Aldi supermarket is a discount supermarket chain owned by a German family. The supermarket opened the first store in Ireland in the year 1999 (Reddan, 2018). The German store is part of the over 10,000 stores owned by Aldi chains of supermarkets. The supermarket stores retail merchandise and foods such as fresh, frozen and refrigerated foods. Aldi supermarket sells products on discount since the main customers include the low and middle-income earners. The supermarket has greatly expanded over time and has divided into Aldi Nord and Aldi Sud (Anon., n.d.). Aldi supermarket operates in a very competitive environment with other retail vendors competing for the same market share. Therefore, Aldi has developed various strategies to beat the competition and survive in the long term.
Aldi retail store operates in a very dynamic environment that experiences changes arising from the many competitors available in the market. The competing retail stores have the ability to change the environmental forces and affect Aldi’s operations (Andrianova, 2018). The paper analyses the various forces in the external analyses that affect Aldi’s strategic position.
The economic conditions have favoured Aldi supermarket especially after the Brexit vote (Anon., 2018). The prices have risen in the UK with the falling of the pound. The effects have favoured Aldi supermarket since most customers look for low prices. Therefore, Aldi has become the number one customer choice due to the sale of goods at huge discounts. Therefore, Aldi has experienced a great increase in sales revenues, which has resulted in a high growth rate. The discounts offered by Aldi put the supermarket in a good position in the market since most supermarkets do not offer discounts (Daft, 2010).
Additional economic factors include inflation in the grocery market. The economic inflation has increased the market prices for products meaning that the shoppers pay more for the goods sold in supermarkets. The situation favours Aldi supermarket in attracting customers due to the discounts offered on the products. The customers find the goods cheaper compared to other supermarkets, which results in a high preference for Aldi products (David, 2011).
Additionally, the general growth in the grocery market has resulted in a rise in the demand for products (Bhasin, 2018). The market has expanded due to the increased demand for groceries. Therefore, the supermarket enjoys a wider market arising from the added demand for groceries. The supermarket serves a wider market due to the discounts offered on the products sold.
The retail market experiences great competition with all parties offering similar products and at the same price (Anon., 2018). The rivals include such as Woolworth, Coles and Lindl supermarkets. All the supermarkets aim at gaining a wide market share through the use of price reductions and discounts. Therefore, the competitors highlight even the slightest increase or reduction in the prices of the products meaning that the customers have adequate information about the prices. Additionally, the marketing campaigns aim at informing the customers about the reduction in prices to snatch the market from other sellers. However, Aldi operates on a principle of trying to minimize the fixed costs of production to beat the overall market competition (Degnegaard, 2010).
The market that Aldi operates has other sellers trying to reduce the prices to the lowest level to beat the competition (Boag, 2018). The action gives the customers great bargaining power since the many competitors give an option for buying products at lower prices. Additionally, the shops operate close to each other, which reduces the switching costs incurred by the customers. Some stores offer loyalty schemes that give great discounts to the regular customers. However, Aldi lacks the scheme, which results in an inability to influence the market prices of products. Therefore, the buyers have a strong bargaining power over the Aldi supermarket (Faulkner, 2009).
Aldi supermarket does not deal with unique products since the main products include groceries (Carroll, 2017). The other giant retailers also offer similar products in the market at the same or lower prices when compared to Aldi. The other sellers lay an emphasis on advertising the products to the customers to increase consumption. Therefore, the customers have much information about the products in the market. The information includes the prices and quality standards of the products on the market. The information in the market enables the customers to compare the products in the market and choose the best (Cole-Ingait, 2018). Additionally, the other market players influence sales through actions such as reducing prices, which when combined with aggressive marketing results in easy substitution. The products sold by Aldi supermarket faces the stressful market conditions, which pose a risk for quick substitution. Therefore, Aldi has to offer great discounts for products to maintain the market share (Olsen, 2018).
Aldi supermarket face the threat of sharing a market share with small startup grocery business (Pasteur, 2018). The reason for competing with the small business arises from Aldi operations strategy, which targets the low and medium income earners. The low and medium income earners can easily get groceries from cheap startup businesses. Therefore, Aldi supermarket faces a tough market where the farmers who sell fresh meat, grocery and eggs straight from the farm could pose stiff competition for the retail store. Therefore, Aldi supermarket maintains the prices of products at a low level by offering huge discounts to the customers. The new low price startup business causes a reduction in the sales and profits of the supermarket within a particular area. Therefore, a continued trend of grocery startup businesses that sell cheaply could push Aldi out of the market.
Additionally, the supermarket also faces competition from other existing brands that enter the grocery market (Edinger, 2012). The supermarkets include Woolworths, which has established a strong brand name in many countries. Lately, Woolworth has opened up stores that sell fresh vegetables, meat and fruits to the customers who have embraced the new stores fully. Woolworths has great financial power to reduce the operation costs, which causes a reduction in the price of products compared to Aldi. Therefore, Aldi faces the threat of losing customers to the new entrants who offer low prices for similar products. Therefore, Aldi supermarket ends up selling products at huge discounts to maintain the clientele.
Aldi’s stakeholder include the customers for the products sold. The customers have a huge influence on the success or failure of the supermarket (Thompson, 2018). Therefore, the supermarket should consult the stakeholders before making any decision since failure to meet the expectations could result in reduced sales. The customers feel the immediate impact of the decisions made by the supermarket. The decisions that cause a huge impact include such as the increase in the prices of the goods. The stakeholders respond by seeking other alternatives such as other sellers offering similar products at lower prices. Therefore, the supermarket faces a fall out with the customers when the prices increase. The customer’s reaction calls for the supermarket to come up with favorable discounts that the customers cannot find in other stores (Farmer, 2018).
The strategic analysis shows that Aldi supermarket employs a strategy that focusses on the price of the products (Boag, 2018). The strategy aims at reducing the prices of goods sold at the supermarket by offering huge discounts on the products. The supermarket aims at offering better discounts than the other competitors in the market. Therefore, the supermarket conducts deep research to identify the prices for similar products in other stores to reduce the prices accordingly. The discounts align with the information in the market since the supermarket needs to keep the customers happy at all times. The price focus strategy has enabled Aldi supermarket to operate for a long time having strong resistance to the competition posed by the competition (Juneja, 2018). Additionally, the supermarket has grown in and outside the UK due to the ability to beat competition based on the price strategy. Other supermarkets face difficulties in reducing the price of products to match Aldi.
Aldi supermarket has used various strategies to beat the competition in the market and expand in many countries in the UK (Krishnan, 2018). Aldi supermarket faced challenges of breaking the barriers placed on companies that enter the retail market. Aldi faced challenges such as intense competition, low profits and lack of economies of scale. However, Aldi has managed to overcome the barriers to become a strong brand in the retail market. However, the company should pursue different strategies to ensure success in the future especially with the dynamic changes in the market trends and economies. Therefore, the supermarket should focus on expanding and penetrating many markets and maintain favorable prices for the customers (Anon., 2018).
Aldi supermarket could use the integration and responsiveness framework to enter new international markets in the future (Bhasin, 2018). The model helps the managers to perceive the environment in a way that enables the products offered by the supermarket to meet international standards. The strategy could assist Aldi supermarket to maintain a competitive advantage and meet demand in the markets of operations. The supermarket could meet the demand and have a competitive advantage by selling products at reduced prices. The integration and responsive framework will enable the supermarket to realize the set goals both in a local and international manner. The framework highlights the forces that have an impact on global integration and local responsiveness (Gleeson, 2018). The forces include worldwide standardization of customer demand, global information and product recognition.
Aldi supermarket responds to both international and local forces that shape the markets and the spending power of the consumers (Smet, 2018). The integration and responsiveness approach could help the supermarket to respond to the forces such as the reduction of product prices by the competitors. Aldi responds to the reduction in prices by maintain very low operation costs, which result in a reduction of the prices of goods sold. Therefore, the supermarket does not experience a fall out with customers seeking to find cheaper and affordable products. Additionally, the integration will enable the supermarket to blend the products offered in a way that meets the standards in the local and international markets. The supermarket could adopt an innovative strategy, which allows the supermarket to come up with the right product and price mix that suits the market (Perks, 2017).
Aldi supermarket could streamline the distribution channels to reduce the costs of supply. The supermarket could contract the regional suppliers in the future to reduce the high costs incurred when shipping goods from overseas to the various Aldi stores (Daft, 2010). The supermarket should check the suppliers that can match the required quality in the countries of operation. The move avoids the need to get inventory from Germany, which proves expensive especially for the stores located overseas. However, the company should only buy locally when the suppliers have the ability to match quality. In most cases, the regional markets have the ability to supply the food supplies but lack the non-food inventory. Therefore, the company should identify the global countries that deliver the products cheaply and with the required quality (Degnegaard, 2010).
The Ansoff matrix also helps to evaluate the plans that the supermarket should adopt to achieve success in the market. The supermarket should explore strategies that strengthen the market position. Additionally, the store should respond quickly to the market changes such as the increase in prices of good caused by inflation and the Brexit vote (Cole-Ingait, 2018).
The Ansoff model assists in the development of market strategies that enhance the growth of the company. Therefore, Aldi should use the model to come up with the best strategy to grow in the global market (David, 2011). Additionally, the model assists in the development of ways and methods that the company should use to compete favorably in the market. The model campaigns for a product market strategy that emphasizes tailoring a product in a way that suits the market demands. The model focusses on four growth alternatives that assist in developing a strong product that beats the market competition. Therefore, Aldi should incorporate the model into the future growth of the supermarket to develop a strong brand with a great market share in both local and international markets.
Therefore, Aldi should focus on a market penetration strategy by offering goods to the international and global markets (Degnegaard, 2010). The store should grow in the local markets and then move to expand internationally by offering goods that meet the global standards. Aldi can achieve the expansion by selling more products to the existing customers and winning more customers to increase the market. The store could achieve the increase in market share by reducing the prices of products to attract the customers. Therefore, Aldi could come up with discounts that result in lower prices for the goods compared to other seller dealing with similar products. Additionally, the supermarket could focus on promotion through aggressive marketing in both local and global markets (Juneja, 2018). The supermarket should create awareness in the market and persuade the customers to buy the products. The supermarket should also open more stores in the UK and other countries with stable economies. Additionally, the supermarket should introduce loyalty cards for the customers to use when shopping. The loyalty cards develop an affection to the supermarkets with the buyers preferring to shop more from the stores. Therefore, the supermarket will experience an increase in the loyalty of customers (Daft, 2010).
Additionally, the supermarket should focus on market development in different regions and countries. The development aims at exploiting new foreign markets that increase the sales volumes of the customers. The supermarket should aim at increasing the units of sale by taking products to the overseas countries that have a high demand for the products sold (Olsen, 2018). Therefore, the company should aim at opening more branches in the UK countries since most of the consumers have a strong spending power, which means that the supermarket will experience more sales. Furthermore, the increase in revenues boosts the financial power of the store to become a strong brand with the ability to compete effectively.
On the other hand, the company could adopt a product development approach that creates new products and services that satisfy both the existing and new markets (Bhasin, 2018). The approach assists in increasing the market for products since the new product satisfy a larger number of customer. The approach requires the supermarket to invest in research and development of new products, acquisition of production rights and buying products from other people. The actions assist in coming up with a unique product that strongly competes in the market since other companies cannot imitate. Therefore, the supermarket has the power to maintain the customers and develop a strong loyalty towards the products. Additionally, the unique products could lead to winning new customers willing to use the innovative goods and services.
Furthermore, the company should diversify the products and operations to satisfy the various needs of the customers (Daft, 2010). The supermarket could diversify by offering new products to the market and developing product mixes that suit the customers’ preferences. Additionally, the diversification calls for an increase in the markets that the supermarket operates in and the offering of different price ranges. The supermarket could offer different prices for products depending on the economic conditions of the regions of operations. Additionally, the supermarket could tailor the products according to the culture of the customers in a particular region. The diversification approach assists the supermarket in satisfying the different customer needs in the various regions of operations (Boag, 2018).
The supermarket should pursue market penetration as the best alternative to achieve success in the future. The strategy calls for a reduction in prices to win more customers and opening up many stores in different regions. The suitable, feasibility and acceptable framework gives further insight into why the supermarket should select a market penetration strategy (Farmer, 2018).
The market penetration strategy is feasible for the company due to the availability of enough funds to open and operate new stores (Carroll, 2017). The supermarket has gained a wide market share over time, which has increased the revenues and the financial power. The financial power could enable the supermarket to open up different stores in the UK and have the ability to operate smoothly.
On the other hand, the stakeholders and other interested parties will accept the move to open new stores in different countries (Thompson, 2018). The persons will agree with the decisions due to the benefits that accrue the expansion to international markets. The benefits include having an increased market share, strong brand and increased revenues. Therefore, all parties will agree with the decision to enter new markets to enjoy the accruing advantages.
The market penetration strategy is suitable based on the strategic position of the supermarket. Aldi supermarket positions strategically as a supermarket that has a strong brand and enjoys a wide market share. Therefore, the market penetration strategy suits the supermarkets need to conquer more markets and win more customers (Carroll, 2017).
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