Critical Market Organizations Analysis For ALDI

Background of Aldi

Discuss about the Critical Market Organizations Analysis for ALDI.

In the year 1913, Aldi was founded in Germany. In 1960, the organization split into two chains. The stores of Aldi had its focus mainly on the European Aldi introduced its store chain in Australia in the year 2001. Aldi has more than ten thousand stores operating all around the world. Among these, Australia has more than two hundred and seventy functional stores. Due to its competitive nature and strategies, Aldi has saved its spot in the list of the top ten retail companies of Australia.

The report will briefly analyze the strategies that have been adapted by the organization so far. It will show how Aldi has managed to stay ahead in the competition of the Australian retail market. The major market issues that Aldi faced in the Australian market are also discussed in this report. The policy measures which kept the organization avert those issues are analyzed with a brief background view of the organization. There are various new strategies that Aldi can adapt in order to be more successful in the industry, which are discussed in brief here.

Karl Albrecht and Theo Albrecht founded the company Aldi 103 years back in the year 1913. In 1960 the organization was split in two chains, one of which was named Aldi Nord and the other was Aldi Sud. These two chains have their headquarters in Germany’s Essen and Mulheim, respectively, which operates independently. Aldi operates in eighteen countries including Australia. The organization has a strong hold in the retail sector of the country. The success of the organization came through its strategy choices. The strategy adopted by the organization in the earlier periods was supplying quality products at a cheap price. The organization has also adapted the strategy of expansion by acquisition in many countries. The first international expansion of Aldi was in Austria. The Hofer retail chain of the country was acquired by the organization. The expansion of Aldi was easier due to the rules and regulations that were set by the European Union. Now the organization has a worldwide turnover of 75 billion dollars. Aldi’s performance bettered as it faced competition. The organization has created more than 7000 stores all around the world as their rapid expansion strategy started. The more competitive the markets began, the more market share was targeted by the organization.

Market analysis for Aldi

The organization has gained the 8^th position in the Australian market in the fierce competition from the global giants. The strategies that Aldi has chosen to gain this spot has increased its efficiency. As stated by Metzger (2014), the strategy Aldi adapted in the Australian market at first was “private labelling.” This strategy increased the organization overall sales. It was followed by an increased production. To support this process, the senior management of the organization adapted the strategy of “eco-sustainability.” In the views of Lees and Winchester (2013), the eco-sustainability approach helped the organization become sustainable and it helped Aldi to be one of the highest profit-making retail organizations in the country. To understand the effectiveness of the strategies adapted by Aldi on the Australian market the PESTLE and SWOT analyses are done as given below:

The rapid changes in the tax policies in the Australian market have caused uncertainty, which made the market unstable. The consistently changing political agendas are the reason behind it. FSANZ has presented the food standard in the country. It works as the barrier for the new firms from entering the market. As stated by Voigt, Buliga and Michi (2017), the protectionism the Australian government follows also increases the production cost for the retail industry in the country.

Among the fastest growing economies in the world, Australia stands sixth. The country’s economy is witnessing a growth rate of 2.7 percent. The unemployment rate in Australia is 5.7 percent. The country is also experiencing increasing cot of fuels. The interest rate in the country is also increasing following the changes made by the federal bank. Australian dollar is strong than most of the currencies.

Home made grocery and food products are more famous in the Australian societies. Due to the size of the country’s population, the retail industry is big. The high quality products are more in demand as the Australia’s young generation is more health conscious. In the views of Kurnia et al. (2015), the economy also shows a low spending culture in the population.

Since the last decade, Australia’s online shopping system has been revolutionized. The quality demanded by the consumers has also increased the bar for the packaging process in the retail industry. The packaging also helps the organizations to differentiate their products. The cost of advertisement has gone down due to the popularity of social media bias. As stated by Armstrong et al. 2014, the technological innovation has raised the speed in the stores.

Political and legal factors

Australia possesses a diverse and high population, which is highly concerned about the environment of the country. With increasing population rate and growth rate, the environment laws has been more tightened by the regulatory authorities, as the pollution is also increasing in the country. Polythene usage in the country has also rapidly gone down for environmental benefits.

The PESTEL analysis above states that the strategy chosen by the organization of “private labelling” is inadequate for the Australian economy. the new environmental laws requires a more firm and upgraded strategy from the organization. This requirement has been met by the next strategy that has been adopted by the organization. Due to the health conscious nature of the Australian population, Aldi has chosen “eco-sustainability” as the new strategy, which distinguishes the organization from the others in the retail industry. It has improved the organization’s reputation in the Australian market. The consumers award Aldi’s caring attitude towards the environment. It has caused increasing brand loyalty.

The following SWOT analysis has been done to analyze the organization’s grasp over the Australian market:

Strength: ·         Strong brand image. ·         International recognition. ·         Increasing reputation for the quality of the products. ·         High control over the products being sold. ·         Low price. ·         Advantages over the competitors in several fronts.	Weaknesses: ·         Lack of differentiation in production. ·         Low brand name loyalty. ·         Manual systems reducing efficiency level in the production process. ·         Limited usage of technology. ·         Few well trained staffs. ·         Low spending on advertisements (Attacks 2016).
Opportunities: ·         Capitalizing on low cost positioning in the market. ·         Expanding the product range. ·         Spending more on advertisement will increase awareness. ·         Increasing quality standards.	Threats: ·         Free trade will bring in more competitors. ·         The competitive advantage enjoyed by Aldi can become temporary. ·         Increasing usage of technology by the competitors.

Table 1: SWOT analysis for Aldi.

Source: As created by the author.

The SWOT analysis above shows the positive and negative aspects of the market from the viewpoint of the organization’s strategies. The opportunities state that the organization can improve by highlighting its strategy of “brand recognition.” For this purpose, Aldi can focus more on advertising, upgrading the existing technology, increase product range. The Porter’s five forces model (appendix) supports this statement. The threats show how important it is for Aldi to move to a better technology. The changes required in strategies are discussed in the next chapter.

The previous chapter has showed the importance of changing the strategies of the organization. The mining boom of Australia shows promising future in the retail industry. This provides a brighter future for Aldi in this economic scenario. The objectives Aldi has right now are increasing the market share and profitability, become a sustainable organization, increase efficiency. To address these objectives Aldi can implement strategies like “brand awareness, technological innovation and adaptation, and expansion of stores in affluent locations.”

Choosing brand awareness strategy will increase the consumers’ involvement with the organization’s products. The product basket that Aldi offers will be more known to the consumers. It will increase the organization’s sales. According to the views of Berman (2015), Aldi can implement this strategy by creating workshops and brand recognition programs. The organization can also use social media for advertising. It will help Aldi to reach people of all age groups. Technological innovation and adaptation also requires the organization using the social media for reaching the target market. This strategy will help the organization change its existing inefficient systems in the production process to achieve better returns to scale. It will reduce Aldi’s cost of production and increase profitability. The organization expanding to affluent locations will give it a location advantage over the rivals. It will also increase sales and brand recognition among the consumers by increasing market share. This strategy is costly though it can increase profit by a huge margin.

Ecological environment

These three strategies have the potential of improving the technology involved in production process. The buyers will get a relaxation from the “limited choices.” It will give the organization the opportunity to engage in better allocation of resources. It will increase the efficiency of the production process of Aldi. These strategies have the potential of adding value to the products being offered by Aldi. Together these strategies will increase the organization’s sustainability and help it to provide high quality products at low prices (Steenkamp 2017).

Conclusion:

Aldi Australia is one of the country’s top retail companies. The organization offers its consumers products of high quality at low prices. This has been possible due to Aldi’s past strategies. The organization is operating in the world economy for more than a century, which ensures the sustainable strategy of Aldi. The Australian market has future promise for the organization as it has the potential of increasing its market share by following the new strategies. The legal and political frame of the country can make the guidelines for the strategy choice of the organization. The PESTEL and SWOT analysis assure that the upgradation in the strategy implementation is required for Australia to stay on the sustainable path. The cost efficiency and brand awareness can be increased by following the three prescribed strategies of brand awareness, technological innovation and adaptation, and expansion of stores in affluent locations.

References:

Armstrong, G., Adam, S., Denize, S. and Kotler, P., 2014. Principles of marketing. Pearson Australia.

Attacks, A., 2016. ALDI ATTACKS!. Month.

Berman, B., 2015. How to compete effectively against low-cost competitors. Business Horizons, 58(1), pp.87-97.

Dagevos, H., 2016. 15 Beyond the Marketing Mix: Modern Food Marketing and the Future of Organic Food Consumption. The crisis of food brands: Sustaining safe, innovative and competitive food supply, p.255.

Eagle, L., 2015. Introduction to Marketing Ethics. Marketing Ethics & Society, p.1.

Kurnia, S., Hill, S., Rahim, M.M., Larsen, K. and Braun, P., 2015. Food Hubs in Australia: Benefits, Challenges and Potential IT Contributions. In PACIS (p. 123).

Lees, G. and Winchester, M., 2013. Do competing supermarkets generally have the same sort of shoppers?. ANZMAC 2013.

Metzger, K., 2014. International Management Analysis of ALDI.

Mortimer, G., 2015. Is Aldi’s move to woo cashed-up shoppers a risk?. The Conversation.

Spanjaard, D., Freeman, L. and Young, L., 2015. Australasian Marketing Journal.

Steenkamp, J.B., 2017. Global Brand Strategy: World-wise Marketing in the Age of Branding. Springer.

Voigt, K.I., Buliga, O. and Michl, K., 2017. Striving for Customer Benefit: The Case of Aldi. In Business Model Pioneers (pp. 11-24). Springer International Publishing.