Walmart, the world’s largest retailer, has completed its takeover of Asda, one of the UK’s biggest supermarket chains.
The deal, which was first announced in October 2016, has been cleared by the Competition and Markets Authority (CMA).
It means that Walmart now owns a total of 11,718 stores around the world, including more than 2,400 in the UK.
The CMA said the merger would lead to “lower prices, improved quality and greater choice” for shoppers.
Asda will continue to operate as a separate brand and there are no plans to close any stores at this stage.
However, the CMA has ordered Walmart to sell Asda’s 335 petrol stations to another company within six months.
The CMA said this was necessary to protect competition in the UK’s petrol market.
Walmart said it was “pleased” with the CMA’s decision and would now focus on “integrating Asda into our business”. Why did Walmart acquire Asda?
There are a few key reasons Walmart might have had for acquiring Asda:
- To Gain a Foothold in the UK Market
- To Reduce Costs
- To Expand Internationally
The UK grocery market is worth an estimated £170 billion and is growing at a rate of 3-4% per year. It is Europe’s third largest grocery market after Germany and France.
Despite being one of the most mature markets in Europe, there is still room for growth as households continue to spend more on food and drink. The UK is also an attractive market for foreign retailers due to its high levels of consumer confidence and spending power. In order to gain a foothold in this lucrative market, Walmart acquired Asda—one of the leading supermarket chains in the UK—in 1999.
One of Walmart’s key strategies is to drive down costs throughout its supply chain in order to offer low prices to customers. The company achieves this by using its scale and bargaining power to negotiate better deals with suppliers (e.g. lower prices for raw materials) and by investing in efficient logistics and technology systems (e.
automated warehouses). By acquiring Asda, Walmart was able to use its economies of scale and bargaining power to reduce costs at Asda’s stores and drive down prices for customers. In fact, Walmart slashed Asda’s prices by an average of 10% soon after acquiring the company.
While Walmart was already present in a number of international markets prior to acquiring Asda, the UK represented a significant opportunity for further expansion. Not only was the UK grocery market large and growing, but it was also relatively undeveloped compared to other markets such as the US—there were fewer large supermarket chains operating in the UK and there was still room for further consolidation within the industry. By acquiring Asda, Walmart was able to quickly gain a leading position in the UK market and use this as a platform for further expansion into Europe.Conclusion:
Overall, it seems that Walmart’s acquisition of Asda was motivated by a desire to gain a foothold in the lucrative UK market, reduce costs through economies of scale, and use this as a platform for further expansion into Europe.
