What problems of motivation did Archie Norman discover at ASDA?

I believe all the problems stemmed from upper management’s lack of focus on the purpose of ASDS’s existence. Had they remembered that ASDA was a people servicing company who’s main objective was to serve customers, to meet their basic need of grocery shopping then they might have never failed. Unfortunately directors were isolated from each other and other managers creating lack of communication between everyone.

By the time Archie arrived at ASDA, the company had become highly centralized and bureaucratic. Morale was very low and the culture was risk averse. Directors and upper management did not seem to care about the company as opposed to store employees who did care but felt intimidated to make suggestions or voice their opinions. Store managers felt ignored and had no input on decisions.

As a result this lack of communication, appreciation and respect for employees reflected in the their attitudes and service to customers.

What do you think Archie Norman should have done on his first day on the job?

What is the financial status of ASDA? How should the company be re-structured? What changes would you make?

Please review some of the video clips about how ASDA promotes itself ( now being part of Walmart), how common people seem to love to hate ASDA, and how the chain has evolved since the ASDA case was written, then answer the following: (a) What do you think are the most important concerns this organization should have about its future? (b) What specific organizational integration-differentiation concerns should they recognize? (c) What employee and customer perceptions should they be alert to in their business planning?

Debrief for the Asda case (chapter 14, shaping implementation strategies)The Asda case
A winning formula
Asda was the first company in the UK to invest in large, edge of townsuperstores, with ample free car parking, selling food and related products.Asda was created in 1965 as a subsidiary of Associated Dairies. It started businessby opening a string of very large discount stores in converted mill and warehousepremises. In the early days shoppers were offered a limited range of verycompetitively priced products.When Asda went public in 1978 it was the 3 rd largest food retailer in the UK selling anever widening range of food and non-food products. Its success continued to bebased on high volume, low margins and good value for money (Asda price).
A change of strategy: the pursuit of higher margins
In 1981 Asda began to shift towards a new strategy focused on raising margins. Arange of new initiatives involved seeking efficiencies to reduce costs and introducingmore high-margin products such as prepared foods and a wider range of non-fooditems.There was also a drive to expand in the South of England where customers hadgreater spending power.
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This expansion policy was slow to get off the ground, partly because planningpermissions for large retail developments were more difficult to secure in theSouth, the price of land was significantly higher and many of the best sites werealready being developed by competitors.
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Sales were less than anticipated because Asda’s value for money image and itsrelatively austere store layouts tended to be unattractive to relatively wealthysouthern customers who were used to shopping in more up-market stores. Asdaattempted to brighten up some of its stores and further distance itself from its‘pile-them-high and sell-them-cheap’ image but this did not generate theanticipated contribution to operating profits.
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Another (related) problem was that long-standing customers in the Northappeared to be confused by what Asda was beginning to offer them and manyswitched their allegiance to new cut-price retailers who were more focused onoffering value for money.
Diversification
Towards the end of the 1970s senior management began to consider the possibilitythat saturation may limit future growth in food retailing and the decision was taken todiversify into non-foods.Some of the most notable acquisitions included:1977 Wades Department Stores (with over 70 prime high street sites)1978 Allied Retailers (Allied Carpets, Ukay Furniture and Williams Furnishings)
The Theory and Practice of Change Management, John Hayes, Palgrave, 2006 Unfortunately this acquisition did not make the anticipated contribution toprofitability because the recession in the early 1980s led to heavy discounting.Ukay furniture faired worst and was sold in 1982. While the recession hitAllied Carpets it continued to make modest profits and by 1985 had improvedto the point where it was decided to expand this side of the business.1985 Asda merged with the MFI furniture group.This merger, the biggest in British retailing up to that point, was another disappointment. Asda-MFI attributed the poor performance to one-off problems, such as a new range of kitchens that failed to sell. It wasanticipated that the problems would be short-lived but performance failed topick up as expected.1986 Asda launched Asdadrive, a car retailing business at sites adjacent to six of its superstores, with the intention of rolling it out to about 75% of all sites.
Re-focusing on the core business
Following the merger with MFI, Asda-MFI’s shares significantly underperformed. In1987 the company surprised the market with a major change of strategy. Instead of continuing with the policy of diversification it decided to refocus on the Asdasuperstores.The Asda-MFI merger ended with a management buy-out of MFI (although Asdathen bought a 25% stake in this new company). Asdadrive and most of theAssociated Fresh Foods business were also disposed of and it was intended todispose of the Allied Carpets business. However, following the collapse of the equitymarket, it proved impossible to obtain the anticipated profit from the sale of AlliedCarpets, so the business was retained (and later expanded with the acquisition of Marples in 1989).In order to develop the core business it was decided to invest up to £1billion over aperiod of three years. Most was earmarked for accelerating the opening of newstores, especially in the South, but there were also other demands. Asda hadlagged behind its competitors in a number of areas.
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Own-label products
. They had all invested heavily in own-label products (thatoffered higher margins and better value to customers) whereas Asda had onlystarted to introduce them in the mid 1980s, and on a much smaller scale.
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Computerised point-of sale equipment
. Competitors had invested heavily intechnology that improved stock control and provided better customer serviceat check-outs.
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Centralised distribution networks
. The competition had also developedcentralised distribution networks for fresh foods that pushed down costs,enabled stores to receive fewer ‘just-in-time’ deliveries from vehicles carryingfull loads, and reduced the requirement for store related warehousing space.
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Store refurbishment
. Asda had neglected many of its stores which werebeginning to look very tired and in urgent need of refurbishing.Asda recognised the need for investment in all these areas.
A leap forward that contributed to a major debt problem
The Theory and Practice of Change Management, John Hayes, Palgrave, 2006 In 1989 a consortium that was planning to buy Gateway agreed that, if their bid wassuccessful, they would sell 62 superstores to Asda for £705 million. This was seenas a very attractive proposition. It offered Asda the possibility of making up for lostground and regaining its old position as the 3 rd largest British food retailer. It alsopromised to double the number of Asda stores in the South of England andcontribute an extra £1 billion to sales. Asda bought the stores in October 1989.Asda’s performance following the purchase of the Gateway stores was poor. Profitswere down and Asda’s stake in MFI contributed a loss. Allied-Marples was also introuble. Asda had net debts of over £900 million. From the end of 1989 Asda’sshare price began to slide compared with major competitors and in September 1991it dropped a further 29%. The announcement of a rights issue at the end of themonth led to another massive fall in the share price.
The appointment of Archie Norman
Archie Norman was offered the role of CEO in October 1991 and took up hisappointment in December. By the time he arrived the company was fast running outof cash.He found a company that was bureaucratic, hierarchical and highly centralised.There was a large headquarters staff located in the new custom-build Asda House.Directors had little contact with their subordinates. The culture was risk averse.People at all levels appeared to be intimidated by their bosses and told them whatthey thought they wanted to hear. They also seemed reluctant to take any initiativesthat would call attention to themselves. Morale was low.The trading department was dominant. Buyers, located at Asda House, determinedwhat the stores would sell but they had little contact with store managers. The newCEO had concerns about both the quality of management and the apparentunwillingness, throughout the organization, to make best use of the talent thatexisted.Store managers felt ignored and found it impossible to have any meaningful input tothinking at Asda House. There were also problems within stores. Verticalcommunication was poor and customers were not valued.
If you had been Archie Norman in December 1991, what would have been your strategy for change?
Notes for debrief
Asda: an example of the simultaneous implementation of a combined Economic/OB change strategy
The simultaneous implementation of a combined Economic/OB change strategyrequires careful planning together with a willingness to let the details of the change
The Theory and Practice of Change Management, John Hayes, Palgrave, 2006