The purpose of this report is to understand the operations of ASOS plc in the international market, China, to be more precise. This report will show how ASOS operates in this market in response to changes that occur based on the PESTEL analysis. Now because these factors are external to the firm, they can either be threats or opportunities as the SWOT analysis suggests (Harrison, 2010). This report will include suggestions for how ASOS can protect its interests and boost or sustain performance in order to survive in an international market. It is important to note that ASOS is no longer operating in China, thus the response strategies I will discuss further in this report will act as a more general strategy for survival in an international market and less like an advice or pre-emptive efforts for ASOS in China. Nick Robertson and Quentin Griffiths came up with the idea of ASOS which is a British online retailer that was found in 2000 in London with their headquarters in Camden town, at the greater London house. Furthermore, ASOS is a firm that believes in a free world where people from all walks of life can express themselves and try new things in the process of enjoying the adventures of life. ASOS is an acronym for ‘As Seen on Screen' (Robinson, 2018)
[2.0] WHAT MAKES ASOS INTERNATIONAL AND SUCCESSFUL.
ASOS is an online firm that sells clothing, accessories and shoes to people ranging from 15-30. It has its own brand and design and therefore sells its on branded things, other brands and it also has a range of labels that are exclusive to ASOS on the app and website. ASOS have an international retail sale of 57% of total market share. “We ship to 239 countries and territories from our fulfilment centres in Germany, the UK and the US, and have offices in Berlin, New York, Paris, Sydney and the UK.” (ASOS.com, 2018)
They put their customers first and therefore they allow them to shop with no barriers by combining the suitable technology and precise logistics to give an unforgettable experience so customers at anywhere can get that new special outfit.
They provide free delivery and returns to create a faultless experience for customers. The premier delivery option gets even better with unlimited next day delivery. Their distribution arrangements include performance centres worldwide to ease delivery times and increased automation at warehouses.
Klarna system is inculcated which allows the customers to pay later and allow them to choose from the wish lists of items selected online. Indeed, ASOS' apps is constantly upgraded for new development in the market.
They have got the friendliest advisors to handle issues in 11 languages as quickly as possible, they are available all-over social media 24/7. (Kulach, 2017)
[3.0] ASOS CORPORATE SOCIAL RESPONSIBILITY.
They aim to achieve improvement while adding social value and reducing environmental impacts, ASOS accomplishes this by putting its focus on the people and environment.
‘ASOS is growing fast – and Fashion with Integrity is at the heart of how we work, and how we encourage others to work.'
Director of Corporate Responsibility, ASOS. (ASOS.com, 2018)
[4.0] FASHION WITH INTERGRITY
[4.1] OUR PRODUCTS: - this involves ASOS creating sustainable products with the objective of being an ‘industry leader' in sustainable fashion in mind. To achieve this, they must take up the responsibility of placing the impact of the environment on their products.
[4.2] OUR CUSTOMER: - ASOS desires to be known as a firm that builds customers confidence. To be diverse and inclusive, understanding business approach to imitate their global diversity and embedding inclusion in their style is compulsory.
[4.3] OUR BUSINESS: - to sustain the business they aim to keep up and monitor supplier integrity, we make sure that adhering to and upholding our values and principles in the ASOS code of integrity doesn't exclude our non-stock suppliers.
[4.4] BUSINESS INTEGRITY: - to give an understanding and to help explore how to switch the forces that deter us and our people from making appropriate choices, to keep the integrity of the business (ASOS.com, 2018).
The analysis that ASOS plc imbibed to impact its environment are Political, Economic, Social, Environmental and Legal factors. It is a premeditated tool to evaluate the organizations macro environment. PESTEL presents remarkable detail about working challenges ASOS Plc will face in normal macro surroundings other than aggressive forces.
[5.1] Political factors: - This is a factor required in impacting ASOS Plc's long-term effectiveness in a market. This is a firm that operates in more than a dozen countries and this therefore exposes it to different types of environmental and political system risks. Diversifying the systematic risks of political environment in a vigorous retail industry across innumerable countries means achieving success. Before ASOS Plc can enter or invest in a particular market it needs to consider factors like Political stability and importance of Retail sector in the country's economy, the risk involved in military invasion to be able to manage the risks involved effectively.
[5.2] Economic factors: - In an economy, there are specific factors that determine aggregate demand and investment. Some of these macro environment factors that relate to the national economy as a whole are inflation rate, savings rate, interest rate, foreign exchange rate and economic cycle. While micro environment factors of economics that are on an individual/ company level such as competition customs impact the competitive advantage of the firm. ASOS Plc can forecast the growth path of not only a particular sector but also of the organization by using country's economic factor such as growth rate, inflation & industry's economic indicators such as Retail industry growth rate, consumer spending. Economic factors that ASOS Plc should consider are The Efficiency of financial markets, The Skill level of workforce that industry, the business cycle stage (e.g. prosperity, recession, recovery), And the rate of Unemployment in that economy. For instance, if ASOS considered factors they would have helped to make better decisions knowing how strong of a competitor Alibaba is.
[5.3] Social factors: - The culture and way of life of society impacts organizational culture in an environment. Marketers at ASOS Plc will get an understanding of the customers of a given market and marketing design for retail industry consumers as beliefs and attitudes of the population are important roles. Social factors that leaders of ASOS Plc should analyse are - the education level including the standard of education in ASOS, the gender roles, social conventions etc relating to culture and attitudes relating to health, environment, etc.
[5.4] Technological factors: - Many industries are now being interrupted by technology. Technological analysis of an industry should be done and the speed at which technology disrupts that industry should be known. This is needed as it explains that Slow speed will give more time for a firm to adjust while fast speed may give a firm little time to cope and be profitable. This is an important factor especially because ASOS has no physical store and is technology related, looking into how technological advancements and changes can affect their app, website and even customers as a whole will help in risk management. Technological factors to be considered are - Recent technological developments by ASOS Plc competitors, Impact on cost structure in Retail industry and Rate of technological diffusion.
[5.5] Environmental factors: - Every market has its own unique norms or environmental standards which impacts the profitability of an organization in those markets. For instance, companies in European countries that operate in renewable sectors get healthy tax breaks. Some of the environmental factors that a firm should consider beforehand are - Weather and Climate change, Laws regulating environment pollution, Attitudes toward “green” or ecological products and Attitudes toward and support for renewable energy. For instance, this will help ASOS to know the sort of goods to create that are in line with their climate and weather change.
[5.6] Legal factors: - In variety of countries, the legal framework and institutions are no longer adequate to protect the mental property rights of an organization. A firm needs cautious evaluation before coming into such markets as it can lead to pilfering of organization's secret sauce therefore the universal competitive edge. Being an online firm, considering if there will be any trade barriers or restrictions to goods allowed in a new market is necessary. Some of the legal factors that ASOS Plc leadership should consider while entering a new market are - Copyright, patents / Intellectual property law, Consumer protection and e-commerce, Employment law, Health and safety law and Data Protection.
[6.0] RISK MANAGEMENT
Effective risk management will help ASOS secure their purpose and mission. ASOS applies its Risk Management Framework to every part of its business in a way for it to be effective within its unique organizational culture. This allows them to specify key risks and make use of management techniques. Once this is done, strategic objectives are then met and then they can deliver the long-term growth and viability of the business. In managing their risks, they need to firstly identify the risks which could be done using the PESTEL analysis. To get a forward-facing view in identifying emerging risks Horizon scanning takes place. This involves scrutinizing a variety of information with the intention of identifying patterns and of coming disruptions that could have a severe impact on the way we organise our work (Marteaux, 2018) . Secondly, a methodology is put in place to assess the impacts of the risks and the probability of them emerging. Thirdly, risks will then be evaluated as they help to create action plans. Fourthly, monitoring and reviewing risks, there are explicit conversations about risk that help to promote a positive risk culture. A firm like ASOS that experiences rapid growth will continually alter the profile of risk, this is why reviewing risks will allow risk owners and management to see the effects of modification. Lastly, A broad risk review containing key risks and other significant changes is prepared for the Audit Committee. (ASOS.com, 2018)
[7.0] THREATS AND CHALLENGES
ASOS planned to hire 1500 so as to be able to expand their head office in London and this made many 'hardcore brexiteers' confused because of this decision despite the uncertainty created by Brexit. The CEO of ASOS, Nick Beighton prepared a “wellness centre”, a training academy, a quiet zone library, a tech bar, as part of his special treatment prepared for staff to relieve worry about day to day aggravations. Many are perplexed why ASOS chose to increase its costs by hiring more workers at the London headquarters especially at this Brexit time where trading decisions are unsure over the next couple of years. London is a universal and inclusive city filled with individuals who will keep ASOS sales running and this made it a good investment and from an overview of things it will give them an opportunity to hire, and especially fire, as they please.
Another unobvious reason should be how much more they are able to influence the UK Government than they do the European Commission, on issues about workers' rights, environmental concerns and the fair payment of tax. Brexit backers may hail the decision as independence from the EU. Although, there is a trade-off involved to make Brexit work as they have promised it will, so as to keep companies coming here so the economy doesn't crash. This may now be a higher corporate sway over Britain and its laws. (Moore, 2016)
ASOS sincerely devoted its operations to the Chinese market at the time it set up its domestic operations in 2013 instead of shipping directly from the UK. ASOS has decided to call it quits with their Chinese exploit and has now decided that their customers in china will now only be able to shop via their global website, while the clothes will be shipped from their factories in Europe. They decided to let go of their staff in China because:
Chinas clothing trade were said to have intricate regulations which contributed to the slow growth in 2014 caused by operational headaches from labelling and China Post. Although, the Chinese postal service has now made efforts and has started to deliver a better service and become less protectionist, it still instigated issues. Before ASOS.cn was inducted there were import taxes that Chinese customers had to pay but these payments were brought to a halt as soon as ASOS local warehouse was opened but there were still trade regulations that required labelling up to a certain level. Though, labelling seems easier to administer on their own brands, it became an issue when they were proving themselves amongst many other competitors. This led to costs turmoil and labelling reconstruction. This learning curve was so abrupt it led to a loss of £4m in the last financial year.
Also, a range of clothing for just one season also wasn't sufficient enough for a country with various regions and climates. ASOS has big competition in China and to stand out they need to give a collection across the entire market.
According to Forbes, Alibaba directs majority of the e-commerce market in china. Alibaba is known to be the ‘behemoth' in the Chinese ecommerce market as it has dominated, and this makes it a problem for ASOS.cn. Chief Executive Officer Nick Beighton told Bloomberg in a phone interview, “The Chinese market is unlike any other we operate in. Getting eyeballs on our products has proved very difficult.”
It is as though the Chinese economy stalled because although it grew by 6.9% in 2015, it is currently experiencing the slowest growth rate for 25 years. This has impacted the ever-expanding middle-class spending, with ASOS no doubt wary that recession could have had an impact on sales.
ASOS brand reputation wasn't strong enough and this added to its failure to compete with local brands even past Alibaba. In reports of top brands in Chinese markets there is lack of international names. For a while, it is as though foreign products are not just associated with luxury and great quality. This conclusion may have impacted ASOS's endeavours to find loyal customers among Chinese millennials. (Davis, 2016)
I have introduced an extra dynamic in achieving both mission and vision of ASOS.Additionally explained how international ASOS is and the specific unique factors they possess that make them successful, then their Corporate Social Responsibility in relation to their fashion with integrity program was visited. The PESTEL factors were considered to give an understanding of factors that affect the business and then the ways to manage the risks that pose at threats based on the SWOT analysis were considered. Lastly, the threats and challenges were discussed focusing on the issues facing their home country and the market we focused on for the report, China.
ASOS.com, 2018. asos. [Online]
Available at: https://www.asosplc.com/corporate-responsibility/our-products/sourcing-map#/all
[Accessed 21 November 2018].
ASOS.com, 2018. asos. [Online]
Available at: https://www.asosplc.com/investors/2018-year-in-review/risk
[Accessed 21 November 2018].
ASOS.com, 2018. ASOS. [Online]
Available at: https://www.asosplc.com/corporate-responsibility/our-business
[Accessed 20 November 2018].
Davis, B., 2016. Econsultancy. [Online]
Available at: https://econsultancy.com/five-reasons-asos-is-pulling-out-of-china/
[Accessed 24 November 2018].
fernfortuniversity, 2018. Asos Plc PESTEL & Environment Analysis. [Online]
Available at: http://fernfortuniversity.com/term-papers/pestel/nyse4/6720-asos-plc.php
[Accessed 21 November 2018].
Harrison, J. P., 2010. STRATEGIC PLANNING AND SWOT ANALYSIS. s.l.:s.n.
Kulach, K., 2017. webinterpret. [Online]
Available at: https://www.webinterpret.com/uk/blog/asos-online-store-global-ecommerce-success/
[Accessed 11 december 2018].
Marteaux, O., 2018. RSSB. [Online]
Available at: https://www.rssb.co.uk/Pages/what-is-horizon-scanning.aspx
[Accessed 24 November 2018].
Moore, J., 2016. Independent. [Online]
Available at: https://www.independent.co.uk/news/business/comment/asos-bets-big-on-london-despite-brexit-a7470396.html
[Accessed 23 November 2018].
Robinson, L., 2018. thefactshop. [Online]
Available at: https://www.thefactshop.com/blog/fashion-facts/asos-history
[Accessed 10 december 2018].
...(download the rest of the essay above)