Executive Summary
ALDI is a leading retail industry in Australia. This paper will discuss a contemporary analysis done on the ALDI. The threat of new entrances, technology, and environment are such factors that are affecting the overall strategic development of ALDI. The macro analysis shows that Aldi affected by its supplier as they are very dominant. Thus, partnership with the supplier will be a good strategy. SWOT analysis will help to identify the strengths, weaknesses, opportunities, and strengths of ALDI. ALDI has a strong strength of having good reputation in Australia’s retail industry. ALDI is also using new strategies to attract customers. However, existing rivals like Coles and Woolworth, affecting the sales of ALDI This report will also present some strategic implications that ALDI should use to make success in the Australian market.
Introduction
ALDI Company’s expansion throughout the Australia is growing as strong from the day of its first store in Australia in 2001 to its development in above 500 stores across WA, SA, NSW, VIC, ACT, and QLD. In this short period, ALDI has stands in top retailers of Australia. ALDI has also influenced the grocery prices in Australia, improved the quality and perception of the private-labeled goods through its exclusive brand's philosophy. It introduced various market-leading edges that never offered by any other retailer in Australia. This company is facing tough competition from Woolworths, Amazon and Coles. To compete with all these competitors, ALDI opted the strategy to provide the products with high-quality at competitive prices. Moreover, ALDI also facing difficulties in meeting its sustainability targets. This report will discuss all these three strategic influences that together impact on the outcomes of Aldi.
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Low Pricing
The market leadership of ALDI depends upon low pricing. To maintain the strategic management, ALDI in Australia invests in the strategies to lower the products’ prices. ALDI is focusing on selling its products at a low price due to the limited range of products and large quantities of purchasing. Rather than offering the promotional pricing and temporary markdowns, ALDI offers low pricing that brings supreme value to the customers. The policy of ALDI on pricing changes is as the first throughout the industry for passing on the lower cost to customers. It is last in increasing prices while the cost increase. The company mentions the change to its customers by displaying notes upon the cartons. ALDI serves the customers’ needs as a discount store by offering the products at low prices with decent quality. It is effective in offering the lowest prices as compared to its competitors. The fair pricing strategy of this company helps it to earn respect from the target market (roymorgan, 2017).
Competition
The main competitors of ALDI in Australia are Coles and Woolworths. They have good strategies such as higher compensation and promotions to employees as compare to ALDI. Both competitors are also offering products on lower prices as compare to ALDI. ALDI is also facing a hard competition the grocery and food in sales. It is affecting the food and grocery price at ALDI. ALDI is committed to maintaining pressure upon its competition by launching new brand campaigns which celebrate the differences as well as challenges the supermarket retailing conventions in Australia. To deal with the competition, ALDI must possess an effective competitive advantage that will result in competition advantage over the competitors. For this competitive advantage, ALDI is using cost leadership and differentiating strategies (Janis Bailey, Pyman, & Parker, 2015).
Sustainability
ALDI is committed to reducing its environmental impact. The company focus to recycle and reuse waste. Its remodeled stores having an environment-friendly building material and LED lighting is helping to optimize the water use and increase the application of renewable energy. ALDI assess the viability of its solar panels throughout the stores and distribution centers. Additionally, Aldi is using a security system for the trolleys for reducing the numbers of trolleys uncontrolled in the public areas. For example, the stores in Scoresby, Victoria because it get the six stars rating by “Green Building Council Australia” for its environmental-friendly designs. Aldi promotes the healthy eating and lifestyle for its customers. ALDI develops a brief sustainable-based packaging guide to buy suppliers and teams based on the Sustainable Packaging Guidelines of Australian Packaging agreement. ALDI also support the One Voice system for providing the mobile shower services to the homeless people living in all states of Australia (Trapp, Pulker, Scott, & Pollard, 2018).
PESTLE Analysis
Political
The multinational companies always strive for the persistent legal environment, despite the government changes, to ensure the growing business and functioning. As per the market analysis the retailing supermarket is much stable, thus, the risk to lose the business is not significant. Australian Government also take actions against of the duopolistic quality of supermarket retailers. Australian government reduced the entrance barrier for the new companies. These legal actions can help the companies for increasing the customer’s bargaining power. ALDI has taken the advantage because of the political framework of Australia and gained greater market shares in the recent years (PC, 2011).
Economic
The Australian government’s budget shows that its economy expects to grow as solidly. It will continue growing in the next years also. According to the CIA statistics in 2017, the GDP of Australia is USD 1.38 trillion (CIA, 2019). These statistics would lead toward higher growth for the household income, and leading to a strong purchasing power. The economic status of Australia also points toward the supermarket industry’s steady growth.
Social
Changes in lifestyles, social concerns, and attitudes have led to a drastic change in grocery retailing industry of Australia. Australian people are concerned for obesity and health. Thus, there is demand for the low-fat food products, easy for cooking food, GM-free and organic foods. Many of the retailers getting benefits from increase in demand as well as pushed the sails with healthy, fresh and organic food. So ALDI is focusing on these preferences of society. From 2017 to 2018 around 9.46 Million people of Australia shopped online. But ALDI supermarket is not providing the online shopping service to the customers (roymorgan, 2018).
Technological
Technology is also playing an important role in retailing field for providing a suitable shopping experience. Australian customers increasingly prefer online shopping. Moreover, the technology is helpful in improving the customers’ experience in store through providing the electronic displays and self-checkout system. Currently, ALDI in Australia is not providing online shopping system. To implement the self-checkouts can be an effective strategy which should consider to increase efficiency.
Environmental
People in Australia are aware of the impact on environment. Thus they mostly prefer to buy environment-friendly products. ALDI in Australia is aware about environmental pollution. Thus ALDI is accountable for impacts that its business has upon the environment. This company is also investing in waste management strategy and ecological products. It reduced the waste for landfills as well as using the energy-efficient products.
Legal
Australia applies the legal system that originates from the English law. Aldi is familiar to German legislation system that uses code law because it is a German company. It can be a challenge in front of ALDI. This company also needs to fulfill the Competition and Consumer Act 2010 for protecting the consumers. It must follow to opening hours as per the trading law. The legal factors such as plastic ban and carbon emission tax implemented across the retailers working in Australia. It affected the policies of ALDI in Australia.
Porter’s Five Forces
Bargaining power of the buyer
ALDI economic conditions of particular region and consumers’ buying power must analyze whenever it starts a store in Australia. It depends upon the substitute products, as well as ALDI must consider the consumers’ taste before establishing the store.
Bargaining power of supplier
ALDI requires raw material. Suppliers can use an influence upon producing industry through selling the raw material at high prices or through having monopoly. Some low pricing suppliers might not focus upon good quality (roymorgan, 2017).
The threat of new entry
Grocery stores with a low cost, such as Wal-Mart entering the Australian market can attract the ALDI’s customers as well as profits by providing the fresh goods in low pricing.
Rivalry among existing firms
In Australia, Coles and Woolworths are main competitors for ALDI. These competitors can have good strategy such as high salary to employees as compare to ALDI Company. These competitors can also merge for reducing prices as cheap.
Threat of substitute
ALDI has less threats from substitutes. But the threats from substitutes could cause major damage. As it deals through regular household products whether low prices, good quality, and fresh products are the main factors, but the customer service can be a major issue.
Internal Environment Analysis
SWOT analysis can be used for identifying the internal position of ALDI. The SWOT analysis is as follows.
Strengths
Pricing is the main strength of ALDI in Australia because it pursues the cost-leadership strategy. ALDI has a strong purchasing power and can influence grocery prices in Australia. It has a strong product mix. Another strength of ALDI is its low operating costs. The low operating cost strategy of ALDI helps it to sell products at low prices. Another strength of ALDI Company is its corporate responsibility policy as it is committed to reducing the environmental impact by reducing the wastage and recycling strategies. It is offering various products and has a good reputation among the customers (Dunford, Palmer, & Benveniste, n.d.).
Weaknesses
ALDI needs to have very high productivity to survive in the competitive market of Australia. The employees of ALDI often need to work as per the multiple shifts and get salary as less than most of other jobs. It creates dissatisfaction among the employees. Another weakness of ALDI is the customer services provide by the company. Another weakness of ALDI is that it has not provide online grocery shopping in Australia. On the other hand, its competitors are focusing on introducing online grocery shopping websites (Pulker, Trapp, Scott, & Pollard, 2019).
Opportunities
The technological advancement is a major opportunity that ALDI can use for managing the organization operations more effectively. Social media can help the ALDI management to promote its brand name much effectively. Expansion in other countries is also a major opportunity for ALDI.
Threats
The main threat that ALDI faces much competition from Woolworths and Coles. As retailers such as Amazon and Walmart also move into the grocery, ALDI is also facing a threat from these competitors. Globalization is another threat because it forced ALDI for competing with local and global competitors (Pash, 2017).
Financial Analysis
ALDI's revenue expects to increase an annualized 12.1% in the five years to 2019, to $9.9 billion. This company has rapidly increasing the market share because of the new stores’ rollout. Consumers are also responding favorably to low prices offered by the ALDI Company. However, ALDI’s revenue growth is starting to reduce as market nears the saturation, particularly throughout the eastern states, whether the ALDI established from long time. The profitability of ALDI has risen throughout the past years because of greater sales of the grocery items as well as economy gains. The financial performance of ALDI of last ten years is shown in the appendix (Youl, 2019).
Strategic Implications
As there is a tough competition in the retailing industry, therefore ALDI must change its strategy. Change in strategies will help ALDI to increase the opportunity and strengths and reducing the weaknesses and threats. ALDI should use the following strategic implications: -
- As compare to Woolworth and Coles, some employees are consulting the customer during the shopping experience. ALDI must consider the customers’ shopping experience and service because it might result in customer satisfaction.
- ALDI will have to use a low price and high-quality strategy to attract more and more customers.
- ALDI must develop new stores and outlet designs for better customer experience.
- ALDI needs to develop more and more customers to attract more and more customers (Sandberg, 2013).
Conclusion
ALDI is facing challenges due to competition, technology, and the environment. As per the internal analysis, ALDI has more strengths instead of weaknesses. So it can retain the customers by providing the products at low prices and with effective quality. It can also use new technology and strategy to attract new customers. External analysis of ALDI shows that the technology and social factors have much impact on ALDI. As other competitors are using the online shopping strategy, ALDI is less developed in online shopping technology. New strategies and online shopping technology will help ALDI to sustain the growth and decrease price so that the customers buy products at similar prices as competitors but without compromising on brand.
References
- Australian Government Productivity Commission. (2011). Economic Structure and Performance of the Australian Retail Industry. Retrieved from https://www.pc.gov.au/inquiries/completed/retail-industry/report/retail-industry.pdf
- CIA. (2019). The World Factbook: Australia . Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/as.html
- Dunford, R., Palmer, I., & Benveniste, J. (n.d.). Strategy for Successful Entry into a Concentrated and Highly Competitive Market. Retrieved from https://www.anzam.org/wp-content/uploads/pdf-manager/2374_DUNFORD_RICHARD_BSP-01.PDF
- Janis Bailey, R. A., Pyman, A., & Parker, J. (2015). Union power in retail: Contrasting cases in Australia and New Zealand. New Zealand Journal of Employment Relations, 40(1), 1-18.
- Pash, C. (2017, October 19). Hot competition is back in Australian supermarkets. Retrieved from businessinsider: https://www.businessinsider.com.au/hot-competition-is-back-in-australian-supermarkets-2017-10
- Pulker, C. E., Trapp, G. S., Scott, J. A., & Pollard, C. M. (2019). The Nature and Quality of Australian Supermarkets’ Policies That Can Impact Public Health Nutrition, and Evidence of Their Practical Application: A Cross-Sectional Study. Nutrients, 11(4), 253. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6520865/
- roymorgan. (2017). Aldi hits new high in supermarket wars. Retrieved from http://www.roymorgan.com/findings/7234-woolworths-coles-aldi-iga-supermarket-market-shares-australia-march-2017-201705171406
- roymorgan. (2017, May 17). Aldi hits new high in supermarket wars. Retrieved from http://www.roymorgan.com/findings/7234-woolworths-coles-aldi-iga-supermarket-market-shares-australia-march-2017-201705171406
- roymorgan. (2018). Who's Shopping Online? Nearly 9.5 million Australians. Retrieved from http://www.roymorgan.com/findings/7612-whos-shopping-online-nearly-9point5-million-australians-201806080733
- Sandberg, E. (2013). Understanding logistics‐based competition in retail – a business model approach. International Journal of Retail & Distribution Management, 41(3), 176-188. doi:https://doi.org/10.1108/09590551311306237
- Trapp, G. S., Pulker, C. E., Scott, J. A., & Pollard, C. M. (2018). Global supermarkets’ corporate social responsibility commitments to public health: a content analysis. Globalization and Health, 1-20. Retrieved from https://globalizationandhealth.biomedcentral.com/track/pdf/10.1186/s12992
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