Accelerated Growth Strategy - Research Paper Example

Research Paper, Business chose Contents Introduction 3 Research Question & Objective 3 Elaboration of the problem 4 Methodology 8 Findings 10 Conclusion 14 References 15 Appendix 17 Questionnaire 17 Introduction The food retail industry is an exceptionally focused business sector. The organizations involved in this sector are responsible for providing value added products/services to the customers. Customers expect value added services at a price convenient and affordable to them. In the backdrop of such a changing concept, the organizations need to rethink their marketing strategy to capture the mindset of the customers. The first glance of changing atmosphere of Australia’s changing food retail industry was observed during early 2000s, when attempts of reducing costs and maximizing shareholders’ worth were the primary aims of the big retail houses. According to Delforce, Dickson and Hogan (2005), “Australia’s agriculture and food industry is undergoing a period of rapid change. The industry makes a major contribution to the Australian economy but is particularly important to rural and regional economies. Accordingly, many food producers and processors are keen to understand the changes that are occurring now and where the Australian food industry is heading”. Research Question & Objective Supermarket stores, in order to be competitive, must offer products/ services at discounted price to become cost leaders in the marketplace. The business operations must focus on offering quality products to customers at competitive prices. Aldi, being a giant supermarket chain based on Australia, has found this change and they have tried to change their strategies accordingly. The research topic discusses on the business operations procedures of Aldi through which they can offer quality products to its customers at right price as well as the reason behind doing so. This paper is concerned with finding the effectiveness of discounted superstores used by Aldi by analyzing the operation Elaboration of the problem Consumer research on multifunctional products has, by far, explained the consumer reactions to products, with complex features that are difficult to use. However, it is found that in some markets, consumer opts for products with multiple, yet simple essential features. In case of products sold by supermarkets, the consumers show highly habitual buying behavior in their choices. The habitual buying behavior expressed by the customers often ends in rational irrespective choices. They can be influenced by buying behavior of other potential consumers too. Thus, consumers often focus solely on the price aspect of the product offerings due to lack of differentiation present in the service offerings. Marketing in discount superstores involves different operations that include labeling, packaging, pricing and point of purchase advertising. These factors not only affect the consumers’ decision making process while purchasing, but also changes the company’s brand image. For example, a long time effort on providing value added services to the customers at a discounted price can force other competitors to reduce their respective prices too. This can result in increasing customer’s expectation on the products offerings even when the base price of the commodity increases. Often it is found that a few number of large supermarket chains are operating in a single market. This is because of the simple reason that the increased competition for cost leadership competitive advantage has pushed the companies to such extent of reducing cost of production that it has become impossible for the new entrants to enter and operate in the market. Quality compromise can exert a deleterious effect on the brand image, and ultimately it can reduce sales. Thus, it was never a viable option for the companies. To analyze the importance of discounts in super stores, the buying behavior of consumers should be known. About Aldi and its operations Aldi, a German based discount supermarket chain, is, at present, one of the most successful and valuable retain business chain with over 9000 stores across the world. They employ almost 100,000 employees from different parts of the world. Their business operation is mostly based on limited assortment concept, i.e. store offerings were initially limited to some basic goods. The goods are sold in large quantity and at a realistic price (Ritson, 2012). The simple way of selling the goods and services helps Aldi to gain considerable savings even after offering discount (PR Newswire Association LLC, 2014). Aldi’s cart rental system has not only involved the customers to experience the self service mechanism, but also reduced the number of employees required in store operation. Aldi believes that its customers need quality for cash yet would not prefer any compromise on quality (The Time 100 Business Case studies, N.d.). What recognizes Aldi from its rivals is its detailed evaluation system. For Aldi, working effectively includes decrease in expenses in every aspect of the business. The product offerings that are being offered in Aldi’s stores are: Clothes Health and beauty products Fresh fruits and vegetables Stationery Household goods Electronic products Soft tools (ALDI, 2014). The supply chain used in Aldi is shown below: (Source: Delforce, Dickson and Hogan, 2005) The next section discusses the type of behavior consumers exhibits while opting for experiencing the superstores. The nature of consumer behavior is an effective way of deducing the importance of discounts in superstores with respect to provision of value added services (Theresa, 2004). Consumer Buying Behaviour Consumers’ buying behavior depends on the difference in the brand and the degree to which the consumer is involved in the buying process. Popularly known as Henry Assael’s Consumer buying behavior model, a matrix representing the different consumer buying behavior in different types of brand differences is shown below:. High Low High Complex (Expensive electronics goods) Variety Seeking (Clothes Health and beauty products) Low Dissonance Reducing (Electronics and Household FMCDs) Habitual (Fresh Vegetables, Stationary goods) Here, the buying behavior exhibited by consumers is habitual while purchasing the FMCG goods. Consumers are little aware of the differences between the brands present in the marketplace and they involve little time in purchasing the products. The goods are used in daily purposes and their habitual buying behavior often ends the shifting preferences to the low price value added offerings, whereas in other goods, like electronics and clothes, the buying behavior is often dissonance-reducing or variety seeking in nature (ALDI, 2014). Methodology In the methodology through which the research has been conducted can state that during the course of handling of a research work, both kind of data sources are however, taken into consideration. The reason why secondary data sources are often taken into consideration is because of its ability to shed light on the previous handled research studies and assignments. This research study having being focused on qualitative data and interpretive philosophy uses deductive approach to data analysis. Using deductive approach this study primarily takes into account the opinion of customers and presents an analysis based on the data gathered from the interviews as well as from the literature while comparing the two. Researcher’s interpretation is also included to draw conclusion, as during literature review deep insights on the subject matter has been collected which has further assisted in data analysis. Figure: Research Methodology Data Collection Method Structured Interviews In this research, structure interview method is used as a tool for data collection. The questions for interviews are pre-planned. Each interview is an exact replication of the other. The interview consists of questionnaires and survey which is answered by the participants, and based on their responses the result is evaluated. Sampling Method Sampling Design Process Sampling design process comprise of various steps like defining the target population, determining the frame of sample, selecting the appropriate kind of a sampling techniques, selecting the right sample size and finally conducting and successfully executing the sampling process. Target population While identifying the target population for the purpose of getting relevant inputs from the respondents in regards to primary research, it can be said that the respondents will mainly comprise of the consumers who visit the stores and purchases the products as well as the people from the organization itself, like the employees operating in the stores, the floor managers etc. Sampling Technique For the purpose of data collection from the respondents, it can be said that the most appropriate sampling method will be the usage of simple random sampling technique. Sample size For appropriate and accurate data collection, 200 consumers are interviewed to find the pattern. Along with that 50 employees from the organization’s side are being interviewed with the structured questionnaire. Designing the questionnaire The used questionnaires are close ended in nature so that the responses are analyzed using basic statistical tools and techniques. Findings The findings that are found from the set of questionnaires are as follows: From consumer interviews: Questions Responses Do you think the products sold by Aldi are meeting the nationally recognized standard? Most of the consumers believe that the product offerings are satisfactory and they are following the quality standard that is nationally recognized (YES). Do they provide clear information about their product offerings? Aldi has provided clear information not only on their products, but also on the shelves and store layouts. Customers find it easy to gather necessary information about the offerings before purchase (YES). Do you think the labeling on the product is enough to give adequate information? Most of the consumers prefer the labeling Aldi has used in their product lines (YES). Do you think the products provided by Aldi are of higher value? Consumers perceive the product offering provided by Aldi of higher value compared to the competitors (YES). Do you prefer low cost offerings? Most of the consumers prefer low cost offerings as the target segment is middle class consumers (YES). Can you compromise your preference to low cost, moderate value offering? The consumers didn’t prefer this option at all (NO) Do you think Aldi needs to improve its business operations more to satisfy customers? Apart from some little recommendations, most of the consumers think that Aldi has been satisfactory in their business operations (YES). Do feel satisfied with the overall ambience while visiting the stores? Consumers exert strong liking towards this point (YES). Are you satisfied with the quality? Most of them are satisfied with the quality of the product offerings (YES). Would like to prefer another visit in future? Consumers strongly prefer to visit the stores more often (YES). (Source: ALDI, 2014) From employee interviews: 1. Do you think the products sold by Aldi are meeting the nationally recognized standard? Ans: the employees and management people agreed on the nationally recognized standard of their product offerings (YES). 2. Do you think the products provided by Aldi are of higher value? Ans: According to them, the product offerings are of higher value than that of the competitors (YES). 3. Do you feel Cost leadership strategy can operate in a long run? Ans: Cost leadership can go to such extent when total cost of sales is less than the revenue. Cost leadership can work in the long run for bulk operations (YES). 4. Do you support the little advertising strategy of Aldi as a method of reducing the expenses? Ans: Advertising expenses do not add significant value as most of the products are fast moving in nature (YES). 5. Do you support Aldi’s strategy of concentrating into low cost segment only? Ans: Low cost segment has higher word of mouth than the high class segment. Thus, considering the low cost segment can increase the customer base (YES). 6. Do you think focused differentiation can be a way of attaining sustainable competitive advantage? Ans: Focused differentiation can be a way of sustainable competitive advantage only if the goods are of highly diversified in nature and the consumer group is loyal. In this case, consumer group is loyal but the product line is not diversified. Thus, this may not be a suitable approach (NO). 7. Do you feel your company vulnerable to substitute products? Ans: No, the company is much ahead of its competitors (NO). 8. Do you think cost leadership is the only way of coping up with the changing consumer needs? Ans: for middle class segments, yes this is the only way (YES). 9. Do you prefer self servicing facilities in departmental stores, which reduce labor cost with an expense of increase in mishandling of commodities? Ans: Employees remuneration can be much higher than the mishandling cost of the FMCG and FMCD goods (YES). 10. Do you think limited number of discounted products can be enough to hold market share? Ans: Limited number of discounted goods can increase the market share in the initial days, and then it is enough to hold the market share for some time. In order to sustain in the market place, the number of product offerings must be increased (NO). (Source: UK Essays, 2014; ALDI, 2014) Conclusion In the conclusion, it can be said that according to the research findings, consumers are satisfied with the low cost higher value product offerings. The consumer segment on which Aldi is targeting is middle class segment with little knowledge of the brand difference between the products. For this reason, the discount supermarket stores of Aldi have been highly successful. But to sustain in the long run, Aldi must invest their resources to the broader segment of the customer base with diversified product range. References ALDI, (2014). Consumers. Retrieved from: https://corporate.aldi.ie/en/responsibility/consumers/. ALDI, (2014). Shopping at ALDI. Retrieved from: https://www.aldi.com.au/en/shopping-at-aldi/. ALDI, (2014). Spend a little Live a lot. Retrieved from: https://corporate.aldi.ie/en/about-us/all-about-aldi/. ALDI, (2014). Suppliers we know and trust. Retrieved from: https://corporate.aldi.ie/en/responsibility/suppliers/. Delforce, R. et.al. (2005). AUSTRALIA’S FOOD INDUSTRY: recent changes and challenges. Retrieved from: http://143.188.17.20/data/warehouse/pe_abarebrs99001197/PC13169.pdf. Howard, T. (2004). Big-box stores squeeze into Big Apple. USA Today. Retrieved from: http://usatoday30.usatoday.com/money/industries/retail/2004-10-18-retailers-new-york_x.htm. PR Newswire Association LLC. (2014). ALDI Launches Accelerated Growth Strategy to Operate Nearly 2,000 US Stores By 2018. Retrieved from: http://www.prnewswire.com/news-releases/aldi-launches-accelerated-growth-strategy-to-operate-nearly-2000-us-stores-by-2018-236713141.html. Ritson, M. (2012). Brand equity is dead. Long live Aldi!. Retrieved from: http://www.marketingweek.co.uk/opinion/brand-equity-is-dead-long-live-aldi/4004104.article. The Time 100 Business Case studies. (No Date). Creating value through the marketing mix. Retrieved from: http://download.businesscasestudies.co.uk/retrieve_aldi_18_YWxkaS9jYXNlLXN0dWRpZXMvMTgvZnVsbC5wZGZ8fA. UK Essays, (2014). Aldi Is A German Based Discount Supermarket Chain Marketing Essay. Retrieved from: http://www.ukessays.com/essays/marketing/aldi-is-a-german-based-discount-supermarket-chain-marketing-essay.php. Appendix Questionnaire Questions for consumers (Yes/No) 1. Do you think the products sold by Aldi are meeting the nationally recognized standard? 2. Do they provide clear information about their product offerings? 3. Do you think the labeling on the product is enough to give adequate information? 4. Do you think the products provided by Aldi are of higher value? 5. Do you prefer low cost offerings? 6. Can you compromise your preference to low cost, moderate value offering? 7. Do you think Aldi needs to improve its business operations more to satisfy customers? 8. Do feel satisfied with the overall ambience while visiting the stores? 9. Are you satisfied with the quality? 10. Would like to prefer another visit in future? Questions for Employees and management people (Yes/No) 11. Do you think the products sold by Aldi are meeting the nationally recognized standard? 12. Do you think the products provided by Aldi are of higher value? 13. Do you feel Cost leadership strategy can operate in a long run? 14. Do you support the little advertising strategy of Aldi as a method of reducing the expenses? 15. Do you support Aldi’s strategy of concentrating into low cost segment only? 16. Do you think focused differentiation can be a way of attaining sustainable competitive advantage? 17. Do you feel your company vulnerable to substitute products? 18. Do you think cost leadership is the only way of coping up with the changing consumer needs? 19. Do you prefer self servicing facilities in departmental stores, which reduce labor cost with an expense of increase in mishandling of commodities? 20. Do you think limited number of discounted products can be enough to hold market share? Read More