Strategic International Business Management: Aldi's Global Entry

This report provides a comprehensive analysis of Aldi's international business strategy, focusing on market selection and entry modes. It begins with a PESTLE analysis of the Czech Republic and New Zealand to determine the optimal target market, ultimately favoring the Czech Republic due to its stable political infrastructure, low labor costs, and dense population. The report then employs Porter's Five Forces to assess Aldi's competitive environment in the chosen market and applies the VRIO framework to evaluate Aldi's resources and capabilities. Finally, it recommends suitable modes of entry for Aldi into the Czech market, emphasizing the importance of market research, social media engagement, and continuous evaluation for successful business expansion. This document is available on Desklib, a platform offering a wealth of study resources for students.

Running head: STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
Report on Aldi’s international business strategy
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Executive Summary
Strategies act as an essential document for the companies and organization in terms of
improving their focus on business. As a matter of specification, strategic approach enables
the companies and organizations to systematize the business activities according to their
priority. Development of strategies is not only the responsibility of the managers. The
employees need to contribute in the strategy development for assessing their capability and
caoacity towards the workplace issues. This type of collaboration leads to the infrastructural
development, which is significant in terms of penetrating into the foreign markets. All these
aspects are applicable for all of the companies and organizations including the retailer Aldi.
Conducting market research on the countries selected would enhances the awareness of Aldi
personnel about the pros and cons of setting business there. Using analytical tools like VRIO
and Porter’s five forces would bring to the forefront the preparedness of Aldi towards
encountering the competitive rivalry from the contemporary brands. Social media would
broaden the scope and arena of the Aldi personnel in terms of choosing the prospective
channels for increasing profit margin. Evaluation would make the personnel acquainted with
the effectiveness of the selected channel for business expansion.

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Table of contents
Introduction................................................................................................................................3
Task 1.....................................................................................................................................3
Pestle analysis of Czech Republic and New Zealand........................................................3
Discussion..................................................................................................................................4
Task 2.....................................................................................................................................4
Rationale for the selected target market.............................................................................4
Task 3.....................................................................................................................................7
Porter’s five forces of Aldi in the chosen market..............................................................7
Task 4...................................................................................................................................10
Application of VRIO framework.....................................................................................10
Task 5...................................................................................................................................12
Recommendation on suitable modes of entry..................................................................12
References and bibliography....................................................................................................14
Appendices...............................................................................................................................17
Appendix 1...........................................................................................................................17
Appendix 2...........................................................................................................................18
Appendix 3...........................................................................................................................19

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Introduction
Task 1
Pestle analysis of Czech Republic and New Zealand
Both New Zealand and Czech Republic are unique in their diversity, customs and
traditions. The following PESTLE analysis enhances the clarity of the readers in terms of the
prospective country, which would upgrade the standards of companies and organizations like
Aldi. The several factors provide a critical touch to the analysis, assessing the effective and
appropriate channel for Aldi in terms of achieving a sustainable growth.
PESTLE analysis of Czech Republic
The political factor is most important for Aldi in terms of setting their business in the
threshold of Czech Republic. This is because stable and efficient governmental infrastructure
is the greatest advantage for countries like Czech Republic in terms of penetrating into the
foreign markets. Moreover, the absence of political unrests is an additional assistance in
terms of carrying out the importing and exporting activities. Low labor costs have increased
the employment rate in Czech Republic. Typical evidence of this lies in the year 2011 when
$214.6 billion GDP was produced (Vlada.cz 2018). Innovative plans in further lowering the
labor costs have escalated the GDP by $279 billion by the end of 2017. This fact places
Czech Republic in alignment with the Western European countries in terms of labor costs.
Along with this, the economic parameter is very important for Aldi. A strong PPP
value places Czech Republic in the 34th position in the stable economies of the world. Social
parameter is important, as the Aldi services revolve around catering to the needs, demands
and requirements of the customers (Refer to Appendix 1). As a matter of specification, most
of the people belonging to the age group of 15 to 64 are the residents of Czech Republic.
Therefore, it would be advantageous for Aldi, if they set up their business in Czech Republic.

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The people of this age group are very passionate towards the new and creative products and
services. These people are highly skilled and qualified. Effective utilization of the latest and
modern technologies, through ages, has produced innovative products for the people.
Therefore, technological parameter is most important. This is because adoption of latest
technologies would help the Aldi personnel to attract more customers towards the brand
image (Refer to Appendix 1).
Along with this, legal and environmental parameters are also the most important
considerations for Aldi business set up in Czech Republic. This is because legal compliance
towards the environmental directives would safeguard the brand from illegal instances and
scandals. Maintaining consistency in the innovations would act as an opportunity for Czech
Republic in terms of gaining the tag of Smart City (Vlada.cz 2018). Czech Republic has
bagged the 24th position in terms of recycling the wastes. Implementation of the landfill
taxes has increased the recycling from 1% to 16%. Free trade movements have enhanced the
stability in the relationship between Czech Republic and the associate countries.
PESTLE analysis of New Zealand
The political factor is most important for Aldi business in New Zealand as the Government
elections after 3 years prove beneficial for New Zealand in terms of introducing new rules
and regulations. Stability in the political system possesses flexibility towards financially
aiding the companies and organizations. Harsh tax obligations hamper the import and export
activities. The economy of the country is very stable. Typical evidence lies in the reasonable
rates of the products and services, which allows enough space to the people for exercising
their purchasing power (Govt.nz 2018). This makes the economic factors most important for
the Aldi personnel to consider while setting their business in New Zealand. In spite of a low
population, the people are skilled and highly educated. An interesting fact is the introduction

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of attractive tourism packages, which has increased the tourist visit in New Zealand. The
government is keen on ensuring the wellbeing of the citizens. Herein lays the appropriateness
of the social factors, being tagged as the most important.
The technological parameter is also the most important, as the adoption of latest
design technologies are an indicator for adding to the stock of customers. For operating these
technologies, the companies and organizations need to have legal compliance towards the
marketing activities and the environment (Govt.nz 2018). Therefore, the weightage of these
parameters are most important and less important. The reason for environmental factor being
less important is because the New Zealand government is responsible for regulating the
environmental activities of the companies and organizations. Environmental directives are a
part of the governmental initiatives, therefore, it does not need separate mention in terms of
Aldi business set up in New Zealand (Refer to Appendix 2).
Discussion
Task 2
Rationale for the selected target market
After comparing the macro environmental analysis of Czech Republic and New
Zealand, it can be concluded that Czech Republic would be an effective option for Aldi in
terms of foreign market penetration. Stable political infrastructure would help Audi personnel
to introduce lucrative offers for the customers. Countering this, alteration in the governmental
structure of New Zealand would seem more beneficial for Aldi in terms of coming up with
lucrative offers, schemes and discounts for the customers. In terms of economy also Czech
Republic is the best option (Vlada.cz 2018). This is because of the low labor costs. Indulging
in partnership with the members of the trade union would enable the Aldi personnel to set up

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reasonable labor costs. This step would be a wise step towards luring the employees towards
the brand image. This partnership would be important in terms of averting the instances of
inflation, high exchanges rates.
The population of Czech Republic is densed. This is an advantage for Aldi in terms of
achieving greater customer satisfaction through the provision of quality products and
services. The presence of skilled and qualified people alarms the Aldi personnel regarding
refraining from the use of wrong and unfair means for marketing. A little mistake would
compel the personnel to encounter customer turnover (Aldi.com 2018). Being highly
qualified would also result in an efficient and prospective communication between the
company and the customers, leading to the production of customer centric goods. On the
contrary, investing in New Zealand would not bear positive results for Aldi. This is because
of the low unemployment rates. Any new innovation would not make the people, as they are
satisfied with the treatment they are getting from the government. Therefore, placing target
on the people of 15-64 years would enable the Aldi personnel to generate high revenue. This
is because; the people of this age group are very passionate towards innovative products.
Herein lays the appropriateness of the technologies of latest designs, which would help the
Aldi manufacturers to produce innovative quality products (Aldi.com 2018).
The past ages of Czech Republic carries the evidence of professional people in the
research and development team. This would act as a keystone for the Aldi personnel to
research the efficient and effective means of catering to the specific needs, demands and
requirements of the customers. Effective utilization of the latest and modern technologies is
the evidence of the competitive advantage, which Aldi would achieve upon settling their
business here. Typical examples of this are the computers, laptops and other machines, which
Aldi has adopted in other countries (Aldi.com 2018). On the contrary, the introduction of
internet in the rural areas would be an advantage for Aldi, if they invest in New Zealand.

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Getting technological skills would broaden their perspectives. This enhancement would prove
beneficial for Aldi personnel in terms of creating corporate minds out of poor people.
Environmentally also, Czech Republic is suitable for Aldi. 24th rank in recycling
wastes would definitely generate an urge among the Aldi personnel regarding the practice of
eco-friendly business. Landfill taxes would be an additional assistance in terms of averting
the instances of environment scandals. Following the environmental directives would prove
fruitful for Aldi personnel if they settle their business in the threshold of Czech Republic
(Vlada.cz 2018). Viewing it from other perspective, recycling would lure more number of
customers. Absence of tax tariffs on movement of goods in Czech Republic would enhance
the reputation of Aldi. Along with this, adherence to the competitive policies would enable
the Aldi personnel to carry out transparent marketing. Transparency in the business
transaction would enable the stability in the relationship with Aldi and the associate partners.
This would result in the introduction of lucrative deals and offers for the stakeholders and
shareholders.
Legal compliance is very important, if Aldi aspires to enhance their reputation. In this
perspective also Czech Republic gets preference. This is because of the absence of tax tariffs
on the import and export of goods (Vlada.cz 2018). However, this does not the marketing
activities of ALdi would not be monitored. On the contrary, New Zealand government’s
success in curbing the corruption would allow Aldi personnel to carry out their business
smoothly. This would ensure the security of both the marketers and the customers, which is
crucial for setting in some other country.
Obligation for paying the lending charge to the government makes Czezh Republic a
better option than Zealand. This is in terms of the free trade movement of the goods. If Aldi
thinks of New Zealand, there are high chances of encountering an empty treasury, which

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would be a negative sign towards enhancing the productivity. However, recently the
government has lifted this obligation, which provides space to Aldi for thinking rationally in
terms of investing in the market of New Zealand (Govt.nz 2018). Moreover, legal coverage
on the business activities would enhance the security of companies like Aldi.
This analysis is based on the macro environmental analysis of New Zealand and
Czech Republic. However, the Aldi personnel need to conduct more market research in term
so assessing the beneficial challenges towards the attainment of competitive advantage over
the contemporary brands.
The score of PESTLE analysis in case of Czech Republic is 170 and that of New
Zealand is 162. The scores clearly indicate that Czech Republic is the best option for Aldi in
terms of expanding the scope and arena of their business. The major drive behind this is the
stability political system of Czech Republic, which ensures the overall wellbeing of the
citizenship (Vlada.cz 2018). Legal compliance to the marketing legislations would enable
Aldi to maintain a stable relationship with the government. Exposing rational and strategic
approach towards marketing would assist Aldi in enhancing their fame and glory over Czech
Republic.
Task 3
Porter’s five forces of Aldi in the chosen market
Porter’s five forces enhance the clarity of the readers regarding the competitors of the
companies and organizations. The number 5 may not be that long; however, the intensity of
the number is enough to assess the complexities of brands like Ali in terms of settling their
business in the threshold of countries like Czech Republic (Vlada.cz 2018). The following is
an analysis of the competitor analysis of Aldi.

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Figure 1: Porter’s Five Forces of Aldi
Competitive rivalry
Aldi faces a very high competition from the contemporary brands like Woolworths,
Coles and Walmart. The ground of this competition is the cost of the products and services.
Slight difference in the prices of the product is seen as a blunder of Aldi by the competitors.
Mistakes from Aldi’s end provide space to the competitors for accumulating lion’s share in
the market. One of the striking facts is the customers are deceived with the false promises of
high advertising costs. However, Aldi is a deviation from this category, as it makes plans of
renovating the fixed prices (Aldi.com 2018). This reflects the adherence to the competitive
policies, which enables Aldi and the contemporary brands to indulge in fair trades and
transactions.
Threat of New Entrants
The threat of new entrants is medium for Aldi. Huge capital investments obstruct the
entry of startups of other brands. This is an advantage for Aldi in terms of executing the
business activities efficiently and effectively. However, the local supermarkets and native
farmers of Czech Republic would hamper the attempts of Aldi personnel regarding the
accumulation of share in the market. If the localites overpower Aldi, it would adversely affect

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their productivity. As a matter of specification, the local people prefer the local products.
Intrusion of retailers like Aldi would affect their buying power and behavior (Aldi.com
2018). The common outcome would be disinterest in the products of such retailers.
Bargaining power of the suppliers
The bargaining power of the suppliers to retailers like Aldi is low in its intensity.
Aldi, through their marketing strategy controls the suppliers, who supply quality products. It
is an advantage for Aldi in terms of selling quality goods to the customers at prices, which
sometimes align with the market price or are less than the market price. Switching between
the suppliers is very low, as the suppliers are in search of retailers, who introduce innovative
discounts, discounts and schemes for the stakeholders and shareholders. Therefore, the
suppliers are the puppets in the hands of retailers like Aldi (Aldi.com 2018). This control
provides them the opportunity to execute the marketing activities smoothly. Rationality in the
execution of marketing activities would be advantageous.
Bargaining power of the Buyers
Aldi operates in such countries, where the demand for quality products is very high
among the customers. They exercise their purchasing power through pressurizing the brands
to reduce the cost price of the products. Negligence towards catering to such demands of the
customers compels the customers to switch over brands. This is not a difficult task, due to the
close proximity of the contemporary brands to the location of the customers. The introduction
of lucrative loyalty schemes and bonus places Aldi out of the context, as no such initiative
have come from their end (Aldi.com 2018).
Threat of substitutes

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Uniqueness lacks in the products and services of Aldi. This provides the
contemporary brands the opportunity to lure the customers with same products at cheap rates.
Strategic approach towards advertising and marketing provide competitive advantage to
brands like Coles, Woolworths and Warmart. This is the greatest barrier for brands like Aldi
in terms of having a firm settlement in the market. Allowing these startups in the threshold of
countries like Czech Republic would make the market position of retailers like Aldi
vulnerable. Moreover, if the customers start liking the products of the startups, the Aldi
personnel would be compelled to encounter instances of customer turnover (Aldi.com 2018).
This would oush the company into utter loss.
Critical insight into the five forces
If Aldi plans to settle their business into the markets of Czech Republic, the greatest
hurdles for them would be competition from the contemporary brands, high bargaining power
of the buyers and the substitute products. Luring the customers by renovating the products of
the other brands would be foolishness. Selling these products at low prices would not earn
them a good reputation. High threat of substitute contradicts the aspect of medium threat of
new entrants. The more startups penetrating into the market of Czech Republic would bar the
entrance of retailers like Aldi. Counter arguing this, strategic planning by Aldi before
penetrating into the markets of Czech Republic would enable the personnel to gain
competitive advantage over these new entrants through the means of controlling the suppliers
(Vlada.cz 2018).
Task 4
Application of VRIO framework
VRIO framework is an important tool in terms of peeking into the internal
environment of a company or organization. As a matter of specification, there are four