Business Judgment: Recommendations for ALDI's Expansion in Australia

RUNNING HEAD: BUSINESS JUDGEMENT
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Business Judgment
Business Case
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Business Judgment
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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

Business Judgment
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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.