Strategic management

With the help of the above table, the strengths, weaknesses, threats, and opportunities of Aldi are evident; however, a brief discussion is also required here. It is the strength of Aldi that it is the only retail supermarket in Germany that has a range of low-priced products. Even focusing on low prices, the company has sold only quality products to the customers. Because of such an effective pricing strategy, Aldi has acquired a larger market share in Germany over the past many years. The presence of Aldi in more than 15 countries states that customers like the products, and this also leads the business to place itself internationally (SWOT analysis of Aldi, n.d.). Due to selling affordable merchandise, the customer base and profit ratio of Aldi are increasing. Apart from strengths, Aldi also has some weaknesses, which reduce the brand identity of the company in the customer's mindset. Due to the low brand image, most of the customers termed it as low quality as well as cheaper goods. Aldi has been capturing price-conscious as well as middle-class people under their target group. The brand still has low recognition from people as compared to others because it does not have a global presence.

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The company sometimes also faces severe competition from LIDL, as it is also the one that delivers low-cost as well as discounted products to the customers. Problems are also coming from the supplier's side, which affects the demand as well as supply aspects. Aldi needs to invest huge resources in advertising so as to give cutthroat competition to other players. It has the opportunity to expand the business overseas, such as in Asia and Africa. With the help of innovative as well as attractive products, Aldi can acquire a greater market share. Aldi cannot cater a complete shopping experience to the customers, thus it is a threat to the company (Saloner, Shepard, and Podolny, 2008). The other well-established brands can diminish the brand identity of Aldi because the life cycle of private label brands remains relatively low as compared to others.

PESTEL analysis of Aldi

Political:

In the UK, the political situations are quite stable and balanced; however, the performance and business decisions of Aldi are highly influenced by the political and legislative conditions of German countries, including the European Union. With the help of sound political forces, Aldi is able to generate huge opportunities for employment. In order to reduce employee turnover rates, political parties have become supportive in nature (Sadler, 2003). 

Economical:

The economic condition of the UK is relatively strong and has been able to avoid recession after the year 2008; however, there is high unemployment and uncertainty in the economic conditions. It is the economic factors of Aldi that are likely to influence the demand, cost, prices, and profits. These economic factors are not controlled by Aldi, but their effects on performance can be profound. 

Social:

The business and marketing decisions of Aldi get affected by the changes in needs and demands of customers (Trim, 2004). The impact of the population on Aldi's business decisions is high, as customers are changing their demands and preferences as per market trends. Due to low levels of education and competitive market prices, customers are changing their preferences and demands. 

Technological:

Customers require a more convenient and high-tech experience, and technology plays a crucial role in impacting the experience as well as preferences in terms of demands. Though Aldi has been using the latest technology to meet the requirements of customers, the level of competition is still high. Aldi can get a number of advantages from technical facets, as this may also develop the competency of the firm. 

Environment:

The UK stands in the 9th position as it is the only one that uses large amounts of energy resources for the purpose of safeguarding the environment (Partington, 1996). It is the concern of Aldi towards natural forces that leads the firm to introduce poly and paper bags by banning plastic bags. In order to cope with the increasing risks of climate change, the company has introduced “The Carbon Plan” so as to achieve emissions reductions.

Legal:

The market in UK is highly regulated by the amendments mentioned in European policies. The policies and amendments mentioned in the EU highly influence the performance of Aldi For instance, the Food Retailing Commission has set some laws in which the firm is not allowed to change the norms and procedures without giving any notice.

Porter's Five Forces

Here in the present report, the researcher has been applying Porter's five forces model so that to analyze the impact of competitor forces on business decisions. Competition is prevailing in the marketplace because of the availability of so many forces, which are mentioned in the below study.

Threat of New Entrants:

The retail market of the UK is primarily dominated by most of the largest retail firms, such as Tesco, Asda, and Sainsbury (Pahl and Richter, 2009). These companies have acquired market share in the UK; thus, it becomes difficult for other players to enter the retail market in the UK. Aldi has been planning to establish the business in the countries as well, but due to legal regulations, the firm may get some threats while entering into African and Asian markets. 

Bargaining Power of Customers:

The customers are possessed with huge bargaining power in terms of having a range of substitutes. Aldi may face the situation of customers switching over as other businesses are emphasizing customer retention strategies, which may affect the profitability factor of Aldi. It has been seen that Tesco has been retaining its customers by customizing services, ensuring low prices, and providing better choices to them (Nijssen and Frambach, 2000). Though the need for supermarkets is high, especially in European countries, consumers are also aware of the issues associated with the operations. 

The Threat of Substitutes:

The threat of substitutes is high, as similar products exist in the marketplace even with low as well as discounted prices. It is essential for Aldi to analyze the availability of substitutes, as this has a huge impact on the company's performance. This may also reduce the demand for regular products, and this also poses a threat regarding customers switching over to other brands. 

Bargaining Power of Suppliers:

This force represents the power of suppliers that can be influenced by major grocery chains and the fear of losing their business to large supermarkets. The suppliers have the power to influence the functions of Aldi as they can directly deliver goods and services to potential users. The effective relationships of Aldi with sellers can have a similar effect on the strategic freedom of the company. The suppliers of Aldi can restrict the supply and demand facet (Munro, 2009).

Bargaining Power of Competitors:

The major competitors of Aldi are growing in the marketplace, and this has led the market to enhance the size and characteristics of the sector. The competitors of Alfa can acquire competitive positions, and this could work as a threat. This may restrict the firm from outsourcing the business even in the global market. Competition is high in terms of the local market, but due to the high use of technical gadgets, Aldi may face trade restrictions while entering other dominant regions.

Thus, to conclude the competitor analysis, it can be said that Aldi is at a growing stage, but due to the presence of huge competition, the identity of the business may diminish; thus, the firm is suggested to enhance the competency level so as to retain its position in the market. It is the low prices and competent strategies enough that have helped the business manage its success in the retail market of the UK. Currently, Aldi is in a growing position in which the company has been focusing on acquiring a huge customer base by providing them with low-cost as well as quality products; thus, this makes the company stand in between the rivalries (Koning, 2007). This has also assisted the company in experiencing significant sales. It is the staff members of Aldi that are getting much benefit from the low-cost strategy, and this is also proven to be significant for the organization. Aldi has been planning to expand its business in African and Asian markets, which may help to develop its identity in other markets, and the targeted groups can also be expanded.

Porter's Generic Strategies

With the help of Porter's generic strategies, the firm can identify the profitability ratio, whether it is above or below the industry average. When getting above the profitability ratio, the business is said to be competent enough to acquire its position in subsequent industries. Considering generic strategies, Aldi can ascertain the ways in which a competitive edge can be accomplished (Khandekar and Sharma, 2005). Strategies mentioned under Porter's generic model could help Aldi acquire a competitive advantage. Cost leadership as well as differentiation are two distinct categories that can be adopted in the present case. In order to create high demand for the products, Aldi can emphasize cost as well as pricing facets. This will also assist the firm in acquiring a competitive edge. The company can enhance the profitability ratio by offering the goods at lower prices, which they have already adopted.

This would also aid in increasing market share. It is relatively a fact that Aldi can achieve the same profits even by selling the goods at discounted prices (Jeffs, 2008). In the present case, Aldi is required to make proper alignment between inbound and outbound activities, as that will help the business to render quality as well as cost-effective products. The production department plays an immense role in adopting a cost leadership strategy. With the help of a differentiation strategy, Aldi can also bring new products to the customers at the same prices, as this ensures the company acquires the retail market in the UK.

Aldi may even apply the Ansoff matrix, which also avails a range of strategies and aims to maximize growth possibilities (Hill and Jones, 2009). Among all the strategies mentioned, one of the best and most appropriate strategies can be adopted for the purpose of maximizing sales and profit ratios. As the firm is trying to establish the business in other countries, the application of the Ansoff matrix is relevant. In order to expand the business in other markets, Aldi can adopt the strategy of market penetration, in which Aldi can sell more as well as the same products in the existing market. This may result in market share expansion and enhancement in business identity. With the help of such a strategy, Aldi can retain its potential customers, and this also safeguards the position of the business in the existing market. Other than this, Aldi can also start selling its goods in new markets with the same products, and this will help the company expand its business entity (Henry, 2008). This may also help the company to develop the image of all products present in subsequent product lines.

Besides this, the strategy of product development can also be adopted in which Aldi can introduce new products to the same customers that are in the existing marketplace. The company may acquire a competitive advantage as well as a brand identity by operating a business in the same market. This also enhances success as well as growth opportunities for the business, and thus the life cycle of the business may be ascertained. Ansoff matrix also facilitates the strategy of diversification in which the firm can introduce a range of new products to a new marketplace, that is, to new customers. The strategy is risky as well as beneficial in nature; that is, Aldi cannot access the level of competition prior to entering any market (Guest, 1997). Diversification is one of the widely used strategies that most of the companies in the retail sector are using for the purpose of business expansion. The business cannot identify the life cycle of products because it operates in other known markets. The most common way for a business to diversify is to develop new products that take advantage of the core competencies of the organization. But the strategy is also known to spread risks.

Value Chain Analysis

Aldi has been managing internal business functions with the help of value chain analysis, and this also aids in analyzing the core weaknesses as well as strengths of the company. With the help of the mentioned value chain analysis, the activities can be segregated into two types, such as primary and supportive activities (Schmitz, 2005). In primary activities, marketing and sales are the only activities that support Aldi and its other business functions. With the help of marketing activities, the company has been acquiring greater market share and this also aids in managing different types of services. Inbound logistics of the company also comes under primary activities, which Aldi has to manage so as to maintain profit margin. Inbound logistics is concerned with the management of activities related to the dissemination and storage of data, which can help in the production process. The operation department of Aldi is also managing distinct types of services along with further processes. Under supportive activities, there comes a firm infrastructure that builds the competency level as the products are arranged in a suitable manner. The human resource management of the firm is also managing the internal processes (Graham, 2008). The company is also focused on technological development.

Corporate Social Responsibility

The business has been focusing on corporate social responsibility, in which they are using energy resources to a wider extent so as to safeguard the environment. Under CSR activities, Aldi has started taking the initiative to ban the use of plastic bags; the company has been using paper as well as poly bags with more resources of natural and solar energy (Devanna et al., 2006). It is the development of a go-green strategy that aids Aldi in promoting its business identity in the market and also reflects how much the business is considering the benefits of the environment. It has also been seen that businesses are acquiring many benefits from CSR initiatives, which also aid in maximizing the profit aspects.

Recommendations

• To go for business expansion
• To target other customers
• To manage internal functions by analyzing the competency ratio
• Expansion and diversification in Asian and American states
• As the company wants to establish the business in other markets, it is suggested to use technological resources to a greater extent.

Conclusion

Attributing the entire report, it is clear that effective strategic implementation requires the workforce to be more proactive rather than reactive, as it can help the organization in shaping the culture with organizational strategies.

References

Books, Journals, and Online

• Aldi Group in Retailing. 2014. [online]. Available through: < http://www.euromonitor.com/aldi-group-in-retailing/report>. [Accessed on 22nd April 2014].
• Crossan, M. M., and et. al., 2011. Strategic Analysis and Action. 8th ed. Pearson Education Canada.
• Devanna, M. A., and et al., 2006. Strategic planning and human resource management. Human Resource Management. 21(1). pp. 11-17.
• Graham, H., 2008. Marketing Strategy and Competitive Positioning. 4th. Pearson Education India.
• Guest, D.E. 1997. Human Resource Management and Performance: A review and research agenda. International Journal of Human Resource Management, 8(3), pp. 263-276

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