Aldi Australia: External Environment & Industry Analysis Report

This report provides a comprehensive analysis of Aldi Australia's organizational strategy and leadership within the Australian supermarket industry. It begins by outlining the background of Aldi's entry and growth in Australia, highlighting its cost-effective business model and focus on quality, value, and convenience. The report then delves into an external environment analysis using the PESTLE framework, examining political, economic, social, technological, and environmental factors impacting the industry. Furthermore, it conducts an industry analysis using Porter's Five Forces to assess the competitive landscape and profitability. The report identifies factors driving industry change, such as technological disruption and evolving consumer behavior, and discusses their potential effects on industry profitability, concluding with insights into strategic planning and adaptation in the face of these changes. Desklib is a great resource to find similar solved assignments for students.

Running head: ORGANIZATIONAL STRATEGY AND LEADERSHIP
Organisational Strategy and Leadership
[Aldi Australia]
Name of the student:
Name of the university:
Author note:

1ORGANIZATIONAL STRATEGY AND LEADERSHIP
Table of Contents
Introduction:....................................................................................................................................2
Background of the chosen organization:.........................................................................................3
External Environment Analysis:......................................................................................................4
PESTLE analysis:........................................................................................................................4
Industry analysis:.............................................................................................................................9
Porter’s five forces analysis:........................................................................................................9
Factors driving the industry towards a change:.............................................................................11
Effect of the change in the industry:..............................................................................................13
Conclusion:....................................................................................................................................14
References:....................................................................................................................................15
Appendix:......................................................................................................................................17
1. External Environment Analysis:............................................................................................17
2. Industry analysis:...................................................................................................................19

2ORGANIZATIONAL STRATEGY AND LEADERSHIP
Introduction:
The retail sector, in particular, the supermarket & grocery stores industry in Australia is
highly competitive. The competition has kept on changing with times and had largely known as
the duopoly of Woolworths and Coles. The wide variety of product line and competitive prices
has kept on establishing stories of success. However, a rapid growth of Aldi in recent times has
not only altered the trend but, also become the reason for declining profit for the industry
(Ibisworld.com.au, 2018). One of the reasons for Aldi’s growth has been the discounted price for
private-label products. Customers had also responded to it which is the reason that forced
Woolworths and Coles to switch over to the same strategy. They also had to consider an
expansion of their private-label product ranges. Smaller supermarket chains like Foodworks have
also struggled to respond to a changing market trend (Ibisworld.com.au, 2018). Industry revenue
is expected to grow up by 3% on an annual basis (Ibisworld.com.au, 2018).
To understand why Aldi is so successful despite the market giants Woolworths and
Coles, it is first necessary to understand the driving factors in the industry. An average person
looks for three factors such as Product Quality, Convenience of Shopping & Value when they
feel like shopping (Singh-Peterson et al., 2016). When looked at the business model that Aldi
uses, it looks bit complicated and also hard to understand what it communicates. However, the
core strategy of the business model is centered on the three highlighted factors. It means Aldi is
fulfilling the needs and wants of its target customers. The three factors have been standardized in
Aldi’ model of business and are continuously executed also (Singh-Peterson et al., 2016).

3ORGANIZATIONAL STRATEGY AND LEADERSHIP
The purpose of this study is to communicate the knowledge related to strategic planning.
The purpose is being served in various ways including the external environment analysis and
also the industry analysis.
Background of the chosen organization:
Aldi is a German based multinational company and had entered Australia in 2001. The
company had its first store in Sydney and since then has kept on growing with its effective
business strategies. However, the excellent performance was noticed in just the last five years.
The company has redefined the market competition with its cost-effective business model. It has
constantly executed the three essential elements of customer needs such as quality, value and
convenience (Knox, 2015). The execution could be possible due to its cost-effective strategies.
Cost-effectiveness was a result of constant strategic planning that also includes maintaining a
lesser number of SKU’s (Stock Keeping Unit). The benefits of the strategy include lower cost of
handling and also higher purchasing power. Exclusive brands of Aldi are accountable for
approximately 90% of their shelf space. Hence, Aldi is able to cut down on the supply prices.
These are few of the reasons how the company has managed to keep the cost of production lower
(Arup, Beaton-Wells & Paul-Taylor, 2017).
Limited range of products was being maintained to focus more on a quality product. The
efficient handling of the production cost was actually reinvested in offering lower prices to
customers. The choice is actually not a very high concern to many customers. There are
customers that prefer getting the reduced range of quality products at competitive price range
over a wide range of expensive and low-quality products. Convenience was maintained with the
help of opening numbers of branches in the different parts of Australia. The expansion rate is

4ORGANIZATIONAL STRATEGY AND LEADERSHIP
appreciable indeed (Corones, 2015). The store layout is another reason why Aldi is able to cut
down on the cost of production. Stores are not open for 24 hours. It helps to save on staffing
costs and utility expenses. The number of employees has also been kept low. Employees are
trained on multi-skills to support their strategy of keeping a low number of employees. Products
are all packaged and hence, it helps to reduce the shelf stocking time of products (Corones,
2015). The checkout process is also very competitive. Customers are encouraged to bring their
carrier bags to avoid unnecessary expenses being made on it. The check-out lines are supported
with long belts. Hence, accommodating a large number of products which is also necessary to
cut down the queues gathered around the place. Packaged products have a barcode in more than
one place supporting an efficient check-out process. Customers are encouraged also to package
their goods. It helps to cut down the time and also the expenses which could have been required
for keeping staffs particularly for packaging (Medlin & Ellegaard, 2015).
External Environment Analysis:
PESTLE analysis:
Political:
The Australian retail grocery sectors have been a point of attraction for the public body
and the critique experts. The competitions have been redefined with the effective strategies of
Aldi which is always good for customers; however, not so for the country's economy. In course
to offer the competitive prices, the supermarket stores have considered being low with their net
profit. Such trend has affected the annual growth of the grocery and the supermarket industry in
Australia. As reported by the IBISWorld, the industry is expected to grow at 3% annually
(Ibisworld.com.au, 2018). Initially, the duopoly of Coles and Woolworths was the reason for

5ORGANIZATIONAL STRATEGY AND LEADERSHIP
criticism and had also produced calls for a reform in the competition laws. It was being felt to
analyze any misuse of the market power (Corones, 2016). Improvements have been felt for
regulation of planning, liquor licensing and trading hours. Aldi’s success just suggests a low
barrier to entry in the industry and also attaining a progressive growth (Corones, 2016).
Economic:
The technological disruption being brought up by new entrants in the Australian retail
sector and also the changing dimension of shopping such as the online shopping are al affecting
the brands and also the country’s economy. Firms are now being shifted to many innovative
moves to solve their incompetency. However, in many ways, such strategies make those
problems poorer (Methner, Hamann & Nilsson, 2015). Aldi has redefined the competition and
has created the urgency for others to bring much innovation in their business strategies, so that,
those firms stay afloat in the industry. Moreover, there is a price war competition in the
Australian retail industry which is always good for customers provided that, three factors such as
value, convenience, and product quality are met. The fact is not so good for the country’s
economy. The competition has affected the annual growth of the grocery and the supermarket
industry. The industry is expected to grow at 3% on an annual basis (Ibisworld.com.au, 2018).
The profit margin is declining for the industry which is an indirect loss the national economy (de
Waal, van Nierop & Sloot, 2017).
Social:
Customers are the drivers of industries, in particular, the grocery retail industry in
Australia. The extent to which they desire for a service it gets reflected in the decision making of
the industry leaders. Woolworths and Coles have long had the duopoly status in the Australian

6ORGANIZATIONAL STRATEGY AND LEADERSHIP
retail sector. However, the fact has been strongly derailed by the German based Aldi. Consumer
behavior and the entrants of new retail business have both forced industry’s leaders to consider
changing their business model. The attempt to offer a competitive price range to customers has
affected the annual growth of the Australian retail industry (Calvo-Porral, Faíña Medín &
Montes-Solla, 2016).
Consumer behavior for shopping has given place to innovative strategies which have
so far been proved productive to Aldi. However, the cost-effective strategy may not be producing
the same effect due to the ever-changing consumer behavior for shopping. Customers, in
particular, the Millennials are now being attracted much towards the online shopping platforms.
Shopping convenience, availability of a range of products, price comparison option,
incrementing usage of Internet in Millennials and delivery at the doorstep are some of the
reasons for a booming online shopping platform (Borraz et al., 2014).
On top of all, the changed lifestyle of young generations has largely supported the
online shopping platform. The young generations, in particular, do not anymore like visiting
physical stores. It does not mean they have stopped going to stores. It rather means they prefer an
online shopping platform where they are not required to visit the physical stores. They can
browse their desire category of products and find a list of products from different brands. They
can also compare for product features and the pricing. Once they decide their choice of products
they are simply required to book it for purchase. Their selected product or the list of products
will then be delivered to their doorstep (Hosken, Olson & Smith, 2018).
Additionally, they do not have reasons to feel like visiting stores. For instance, Aldi that
offers the cheapest products is still expanding and yet to reach to a wider customer base in the

7ORGANIZATIONAL STRATEGY AND LEADERSHIP
country. The store is still inaccessible to many. It does not make the sense traveling miles to
reach to the store for products which could be conveniently purchased on the various online
platforms (Price, 2016). Physical stores at present have no answer to the revelation created by the
online shopping zones. There is a need for technological innovation that could support a huge
change in regards to the physical layout of the stores. Millennials are prone to the technological
interface. Hence, suggestions would be for technological and strategic innovation in physical
shopping stores (Price, 2016).
Technological:
Technological innovation has evidently kept on driving the consumer behavior in the
Australian retail market. Initially, the market was dominated by the duopoly of Woolworths and
Coles which later on being affected by Aldi. Aldi has driven the shopping behavior with its cost-
effective business models focussed to provide value, quality product, and shopping convenience.
However, the biggest disruption was being laid from the entrance of online shopping platforms
(Luck & Benkenstein, 2015). It has actually steered the market with customers in specific the
Millennials thronging to the concept. It has offered the services which have no answers from the
physical stores. The ever-growing use of internet has made such things possible. Customers who
love technological gadgets have responded to a changed interface (Luck & Benkenstein, 2015).
The innovation has disrupted the industry and produced a necessity to adopt the change
pattern of shopping behavior. They must consider introducing the innovative strategies, so that,
they are able to pull and retain their customers at their physical stores. There is a need for
reducing the wait time of customers. Technological gadgets need to be implemented in the
feasible zones to attract the young customers. The shelf layout must be changed to make

8ORGANIZATIONAL STRATEGY AND LEADERSHIP
customers feel the online kind of experience. The number of stores is needed to be increased, so
that, accessibility rate could increase (Pantano, 2014).
Environmental:
There are environmental concerns which are drawing the attention of the national
government. Greenhouse gas emission and waste production are the matter of worries for
supermarket giants. The supply chain operation which also includes the logistics operation is a
resource to greenhouse gas emission. Supermarket brands are under a strict scrutiny of the
national government due to its contribution to the greenhouse gas emission. There is a need for
effective strategies to effectively reduce the level of greenhouse gas emission (Hosken, Olson &
Smith, 2018). They are in a way involved in the production of wastages. Packaging which is an
important part of operation contributes to environmental pollution. It effectively contributes to
the greenhouse gas emission. Recycling of older products is also a concern (de Waal, van Nierop
& Sloot, 2017).
Legal:
The Australian grocery and retail industry needs to follow certain legal policies or else
they may be in danger or scrutinized for violating any of such policies. They are scrutinized
under the Competition and Consumer Act 2010 which protect any unfair practice in regards to
competition and trade. The purpose is to enhance the welfare of Australians (Corones, 2016). As
earlier being stated that the duopoly of Woolworths and Coles have already attracted scrutinized
move of the public body. Hence, Aldi will need to ensure that do not come across such
obligations. The Greenhouse and Energy Minimum Standards (GEMS) Act 2012 governs a
national framework guiding the product energy efficiency in Australia (Corones, 2016). Giant

9ORGANIZATIONAL STRATEGY AND LEADERSHIP
supermarket brands like Aldi may be required to continually deploy thoughts to remain safe from
any such obligation. This is also necessary to prove their image as a socially responsible firm.
Industry analysis:
Porter’s five forces analysis:
Threat of substitutes: (Low)
The Australian supermarket and grocery industry has witnessed a wide variety of stores
like convenience stores, specialty grocery stores, and farmer's markets. However, the market is
now reaching the saturation stage (Medlin & Ellegaard, 2015). Additionally, the technological
disruption does already exist in the form of online shopping platforms. The existing supermarket
giants like Woolworths, Coles, and Aldi can only consider improving the shopping interface
through incepting a few of technological innovations. Brands can improve the shopping
experience of their customers but, only through feasible technological interventions (Arup,
Beaton-Wells & Paul-Taylor, 2017). Hence, it appears as if there are no more scopes for a
substitute business.
Threat of new entrants: (High)
The sheer competition from online shopping giants has produced the necessity for few
modifications in the existing store format. Modifications need to be in regards to such as
improving the shopping interface, reducing the wait time for customers and increasing the
number of stores. Hence, firms with the effective business model may be a possibility. Lidl, for
example, has made a knocking entry in the Australian retail industry (Methner, Hamann &

10ORGANIZATIONAL STRATEGY AND LEADERSHIP
Nilsson, 2015). Despite the fact that the market is close to the saturation stage, it has still space
available for innovative firms. There are scopes in regards to technological disruption in the store
layout to make it appealing to customers in specific to Millennials (Pantano, 2014).
Competitive rivalry: (High)
The Australian grocery and retail industry is highly competitive. The competition was
redefined by a duopoly dominance of Woolworths and Coles. It was further stormed with an
entrance of Aldi in 2001. The cost-effective business model of Aldi has helped the company to
establish its own image. At the current moment, Aldi is giving a strong fight to Woolworths and
Coles. Actually, Woolworths and Coles are feeling the heat of Aldi (Calvo-Porral, Faíña Medín
& Montes-Solla, 2016). The competition reached a different level with the technological
disruption of online shopping platforms. It has influenced the shopping behavior of Millennials
significantly. It has also attracted the Baby Boomers. The incrementing internet usage has
encouraged customers to online shopping. They found this rather user-friendly due to the
convenience of shopping, availability of large stocks, comparative study of different brands in
terms of product features & prices and the home delivery (Arup, Beaton-Wells & Paul-Taylor,
2017).
Bargaining power of buyers: (High)
Consumers drive the Australian grocery and retail industry which is also evident through
the successive dominion of Woolworths & Coles, cost-effective dominion of Aldi and online
shopping platform. Consumers have always been the drivers. Consumers drive it through their
behaviors not necessarily confined only to shopping behaviors (Methner, Hamann & Nilsson,
2015). Customers had needed cheapest yet the quality product. Such behavior of customers had

11ORGANIZATIONAL STRATEGY AND LEADERSHIP
given space to discounted stores. When retailers have felt the necessity to provide a convenient
shopping experience they had come up with the convenient stores. Aldi had identified the need to
offer all those three elements such as value, quality product and shopping convenience under one
roof. Online shopping platforms can be regarded as an outcome of incrementing internet usage
(Calvo-Porral, Faíña Medín & Montes-Solla, 2016).
Bargaining power of suppliers: (Low)
The Australian supermarket brands have been able to manage an effective relationship
with suppliers. Hence, they had been able to manage it according to their needs. Till the time,
when duopoly of Woolworths and Coles had existed they had been dominating their relationship
with suppliers. They were the biggest buyers and hence, they had the advantage (Hosken, Olson
& Smith, 2018). Aldi, on the other hand, moved along a different line to manage an effective
relationship with suppliers. The first move was to reduce the number of stock keeping units
(SKUs). They had also offered a very limited range of products than Woolworths and Coles do.
In this way, Aldi was able to reduce the bargaining power of suppliers (de Waal, van Nierop &
Sloot, 2017). Few of the exclusive private-label brands were accountable for a 90% shelf space
payment (de Waal, van Nierop & Sloot, 2017). In this way, Aldi was able to reduce the cost of
production and also the bargaining power of suppliers.
Factors driving the industry towards a change:
Few factors are worth mentioning due to its impact on the Australian retail industry. The
Australian customer landscapes especially the Ethnic Australians and Millennials are shifting
towards a new direction. They want fresh, healthy and quality products from a resource other
than the online shopping platforms. They are well educated on the impact of business on the