asda negatively since the demand for its products falls when the interest rates are high.
Moreover, exchange rates also impact Asda significantly. Since Asda also sells imported products, the exchange rate impacts the demand for imported products.
For example, GBP depreciates against the USD. In that case, the commodities imported from the US will get more expensive, and their demand will fall. Hence, the operations of Asda are impacted by fluctuations in the exchange rate.
Social Factors Affecting Asda
Social factors are the social and cultural factors that affect the operations of any business. Let's take a look at how different social factors affect Asda.
Shopping methods vary in each society. Initially, everyone used to visit markets for shopping; that's why businesses used to look forward to opening conventional brick-and-mortar stores.
However, as technological advancement has occurred, people are now leaning towards online shopping since many find it more convenient.
Asda has opened more than 600 stores in the UK as the shopping methods are shifting; Asda is being impacted since if the majority of people start to shop online, then Asda will have to close the majority of its stores because these stores would be useless.
Moreover, Asda gained popularity due to its self-service model. Asda still operates on the same model. However, there is a possibility that people would start disliking the self-service model and demand workers to get the products for them.
Such a change in consumer preferences will impact Asda significantly since then, Asda will have to hire more workers, which will cause the operating cost of the company to increase.
Technological Factors Affecting Asda
Technological factors refer to technological innovation, and this section will discuss how technological innovations impact Asda.
The use of data analytics has become essential for businesses. Using data analytics tools, businesses can discover consumer behaviors and consumption patterns, which help businesses make informed decisions and develop effective policies.
Data analytics also impact the operations of Asda since the supermarket company can use data analytics to forecast sales and identify the targeted audience for upcoming marketing campaigns.
Besides that, as access to the internet has become quite common, people prefer to shop online. This has revolutionized the retail industry since now businesses are shifting online.
Online shopping also has a great impact on Asda. As online shopping increased, Asda opened its online store where consumers can place their orders. Online shopping is decreasing the reliance of businesses on conventional stores.
Moreover, the operational costs of managing an online store are way less than managing conventional stores. Other than that, as the internet has penetrated the globe, businesses have started using social media as a marketing means.
Asda also uses social media platforms for marketing purposes. By doing so, the reach of Asda has increased, which is beneficial for the company.
Legal Factors Affecting Asda
Legal factors refer to the legal framework and laws present in a country. Let's take a look at how different legal factors impact Asda.
The labor laws in any country have a great impact on businesses across the globe. The UK has strict laws against labor discrimination and unequal treatment of laborers.
Since Asda operates in the UK, it must be careful and ensure its laborers get the right wages and treatment. Otherwise, the supermarket chain may have to pay heavy fines.
Moreover, the UK has strict quality assurance laws. Asda has to ensure that its products' quality is not compromised and that they don't contain harmful substances. It might face a ban if the company cannot comply with the quality assurance laws.
Besides that, Asda has to ensure that its consumers' data doesn't get leaked, or else the company may have to face lawsuits since there are strict laws present for consumer protection in the UK.
Environmental Factors Affecting Asda
Environmental factors in the PESTLE analysis discuss how different environment-related factors impact the operations of businesses. In this section, we will look at how environmental factors impact Asda.
As the world has acknowledged the issue of global warming, people have become aware of the causes of global warming. Environmentalists press businesses to consume renewable energy by installing windmills and solar panels.
Asda is one of the biggest supermarket chains in the UK. It bears the same pressure of consuming renewable energy as any other business. Installing solar panels or windmills will increase the expense of Asda, and the company might face liquidity issues.
On the other hand, if the company doesn't adopt renewable energy, people might start boycotting the supermarket chain.
Moreover, as the frequency of natural disasters has increased, road blockages have also increased. These road blockages often cause disruption in the supply chain of Asda, due to which the company suffers.
Similarly, the internet connection gets disrupted by natural calamities, due to which sales from Asda's online store get affected.
Asda PESTLE Analysis: Final Word
Asda is one of the UK's most renowned and biggest supermarket chains, next to Aldi and Sainsbury's. Asda has more than 600 stores across the UK, providing employment to more than 145,000 employees.
However, Asda had a humble beginning in 1920 when a few farmers opened a dairy shop. Later in 1949, Asda's first self-service grocery store got established, and from there onwards, Asda kept growing.
Over the years, the supermarket chain developed effective techniques to increase its customer base. For example, it diversified its products and worked on customer care.
Besides that, the company acquired other small supermarket chains to increase its market share. Later in 1999, Asda became a part of the Walmart family and continued to grow.
After discussing the history of Asda, we proceeded further. We conducted the PESTLE analysis of the company to see what external factors impact it.
With the help of the PESTLE analysis framework, we were able to analyse how different external factors affect Asda. If this article made you curious about PESTLE analysis, look at some examples here.
