Strategic Management and a Stakeholder Approach - Case Study Example

ALDI in Australia Your name: Course Name: Course ID: 1. Introduction The food industry in Australia is a competitive one. More so than ever, retail supermarkets are required to give their consumers value for their money (Bonn, 2007). Consumers in Australia have been seen to need best quality food merchandises at lower prices. With such tough competitive environment in the food industry, it is important for supermarkets to understand what their customers want (Hanson and Hitt, 2011). ALDI supermarket understands its customers want value for their money but at same time, not to compromise on their product quality. Since its inception, ALDI supermarket has established itself as a reputable brand in global markets including Austria, Germany, the U.S. and Australia (Zott & Amit, 2008). “The retail chain has over seven thousand stores in different parts of the world” (Bonn, 2007). What differentiates ALDI from other supermarkets is its competitive pricing strategy and still the supermarket is able to maintain high quality of its goods (Bonn, 2007). In fact, in some cases, the ALDI’s products have been found to be 30 per cent cheaper than those offered by other retail chains. Although the business environment is good for retail sector in Australia, competition is also high ever than before (Bonn, 2007). Many large corporations such as Carrefour, Woolworths, and Wal-Mart etc, are competing for expanding both local and international market by implementing every strategy at their disposal. ALDI retailer is very simple and small compared to Woolworths and Wal-Mart retail chains regarding store occupancy, sell products etc (Bonn, 2007). However, the retail chain survived in this strong competitive environment and become one of well known retailers that can compete with other large corporations (Bonn, 2007). Therefore, based on ALDI in Australia, this paper will analyze the approach ALDI should use in order to maintain its strategic competitiveness and level of growth in light of competition that the retail industry is facing. 2. Strategic management and strategic competitiveness Strategic management is a continuous process which organizations use to establish their worn objectives and goals and analyze their external and internal business environment, thus, the company is able to choose one or more strategies to use in order to create value for their customers and benefit other stakeholders (Hoetker, 2007).Any business should set its corporative strategy so that it can be able to define their business and where the business is projected to go in future. On the other hand, business strategy is seen as an important part of the business’s overall strategy (Zokaei & Simons, 2006). Strategic management is a key determinant of the overall business performance, because it includes a series of procedures and action that help the business to decide how to compete and create competitive advantage (Freeman, 2010). For instance, the business strategy that has been adopted by ALDI supermarket can be said as simple but very effective (Bonn, 2007). ALDI’s core business concept has been the reduction of their product cost in every means. For example, the retail chain has in the past specialized on staple products and use its lower pricing strategy to attract customers, and this has helped the retail chain to increase its sales and achieve more profits returns (Zokaei & Simons, 2006). ALDI supermarket is featured with high efficiency and effective of management and operation that is based on cost reduction strategy. All its stores in different parts of the world have one thing in common, simple designs and decorations, thus the retail chain has managed to minimize some of its operating cost (Bonn, 2007). On the other hand, strategic competitiveness can be describe as successful creating and implementing value added strategies (Hoetker, 2007). Strategic competitiveness is related to the company’s market objectives and goals, because its aim is to achieve a certain market objective (Hitt & Ireland, 2012). For example, ALDI performance in Australia has been an outstanding one, according to many analysts; this has been seen as a sin of strong strategic competitiveness on the part of the company. The company’s strategic designs and implementation has made it to remain competitive in Australia retail market. The business environment in grocery industry in Australia has remained stiff and is characterized with technological changes, strong and strong competitors (Hitt & Ireland, 2012). Therefore, ALDI’s business competitiveness have been influenced by its competitors and this has made it hard for the company to achieve better market performances. However, the supermarket’s effectiveness can be further improved when the company implements new technology (Zokaei & Simons, 2006). 3. External Environment The external analysis is used to analyze the corporation’s external business environment. The usage of external analysis measure is to examine the company’s strategic threats and opportunities in the corporation’s business environment which can affect the overall goal of a business (Birkinshaw, Hood, & Young, 2005). The grocery industry external environment has influence the performance of retail giant, because the industry external environment have been found to affect the business activities and strategic implementation of the retailer is affected by the industry environment. According to Zokaei & Simons, (2006), the external environment for most businesses in could provide both the opportunities and treats to retail supermarkets. More specifically, the Australian population has grown and this in return expanding the market demands, which have been seen to be good for the retail market. In addition, Australia’s economic environment is stable and this has translated to be good for the retailers, because people have money their pockets that can enable them to purchase grocery products (Freeman, 2010). Moreover, over the years the Australian government has been able to support foreign investments, but at same time, it has managed to regulate the behavior of corporations through policies and laws (Birkinshaw, Hood, & Young, 2005). Finally, ALDI’s management can use technologies to increase their organizational efficiencies and organizational effectiveness. For example, work efficiencies can be improved with the help of modern technologies. In terms of the industry environment, ALDI can employ Porter’s five forces model to evaluate it current position in Australian grocery sector (Porter, 2008). At the moment, the threat of a new entrants into the grocery sector is low because it is time consuming and costly to establish a new business in Australia (Zott & Amit, 2008). The Australian government has established may controls and procedures that acts as a barrier, so the barriers in the country are high (Porter, 2008). The threat of substitutes is low in the grocery industry (Hitt & Ireland, 2012). The customers bargaining power is high because the products in Australia have been standardized and the switching cost for alternative products are very low (Porter, 2008). The bargaining power of the supplier has also been found to be low because most retail chains are trying to get lowest prices for their suppliers (Zott & Amit, 2008). Lastly, competitive rivalry in the grocery industry is quite high. In the past, the grocery industry growth has been slow and there is a lack of differentiation opportunities. 4. Internal Environment For a company to remain competitive, it is important for the company to carry out its internal analysis of its business (Birkinshaw, Hood, & Young, 2005). An internal analysis will give the management a clear picture of the business operation, how effectively the business has use its resources, and how effective its current strategies are. When a business executes its internal analysis, a business will be in a position to know their capabilities, unique resources and competencies. The internal environment of ALDI has played an important role in the market performances of the retailer, if the retailer has sufficient capabilities and resources and feasible mechanism to conduct business activities (Zott & Amit, 2008). Based on the value chain analysis model, it can be used to measure if a business operation can be used to create value addition (Freeman, 2010). For one, the primary activities for a business are involved with product distributions and sales, and after sale services (Birkinshaw, Hood, & Young, 2005). Various activities of ALDI have been found to be satisfactory because the retail chain has not only provided a wide range of products, but also the company has been able to reduce its business costs as a result of increasing its organizational efficiency (Freeman, 2010). In addition, a series of supportive activities such as human resources and retail chain infrastructure are important for retail chain to achieve better market performances (Birkinshaw, Hood, & Young, 2005). For example, if a company has a pool of talented employees and sufficient facilities, the core function of the company can be performed in an appropriate manner (Hitt & Ireland, 2012). 5. Business level Strategies Business level strategy has been described in the past as integrated and coordinated sets of commitments and actions that have been designed to a business to create competitive advantage through exploitation of core competencies or attributes in a specific market (Freeman, 2010). The business level strategy has been found to play a vital role for a company to achieve strategic competitiveness (Zott & Amit, 2008). The direction the company could ensure its business resources are used in a proper way. Also, the business-level strategy could create the competitive advantages for a particular company, so that the company could compete with their competitors in appropriate ways. According to the review of the case study, ALDI is able to put in place a series of measures that will create differences in the retail chain position relative to the competition from its rivals (Birkinshaw, Hood, & Young, 2005). Cost leadership is another strategy that can be used by ALDI company. The retail giant source most of its fresh product in Australia. Conclusion ALDI is a very successful retail chain and famous for its unique operation styles in term of its concept of cost saving strategy and hard discount strategy and running small quantity goods in order to attract customers. ALDI is in the direct direction on its expansion strategy, it will never risk to expand in order to open up another retail stores unless it has seen the previous retail stores are making profits in that region. The company’s concept is seen as simple which is centered at the customers and seeking for customers benefits. In this way, the company is able to win a lot of loyal Australian customers. However, despite these positive impacts, the company has cruel rivals which force the company to take further actions to put in check its rivalries. 6. Recommendation Based on the discussion above, the senior managers of ALDI should take immediate actions to deal with the current challenges that face the retail giant. ALDI should attempt to source part of its supplies from other countries because it is cheaper. In addition, the company should continue to provide cheap prices; even though own labels are increasingly popular. Furthermore, the retail chain should take full advantage of the information technology system and virtual supermarkets in order to ensure the organizational efficiencies and low cost and achieve better market performances. Lastly, the company made profit from the seventy two stores in Australia, ALDI should consider expanding their market potentials in other states and territories in Australia before new competitors move into Australia. Reference List Bonn, I. 2007, ALDI in Australia. School of Business, Bond University Birkinshaw, J. & Hood, N. & Young, S. 2005, ‘Subsidiary entrepreneurship, internal and external competitive forces and performance’, International Business Review, vol.14, no.2, pp. 227-248 Freeman, R. E. 2010, Strategic management: a stakeholder approach, Cambridge University Press, London. Hoetker, G. 2007, ‘The use of models in strategic management research: critical issues’, Strategic Management Journal, vol.28, no.4, pp. 331-343 Hitt, M. & Ireland, R. 2012, Strategic Management Cases: Competitiveness and Globalization, Cengage Corporation, New York Nag, R. & Hambrick, D. 2007, ‘What is strategic management: inductive derivation of a consensus definition of the field’, Journal of Strategic Management, vol.28, no.9, pp. 935-955 Porter, M. 2008, ‘The five competitive forces that shape strategy’, Harvard Business Review, vol.86, no.1, pp. 25-40 Zott, C. & Amit, R. 2008, ‘The fit between product market strategy and business model: implications for firm performance’, Strategic Management Journal, vol.29, no.1, pp. 1- 26 Zokaei, A. & Simons, D. 2006, ‘Value Chain Analysis in consumer focus improvement: a case study of the UK red meat industry’, International Journal of Logistics Management, vol.17, no.2, pp. 141-162 Read More