Disucss about the Competitive Strategy for Techniques Analyzing System.
Retail industry is characterized by high competition and low profit margins. The intense competition between the companies and the saturation of the business has resulted in the eroding profit margins between the companies (Hubbard et al., 2014). Moreover, there are limited options to obtain competitive advantage and most of the retail organizations are dependent upon cost leadership to maximize their profit share. Marketing is also crucial for the retail organizations to attract new customers and maintain the market share (Porter, 2008). Aldi is a leading retail business organization headquartered in Germany. The company was founded in 1964 and since then has become the leading discount retailer across the world.
Aldi has created a name for itself by selling the grocery and the farm products at very low prices and tapping the low cost customers. The company keeps its price low by reducing the services offered to the customers and selling products in its own private brand. In the recent years, the company has given competition to various multinational retailers and forced them to reduce their price and profit margins. IN the UK, the major competitor of Aldi is lidl which is also a discount retailer. Both the companies are beating their competitors on premium products by offering bargain prices. Asda, Tesco and Morrisons are the major competitors of the company (Rodionova, 2016). Aldi entered the Greenfield Australian market in 2005 and has created substantial market share wherein no other foreign retail organization had been successful. In this essence, in this report, the marketing strategy of Aldi has been explored (Reynolds, 2014).
The Aldi is a brand which encompasses two supermarket retail chains. It has stores over 18 countries and the expanding in other countries. The company operates in major parts of Europe, Australia and the USA. There are about 8000 stores of Aldi situated in different parts across the world. Aldi began its operations in the UK in 1990; however, its presence in the country is limited. In the recent years, the market share of the company is constantly growing due to its no frill attached cheap services. Several affluent customers have also started attracting towards cheap and low cost products offered by the company. The growing affluence of the retail chain has dreaded the previous supermarket chains and the companies have adopted strategies to reduce their prices. In Australia, the company initiated operations in 2001. At that time, the retail market of Australia was dominated by the duopoly of Coles and Woolworths who had maximum market share. Other than that, a local discount retailer named Franklins was also operational. Although the retail market of Australia was a Greenfield operation, several foreign retailers entered the Australian market and failed as they were unable to snatch their market share from the market leaders. However, Aldi has become successful in the Australian markets as it obtained the market share of Franklins after its failure and provided qualitative products to the customers.
In order to capture market share and attract new customers, the companies adopt robust marketing strategy. The marketing strategy of a company is strongly related to the sales and operations and the public relations of the company. The business organizations strategize their marketing activities to coordinate marketing activities and maximizing the impact of the marketing tactics (Leake, Vaccarello and Ginty, 2012). In this regard, the marketing methods of Aldi in Australia have been examined in the below section:
The marketing strategies of a company can be differentiated under three generic strategies, namely, focus, differentiation and cost leadership. In the focus strategy, the company focuses on a narrow customer segment and adapts its products according to the needs of targeted customers. The differentiation marketing strategy refers to the marketing methods wherein the company develops different marketing plans according to the different target customers. In contrast to it, the cost leadership marketing strategy refers to the marketing strategy wherein the companies reduce their operational cost and pass that cost advantage to their customers (Leake, Vaccarello and Ginty, 2012.). Basically, in the cost leadership strategy, the business organizations market themselves as the cheapest seller of the services.
Cost Leadership: It can be examined that Aldi has adopted the marketing strategy of cost leadership and differentiated strategy. In the cost leadership strategy, the company has reduced the operational costs associated with the operations of the retail stores. The retail stores are built with a simple design for easy navigation and the customers are provided with no extra services. The most important contributor to the cheap prices offered by the company is the private labels which are the product manufactured by the company. The retailer also sells fewer items than a typical retail store which increases sales volume and drive discount. Moreover, by implementing private labels the company reduces the cost of the middle man (Lutz, 2015). As discussed above, the designing of the store are done in a manner such that the operational costs are optimized. The stores use natural sunlight and utility costs are minimized. The working of the store managers is also optimized by using stock shelves instead of boxes. In the same essence, the company has implemented several strategies such as easy scanning, check-out system, self-service and use of shopping carts to reduce the costs to the company.
Differentiated Strategy: The Company has implemented differentiated strategy to tap customers from different market segments. In this strategy, the company has targeted the low cost customers and the environmentally aware people. It has targeted its marketing strategy to the environmentally conscious people by increasing the number of environmental friendly policies. It promotes its energy efficient drives, and promotes itself as a socially responsible retail marketer. The company introduces itself as an organization which is not operational twenty four hours and thus adopts energy efficient practices. Moreover, it also promoted the sourcing of fresh fruits and vegetables and the environmentally-friendly packaging. It has also participated in several communities that promote the child nutrition, no artificial color and quality testing (Aldi, 2017). It can be inferred from the above discussion that Aldi follows the strategy of cost leadership and the differentiated marketing strategy.
So far, Aldi has been successful in creating a substantial market share for itself in the Australian market. However, the company can increase its market share by adopting several marketing tactics. In the following section, several recommendations are made to develop the marketing plan of Aldi.
Use of Online Methods: As the company is focused on reducing its operational costs, it can implement online methods to drive its marketing strategy. The online methods are cheap and viable option to communicate with the young generation through social media. The company should be responsive of the messages and the complaints of the customers. Other than that, the company should also focus on connecting with its customers on the social media. Aldi can also implement email marketing and social page optimization to attract customers (Leake, Vaccarello and Ginty, 2012). It can share the new schemes and the discount offers to the customers though online methods.
Offering free newsletter: Aldi can enhance its customer base by offering a free newsletter. The newsletter will contain information regarding the new offers, products offered by the organization and discounts. It will help the company to increase its potential customer base. Free newsletters are accessible to everyone and it increases brand awareness. Along with it, the company can start blog in the online media wherein it can connect with its customers. The company should connect with its customers and ask for their opinion and responses for the services provided. Incorporating the suggestions of the customers will increase the customer satisfaction and the service quality (Gilmore, 2003).
Offer excellent Customer Service: Aldi provided minimal customer services to its customers to reduce its operational costs. However, in Australia the company is also targeting the middle-class customers by providing quality products at reasonable rates. These customers are habitual of getting excellent customer services. Therefore, Aldi can initiate to provide excellent customer services to its customers. The company can hire experienced professionals from the competitor companies such as Coles and Woolworths to incorporate their market knowledge and customer satisfaction techniques into their working (Brink and Berndt, 2008).
Building Partnership with the Suppliers: Aldi is a discount retail organization. The company resists selling branded products and relies on its own private label. The company should focus on establishing partnerships with the local suppliers and the farmers in Australia so that it can reduce the cost by bulk operations (Brink and Berndt, 2008).
Investing in the longevity of the Customer Relationship: If the involvement of the customer is high with the company, it is more likely that the customers will stay in the company rather than going to its competitors. The company should focus on delivering high quality customer service to enhance customer satisfaction. Asking the customers for their feedback will also make them feel important. Enhancing the customer satisfaction will result in word of mouth publicity which will increase the brand awareness and customer loyalty (Mudie and Pirrie, 2006).
Conclusion
It can be concluded that the Aldi is prominent discount retailer which has developed numerous strategies to develop its market share in Australia. Aldi was founded in Germany and over the years opened its retail stores in several countries of Europe, the UK and the USA. The company has been successful in developing a niche low cost market. In Australia, the company has implemented two strategies of cost leadership and differentiated strategy to attract customers. In the cost leadership strategy, the company provides its products at a comparatively lower rate than its competitors. In Australia, the major competitors of the company are Coles and Woolworths which offer products at comparatively higher rates. Aldi has forced these companies to reduce their prices. Along with it, the company also follows the differentiated strategy and with it tries to capture the environmental-friendly customers. This strategy can be perceived in the designing of the stores, product packaging and the use of light and utilities. Aldi can grow its market share in Australia by using online marketing channel and offering free newsletters. The company should also focus on building relationships with the suppliers and the increasing the customer efficiency. By building relationship with the customers, the company can invest in the longevity which will result in word of mouth publicity. The satisfied customers will publicize the company themselves and the company can reap profits from it.
References
Aldi. 2017. Environment. [Online]. Available at: https://corporate.aldi.us/en/corporate-responsibility/environment/ [Accessed on: 21 January 2017].
Brink, A. and Berndt, A. 2008.Relationship Marketing and Customer Relationship Management. Cape Town: Juta and Company Ltd.
Gilmore, A. 2003. Services Marketing and Management. London: SAGE.
Hubbard, R.G., Garnett, A.M., Lewis, P. and O’Brien, A.P. 2014. Microeconomics. Pearson Australia.
Leake, W., Vaccarello, L, and Ginty, M. 2012. Complete B2B Online Marketing Serious skills. London: John Wiley & Sons.
Lutz, A. 2015. How Aldi sells groceries for cheaper than Wal-Mart or Trader Joe’s. [Online]. Available at: https://www.businessinsider.in/How-Aldi-sells-groceries-for-cheaper-than-Wal-Mart-or-Trader-Joes/articleshow/46857585.cms [Accessed on: 21 January 2017].
Mitchell, S. 2014. Aldi Australia sales forecast to tip $15b by 2020. [Online]. Available at: https://www.smh.com.au/business/retail/aldi-australia-sales-forecast-to-tip-15b-by-2020-20160418-go8rmu.html [Accessed on: 21 January 2017].
Mudie, P. and Pirrie, A. 2006. Services Marketing Management. London: Routledge.
Porter, M.E. 2008. Competitive Strategy: Techniques for Analyzing Industries and Competitors. Simon and Schuster.
Reynolds, E. 2014. Why do Australians love Aldi? The secrets to the supermarket’s phenomenal success. News.com.au. [Online]. Available at: https://www.news.com.au/lifestyle/food/why-do-australians-love-aldi-the-secrets-to-the-supermarkets-phenomenal-success/news-story/fb4c5e30228f5f23b720f7b0caee3018 [Accessed on: 21 January 2017].
Rodionova, Z. 2016. Aldi and Lidl are now beating their competitors on non-budget items. The Independent UK. https://www.independent.co.uk/news/business/news/aldi-and-lidl-are-now-beating-their-competitors-on-non-budget-items-a6969461.html
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