Global Marketing Assignment: Business Expansion of Asda in Thailand

Question

Task: For this report on global marketing assignment, you are required to research a multinational company. You are required to analyse the strategic activities and decisions of a multinational company of your choice to establish a subsidiary in an international location. Please note that the MNC must not have a presence established in your target international location and you will be required to demonstrate this as part of your report.

Your assignment should highlight, analyse and critically evaluate the following:

i. Reasons for parent company’s international expansion;
ii. Possible strategic choices available to the parent company;
iii. Reasons for choice of location for the subsidiary;
iv. Strategic methods of entry and the possible consequences;
v. The potential organisational and managerial problems for the subsidiary operating in the new international environment
vi. You should provide strategic advice for the subsidiary to overcome the problems highlighted in v.
The paper should be based on a thorough research of various types of data such as library sources, company documentation, web-based material, personal experience in a company and personal interviews if applicable. Appropriate academic theories and models should be employed wherever relevant.

Answer

Executive Summary
The current report on global marketing assignment has focused on analysing market data from head-quarter market of Asda along with the performance of Asda to justify the reasons for internationalisation using Porter’s Diamond model. It has also presented the strategy to internationalise the company and analyse the macro environment of Thailand in the retail industry to the relevance of expanding the business in this market along with selecting the mode of entry and potential problems followed by solutions to those issues.

Introduction
Global strategy revolves around completing tasks of covering three areas of developing strategies, including international, multinational, and global strategies. Primary reason for implying these strategies is to enable a company to reach the objectives and goals of expansion in the international market. However, the strategic approach does not forget or go beyond the strategies back in the home market. The morale, values, ethics, vision, and mission statement of a company remain the same even in internationalisation; however, it changes the aspects of communication and marketing as per the local cultural and social values. The report focuses on developing global strategies for Asda to expand its business in Thailand.

The organisation belongs to a Retail industry actor that was founded in the month of February 1949 in Wakefield, UK. The headquarter of the organisation is present in Leeds, England, UK. In 2019, the sales of the company were £22,899.2m while the amount was £22,916.5m in 2018. Therefore, the sales declined by 0.8% excluding fuel and Vat in that year. Along with that, operating profit of Asda was £584.2m. Currently, this organisation operates in more than 27 countries, including the UK and the United States under 63 different banners. At the same time, the company has more than 6,200 retail units in the international market under the strict supervision of CEO and President Judith McKenna. At present, around 145,000 employees are working for Asda with an operating income of £584.2 million. Hence, the selected market for expansion for Asda is Thailand as the market comes with a growth rate of 3% in the retail market with the largest market share of £41.44 billion.

Hence, the report utilises market data from head-quarter market of Asda along with the performance of Asda to justify the reasons for internationalisation using Porter’s Diamond model. Along with that, it is going to present the strategy to internationalise the company and analyse the macro environment of Thailand in the retail industry to the relevance of expanding the business in this market along with selecting the mode of entry and potential problems followed by solutions to those issues.

1. Reasons for Internationalisation and Porter’s Diamond
In 1985, Michael Porter introduced the theory of competitive advantages for the business organisations when it comes to developing strategies for the company to increase productivity growth. It is no different in the case of Asda as the company has potential to grow faster in other international markets as it is already working in more than 27 countries, including the home country. This UK-based company has the opportunity to improve the profitability in this industry as per the attractiveness of the sector based on the condition of the home market to evaluate the international success.

Factor conditions
Asda has earned competitive advantages to become the top online supermarket of UK in the fiscal year of 2020 that has helped the company to earn the title of 2020 Grocer Gold Awards. The crucial success factors that have helped the company to become successful in catering to customers by ensuring product branding, community programmes, strong emphasis on the needs of the stakeholders. Most importantly, the organisation has become successful in developing better relationships with the customers by having low cost products compared to its top competitors such as Marks and Spencer, Tesco, Macy’s and Next and John Lewis Partnership. Most importantly, the company has earned the support of stakeholders and suppliers through innovation, reputation, and values, purpose, and mission of the company.

Demand conditions
Structural shift of Asda to online shopping has helped the company to increase the sales by 5.1% in the fourth quarter of 2020 even after creating around 4500 job opportunities for employees.

Related and supporting industries
Supporting and related industries of Asda include the suppliers from UK dairy farmers and local people. This company follows the animal health and welfare standards in Asda through a clear farming policy by following the environmental and legal aspects of providing best services to the customers. For example, this company has focused on supporting the UK farmers by prioritising sales of domestic vegetables and grains along with British Chicken, Beef, and Pork. Applying groceries to the customers even at the height of the pandemic is the key concern of the organisation (Pruthiet al. 2018). Due to this reason, it is essential for the organisation to work on the factors such as increasing the volume of supporting UK produce by reducing food waste. This aspect can help the organization in expanding the business in the international market by supporting the local market to emphasise the sustainable approach of the company.

Firm strategy, structure, and rivalry
Combination of online and physical stores is the most crucial strategy of expanding business all over the world in Asda that has also helped the company in creating extra jobs at the verge of losing career due to pandemic that has helped the company in expanding ranges of new product through innovation. Expansion of the brand identity has impacted the competitive advantages of the company positively compared to its rival companies such as Morrisons, Waitrose and Partners, and Spinneys.

Chance
The events that affect the growth of the company randomly are known as chance events as per the Diamond Model of Porter; however, these aspects can also be converted into the opportunities as per the strategic approach along with managing the risks efficiently. For example, in the case of Asda, COVID-19 pandemic affected the growth of the physical stores; however, the company became successful in rearranging the entire business by working on shaping up the online strategies of business in the age of digitalisation.

Government
International competitiveness mostly depends on the laws, regulations, and the structural aspects of government when it comes to promoting the business approaches. In this case, the UK government has focused on the misshapening approaches of the companies in promoting the local suppliers (Abd et al. 2021). In the internationalisation of the retail sector, Asda has started to focus on utilising support from local farmers by following the laws and regulations regarding import and export in the business environment.

2. Strategy to Internationalise
2.1 Transnational Strategy
The new expansion of Asda in the international market of Thailand will include a transnational strategy that will help the company in meeting the local preferences along with maintaining balance with the global strategy of the company regarding the vision, mission, values, and ethics of the company. It is not possible for any organisation to gain competitive advantages in a business environment without having personalised strategies for any specific location regarding expansion of the business. From that aspect, the organisation will become successful in cutting the costs of decentralising the business on the basis of the centralised approach of creating different dimensions in the international strategies.

2.2 Justification
Primary reasons for selecting the strategy of business expansion in the global market include greater business opportunity by meeting localised demands and needs of the customers. Along with that, market penetration becomes better with the hands of lower cost strategies in the case of transnational strategy. Most importantly, Asda is well known for its low-cost products and services in both physical and online stores to help people to save more money that can help them to lead a better life. High responsiveness and high integration are crucial aspects of the transnational strategy of expanding business in the international market.

3. Country analysis

a) PESL analysis of Thailand

Table 1: PESL analysis of the new market
(Source: Created by author)

b) Porter’s Five Forces Analysis

Table 2: Porter’s five forces
(Source: Created by author)

c) Justification of selecting Thailand(concluding the framework)
Thailand will be helpful for this organisation in terms of providing a cost-efficient workforce that is adaptable and large with the highly efficient and hard-working employees. Along with that, proactive government policies and diverse aspects of the retail sector can help in continuing business. Most importantly, the welcoming and open economy of Thailand can help in improving the entire business with strong exports and steady growth. Most importantly, Thailand comes with world-class infrastructure that comes with international river ports, deep seaports, international airports, and modern city-wide mass transit. Along with that, an extensive highway system of fair and free trade in this country helps people to become motivated to run business.

4. Mode of entry
a) Selection of the mode of entrylinking to previous tasks
Partnering with local distributors and agents is the most efficient way to enter into the market of Thailand. Most importantly, reaching the potential buyers in Thailand is the most important aspect in completing business in this country that can be done through franchising the local brands. The agents will become successful in utilising their knowledge and experience in providing the best services and product to the customers through the better relationship with the government officials and key businesses in this country (Santamaria et al. 2018). Along with that, commercial sections can also help the company to work more efficiently in this country. Expanding the presence of Asda in the Thailand market can help in improving the business procedure along with increasing the revenue by using new and advanced technology. It has also been identified that the system of exporting and working with the local businesses can help the business management team of Asda to create balance in the work procedure.

b) Justification for the selected mode of entry
Exporting is a well-known method of reaching foreign markets with a well-established and traditional procedure of acquiring any market. In This case, Asda will become successful in completing the task of investing in foreign production facilities and helping the local suppliers when it comes to meeting the marketing expenses. Most importantly, it comes with limited control over the substantial costs along with having low risks. Distribution of the products along with controlling the market a little is important factor in this business organisational aspect. Even after having issues regarding firsthand experience regarding customised services and products along with having local preferences and tastes. In this case, possible tariffs and transportation charges are critical aspects of working in the procedure of the model of entry in the new business market (Contractor et al. 2019). Most importantly, this mode of entry has the potential to manage the expense of distributing systems of the products along with having support from the local sales force. Along with that, trade shows and advertisements are the most important aspects in helping the company to reach most of the people.

5. Managerial and Organisational Problems
a) Organisational coordination problem
Lack of techniques of coordination between the managers and employees might create issues regarding managing the business efficiently. Primary reason for such a fact is that employees cannot work efficiently along with reaching the goals and objectives of the organisation without having support from the managers along with becoming motivated. Primary reason for such a fact is that organisations cannot get success and competitive advantages in a new market without having clarity in the objectives and goals. From that aspect, objectives and ideas of the working approaches can help the organisations in improving the entire condition of work. For example, the problem in the coordination can occur within organisations setting with the efforts towards synchronisation, unification, and integration of the common goals.

b) Cultural problem (Hofstede)

As per the proposed aspects of regional and national factors that affect the organisational culture in Hofstede model it has been identified that culture of the workplace is essential within an organisation setting that can help an organisation to influence the behaviour of the employees. In this concern, culture and contribution of the employees play a crucial role in helping the entire procedure of organising the measurement of the approaches (Kunischet al. 2019). Along with that, it is also crucial for the company to include a better model for the organisational approaches that can help in creating different dimensions of work. Criticism of the work of Hofsede is also known in this aspect that can create issues in the employee behaviour and can create challenges for the organisations.

c) Organisational structure problem
Lack of teamwork, lack of innovation, poor customer service, too many bosses, and poor communication are common issues regarding organisational structure problems. Primarily, it has been identified that lack of teamwork can help in unifying the message and hierarchy of the company. However it cannot produce the best services and products of the customers without having proper support from the employees. Communication, innovation, and customer services are other critical aspects that can create issues regarding organisational structure.

6. Solutions for the issues
Sound organisation structure
It is essential for the organisation to work on the factors such as having a preferable and appropriate organisation structure to create a better dimension regarding working approaches and cooperation among the employees and managers through the voluntary approaches. Effective control from the perspectives of leaders can only help in improving the concerns of the community.
Mutual communication
It is not possible for any business organisation to complete tasks of reaching the goals and objectives as per the mission and vision statement without having support from the employees and management team. From that aspect, it is crucial for the organisations to continue better communication (Mikhelidze, 2019). Mutual communication can only improve the working process in this organisation along with having the authoritative approaches to complete the roles and responsibilities efficiently. It is not possible for any company to manage the intere coordination through the improved procedure of having a clear perspective of competition and communication in the separate services.
Creating relationship between the organisational and national cultures Culture of the UK and Thailand are quite different from the ideological aspects; however, it is essential for the organisation to manage the business environment internally by working on maintaining balance. It is crucial for the organisation to maintain the entire business approach through cultural differences. Differences between the cultural dimensions can be identified in the aspects of maintaining the gap regarding conflicts and issues in managing the differences in working approaches.

Conclusion
Global strategy of any business organisation plays a crucial role in completing tasks in an international business environment. In this case, as a powerful retail organisation in the global market Asda has created a well-known dimension in this sector. However, the company has not yet gone to explore the market of Thailand. Due to this reason, the present report has strategized the approaches of the company to reach the Thai market. This market comes with the potentiality of helping Asda to increase its revenue from the aspect of having a highly technology oriented and hard-working workforce.
Most importantly, this report has analysed Porter’s diamond model along with Internationalise strategy for the business organisation before analysing the country. For example, it has analysed political, legal, social, and economic factors within the Thai-market. Along with that, Porter’s five forces have helped in analysing the present condition regarding threat of new entrants and substitutive products. On the other hand, the report has also identified critical issues that can occur in this organisation regarding organisational structure problem, cultural problem of Hofstede, and organisational coordination problem. Solutions for the issues, including mutual communication, and sound organisation structure can help in improving the entire aspects of creating better relationships through the organizational and national culture in the country.

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