Aldi Australia: Strategic Analysis of External and Internal Factors

This report offers a comprehensive strategic analysis of Aldi Australia, a prominent retail chain. It begins with an executive summary and an introduction outlining the report's objectives. The core of the analysis involves a PESTEL framework, examining political, economic, social, technological, environmental, and legal factors impacting Aldi. A SWOT analysis is conducted to evaluate the company's strengths, weaknesses, opportunities, and threats. The report then applies Porter's Five Forces to assess the competitive landscape, including the threat of new entrants, substitute products, buyer and supplier power, and competitive rivalry. Finally, an industry supply chain analysis is presented to understand Aldi's value creation process. The report concludes with a summary of findings and references.

Running head: SUPPLY CHAIN
Strategic Management and Business Policy
Name of the Student:
Name of the University:
Author Note:

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Executive Summary:
The aim of the report is to provide an overview of Aldi Australia. The report provides an
overview of the PESTEL framework. It also puts forward a SWOT analysis. The report also
undertakes a Porter five forces analysis with special focus on threat of new entrants, threat of
substitute products or services, bargaining power of buyers, bargaining power of suppliers and
competitive rivalry among existing firms. The report also puts across an analysis of the industry
supply chain

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Table of Contents
Introduction:....................................................................................................................................3
1. PESTEL Analysis........................................................................................................................3
2. SWOT Analysis:..........................................................................................................................5
3. Porter’s Analysis:.........................................................................................................................6
4. Industry Supply (Value) Chain....................................................................................................7
Conclusion:......................................................................................................................................8
References:....................................................................................................................................10

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Introduction:
The report aims at providing an insight into Aldi Australia. The retail chain had over 300
stores spread across Victoria, Queensland and the New South Wales (corporate.aldi.com.au,
2019) In 2013, the company put across plans for expansion of operations across the Southern and
the Western Australia. This particular supermarket has been a discounter providing limited
assortments and it emphasizes primarily on products with private level. Such types of retailers do
not provide the facilities of full range supermarket and have smaller stores. It is the sole assorted
discounter across the Australian subcontinent that has interstate network.
The report puts across a detailed discussion of the PESTEL framework along with a
SWOT analysis. The report also undertakes a Porter’s Five Forces analysis by focusing on the
threat to the newer entrants, threat of the substitute products or services, bargaining power of the
buyers, bargaining power of the suppliers and competitive rivalry amongst the existing firm.
There is also discussion about the industry value chain.
1. PESTEL Analysis
Political Factors:
Australia represents safe destination for investments due to the stable and progressive
regulatory and political environment of the country that provides confidence and certainty to the
investors (Fowler 2013). The open, efficient, transparent, lower corruption levels pose little
threat on supermarket chains like Aldi thereby allowing them in flourishing their business in a
better way.
Economic Factors:

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Australia is one of the biggest capitalist economies across the world that has been
dominated by service sector. This economic growth of the country primarily depends on the
mining and the agricultural sectors (Storey 2016 ). The country holds the tenth position in the
index that offers the ease of doing business to the retailers like Aldi.
Social Factors:
Australia represents a multicultural country with a present population of 20 million. This
population has been projected to increase to about 3.7 million by the year 2026 due to the ageing
population, increase in separation and divorce and delayed marriages (Jacobs 2016). The
increase in population puts across a positive boost to retailers like Aldi.
Technological Factors:
Introduction of newer communication technologies like the e-commerce and internet has
provided a boost to towards international competitiveness of the business(Gibson, Rosen and
Stucker 2015). The presence of technologies has allowed various Australian firms to use the
internet technology and thereby undergo an expansion in the international markets. The newer
means of communication has also provided a boost to retailers like Aldi.
Environmental Factors:
These have primarily been the weather and the weather change. Sometimes changes in
the temperature have resulted in a negative impact on the market sectors like tourism, farming
and insurance (Gifford and Nilsson 2014). The presence of global warming has caused
significant environment changes. However, with better recognition of the environment this
particular external factor have become a crucial issue that businesses like Aldi must consider.

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Legal Factors:
The implementation of old discrimination and impairment discrimination legislation,
demand for higher requirements and rise in minimum wage for the firms is some of the examples
of the laws that might impact the operations of retailers like Aldi (Gregg and Parthasarathy
2017). This is because, legal changes influence cost of the firm and the regulations of the
demand have an impact on the purchasing power of the customers.
2. SWOT Analysis:
Strength
1. Charges lower prices from customers
2. Have a stronger ecosystem
3. Provides higher level of customer support
4. Allows greater savings due to the discounted
prices offered.
5. Provides as strong product mix comprising
of general merchandize, premium brands and
the brands with the private label (Brandes and
Brandes 2015)
Weakness
1. Have a lower margin
2. Leads to lower levels of employee
satisfaction
3. Results in poorer penetration amongst the
higher income groups.
Opportunities
1. Puts across preference for customer with
newer categories of products that further opens
Threat
1. Competition since Aldi faces immense
competition from other retailers like

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up newer avenues of the business. Woolworths and Coles
3. Porter’s Analysis:
Threat of New Entrants
The threat of entrants is higher for Aldi as it operates within grocery industry where the
demand is believed to increase with the growing demands of the populations. Besides, the
Australian government also provides a boost to newer businesses thereby increasing the
competition (Suwardy and Ratnatunga 2014). Small scale retail stores are unable to enter the
markets due to the economies of scale. However, bigger companies like Tesco face lesser
barriers in entering Australian market.
Threat of Substitute Products or Services high
The threat of the substitute products or services has been higher for Aldi. This is due to
the presence of shopping malls and the larger scale supermarkets since they provide a larger
supply of the substitute products (Hajar 2015). In addition to offering the home brands at cheaper
rate they also focus on the national brands. Further, the advent of the newer technology stores
and the supermarket does not hesitate in putting across grocery substitutes and house items not
only at a lower cost but with higher quality.
Bargaining Power of Buyers
Aldi faces a higher bargaining power from the buyers as every potential customer in
grocery industry has a higher level of demand. As the grocery products are medium or low
involvement products buyers seem to bargain for higher quality of products along with a greater

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level of service at lower cost (Sutton-Brady, Kamvounias and Taylor 2015). If they are unable to
find it then there always lies possibility for the customers in shifting to another retailer since this
does not involve any cost.
Bargaining Power of Suppliers
The bargaining power of suppliers is lower in Australia. It is to be noted that a supplier
should decrease the cost and enhance the quality of the products to remain competitive within the
retail industry of Australia. As the competitive firms focuses on reducing the cost hence Aldi
faces a lower bargaining power of suppliers. Besides, there are larger companies within the
industry that have strategies for improving the efficiency and reducing the cost. For example, the
Every Day Low Price (ELDP) strategy has allowed Woolworths, in reducing the prices of the
national brands by pushing the manufacturers in cutting down prices (Brenes, Ciravegna and
Montoya 2015).
Competitive Rivalry among Existing Firms- high
Australia has various equally balanced firms within its grocery industry who not only
competes within the market but also puts forward best quality at the lowest price. Most of the
grocery products in Australia are easier to imitate and undifferentiated. Hence, there is
intensification of rivalry and hence purchasing decision remains price and a lower degree of
service.
4. Industry Supply (Value) Chain
The value chain involves activities that Aldi undertakes for delivering a valuable product
to the market (Burch and Lawrence 2013). By conducting a value chain analysis, during planning

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process, it is possible in identifying the competitive advantage. The firm represents a collection
of various activities with shared relatedness. It is not possible for Aldi to trade all the activities in
external market. The Value Chain approach puts across that a company is able to consider such
activities as the rent sources. Such activities also act as the barriers to newer entrants or results in
cost disadvantages for the competitors. The value chain analysis also helps in identifying the
complicated interdependencies and the inter relationships. It also results in improved flow of the
information that enables the retailer in identifying and exploiting newer opportunities and
reduction of the external threats. It also results in the improvement of the product and the
material flow due to the improved sales and demand forecasting. This also helps in improving
inventory management through minimization of delays by tracking the activities across the
supply chain. Customers place higher level of importance to quicker response and provide
convenient access to information related to products. Unexpected interruption in flow of
information has affected the relationship between customer and supplier.
Figure 1: Industry Supply (Value) Chain of Aldi Australia
Source: (Tamm et al. 2015)

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Conclusion:
On a concluding note, it has found from the PESTEL analysis that the political,
economic, social, technological, environment and legal factors put across an impact on Aldi. The
political, economic, social, technological factors put across a positive impact while the
environment and legal factors put across some amount of challenges in carrying out the
operations. The SWOT analysis shows the strengths, weakness, opportunities and threats of the
firm. As far as the threats are concerned the retailer faces major challenges from prominent
retailers of Australia. The report also conducts a porters five forces analysis. From the analysis it
becomes clear that Aldi faces a higher threat to newer entrants, bargaining power of buyers, and
threat of the substitute products and intensity of rivalry amongst the competitors. It however
faces a lower bargaining power of the suppliers. The report also undertakes a value chain
analysis of Aldi. The use of the value chain helps in optimization of the products, finance and the
information flow. It has been found that there are certain challenges associated with the value
chain analysis as the company might lose the vision and the overall strategy through dividing the
operations into various activities. Sometimes due to enhanced level of complexity it becomes
difficult to divide the operations into the primary and the support activities.

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References:
Brandes, D. and Brandes, N., 2015. Bare essentials: The Aldi success story. Linde Verlag
GmbH.
Brenes, E.R., Ciravegna, L. and Montoya, D., 2015. Super Selectos: Winning the war against
multinational retail chains. Journal of Business Research, 68(2), pp.216-224.
Burch, D. and Lawrence, G., 2013. Financialization in agri-food supply chains: private equity
and the transformation of the retail sector. Agriculture and human values, 30(2), pp.247-258.
corporate.aldi.com.au , 2019. [online]. Available at
https://corporate.aldi.com.au/en/about-aldi/[accessed 25Aug, 2019]
Fowler, A., 2013. Electoral and policy consequences of voter turnout: Evidence from
compulsory voting in Australia. Quarterly Journal of Political Science, 8(2), pp.159-182.
Gibson, I., Rosen, D. and Stucker, B., 2015. Business Opportunities and Future Directions.
In Additive Manufacturing Technologies (pp. 475-486). Springer, New York, NY.
Gifford, R. and Nilsson, A., 2014. Personal and social factors that influence pro‐environmental
concern and behaviour: A review. International Journal of Psychology, 49(3), pp.141-157.
Gregg, D. and Parthasarathy, M., 2017. Factors affecting the long-term survival of eBay
ventures: a longitudinal study. Small Business Economics, 49(2), pp.405-419.
Hajar, I., 2015. The effect of business strategy on innovation and firm performance in small
industrial sector. The International Journal of Engineering and Science (IJES), 4(2), pp.1-9.

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Jacobs, K., 2016. Experience and representation: contemporary perspectives on migration in
Australia. Routledge.
Storey, D.J., 2016. Understanding the small business sector. Routledge.
Sutton-Brady, C., Kamvounias, P. and Taylor, T., 2015. A model of supplier–retailer power
asymmetry in the Australian retail industry. Industrial marketing management, 51, pp.122-130.
Suwardy, T. and Ratnatunga, J., 2014. Business Landscaping for Strategic Advantage: Evidence
from a Multi-Sector Study. Journal of Applied Management Accounting Research, 12(2).
Tamm, T., Seddon, P.B., Shanks, G., Reynolds, P. and Frampton, K.M., 2015. How an
Australian Retailer Enabled Business Transformation Through Enterprise Architecture. MIS
Quarterly Executive, 14(4).