Asda is the second largest supermarket chain in the UK with a16.8% of the grocery market.
Which is also offering food, drink, clothing andgeneral merchandise. It also provides a range of financial services, sold bothin the supermarkets and online all over the UK.The headquarters of Asda Stores Ltd is in Leeds, WestYorkshire and was founded in 1965 by the supermarket owning Asquith family whenthey decided to merge with the Associated Dairies Company of Yorkshire (ASquith + DAiries = ASDA). In the subsequent decades ASDA expanded south andbought rival chain of superstores Gateways Superstores amongst others.Wal-Mart bought Asda 26 July 1999 for £6.7 billion which madeit into a subsidiary of the retail giant, it became the 2nd largest in terms ofmarket share of the supermarket chains and since then ASDA claimed a gain ofone million new customers.
George, its own range of clothing was launched in 1990 in thesuperstore estate and replaced the 70s and 80s clothing labels of Asda afterbeing advertised as a premium quality clothing for fashion and reasonableprices and in turn great value. Marketing MixIn order tomake a tangible comparison of how both the organisations -ASDA and Lidl- operateI must first evaluate Asda’s marketing mix.Product: Asda stores are one of the most prominent retail chains in the world. Asda provide and offer are myriad of serviceswhich are equally as unique as they are wide ranging. Though the supermarketretail business is the main focus, Asda also offers a mobile phone companybased on EE network, along with financial services amongst others. According toKotler, (2003) you should happy to all business partners, customers, suppliersand distributors for earning and long-time business and Asda has been do thisvery successfully. Asda provide loyalty schemes to attract the customers andcustomers gain benefits on their purchases. Its adaptive websites has a 24hoursonline service which solves the customers’ problem online.
In 2014 Asdasupermarkets began to offer a technological innovation to their customers bytrialling a three-dimensional (3-D) printing service, which uses scanningequipment to produce scale models, a new system which had previously confined largelyto business-to-business markets.Price: For certain retailers pricing hasbecome the foremost element of the marketing mix and is therefore the keycomponent of their brand image, Asda is a key example of this, with a low pricestrategy as key to sell huge volumes of products, Asda records good growth byplaying the price strategy. ASDA pursues low cost agenda to offer lower pricesfor its customers. It is committed to providing customers with outstandingvalue for money across its entire range of food, general merchandise andclothing (McKenna, 2008) .
Retailers that charge consistently low pricesthroughout the duration of the year, with barely any price promotions practice everydaylow pricing (EDLP). This technique has been used to great success by Asda dueto it being such a large retailer and economies of scales make low pricesfeasible. The aim of EDLP is to encourage customer loyalty from price-sensitiveconsumers (Goworek and McGoldrick, 2015).Place:Bennison et al (1995) claimed that location wasthe primus inter pares (first amongstequals) of the retail marketing mix Asda has got its presence in severalplaces.
Market expansion can be achieved throughattraction of new users to the product or service, identifying new uses for theproduct or developing new products and services to stimulate the market. Newusers can be found through geographical expansion of the company’s operations-whether that be domestically or internationally. Asda pursued new customers forits products in its move south from the Yorkshire home base. Promotion: ASDA marketing people are alwayscurious to adopt new and innovative promotional techniques. They are offeringtheir customers like two for £2, one for £1.99 and similarly many othertechniques.
The roll back tags of ASDA are visible to every visitor. The storesare instructed to display reduced price products in front of store so these cancatch the attention of customers immediately when they enter into store. (ASDA,2009).
There is also a trend towardsretailers like offering their own sub brands to appeal to different marketsegments, in Asda’s case their supermarkets offer essential grocery items atlow prices under the ‘smart price’ label, standard products with and the moreexpensive products under the ‘Extra special’ label, the logos and packaging foreach of these labels are designed to be compatible with their price levels. 5 FORCESCOMPETITIVE RIVALRY: The retail industry in UK is highlycompetitive as there are so many players involved which gives a very toughcompetition to the existing players and the new entrant’s also. Asda has maincompetition with Tesco, Morrison, and Sainsburys each of these are working todifferentiate itself from others in order to become the market leader andcapture a large market share. The intensity of the rivalry between competitors Asdaand Sainsburys is extremely important, Sainsbury’s returned to achieving the secondlargest market share in 2012 with 35 consecutive quarters of scales growth,overtaking Asda which had taken this position for several years (Withnall,2013), despite Sainsbury’s selling higher-priced products on average than Asda.Sainsburys success in this respect may have been as a result of its differentiationstrategy and stronger brand image, whereas Asda had adopted a cost leadershipstrategy, in line with Walmart- Asda’s parent company. The different marketersof these organizations are launching new strategies different from others inorder to beat the competition.
Each organization in the retail industrydifferentiates itself from others by product differentiation, differentstrategies, lower priced products, different offers and schemes, attractingpromotional activities and satisfying the customers in the best and mostefficient manner so that the customers don’t switch to the rivals and be brandloyal to the organization only, and this was evident in this case. THREAT OF NEW ENTRANTS: The threat of new entrants isn’t ashigh as it is in other sectors due to Asda, Tesco, Sainsburys and Morrisonsalready being established players in the retail industry, dominating a largeshare of the market which makes it difficult for new entrants. To enter theindustry a newcomer would likely need a huge capital investment firstly andalso enough knowledge of the market to survive. POWER OF BUYERS: Customers are the integral part ofevery business.
Customers or the buyers in retail industry while purchasinggoods from different supermarket stores use their buying power decision fromwhich supermarket they should buy goods from, which provide them with the bestservices and which gives them maximum satisfaction. Asda provide theircustomers with low priced products, good quality, variety of products, goodcustomer services for which the buyer uses it power in shop from Asda in orderto satisfy their needs. POWER OF SUPPLIERS: Every organization should have afruitful relationship with the suppliers in order to survive and beat thecompetition. The retailer should have suppliers supporting them in order tohave the goods on time and can have the demand and supply cycle working for theconsumers. Asda has more than 500 suppliers working for them which is providingdifferent goods to Asda and then making it possible to satisfy the customers’ demandsat Asda stores. The supplier has the power whether to provide the goods to theretailer or not and they can switch to the rivals if an better price is givento them.
THREAT OF SUBSTITUTE PRODUCTS: In the grocery market there are sameproducts offered by different supermarkets what differentiates one from theother is price, quality, services and the brand so for a single product thereare so many substitutes available in the market. In the other context we canalso look at the increasing competition from the convenience stores and offlicense shops which act as a substitute to Asda if a consumer want to purchasefew things give is also giving a tough completion to them.SWOT ANALYSIS Strengths:· Asdais an established brand name with strong social image.· Wellknown for its memorable marketing campaigns· Hasa strong online presence and use this to be in constant contact with itscustomers via social networking, they consistently engage with consumers viaquestionnaires, competitions and things of that nature· Majoremployer in UK markets thus it has a major pool of talented and experiencedwork force. Has over140,000 employees working at over 500 stores.
Weaknesses:· Incomparison to its competitors ASDA has low market penetration.· Limitedglobal presence as compared to few other competitors· Whererivals such as Tesco have smaller versions of their superstores (Tesco express,metro etc.) Asda haven’t got something to compete with this.
Opportunities: · Asdacan widen its product range especially non-food retail.· Venturinginto markets that are growing such as India and China.Threats:· AMajor threat to Asda is from its competitors especially Tesco mainly being the threatof substitute products available through the competitor stores at lower prices.· Asda’smain market remains in the UK so a drastic change in the UK economy could bedetrimental· Thereis a pressure to maintain low prices, which can be difficult to maintain for aretailer the size of Asda LIDLA determining factor in our futuresuccess will be our values of respect, recognition, responsibility, and trust.These “value pillars” define who we are and how we are going to reach ourgoals. LidlStiftung & Co.
KG is a German global discount supermarket chain, based inNeckarsulm, Germany. Lidl’s history begins in the 1930s, when their first storewas created in Germany acting as a grocery wholesaler. Lidl first opened in theUK in 1994 and has grown rapidly in the 23 years since, they now have over 650stores and 10 distribution centres across Great Britain. The fact that Lidlonly expanded out of Germany 23 years ago makes the number of stores they havein operation even more astounding.
The sheer speed of their expansion has madeLidl one of the most feared competitors in the market.Product: The productssold in Lidl aren’t dissimilar to the products sold in leading supermarketslike Asda, however they are sold under different brand names in Lidl stores.Very solidbrand name from being one of the cheapest supermarket retailers in theindustry. Their main competition as a value supermarket is Aldi (Bosshart,2006).Consumerscould have a negative perception of the quality of Lidl’s products as they aresold for such a cheap price (Siro, et al., 2008).
Price:The term ‘value’often associated with low prices, as illustrated by the description of low pricedclothing stores such as Lidl as ‘value retainers’. However, value is dependenton other elements of the marketing mix, rather than pricing alone. A productwith a relatively high price can therefore still be considered good value by aconsumer if it serves its purpose well and possesses attributes which are notpresent in cheaper products in the same category. As a result of this consumersdo not always perceive the lowest-priced product as being the best value. Productswith expensive prices may be viewed by consumers as high-quality products,whereas lower prices can be viewed as indicators of poor quality, but this isnot necessarily the case at all.One of thekey competitive advantages for Lidl is their clever pricing strategies.
Lidlentered the market on the basis of being one of the most value-drivensupermarkets in the industry (Dolgui & Proth, 2010). Place:Lidl havenumerous stores across the UK and Europe. However, depending on the country,they operate in different segments of the supermarket industry, ranging fromvalue to high-end goods (Butler, 2014).Lidl tend tobuild in deprived areas where cheap food is more necessary. They sellreasonable food that appeal to all incomes. Promotion:Lidl havefaith in their pricing model and believe that their low prices alone are enoughto attract customers and for this reason they don’t have any loyalty schemessimilar to the likes of Asda.
For this same reason they don’t offer discountsas highly as some of the other major retailers due to their prices being so lowalready.SWOT Strengths: · Lidlhave a formidable structure which allows them to sell their products so cheaply· Theyhave plenty of stores amassed in a very short time across the UK and Europewhich gives them a great amount of exposure.· Lidlhave a strong online presence that keeps consumers in the loop about productsand any deals they have.
· Theprices give more of a ‘For the people’ feel to the brand.Weaknesses:· Comparedto the likes of Asda and Tesco they have a low market share.· Theirproducts being so cheap can hinder them at times due to the stigma amongstconsumers of low-priced products being seen as low quality.Opportunities:· Potentialto expand in the UK and acquire a higher share of the UK grocery market.· Successfullyexpanding abroad can provide more funds to invest in the UK.Threats:· Aldibecoming the dominant discount grocery retailer.
The rise of Aldi is a seriousthreat, as Aldi follows a similar model to Lidl.· IfLidl were to engage with a price war with other major grocery retailers thenthey could force competitor’s prices down.· Internationalexpansion of other global brands would cause more competition. Positioning Positioning is the act of designingthe company’s offering and image so that they occupy a meaningful and distinctcompetitive position in the target customers’ minds.
(Kotler, 1997) Customersegmentation is when a customer base is divided into groups or segments thatare similar in certain ways, e.g. gender age, how they spend their money andinterests. During segmentation, it is important to specify the specific wantsor needs of each individual segment. Companies that use customer segmentationrecognise every customer is different and that it would be much more useful totarget specific groups with messages that are relevant specifically to themtheir marketing efforts would be better served if they target specific, smallergroups with messages that those consumers would find relevant and lead them tobuy something, by doing this companies intend on increasing market efficiency.They also hope to grasp a more detailed understanding of their customer’spreferences and needs.
The four main methods used to segment markets are:demographic, geographic, psychographic and behavioural.Retailpositioning aims to provide competitive advantage by differentiating theretailer from its competitors through a retail offering that appeals to and isreadily identifiable by its specific target markets. This process involves identifyingpotential customers by breaking the consumer population down into groups bysuch characteristics as gender, age, income, geographic location, and lifestyle.However, each group must be sufficiently large and within broad categories foreach characteristic so that the retailer targets meaningful customer groups. Theessential principle of competitive positioning is that it is concerned with howcustomers in different parts of the market perceive the competing companies ,products/services or brands.
Each firmcan reduce he competition it faces by positioning its products for sale tomarket segments which other firms cannot attract so successfully (Sheaff,2002).The retailerneeds to identify the type of consumers at which it targets its merchandise. Thisenables the company to establish the target customers’ needs and wants and tooffer merchandise at suitable prices and locations to meet these needs. Retailerscan adopt a mass marketing approach, aiming at a broad range of customercategories, or target a smaller niche of customers. The main type of customertargeted by a retailer is referred to as the ‘core customer’ and they form thelargest proportion, if not most of the company’s clientele. They can bespecified in market segments by demographic characteristics such as age groupor by aspects of their lifestyle. The retailer will also probably attractcustomers in other categories, e.g.
those who are older or younger than thecore customer’s age. After identifying the most suitable market segments totarget, retailers can then decide on how they would like their market positionin comparison to competitors, a process known as Segmentation, Targeting,Positioning (STP).Low servicestrategies have been particularly successful in some sectors during the economicdownturn and recession of the late 2000’s.
In Lidl’s case, they have madesignificant inroads into Tesco’s market leadership during the toughest of the economicconditions. While high service strategies at Sainsbury’s and Waitrose have enhancedtheir competitive position, low service and very low strategies at Lidl havealso been effective (Piercy et al.,2010) StrategyI believethat Lidl has enormous potential and that is shown by it’s rapid rate of growthIn such a short space of time, but that being said Lidl does have some learningto do in a business sense from Asda. That’s not to say Lidl’s business model isfailing but it is more to suggest alternative ways of going about things whencompeting with the likes of Asda and pages they can take out the book of thesebig players.
One thingthat makes Asda so successful is how memorable some of their marketingcampaigns have been, the marketing strategy of ASDA is successful especiallyinspiring the customers through their lower prices strategy. Whilst Lidl alsohave a low pricing strategy they place too much faith in it and have nothing tofall back on, they believe that the low prices are enough to incentivise consumers,I don’t think that they should be so reliant on only that, Asda is constantlyoffering promotions and memorable offers to attract customersOne exampleof this is their two-price guarantee offer, in the retail industry each of thesupermarket claims to be the cheapest as a promotional strategy but now Asdalaunched the price guarantee offer for its customers in which Asda will payback the amount with a penny extra if it fails to claim the cheapest all aroundsupermarket. Asda employees has teamed up and launched mysupermarket.co.ukwhere consumers shopping from Asda can type their receipt and can easilycompare their difference in prices with Tesco, Sainsbury and Morrison’s and ifAsda fails to be the cheapest then consumers will get a printable voucher andplus a pence and voucher can be redeemed at Asda stores.
This is somethingwhich could’ve been utilised perfectly by Lidl especially considering onaverage Lidls prices are in fact lower than Asda’s, as well as brought somerecognition amongst consumers to Lidl. More innovation and fresh ideas areneeded by Lidl to catch Asda, they can’t do it on price alone.