1MANAGEMENT Executive summary Thereportproposedabouttheacqusitionsandstructureconsideringtheretail supermarketchaininAustralianamedAldi.Theotheracqusitionsstructureincluded acquiring the stocks, assets and mergers to form combined entities and at the same time, facilitate the scopes for shareholders and investors to make investments and facilitated the amount of cash provided for starting business in a new way with the merger and acqusitions. From the report, it could be understood that the company acquiredDelhaize Group's Bottom DollarFoodRealEstateSitesandevenmergedwithKohltoenhanceitsbusiness performance and aimed at business expansion by opening up new stores all over the world.
2MANAGEMENT Table of Contents Introduction of Aldi...............................................................................................................................3 Acquisitions structure............................................................................................................................4 Acquisitions of Aldi..............................................................................................................................4 Structures of the companies...................................................................................................................7 Aldi’s three strategies............................................................................................................................9 Marketing mix model for Aldi.............................................................................................................11 Disadvantages of acquisition...............................................................................................................12 Conclusion...........................................................................................................................................13
3MANAGEMENT Acquisitions and structure- Australian Supermarkets Introduction of Aldi The structure of Australian supermarkets is quite good and the major supermarket chains are managed to ensure overall client satisfaction with the inclusion of Aldi, Coles and Woolworths. The supermarket chains have often been found to merge with small and medium sized businesses for ensuring international business expansion along with creation of scopes for higher revenue generation with much ease and efficiency. Though mergers and acquisitions, the supermarket chains have manage to survive in the competitive marketplace as well as helped in managing business much more easily with the purpose of expanding business and drawing more clients to increase the profit level achieved by the organisation (Lin 2014). The acquisition and its structure by the supermarket chains has facilitated the breaking down of the value of the business into both cash and non-cash components including the earn outs, rolled equity, vendor take backs, etc. Aldi is a common brand consisting of two German owned discount supermarket chains that has opened up 10000 stores in more than 20 countries, which has allowed the company to make a turnover of more than €50 billion. The German operations include multiple regional companies, which has further resulted in creating a sustainable position and spreading many stores all over the world further has generated higher revenue. The business practices have helped in allowing the customers to make an exit through the checkout point and even managed Apple Pay contactless payment system for expandingtheproductselectionandpurchasesmadebytheclientswitheaseand effectiveness (Aldi.com.au 2019).
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4MANAGEMENT Acquisitions structure The major aspects that contribute to the structuring of merger andacquisitionarestockpurchase,purchasingassetsandmergers.Themergersand acquisitions include acquisitions of assets such as plants, machineries. Physical inventories, trademarks, patents, copyrights, etc. The purchasers gain the stocks of the company that is targeted from the holders of stocks. The buyers need to negotiate about the warranty period and representations considering the assets and liabilities while the purchase of assets include managing the purchase agreement and make the structure of acquisition effective for the buyers to purchase the assets (Arora, Belenzon and Rios 2014). The merger enables combining entities to form a single combined entity and this allows the shareholders or investors to gain significant amount of cash along with start of fresh entity too. The acquisition structure not only benefits the company to gain tax benefits, but also allows for managing asset transactions along with prevention of tax losses that can create issues for the taxable income in the future (Bouraoui and Li 2014). Acquisitions of Aldi One of the major examples of Aldi acquisition include the purchase of Delhaize Group's Bottom Dollar Food Real Estate Sites. The purchase of 66 real estate assets from the Delhaize Group has further helped in acquiring various lands, Buildings and managed leasehold improvements that are related to the Bottom Dollar Food operation. The retail chain Aldi has offered god quality and fresh groceries and with the purchase of real estate transactions, the groceries are produced of high quality and at reasonable prices to the regular stores for fulfilling the needs and requirements of the clients with ease and effectiveness (Aldi.com.au 2019). The accelerated growth plan has been further facilitated with the purchase of the estates, which has further helped in opening up new stores along with
5MANAGEMENT introduction of many stores all across. With the acqusitions, there has been huge expansion, which has further helped in opening stores coast to coast and anticipated more than 45 million clients every months (Antràs and Yeaple 2014). The expansion resulting from the acqusitions has also allowed the company to create huge employment opportunities for people as well as create good working conditions at the stores, warehouses and division offices for ensuring that the employees can perform to their potential to serve the clients. It has helped in persevering with the withdrawal of private equity partners and this has been one of the effective ways to deal with the global financial crisis too. This has benefited the shareholders or investors and the companies have managed to work together to form new departments. The Australian Taxation Office made sure to manage capital gain tax and created convenience for the shareholders or investors of Aldi Supermarket to work in coordination with Delhaize Group (Arora et al. 2014). The acquisition structure has improved with the sharing of transactions revolving around the management and purchase of business entities and future liabilities, loans and other receivables too. The value assets attained could help in enhancing the business performance, furthermore ensure speeding up the business operations and processes along with accomplishment of the business goals and objectives with much ease and efficiency (Cooper and Finkelstein 2014). NotonlyAldihasgainedagoodcapitalandincreased numbers of assets, but also there has been creation of better scopes and opportunities for the businesses to reposition the brand portfolio and target a higher capital for utilising higher growth prospects to succeed in terms of future earnings (Filipovic, Vrankic and Mihanovic 2014). It is essential as well for gaining strong rate of return on investments, good capital and creating a sustainable position within the concerned industry too. By maintaining a strong strategic stake in Delhaize Group, Aldi has created strong connections with other businesses and people too, which has helped in the development of strategies along with determining the
6MANAGEMENT potential as a reputed and established loyalty organisation, furthermore obtain proper support and investments of both these two companies (Elsas, Flannery and Garfinkel 2014). The growth has accelerated at Aldi with the use of a unique business model that has allowed the clients to find more convenience in making purchases of grocery items because of the he amounts of costs that are saved. With the acqusitions of the Group, the company has also managed to increase the geographic footprint, which has allowed the company to introduce new products and services along with the continuous supply of healthy food items and on-trend options like fresh produces for the customers (Chapman et al. 2013). It is also important to ensure that informal clearance about the acquisition is managed for ensuring that both the businesses understand the feasibility of acquisition and check whether it could benefit them to survive in the competitive business environment or not. After looking closely at the acquisitions of independent supermarket chains, it has been found that the section number 50 prevents acquisition that can reduce the level of competition within the marketplace (Ferreira et al. 2014). Thus, forecasting and analysis of feasibility of acquisition is being done to determine the significance of acquiring Delhaize Group's Bottom Dollar Food Real Estate Sites along with the identification of effects regarding choices made by consumers and competitive constraints on the other supermarket chains in Australia (Howson 2017). There is another example of Aldi merging with Kohl as a signed deal for piloting the grocery test and at the same time, open up new stores to drive the traffic level. As people are concerned with the purchase of grocery items on a consistent manner, there has been approaches undertaken to draw in more clients and enhance the lifetime order value, because of which an effective model has been implemented by Aldi with Kohl as a partner for attracting a huge customer base with lesser chances of risks associated
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7MANAGEMENT with it (Cooper and Finkelstein 2014). Aldi’s pilot launch has further resulted in hybrid partnerships including the fitness centres and health clubs, which can be beneficial too for generating more sales and attract investors or shareholders to make investments on the company for higher revenue generation. The ACCC wanted proper agreement from Aldi and Kohl related to the acquisition for providing information though with the limitations in acceptance of protocol. This would help in managing continuation of existing practices of enabling improvements in acquisitions outside the protocol too (Antràs and Yeaple 2014). AldisupermarketchainhasmergedwithKohlandalso acquired Delhaize Group by working with Standard bank that acted as a financial and debt advisor along with managed the roles and responsibilities of transactional sponsorship and providers of lead debt. It has been one of the largest outbound acquisitions that created a great deal and at the same time, facilitate the shareholders or investors’ base to ensure proper funding, debt and equity management. The merger and acqusitions has been aimed to enhance the growth of the company by opening multiple distribution channels to serve people conveniently (Lebedev et al. 2015). Due to this, there has been increase in the offerings of grocery items along with clothing, footwear and textile items too. This also helped in incorporating more grocery products in the stores along with more clothing and textile products, which catered the needs and preferences of people with ease and efficiency. Not only the market share has increased for Aldi supermarket after the acquisition, but also there has been increased numbers of stores (Erhemjamts et al. 2013). Structures of the company The structure of Aldi shows that more focus has been given on functional and mechanistic aspects, which has helped in offering products and services at a much lower price when compared to its competitors such as Walmart, Trader Joe, etc. The
8MANAGEMENT main strategies include using private labels, which allows for avoiding the middle man or third party and thus the savings are passed on to the clients, which ensures increased sales volume and discounts on products and services too (Edwards, Kravet and Wilson 2014). The no-frills design along with environment friendly lighting and clean energy usage has reduced the costs of utility and operations too. Aldi supermarket chain’s management structure is effective considering the fact that most of the stakeholders have been taken into consideration to ensure smooth business functioning. With the management of a new structure of the organisation, the company has managed to target supply chains and gained the trust and loyalty of clients, which further helped in creating new scopes and opportunities for driving earnings and at the same time, target the diverse market segments to fulfil needs of many. The effective organisational and management structures further assisted the company to save
9MANAGEMENT operational costs and utilise the big data and information for improving the online shopping experience and drive customers’ loyalty (Zaheer, Castañer and Souder 2013). Aldi’s three strategies Oneofthemajorandrecentbusinessstrategiesisthe upgrades of many stores, which has been possible with the help of $1.6 billion investment to re-model the 1,300 US stores by the end of the year 2020. The changes are managed with the help of introducing open ceilings, natural lighting systems’ addition, LED fixtures, utilisation of energy saving refrigeration and using environment friendly building materials for ensuring the reduction of operational costs along with staying ahead of the competitors in business. With its huge numbers of stores all over the world, the smaller size stores can also reduce the costs of overhead and at the same time, reduce the effects of global warming along with maintenance of energy efficient procedures (Filipovic, Vrankic and Mihanovic 2014). The use of solar panels in the roofs has further allowed to implement a remodelling program and thus the company has made investments of $3.4 billion to expand its stores, furthermore created scopes for mergers and acqusitions to benefit within the marketplace. Being the food retail industry a highly competitive industry, the organisations need to provide the customers value for money and thus high quality products need to be offered at reasonable prices for catering to the needs and preferences of the clients. The competitive pricing strategy has been implemented by Aldi by comparing the prices of different other retail chains and then implement the right pricing strategy for reducing the quality of products though without making any compromise to the quality of products and services (Howson 2017). The lean production strategy has further helped in getting more from less, which has reduced the quantity of resources used or the production of good quality products and services. The learn production strategy has also eliminated the
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10MANAGEMENT wastesandusedlesserlabour,space,materialsandtimeforensuringcontinuous improvement, timely production, time based management of human resources and managing proper quality of products to make people understand their roles and responsibilities properly while working after acqusitions (Lebedev et al. 2015). The three major values of the organisation are simplicity, consistency and responsibility and thus becoming socially responsible is an integral part of any businesses. The sustainability strategy is implemented by Aldi to become socially responsible by caring about people, community and individuals roles as a business aimed towards the formation of a better world. To maintain high level professionalism and integrity, Aldi has implemented corporatesocial responsibilityprinciplesthat are needed to be followed by the employees to committing towards something good to the environment, furthermore define the minimum social standards that are applied to the business partners and suppliers all through the supply chains of the organisation. The sustainability and competitive strategies, either of these two, can be the most suitable, because it can help Aldi to survive in the competitive business environment by reducing operational cost and even ensure become responsible towards the community for creating positive mind-sets among clients. The acqusitions have not only allowed the business to manage proper corporate governance and ensure that the laws, rules, regulations and guidelines are followed properly to meet up business standards. This also favoured the cultural shift of focus from the main office processes to the financial results and business’ operational outcomes too (Zaheer, Castañer and Souder 2013). The support functions were facilitated, which further ensure divisional success along with creation of more scopes and opportunities to reduce the overhead costs and other costs incurred for the various business operations and processes’
11MANAGEMENT management. The acqusitions and structure further brought immense improvements for Aldi such as necessary changes in the working capital positively, thus helping to centrally manage the range and reduction of SKU along with auto-replenishment and effectively using the promotional approaches and adver6isments’ management too (Chapman et al. 2013). It has created value creation opportunities for Aldi such as maximisation of shareholders; value along with the improvement of trade related performance of the existing businesses too. The synergies include leveraging the global sourcing activities and improvement in supplier arrangements, which has further facilitated the use of brand related aspects and maintained a positive brand image and name too. Marketing mix model for Aldi Product Theproductsareofferedat affordablepriceswithout compromising on its quality Thesourcingofproductsfrom selected suppliers and own branding have created greater control over the processes of production and pricing Theotherproductrangeincludes fresh fruits, vegetables, health and beautyitem,electronicproducts, household goods, etc. Aldi Talk and Aldi Mobile are the mobilenetworkoperatorstoo Price Theunitpricingstrategyatthe grocerystoreshashelpedthe customers to compare between the prices if products of Aldi and other supermarket chains The low prices are charged to create market penetrationand gain higher market share The competitive pricing strategy has allowed Aldi to keep prices low and createpositivemindsetsamong clients (Aldi.com.au 2019)
12MANAGEMENT available Place Morethan8000storesin18 countries and new stores are being introduced in Britain every week Theproductsareprocuredfrom suppliersandstoresatehelocal warehouses The online presence has created ease for customers to check the product details and locate the nearest stores too Promotion Investments in promotional activities haveallowedforgreaterbrand exposure Theinteractionwithclientsvia direct mail and newspapers is useful too Theuseofemailmarketinghas furtherhelpedindevelopingtrust among the clients Disadvantages of acquisition Acquiring a similar kind of company within the similar kind of sector, i.e., the retail supermarket industry often creates risks of becoming redundant. One of the major disadvantages is that when the two businesses have similar kinds of geographical spheres and the target audiences are also same, then it might get difficult to compete against the second business that has been acquired. The difference in culture, values and beliefs further could contribute to the clash and misunderstanding of the existing business and at the same time, create risks associated with the retention of staffs that the business has aimed to
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13MANAGEMENT acquire (Lin 2014). This would also result in increase of debt load, furthermore affect the business expansion in the future as well. Though there are tax benefits, good economies of scale and gaining better control over the market considered as major benefits, still there are few areas where acquisitions might bring undesirable results such as the loss of staffs who are skilled and knowledgeable, internal competition within the workplace, increase in operational costs alongwithuncertaintyconsideringtheapprovalofmergeroracquisitionthrough management of proper assurances. Conclusion Based on the report, it could be understood that the acquisitions and structure of the supermarket chains in Australia had been focused on. The structure of acquisition enabled management of stocks, inventories and at the same time, managing negotiations related to the warranty period and making purchase agreements too. The major acquisitions were done by Wesfarmers to merge with Coles while Woolworths’ acquisition of David Jones also brought major transformation to the business for sustaining in the competitive marketplace. In spite of the advantages, there were few disadvantages such as redundancy and higher costs of operations, which might affect the business functioning and thus focus should be upon it to ensure smooth business functioning. References Aldi.com.au. (2019).ALDI Supermarkets - Good Different - ALDI Australia. [online] Available at: https://www.aldi.com.au/ [Accessed 28 Jan. 2019].
14MANAGEMENT Antràs, P. and Yeaple, S.R., 2014. Multinational firms and the structure of international trade. InHandbook of international economics(Vol. 4, pp. 55-130). Elsevier. Arora, A., Belenzon, S. and Rios, L.A., 2014. Make, buy, organize: The interplay between research, external knowledge, and firm structure.Strategic Management Journal,35(3), pp.317-337. Bouraoui, T. and Li, T., 2014. The Impact of Adjustment in Capital Structure in Mergers & Acquisitions on US Acquirers' Business Performance.Journal of Applied Business Research, 30(1), p.27. Chapman, K., Innes-Hughes, C., Goldsbury, D., Kelly, B., Bauman, A. and Allman-Farinelli, M., 2013. A comparison of the cost of generic and branded food products in Australian supermarkets.Public health nutrition,16(5), pp.894-900. Cooper, C.L. and Finkelstein, S. eds., 2014.Advances in mergers and acquisitions. Emerald Group Publishing. Edwards, A., Kravet, T. and Wilson, R., 2016. Trapped cash and the profitability of foreign acquisitions.Contemporary Accounting Research,33(1), pp.44-77. Elsas,R.,Flannery,M.J.andGarfinkel,J.A.,2014.Financingmajorinvestments: Information about capital structure decisions.Review of Finance,18(4), pp.1341-1386. Erhemjamts, O., Li, Q. and Venkateswaran, A., 2013. Corporate social responsibility and its impact on firms’ investment policy, organizational structure, and performance.Journal of business ethics,118(2), pp.395-412. Ferreira, M.P., Santos, J.C., de Almeida, M.I.R. and Reis, N.R., 2014. Mergers & acquisitions research: A bibliometric study of top strategy and international business journals, 1980–2010. Journal of Business Research,67(12), pp.2550-2558.
15MANAGEMENT Filipovic, D., Vrankic, I. and Mihanovic, D., 2014. Theoretical overview of microeconomic aspects of mergers and acquisitions.Journal of economic and social developmen,1(2), pp.0- 0. Howson, P., 2017.Due diligence: The critical stage in mergers and acquisitions. Routledge. Lebedev, S., Peng, M.W., Xie, E. and Stevens, C.E., 2015. Mergers and acquisitions in and out of emerging economies.Journal of World Business,50(4), pp.651-662. Lin, L.H., 2014. Organizational structure and acculturation in acquisitions: Perspectives of congruence theory and task interdependence.Journal of Management,40(7), pp.1831-1856. Zaheer, A., Castañer, X. and Souder, D., 2013. Synergy sources, target autonomy, and integration in acquisitions.Journal of Management,39(3), pp.604-632.
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