The Opportunities and the Challenges of the ALDI Company - Case Study Example

ALDI Case Study Table of Contents Introduction 3 Strategic Management and Strategic Competitiveness 3 External Environment 4 Rivalry 4 Threats of Substitute 5 Bargaining Power of Customers 5 Bargaining Power of Suppliers 5 Threat of new entrants 6 Internal Environment 7 Business Level Strategies 8 Recommendations and Conclusion 9 References 11 Introduction ALDI is one of the fastest growing retailers in Australia and the world with considerable number of stores operating in both Australia and worldwide. The company currently operates through 270 stores within the national context and over 8,000 operating in other parts of the world. It has also been observed that the company continuously seeks for expansion both within the national and international contexts. The product line of the stores of ALDI includes food and general products to offer a wide variety of products such as frozen foods, bakery products, sweets and beauty products to name a few (ALDI, 2013). It has thus been noted from the analysis that the company has been quite successful in executing its operations in Australia as compared to other regions of the world. This paper would hence discuss about the opportunities and the challenges of the company in their operations in Australia and other regions of the world. Strategic Management and Strategic Competitiveness Strategic management could be defined as the description of the strategies that has been adopted by managers of companies so that better performance and competitive advantages could be obtained for the organizations. It could be further defined as the set of strategies developed by the organization which decides the performance of the business by a large extent. On the other hand, strategic competitiveness refers to the results and effectiveness of the strategies adopted by companies in order to successfully achieve the determined goals of the organization in the long run. Furthermore, it has been observed that these are special ideas of companies that make them different from their competitors and allow them to perform better (Hitt & et. al., 2012). It has further been noted that competitive landscape of this century also influences the companies to adopt a different mind-set for decision making. As the market is quite competitive, firms are encouraged to take better and different decisions so that they could get the maximum competitive edge over their rivals (Tsai, 2003). In this regard, it has been learnt that ALDI always seeks to provide quality product at low price so as to obtain competitive advantages over its competitors. External Environment It has been observed that external factors are quite critical in context of the performance in modern day business. In this regard it can be mentioned that external aspect of the business imposes a considerable impact on the performance of ALDI in Australia. In order to provide a detailed explanation of the aforementioned facts, Porter’s five forces model for the retail industry of Australia will be focused on and discussed hereunder. Rivalry It has been observed that with the inclusion of ALDI in the grocery industry of Australia, the level of competition has seen a significant increase since the past few years. It has further been noted that the rival companies of ALDI uses advanced technologies in their operation. This aspect presents additional competition for ALDI (Kornberger & Schweitzer, 2011). Threats of Substitute It has been noted that there are many other companies which attempt to sell the products similar to that of ALDI. Also, it has been observed that as a new entrant, the company needs to pay high price to consume the local products and sell those at lower prices which has been hampering the financial performance of the company largely. This deciphers a high degree of threat of substitutes for ALDI in the Australian market (Kornberger & Schweitzer, 2011). Bargaining Power of Customers As there are considerable number of firms in the Australian grocery industry the bargaining power of the customers is on the higher side. In that regard, the company seeks to provide products that are of good quality with reasonable price. It is worth mentioning in this regard that the performance of the company needs to surpass the performance of its competitors like Woolworths and Coles in the Australian grocery industry (Kornberger & Schweitzer, 2011). Bargaining Power of Suppliers It can be noted in this regard that as the products involved in the grocery industry is mostly obtained from suppliers, the bargaining power of the suppliers is quite high. ALDI also need high amount of raw materials for its products. In regard to maintain the bargaining power of the supplier at a lower level to obtain competitive advantages, it would be crucial for the company to provide more effort in maintaining strong relationship with suppliers (Kornberger & Schweitzer, 2011). Threat of new entrants In the industrial context, it can be learnt that entrance of a new competitors in the market is always a threat to the existing companies owing to which the barriers are created to discourage the new entrants from entering the market. It has been observed in this context that as a new entrant, ALDI had to deal with various challenges in the Australian market in terms of global competitive forces, high requirement of capital and homogeneity in industrial structure which the company needs to cope up with the implementation of advanced technology and pricing in order to sustain in the grocery industry of Australia (Kornberger & Schweitzer, 2011). Fig: Porter Five Forces Model Internal Environment In order to understand the internal environment of ALDI value chain analysis have been implemented and discussed below. In relation to inbound logistics of the company, it has been analyzed that most of the products sold by ALDI are its own brand. The company purchases a bulk of its products from the suppliers and manufactures them in its own production house. As the company operates with its own brand name, it is able to obtain a clear view of the changing customer buying behavior and the life cycle of the product which in turn contributes to its competencies. Also, with the virtues of its home produced brands, the company has been able to provide its customers with high quality services and attract maximum number of customers. In respect to its outbound logistic operations, it has to be mentioned that the company operates through its transport system so that the product could be reached to the maximum number of people in the right time in its stores. This aspect enables the company to be self dependent and also contributes to its control over its strategic operations (ALDI Australia, 2013). ALDI always seeks to make products in accordance to the need of the customers. The marketing and sales strategies of the company therefore intend to cut the cost of the products rendering due significant to its profit margin so that the ultimate product could be delivered to the customers at a competitive price unmatched competitive advantages. Concerning its services, ALDI always seeks to provide the best possible services to its customers. The effective workforce of the company is also a major aspect in this regard. When assessing ALDI’s infrastructure, the company can be observed to preserve high degree of control on the quality of the products so that every product delivered as per the tastes and preferences of the customers. Furthermore, the company recruits efficient staff to satisfy the needs of the customers and execute the strategies of the company (ALDI Australia, 2013). From the value chain analysis, it can be inferred that the company manages its internal environment quite well which apparently contributes towards its success. Fig: Porter’s Value Chain Analysis Model (NetMBA, 2010) Business Level Strategies Business level strategies are often referred to those decisions which are adopted by organizations in order to get the competitive edge over the rival companies. There are various types of BLS strategies that could be implemented within business operations and gather competitiveness. Some of them are cost leadership, Differentiation and integrated low cost strategy among others (University of Albany, 2013). It has been observed that the BLS strategy used by the ALDI in Australia is inclined towards cost leadership. According to this strategy, the company intends to compete with its competitors on the basis of price. Contextually, it can also be noted that due to the deliverance of the product at a low price, the company has seen success in a short tenure of operation within the Australian market. Furthermore, it has also been analyzed that the company was accepted by the consumers much readily, hence providing it a competitive edge over its pre-existing global competitors. Moreover, it has also been learnt that as the company has been manufacture its products in its production houses itself, it was able to obtain a cost advantage to market the product constantly at a low price (ALDI Australia, 2013). Hence, it can be affirmed that this strategy of the company could be used for a longer period of time to obtain competitive positioning in the national market of Australia. Recommendations and Conclusion From the overall analysis it could be stated that there are some challenges being faced by ALDI in Australia. Influenced by its production costs, the products of the company was quite expensive at the initial stage of the business. To mitigate this challenge, the company can take the virtue of its already built customer base and avoid making any discounts or offers for the Australian market and therefore suffice its deficit. Moreover a small increase in price of Australian product should also be made in this regard. This would not affect the sales of the company as there are a variety of products marketed by the company at a very low price. Undoubtedly, ALDI has to update continuously in terms of the implementation of technologies, so that it could attract the maximum customers and ultimately surpass its performance from that of its competitors. Furthermore, the challenges regarding private labels should also be mitigated. In this regard, the company needs to promote the product so that the interests of the Australian customers are not diminished due to price hikes. The company should also need to minimize the price difference between its products and that of its Australian competitors so as to maintain a healthy competitor relation. From the overall analysis it could be concluded that there are both positives as well as negatives for the company in the Australian market. The company has faced challenges as well as enjoyed success in its operations in Australia. However, in order to attain maximum market share in the Australian grocery industry, the company would need to overcome the mentioned challenges efficiently. References ALDI, 2013. ALDI the Australian History. Home. [Online] Available at: https://www.aldismartercareers.com.au/aboutaldi.aspx [Accessed April 16, 2013]. ALDI Australia, 2013. ALDI Info & Services. Home. [Online] Available at: http://aldi.com.au/ [Accessed April 16, 2013]. Hitt, M. A. & et. al., 2012. Strategic Management: Competitiveness and Globalization. Concepts and cases. Cengage Learning. Kornberger, M. & Schweitzer, J., 2011. Strategy: Theory and Practice. SAGE. NetMBA, 2010. Porter’s Generic Value Chain. The Value Chain. [Online] Available at: http://www.netmba.com/strategy/value-chain/ [Accessed April 16, 2013]. Tsai, H-L., 2003. Information technology and business process reengineering: new perspectives and strategies. Greenwood Publishing Group. University of Albany, 2013. Business Level Strategy. Home. [Online] Available at: http://www.albany.edu/faculty/ja0754/bmgt481/lecture4.html [Accessed April 16, 2013]. Read More