In the nascent global economy e-commerce has moved progressively to become a necessary constituent of business strategy and a strong cause for economic development. The incorporation of information and communications technology (ICT) in business has radically changed relationships within organisations and those between and among organisations and individuals. The use of ICT in business has specifically increased productivity, inspired greater customer participation, and enabled mass customization, besides reducing costs.
The advancements in Internet and web-based technologies, distinctions between conventional markets and the global electronic marketplace-such as business capital size, among others are steadily being contracted down. The name of the game is strategic positioning, the ability of a company to determine evolving opportunities and utilize the necessary human capital skills (such as intellectual resources) to make the most of these opportunities through an e-business strategy that is simple, workable and executable within the circumstance of a global information environment and new economic environment. With its effect of levelling the playing field, e-commerce linked with the proper strategy and policy approach enables revenue increase from sales as well as significantly decrease costs through greater efficiencies of operation.
E-commerce diverges from the traditional sphere of business by speeding up the business activities and giving a totally new dimension and definition to business. How those this relate to the company’s perspective?
Using ASDA as a case study and with further research, this report looks at why and how an organisation adopts and implement e-commerce as a form of business strategy and also how it has helped maintain that competitive advantage over rival companies.
Introduction
The company which we choose is ASDA. ASDA Group Ltd. operates as one of the largest food retailers in the United Kingdom. The company’s stores sell a wide variety of merchandise including food and apparel, along with house wares, music, videos, and books. They also have their own mobile network which called ASDA Mobile.
ASDA Stores Limited was founded as Associated Dairies & Farm Stores Limited in 1949 in Leeds, West Yorkshire. ASDA is an abbreviation of two merger of the Asquith chain of three supermarkets and Associated Dairies and this name was adopted in 1965. [1]
ASDA became a subsidiary of the American retail giant Wal-Mart, the world’s largest retailer,[2] in 1999.[3] Under its new parent’s guidance, ASDA has been adding pharmacies, opticians, jewellery, and photo departments to its stores. ASDA is the second largest chain in the UK after Tesco,[4] having overtaken Sainsbury’s in 2003. ASDA is Wal-Mart’s largest non-U.S. subsidiary, accounting for almost half of the company’s international sales.
Key Dates [5]:
1920: J.W. Hindell creates Hindell’s Dairy Farmers Ltd.
1949: Associated Dairies and Farm Stores Ltd. becomes a public company.
1965: ASDA Stores Ltd., a food stores subsidiary, is created.
1985: MFI is acquired.
1987: Associated Fresh Foods is sold; MFI is sold in the largest management buyout in British history.
1989: ASDA buys 62 Gateway superstores.
1999: Wal-Mart Stores Inc. acquires ASDA.
2003: The company becomes the second largest food retailer in the United Kingdom.
We have six members in this report group and the leader made the plan of research. We discussed and finally choose this topic: “The Use of E-Commerce to Support Business Strategy”. In our group, the first step was to identify which company we will research, then communicate with the strategy manager of this company. The second step was based on the business situation of this company to interview the strategy manager and ask some relevant questions about e-commerce implementation as well as the business strategy of the company. Before the interview we prepared about twenty questions for this topic. In this whole survey we sourced for numerous and credible information from the internet such as the background of the company which we choose and its current business strategy. When we finished the survey, we analyzed the data and thought about the reasons why they choose the way they did and whether there are still some aspects that need to be improved.
The growth of the internet is rapidly changing and is facilitating the way of doing business. It has in many ways given rise to an innovation labelled E-commerce.
“Electronic commerce, commonly known as (electronic marketing) e-commerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks.” [6]
E-commerce has become an avenue for organisation to advertise their company, manage consumer enquires and market their products. E-Commerce may be involved in the design, finance, production, marketing, inventory, distribution, and service aspects of a business’ activities. As such, the use of e-commerce by a firm has the potential to both increase revenues from sales as well as significantly decrease costs through greater efficiencies of operation.
E-Commerce activities generally are classified as business to business (B2B), business to consumer (B2C) or consumer to consumer (C2C). Business to business e-commerce involves using the Internet to facilitate supply-chain operations and include electronic data interchange (EDI), electronic funds transfer, electronic forms and messaging, and shared databases. Business to consumer ecommerce uses the Internet as a retail market channel and in the case of information, as a product or service delivery channel.
ASDA doing the business in B2C on their web site, there are thousands of goods are on show. You can watch the pictures and see the details of the goods, also you can buy goods on the internet, and then ASDA will deliver them to your home.
Johnson and Scholes define strategy as follows:
“Strategy is the direction and scope of an organisation over the long term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations”.[7]
In other words, business strategy is to make company adapt business environment and challenges of competition, in order to survive and continued development in long-term planning.
On the internet, it is easy to gather information, so the company collect the customers’ needs, queries and behaviours by E-commerce. Then put all the data into data warehouse, and output the results to support business manager to make strategy.
This Chapter includes three parts; there are Financial, ASDA’s band – Smart Price and ASDA Mobile. ASDA, the British supermarket, retails food, toys, clothing and general merchandise from its 346 UK stores. Having overtaken Sainsbury’s in 2003, ASDA became the second largest chain in the UK after Tesco. [8]
Therefore, the ASDA have own band, ASDA Smart Price, ASDA Smart Price products are usually the lowest price option in a product category in ASDA stores. For example, a box of Smart price cat food costs 70 pence while the equivalent ASDA brand cat food costs 1.70 pounds and well known name brand alternatives cost from 2.4 pounds upwards.
ASDA Mobile is a mobile virtual network operator (MVNO) in the UK, operated by ASDA, using the Vodafone UK network. ASDA mobile was launch in April 2007. As of 21 August 2007, ASDA mobile was available in 237 stores across the UK. There are many phones available on ASDA Direct, although ASDA do not sell all of them on the ASDA Mobile network. It has 99% UK coverage and coverage in over 200 countries around the world. [9] You can top-up ASDA mobile phone at any ASDA store and at more than 85,000 places where you see the top-up logo. [10] With ASDA Mobile, you will probably find yourself topping up a little less often than other people do, but whenever you need to, it really could not be easier. If you want to join ASDA mobile services, but, you do not want to lose your old mobile phone number where from other network, [11] you can keep you old mobile phone number in ASDA mobile network, just need three steps, you can keep you old mobile phone number in ASDA network.
ASDA Financial Services includes Credit Cards, Loans and saving. ASDA Credit Card have many benefit in ASDA store, there are Earn up to £50 in ASDA vouchers each year, 5% discount at ASDA Living stores and Free home shopping delivery. The Loans include Personal Loans. Last, the saving includes Youngster Bond Extra, [12] the plan is available for all children, but especially those who aren’t eligible for the Child Trust Fund.
ASDA’s food trading strategy looks for offer a wide range in food categories. It is not like their competitors that insist on larger pack sizes. ASDA’s main food trading strategy is based on price which offering the best value to customers. ASDA has a policy called ‘EDLP’ (Every Day Low Price), the key features are in the followings:
Stable Pricing: ASDA is consistent in low prices rather than promotions. So they could give the customer confidence that they do not need to ‘shop around’ to get the best prices.
Volume Stability: Lack of promotional activity makes ASDA to avoid high volume swings. Then they have more accurate forecasting and stockholding, more efficient and cost effective supply chain.
10-15% Cheaper: ASDA aims to offer a shopping basket which is 10-15% lower than the key competitors.
Simplified depth of Range: leading to a reduction in SKU’s. [13]
ASDA has a specialist local sourcing team that focus on satisfies the tastes and needs of local consumers. ASDA’s local sourcing strategy is to work closely with suppliers and has the following commitments to them:
three/six months on shelf commitment (unless otherwise agreed)
direct deliveries to stores or the most appropriate and cost effective method for both parties
will consider minimum orders and order frequency
easy ordering via fax or EDI
will advise on electronic ordering, marketing and technical issues
local marketing support with ASDA local branding – “Best of…”
working together with regional food groups.
payment terms to suit all
easy to follow processes
Training day at ASDA House or Regional Depot. [14]
A Local Supplier is usually set up to supply 1 to 10 stores in a relevant location, and if successful will be set up more stores. Currently ASDA deals with about 350 Scottish Suppliers with sales of £100m in 2005. ASDA said that its Local Supplier business grew by 55% in 2005. ASDA operates 38 stores in Scotland with a further 5 opening in 2006. [15]
ASDA’s target consumer is located in lower socio-economic groups. Middle income group has a gradual increase because ASDA launch of extra special range and increasing breadth of range, furthermore, there are new stores opening and some stores have regenerated.
ASDA’s consumer is commonly younger than average and 34% of consumers come from families with four or more people. So they are mainly affected by price, distance and larger pack sizes aimed at families. ASDA’s average customer spend at £31.42 is above the average of £27.10 for the market as a whole. [13]
ASDA’s aim is to provide a simple offer in ranging with orderly categories and ordinary ranges. ASDA carries a large number of categories and needs to drive efficient use of space across categories and within product groups. Larger family shoppers look for bigger pack sizes. Expand the brand’s appeal needs large numbers of own brand ranges. ASDA try to offer customers a choice of “Good, Better, Best” in each category, and has created range architecture to support this:
Smartprice: The standard entry-level products in each category are sold under the Smartprice label. Smartprice covers over 640 lines in both food and non-food. ASDA is positioning the Smartprice brand against the value/economy offerings of competitors, and claims that this range will never be beaten on price, even by the hard discounters. This positioning is not at the expense of quality however, with ASDA’s policy of ensuring all products in the range being consistently the comparative best in the market.
ASDA Brand: ASDA has a core own label range of over 8,000 products positioned to match or better manufacturers’ brands and competitors’ own label products. These lines are sold at a significant discount to manufacturers’ branded products.
Extra Special: ASDA’s premium range is aimed at offering the best quality food on the market. It consists of about 500 lines including a number of selected fresh and ambient food categories. Strong packaging with high production values positions these ranges as luxuries.
Organic: The Organic own label was created to cater for one of the fastest growing markets in the UK. It consists of over 100 lines developed to be great tasting and to offer great value. The Organic range aims to provide a complete range of organic foods to suit all needs and occasions, at a price affordable to the everyday shopper. All Organic own label food and drink must meet UKROFS standards (UK Register of Organic Food Standards) as a minimum with on-going focus to achieve IFOAM (International Federation of Organic Agriculture Movements) standards. The aim is to source from Britain wherever viable.
Good for you: Aimed at meeting consumers’ health needs, particularly those looking for lower fat foods, this expanding range currently consists of 230 lines. Calorie, fat and salt levels are clearly indicated on the packaging, which carries a standard logo and branding across the range. All ‘Good for you’ products have been developed to meet strict criteria on fat, saturated fat, salt and sugar contents for a healthier offer whilst avoiding any compromise on taste.
Great Stuff: This is a replacement for two of ASDA’s children focused sub-brands – More for Kids and Garden Gang. The new range comprises approximately 70 products, and the range extends beyond just food and drink lines. Great Stuff carries the strap line ‘Taste-tested by kids, endorsed by ASDA nutritionists’. [13]
‘EDLP’ (Every Day Low Prices) is a pricing strategy implemented by ASDA. The main points are in the followings: First is the price 10-15% lowers than competitors. Secondly, ASDA consistently low prices on a wide range of categories. Thirdly, ASDA generally have very few short term promotions. And then ASDA sticking to profit delivered through increased volumes rather than margin improvement.
In recent years ASDA has avoided ‘Buy one get one Free’ / Special Packs / Extra Value packs, however, the difficult trading conditions may see this trend reversed. Anyway, rollback is the main way of price communication used by ASDA. [16]
In ASDA supermarket, there are so many information get from the customer, so that those information need to classify. So in this report will use Information Classification model. There are three kinds of information, strategic information, tactical information and operational information undertake for strategic managers, tactical managers and operational managers respectively. Operational information is detailed information collect by low position employees. Tactical manager will monitor what the position employees do and give tactical information as brief conclusion to the strategic manager to make business strategy. Below is Information Classification model:
Source from: Middlesex University School of Engineering and Information Sciences BIS3324 PPT p4
Also, SWOT analysis will use in ASDA’s business analysis. SWOT analysis is a kind of analysis to protect business away from risk. There are four elements in this analysis, Strengths, Weaknesses, Opportunities and Threats. Strengths are current business strengths of company, weaknesses are the weak points in company’s business, opportunities are the market that company want to extend and threats are what factor will be dangerous to company.
Furthermore, ASDA’s customers’ e-mail survey is using the competitive Intelligence model. There is competitive Intelligence process below.
Source from: Middlesex University School of Engineering and Information Sciences BIS3324 PPT p6.
ASDA uses two main approaches of e-commerce to support its business strategy; they are E-mail survey and online shopping.
In E-mail survey, ASDA would like to introduce products which can be provided from Far East area suppliers through sending E-mail to its customers, which is one of the world’s retail initiatives. There are many different kinds of product pictures in the E-mail, and the customers can reply the E-mail, tell which products they like to ASDA and provide their suggestions for products’ prices and types according to their minds. ASDA stores and choice depends largely on customer feedback. For example, ASDA purchases products for Christmas, at the same time, ASDA sends E-mail about some Christmas gift pictures to its customers, in order to know which types and which price level of Christmas products can satisfy more customers. It helps ASDA to know what products can attract its customers, and more easily to purchase right products from its suppliers which can meet customers’ needs. It creates a precondition for ASDA to provide customer satisfaction of products.
ASDA wants to enhance its ability through collecting data information from the E-mail survey, and welcome its customers to take part in its company’s activities. The approach of sending E-mail to customers can enhance ASDA’s ability of satisfying its customers, because the E-mail survey is more easily to conclude what products customers like and which price of products they prefer through describing and analyzing the data got from the E-mail reply. The statistics of data from the E-mail reply is helpful for ASDA to get some useful information about customers’ demand, and understand their views. As an example, ASDA would like to send E-mails includes a lot of product pictures to its 18,000 customers, which is as a customer review organization, also known as Pulse of the Nation. The organization is regularly on a number of matters about products’ prices and types into question. That is a good way of ASDA doing promotion and improving its business strategy, for example, ASDA setting price can be based on its customers’ suggestions, so that customers can get a reasonable and satisfied price when shopping in ASDA. Also, the low price strategy can be spread well by the E-mail survey. Thus, E-mail helps ASDA not only implement its business strategy, but also continue to improve it. Also, it is more easily to satisfy customers’ needs.
In online shopping, ADSA have a web-based goods sale system. This is the website address of ASDA’s online shopping http://www.asda.co.uk/. There are a stable number of products with beautiful pictures, price and introduction provided to customers to choose, for example, food, furniture, toys, electrical and so on. Any products have about 10-15% discount special listed in an obvious side on the website to sell which is helpful for ASDA to sell its low price but with good quality products, promote its business strategy and attract a large amount of customers; also, it is good for customers to easily choose low price and good quality products. Online shopping help ASDA to sell its low-cost strategy and increase market share.
The customers can get some latest information about the ASDA store which is the nearest to their home from the website, for example, which types of products have special offer. It provides a lot of convenience for customers. There is no need to always to go to ASDA store to get information, just stay at home, the customers can easily achieve these ASDA latest information through logging in the website.
Grocery shopping delivered to their door. It not only provides a lot of convenience for customers, but also is a good way of showing ASDA’s satisfied service. Online shopping is useful for ASDA to support its business strategy. There is no need to go outside, the customers only stay at home, click the button, and wait for the ASDA staff deliver the products which they have chose from the website. It helps the customers save a lot of time, especially, some customers who are busy working.
ASDA manager will classify information from the customers through the E-mail survey. ASDA have three kinds of managers, they are strategic managers, tactical managers and operational managers. Firstly, operational manager of ASDA will process the information from the e-mail survey of the customer. In this phase, customer’s e-mail survey information is kind of detailed information at beginning and will be collected by operational manager. Also, this information data will make up statistical tables and graphs or pie charts. At the same time, tactical managers of ASDA will monitor the progress of implementation that transform customer’s e-mail survey information into graphs or pie charts. What’s more the ASDA tactical manager will give a simple analysis of this graph, shows what kinds of product that customer need and reasonable prices of product the customer wants, then give their suggestions. After that they will submit this information to strategic managers. By following, strategic managers will consider which suppliers have suitable products in the reasonable prices. In this situation, in order to keep future business success in market, they will deliver business strategy of suppliers choosing for next two or three years, also they can change their minds very flexible at moment.
ASDA as a third large supermarket in UK, its strengths are low price sale of products, such as any products have about 10-15% discount. It is real lower price sales than other UK supermarkets do. Weaknesses are no club card for customers so that lose some kind of housewives who like to get points from buying things then can exchange to some small gifts. Opportunities of ASDA are to enhance its market share online sale. For example, ASDA company’s food online sales already covered 75% of all households since February 2008, but the coverage of online sales will be expanded in 2009 to 95%.[17] At last, threats of ASDA is its main competitor the supermarket Tesco, Tesco is second large supermarket in UK before ASDA, always Tesco will have price war with ASDA.
Most businesses use e-commerce because it provides the opportunity for increased profits through higher sales or lower costs and thus increased sustainability of the firm. E-Commerce has the potential to significantly improve the efficiency of operations in all phases of the business’ supply chain. Some of the benefits of e-commerce are summarised below.
E-Commerce provides cost effective opportunities for expanding and targeting markets, and business organisations which adopts e-commerce maintain websites designed to promote the companies’ products or services.
The availability of e-commerce and supportive computer software systems and services enables a company to investigate new areas of business (products and customers) by offering interactive websites for their dealers such that they can download company marketing information yet customize the materials for the dealer’s specific needs (e.g., items on sale and location and date of sale)and as such, each dealer can have easy access to professionally designed marketing materials with dealer specific details.
Business profits can be improved by increasing revenue through stronger sales and/ or by reducing the costs related with incessant sales. The use of e-commerce also assists in cutting selling costs among firms by reducing the need for paper catalogs and sales flyers.
Customer services can be provided before the sale by making it easy for customers to find what they want or after the sale in terms of handling order returns, repairs, or operational questions. The company website can be helpful in providing both before- and after-sale services.
For many businesses, an e-commerce site provides a way to maintain and even strengthen customer relationships. Through targeted marketing push strategies, businesses can reach out to customers even when they are no longer in the area. In other words, a company may decide to change its location but its web site is still accessible.
Using ASDA as a case study, as well as further research on a diverse collection of business organisations with various levels of experiences regarding e-commerce, interesting insights into the use of e-commerce to support business strategy was gained, all of which is summarised below.
Consumers increasingly depend on the Internet for information, and a website is a relatively inexpensive way to present information on a business’ sales, products, hours, location and phone number. Also, a well designed website can provide potential customers with an image of a business that exceeds the business’ actual physical presence.
Vast variety of programs and services are readily available locally and on the Internet to help companies with their e-commerce. Services present include website design and hosting; software systems for incorporating e-commerce with accounting, shipping, and inventory management; and business analytics software to provide data and statistical analysis on the company’s e-commerce activity. These services can be valuable in identifying a niche market, getting across to customers in that market, and developing an effective production and distribution system for serving customers.
The innovation of e-commerce may result in a substantial appreciation in sales, and the business must be prepared to meet this demand or the e-commerce window of opportunity may be lost. A typical Internet customer expects immediate and accurate responses to their online orders. The timely delivery of goods and services coherent with the quality perceptions of customers is vital to cultivating repeat customers, word-of-mouth advertising, and favourable online reviews. Furthermore, the business can somewhat manage the rate of increasing product sales by limiting web-based promotions to targeted geographic areas or specific customer profiles.
E-commerce maintains the promise and challenge of touching every part of a business’ operation from product design and production to distribution and service delivery. Businesses using or considering e-commerce should investigate the potential roles for e-commerce in all aspects of the businesses’ operations. Businesses with e-commerce activities may reap hugely by using the information provided through e-commerce (e.g. customer characteristics, location, and order size and regularity) to boost efficiencies in other areas of operation. For instance, online sales may create the opportunity for direct delivery to customers and reduce direct reliance on wholesalers. Furthermore, Internet marketing may attract customers from parts of the world not previously served by the company. Cultural differences between buyers and sellers might present unforeseen challenges; thus, understanding and planning for transactions with foreign customers will enhance the benefits from these opportunities.
E-Commerce is much more than maintaining an informational website. E-commerce related components and services may add more to the firm’s costs than they contribute to profits. In other words, e-commerce may not be a profit maximizing business strategy for a firm if the cost of implementing e-commerce exceeds the increase in net revenues or decrease in operating and marketing costs credited to e-commerce.
In summary, the most important issue to the organisation is that e-commerce guarantees a laudable return on investment. It is an awesome business strategy to keep note of resources dedicated to e-commerce implementation and the rewards in terms of increased sales and reduced cost, assigned to e-commerce strategies. If a business realises a poor return on investment after spending so much time and money on e-commerce, then it can be said that e-commerce as currently used is not a good business strategy for the organisation. In such scenario, the organisation will have to opt out from e-commerce completely.
E-commerce some what defines the way a business organisation handles business transactions. ASDA uses e-commerce to reduce their market costs, increase sales, enhance management and distribution, improve delivery of service and maintain fantastic customer relation. E-commerce exists as an essential constituent of a company’s business strategy. It is thought to be advantageous to a company’s gain and sustainability. It is just not an add on activity, it has the ability to significantly influence strongly a company’s financial transactions; having to do with the execution of trades and keeping customer records and as such, company’s should have a well laid plan regarding resources to entertain new markets and customers. In general, the gains of e-commerce to business are increased if the company effectively manage and maintain an up-to-date e-commerce program as well as the integration of such program to its business plan. Most importantly, e-commerce must be seen as an integral part of a company’s business plan.
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