Strategic Analysis Of Aldi: Identifying And Evaluating Strategic Options

Pestle Analysis

Albrecht Discount Inc., globally known as Aldi is a German-owned discount supermarket chain. Aldi opened its first supermarket in Ireland in 1999. Aldi is considered the market leader in industry of international grocery retailing, owns, and drives chain in the discount grocery stores in Europe, Australia, and the United States. The company is dealing in retail stores and supply chain merchandise and food including meat products, frozen and refrigerated food, sweet and snacks, dairy and bakery products, beverage and pantry products in addition to the home care and personal care products. The company does not disclose its sales or profits in Ireland. The company has over 10000 stores worldwide. The company has a turnover of more than Euro 1.3 billion turnovers with more than 3500 employees, which are performing at their best level (Aldi, 2018).

In present Aldi is using the analysis, which is done to identify and evaluate the strategies, which can operation in the business environment. These strategies are used by the company to evaluate the strategic options available to the company. The strategy used while evaluating Aldi performance and strength includes the Ansoff matrix and SAF strategy. In this, the company competitive advantage can be evaluated and analyzed. These strategies help to identify the direction and methods used by the company and if there is any deviation in the expected performance, corrective measures will be taken (Kiplinger, 2018).

Economic factors

The slowdowns in the economy in the developed countries found to be affected by the crisis. The industry and customer both are affected due to the less purchasing power in economy. This is the reason Aldi starts giving the products on discount so that more goods can sell in the market. Larger revenues, as well as the market share, will be grabbed by the company (Pestle, 2013).

Social and cultural factors

In society, nowadays individual become socially responsible and wants the company to remain responsible towards the society. Consumer tries to purchase the goods from retailers who are adopting the sustainable practices. Aldi also tries to adopt the socially responsible activities to remain competitive in the market (Drucker, 2014). 

Technological Factors

Technology is altering the method consumer’s shops retail products and the way retail businesses function in bad and good ways. Technology has been improved in the market by using the mobile phones and commerce media, which provided the benefit to the retailer to interact with the customers and give them more knowledge about the services. A company like Aldi is using the Radio Frequency Identification Device (RFID) to facilitate end-to-end tracking of ingredients and better stock control through business intelligence tools (Shanmugam, 2013).

Porter’s Five Forces Model

Environmental Factors

Aldi has increased the use of eco-friendly packaging in providing the products from their store. The company has prompted to not to use the polythene bags in their business and try to reduce the amount of pollution in the environment (Pestle, 2013).

Legal Factors

Aldi is following the Australian Common Law in its business.  Company is abiding by the laws and legislation in Australia. Aldi is trying to maintain better relationship with authorities so that there will not be any restriction from Australian Retailers Association (Kolios and Read, 2013).

Bargaining power of Suppliers

The buyers in the supermarket are found to have the low negotiating power due to the presence large sellers in the market. The industry of grocery retail, supplier’s fear to lose their contracts in business as there is the large availability of the supermarkets. This gives Aldi the power to get the products from sellers at lowest likely prices to recover its profit margins (West, and Bogers, 2014).

Bargaining power of buyers

Aldi customer is found to have the high negotiating power due to the low exchanging cost in shopping among the low priced supermarkets like Tesco, Asda. These are major competitors of Aldi and give the extensive choice of food retailing consumers. Lot of power has been given to choose between numerous supermarkets when shopping around, which is exactly what they do (Dobbs, 2014).

The threat of new entry/Barriers to entry

In the UK food retailing industry, the entry of new entrants is found to be the relative case with which many firm can enter the market of food retailing. The only threat is of the big four present in the market. Aldi has managed to compete with big four by introducing the strategy of offering the discounts up to 40% below the competitor’s prices for related products (Gawer and Cusumano, 2014).

Threat of substitutes

In the grocery market, the threat of substitutes is found to be high for food items. As Aldi has not specific in products or services, the products, which are offered by the Aldi, can be found at other supermarket stores also. The only change between the Aldi is that they offer the product at a very low cost (Porter and Heppelmann, 2014).

Competitive Rivalry

The rivalry in the retail industry is found to be intense in nature. As all the players are offering almost the same products and services at the same price in the market. Woolworth, Coles, and Wal-Mart are some of the competitors of Aldi. In addition, the company drives on the principle of reducing fixed costs just like all of its competitors. Thus, the rivalry in the sup[ermarket industry is found to be high and intense in nature (Yunna and Yisheng, 2014).

Stakeholder Analysis

Keep Satisfied

The stakeholders are engaged in and consult on the interest area of their stakeholders. These interests include safety measures in a food item, the system of delivery in business. In Aldi, the shareholders are found to become the key player and want to shifts to the right (Sutherland, 2014).

Manage Closely

In this, stakeholders are the key players in the market and try to remain in this group. Aldi stakeholders are involved in the decision making of the business to remain updated the performance of the company. Aldi shareholders have also involved themselves in the governance and social responsibility top remain the positive image of the organization in the mind of the public. The employees of the company become the key player. As they are, found with the more power and can hinder the performance and implementation of the new strategy (Telegraph, 2018).

 

(Source: Moriarty, 2014)

Monitor

The Aldi stakeholders are not finding to least informed about the happening in the business. The stakeholders are finding to inform by the company in every step performed by the managers. However, in this step, the information transferred through the newsletter, website, and emails shots (Hörisch, Freeman and Schaltegger, 2014).

Keep informed

The requirements and needs of stakeholders are taken as a priority by Aldi. Products are made according to customer needs and requirements.  In this, stakeholders are keeping informed about activities and operation, which are done, in the near future by the management. This will increase the goodwill of the business (Bridoux and Stoelhorst, 2014).

Market Penetration

Aldi should open new retail stores and put their attention on developing different types of customers. Aldi is targeting the different set of customers ranging from high class to the middle class by offering a large variety of products. The company is making the loyal customers by introducing the loyalty cards to them. Aldi must make the initiatives towards introducing the sponsorship of sports (Gregor, and Hevner, 2014). The next target of Aldi is to continue growing in the UK. Moreover, the company is planning to open new outlets and emphasis on different target customers, not only from social backgrounds.

Product development

In this, the company tries to develop the new product in the existing market. Aldi tries to put its cost lower in the market to have the large assorted area. Introducing the new product by Aldi increases their revenues in the future. Aldi is also planning to introduce a new delivery system that will satisfy the customers and put their focus on quality (Alstete, 2014).

Market development

In this, Aldi is trying to cover and capture the new market by offering the existing product. In future Aldi is planning to internationalize its product overseas. Moreover, the company is planning to explore its business in a different sector of the market to grow their business (Zeschky, Winterhalter, and Gassmann, 2014).

Diversification

This strategy is considered risky in nature. The company is planning to diversify its product range. The Aldi success in the market depends on introducing new lines and service of product s in their business operations. In addition, to gain, the large market in near future, the company is trying to emphasis on offering a broader range of products to attract the customers in Australia (Proctor, 2014). 

International and Innovation strategy 

From the analysis, it can be evaluated that the international strategy of Aldi from the example of the UK, also taking into accounts the international background. Therefore, the study proposes that Aldi position in the market is very sturdy. As related to its competitor Lidl and Tesco, Aldi has the biggest market share. Moreover, Aldi is found to more receptive in the local market to grab the large area not only in the UK but also to another market where it operating its business. In the strategy adopted by Aldi, focus is given on providing  the product at a low cost and low price. The environmental protection is also taken care by the Aldi by focusing on reducing the carbon footprint emissions (Ferrero, Hoffman and McNulty, 2014).

The recent innovation done by Aldi includes using the environment-friendly approach to attract the customers. In this strategy, the company focus on providing the positive e contribution towards local communities and provide efficiency in Health and Nutrition of their customers. Various sustainable strategies are used by the company to create a large customer base while manage to producing their innovations (Feedough, 2018).

 

(Source: Learning Centre, 2010)

The Johnson and Scholes suitability, feasibility, and acceptability model have been used in evaluating the strategic evaluation and selection of resources.

Suitability

From the PESTLE analysis, it can be analyzed that the political and economic factors are in the favor of Aldi Company as they are providing the products at low cost to the consumer, which increases their market in the market. Customer and market demand also plays an crucial part in the suitability analysis. In the UK, Aldi has many opportunities to explore in the market and have the ability to face the challenges present in the market in the form of competitors and political instability in the environment (The Irish Times, 2018).

Another strategy that is Porter’s five forces model can be used to determine the suitability of the strategic choice in the market. The company is using its strength to remain competitive in the market. Aldi is considered the low-cost provider in the market. This is considered to be its biggest strength which will work anywhere in the country (Learning Centre, 2010).

Feasibility

Feasibility focuses on the inside abilities of the company. The internal capability of the company lies in 6M, which are money, manpower, machinery, market, material, and makeup. From these factors, Aldi is finding to have the money, manpower, material, machinery, and market which make them survive and sustain in the environment for the long span. From the Ansoff matrix, it can be analyzed that Aldi has the fast production in its operation and uses the concept of economies of scale, which makes per unit cost of product low (Learning Centre, 2010).

Feasibility can be analyzed checked by the market area covered by Aldi in the UK and targeted market. From the PESTLE and porter five forces analysis, it can be evaluated that the company is growing and able to increase its market share while providing the good services to their customer.

Acceptability

Acceptability focuses on the other two concepts of the strategic choices, which are related to stakeholders and financial aspects. From the stakeholder’s analysis, it can be evaluated that the stakeholders of Aldi are found to be satisfied with the information given by the company. The employees in the company become the key player with high power and this group can hinder the overall performance and implementation of the strategies (Oxford, 2018).

Activities	Objective	Action Strategies
Goal/objective of Promotion	Increase brand recognition, and growth in sales	Advertisement through T.V and introduction of loyalty cards
Responsible Team	Increase in sales	The company focus on increasing the sales by offering discounts and other schemes. The marketing department will be responsible to create attractive messages to spread knowledge about the company and products.
Increase in market share	Offering Quality and reasonable products	By providing the product at a low cost
Time period	To establish and promote sales in other countries possible	6 Months
Review of Action plan	To identify the deviations in the plan	Managers will properly track the progress of the plan and will make changes wherever possible.
Implementation	Successfully implementing the plan in order to grab sales from the target market	Promotion of the product will do through communications channel under the guidance of marketing team.
After implementation review	Review of the customers, an increase in the sales	Checking the effectiveness and success of the plan

Conclusion

From the above discussion, it can be concluded that the supermarket chain is considered one of extremely focused and competitive markets. Aldi is competitng with the companies like Woolworth, Asda, and Tesco. Despite competing with these big firms, company has been found to establish the market in which created values are served to its customers. The overall strategy choice and implementation of strategy done by the Aldi is found in favor. From the PESTLE analysis, it is evaluated that factor like political, economic factors and environmental factors are in favor of Aldi and company can run its business while capturing the large portion. From porter five forces, it is evaluated that the buyers have the bargaining power in the market, which makes the company lower their prices but has less threat for the substitutes and new entrants. As all competitors are selling the same products and services. From stakeholder’s analysis, the stakeholders are informed well about the services and new strategies implemented by the company but one of the stakeholders that are employees found with the high power, which can harness the implementation of new strategy, by Aldi. The company is moving in the direction where it has a competitive advantage in the market by lowering the cost of its product. Aldi positioned itself in the, market as the low cost provider from which the market penetration can be done. This strategy is also useful for internationalising the business. By using SAF strategy, it can be evaluated that Aldi is acceptable in the market.

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