Opportunities in UK Retail Market for Aldi

This report analyzes the UK retail market and identifies opportunities for Aldi based on current mega trends. It explores the concepts of entrepreneurship and innovation and applies models like BCG Matrix, PESTEL, STP, 7P, Porter's five forces, and GE Matrix.

OPPORTUNITY PROJECT

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Identifying Mega trends...............................................................................................................1
Identifying opportunity arising from mega trends.......................................................................2
The entrepreneurship and innovation of the opportunity............................................................2
Application of BCG MATRIX for the identified opportunity.....................................................2
Application of PESTEL for the identified opportunity...............................................................3
Application of STP......................................................................................................................5
Application of 7P.........................................................................................................................5
Application of Porter's five forces...............................................................................................7
Application of GE Matrix............................................................................................................7
CONCLUSION................................................................................................................................8

INTRODUCTION
Opportunity is the situation which is in the favour of something. A business opportunity is a
situation when an organisation or individual have a chance to turn things upon a favourable side
(Benjamin, 2017). The main aim of this report is to analyse a market or a sector and then identify
current mega trends in that sector with the aim to identify opportunities arising from the impact
of those trends. The market which is selected in this report is retail market of United Kingdom.
Apart from this, a large scale organisation operating in this market is also selected which is Aldi.
Aldi is a private limited company which was established in the year 1946 by Karl and Theo
Albrecht. This organisation has headquarters in Germany and operates in various nations of the
world such as Ireland, United Kingdom, China, Italy etc (Asda. 2020).
In this report, retail market of United Kingdom will be investigated and mega trends will be
identified. Those trends then be assessed to analyse the opportunity for Aldi. The identified
opportunity idea will then be analysed and evaluated using various models such as PESTLE,
BCG Matrix, STP, 7Ps, Porter's five forces and GE matrix. The opportunity will also be
evaluated with the concepts of entrepreneurship and innovation.
MAIN BODY
Identifying Mega trends
Mega trends are the global economic forces of development which influences businesses and
their operations (Bennett and Winslade, Enpulz 2013). Retail market of United Kingdom is one
of the most growing markets which rapidly face development opportunities. Due to the political
influences of BREXIT, the retail market of UK has been experienced the slowest growth rate in
2019. According to Deloitte UK’s report (2019), the external forces of BREXIT and slow
economic growth has lead this market towards three mega trends. These trends are stated below:
 Sustainability paradigm shift – Retail industry of UK is the major contributor of carbon
emissions. It has been seen in recent years that customers are recognising their moral
values and shifting towards the products and services which are environment friendly.
 The re-invention of retail – Customers of United Kingdom demand innovation and
invention in current practices. In recent years, customers are observed to be shifting
towards innovative products and services.
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 Purpose is the new digital – according to this trend, population of UK prefers to
digitalise their actions due to which every industry in recent years has been seen to
converting from bricks and mortar to bricks and clicks (Retail Trends 2020, 2020).
Identifying opportunity arising from mega trends
After analysing three mega trends in the retail market of UK, it has been evaluated that
these trends can result in opportunities for retail organisation such as Aldi. The first mega trend
of sustainability can be used by Aldi to bring sustainability in their activities. Aldi can
discontinue the use of plastic and make sure that they are not leaving huge carbon footprints on
the environment.
The second and third mega trend can be transformed into another opportunity for Aldi. It
has been seen that Aldi has an online platform from where its customers can order delivery of
products, but this delivery is only restricted to grocery products. Aldi deals in variety of products
and these all must be available for delivery. Apart from this, Aldi can digitalise all its payment
options so that they can get benefitted from the mega trends.
The entrepreneurship and innovation of the opportunity
Entrepreneurship is the concept of designing and launching a new product or service which
has a purpose. This process of entrepreneurship can be utilised by any scale or scope of business
(Browning, 2014). In case of Aldi, they can design and launch their new services of
discontinuing plastic use and use cloth, wooden and jute packaging. They can provide service of
online shopping in which their all produces will be available and lastly they can digitalise all
their payment options.
Innovation is a concept in which an organisation makes efforts for to provide new products
and services in market (Bryan, King and Ward, 2011). By providing service of online shopping
for all the products will be an innovative approach for Aldi as none of its competitors has this
service.
Application of BCG MATRIX for the identified opportunity
BCG matrix is an effective model that has been developed by Boston Consulting Group in
order to assess an organisation’s strategic position within the market place, along with its
potential. Hence, in relation to Aldi, below is the application of this model to assess the viability
of the above mentioned options:
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Stars- These are the offerings within an organisation which have high grow markets, as well
as high market share. As for Aldi, these are its organic vegetables and grocery items that hold
high grow markets within the firm, along with high market share due to the current trend within
the UK market associated with health consciousness.
Cash Cows- This dimension deals with offerings that have low growth markets and high
market share. With respect to Aldi, there are several product ranges within the firm which falls in
this category, such as its cereals and canned foods, which are preferred by a lot of customers and
hence, have a wide market share.
Question Marks- These products are the ones which have high growth markets and low
market share. The service of the firm including online shopping is associated with this
dimension. The reason for this is that Aldi invests a huge sum of money in context of
maintaining and promoting its website from which these online services are provided. However,
due dealing in just groceries, the same is yet to achieve high market share.
Dogs- These products are the ones which have low market share, as well as low growth
markets. Majorly, all the retail offerings that are sold by the company are included in this
category. This is because while other firms have shifter their packaging to more sustainable and
environment friendly alternatives, Aldi is still using primitive methods for the same.
Hence, all these dimensions of BCG matrix make it necessary for a firm like Aldi to adopt
other alternatives of packaging their offerings, as mentioned above and invest within the same in
order to ensure that a high market share is acquired by its retail offerings. On the other hand,
digitalising the payment options, as well as including wider range of products within its online
commerce channel would also allow the firm to shift its online service toward the Star category.
Hence, both these options are pretty much viable for the firm as per this framework.
Application of PESTEL for the identified opportunity
PESTLE analysis is the technique of analysing the external environment of an organisation
and its products. This model is applied in context of Aldi and its opportunities so that viability of
the opportunities can be assessed.
Political – This type of environment is the combination of various factors such as political
stability of the nation, government policies, rules and regulations etc. In case of United
Kingdom, retail industry is impacted by current political instability which has been caused by
BREXIT. This instability can result in an opportunity for Aldi as they can bring sustainability in
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their services and can even procure funds from government due to making efforts for reducing
carbon foot print on the environment.
Economic – This environment includes factors such as population of the nation, GDP,
interest rates, economic growth and many more. Economic environment of United Kingdom is
changing due to BREXIT. In order to influence the people of UK to use digital modes of
payment, government has reduced the charge on digital payments. This environment can benefit
Aldi as by this, they can digitalise their operations and introduce online payment options. This
will attract more customers and profitability of the company will be enhanced.
Social – These are the factors associate with the society’s preferences and choices
(Chapman and Ward, 2011). United Kingdom is a developed country and UK’s population is
educated. This education has provided them an understanding that it is important for save the
environment from carbon footprint. Lifestyle of UK’s population is also changing due to which
they prefer to shop online using online payment modes. This environment is highly in the favour
of Aldi as this company can exercise their opportunities of bringing sustainability and
digitalisation in their organisation and this will also enhance the profitability of the company.
Technological – As per the business environment of United Kingdom, technology is
continuously rising. This implies the need upon retail organisations such as Aldi to enhance their
technological approach. The requirements of this environment are aligned with the opportunities
of Aldi as this company has the opportunity to digitalise their payment options and enhance their
online shopping experience for customers.
Legal – This environment is the combination of various laws and regulations which are
required to adhere. This environment can raise problems for Aldi as for the purpose of
establishing their new services, company must option permission from government. Tis
environment will levy a burden upon the legal team of this organisation.
Environmental – This is the last factor in PESTLE analysis. This environment is the
combination of factors such as pollution, waste management etc (Dansby, Stewart and Webb,
2012). As the opportunity of Aldi is to sustain their operations, these factors observed to be in
the favour of Aldi. By discontinuing the use of plastic and using other appropriate modes will
reduce the environmental pollution and will satisfy the environmental regulations.
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From the above PESLE analysis, it has been observed that both the opportunities identified
for Aldi are viable and will result in maximum profit and customer satisfaction. The only issue
which they will face will be ample legal compilations.
Application of STP
This is a model, which allows classifying the entire market into different segments and
then selecting an appropriate segment for the purpose of targeting and positioning (Egan, 2013).
Segmentation – For the service of online shopping and online payments, the market of
United Kingdom will be segmented using demographic age segment. And for the service of
sustainability operations, the UK market will be segmented using demographic education
segment.
Targeting – For online shopping and online payments, the age group of 15-55 will be
targeted. The reason behind selecting this segment to target is that people of this age prefer to
pay through online mediums so that they have the facility of paying less interest and also people
under this age group has less time to spend on shopping so they can order online. The service of
sustainability services will target people with high education as they know the importance of
environmental sustainability.
Positioning – The service of online payment and market will be positioned by marketing
these services on social media websites so that appropriate population can be communicated with
the newly launched services of Aldi. The service of brining sustainability in the operations of this
company by discontinuing the use of plastic can be positioned through the way of press release.
Aldi can communicate to a larger audience that they are concerned about the environment due to
which they have decided to bring sustainability in their operations.
From the above model analysis, it has been seen that if the services suggested to Aldi are
effectively positioned in market then they can help Aldi to grow in business environment and
survive for longer time period.
Application of 7P
Ps of marketing is a model which helps in analysing every aspect of a product of an
organisation (Engler and et.al, 2013). In case of Aldi, the opportunities are to launch two services
which are brining sustainability in the operations and introducing enhanced online shopping and
payment options. Both of these services are analysing using 7 Ps model below:
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Product – In context of Aldi, there are two services are suggested to be established. These
services are sustainability in the operations by discontinuing the use of plastic and using wooden,
paper and jute packaging instead. Another service of Aldi is to introduce improved online
payment options and online market platform where all the products available at physical store
will be available at online market too.
Price – The pricing strategy of for all the services stated above will be penetration strategy
in which at first low costs will be charged for the services but with the passing time these costs
will be raised. At every online order, Aldi can charge a small amount of convenience fee and
similarly for sustainable packing a price can be charged too.
Place – The service of sustainable operations will be available at the all physical stores of
Aldi. Whereas, the service of online shopping and online payment options will be available at
virtual stores of Aldi.
Promotion – As two services are suggested to Aldi, promotions of these services will also
be done using two advertising tools. The first service of sustainable operations will be promoted
using the tool of press release in which wider audience will be targeted at once. For the second
service that is enhance online stores and payment options will be marketed using social media
platforms such as Facebook, Twitter, Instagram etc.
People – The key people in establishing these two new services will be employees of Aldi.
These employees are the assets of this company who will make efforts to effectively deliver
these two services to customers effectively.
Physical evidence – As both the products which are suggested to Aldi are services, it is
important to identify their physical evidence so that they can be evaluated. The domain and
website of Aldi’s virtual market will be the physical evidence of online payment and shopping
service. The service of sustainable operations will have the physical evidence of packaging
material made with wood, cloth and jute.
Process – The key process of the services will be the information technology process from
which the virtual market of Aldi will be controlled and payments of customers will ensure to be
safe (Ivascu and Cioca, 2014).
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Application of Porter's five forces
Porter’s five forces is an industry analysis model which helps in analysing the competitive
forces in industry. The sector which is selected in this case is retail sector and this analysed
below using five forces:
Threat of new entrants – Retail industry of United Kingdom is a profit making organisation
and it is difficult to establish a new large scale business in this industry due to intense
competition. But along with this the scope of retail industry is also wide which do not require
high capital to establish a small retail store due to which it can be said that threat of new entrants
in retail industry of UK is moderate.
Threats of substitute products – The services which are suggested to Aldi are easy to ne
substituted as competitors of Aldi can launch more improved ways of online shopping and
payments and they can also use more effective packaging materials than jute and cloth (Johansen
and et.al., 2019). By this, it can be said that threat of substitute products in retail industry of UK
is high.
Bargaining power of suppliers – Retail organisations in United Kingdom has ample
options of suppliers from which they can procure their materials. Aldi can procure their jute and
cloth packaging products from various suppliers which imply bargaining power of suppliers in
this market is low (Weybrecht, 2017).
Bargaining power of buyers – Due to intense competition in this industry, customers have
various options but as Aldi is suggested to launch their innovative services market, there will be
fewer options left with the customers due to which it can be said that bargaining power of
customers is moderate.
Rivalry among existing competitors – There are hundreds of retail organisations in United
Kingdom due to which it has been observed that there is high rivalry among competitors in retail
market of UK.
From the above analysis, it has been seen that the competition in retail market of United
Kingdom is higher due to which the suggested services to Aldi even becomes crucial for them to
be followed so that Aldi can gain a competitive edge in market by introducing their new services.
Application of GE Matrix
GE matrix is a product portfolio matrix which is used to analyse the products of an
organisation and classify them into various matrices shown in below figure. In case of Aldi, they
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are suggested two services which are introduction of sustainable operations and enhancement of
online shopping and payment experience (Morden, 2016). The first service of sustainable
operations can be fit into high – low matrix in which market attractiveness of this service will be
high but business strength will be low as sustainable packaging products will be expensive which
can lower the profitability of the business.
The another service which is “enhancing the online shopping and payment experience” can
be fit into the high – strong matrix in which market attractiveness of this service will be high and
along with this this service will also provide strong business strength to the business.
(Source: GE matrix. 2020)
From the above GE matrix model analysis, it has been observed that it is viable for Aldi to
introduce these services as these will result into higher business strength and higer market
attractiveness of the business.
CONCLUSION
Thus, it could be concluded from the report above that opportunity is very important for a
company to assess, evaluate and cease as it contributes towards its sustainability and growth in
an appropriate and effective manner. Furthermore, it is necessary that companies identify these
opportunities arising from mega tends in their sector, which would be beneficial for its market
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performance. In addition to this, several frameworks such as BCG Matrix, PESTLE Analysis
STP, 7Ps of Marketing, Porter’s Five Forces, as well as GE Matrix must be subjected towards
analysing the opportunities and new services of the company, which would be enabling the firm
in assessing the viability of the options and implement those services in the company towards
these opportunities.
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REFERENCES
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<https://www2.deloitte.com/uk/en/pages/consumer-business/articles/retail-trends.html>
Asda. 2020. [Online]. Available through: <https://www.asda.com/>
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