Analysis of Aldis Microenvironment - Assignment Example

Student Name: Tutor: Title: ALDI’S MICROENVIRONMENT Course: ALDI’S MICROENVIRONMENT Executive summary Aldi supermarket has realized growth since its inception in 1946. This report at the microenvironment of Aldi discount supermarket. A brief introduction gives an overview of the task and what the entire report is all about. The main findings commences by looking at stakeholders analysis that can be found at Aldi. Mendelow framework has been applied. The retail industry has been discussed using Porter’s Five Forces model. Stakeholders have been categorized into internal and external stakeholders and their influence and interest outlined. The report concludes with the main points discussed in the essay while at the same time offering recommendation in the very last part. Consulted sources are reflected in the reference part of this essay. Contents Executive summary 2 Contents 3 Introduction 4 MAIN FINDINGS 4 Key stakeholders in Adli’s microenvironment 4 Mendelow’s stakeholder analysis 4 Porter’s Five Forces model 6 Bargaining power of suppliers 6 Bargaining power of customers 6 Threat of new entrants 7 Threat of substitute products 7 Competitive rivalry within an industry 8 Internal stakeholders 8 External stakeholders 9 Conclusions 11 Recommendations 12 References 13 Introduction Aldi is one of the largest retail chains in the world. It is a discount supermarket which is based in German. Since its inception by two brothers in 1946 it has grown to boast of 8,078 individual stores internationally. Operating in different environments both national and international makes Aldi to have different stakeholders that influences the objectives of the company according to their interest and power. This is reflected in the kind of influence that the stakeholders have on the affairs of the organization (Powell, 2001). This report analyses the microenvironment of Aldi discount stores. Understanding microenvironment helps Aldi to come up with a competitive strategy that will make it remain ahead of its competitors. The recommendations discuss some of the important points that Aldi should consider when developing its growth strategy. MAIN FINDINGS Key stakeholders in Adli’s microenvironment Mendelow’s stakeholder analysis Mendelow framework is used in strategic analysis and usually is understanding or categorizing stakeholders according to how they influence the organization. The goal is to find out the degree of influence of the stakeholder on the organization by studying individual power and the interests that the stakeholder has in the affairs of the organization (Clulow, Gerstman, & Barry, 2003). Those stakeholders who possess the highest combination of interest and power are the ones who actually influence objectives. Power is the ability of the stakeholder to influence objectives whereas interest is the willingness of the stakeholder (how much they care). Influence = Power × Interest Low Interest High High Power Low Minimal effort Keep informed Keep satisfied Key players The Mendelow Framework Stakeholders at Aldi discount supermarket chain will also fall into different categories according to Mendelow stakeholder analysis. Investors at Aldi have a huge influence on the objectives of the company since they determine what projects of expansions that the supermarket will engage in. the suppliers are also important since they have to bring the products which are much needed by the customers. The promptness of supplying the goods is very important for the supermarket chain to meet its daily and strategic goals (Fletcher et al., 2003). Shareholders have to be kept informed of the performance of the company and any change in strategy that may occur. Employees and managers determine the accomplishment the set goals and objectives. Porter’s Five Forces model Bargaining power of suppliers The retail has low bargaining power for suppliers since they are many. They determine the types of goods that will be found in the stores. The cost of switching to another supplier is not high and retail stores can look for other suppliers at any given time (Chekitan & Schultz, 2005). Save for some specific brands of products, many are easily supplied by available suppliers. Aldi can get differentiated products from suppliers to boost its range of products. Aldi can obtain the needed products without challenges from suppliers. Bargaining power of customers The retail market is characterized by cut-throat competition that witness customers switching allegiance from store to another. The customers are well aware of the products in the market and the variety being offered by different stores. It does not cost them anything to switch brands. Aldi has to provide top quality service and discounted prices in order to win over customers. The deeply discounted prices for food items encourage the growth of the discount chain store (Hochbaum et al, 2011). Threat of new entrants Large retail stores like Aldi discount supermarket requires a huge amount for capital to establish. The threat of new entrants is not high and the number renowned retail stores are well known worldwide. However, it would not a customer anything to stop using Aldi’s products and instead use another retail provider (Porter, 2008). Consequently, Aldi has to remain active and competitive in order to protect its market share and even expand. Threat of substitute products Offering deeply discounted prices of popular food items is a strong attribute to Aldi discount supermarket. Not all competitors are willing sacrifice their chance of making huge profits by discounting their prices. The chance of competitors imitating such a culture is minimal. Nevertheless, the products that are offered by Aldi discount retail stores can easily be produced by other retail players in the market. Aldi has to set its price while considering the prices of competitors (Mulcaster, 2009). Discounted prices being offered by Aldi stores is a good competitive strategy of retaining customers and attracting many others. Competitive rivalry within an industry There is fierce rivalry within the retail industry and every company is doing its best to remain competitive as well as profitable (Rijamampianina, Abratt & Yumiko, 2003). The UK grocery retail market contains four sections which include traditional retails, convenience stores, hypermarkets, superstores, supermarkets and online. Aldi discount stores fall within the hypermarkets, supermarkets and superstores sector which is dominated by Asda, Morrisons, Tesco, and Sainsbury. Aldi has a small market share of about 3% in the grocery market. It can be noted that there is stiff competition for the same clients in the market and companies have to be very aggressive (Hochbaum et al, 2011). Advertising battles, new products, sales promotion campaigns, and improved after sale service characterize the retail industry that Aldi is operating in. there is a lot of value addition that Aldi has to do in order to expand its chances of growth. Internal stakeholders Employees Workers at Aldi have to be assured of job security and growth of their career in order to give their best. The working conditions have to be excellent and salary paid time. Monetary benefits like salary increase, bonus, and a rise in rank encourages the employees to work hard. Pay should be proportional to the degree of challenges in the line of duty. Training will increase self confidence and skills of the employees (Sims, 2007). Managers Managers set the targets and chats the ways for strategic accomplishment of the goals of the company. They give direct to the rest of the employees. The managers want to be treated right by Aldi and given salaries and working conditions that meet their qualifications and challenges of their responsibilities. Promotions, bonuses, job security, and status are some of the things that can be used by Aldi supermarket to motivate managers (Martin, 2008). When growth is realized, managers will get bonus due to high profits. It is upon the managers to do their best for their own good and the company’s. Shareholders The shareholders are interested in the growth and the expansion of the company to its strategic goals and objectives (Nag, Hambrick, & Chen, 2007). High profits for the company will result in a rise in the dividend paid to shareholders. Shareholders are interested in how Aldi is being run since they have invested their money in the company and entrusted directors with the responsibility of ensuring their growth. External stakeholders Customers Customers are important shareholders to Aldi supermarket chains. Customers determine the growth and the market share of the company. If customers were to reject the products of the company, it will be difficult to realize growth. Meeting the needs of the customers is the paramount goal of Aldi supermarket establishment (Dalton & Best, 2008). The customers have to feel that they are getting value for their money which leads to consumer satisfaction. Finance providers Aldi has to consider the interest of financial providers. Since they facilitate the operations of the company, financial obligations have to be met with all interest accrued. The company has to generate enough cash that will enable not only its growth but also repayment of financial obligations. If Aldi meets its financial responsibility created by money owed to financial institutions, there will be an opportunity to borrow more and attract other investors (Hemmati et al, 2002). The management of financial resources within the company is very important for the stability and future prospects of the company. The community When Aldi discount supermarket is looking for land for expansion and suppliers who can provide fresh products, the larger community is affected. The stores have to be build where accessibility is not a problem and even infrastructural facilities have to be constructed by the company. The environmental regulatory agencies influence packaging and the kind of policy set to ensure protection and conservation of the environment (Khan, 2005). Competitors Competitors are important to Aldi since they affect the strategic decisions that are made at Aldi discount supermarket stores. Providing food items at deeply discounted prices was a strategy of eating into the market of retail stores which offers food items at high prices. In order to have a competitive edge, Aldi has to provide service and products at a different level as compared to its competitors. Competitors shape the direction of strategic expansion (Mitchell, Agle, & Wood, 1997). The government The government is important to Aldi since it is involved in licensing, labor policy and regulations on safety and quality standards (Chinyio & Olomolaiye, 2009). Aldi operates internationally and the relationship of one government to another will affect where stores of the company will be stationed. Good relationship with the government will provide a perfect environment for the company’s operations. Conclusions Maintaining a competitive edge in the retail market is not easy. Aldi has a responsibility of evaluation its interaction with different stakeholders to determine their influence on its objectives. Comprehensive stakeholders’ analysis reveals the power and interest that each group of stakeholder possesses. The UK market provides an opportunity for Aldi to expand if it uses any opportunity in the market well. This report has discussed the influence of different stakeholders and their role in shaping the direction of the company. Porter’s Five Forces model provides an analytical look of how Aldi approaching is operation in the microenvironment. Recommendations Aldi discount supermarket chain has to realize the importance of each of the stakeholders and ensure that their interests are met. Stakeholders cannot be ignored since a company cannot exist in a vacuum. It is surrounded by both micro and microenvironments. The influence of the shareholders on the objectives and direction of the company has to be ascertained to make sure that each of the stakeholders receives attention that he deserves. The company’s management should know what it cannot do in order to meet the expectations of the stakeholders. The response of the stakeholder on the growth and development of the company has to be taken seriously since to reflect acceptability of the company in the wider community (Savage, Nix, Whitehead & Blair, 1991). The interrelations that the company has with the microenvironment create the need of assessing the satisfaction of each of the stakeholders. Aldi cannot exist in a vacuum and, therefore, it has to relate with other players in the market. Aldi has few non-Aldi brands while the rest are own-brand labeled. It is important for the company to provide variety for its customers by diversifying into the non-Aldi brands. Aldi discount supermarket commands a small size of the market share and the tactics used to penetrate new markets have to be changed to incorporate modern competence. It is important for Aldi discount supermarket to identify a niche in the market with unmet needs that will help it expand its market share (Jeffs, 2008). A unique point in the market will assist Aldi supermarkets in creating a competitive advantage that will not be easily imitated by competitors. Differentiation can be successfully be used by the company to diversify risks as well as providing variety to the customers. Having few product lines limit the profits that the company can realize in any given time. References Fletcher, A., et al., 2003, Mapping stakeholder perceptions for a third sector organization." in: Journal of Intellectual Capital 4(4): 505 – 527. Mitchell, R. K., Agle, B. R., & Wood, D.J.., 1997, Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What really Counts, Academy of Management Review 22(4): 853 - 888. Savage, G. T., T. W. Nix, W. & Blair, 1991, Strategies for assessing and managing organizational stakeholders, Academy of Management Executive 5(2): 61 – 75. Hemmati, M., Dodds F., Enayti, J., & McHarry J., 2002, Multi-stakeholder Processes on Governance and Sustainability, London Earthscan. Jeffs, C., 2008, Strategic Management, SAGE, New York. Dalton, C. & Best, N., 2008, Integrated Management 2008, Butterworth-Heinemann, Melbourne. Porter, M.E., 2008, The Five Competitive Forces That Shape Strategy, Harvard business Review. Chinyio, E. & Olomolaiye, P., 2009, Construction Stakeholder Management, John Wiley & Sons. Khan, J., 2005, The importance of local context in the planning of the environmental projects: Examples from two Biogas cases, Local Environment, 10 (2): 125. Hochbaum, D.S., Moreno-Centeno, E., Yelland, P., & Catena, R.A., 2011, Rating customers according to their promptness to adopt new products, Operations Research 59(5): 1171-1183. Chekitan, D.S. & Schultz, D. S., 2005, In the Mix: A Customer-Focused Approach Can Bring the Current Marketing Mix into the 21st Century, Marketing Management, 14(1). Powell, T. C., 2001, Competitive advantage: logical and philosophical considerations, Strategic Management Journal, 22 (9): 875–888. Rijamampianina, R., Abratt, R., & Yumiko, F., 2003, A framework for concentric diversification through sustainable competitive advantage, Management Decision 41 (4): 362. Clulow, V., Gerstman, J. & Barry, C., 2003, The resource-based view and sustainable competitive advantage: the case of a financial services firm, Journal of European Industrial Training 27 (5): 220–232. Mulcaster, W.R., 2009, Three Strategic Frameworks, Business Strategy Series, 10 (1): 68 – 75. Nag, R., Hambrick, D. C., & Chen, M.J., 2007, what is strategic management, really? Inductive derivation of consensus definition of the field, Strategic Management Journal, 28 (9): 935–955. Martin, J., 2008, Human Resource Management, SAGE, New York. Sims, R.R., 2007, Human Resource Management: Contemporary Issues, Challenges and Opportunities, IAP, New Delhi. Read More