Aldi: Current Status And Challenges In China Market

Introduction to Aldi

Discuss about the Aldi- Business in China for Situation in International Market.

ALDI – biggest supermarket of Germany which was started in 1946 by two brothers Karl and Theo Albrecht. It has 20,000 stores in 20 countries. Aldi business is divided into groups Aldi Nord which has stores in North of Germany and Aldi Sud which has stores in South of Germany (Ruddick, 2013). In this report, discussion will be done on- current status of Aldi sin the market, how their cut down price model make them come under world’s two best retailers (Davey, 2018). Issues faced by Aldi in order to start its business in China like understanding China local laws which will affect their business, culture of people in China (Australian Trade and Business Commission, 2018). After that discussion will be carried on segmentation, targeting and positioning. In last, recommendation is given to Aldi for successful operation of business in China like targeting those customers that will increase the demand of goods of Aldi. 

Market condition of Aldi is very prosperous, its market share has been risen from 5.3 percent to 7.3 percent as well as sales of Aldi also raised by 2.5 percent (Chapman, 2018). It has set up British biggest four grocery stores and ruled 7.3 percent grocery market of UK (Gale, 2018).  Aldi has attracted almost one million households during last three years. The supermarkets are continuously attracting most of the citizen due to its low prices (Cox, 2018). It has almost 8000 stores all over the world. Aldi is one of the largest private company of the world. It scored 8^th rank in ‘Stores Media’s 2015 survey’ (Marum, 2016). Moreover current situation of Aldi can be seen better by SWOT analysis of the company-

1. It offers good quality product at affordable prices which can easily attract more and more customers towards it.
2. Operating cost of the company is minimum.
3. It has its business in 20 countries which is major strength for Aldi.
4. Customer support is the main strength which Aldi is having because it offers product at low prices.

1. Employee satisfaction is not appropriate in Aldi, the article on Aldi says that employees working hours are too long in Aldi (Rodionova, 2017).
2. Aldi offer their products to low and middle class so high class people mostly do not prefer their product which is major disadvantage to the company.

1. By providing better services to customers they can charge higher prices which can increase their profit.
2. Growth opportunities are in countries such as Asia and Africa because these countries are growing economies (International Monetary Fund, 2017).
3. It can set up its business in various states due to its market share, it can easily attract customers due to its reputation

1. Aldi has to face high competition from Woolworths and Coles which are big companies in Australia.
2. It has to face risk that are associated with its suppliers.  

If Aldi wants to set up its location in China there are various challenges it will face which are discussed below-

1. Language differentiation- the language which they are using in Australian market is different from Chinese market so before setting up new business in China, Aldi has to understand the language preference of the people of China which can be a major task for Aldi.
2. Use of Web is totally different- while using websites, Westerners read them from left of the top to right of the bottom on the other hand Chinese consumers read them from centre of the top to centre of the bottom. Chinese speakers adopt services like WeChat, Weibo on the other hand Westerners adopt services like Twitter, Facebook, Google (Freed, 2016).

Besides above mentioned points, following things must be taken into consideration such as analysis of competitors of China before setting business in China- Aldi has to face competition from various China’s supermarkets like Wal-Mart, Tesco, Lotus, Carrefour so a careful understanding of these supermarkets is necessary to successful in Chinese market.

Pestel Analysis Of China-

The model of PESTEL analysis is quite helpful in today’s business environment. This helps in analyzing business environment (Perara, 2017).

1. POLITICAL FACTORS- Government regulation of China will majorly affect the Aldi way of working. The government of China focus on E-Commerce which is major thing in which Aldi has to make changes for setting business in China. So before starting business in China, Aldi have to take in consideration the political issues which are in China (Adamkasi, 2015).
2. ECONOMIC FACTORS- Economic factor of China has both positive and negative impact on Aldi. Positive factors in China are- increment in consumers purchasing power and labour cost in China is very low so this is good idea to start business in China by Aldi but there are economic issues of high inflation rate (banks of China has huge interest rate which can be depressing situation for Aldi) and high property prices (prices of property is huge this will increase the capital investment of Aldi. So before starting business in China, Aldi have to take care of these two points (Adamkasi, 2015).
3. SOCIAL FACTORS-Social factors like consumers lifestyle, age, religion is different in China. Most of people in China prefer doing shopping online because 90% of the people in China are literate which can adversely affect the Aldi supermarket but also there are some people prefer doing shopping at supermarkets because of the risk associated with online shopping so in order to start business in China, Aldi has to see the ratio of people who prefer shopping from supermarkets (Adamkasi, 2015).
4. TECHNOLOGICAL FACTORS- There are various technological factors which will affect the Aldi supermarket like they do not have safe online payment system, the most used payment system credit card not have much acceptance in China (because people do not get safety regarding using credit card) (Adamkasi, 2015).
5. ENVIRONMENTAL FACTORS- Environmental factor of China will have huge impact on Aldi. In China there is a provision for shopping online rather than visiting the shop, reason for shop online is that only few vehicles will be used which in turn result in less pollution in the country. So to set up business in China, Aldi has to understand all the norms of China related to environment protection (Adamkasi, 2015).
6. LEGAL FACTORS- There are various legal factors which will affect Aldi to enter in Chinese market-

• Every company requires Form of Representation in China. Without it companies are not allowed to distribute profit
• There is legal restriction on selling some goods, this requires licensing requirement so before selling any hazardous goods companies has to take license and permission from legal authorities.
• Taxation system of China is somewhat different from other countries so this has to taken in consideration before starting business in China (Huschblackwell, 2018).
• In China, every company has to specify the scope of its business in registration documents of its business. Such as if Aldi want to start its business operation in China it has to draft that its business scope will not be done outside the approved business scope.  

Aldi can put its brand value in China by Segmentation, Targeting and Positioning.

• Segmentation- The process of dividing market into smaller groups is called Segmentation. Aldi before launching its supermarket should aware of people choice or lifestyle in China. As Chinese consumers are growing so fast, they are becoming distinct so in this case Aldi should divide its consumer into classes and should know each class preferences (Erickson, 2017). Aldi can earn huge profit if its market is divided into different classes of people that is different segment for child, middle age people and adults.
• Targeting- Target customers in China for Aldi are mostly low and middle class people. They should also target high class people so that they can earn huge profit by segmenting counters for men and women. As some Chinese consumers are brand addicted so Aldi can also charge high prices by providing good quality to high class people (Yu, 2014).
• Positioning- To make difference from other competitors in the market, Aldi launched ad that shows that the brand which they offering is something different from others. The ad shows a woman dancing with her shopping cart and she rotate and grab the trolley which reveals that Aldi customers are happy (Samios, 2017). Besides this Aldi offer better quality products at lowest prices so that more customers can grab the products. 

Recommendation And Conclusion

From the above discussed report it can recommended that-

• Aldi should offer its product to high class people besides low and middle class people. High class people can increase the profit as well as growth of Aldi. It should start a segment for high class people by providing better and good brand to these people, this will attract more and more high class people (Jing Daily, 2014).
• Online shopping facility should also start by Aldi as Chinese consumers mostly prefer shopping online. They believe that with the growth of online platform, they can easily purchase their necessity items (Fibre2Fashion, 2017).
• Pricing should be kept in such situation which will benefit both Aldi as well as consumers.
• Before moving to China, Aldi should know properly the language of China as well as payment system of China as Chinese consumers do not use credit card facility for payment.
• Aldi should understand all the legal issues which are lying in China for starting a business like laws related to property rights, local taxes which are lying in China, registration procedure as well as licensing requirement.
• A brief analysis of competitors in China has to be done for successful business operation in China, so that smooth and efficient operation of business can be done.

From the above explained report, it can be concluded that Aldi has successful business operation in its location, Aldi mainly have product line for low and middle class people which offers good product at low prices. It is also explained in the report that the market position of Aldi is worth with many growth opportunities. Further discussion was carried on challenges like language problem and different web system which was there for starting business in China with the help of pestle analysis.  

References- 

Australian Trade and Investment Commission. (2018). Business risks. Retrieved from: https://www.austrade.gov.au/Australian/Export/Export-markets/Countries/China/Doing-business/Business-risks

Champan, B. (2018). Aldi and Lidl reach record market share as shoppers continue to look for low prices. Retrieved from: https://www.independent.co.uk/news/business/news/aldi-lidl-market-share-record-high-supermarket-figures-shoppers-discount-low-prices-a8288011.html

Cox, J. (2018). Lidl and Aldi share title of Britain’s fastest growing supermarket, data reveals. Retrieved from: https://www.independent.co.uk/news/business/news/lidl-aldi-uk-fastest-growing-supermarkets-joint-top-germany-budget-discount-new-stores-a8149071.html

Davey, J. (2018). Aldi and Lidl dig deeper into Britain’s grocery market. Retrieved from: https://www.reuters.com/article/us-britain-grocers-discounters/aldi-and-lidl-dig-deeper-into-britains-grocery-market-idUSKBN1H108I

Erickson, J. (2017). CHINA’S CONSUMERS ARE SEGMENTING INTO DISTINCT GROUPS: A FIELD GUIDE. Retrieved from: https://www.alizila.com/chinas-consumers-are-splintering-into-distinct-groups-a-field-guide/

Fibre2Fashion. (2018). Chinese consumers prefer online shopping: report. Retrieved from: https://www.fibre2fashion.com/news/textile-news/chinese-consumers-prefer-online-shopping-report-228885-newsdetails.htm

  Freed, J. (2016). Why you can’t market to Chinese in the same way as English speakers.              Retrieved from: https://www.smh.com.au/business/companies/why-you-cant-market-to-chinese-in-the-same-way-as-english-speakers-20160311-gng7ly.html

Gale, A. (2018). Why Aldi and Lidl will keep on growing. Retrieved from: https://www.managementtoday.co.uk/why-aldi-lidl-will-keep-growing/article/1386497

Husch Blackwell. (2018). Top Eight Legal Issues Regarding Entering the China Market. Retrieved from: https://www.huschblackwell.com/newsandinsights/top-eight-legal-issues-regarding-entering-the-china-market

Jing Daily. (2014). 4 Unique Characteristics Of Chinese Shopping Habits. Retrieved from: https://jingdaily.com/4-unique-characteristics-of-chinese-shopping-habits/

Marum, Anna. (2016). 16 things to know about Aldi, the German grocer trying to take over America. Retrieved from: https://www.oregonlive.com/window-shop/index.ssf/2015/08/aldi_16_things_to_know.html

Perara, R. (2017). The PESTLE Analysis. Sri Lanka: Nerdynaut. 1-17.

Rodionova, Z. (2017). What is it like to work at Aldi? Employees reveal long hours, poor work-life balance…but good pay. Retrieved from: https://www.thesun.co.uk/money/3729239/what-is-it-like-to-work-at-aldi-employees-reveal-long-hours-poor-work-life-balance-but-good-pay/

Ruddick, G. (2013). Aldi: a history of the low-cost supermarket. Retrieved from: https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10343032/Aldi-a-history-of-the-low-cost-supermarket.html

Samios, Z. (2017). ‘Good different’: Aldi launches new brand positioning to celebrate its differences. Retrieved from: https://mumbrella.com.au/good-different-aldi-launches-new-brand-positioning-celebrate-differences-444735

Yu, Liann (2014). Consumption in China: How China’s New Consumer Ideology is Shaping the Nation. United States: John Wiley & Sons. 1-176.

International Business Fund, (2017). Asia’s Dynamic Economies Continue to Lead Global Growth. Retrieved from: https://www.imf.org/en/News/Articles/2017/05/08/NA050917-Asia-Dynamic-Economies-Continue-to-Lead-Global-Growth