Business Strategy - Strategic Management Plan for Aldi
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This report discusses the impact of macro-environment on Aldi and its strategies, analyses the internal environment and capabilities of Aldi, applies Porter's Five Forces model for evaluating competitive forces of the given market sector of Aldi, and devises a strategic management plan for Aldi.
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Table of Contents INTRODUCTION..........................................................................................................................3 MAIN BODY...................................................................................................................................3 TASK 1............................................................................................................................................3 P1 Application of the appropriate frameworks for analysing impact and influence of macro- environment on given organisation and its strategies.............................................................3 M1 Critical analysationof macro-environment for determiningand informing strategic management decisions............................................................................................................5 TASK 2............................................................................................................................................5 P2 Analysation of internal environment and capabilities of given organisation through using appropriate frameworks..........................................................................................................5 M2 Critical evaluation of internal environment for assessing strengths and weaknesses of an organisation's internal capabilities, structure and skill set.....................................................8 TASK 3............................................................................................................................................8 P3 Application of Porter's Five Forces model for evaluation of competitive forces of given market sector of organisation.................................................................................................8 M3 Devise appropriate strategies for improving competitive edge and market position on the basis of outcomes...................................................................................................................9 TASK 4..........................................................................................................................................10 P4 Application of a range of different theories, models and concepts for interpreting and devising strategic planning for given organisation...............................................................10 M4Astrategicmanagementplanhavingtangibleandtacticalstrategicprioritiesand objectives..............................................................................................................................11 D1 Critique and interpret information and data applying environmental and competitive analysis to produce a set of valid strategic directions, objectives and tactical actions........12 CONCLUSION..............................................................................................................................13 REFERENCES..............................................................................................................................14
INTRODUCTION The concept of business strategy is defined as a clear as well-defined set if plans, operations and objectives that states the process in which an organisation compete within a specific marketplace through offering products and services. Effective business strategy permits a company in forecasting and accomplishing dynamic demands of the market share. This report is based on Aldi which is considered as one of the largest supermarkets of the United Kingdom havingmorethan10000stores(Acuña-Carvajalandet.al.,2019).Itisamultinational organisation which was founded in the year 1961 by Karl Albrecht and Theo Albrecht. Within this report, there will be analysation of impact of macro environment on organisation and its strategies. Along with it, this report also covers different models to analyse influence of macro environment on given company. There will be analysation of internal environment for assessing strengths and weaknesses of organisation's internal structure, capabilities and skill set. The model of Porter's Five Forces will be used for evaluating competitive forces of the given market. Moreover, this report also includes application of models, theories as well as concepts for interpreting and devising strategic planning for the given company. Furthermore, a strategic management plan will be conducted that has tactical and tangible strategic objectives and priorities along with set of valid strategic directions, tactical actions and objectives. MAIN BODY TASK 1 P1 Application of the appropriate frameworks for analysing impact and influence of macro- environment on given organisation and its strategies This becomes significant for a business to analyse different factors of macro-environment as it will help the organisation in making strategic decisions as per situations of the business (Bayo-Moriones, Galdon-Sanchez and Martinez-de-Morentin, 2020). In context to Aldi, the organisation can make use of different frameworks like Pestle Analysis for analysing influence of macro-environmental factors. The impact of such macro-environmental factors is described as under in relation to Aldi: Political Factors:These factors are associated with guidelines, policies as well as rules and regulations of the government such as political stability, trade policies and many more. Within UK, there is political stability that enables the businesses within the country
to trade in an effective manner. In context to Aldi, the company can freely trade in global markets also as there are less trade restrictions that are to be followed by company at time of trading globally. This brings positive impact on company as the sales volume and profitability of the organisation increases. Economic Factors:These factors include interest rate, exchange rate, inflation rate, GDP growth and many more that impact the functioning of an organisation in an indirect way (Farrukh and et.al., 2020). In context to Aldi, the economic lockdown due to pandemic situation of COVID-19 has great impact on the respective organisation as there were closure or shutting down of the businesses within the country. This has bring negative impact on the business operation of the company as there was a decline in the sales operations and thereby profit margins of the company. Social Factors:Such kinds of factors include taste an preferences, expectations of customers, lifestyle, health consciousness and so on. Because of the pandemic situation of COVID-19, the customers of the country become more health conscious and prefer to buy healthy products. Aldi has conducted market research in order to understand the perceptions of customers towards products of the company. With the help of this research, the company can introduce those items that are more in demand of the target market. It brings positive impact on the organisation as level of productivity, profitability and efficiency of the company got increased. Technological Factors:The technological environment of UK is highly upgraded and developed and it is a great opportunity for Aldi to make use of advanced technologies such as Artificial Intelligence, Machine Learning and many more at time of conducting business operations(Fraser, 2019). This will help the company in saving its both time and cost as well as brings positive impact on the brand image. Legal Factors:These factors are concerned with the laws and legislations that are framed by the legislative system of a country. The government of UK has made certain legislations and laws such as Employment law, Human Rights Law, Consumer Protection Law and so on. Managers of Aldi adheres all such laws and works in an ethical environment which brings positive impact on the business operations and organisations as a whole. It also enhance the brand image of the company within the marketplace which ultimately results in increment in the profit margins of the organisation.
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EnvironmentalFactors:Thesefactorsincludepollution,temperature,climate, environmental laws, Corporate Social Responsibility, etc. Aldi is making use of electric vehicles while delivering its products door to door. Such electric vehicles emit less pollution to the environment and ultimately brings positive impact on the organisation. M1Criticalanalysationofmacro-environmentfordeterminingandinformingstrategic management decisions From above discussion, it is critically analysed that there are a large number of macro- environmental factors that are influencing decision making process of the company(Hsieh, Ma, and Novoselov, 2019). These factors consist of political, social, economic, technological, legal and environmental. The impact of these factors on the operations of business is in such a way thateithertheybringpositiveimpactornegativeimpactonbusinessperformance.The analysation of the impact of these factors has helped Aldi in making strategic decisions in an effective manner that enhances the level of productivity, profitability and efficiency within the workplace. Contrary to it, Aldi is required to focus on such factors that are creative adverse impact on the performance of the organisation as a whole. TASK 2 P2 Analysation of internal environment and capabilities of given organisation through using appropriate frameworks In order to analyse the internal environment and capabilities of the organisation, Aldi can make the use of different models such as SWOT Analysis and VRIO model. The explanation of these models is given as below in context to Aldi: SWOT Analysis of Aldi StrengthsWeaknesses Competitive and Discounted Pricing:Aldi is making use of a pricing model which keeps prices low or offers discounts(Kong and et.al., 2020). Therefore, it is a major strength for company as the pricing of its products is so low that even more significant rivalries find it Low-Profitmargins:Theexceptionally executedconceptofAldiofrestricted assortment may be assisting organisation for generating sales and growth but there is no surety for achieving profitability through such approachaslowpricingmodelsfacilitate retailerstogeneratesalesbutdrastically
difficult to keep up. BrandReputation:Respectiveorganisation has branded it successfully as it is offering the productsatsuperiorqualityandatlowor discountedprices.Suchreputationprecedes Aldi whenever it starts an outlet and there are a large number of customers on the opening day of the outlet(Kong, Jiang and Zhu, 2022). minimises profit margins. Low focus on customer satisfaction:It is another major weakness of Aldi that it less concentrates on customer satisfaction. Market- base has to pay a redeemable fee for shopping cart and must buy their bags as well as pack their purchases. OpportunitiesThreats Expansion into emerging markets:It is a great opportunity for Aldi that The Western World provides a lucrative market for retail businesses and each major retailer scrambles for getting in on action. But, now the emerging markets offer better pickings along with bonus oflow-pricedlabour.Thiswillbeagreat opportunity for company as it has made its name in minimising overhead costs. GrowthofOnlineRetailSector:Thisis another opportunity for Aldi to make tentative forays within the online sector which would help it in enhancing level of sales volume and therebyprofitabilityinbusinessthrough workingonitspricingstrategyintoonline trading. HighCompetition:Thereiscut-throat competition in retail industry and hence Aldi sacrifice short-term gain for uncertain long- term benefits to overcome competitors. The company has chosen to target a market offering slight profits and invests greatly on expansion inUKandUSwhichwilleitherriseor decrease the profitability of company. Threat of legal factors:Aldi has faced serious legal accusations like Issues concerned with Copyright on its brand slogan. Crucially, the lawnotpermitsrelativeadvertisingso organisationcanbeforcedtostopusing practices associated with advertising. This has alreadysetfootforconnectingitwiththe market share and ultimately such types of legal accusations can ruin the business and brand image of Aldi which can be a major threat for company(Aldi SWOT Analysis, 2022). VRIO Model Analysis
Resources/CapabilitiesValuableRareImitableOrganised Financial resourcesYesYesYesYes Human resourcesYesYesYesNo PatentsYesYesNoNo Local food productsYesNoNoNo Valuable: Financial Resources of Aldi are extreme valuable as these facilitate in investing into external opportunities that arise and also in combating external threats(Latifah and et.al., 2020). Human resources of the company are also valuable as they are trained, skilled and capable which results in more productive output for the firm. The local food products are also the valuable resource of the organisation as these are highly differentiated which makes perceived value of these by market-base high. Patents are the valuable resource of Aldi as these allow the company to sell its products without competitive interference. Rare: Financial resources of Aldi are rare as strong financial resources are only possessed by few organisations within industry. Human resources of the company are also rare as these are highly trained, skilled and talented which is not in the case within manpower in other companies. Patents of Aldi are rare resources as these are not easily available and are not possessed by rivalriesandalso permitthecompanyto usethemwithoutinterferencefrom competition(Liu, Wu and Chan, 2021). Imitate: Financial resources of the organisation are costly to imitate as these resources have been developed by organisation through long lasting profitability over years. Human resources of the company are also costly to imitate as other companies cannot train their manpower to improve their skills, talent and capability in the same way as Aldi does.
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Organisation: Financial resources of Aldi are organised to capture value as these are used strategically for investing within right places, making use of opportunities as well as combating threats. M2 Critical evaluation of internal environment for assessing strengths and weaknesses of an organisation's internal capabilities, structure and skill set From above discussion, it has been critically evaluated that Aldi has conducted internal environment analysis for the purpose of ascertaining strengths and weaknesses(Liu and Kong, 2021). Through this, the company has identified its strong as well as weak points along with recognising different opportunities and threats available to the organisation. Through analysing internal capabilities of the respective company, this has been evaluated that the financial resources of Aldi are valuable, rare, inimitable and organised within the business that gives a competitive advantage to the organisation as a whole. This helps the company in achieving its growth and success in an effective and efficient manner and also enhances the productivity and profitability of the organisation. TASK 3 P3 Application of Porter's Five Forces model for evaluation of competitive forces of given market sector of organisation The model of Porter's Five Forces is usually adopted by an organisation for the purpose of evaluating competition level within industry. This helps managers of Aldi in developing strategic plans and decisions accordingly towards attainment of organisational goals. Different forces of this model are discussed as under in relation to Aldi: Threat of new entrant:This refers to a situation in which new industries enters within existing market with new strategy and willingness for obtaining market share(Liu and et.al., 2020). The government of UK has made certain barriers andregulations within retail industry for new entrants and needs licence for taking entrance within the industry. Therefore, there is a low threat of new entrants to Aldi as more investment is required for entering into the respective industry. Competitive rivalry:There are large number of competitors within retail industry that are offering same kinds of products as of Aldi with an objective of earning and
maximising profitability level. This force helps in determining competition level and number of competitors of respective company within such industry. In context to Aldi, the several competitors include Lidl, Penny Market, Biedronka and many more that are active in marketplace. Hence, there is moderate threat of competitive rivalry among existing market. Threat of bargaining power of customers:In context to Aldi, buyers exert the pressure on company for seeking discounts and offers to get better quality products at lower rates (Maniora, 2018). As there are number of buyers of the company demanding products at less possible cost, therefore there is a high threat of bargaining power of buyers as they can switch to another brand offering products at lower cost relatively less from Aldi. Threat of bargaining power of suppliers:In relation to Aldi, there are large number of suppliers within the retail industry. Thus, there is a low threat of bargaining power of suppliers as Aldi can easily switch to another supplier in case if one supplier will supply its material at more price to Aldi in comparison to others. Threat of substitutes:When substitute products of are more expensive in comparison to Aldi, then there will be low threat of substitute products as the target market will not switch to another company as Aldi is offering its products at less cost in comparison to its competitors with same benefits. M3 Devise appropriate strategies for improving competitive edge and market position on the basis of outcomes It becomes significant for an organisation to develop appropriate plans and strategies that will provide assistance in capturing market advancement in a successful manner. Such strategies are usually associated with multiple factors like chasing competitive advantage, taking feedbacks and suggestions, improving quality,etc(Martinez Hernandez,Sánchez‐Medina and Díaz‐ Pichardo, 2021). Moreover, adopting such strategies will help Aldi in maintaining effective relationship with stakeholders. For getting effective market position, organisation may adopt various strategies such as conducting market analysis to understand customers perceptions. This well improve brand image, value and number of customers of the company within marketplace.
TASK 4 P4 Application of a range of different theories, models and concepts for interpreting and devising strategic planning for given organisation Ansoff Matrix Model This model helps an organisation like Aldi in measuring the growth and success of company and also assists in ascertaining ways through which it can expand its business at potential marketplace. There are different growth strategies under this model that are described as follows in context to Aldi: Market Penetration:With the help of this strategy, Aldi can sell its existing products within existing markets through improving its advertising and promotional strategies (Oldman and Tomkins, 2018). This facilitates in capturing more customers within marketplaceandgainingcompetitiveadvantageoverrivalriesthroughimproving promotional activities for its food products. Product Development:If Aldi makes use of this kind of growth strategy, then company is required to develop and introduce its new product within exiting markets for attracting more customers. Organisation is required to understand customers perceptions before introducing new product and after that it should launch product. This will enhance productivity and profitability level within organisation and also increases number of market share. Market Development:It is another growth strategy that enables Aldi in enhancing its business operations and functions within new markets through capturing more customers with its existing products. The company can target other market segments for selling its existing products to them because this will help company in increasing market share and profit margins of the company. Diversification:Through adopting such kind of growth strategy, Aldi is required to introduce its new product within new markets(Pang and et.al., 2019). By doing so, the organisation can target more and more customers through bringing innovation in new products and services. Though it is a riskier strategy, but can generate a huge amount of revenue for company and gives it a competitive edge. From above discussed growth strategies, the most effective and suitable strategy for Aldi is market development in which it can expand its business in new markets. This will provide
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assistance to organisation in attracting more customers towards business and its products and services. Porter's Generic Strategies This is another kind of strategic model that facilitates an organisation in concentrating on chasing competitive benefits over a specific area. There are three main strategies under this model and these include cost leadership, differentiation and focus strategy(Tseng and et.al., 2022). These different strategies are explained as below in relation to Aldi: Cost Leadership:Through adopting such strategy, Aldi can increase its sales operations by lowering the cost of its products and then selling them within marketplace to its potential customers. This strategy helps company in chasing competitive edge on its pricing strategy and attracts more number of market-base. Differentiation:It is another strategy that can be adopted by Aldi through developing unique products offering great value to the customers. The organisation is needed to add some more innovative and unique features and more benefits to its products that directly satisfy customers needs and perceptions. This gives company more opportunities to demand price as per technology used in introducing differentiated food products. Focus:This is last strategy of respective model that enable Aldi to get competitive scope within retail industry. The respective organisation can adopt such strategy through concentrating on narrow segment and within that segment tries to attain either a cost advantage or differentiation within food products. Through making use of such strategy, Aldi can enjoy extreme degree of customer loyalty towards company. From above discussed all generic strategies, it is justified that Aldi can adopt cost leadership strategy for attaining more customer-base and meeting organisational aspirations effectively. This will also provide assistance to company in chasing high competitive benefits over competitors within the marketplace. M4 A strategic management plan having tangible and tactical strategic priorities and objectives Strategic Management Plan Strategies:Aldi can adopt market development strategy in order to achieve growth and success of the company effectively. As per this strategy, the company will introduce new market segments for selling its existing food and other products. The reason behind adopting such strategy is that it will help organisation in capturing more market opportunities in a successful
manner. Furthermore, Aldi may also adopt cost leadership strategy for attracting more customers towards products that are sold at less cost and organisation. This will also assist in achieving higher growth and more development opportunities for the organisation. Objectives:The objectives developed by Aldi are given as follows: To enhance the customer satisfaction by 15% in a year through providing food products at superior quality to target market. To extend the selling of differentiated food products by 10% in a year within the retail industry that will help the company in enhancing revenue. Tactics:As per the set objectives, the tactics that are required to be adopted by Aldi for conducting organisational functions are as under: The company must conduct appropriate management of funds so that it will help the organisation in achieving pre-determined objectives effectively. Thisisalsosignificantfor respectiveorganisationtorecruitskilled,talentedand experiencedmanpowerwho can understandcustomersperceptions,theirtasteand preferences and many more within marketplace. Through adopting such tactics Aldi can enhance its business effectively and it will also facilitate in adopting cost leadership strategy in a successful way for achieving set objectives. D1 Critique and interpret information and data applying environmental and competitive analysis to produce a set of valid strategic directions, objectives and tactical actions The management of Aldi can adopt a large number of models, frameworks and strategies that can provide assistance to the organisation in gaining the understanding of the potential and competitive market for achieving objectives successfully(Vardarlier and Zafer, 2020). For instance, the company can adopt Pestle Analysis for evaluating its external business environment within retail industry. It will facilitate the company designing strategic plans as well as strategies according to the analysation. Moreover, the management of Aldi can also adopt SWOT analysis and VRIO model for analysing its internal business environment and capabilities of organisation respectively. It can also make use of the different strategic models such as Ansoff matrix for growth and success of business as well as porter;s generic strategies for chasing competitive edge withinmarketplace.Thesedifferentmodelsandconceptswillprovideassistancetothe organisation in prioviding direction so that all the members of the company can work in an effective and well-defined manner.
CONCLUSION From above explanation of the report, it has been concluded that the aspect of the business strategy assist the company in defining the business through providing a combination of values and also gives it a purpose. This offers a roadmap to the organisation that gives direction to the management of a business towards attainment of organisational aspirations. This report has been covered the analysation of the impact and influence of the macro-environmental factors on the organisation and its business strategies. Along with it, there has been an analysation of the internal business environment of the organisation along with its capabilities by using SWOT Analysis and VRIO Model. Furthermore, there will be an evaluation as well as application of the outcomes of an analysis through using the model of Porter's Five Forces to a f=given market sector. In addition to it, there will be an application of the models, theories as well as concepts in order to assist with the process of gaining the understanding and interpretation of the strategic directions to an organisation. All these aspects that have been covered in this report help the companyinachievinghigherlevelofproductivity,profitabilityandefficiencyofthe organisation as a whole.
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