Strategic Management in Business

This assignment focuses on exploring fundamental concepts within strategic management, utilizing frameworks such as Porter's Five Forces and PESTLE analysis to understand their application in the business world. It draws upon a range of scholarly sources to illustrate how businesses employ strategic approaches for success.

Strategic Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Company's overview..............................................................................................................1
TASK 1............................................................................................................................................2
Internal and external environment analysis............................................................................2
TASK 2............................................................................................................................................7
Competitive analysis of the company.....................................................................................7
TASK 3..........................................................................................................................................11
Recommendations for wider implication of strategic decisions...........................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
In an organisation, the investors and management wants to undertake profitable decisions
but they are sometimes at a loss of where to begin. This is where strategic management come in
to role and benefits the business entity. The concept of strategic management involves
formulation and implementation of major goals and initiatives framed by top management. This
evaluation is based on consideration of resources and assessment of internal and external
environment of the organisation (Crossan and et. al., 2011). It helps to provide overall direction
to the enterprise and involves specifying organisation's objectives, plans and policies to be
attained. An effective business enterprise is that which has initiated programs and services to
ensure open communication, effective leadership and good management.
Through this current report a management consultant conduct strategic analysis of
eminent organisation Aldi Supermarket chain. He studies internal and external environment of
the company to help in formulating strategies. Also, makes evaluation of its competitive position
in wide global market. The management consultant then suggests recommendations for wider
implication of such policies decisions on different areas of organisation (Hill and Jones 2009).
The report considers several key concepts of strategic management that comprises goal setting,
strategic analysis formation, its implementation and monitoring for the concerned business
enterprise.
Company's overview
Aldi is a leading global supermarket chain and largest privately owned business entity in
the world. It was founded by two brothers Karl and Theo Albrecht in 1946 headquartered in
Essen, Germany. The company is providing its services across 18 countries and managing
around 10,000 stores. It provides large scale products dealing in food, beverage and sanitary
articles. The major operations of concerned corporation are in Europe, Australia and United
States. Currently, Matthew Barnes acting as a CEO of one of the biggest private owned retail
company. Taking in consideration the present scenario of the company it is believed that there
are many scopes of its expansion in emerging markets like China and India.
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TASK 1
Internal and external environment analysis
Business environment is considered as sum total of all internal and external factors that
influence an organisation. It influences the performance, outcome and development of a business
entity. Internal factor includes all those factors that have a direct impact on functioning of an
organisation. On the contrary, external factor are those which influence business from outside ijn
indirect manner. The management of an organisation focuses on detail study of both internal and
external environment (Hitt, Ireland and Hoskisson, 2012). They undertake detail study of internal
and external forces so that effective policies can be framed and implemented accordingly.
Internal environment analysis
In order to make internal environment analysis of Aldi Supermarket chain the
management consultant make use of value chain analysis. It is a useful tool to know how to
create the greatest possible value for potential customers. The cited business organisation
undertakes various operation to deliver valuable product and services in concerned market.
Value chain analysis help to better understand the activities through which Aldi supermarket
chain develops competitive advantage and creates shareholders value (Jeffs, 2008). The main
objective of the retail company is to offer the clients a level of value that exceeds the cost of
activities. Porter proposed a general purpose value chain that consists of examining all business
operations and activities that are connected with concerned company.
As mentioned earlier, value chain analysis focuses on systems that transforms input or
raw material of company into output or finished goods. The process is divided in two basic parts
that are described a follows:
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Primary activities
Firstly, it will evaluate primary activities of the company that directly relates to physical
creation, maintenance, sale and support of product and services. It covers areas that are are
directly concerned with producing and delivering of products. The detail analysis of these
activities plays crucial role in determining production, packaging and distribution policies. The
primary activities consist of following: Inbound logistics: It includes those activities that are related to receiving, storing,
distributing inputs internally (Munro, 2009). Here, warehousing and storage are the key
functions performed by store managers of Aldi supermarket chain. It requires a strong
relationship with suppliers in order to have constant supply of raw materials or inputs. Operations: These include those activities that transforms or convert inputs into outputs.
It includes operations conducted for production, research, packaging and distributing to
potential customers. The production team of cited company make proper analysis of
inventories available to avail various services to upcoming customers in their
supermarket. Outbound logistics:Here, those operations are undertaken that result in availing finished
goods and services to customers. Aldi avails variety of finished products like food items
and beverages of different company's as its output (Hodgkinson and Healey, 2011). The
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Illustration 1: Porter's generic value chain
(Source: Hill, Jones and Schilling, 2014)

supermarket has classified products in various sections and segments that are easy to
access. Marketing and sales:Another element of primary activities is marketing and sales that are
essential to make potential customers aware about services offered by the company. It
helps to persuade clients to purchase commodities of cited organisation rather than its
competitors. It requires effective marketing and communication techniques to attract
targeted customers towards the supermarket services. Service: It refers to after sale services offered by Aldi retail company to its respective
customers. It includes those activities that are associated with maintaining product
performance after it has been purchased by clients. In case any damage occurs to the
goods under warranty period the mentioned company take certain actions improve it
(Swayne, Duncan and Ginter, 2012).
Support activities
Another factor of Porter value chain analysis is secondary activities that support in
performing primary activities. All the elements of support activities are actively oinvolved in
undertaking primary activities. Both of them go hand in hand that is when one process is
followed it is assisted by another process elements. Following are the major factors of support
activities: Procurement: According to this force, concern is led on acquiring resources needed to
produce and distribute products (Thompson and Martin, 2010). The management of
stated firm find suppliers that can avail raw materials while, vendors that can offer better
and best price for commodities. Procurement can be simply refereed as process that led to
purchase of raw materials at comparatively less price. Human resource management: It is known fact that human resources are essential factor
to accomplish set organisational goals. The activities involved in its management are
recruiting, training, motivating and retaining qualified mangers and employees. The
supermarket focuses on acquiring skilled and qualified workforce that deals their
customer in effective manner. Technology development: Like every business enterprise Aldi also promotes adoption of
advanced technologies for performing different operations (Wheelen and Hunger, 2011).
As organisation is benefited by low cost and better output from advanced tools and
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equipments. These activities are also related to managing and processing information as
well as protecting concerned enterprise knowledge base.
 Firm Infrastructure: This element of support activity includes functions that allow
maintaining daily operations of cited company. The operations related to accounting,
legal, administrative and general management are involved in it. It considers these basic
functions essential for the company.
External environment analysis
There are wide range of major forces and trends that affect working of organisation due
to external sources. This analysis entails level of threat and opportunities engrossed on an
organisation (Deasy and et.al., 2012). It influences performance and productivity of both
organisation and its resources. In order to properly evaluate external forces affecting an
organisation are the management consultant will undertake PESTLE analysis. It consists of
various factors that are symbolised by each letter in the acronym. Managers and strategy builders
often undertake this analysis to better understand external organisation of a business entity.
Illustration 2: PESTLE analysis of Aldi
(Source: Joardar, Kostova and Wu, 2014)
The PESTLE framework of Aldi supermarket chain can be understood as follows:
Political factors
The first acronym of Pestle reflects political factors influencing working of the company.
It determines degree of government intervention in various aspects of economy. Aldi is operating
in developed countries where government intervention is comparatively less than compared to
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other target market. There is political stability in the work environment that causes better
execution of policies and plans framed by management of concerned company (Porter and
Rivkin, 2012). The organisations like Aldi are able to respond to current and anticipated future
legislation of the country in which operates and adjusting marketing policies accordingly.
Economic factors
The second acronym of Pestle analysis is economic factors that has significant role
finance department of Aldi supermarket. It specifically relates to profitability of the company. It
includes factors like economic factors, interest rates, disposable income, inflation and exchange
rates. The management team of concerned firm keep crucial eye on taxation policy of the
countries its operating in. due to increase in tax rate, the supermarket will be liable to pay more
amount to the government. In order to meet this extra expense company will increase prices of
its products (Sørensen, 2012). This ultimately increase price of products, reduces consumer
purchasing power and minimizes profitability of the company.
Social factors
It is also known as socio-cultural factors that involve trends, beliefs, culture and attitudes
of population. Aldi perform market operations in very large are, it is a global company. Every
region has its own culture and trend that need to be considered essential while manufacturing
products for them. They obtain consumer buying patterns, attitude and opinion by making proper
analysis of market conditions. In addition, factors like population growth, health consciousness,
career attitude and age distribution are also included in the process.
Technological factors
The acronym T represents technological development taking place in the market.
Recently, digitalisation of data and information has on one hand proved beneficial for the
company while online shopping has become threat for the organisation (Teece, 2010). The
managerial and administrative staffs is able to manage accounts in systematic manner along with
better frequency. But evolution of online shopping concept has resulted in extensive competition
among Aldi supermarket and its rivalries.
Environmental factors
Another essential element is environmental factor that represents ethical viewpoint of
concerned business enterprise. It has become significant due to scarcity of raw materials,
pollution targets, global warming and substantial development. These are certain issues hat need
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complete concern from Aldi supermarket. In order to minimize harmful risk of environmental
issues the company will adopt proper waste management techniques (Welford, 2013). Disposal
of waste materials needs to be performed in safe and secured manner to reduce environmental
risk.
Legal factors
The legislative changes take place from time to time and influences performance of the
company. It generally includes employment regulation, competitive regulation, patent
infringements, health and safety regulations. These rules and regulations will guide the
organisations to conduct its operations in more effective manner. They need to maintain
standards of advertising, product labelling and product safety (Morecroft, 2015). It will protect
rights of various stakeholders of the company that play crucial role in decision making process of
concerned company.
The analysis of both internal and external factors has resulted in proper study of factors
affecting productivity of the company. This will help management to frame effective stratergies
for the company.
TASK 2
Competitive analysis of the company
The concept of competitive analysis is effective marketing tool that make proper
assessment of strength and weaknesses of current and potential competitors. It is analysis that
provides both an offensive and defensive strategy for Aldi to identify opportunities and threats.
The two primary activities performed during competitive analysis are obtaining information
about rivalries and using the information to predict competitive behaviour. The management
team of Aldi should not only focus on its existing competitors in the market but to target
potential rivalries. They should study and evaluate their respective competitor’s strategies so that
they get better results out of it (Stacey, 2013).
The company will make use of two models for systematic competitive analysis of the
firm which are described below:
Resource based view theory
The strategic approach is wide and varied and resource based view is commonly cited
strategic approach to attain competitive advantage. The theory firstly includes identifying the
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firm’s potential key resources and deriving strategy to apply them to create synergy. Through
this theory the concerned supermarket organisation assess available amount of business strategic
assets. The business entity needs to make optimum utilisation of all useful resources that must be
helpful to determine its competitive advantage. RBV theory holds company assets as the primary
input for overall strategic planning.
There are different ways in which business strategy achieve competitive advantage
through proper use of organisational resources (Breyfogle, 2010). Concept of resource based
view highlights some insight of strategic resources and enables to generate above average profit
for Aldi supermarket. Top executives of concerned retail firm carefully consider that what type
of resources is at company's disposal. They also examine as to how the assets may equate
operational value through strategic processes. The theory defines characteristics that make a
competitive process sustainable to work in. These elements are discussed properly below to
ensure strategic development of concerned business firm: Valuable: According to this factor, a resource must enable enterprise to employ a value
creating strategy. This can be performed either by outperforming its competitors or by
reducing its own weaknesses. The value factor needs to be determined by cost invested in
the resources remain lower than the future rents demanded by value creating strategy.
The transaction costs associated with the investment in the resource cannot be higher than
the discounted future rents. Rare: Second element of VRIN concept implies that products and services offered by
mentioned business entity must be rare in nature. It focuses on uniqueness of the product
available in the market (Brooke, 2009). In a perfectly competitive strategic factor market
of resources and the price of resource will be reflected of expected discounted future
above average returns. Uniqueness and differentiation of services provided by Aldi plays
crucial role in establishing its brand image in the market. Inimitable: Here, raw materials required to produce a commodity need to be controlled
by a single firm. This can lead to competitive advantage situation in an industry. The
substantial benefit of this element is that competitors are not able to duplicate the
strategic asset perfectly. The important underlying factor of inimitably is causal
ambiguity which occurs if the source from which a firm competitive advantage stems is
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unknown. The uniqueness of commodities helps to create brand image for the compnay
in concerned market.
 Non-substitutable: Lastly the element included to understand competitive advantage of
organisation is to ensure non substitutable. The factor states that if a resource is rare,
potentially value creating and imperfectly imitable it will be demanded more in the
market (Carbone and Stoddard, 2011). Competitors are able to encounter concerned
enterprise to counter firm's value creating strategy with a substitute. If rivalries are able to
counter organisations value creating strategy with a substitute, prices are driven down to
point that price equals the discounted future rents resulting in zero economic profits.
Porter's five forces analysis
It is a framework that analyses level of competition within an industry and business
strategy development. Through this simple but effective tool management is able to understand
both strength of current competitive position and upcoming expansion opportunities. Porter five
force determines company's competitive environment which affects profitability of the
organisation. The bargaining power of buyers and suppliers affect small business enterprises'
ability to increase prices and manage costs. There are different parameters on the basis of which
competitive analysis is done for the firm (Eshun, 2009). The potential business entity makes
detail analysis of its rivalries to ensure that it maintains and retain its position in the current
market.
Five force analysis assumes that there are five important forces that determine
competitive power of Aldi supermarket chain, which can be better understood from the following
description:
Illustration 3: Porter's five force analysis
(Source: Deasy and et.al., 2012.)
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 Threat of new entrants: Aldi is international supermarket chain and it operates in wide
area of network. The entry of new firms in retail industry will result in gain of market
share and will intensify rivalries. Every year several business firms enter into the global
market although very few of them are able to resist in the market. Aldi is benefited by
this fact and there it posses less risk from new entries. There is lack of access Suppliers bargaining power: Suppliers are an essential componient for the busienss
organisation to have contiuous flow of goods and services. Aldi has very few large
suppliers and they play crucial role in availing continuous flow of products. Suppliers of
Aldi have strong bargaining power that makes the business enterprise rely largely on
suppliers (Kourdi, 2009). Buyers bargaining power: Customers are considered as end users of finished products
manufactured by the company. Client satisfaction is one of the prime objective of
concerned retail market. Alida posses moderate buyer bargaining power sa it already
posses good amount of existing customers. They prefer to consume its products available
in retail outlets. Threat of substitute goods: The substitute products are produced in different industry but
critically satisfy customer needs and demands. Here, customer loyalty is essential factor
to hold profitability of the company. Although, the mentioned business entity have great
influence of substitute goods. It generally provides products related to food items and
beverage that has large scope of development and diversification of substitute goods.
 Industrial rivalries: Aldi faces strong competition from few very eminent supermarket
companies like Tesco, Morrison and Asda. Often condition like price war and intensive
promotion attracts existing customers of Aldi to shift to theses mentioned supermarkets.
These big enterprises are making huge investment in innovation and development of
marketing tools and techniques that has led to threat for Aldi to retain its position in the
market.
TASK 3
Recommendations for wider implication of strategic decisions
Alid is offering various products in Europe, USA and Australian market and planning to
expand its horizon in Asian countries especially China and India. Although, it will face various
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issues related to legal regulations for the company (Bradley, 2016). One of the major issue faced
by concerned company is excess involvement of political and legal factors while conducting its
operations in mentioned targeted markets. The company has to go through lethargic and complex
procedure to set up it supermarkets in concerned organisations. It slower down the mechanism of
undertaking various business operations. Political involvement and rigidity among government
officials has resulted in serious issues to be concerned.
Apart from this, another drawback that hinders profitability of company is technological
enhancement in the market. It has resulted in adoption of innovative and creative ideas of
promoting products. Social networking sites and other digital options are available in market to
promote and have intensive marketing practices for the company. Management of the
organisation is required to undertake such operations that result in adoption of such technologies
in Aldi work environment too (Hill, Jones and Schilling, 2014). Shopping through online
platform is also major concern for the company to ensure that existing and new clients do not
shift to these operations. It should avail attractive offers to the customers that result in retention
of client5s in existing company. It will help to develop strong customer relation and will
establish customer loyalty in favour of Aldi supermarket.
Entering into an international market is an utmost challenging task where the firm has to duly
and effectively consider its various approaches. The above carried analysis is however
considered a wide contending strategy of Aldi where it mainly focusing upon attaining a
leadership position in being a cost effective firm. Some other major strategies of Aldi are
specified as its prominent approach of building differentiated goods and products. It duly gives it
a competitive advantage as compared to its major other competitors like TESCO and Sainsburry,
etc. However, the firm is duly facing certain issues in successfully leading into the world of
expansion and thus needs an effectual strategic plan to begin with.
This can be achieved by promptly transacting with the growth strategies of Aldi thereby
considering the four major constituents of Ansoff matrix. It primarily inculcates the stage of
market penetration which means to sell the product with much more consideration of opting for a
better approach of promoting goods by together using a sustainable method of revising the
ongoing strategies of pricing and other related constituents (Deasy and et.al., 2012). It also
recommends the firm to route these operations into certain emerging markets of China and India
with some similar effective action plans to get a better and prominent response by customers.
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The second element includes product development which certifies Aldi to build some
new products that duly matches the ongoing trends of their expanded market arena. It also
provides an option of either altering their existing products to place it into its existent market or
to introduce several new products and services into the new market place by duly understanding
their varied needs and demand. Next is an active element of market development which is in
regard to make huge expansion of Aldi's business activities into an external arena. With a
reflective point of gaining more number of profits, it recognizes a need of making expansion into
the major arenas of India where there is only 4-5% existence of supermarkets like Aldi.
Therefore, it will be a most stable and secured approach for Aldi to promptly raise its
shares and revenues by duly penetrating into the markets of India (Sørensen, 2012). Lastly, there
is a leading factor of making an apt strategy for diversification of its product and services. It
therefore suggests Aldi to create a sure-shot plan of targeting a new market with a new
segmentation of customers with its most effective goods and services. However, it is a
speculative approach to globally cater major number of service users but yet with a sure consent
of raising the profitability of the firm.
CONCLUSION
The present report determines role of strategic management in accomplishing
organisational goals and objectives. Aldi is one of the leading supermarket organisation serving
different types of products in its premises. The report undertakes study of internal and external
environment to understand their influence over productivity of the firm. For internal factors
study value chain analysis is conducted that concludes combination of primary and support
activities result in attainment of desired results. While on other hand, external factors are studied
through Pestle analysis of Aldi business environment. Further, to evaluate its competitive
environment research based view theory and porter's five analysis is conducted. In the end, few
recommendations are provided to improve its strategies for further growth and development.
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