Swot Analysis of the External Environment of Asda Wal-Mart

No business can operate in isolation. All businesses operate in the wider business environment, which is described as ‘the external context in which organisations find themselves undertaking their activities’ [ (Capon, 2000, p. 8) ]. This essay will use the stakeholder model to examine the external factors effecting Asda Wal-Mart. It is recognised that there are many internal stakeholders this essay will concentrate on the external stakeholders. A stakeholder diagram will firstly illustrate the relevant stakeholder which will then be mapped onto a stakeholder matrix showing their power and influence using the model described Capon [ (cited in OU, 2009, p. 33) ].

The case study shows the following stakeholders in the external environment.

High Power / High InterestCustomers| High Power / Low Interest| Low Power / High InterestCompetitorsSuppliers| Low Power / Low InterestCommunities|

High Power / High Interest

Customers are a powerful stakeholder group as indicated in the case study. Wal-Mart is the largest retail chain in the world, and the second biggest supermarket chain in the UK. The retail industry is heavily customer focused and as such Asda Wal-Mart should closely consider the needs of its customers. This is shown by the fall in market share in 2005 when competitors will have offered customers a better reason to shop with them rather than Asda.

Low Power / High Interest

Competitors while unable to exert much power over Wal-Mart have a high degree of interest in them. The case study indicates that Asda concentrates on building market share on the back of low prices, any competitor in the low price segment of the market would have a high degree of interest in Asda. The rise in sales growth in non-food lines of 25% also shows that other retailers, not just supermarkets should also be interested in Asda Wal-Mart. Competitors could use their buying power to influence Asdas suppliers but there is little evidence of this in the case study. Competitors should also be interested in Wal-Mart due to history of buy-outs and joint ventures as well as the claim of Asda being the most affordable supermarket in the UK.

The items Asda Wal-Mart sells can be sourced from many different suppliers, which would indicate that suppliers compete with themselves and as such are not in a high influence position. The case study shows that Asda is able to leverage the huge buying power of Wal-Mart to source items as prices not matched in the UK market. This is also shown in the fact that Wal-Marts trade with China outstrips that of the UK.

Low Power / Low Interest

Communities are not immune to the Asda Wal-Mart effect. The case study highlights that while welcomed by some, they heavily affect others in a community. This has lead to smaller competitors being driven out of business causing some communities to have to travel greater distances to shop.

Conclusion

The case study shows that while there are many external stakeholders customers have the highest power and interest out of the external stakeholders. Asda Wal-Mart must pay particular interest in this group if they are to continue to maintain or grow their market share within the UK.

References

Open University (2009) Analysing Business Cases: Resource Book 1, The Open University, Milton Keynes

Capon, Claire (2000) Understanding Organisational Context, Financial Times/ Prentice Hall.