In the current timwes, every organization focuses on reducing operational risk with the motive to improve overall performance and profitability of company. This report is based on PESTLE analysis of Asda that determine external enviorment’s risks impacting its operation. Asda is one of the leading retailer company in UK which aim at providing high quality goods to its customer. Market share of Asda is 14.3% and total revenue earned during 2023 leads to £5.4 billion (Market share of Asda, 2023). Company is operating in highly competitive market that made it necessary company to invest in marketing strategies. This report will discuss on the simulation games and reflection will be provided on the operational challenges faced by company.
Reflection on process in simulation and various operational challenges
Simulation in management is the model that is used for determining the effectiveness of particular decision. This involve creating an artificial environment in which various decision are tested that enable managers in deciding on potential outcome of particular decision. Operational challenges are related to issues which results in increasing in waste and reduction in profitability of company. Gibbs’ reflection model will be used to share my experience and learning from process of simulation (Gibbs Reflective model, 2020). During first round of simulation I was asked to allocate appropriate budget to each department of Asda, identifying need of labor, determining resources, identifying source of additional capital and forecasting demand for goods. For fulfilling all the duties I only focused on historical data of company and concentrated towards allocating funds according to previous year. All decision was taken on the basis of the historical data and focus was not paid towards current situation.
After 3 months it has been identified that there was reduction in profitability of firm and cost of organization has been increased. After detail analysis of policies and decision I have understood that my concept of taking decision on basis of historical data was not effective as this lack the current condition in market. This approach ignores the concept of time value of money that results in ineffective decision making process. During second round I have focused on making decision based on the steps and process which has been followed by competitors as it will help in getting better insight of the all relevant element associate with decision making process. I have allocated budget according to competitor without focuses on need and requirement of current company. This creates issue as other company had allocated high amount towards its manufacturing because company focuses on producing its own goods whereas ASDA focus towards acquiring final products. I was unable to identify the exact number and type of labor which are required for carry out the operation.
From the experience I have understood that for effective decision making process I should focuses on carrying out adequate research that assist in determining all the factors impacting particular firm. For allocating appropriate budget I focus on evaluating past budget and forecasting revenue which can be earned in upcoming year. After evaluating company’s data I have identified that company is incurring high amount on marketing through advertisement which is not providing results equivalent to investment. Company is not investing enough in research and development department that will helpful in determine exact need for product. Investment towards this department will support in Inventory control and reduce operational wastages. While allocating budget, I have allocated less amount on advertisement and focuses on investing on social media marketing by which awareness can be created among customer with less investment. I have allocated huge amount towards research and development that assists in determine changes in current market and helps in taking effective decision.
Earlier, I have estimated need of product based on previous year data and estimating 5% increase or decrease in demand according to season. This results in providing incorrect estimation as I ignore current trends and condition of market. For improving my decision I have conducted research and survey to determine needs and satisfaction of customer. This assists in determine the preference of individual and identifying loyalty of customer toward particular company. In first session I have taken decision based on historical which unable me in understanding level of employees satisfaction and their satisfaction related to job. This creates uncertainty of employees leaving job and increase in labor turnover rate (Kou et al, 2021). Profitability of company has been negatively impacted by this decision as Asda need to invest towards acquiring employees and providing training to them. In second round when I determine need on the basis of competitor, I ignore type of duties which should be done and not focused on existing number of employees in Firm.
After evaluating all aspects I have taken decision after identifying satisfaction level of employees which assist in determine turnover rate in company. If employees satisfaction level is not effective than it indicate that employees may leave job which will create risk for ASDA and results in creating operational challenges. So before taking any decision I have focused on conducting survey and interview with employees, identifying rate of absenteeism and determining employee’s net promoter score. After this I have divided total job on the basis of skilled and unskilled that assist in determining type of labor required. I have evaluated employees on the basis of their capabilities and focuses on allocating them work which is most suitable for them. For determining source of additional capital I have taken decision based on competitor’s preferences and historical data. In this session, I have ignore the total cost, risk, market condition, interest rate, inflation, tax rate before taking decision. For taking effective decision I have evaluated market condition and environment of ASDA that assists in choices best source.
It has been derived from research that country is having high tax rate which indicate that company should introduce debt in their capital structure. High inflation rate in country results in increase in interest rate that indicates company to raise capital through equity source (Li et al, 2022). From the simulation I have develop my skills regarding needs and importance of evaluating market before taking any decision. I have understood that quality of decision making can be improved by focusing on internal and external environment in which particular company is operating. My Planning and decision making skills have been enhanced by commencing this activity. Through this activity I have understood before taking secondary data, all information should be evaluated on the basis of objective, time, market condition and method by which it has been collected. I have taken decision based on previous year data and competitors’ information before evaluating them on various bases. It has developed my understanding regarding various operational challenges faced by company and measures through which it could be overcome.
PESTLE analysis of ASDA
Every company aims at determining business risk associated with the working of organization. This enables firm in taking necessary measures in advance that helps in mitigating the impact of particular risk. Pestle analysis is conducted to identify risk that are caused due to the external environment in which company is operating. PESTLE analysis of ASDA is as follows:
Political factors: Policies formed by UK government related to tax rate, employment and business operation impoact the working of company. It has been identified that minimum wage rate has been increased in UK which results into high cost of operation for company. Brexit results into introducing trade barrier for company that leads to creating challenges in international expansion (Fengyi, 2021). There is political instability in UK that results into continuous changes in the policies and create issue for company to cope up with changes.
Economic factors: UK is facing high inflation rate in country which result into increasing cost of living for people. This creates negative impact on the working of Asda as it results into reduction of sales. Interest rate on borrowing has been increased in UK that creates difficult for company in raising additional capital as it incur high cost (Sarstedt et al, 2019). Changes in exchange rate makes huge impact on the demand of product in domestic and international market. Furthermore, unemployemnt rate in the country has been increased by 1.3% that indicate reduction in net disposable income of people. Brexit in country impact trade agreement within different country and results in increased in price of imported goods. Asda needs to transport goods from one place to another which is negatively affected due to rise in the price of fuel.
Social Factors: Theres is continuous change in needs and prefernces of consumer that firm should take care for maintaining stablity in industry. Along with this, company should focus on selling products through online mode and need to concentrate twoards organic goods. Firm’s operations should be compile with sustainable and ethical policies that assist in attracting more customers. Changes in demographic of country will also negatively impact the working of Asda (Laining et al, 2021). There is an unequal distribution of income among population that impact demand for certain type of goods. Diverese cultural has been followed in UK so Asda needs to focus on investing towards research & development that assits in determining the type of goods that company should offer.
Technological factors: Traditional markets has been shifted to E-commerce that create need to invest in building online presence. Innovation has been done towards AI learning, machine learning, supply chain management and tracking systems. Asda should focus towrads investing in this technology that support in reducing cost and increasing efficiency for the company. Technology has been introduced for understanding customer behavior by collecting and anlalyzing data. More emphasis has paid on social media and digital marketing that assists in attracting more customer. Asda has invested towards introducing this technology in their operations that help in achieving goals effectively and efficiently. Need for cyber security has also been increased due to incraese in the usage of digital media and software in companies.
Environmental Factors: As Asda is dealing in grocery product, changes in climate condition creates obstacles in effective working. Climatic condition negatively impact agricultural of country and result into unavailability of certain product in stores. Concern towards sustainable activites has been increased by both consumer and government whih create pressure on company to decide on such activity. Asda has focused on sustainable act by reducing use of plastic and implementing waste managemnet system in its opeartions. Government has increased pressure on companies for reducing carbon footprints in their operation by introducing change in use of energy
Legal factors: This includes fulfilling and compiling with all laws and regulations of country. There is increase in minimum wage rate in country by £1.22 in current year that company should take care for effective working (John and Bhatnagar, 2019). This leads to increase in cost of operation and eventually results in decreasing in profits of company. Asda needs to compile with Food Safety Act 1990 that includes legislation related to safety and quality of food products. There are various laws related to waste diposal, usage of energy and packaging that concentrated towards sustainable development in country. There are large number of competitors in retail industry so company should focused on following competitior laws for ensure fair activites.
Conclusion
It has been concluded from report that simulation helps in enhancing quality of decision making and eventually results in imporving overall performance of company. It has been derived that process of simulation helps me in improving my skills of market research and enable me conducting effective survey. Skills regarding planning and allocating appropriate budget has been developed through this activites. It has been determined that there is political instability in the country which negatively impact working of ASDA. Brexit results in creating trade barrier, increase in tax rate and inflation rate in UK. There are various rules and laws which are formed by government that create obstacles in effective working.
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References
Books and Journals
Fengyi, Z., 2021. The Analysis of Asda-Sainsbury’s Merger/Acquisition. Journal of Finance Research, 5(1), pp.1-6.
John, I. and Bhatnagar, S., 2019, January. Efficient Budget Allocation and Task Assignment in Crowdsourcing. In Proceedings of the ACM India Joint International Conference on Data Science and Management of Data (pp. 318-321).
Kou, G., Xiao, H., Cao, M. and Lee, L.H., 2021. Optimal computing budget allocation for the vector evaluated genetic algorithm in multi-objective simulation optimization. Automatica, 129, p.109599.
Laining, A., Nawang, A., Sahrijanna, A., Masruri, M.H. and Syah, R., 2021. DIETARY ORGANIC MINERAL INFLUENCES THE GROWTH, FEED UTILIZATION AND VERTEBRAL MINERAL CONTENT OF WILD GOLDEN RABBITFISH, Siganus guttatus. Indonesian Aquaculture Journal, 16(1), pp.35-42.
Li, K., Acha, S., Sunny, N. and Shah, N., 2022. Strategic transport fleet analysis of heavy goods vehicle technology for net-zero targets. Energy Policy, 168, p.112988.
Sarstedt, M., Mooi, E., Sarstedt, M. and Mooi, E., 2019. The market research process. A Concise Guide to Market Research: The Process, Data, and Methods Using IBM SPSS Statistics, pp.11-24.
Online
Gibbs Reflective model. 2020. Online Available through :< https://www.ed.ac.uk/reflection/reflectors-toolkit/reflecting-on-experience/gibbs-reflective-cycle>
Market share of Asda. 2023. Online Available through:< https://www.statista.com/statistics/280208/grocery-market-share-in-the-united-kingdom-uk/>
