1. Provide a situational analysis of Aldi in Australia?
2. Discuss the fit between the company strategy and its context?
3. Analyse and evaluate the current strategic approach of the organisation?
4. Discuss the fit between the company strategy and its goals and expectations?
5. Outline with recommendations the future for Aldi you have chosen based on their current situation and strategy?
Aldi, German supermarket chain, has established its strong hold over the Australian market by sweeping out the market share of Coles and Woolworths supermarket chains of Australia. Aldi has acquired a market share of 12.5% in Australia which has reduced the market share of Woolworths to 36.3% (Roy Morgan Research, 2016). The market share revenue of Woolworths has reduced to $29.8 billion (Roy Morgan Research, 2016). This decrease has been reported consecutively for the second time and Woolworths has lost 1.4% of the market share. Though Coles saw an increase in market share by 0.9% to capture 33.2% of the market share and the remaining 0.5% was the growth of Aldi. Aldi has strategically captured the Australian market and its market share has been tripled over the period of ten years and has witnessed a rise from 3.1% to 11.6% and currently enjoys a market share of 12.5%(Roy Morgan Research, 2015). Aldi has established 350 stores in the country and its sales have reached $A4.03 billion which has been labeled as critical mass (Chung, 2014). Aldi’s low pricing strategy has attracted the shoppers of Australia and they are more likely to attract by the low prices and value driven services. Aldi has opened up 80 more stores across the eastern seaboard to create a war against Woolworth and Coles Supermarket (Greeblat, 2015). The shoppers seem to have loose their interest to buy from Aldi supermarket and the German supermarket chain has first time witnessed drop of market share (Boyd, 2016).
Aldi focuses on providing the lowest possible prices to the customers which it has achieved through limited range, exclusive brand products, focus and price change policy. Aldi has a focus to attract the consumers through its guaranteed lowest possible prices. Aldi also focuses on providing value driven services to the customers.
In order to analyze the strategy of Aldi, we need to understand the external environment factors which influence the consumer behavior of Australian market. The consumer behavior is affected by economic, regulatory, cultural and political factors which drive the market forces.
Economic
With the emerging technology and fierce competition among the companies have been proved to be advantageous to the customers in terms of wider options and increased ease of access. The market has become more complicated due to availability of wider options and thus, the decision process for selecting a single product has also become more complex because consumers have to differentiate between large ranges of products. The economic factors that could affect the behavior of consumer include inflation, job opportunities, complexity and competition in the market. Further, aggressive marketing by the firms including Coles, Woolworths and other supermarket chains have also confused the customers.
Political
Political policies strongly affect the behavior of consumer by facilitating them the means of financial sources, market regulation and other methods. The government of Australia facilitates the people with every means of financial resources to give them better lifestyle.
Socio-economic Status
Socio-economic status refers to the wealth of people, occupation, level of education and income level of the people living in Australia. The purchasing capacity of Australians has risen by more than 43% over the 15 years and they have the habit of large consumption (Santander, 2017). They give preference to new products over the old ones and like to have wide range of options. The rising trend of obesity and diseases has increased the concerns for health among the Australians which has increased the demand for fresh and organic food (Bureau of Statistics, 2013).
Further, Australia has a very high standard of living and an increasing demand for value driven products. The consumers are ready to pay higher amount for quality product and valued services (Santander, 2017).
From the analysis of external environment of Australian market, it can be derived that people are not price sensitive, rather, they are driven by the quality and values of the products and services. Now, Aldi has a total focus over maintaining its low prices as compared to its competitor. The strategy may have large attracted the consumer base, but that would not be a sustainable market strategy to retain the customer for a longer period of time. From the socio-cultural factors, it is clear that people look for innovative products and services which also serve them value at the same time.
Thus, the strategy of Aldi may have been proved successful for achieving short term goal, but it would not help to maintain the sustainability of the company.
Mckinsey’s 7S model would be applied in order to analyze the current strategy of Aldi. The model consists of shared values, style, staff, structure, skills and strategy (Michalski, 2011).
Shared Values
Aldi is a German based supermarket chain and has established its market in Australia through its strategic marketing and plan. The mission of the company is “To provide our customers with the products they buy regularly and ensure that those products are of the highest possible quality at guaranteed low prices”. Aldi has focused on building long lasting relationship with the customers by providing value driven services to the customers. Aldi has strategically employed principle of marketing mix by offering the blend of right product and right price. Aldi provides selective high quality products at the lowest prices to the shoppers. It has strategically developed its promotional campaigns such as ‘Like Brands. Only Cheaper.’ in order to pull customers (The Times 100). Aldi extensively makes use of above the line promotions and below the line promotions to convey its message to the customers. It uses ‘Swap and Save’ campaign to convey the customer that by shopping at Aldi they could save their money (The Times 100).
Style
Aldi also uses promotional emails and social media network to pull the customers. Further, it has strategically selected its suppliers to offer lowest prices to the customers and achieve its economies of scale. Aldi selects its suppliers rigorously to maintain its product quality and sell the product under its own label (Butler, 2016).
Staff
Aldi has very well trained staff who can immediately resolve the queries of the customers.
Structure
Further, Aldi has successfully deployed competitive pricing strategy by setting its prices slightly lower than that of its competitors which are Coles and Woolworths (Kakulas and Messurier, 2015). Aldi is able to manage its low prices by purchasing the product in bulk which has supported the company to develop its long term relationship with the customers. This gives Aldi the levy to negotiate for the prices and receive the product at the lowest possible price.
Skills
Apart from low prices, Aldi has launched its newly ‘Everyday Amazing’ campaign. Aldi has recently shifted its focus from price to offer value to the customers. Aldi now focuses on portraying its image in terms of ethics, fairness and responsible sourcing in front of customers (Hobbs, 2016).
Strategy: Achieving the Economies of Scale
The store layout of Aldi has also been designed in such a manner so as to prevent the extra expenditure of the company. The store location of Aldi considers the demography of the specific region, ensures connectivity and accessibility and availability of parking space to the customers.
Aldi maintains limited range of products which helps to reduce the cost of inventory management. Aldi ensures that the products which are very popular among the consumers based on their sizes, variation and tastes, are maintained in the stock.
The goal of Aldi is to provide the consumer with the lowest guaranteed prices along with value driven services. In order to achieve this goal, Aldi has opened 350 stores across the country and still planning to open 10 stores in South Australia and another fourteen in the region of Western Australia (Easter, 2017). The total number of operating stores in South Australia and West Australia would become 39 and 31 respectively by the end of the year and the total number of stores would cross the limit of 400 over the country.
In order to understand the current market scenario, the report would discuss and analyze the supermarket players in the Australian market.
(Source: Roy Morgan Research, 2016).
The supermarket in Australia is dominated by Woolworths with a market share of 36.3%, followed by Coles with a market share of 33.2% which is followed by Aldi with a market share of 12.5% which is again followed by IGA with a market share of 9.8%. The other supermarkets enjoy the remaining market share of 8.1% in Australia.
Woolworths
Woolworth is an Australian supermarket chain with 961 operating stores in the country. The goal of the company is to develop customer and store led culture in Australia through its excellent team. Woolworth is completely customer centric firm and has been consistently developing strategies to delight the customers. Its customer focused strategies involve enhancing the core offer, innovating products and services to provide great customer experience and improving the overall model through its lean retail model to meet the demands of the customers (Cameron, 2015).
Woolworths has maintained is dominating position through its value driven services by providing wide range of products by ensuring the product quality at the same time. Further, it also provides click and collect services to its customers to increase the convenience of the customers (Australian Food News, 2015).
Coles
Coles is also an Australian supermarket chain which enjoys the second place is Australian supermarket. The supermarket chain has maintained its strong position through its quality services and value to the consumers. It has a sustainable operating model which ensures that supply chain process through strategic relationship with the suppliers (Coles, 2016). Further, Coles has retained its customer base through its low pricing strategies, store layout, loyalty programs and strategic supplier partnership. The supermarket also focuses on providing fresh food to the consumers through extended value leadership and simplified activities of supply chain. The supermarket chain also provides mobile based application to its customers who want to shop online. Coles has thus, successfully maintained its second place in the market by delivering quality services to the customers (Coles, 2017).
IGA
Independent Grocers of Australia is an Australian based supermarket chain which was founded in the year 1988 (IGA, 2017). The supermarket chain has strategically recognized the consumer behavior across the nations to establish its authority and enjoys a market share of 8.1% in Australia (Roy Morgan Research, 2016).
New market entrants and potential threat
Due to low market barriers, the supermarket industry has new entrants which could be potential threat to Aldi supermarket. David Jones targets the upper segment of market through its premium pricing strategy. It could be a potential threat to Aldi because of changing lifestyle and high profile of the Australian consumers (Pash, 2016).
From the context, it can be concluded that there are three other major players of supermarket industry which would impact the goals and expectations of Aldi. Aldi has opened 350 stores across the country and has further expansion plans to open up new stores across the country. Aldi also expects to provide guaranteed lowest prices which would be difficult because of the strategic moves taken by Coles and Woolworths to compete with the prices of Aldi. Further, its expansion plans also needs to be revised because supermarket has become a saturated industry because of wide range of choices available to the consumer.
In order to grow the market size and maintain the sustainability, Aldi could adopt the following strategies:
1. Enhance its product quality: Aldi needs to enhance its product quality and ensure that the customers receive fresh food products. This would help Aldi to maintain its sustainability by retaining its existing customers.
2. Open other channels to increase its consumer base: Further, Aldi could also new channels of shopping in order to increase the consumers. It could adopt online selling through web based application which is the latest trend among the people.
3. Engage its Customers: Aldi could attract the customers by providing them home delivery services to offer them great shopping experience. This would help Aldi to increase its customer engagement by offering ease of shopping to the customers. Loyalty card could also help Aldi to retain its customers and maintain its sustainability.
References
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