Aldi Business Analysis: Resources, Value Chain And VRIO Framework

Resources of Aldi

The report has been authorized by Course Coordinator of MGT704 Global Business Management, at the USC, Australia.

The primary aim of this report is to understand and analyze the business of Aldi. The multinational companydeals with supermarket chains across the world and is one of the largest retailers of the world with more than 10,000 retailers in more than 20 countries.

The main limitations that were faced during the creating of the assignment are as follows:

• The report focuses on secondary reports mainly as the there are limited primary sources
• The report did not provide a direct access to the core information of the organization.

The topic of the report is to study the business of Aldi. They currently operate through over 1000 stores and have a workforce of over 115,000 employees across the county. They also have distribution centers and support offices to provide their customers with high value and quality products for daily use (Ghalebeigi 2015). The report will briefly highlight the details about the company and which would be followed by resourced based analysis as well as the method to adapt external firm.

The research methodology that is used would be highlighted as follows:

• The model would be based on the view model that would help in understanding the resources, capabilities, value chain and the VRIO analysis (Ododo et al., 2017).
• The use of Porters five forces will be implemented.
• The research would also analyze the diamond framework and the cage framework model.

Aldi is a major Australian company that has its retail market throughout throughout the world in 20 different countries. The company was founded in the year of 1913 and ever since then, it has maintained its status as one of the largest retailers of the world. It is a Garman based supermarket business.

The resources of the company can be described as follows:

Financial Resources – As Aldi operates in more than one country, it can be described as a multinational company. The capital structure of the company is massive as it has been recover that from the 20 different locations, an estimated combination of $50 billion has been turned over.

Human Resources – Being a multinational company, Aldi’swork-forceexist across all of it sectors. By having multiple business across the business the company expanded more and more till the point it wasglobally incorporated.

Technological Resources – As the company has its business supermarket chains, the business has grown to an exceptional level that would require high end technological equipments like advance CCTV cameras and cyber promotional approaches.

Intellectual Property Rights – The company has the rights that would let them to agree with other countries along with various intellectual rights which is private to the firm (Harleman 2015). 

With other resources in place, Aldi is one of the very few businesses in Australia that is capable of possessing capabilities which can be analyzed and those of which are only private to the firm. Some of such services include:

Value Chain Analysis

Specialized in retail business: The company is the largest retailer business in Australia as they have a chain of supermarkets which maintain a 12.6% of market share (Fuseini et al., 2017).

Specialized in networking business:  The company has its mobile virtual networking service set up in Australia called Aldi mobile and it uses the Telstra’s networking service.

Infrastructure: Not only the company has access to technological aspects but physical infrastructure as well.

Global brand name: Due to a popular global brand name, the company has the opportunity to expand its business to other countries.

Stores and customer service: As they already deal with liquor takeaway, mobile service and retailing service across the country, it is known that the Aldi provides one of the best customer service operations.

Excellent marketing and innovation facilities: In all of the three businesses that Aldi deals with, it requires intensive customer service and because of that innovation is required (Jacenko and Gunasekera 2005) The retailer section has supermarkets all across the country and also the liquor shops and mobile networking service business uses improvisations in innovation techniques

The value chain analysis of the firm helps in the understanding of the activity procedure of the firm as having been applied by the company. This concept is divided into two activities which is the primary and the secondary.

Support activities
Firm’s infrastructure: Each department of the firm like legal, financial and managerial are operational.
Human Resource Management: The company has more than 104400 employees working and contributing towards a positive culture.
Technology Development: The organization`s core advantage is the technology development as it aims to prepare value by emerging in areas like digital marketing.
Procurement: The company procures IT Network equipment and other related equipment’s from the various suppliers and purchase spectrum of a great bandwidth
Inbound logistics: The inbound logistics are the components of network like the tin, tungsten and gold.	Operations: In this scenario, the new domains of connectivity are developed and maintained (Bjørner et al., 2004)	Outbound logistics: The products are transported to various warehouses and then to the retail stores for operations.	Sales and Marketing: The products are sold directly at the stores and the installation services ae provided	Service and support: There are various online centers as well as business centers which enhance the experience of the customers.
Primary activities

The VRIO framework helps in the understanding of the capability of the resources as possess by Aldi.

Resource or capability	Valuable	Rare	Imitable or Non-substitutable	Organized to Exploit	Competitive Implication
Strong brand name	Yes	Yes	No	Yes	High competitive advantage
Customer service and base	Yes	Yes	Yes	Yes	High competitive advantage
Financial excellence	Yes	No	Yes	No	High
Marketing	No	No	Yes	Yes	High competitive advantage
Brand presence	Yes	Yes	No	Yes	High competitive advantage

Bargain Power

Due to the aspect of low switching costs, Aldi customers have high bargaining power (Sanin 2015). Thi is more so because of their rivals who undergo the same strategy like Tesom Asda or Spar and Londis.

Supplier Power

Due to low power of bargaining, Aldi had the fear to lose the contracts of their business to a different supplier in term of supermarkets. This is turn provided Aldi the power to receive products from the suppliers at the lowest price so that it would improve the profit margin.  

Buyer Power

The power of the buyers is excessive when related to Aldi. As the supermarkets are mainly low cost based, therefore the buyer has most of the control over the products (Bernet and Stricker 2001). Aldi provides a wide range of products for the buyers to select from.

Threat of Substitution

The grocery market is normally low for food items and this is more common in Aldi. As there are niche food products, supplements are used as the means of substitute for food market. When people start to eat herbs and supplements as a meal, the threat for Ali remains very minimal.

VRIO Framework

Threat of New Entry

As Aldi is part of the Big 4 retailers of the country, therefore they are practically immune to newcomers in the market. As their profits are already protected, they have massive investment in distribution.

In the last ten years, most grocery retailers have achieved institutional investors as the process was stable and consistent requirement for food mean that Aldi offers regular and predictable income. There have also been instances when the retailers are forced to book asset values due to decrease in sales profit (Wu et al., 2015).

LAW: AlDI is a German company that has expanded its operations in Australia hence the company has to abide by all the legal jurisdictions by which other organisations in the industry are bound. Tax laws, labour laws, property laws, import and export laws, licensing laws etc are some of the basic legal jurisdiction the government of Australia has over the company. Aldi also has to abide by the competition law of the country.

REGULATIONS: AlDI does not associate with a political organisation or propaganda, however, the company supports sponsorship. The company also abides by the Australian Consumer Law regulations such as manufacturer’s warranty etc (Corporate.aldi.com.au 2018).

RULES: The company has strict rules against bribery, the employees of the company are restrained to take private benefits from professional relationships. Apart from that ALDI ensures that the facilities that manufacture the in-house brand is audited by recognised authorities like Global Food Safety Initiative (GFSI), as well as Harmonised Australian Retailer Produce Scheme (HARPS) which helps the company to align with the made in Australia program .

In terms on informal institutions, Aldi have shown many consumers alternative in relation to the traditional type of supermarkets. These type of discount based supermarkets provide a small range of products that comes with a low price.

NORMS: The norms that the company follow in Australia are aligned with the core values and principles by which the organisation has been established and is run in the host country (Aldi.com.au 2018).  

CULTURE: The culture of the company revolves around the assurance of quality and price that they offer the Australian market. The company has penetrated the Australian market in 2001 and since then there has a significant development of brand value among the target market in the country (Corporate.aldi.com.au 2018).

ETHICS:  ALDI Australia follows the employee welfare and human rights ethics for the people who are associated with the company. There are a number of information of the customers which are stored in the database of the company and the organisation ensures that this data is secured. Protection of trade secrets and abiding general principles are some of the major ethical considerations for the company (Corporate.aldi.com.au 2018).

	Cultural Distance	Administrative Distance	Geographic Distance	Economic Distance
Country level	Different languages Different value systems	Lack of shared regional trading bloc Lack of common currency	Physical distance	Differences in income and labor costs
Country level	Traditionalism	Home biasness Societal conflict	Geographical size	Economic size

Influence of Formal and Informal Institutions on Aldi’s Business

The diamond model haps in asserting a competitive advantage in regards to come certain factors.

Factor Conditions

Aldi has a great access towards raw materials as they have series of supermarket chains across the world (Mortimer and Grimmer 2018).

Demand Conditions

The market size for the communications for the products used in the supermarket is very high

Firm’s Strategy, Structure and Rivalry

The organization’s structure and strategy are followed by Aldi and providing excellent service with lower cost.

Related and Supporting Industries

The related industries are for gas station, mobile network and alcohol takeaways.

The generic strategy that is used by Aldi is the Cost leadership strategy through which the organization provides products at lowest price to its customers. The strategy of the company is to provide the customers with good quality products with recognised authorities’ quality assurance at the lowest price possible. As the company has the resource and capability to provide the customers with a low price in the products the company as well as is backed up with an efficient supply and logistic chain.

Aldi in the time of operation has achieved remarkable position in the market. Form the above analysis it can be said that the company is operating in an intense competitive industry, where players like Woolworth and Coles already had strong role in the industry before ALDI entered the Australian market.  The company has the resource and capabilities to keep up with the changes in the market and align the strategies with the principles and core values that the company follows. The company has over the years developed techniques and invest on innovation in order to provide the customers with the best quality product at the lowest price possible.

Some of the recommendation plans are:

• Maintaining different strategy and be open for new ideas.
• By investing more capital towards the process of marketing.
• By understanding what the customer wants and setting up the business accordingly.
• Reducing the time of wait at the counter.
• By making lucrative offers for the customers other than the discounts.
• Valuing customer feedback.

Conclusion

In conclusion, it can be said that the Aldi is a multinational organization that caters to both local and global populations. Being one of the largest supermarket chains in the country, Aldi aims to capture the market from low cost. The business operates in over 8000 stores worldwide and one of the largest market controllers in Germany. In some countries, Aldi has been criticized of being a cheap brand that deals in low quality of goods and materials. Recently, the company has made advances not only inside but outside as well. There have been many awareness programs that were funded by the company and which have made significant impacts. In Australia, the promotional methods are also very common as the company is well known across all sectors. Though it is not the best supermarket chain in Australia, it is certainly one of the best.

References

Aldi.com.au 2018. About ALDI. [online] Aldi.com.au. Available at: https://www.aldi.com.au/en/about-aldi/responsibility-at-aldi/[Accessed 29 Aug. 2018].

Bernet, A. and Stricker, S., 2001, February. German wineries on the web: A survey of web sites of Mosel-Saar-Ruwer and Pfalz wineries. In Submitted for the 75th European Seminar of the EAAE (pp. 1-8).

Bjørner, T.B., Hansen, L.G. and Russell, C.S., 2004. Environmental labeling and consumers’ choice—an empirical analysis of the effect of the Nordic Swan. Journal of Environmental Economics and Management, 47(3), pp.411-434.

Corporate.aldi.com.au 2018. Code of Conduct. [online] Corporate.aldi.com.au. Available at: https://corporate.aldi.com.au/fileadmin/fm-dam/pdf/CoC_AUS_screen.pdf [Accessed 29 Aug. 2018].

Fuseini, A., Wotton, S.B., Knowles, T.G. and Hadley, P.J., 2017. Halal meat fraud and safety issues in the UK: A review in the context of the European union. Food Ethics, 1(2), pp.127-142.

Ghalebeigi, A., 2015. Option Contracts for Supermarket Fruit Supply Chains: Theory and Practice (Doctoral dissertation, Victoria University).

Harleman, R.F., 2015. National brands in the discount supermarket: does brand image transfer occur on national brands whe

Jacenko, A. and Gunasekera, D., 2005, May. Australia’s retail food sector’. In Pacific Food System Outlook Conference, Kunming, China (pp. 11-13).

Mohdaly, A.A., Smetanska, I., Ramadan, M.F., Sarhan, M.A. and Mahmoud, A., 2011. Antioxidant potential of sesame (Sesamum indicum) cake extract in stabilization of sunflower and soybean oils. Industrial Crops and Products, 34(1), pp.952-959.

Mortimer, G. and Grimmer, L., 2018. Love them or loathe them, private label products are taking over supermarket shelves. The Conversation, (19).

Ododo, C., Mulholland, G. and Turner, J., 2015, November. Can Discount Pricing Be A Comeptitive Brand Strategy? An Evaluation of Aldi. In International Conference on Marketing and Business Development (Vol. 1, No. 1, pp. 241-251). Bucharest University of Economic Studies Publishing House.

Sanin, J.D., 2015. A BIG RESPONSIBILITY! The Moralization of markets and Rise of supermarket patriotism. Sites: a journal of social anthropology and cultural studies, 12(1), pp.83-106.

Shannon, J., 2016. Beyond the supermarket solution: Linking food deserts, neighborhood context, and everyday mobility. Annals of the American Association of Geographers, 106(1), pp.186-202.

Wu, J.H., Neal, B., Trevena, H., Crino, M., Stuart-Smith, W., Faulkner-Hogg, K., Louie, J.C.Y. and Dunford, E., 2015. Are gluten-free foods healthier than non-gluten-free foods? An evaluation of supermarket products in Australia. British Journal of Nutrition, 114(3), pp.448-454.