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Aldi moves beyond competing on price - Essay Example

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In the current economic downturn environment, companies across the world are taking measures to increase efficiency yet at the same time cutting down cost of operation in order to sustain profitability. It is especially hard when consumers are highly cautious in their spending…
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Download file to see previous pages In the process they have also changed competitive environment. In the face of such changing economy supermarkets like ALDI should respond to its environment, and take strategic actions to not only sustain growth but also improve on its competitive position in the industry.
The UK supermarket industry in 2008 accounted for retail sales of approximately £124.1bn and performed well compared to other industries despite market gloom (Verdict 2009). This combined output has been generated by the various categories of supermarkets - large grocery retailers, regional retailers, fascia group, convenience stores, LADs (limited assortment discounters), frozen food retailers and specialist retailers (Verdict 2009). Despite its financial size, the supermarkets industry is driven by the major large grocery retailers which account for 85 percent of its sales and four dominant supermarkets (Competition Commission 2008). Although, ALDIs direct competitors are Lidl and Netto, it is also competing with the other categories of retailers. Considering this scenario, ALDI which is a LAD must consider its competitive environment in order to devise strategic plans for sustainable growth.
To analyze the industry, Michael Porters (1985) Five Forces Model is being used to gauge the competitive environment. The Five Forces include buyers bargaining power; suppliers bargaining power, threats of substitutes; threats of new entrants; and the degree of rivalry among the firms. These shall be analyzed as follows:
The supermarkets are the price-takers according to the Competition Commission Report (2008) which means that the consumers have to buy at the price set by the supermarkets. The supermarkets compete based on prices which although allow consumers a wide range of retailers to choose from but the nature of the product (food) allows them to be ...Download file to see next pagesRead More
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