Business organisations and environment in a global context

Business organisations and
environments in a global
context

Table of Contents
INTRODUCTION...........................................................................................................................1
Background information on Aldi................................................................................................1
Discussion on the business environment of Belgium.................................................................2
Appropriate analytical approaches along with its applications, uses and examples...................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Global business environment can be defined as the societal and task environment of an
organisation, which is influenced by the global forces. These global forces include global labour
market, economical forces, technological forces and global competition, legal and political
forces, etc. Aldi is one of the most common brand in retail sector with around 10000 stores
operating at a global level. The company was founded around 73 years ago in the year 1946 with
its headquarter in Germany. This report will take into consideration that Aldi is planning to
expand its current operations in the Belgium with respect to its foreign direct investment
decision. Apart from that, background information of the company as well as country would also
be discussed in detail. Furthermore, application and use of appropriate analytical approach along
with data and examples would be discussed.
Background information on Aldi
Aldi is a private company in retail sector, which has been founded by Karl and Theo
Albrecht, both were the real brothers(Voigt, Buliga and Michl, 2017). The company deals in
variety of products such as it deal in food, beverage, household essentials, sanitary products and
much more. The company deals through its discount supermarket chains spread over in the entire
world and is owned by a German family.
Roots of the company were established years ago that is in the year 1913 by the mother
of the founders of the company in the form of a small store in a suburb of Essen. Within few
years, that is by the mid of 1946, both the Albrecht brothers were able to open a retail outlet
nearby and within 4 years from this, they were the owners of 13 stores. Aldi was advertised as a
'cheapest food source' and this was the major reason behind the rapid growth of the company.
Moreover, within 20 years company was able to establish its roots in international market
with its first international store in Netherlands and then it went on expanding its operations in
other countries as well and currently the company has 10000 stores operating at the global level.
But currently, the company is taking decision on acquiring foreign direct investment with the
objective of expanding its operations in Belgium(Boyer and et.al., 2018).
Aldi runs its stores under the two names. One is Nord and the other one is Sud. Both has
a different logo. Both the stores of the group run very smoothly towards the attainment of their
objectives. Aldi Nord comprises of around 35 branches with around 2500 stores particularly in
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its home country. While on the other hand, Aldi Sud comprises of 31 branches with around 1600
stores.
Store layout of Aldi stores are very attractive. They have beautiful interior along with
wonderful infrastructure. All the items in the stores are properly displayed with their discount
prices and specialized items such as food, toilet papers, beverages and other household items.
The company even produces and sells own brand products which helps the company in earning
huge profits. The company even uses the practice of avoiding price tags to display prices rather
they use barcodes.
But the company even faced lot of controversies which has hindered the company from
achieving its objectives efficiently(Winkler, 2016). The reputation of the company was spoiled
as the company was viewed as selling cheap goods at low prices. This in turn resulted in
decrease in the sales of the company because people avoided purchasing products from Aldi as it
bad for their status.
Discussion on the business environment of Belgium
Business environment of Belgium is very flexible, which in turn makes it an attractive
destination for investors to make foreign direct investment. Thus, in order to attract foreign direct
investment, government of Belgium has given ease in starting the operations in the
economy(Hamilton and Webster, 2018). The country has very minimum entry barriers which in
turn reduces the complexities in the working of business operations because of lack of
government restrictions on carrying out its business activities smoothly. This has helped the
government of Belgium in attracting huge amount of foreign direct investment which would play
a vital role in the development of economy as a whole.
Even the geographical location of the country is very favourable for the growth of the
business organisations because of easy availability of raw material and at affordable prices. This
in turn would help the business firm in earning greater profit margins as the cost of producing the
goods would be less.
Moreover, Belgium is the world's third largest globalised economy which in turn offers
huge benefits to the foreign investors. The economy of the country is such that, it provides highly
accommodating economic, political and social environment which plays a major role for
achieving the objectives of the company smoothly.
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Furthermore, Belgium is a high performer in maintaining consistency in research and
development as well as innovation(Evens, 2017). This is one of the major reason behind
increased foreign direct investment. The companies established in the country can take benefit of
technological advancement to gain the competitive advantage over its rivalry firms by bringing
innovation and creativity in its working operations.
Even the country is known for supporting start-ups to a great extent so that they can
achieve their goals and objectives effectively and efficiently. Results show that, all those start-
ups that came to Belgium for starting their business operations had their best experiences.
The country has managed to hold the position in the top 150 countries in terms of ease of
doing business which is one of the reason behind company holding the global rank. Ease of
doing business is concerned with carrying out business activities in a country which has
business-friendly regulations. Surveys show that ease of doing business index in Belgium is 36.0.
Appropriate analytical approaches along with its applications, uses and examples
There are mainly three analytical approaches that are widely used and those are:
 PESTEL analysis of Belgium
It is an important analytical framework that is used to analyse the business environment
from various perspectives. These perspectives are as follows:
POLITICAL FACTORS
Political factors include various drivers and challenges that influence the foreign direct
investment decisions for the purpose of expanding its current business operations in
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Illustration 1: ease of doing business index
source: [Business environment - Belgium. 2016]

Belgium(Aalto, 2016). Political factors include factors such as political stability or instability,
policies and procedures of political party in power, etc.
When it comes to Belgium, its political environment is quite stable as it follows
decentralized unitary state as well as constitutional monarchy. Stability of political environment
plays a vital role for the expansion of businesses within the country.
ECONOMIC FACTORS
Economic factors are one of the most important factors of the external environment.
These factors include factors such GDP growth rate, exchange rate, interest rate, employment
rate, tax reforms, etc. When it comes to economy of Belgium, it is found that major economy is
dominated by the service sector which contributes around 80% of the total GDP of the country.
For example: when it comes to GDP growth rate, trends show that maximum growth rate
percentage was in 2015 that is around 6%. Even it is found that the country is prioritizing capital
expenditure and encouraging private investment for the purpose of increasing employment rate
of the country. Moreover, the government of Belgium is focussing on tax reforms in order to
increase the consumer spending and encourage sustainable development.
SOCIAL FACTORS
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Illustration 2: Trends of the real GDP growth rate
source: [Macroeconomic opportunities and PESTLE analysis of
Belgium. 2017]

Another important element of pestle analysis is social environmental factors. They
include factors such as lifestyle of people, attitude, culture, norms, values, population growth,
etc.
For example: it is found that the population of the Belgium is growing steadily which is
a positive point from the perspective of the businesses because with the increase in population
their sales will also increase. On the other hand, from the perspective of economy, it is found that
increase in population may lead to increase in unemployment rate because of lack of
employment opportunities in Belgium.
TECHNOLOGICAL FACTORS
Technological factors are the most important factors of pestle analysis because they play
a major role for the growth and survival of the business in the competitive environment. In order
to gain the competitive advantage over other companies, it is very essential for business firms to
remain updated with technology. Government of Belgium fosters innovation in technology, up-
gradation and creativity(Aithal, 2017).
ENVIRONMENTAL FACTORS
In order to avoid complexities in working, it is very essential for business firms to
consider various environmental factors crucially. If these environmental factors are not taken
into consideration by the business firms, then they will attract unnecessary government
restrictions which may hinder the smooth running of the businesses.
For example: Belgium government is focussing on tax reforms in order to foster
sustainability.
LEGAL FACTORS
It is important to have knowledge of legal factors and its impact on business firms from
the statutory point of view. It is compulsory to follow these rules and regulations in order to run
the business smoothly in the long run.
For example: labour law in Belgium governs terms of employment.
 Porters five force model
there are five elements of porters five force model and those are:
THREAT OF NEW ENTRANTS
when it comes to retail industry, threat of new entrants is high because of the ease of
doing business. Apart from this, commodification of food retailing business has lowered the
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barriers of entry of new business and this in turn has given a chance to competitors to enter into
the market by charging low prices. These are the major reason behind easy entry of firms in
retailing businesses(Harding, 2017). Hence, Aldi was able to compete with the major
competitors of retail industry by offering the products at discounted price than its competitors
charged for the similar products.
THREAT OF SUBSTITUES
Threat of substitute products is quite high in the retail sector because of wide range of
substitute products available in the market. Since with the changing time, small convenience
stores are increasing in almost every country, they could serve the purpose of a substitute product
of big supermarket chains. While on the other hand, it is also found that the diverse range of
products that are offered by superstores could never be provided by these convenience stores.
Hence, threat of substitute products to Aldi is moderate.
BARGAINING POWER OF SUPPLIERS
Lower the bargaining power of suppliers, higher would be the benefit to the business
firms. Since, the supermarkets are benefited with the advantage of their brand name, they have
good relations with the suppliers. Moreover, supermarkets have access to wide number of
suppliers and this in turn leads to decrease in the bargaining power of suppliers(Rothaermel,
2015). Hence, Aldi is also a known supermarket, the bargaining power of suppliers is very low.
BARGAINING POWER OF BUYERS
Customers are the most important part of every businesses. No business firm can survive
in this competitive environment if it fails to fulfil the requirement of the customers. Since every
customers has different requirements, supermarkets should be capable of providing wide range
of products to the customers and at reasonable prices otherwise they would shift to the
competitive firm providing similar products at cheaper rates. Hence, if Aldi wants to grow and
survive in this competitive world, then it has to fulfil the requirements of the customers that is
bargaining power of customers is very high.
INDUSTRY RIVALRY
Industry rivalry in the retail market is very high. Thus, in order to gain competitive
advantage over the rivalry firms, it is very important to keep the cost of the products low. This
could be done by achieving economies of scale that is by undertaking large scale production.
This in turn would help the companies in gaining fair market share and to earn high profit
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margins(Burns and Dewhurst, 2016). But when it comes to Aldi, it is said that company provides
fierce competition to its rivalry firms by providing products at low prices.
Hence, a detailed study of all these elements is very important in order to understand each
and every aspect of the external environment so as to be in a better position to fight in case of
uncertainties.
 Demand - supply scheme
supply may be defined as the quantity of products that the supplier of the commodity is
willing to sell at a given price. While on the other hand, demand may be defined as the desire of
the customers to purchase a particular commodity at a given price taking into consideration
his/her purchasing power. Higher the demand, better for businesses. Thus, demand and supply
scheme focusses on establishing the relationship between the quantity of products that the
supplier is willing to sell and the buyers are willing to buy.
They pay immense emphasis on maintaining equilibrium in the demand and supply that is
company should be able to supply as much commodity as desired by the customers(Ayers and
Odegaard, 2017). Hence, efforts are made that there is neither shortage of supply to meet the
demands of the customers nor there is excess of supply which may result in dead stock.
In Belgium, demand and supply scheme in retail industry is very complex as it includes
various kinds of rules and regulations which may hinder the smooth running of the business.
Demand in the retail industry is very high but at the same time it is of varied nature. Thus, it
becomes very difficult for supermarkets to manage these demand efficiently as the supply chain
in retail industry is comparatively long then the other industries. Thus, it takes time to reach
products in the retail outlets which may lead to delay in fulfilling the needs of the customers.
Hence, the demand and supply scheme in retail industry is very dynamic and not at all flexible.
Demand and supply scheme is very essential part of external environment and a thorough
knowledge on this is required as they play a vital role in fixing the prices of the products.
CONCLUSION
From the above study, it has been summarised that the company is known for providing
products at a cheaper price which in turn has helped the company in gaining competitive
advantage over other rivalry firms. Even the business environment of Belgium was discussed in
detail, which reflected that there is ease of doing business in the country because of minimum
entry barriers, geographic location, etc. Apart from that, three analytical tools were also
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discussed. Pestle analysis was discussed from the point of view of country. While on the other
hand, second analytical tool that is porters five force model is discussed from the point of view
of a company. Finally, in the end demand and supply scheme was dicussed from the point of
view of industry.
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REFERENCES
Books and journal
Aalto, M., 2016. Industry Analyses for a case company.
Aithal, P.S., 2017. Company Analysis–The Beginning Step for Scholarly Research.
Ayers, J.B. and Odegaard, M.A., 2017. Retail supply chain management. CRC Press.
Boyer, S. and et.al., 2018. Could Aldi Succeed in Canada?.
Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan
International Higher Education.
Evens, T., 2017. Market Structure and Innovation Policies in Belgium. In Innovation Policies in
the European News Media Industry (pp. 25-36). Springer, Cham.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Harding, S., 2017. MBA management models. Routledge.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Voigt, K.I., Buliga, O. and Michl, K., 2017. Striving for Customer Benefit: The Case of Aldi.
In Business Model Pioneers (pp. 11-24). Springer, Cham.
Winkler, I., 2016. ALDI–A Case of Rigorous Employee Control?. SAGE Publications: SAGE
Business Cases Originals.
online
Macroeconomic opportunities and PESTLE analysis of Belgium. 2017. [online]. Available
through: <https://www.lucintel.com/pestle-analysis-belgium-2017.aspx>
Business environment - Belgium. 2016. [online]. Available through:
<http://mecometer.com/whats/belgium/business-environment/>
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