Business Judgment: Recommendations for ALDI's Expansion in Australia

This report provides recommendations for ALDI's three-year expansion plan in Australia to compete in the supermarket industry. It includes an analysis of ALDI's current position, competitors, and tools used for analysis. The recommendations focus on increasing product range, adapting to environmental changes, and opening more stores in urban areas.

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Business Judgment
Business Case
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1. Introduction
ALDI is founded by Karl and Theo in 1946 in Germany as they took over their mothers small
grocery shop and expanded it in Ruhr region with 13 stores by 1948 and the company owned 300
stores by 1960. That aggressive expansion was the reason behind their success and presence at
present in over 20 countries. After its successful presence in the domestic market, they decided
to expand into their neighboring countries like Austria in 1967 and then expanded to US, Europe
and Australia. During the entry in the Australia by ALDI, the retail segment was dominated by
Woolworth and Coles (Aldi, 2019).
In 2017, the company was present in 18 countries and also succeeds in online business in various
parts of the world. ALDI group employed 100,000 employees and had total turnover of €83bn
that made then the 8th largest retailer in the world (Chung, 2017).
By analyzing the supermarket industry and the position of ALDI Australia in supermarket chain
in the Australia some recommendations are to be given in accordance with the situation of the
company. The main objective of this study is to provide suggestions and recommendations for
the further three year planning and expansion of the company in Australia in order to compete in
the market.
2. Current Scenario
At present, Supermarket industry in Australia is growing but the competition in the market is
increasing as the two main giants in the country the Woolworths and the Coles shared
approximately 70% share in the total market (Cloutman, 2017). So to survive in this condition
the ALDI has to take some steps or has to change some strategies in order to compete with these
two giants for that planning the company SWOT analysis is done.
2.1 ALDI Current Position
ALDI in Australia is the most profitable retail chain in comparison to its competitor Woolworth
and Coles. ALDI operates at EBIT margin of 6%, Cole and Woolworth at 4.6% and 5.4%
respectively. The company has presence in Australia with 475 outlets acquired 9% of the retail
super market in the country (IBISWorld, 2017). The main approach of the company is to offer

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qualitative products at low prices and establish themselves in the market as hard discounter and
focused on to be a retailer who keeps his operation simple, keeping cost down, and offering
customers the qualitative goods at lower price they done this by cutting out their costly overhead
expenses (Maseeha & Indu, 2008). Other approach they follow to compete in this market is
offering limited range of goods that helps the company in taking more discount via bulk
purchase. This approach also helps in cutting down of handling and distribution cost and allowed
the company to get by with small stores. ALDI special buys offer is a way to boost up the sales
of the company for different segments that includes goods like household appliances, apparel,
and electrical goods and sports equipment (Morgan, 2015).
2.2 Competitors Position
The main competitors in Australia for ALDI are Woolworth and Coles, they have market share
of 70%. In order to capture the market they opt the strategy of aggressive expansion through
acquisitions and opening new stores in the country. Both the companies further expanded their
activities in other fields also that are financial, petrol and hardware services. In 2017, the annual
sales and net profit for the Woolworth was $60bn and $1,48bn and of Coles was $65bn and $2bn
respectively (Woolworth, 2017). In order to respond the strategy of ALDI, both the companies
tried to cut their cost and opted for cost leadership strategy and also expanded their private label
range.
3. Tools
For the study and further judgment for the three years expansion the company actions are based
on the below analysis. This helps in understanding the market situation of the Australia clearly
and knowing more opportunities available with the ALDI in Australia so that further expansion
can be done.
SWOT analysis helps in understanding the strengths and weaknesses of the company in current
situation. Opportunities and threats are helpful in judging the external environment in Australia
whereas the strengths and weaknesses help in knowing internal environment of the company.

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Porter’s Generic model is very beneficial in analyzing the best strategy of the company and its
unique areas where company perform best in compare with its competitors. ALDI is cost leader
in the market and this is their strength that will be helpful in gaining further market share.
3.1 SWOT Analysis
Low Prices with good quality products
Lean Operation model- Low operating cost
Positive supplier relationships
Innovative Sales Model
Store Layouts and location
Strengths
Limited range of goods offered
Less emphasize on customer service
Ability to Stock the stores
Consumer familarity
Poor adaptability to technology
Store Aesthetics
Weaknesses
Expand in organic food options
Offer multiple ranges and products to the current
customer base in Australia
Increase use of technology in outlets
Urban Presence
More focus towards customer relationship
management
Oppurtunities
Increasing Competition from Woolworth and Coles
Changes in political environment
Online presence or competition and customer
changing preferences
Low Brand loyalty
Threats

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3.2 Generic Business Strategies
Figure: 2 Porter’s Generic Strategies, ALDI’s Strategy: Cost Leadership/Differentiation Strategy
Source: (Jenkins & Williamson, 2015)
3.2.1 Cost Leadership Strategy
 ALDI Group is a hard discounted store that focuses on cost leadership strategy that is
through reducing its cost of operation.
 The company buys land on low price areas, build cheap warehouses and display their
items in pallet rather than displaying it on the shelves.
 The outlets of ALDI Australia stocks about 700 products whereas its competitor
Woolworth and Wesfarmers have in the range of 25,000 and 30,000 products to offer.
 Due to less number of product offering ALDI stores have usually 1200 square/meters of
area while the other supermarket stores have 5000 square/meter which will be beneficial
for the company to reduce its maintenance cost.
Broad
Narrow
Target
Scope
Differentiation
Focus Strategy
Focus
Strategy
Differentiation
Strategy
Cost
Leadership
Strategy
Advantage
Low Cost Product Uniqueness

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3.2.2 Differentiation Strategy
The unique selling proposition of the company is that it is quite stingy in terms of cutting cost so
that the customers get more of the products at lower price but considering the quality it is not
stingy in that terms. In the following ways mentioned below helps to understand the
differentiation strategy of the company:
 ALDI offer more salary to its employees as compare to other market players , its store
assistant get $19.10 for an hour whereas its competitor pay $15 for an hour.
 The prices of general products are less as compare to its competitor from that the
customers save more (Ferguson, 2017).
 ALDI’s brand strategy of providing high quality products at lower price helps the
company to satisfy the customers and acquire more customer base.
4. Recommendations
On the basis of tools used to analysis following recommendations are made for ALDI to increase
its market share in the Australia. Firstly company has to increase its range of products because
due to more offering by the competitors they can lose their customer base to other two giants.
ALDI business model mainly moves around offering fresh and qualitative products at lower
price to their customer but the company has to increase its product range whether it may incur
huge investment.
Secondly, I recommend ALDI to adapt quickly the environmental changes and implement some
technological advancement in their stores in Australia that will attract more customers and using
online platform for providing services to the customers will be add on advantage for the
company as the future will be era of online shopping and through that move they may attract
online customer base. On the basis of cost leadership and differentiation strategy of the company
it is decided that company should open more stores in urban area, inside hospitals and near
commercial buildings that will be counted in its differentiation strategy as it helps in getting
more customers from each of the area and helps to earn more profits in long run.

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In a nutshell, offering wide range of products give customers an advantage of getting all the
necessary stuff at one roof at lower price with good quality so it will definitely increase the
market share of ALDI in Australia. Further the presence of company at urban areas and opening
up new stores helps in reaching to more number of customers in different region, increasing
number of store will require more investment by the company but making its presence feel in
these areas give positive result and a differentiation to the company from other competitors.
5. Conclusion
The report was based on the analysis of ALDI’s current scenario and suggesting some action to
acquire more Australian market share in the upcoming years. Few recommendations were given
in the report on the basis of tools that helped in the understanding the environment and company
in better way. The two tools that were used in analysis were SWOT analysis and Porter generic
strategies. These tools are beneficial for identifying the key opportunities that ALDI will get in
Australia and generic strategies helped in understanding the cost leadership strategy and product
differentiation strategy of the company against its competitor. So at last it was recommended that
company should increase or expand its product offering to customers and open up new stores in
urban areas, near commercial areas and inside hospital as these are the crowded areas where the
customer footfall is more. So it is concluded that for business judgment, proper analysis and
study is to be done by identifying different alternatives.

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6. References
Aldi, 2019. ALDI About us. [Online]
Available at: https://www.aldi.com.au/
[Accessed 15 March 2019].
Chung, F., 2017. ALDI launches biggest brand overhaul in 16 years, vows to maintain price
leadership or ‘we’re dead’,. [Online]
Available at: news.com.au
[Accessed 15 June 2019].
Cloutman, N., 2017. Supermarket and Grocery stores in Australia. [Online]
[Accessed 15 June 2019].
Ferguson, A., 2017. Aldi blitzes Woolworths, Coles, Nilsen retail barometer finds. Sydney
Morning Herald, Volume 2, pp. 25-36.
IBISWorld, 2017. Market Revenue. [Online]
[Accessed 15 June 2018].
Jenkins, W. & Williamson, D., 2015. Strategic Management and Business Analysis. New York:
Routledge.
Maseeha, S. & Indu, P., 2008. ALDI: The European hard discount straaegy in Australia. Center for
Management Research, Volume 1, pp. 305-375.
Morgan, R., 2015. The Aldi effect: Australia changing supermarket scene. Roy Morgan Research,
Volume 6, pp. 32-37.
Woolworth, 2017. Annual Report. [Online]
[Accessed 15 June 2019].