Discuss about the Strategies for International Industrial Marketing.
This report is basically based on the case study ‘Contemporary Strategic Management: An Australian Perspective’ and the aim of this report is to analyze the strategic management of Aldi in Australia. For this, situational analysis of the company has been done. Aldi is the German based retail store which was established in 1948. Aldi was established by two brothers named Theo and Karl. Now this company is the biggest food retailer company in the world. In present time, company has around 700 stores across the world. Company has the strategy of providing best quality of products at the low cost to the customer (Hitt, et al, 2009).
Although the environment is good for retail industry in every company but the competition in the market is also very strong. There are many large retail companies such as Wal-Mart which is also expanding its business and dominating other retail stores in the industry. Aldi has survived in the competitive market and become the popular retail store among the customers across the world. The company has become one of the famous retailer companies which can compete with the larger retailing organizations. In this report, the business strategy of Aldi will be analyzed. Along with this, the report will also provide the analysis of goals and expectations of the company (Boone & Kurtz, 2013).
In the situational analysis of the company, all those aspects are included which impact the business operations of the company in the market. Situational analysis can be done through SWOT analysis, environmental analysis and five forces analysis. For the situational analysis of Aldi, five forces analysis has been done in this report. All the five forces determine the intensity of competition and profitability of the industry. Basically, this analysis provides the idea about where the company stands in the competitive market (Chernev, 2015).
Threats of new entrants:
The customers of Aldi can be decreased due to many low cost grocery stores such as Wal-Mart and many local firms who are selling many fresh dairy products, vegetables, eggs to enter in the market. These stores can steal the customers and profit of the Aldi by providing fresh products at the low cost to the customers (Grant, et al, 2014).
Threats of substitute products:
The threats of substitute products for Aldi are relatively low but it can be the cause of major damage. The company deals with everyday products which includes good quality, fresh products, and low prices. These are the main factors of the Aldi’s business operations but there can be the issue related to customer services. Company has patented genuine products that can be the cause of headache for Aldi.
Bargaining power of the customers:
The buyer power should be analyzed by the company while going to start the store in the market along with the economic situation of that region. The bargaining power of the customers depends upon the availability of the substitute products and the taste and preferences of the customers (Martínez, 2012).
Bargaining power of suppliers:
Every company needs raw materials for further production. If the suppliers of the company are powerful then they can impact the company by providing raw materials at higher rates or by having control in the market. If the suppliers provide the material at lower prices then there might be the possibility of bad quality.
Coles, Woolworths are the key rivals for Aldi in the Australian market. Those companies have good strategy for their business operations such as high salary to their employees as compared to Aldi. Along with this, both the companies can merge to reduce the cost incurred in the business (Armstrong & Cunningham, 2012).
There are three generic strategies i.e. cost leadership, differentiations and focus that can be adopted by Aldi to deal with the five forces in the market. these strategies can be implemented by the company to improve its position against competitors.
Strategic management is an important process by which company is able to create values for the customers and benefit to the stakeholders. With the help of strategic management, company is able to establish the vision, goals and objective for the future growth and success. So, every company should adopt the corporative strategy to define the future goals and objectives in the operating market. Aldi has also adopted the concept of business strategy. Although the concept of business strategy of Aldi was very simple but it was very effective also. The main aim of the company is to reduce the cost in any way. Company is using cost reduction strategy and the strategy of the company is different from other retail companies. Along with this, the method of strategy implementation of Aldi is also different. In the cost reduction strategy and principle, Aldi has involved high efficiency of operation and management (Turnbull & Valla, 2013). In this manner, all the stores of the company in all over the world are designed and decorated simply to minimize the cost. The cost reduction strategy of Aldi can be seen as follows:
The stores of Aldi takes up only 750 square meters and by which company is able to cut down the cost of rent, water and electricity consumption. Along with this, company has limited number of good quality products for selling purpose. So, company is able to reduce the cost of storing inventory and expenses of shelves. One Aldi store only sells around 700 products which are very less but it is able to satisfy the daily necessities of the customers. The grocery structure also helps the company to save the logistic cost. It enables the company to take advantage of negotiation with the suppliers in terms of quality control and price (IBISworld, 2016).
Employee strategy-
Company basically employs four or five employees on one store as compared to other retail industries that employ 15 employees on one store. Although company pays more to those employees for this but it is very helpful in reducing the employee cost.
Promotional strategy-
As compared to other retail companies, Aldi is not dependent on lots of advertising and public relations. Focusing on the cost saving strategy, company never does advertising. Company has the concern of customer benefits because all the expenses in the advertising are paid by the customers (Chakravarthy & Coughlan, 2011).
Based on the competitive market of Australia, the strategy of Aldi is to provide high quality products at the low prices to the customers. The key elements of the strategy are exclusive brand products, limited range, price change policy and focus.
Exclusive brand products:
The main strategy of the company is to focus on exclusive brand products for the customers. Company maintains the partnership with the leading manufacturing companies to produce the products of their own brand. Only few name brand products are offered by the company.
Limited range:
The company Aldi has limited range of products in its stores. The company follows the market that is successful in terms of size and variation. The company stocks the products according to their characteristics. Along with this, Aldi always seeks those suppliers who can provide the products having those characteristics such as taste at the most attractive prices. There are many traditional supermarkets which stock the products up to 20,000 lines but Aldi stocks only 600 to 700 lines. Thus, Aldi is able to reduce the cost by having one size of each product (Fifield, 2012).
Focus:
Aldi has the strong focus on its core business. So, the company is not following the strategy of traditional companies to expand the business in the market. The company is focused only on a strict policy of selling core products. In this policy, a batch of products such as computers and televisions will be sold under fixed prices. This is the practice of ‘surprise buys’. With this ‘surprise buys’, company is focused on low price and high quality policy.
Price change policy
The policy of price change of Aldi is the first in the industry. This policy is focused on the lower cost customers and last to increase the price of the products when cost increase. The company provides the information regarding the price change to the customers by placing a note on the products in the stores.
The main aim of the company is to provide best quality of products at the lower prices. To survive in the competitive market of Australia, the company is adopting innovative strategies to achieve the goals and objectives of the company. The company deals with everyday products which need quality and fresh products. The goal of the company is to become one of the best retailer companies as compared to its competitors across the world (Peñaloza, Toulouse & Visconti, 2013). For this, company has adopted three basic strategies i.e. cost leadership strategy, differentiation strategy and operational excellence.
Cost dealership:
Adli is the famous company as the ‘hard discounted’ store among the customers. Now, company is using cost leadership strategy to reduce the cost incurred in the operations of stores. In this manner, company buys low cost lands for the stores, builds cheap warehouses, and keeps tiny staff. Along with this, unnecessary cost is avoided in the company. By this strategy company is able to keep the cost and prices low for the customers (Chung, 2015).
Differentiation strategy:
To improve its position and to make itself the best in the industry, the company has adopted differentiation strategy in the products. The uniqueness is about the company is that it is relatively in favor of cost cutting so that customers can be able to get products at lower cost. Under this strategy, customers get good quality products and employees get good payments for their job. With the differentiation strategy, company is not able to get the goal of providing good quality products to the customers.
Operational excellence:
One of the main objectives of the company is to be the leading company in terms of operational efficiency. Aldi uses the operational excellence strategy in its business to maintain its operational efficiency in the market. By this strategy, the company is able to supports in the operations in terms of proper use of resources, maximization of resources; operate the business in the effective way and to achieve the set goals or objectives.
Conclusion:
From the above discussion, it has been analyzed that the company Aldi is using the corporate strategy very effectively which fulfills the philosophy of the company to provide the highest quality of product at lowest prices. Along with this, employees also get good salary paid leave, and compensation. There are some recommendations for the company for the future based on the current situation and strategy. Company should have more products in its stores because today’s customers are choosy. They are not always satisfied with fewer products. They always want more. Along with this, company should employ more people on the stores as if it will be helpful for the company to attend the customers. Further, Aldi needs to invest in the product development process as competitors are trying to capture the consumer market of the company. Based on this idea, Aldi might be able to improve its brand image and increase its share in the Australian market. With this, company may directly sell the products to the local and small retailers of Australian market to increase the market area in the Australia. This will increase the sales of the products of the company. Further, the website of the company should also be improved to attract more and more customers in the Australian market.
References
Armstrong, G., & Cunningham, M. H., (2012), Principles of marketing, Australia: Pearson publication
Boone, L., & Kurtz, D., (2013), Contemporary marketing, USA: Cengage Learning
Chakravarthy, B., & Coughlan, S.. (2011), Emerging market strategy: innovating both products and delivery systems, 40(1), 27-32
Chernev, A., (2015), The Marketing Plan Handbook (4th), NY: Cerebellum Press
Chung, F., (2015), The Supermarket switch is on as Aldi takes top award in customer satisfaction, accessed on 27th January 2017 from https://www.news.com.au/finance/business/retail/the-supermarket-switch-is-on-as-aldi-takes-top-award-in-customer-satisfaction/news-story/3ce35413bb26d01118190010c9cb0916
Fifield, P., (2012), Marketing strategy (2nd edition), Berlin: Reed educational & publishing Pvt Ltd
Grant, M. R., Butler, B., Orr, S., & Murray, P., (2014), Contemporary Strategic Management: An Australian Perspective, (2nd), Wiley
Hitt, M. A., Ireland, D. R., Hoskisson, R. E., Rowe, G. W., & Sheppard, J. P. (2009), Strategic Management. Toronto: Nelson Education Ltd
IBISworld, (2016), Supermarkets and Grocery Stores in Australia: Market Research Report. Accessed on 27th January 2017 from https://www.ibisworld.com.au/industry/default.aspx?indid=1834
Martínez, P., (2012), The Consumer Mind: Brand Perception and the Implications for Marketers, USA: Kogan Page Ltd
Peñaloza, L., Toulouse, N., & Visconti, L. M., (2013), Marketing management: A cultural perspective, USA: Routledge
Turnbull, P. W., & Valla, J. P., (2013), Strategies for international industrial marketing, USA: Croom Helm
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