ASOS Plc

ASOS Plc

ASOS Plc is a British organization founded in 2000 in London with the main focus on retailing the fashion and cosmetic product for the young people in their 20s. The headquarter of ASOS Plc is in London, England, United Kingdom. There was a gap of fashionable products for the young individual on the market (Borsenberger et al. 2016). ASOS Plc is the global fashion retailer that provides lifestyle products to both men and women. The organization sells a mixture of private labels, local as well as global brands through 8 websites in the US, UK, German, Spain, Russia, Australia, Italy, and France. The founders of ASOS Plc are Nick Robertson, Andrew Reagan, and Quentin Griffin. The major products offered by the company include shoes, clothes, beauty, and other accessories. By 2019 the number of employees was more than 4000. ASOS Plc falls under the industry of retail discretionary while in the consumer discretionary sector. The sub-industry is the E-commerce discretionary. The paper will focus on finding out the competitive position of ASOS Plc by integrating information in a partial SWOT (OT), Porter’s Five Forces, External Factor Evaluation (EFE) matrix and Competitive Profile Matrices (CPM)

Through the help of porter, five forces ASOS Plc determines the industry attractiveness as it understands its competitive positioning in the market. The analysis can be applied by the organization to come up with a strategically suitable decision or choices that not only enhance its long term survival but also improve its performance.

Threats of New Entrants

Threats of the new entrants indicate how the new market players impose threats to the existing market players. When the industry is profitable, then the barrier to enter the same industry will be low.  The entry into industry needs substantial capital as well as resources investment. The force tends to lose the strength of the item is differentiated in the high, and customers impose high value on unique or special experiences. ASOS Plc can place the low threat of the new entrants if the existing regulatory platforms put challenges to the new organizations interested in entering the market (Borsenberger et al. 2016). The new entrant will be required to comply with strict time, consuming regulatory demands which end up discouraging entrance into the market. The threats will be low if the psychological switching cost for the customer is high, and the existing brands have already established or founded their brands.

Therefore, for the ASOS Plc to challenge, the organization can develop brand loyalty through addressing customer relationship management. ASOS Plc can develop a long-term contractual relationship with the distributors to widen access to the target market. Another important thing to do is to invest in research to get valuable customer data and be innovative.

Threat of Substitutes

The presence of substitute products as well as services in the industry, make the competitive environment challenging for the company. The threats of substitutes include factors such as the availability of cheaper products in the industry. Theo psychological switching cost moving from the industry to the substitute product is low. The substitute product tends to provide the same or superior quality and performance compared to the one delivered by ASOS Plc (Li, Frederick, & Gereffi, 2019). Contrarily the substitute threat is substantially low if ASOS Plc the switching cost of consuming the substitute high and two when the consumer cannot derive the same utility based on performance and quality. Therefore, ASOS Plc can address this challenge by emphasizing how the company delivers products much better than any other substitute. Offer better experience to customer work on loyalty and focus on differentiation of the products.

Bargaining Power of Buyers

Bargain power of buyers implies the pressure consumers exert on the organization to get quality products at an affordable price plus excellent services. The factors that increase the bargaining power of the buyers include; the more concentrated customer base magnify the consumer bargain power against ASOS Plc. If the customers are few, then they will definitely impact the market.  The presence of low switching cost and other factors such as customer price sensitivity purchasing the standard product in high number or volume and high market knowledge increases the consumer bargaining power (Choudhury, 2018). To address the issue of consumer bargaining power, ASOS Plc should diversify the customer market base. That is through the introduction of rather new products, adopt diversification techniques, and target new market segments. Marketing, as well as promotional techniques, brings significant outcomes. Focusing on innovation, thus building loyalty and delivering excellent customer experience, ultimately reduce consumer bargaining power.

Bargaining Power of Suppliers

Barging power of suppliers has to do with the pressure exerted by suppliers on the business through using techniques such as reducing product availability, increasing the price, and reducing the quality of the product. The higher bargaining power of suppliers increases the competition in the industry as such, lowering the growth potential and profit of ASOS Plc. Contrarily weak bargaining power of suppliers leads to increased profitability and attractiveness of the industry (Choudhury, 2018). The bargaining power of suppliers will be high for the ASOS Plc when suppliers have concentrated in a particular area, and their concentration is higher than buyers. The force also becomes high when the cost of switching suppliers is categorically higher. The power increases when the suppliers are few with increased product demand (Rusanen, Hänninen, & Paavola, 2017). The supplier’s position is strengthened when ASOS Plc is less educated, have inadequate market knowledge, and, more importantly, have limited data related to price sensitivity. Therefore ASOS Plc can make their position strong by reducing overdependence on one supplier. Grow in terms of price-sensitive and adopt product differentiation techniques. Develop a long term contractual relationship with their suppliers; this leads to loyalty and lowers their bargaining power.

Rivalry among existing firms

ASOS Plc can face very strong pressure from competitors. This not only leads to profitability but also the growth in the industry is definitely low. The rivalry among existing organizations will be low for ASOS Plc if there are a few numbers of players in the industry. Secondly, there will be less competition if the industry is growing at a faster rate. There will be a low rivalry if there is a clear market leader, switching cost for customers is high, product and services are vividly differentiated, and as such, every market player focuses on varied sub-segments (Borsenberger et al. 2016). When the exit barriers are low, the company can leave the industry minus, incurring a lot of loss. There may be an intense rivalry if the existing market players are strategically diverse and target a similar market. The rivalry is at its best if the consumers are not loyal to any existing brand as such attract other players (Li, Frederick, & Gereffi, 2019). ASOS Plc should, therefore, target the implicit needs and expectations of the customer in the course of product differentiation. Switch costs can be raised by developing long-term customer relationships. To identify a new market segment, the organization should prioritize market research.

ASOS Plc SWOT Analysis / Matrix

OT ANALYSIS

External Factor Evaluation (EFE) Analysis

The rating in this EFE matrix represents the response done by ASOS Plc toward the stated opportunities and threats. The higher the rating, the better the response of the organization to exploit the given opportunity and then overcome or defend the threat. The rating is done on a scale of 1-5. 1 represents poor response; 2 represents fair response; 3 represents average response; 4 above average response and 5 is superior response.  Weight represent important factors on the company’s success and falls on a scale of 0-2. The sum of all the weighted scores is equal to the total weighted score, the final value of total weighted should range from 1to 5, and when the company’s total weighted scores are above 3, it is considered strong in its position.

The total weighted score of ASOS Plc is strong since its more than 2.5 and being 3.81 it means that the organization is putting in a lot of effort to exploit the opportunities presented while improving on the weakness. An increased number of weaknesses in the organization makes it stuck, and the rate of growth tends to be a bit slow. One of the greatest opportunities that are credited to ASOS Plc is the concentration of diversity and practicing new technologies (Borsenberger et al. 2016).  Competitors, in this case, do not deliver products with diversity and exclusivity. Through the use of new trends of buying from mobile phones, computers and tablets, and the application of services that consumer is able to update their buying experience, the organization increases its profitability. The increment of the pay is being substituted by the fact that the organization gets to employ relatively few people due to online shopping; therefore, employees are paid handsomely well.  One major threat the organization faces is the lack of physical shops as such customer services can be a bit poor (Choudhury, 2018). To improve on this weakness, the organization continues to create more interactive services to enhance customer experience. The differentiation and exclusivity in the organization work because some items and brands just work only with ASOS Plc, and loyal customer tends to choose these products over and over against the new ones. The organization is also producing some of the favorable trends in the UK in addition to the growing demand for private labels

Competitive Analysis

The three competitors of ASOS Plc that have been integrated with this research include Alibaba, Zalando, and fashion matches. Zalando is a German online shop that started in 2008 by David Schneider and Robert Gentz. The shop sells shoes, furniture, accessories, and clothes. Zalando owns more than 1500 brands and uses technology to build on customer experience (Rusanen, Hänninen, & Paavola, 2017). Centralization is also the primary brand’s strategy pertaining to the internalization; each country determines the delivery form because the market is always different, according to Zalando (Au-Yeung et al. 2016). The strength of Zalando is the relationship between suppliers and the technology backbones. One strength of Zalando is delivering goods at a lower price compared to the competitors due to the large quantity they buy with a discount. This can also be taken as a weakness because technology requir5ehigh investment and for the development and research and low prices reduces company cash flows.” In 2019, retail e-commerce sales worldwide amounted to 3.53 trillion US dollars, and e-retail revenues are projected to grow to 6.54 trillion US dollars in 2022. Online shopping is one of the most popular online activities worldwide”. Alibaba is also a global Chinese company founded in 1999 and deals with online shops.

The target or goal of Alibaba to allow the world to find an easy way of conducting business anywhere. The business deals with brands such as clothes, accessories, and beauties and merchants. The major strength of Alibaba is the huge and populated market; it operates with the second economy in the world-China (Au-Yeung et al. 2016). The weakness is that there are too many merchants on board, leading to better brands calling off due to competition, counterfeit goods from local distributors, and m not able to make a profit. The third company is fashion matches deals in varieties of products, including books, home décor, clothes, art, and gallery exhibit, own the brand and tourism (Rusanen, Hänninen, & Paavola, 2017).  While some of the weaknesses of the organizations are location and designer range, its strength outweighs the weakness. The strength includes improved personal experience, the fact that its global, visual merchandising, and owns the brand.

The purpose of this research paper was to analyze the competitive position of ASOS Plc and integrate that information in a partial SWOT (OT), Porter’s Five Forces, External Factor Evaluation (EFE) matrix, and Competitive Profile Matrices (CPM). The research also shows that the retail and e-commerce industry is competitive. Generally, the global retail market is expected to top $25 trillion USD by 2019. But, growth has slowed considerably versus the prior five years and is not expected to pick up through 2023. This means that ASOS Plc has to improve in terms of technology, open new market because it is mostly concentrated in Europe and differentiate their products to survive the competition. From an organization such as Alibaba,

References

Au-Yeung, B., Chu, D., Enfante, M., Logan, G., & Saelee, K. (2016). Industry Analysis: Cloud Computing.

Borsenberger, C., Cremer, H., De Donder, P., & Joram, D. (2016). Differentiated pricing of delivery services in the e-commerce sector. In The Future of the Postal Sector in a Digital World (pp. 191-211). Springer, Cham.

Choudhury, R. N. (2018). The determinant of Foreign Direct Investment in India’s E-commerce Sector. Available at SSRN 3490466.

https://csimarket.com/Industry/Industry_Financial_strength.php

Li, F., Frederick, S., & Gereffi, G. (2019). E-commerce and industrial upgrading in the Chinese apparel value chain. Journal of Contemporary Asia, 49(1), 24-53.

Rusanen, O., Hänninen, M., & Paavola, L. J. (2017). Mastering Strategic Change in a Political and Complex Organization. In Academy of Management Proceedings (Vol. 2017, No. 1, p. 15666). Briarcliff Manor, NY 10510: Academy of Management.