Business Strategy: Macro and Internal Environment Analysis for Aldi

This report provides a comprehensive analysis of Aldi's business strategy. It begins by examining the macro-environment using frameworks like PESTLE, assessing the impact of political, economic, social, technological, legal, and environmental factors on Aldi's operations. The report then delves into Aldi's internal environment, employing SWOT and VRIO models to evaluate its strengths, weaknesses, opportunities, and threats, as well as its resources and capabilities. Porter's Five Forces model is applied to analyze the competitive forces within Aldi's market sector, followed by the application of various theories and models to interpret and devise strategic planning. The report culminates in a strategic management plan with tangible objectives, tactical priorities, and strategic actions, incorporating environmental and competitive analysis to produce valid strategic directions. The analysis highlights Aldi's strategic decisions, its response to the COVID-19 pandemic, and its competitive advantages such as discounted pricing and brand reputation. The report also addresses weaknesses, threats, and opportunities, and makes recommendations for improving competitive edge and market position.

Business Strategy

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
P1 Application of the appropriate frameworks for analysing impact and influence of macro-
environment on given organisation and its strategies.............................................................3
M1 Critical analysation of macro-environment for determining and informing strategic
management decisions............................................................................................................5
TASK 2............................................................................................................................................5
P2 Analysation of internal environment and capabilities of given organisation through using
appropriate frameworks..........................................................................................................5
M2 Critical evaluation of internal environment for assessing strengths and weaknesses of an
organisation's internal capabilities, structure and skill set.....................................................8
TASK 3............................................................................................................................................8
P3 Application of Porter's Five Forces model for evaluation of competitive forces of given
market sector of organisation.................................................................................................8
M3 Devise appropriate strategies for improving competitive edge and market position on the
basis of outcomes...................................................................................................................9
TASK 4..........................................................................................................................................10
P4 Application of a range of different theories, models and concepts for interpreting and
devising strategic planning for given organisation...............................................................10
M4 A strategic management plan having tangible and tactical strategic priorities and
objectives..............................................................................................................................11
D1 Critique and interpret information and data applying environmental and competitive
analysis to produce a set of valid strategic directions, objectives and tactical actions........12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
The concept of business strategy is defined as a clear as well-defined set if plans,
operations and objectives that states the process in which an organisation compete within a
specific marketplace through offering products and services. Effective business strategy permits
a company in forecasting and accomplishing dynamic demands of the market share. This report
is based on Aldi which is considered as one of the largest supermarkets of the United Kingdom
having more than 10000 stores (Acuña-Carvajal and et.al., 2019). It is a multinational
organisation which was founded in the year 1961 by Karl Albrecht and Theo Albrecht. Within
this report, there will be analysation of impact of macro environment on organisation and its
strategies. Along with it, this report also covers different models to analyse influence of macro
environment on given company. There will be analysation of internal environment for assessing
strengths and weaknesses of organisation's internal structure, capabilities and skill set. The model
of Porter's Five Forces will be used for evaluating competitive forces of the given market.
Moreover, this report also includes application of models, theories as well as concepts for
interpreting and devising strategic planning for the given company. Furthermore, a strategic
management plan will be conducted that has tactical and tangible strategic objectives and
priorities along with set of valid strategic directions, tactical actions and objectives.
MAIN BODY
TASK 1
P1 Application of the appropriate frameworks for analysing impact and influence of macro-
environment on given organisation and its strategies
This becomes significant for a business to analyse different factors of macro-environment
as it will help the organisation in making strategic decisions as per situations of the business
(Bayo-Moriones, Galdon-Sanchez and Martinez-de-Morentin, 2020). In context to Aldi, the
organisation can make use of different frameworks like Pestle Analysis for analysing influence
of macro-environmental factors. The impact of such macro-environmental factors is described as
under in relation to Aldi:
 Political Factors: These factors are associated with guidelines, policies as well as rules
and regulations of the government such as political stability, trade policies and many
more. Within UK, there is political stability that enables the businesses within the country

to trade in an effective manner. In context to Aldi, the company can freely trade in global
markets also as there are less trade restrictions that are to be followed by company at time
of trading globally. This brings positive impact on company as the sales volume and
profitability of the organisation increases.
 Economic Factors: These factors include interest rate, exchange rate, inflation rate, GDP
growth and many more that impact the functioning of an organisation in an indirect way
(Farrukh and et.al., 2020). In context to Aldi, the economic lockdown due to pandemic
situation of COVID-19 has great impact on the respective organisation as there were
closure or shutting down of the businesses within the country. This has bring negative
impact on the business operation of the company as there was a decline in the sales
operations and thereby profit margins of the company.
 Social Factors: Such kinds of factors include taste an preferences, expectations of
customers, lifestyle, health consciousness and so on. Because of the pandemic situation
of COVID-19, the customers of the country become more health conscious and prefer to
buy healthy products. Aldi has conducted market research in order to understand the
perceptions of customers towards products of the company. With the help of this
research, the company can introduce those items that are more in demand of the target
market. It brings positive impact on the organisation as level of productivity, profitability
and efficiency of the company got increased.
 Technological Factors: The technological environment of UK is highly upgraded and
developed and it is a great opportunity for Aldi to make use of advanced technologies
such as Artificial Intelligence, Machine Learning and many more at time of conducting
business operations (Fraser, 2019). This will help the company in saving its both time and
cost as well as brings positive impact on the brand image.
 Legal Factors: These factors are concerned with the laws and legislations that are
framed by the legislative system of a country. The government of UK has made certain
legislations and laws such as Employment law, Human Rights Law, Consumer Protection
Law and so on. Managers of Aldi adheres all such laws and works in an ethical
environment which brings positive impact on the business operations and organisations
as a whole. It also enhance the brand image of the company within the marketplace which
ultimately results in increment in the profit margins of the organisation.

 Environmental Factors: These factors include pollution, temperature, climate,
environmental laws, Corporate Social Responsibility, etc. Aldi is making use of electric
vehicles while delivering its products door to door. Such electric vehicles emit less
pollution to the environment and ultimately brings positive impact on the organisation.
M1 Critical analysation of macro-environment for determining and informing strategic
management decisions
From above discussion, it is critically analysed that there are a large number of macro-
environmental factors that are influencing decision making process of the company (Hsieh, Ma,
and Novoselov, 2019). These factors consist of political, social, economic, technological, legal
and environmental. The impact of these factors on the operations of business is in such a way
that either they bring positive impact or negative impact on business performance. The
analysation of the impact of these factors has helped Aldi in making strategic decisions in an
effective manner that enhances the level of productivity, profitability and efficiency within the
workplace. Contrary to it, Aldi is required to focus on such factors that are creative adverse
impact on the performance of the organisation as a whole.
TASK 2
P2 Analysation of internal environment and capabilities of given organisation through using
appropriate frameworks
In order to analyse the internal environment and capabilities of the organisation, Aldi can
make the use of different models such as SWOT Analysis and VRIO model. The explanation of
these models is given as below in context to Aldi:
SWOT Analysis of Aldi
Strengths Weaknesses
Competitive and Discounted Pricing: Aldi is
making use of a pricing model which keeps
prices low or offers discounts (Kong and et.al.,
2020). Therefore, it is a major strength for
company as the pricing of its products is so
low that even more significant rivalries find it
Low-Profit margins: The exceptionally
executed concept of Aldi of restricted
assortment may be assisting organisation for
generating sales and growth but there is no
surety for achieving profitability through such
approach as low pricing models facilitate
retailers to generate sales but drastically

difficult to keep up.
Brand Reputation: Respective organisation
has branded it successfully as it is offering the
products at superior quality and at low or
discounted prices. Such reputation precedes
Aldi whenever it starts an outlet and there are a
large number of customers on the opening day
of the outlet (Kong, Jiang and Zhu, 2022).
minimises profit margins.
Low focus on customer satisfaction: It is
another major weakness of Aldi that it less
concentrates on customer satisfaction. Market-
base has to pay a redeemable fee for shopping
cart and must buy their bags as well as pack
their purchases.
Opportunities Threats
Expansion into emerging markets: It is a
great opportunity for Aldi that The Western
World provides a lucrative market for retail
businesses and each major retailer scrambles
for getting in on action. But, now the emerging
markets offer better pickings along with bonus
of low-priced labour. This will be a great
opportunity for company as it has made its
name in minimising overhead costs.
Growth of Online Retail Sector: This is
another opportunity for Aldi to make tentative
forays within the online sector which would
help it in enhancing level of sales volume and
thereby profitability in business through
working on its pricing strategy into online
trading.
High Competition: There is cut-throat
competition in retail industry and hence Aldi
sacrifice short-term gain for uncertain long-
term benefits to overcome competitors. The
company has chosen to target a market offering
slight profits and invests greatly on expansion
in UK and US which will either rise or
decrease the profitability of company.
Threat of legal factors: Aldi has faced serious
legal accusations like Issues concerned with
Copyright on its brand slogan. Crucially, the
law not permits relative advertising so
organisation can be forced to stop using
practices associated with advertising. This has
already set foot for connecting it with the
market share and ultimately such types of legal
accusations can ruin the business and brand
image of Aldi which can be a major threat for
company (Aldi SWOT Analysis, 2022).
VRIO Model Analysis

Resources/Capabilities Valuable Rare Imitable Organised
Financial resources Yes Yes Yes Yes
Human resources Yes Yes Yes No
Patents Yes Yes No No
Local food products Yes No No No
Valuable:
 Financial Resources of Aldi are extreme valuable as these facilitate in investing into
external opportunities that arise and also in combating external threats (Latifah and et.al.,
2020).
 Human resources of the company are also valuable as they are trained, skilled and
capable which results in more productive output for the firm.
 The local food products are also the valuable resource of the organisation as these are
highly differentiated which makes perceived value of these by market-base high.
 Patents are the valuable resource of Aldi as these allow the company to sell its products
without competitive interference.
Rare:
 Financial resources of Aldi are rare as strong financial resources are only possessed by
few organisations within industry.
 Human resources of the company are also rare as these are highly trained, skilled and
talented which is not in the case within manpower in other companies.
 Patents of Aldi are rare resources as these are not easily available and are not possessed
by rivalries and also permit the company to use them without interference from
competition (Liu, Wu and Chan, 2021).
Imitate:
 Financial resources of the organisation are costly to imitate as these resources have been
developed by organisation through long lasting profitability over years.
 Human resources of the company are also costly to imitate as other companies cannot
train their manpower to improve their skills, talent and capability in the same way as Aldi
does.

Organisation:
 Financial resources of Aldi are organised to capture value as these are used strategically
for investing within right places, making use of opportunities as well as combating
threats.
M2 Critical evaluation of internal environment for assessing strengths and weaknesses of an
organisation's internal capabilities, structure and skill set
From above discussion, it has been critically evaluated that Aldi has conducted internal
environment analysis for the purpose of ascertaining strengths and weaknesses (Liu and Kong,
2021). Through this, the company has identified its strong as well as weak points along with
recognising different opportunities and threats available to the organisation. Through analysing
internal capabilities of the respective company, this has been evaluated that the financial
resources of Aldi are valuable, rare, inimitable and organised within the business that gives a
competitive advantage to the organisation as a whole. This helps the company in achieving its
growth and success in an effective and efficient manner and also enhances the productivity and
profitability of the organisation.
TASK 3
P3 Application of Porter's Five Forces model for evaluation of competitive forces of given
market sector of organisation
The model of Porter's Five Forces is usually adopted by an organisation for the purpose
of evaluating competition level within industry. This helps managers of Aldi in developing
strategic plans and decisions accordingly towards attainment of organisational goals. Different
forces of this model are discussed as under in relation to Aldi:
 Threat of new entrant: This refers to a situation in which new industries enters within
existing market with new strategy and willingness for obtaining market share (Liu and
et.al., 2020). The government of UK has made certain barriers and regulations within
retail industry for new entrants and needs licence for taking entrance within the industry.
Therefore, there is a low threat of new entrants to Aldi as more investment is required for
entering into the respective industry.
 Competitive rivalry: There are large number of competitors within retail industry that
are offering same kinds of products as of Aldi with an objective of earning and

maximising profitability level. This force helps in determining competition level and
number of competitors of respective company within such industry. In context to Aldi,
the several competitors include Lidl, Penny Market, Biedronka and many more that are
active in marketplace. Hence, there is moderate threat of competitive rivalry among
existing market.
 Threat of bargaining power of customers: In context to Aldi, buyers exert the pressure
on company for seeking discounts and offers to get better quality products at lower rates
(Maniora, 2018). As there are number of buyers of the company demanding products at
less possible cost, therefore there is a high threat of bargaining power of buyers as they
can switch to another brand offering products at lower cost relatively less from Aldi.
 Threat of bargaining power of suppliers: In relation to Aldi, there are large number of
suppliers within the retail industry. Thus, there is a low threat of bargaining power of
suppliers as Aldi can easily switch to another supplier in case if one supplier will supply
its material at more price to Aldi in comparison to others.
 Threat of substitutes: When substitute products of are more expensive in comparison to
Aldi, then there will be low threat of substitute products as the target market will not
switch to another company as Aldi is offering its products at less cost in comparison to its
competitors with same benefits.
M3 Devise appropriate strategies for improving competitive edge and market position on the
basis of outcomes
It becomes significant for an organisation to develop appropriate plans and strategies that
will provide assistance in capturing market advancement in a successful manner. Such strategies
are usually associated with multiple factors like chasing competitive advantage, taking feedbacks
and suggestions, improving quality, etc (Martinez Hernandez, Sánchez‐Medina and Díaz‐
Pichardo, 2021). Moreover, adopting such strategies will help Aldi in maintaining effective
relationship with stakeholders. For getting effective market position, organisation may adopt
various strategies such as conducting market analysis to understand customers perceptions. This
well improve brand image, value and number of customers of the company within marketplace.

TASK 4
P4 Application of a range of different theories, models and concepts for interpreting and devising
strategic planning for given organisation
Ansoff Matrix Model
This model helps an organisation like Aldi in measuring the growth and success of
company and also assists in ascertaining ways through which it can expand its business at
potential marketplace. There are different growth strategies under this model that are described
as follows in context to Aldi:
 Market Penetration: With the help of this strategy, Aldi can sell its existing products
within existing markets through improving its advertising and promotional strategies
(Oldman and Tomkins, 2018). This facilitates in capturing more customers within
marketplace and gaining competitive advantage over rivalries through improving
promotional activities for its food products.
 Product Development: If Aldi makes use of this kind of growth strategy, then company
is required to develop and introduce its new product within exiting markets for attracting
more customers. Organisation is required to understand customers perceptions before
introducing new product and after that it should launch product. This will enhance
productivity and profitability level within organisation and also increases number of
market share.
 Market Development: It is another growth strategy that enables Aldi in enhancing its
business operations and functions within new markets through capturing more customers
with its existing products. The company can target other market segments for selling its
existing products to them because this will help company in increasing market share and
profit margins of the company.
 Diversification: Through adopting such kind of growth strategy, Aldi is required to
introduce its new product within new markets (Pang and et.al., 2019). By doing so, the
organisation can target more and more customers through bringing innovation in new
products and services. Though it is a riskier strategy, but can generate a huge amount of
revenue for company and gives it a competitive edge.
From above discussed growth strategies, the most effective and suitable strategy for Aldi is
market development in which it can expand its business in new markets. This will provide

assistance to organisation in attracting more customers towards business and its products and
services.
Porter's Generic Strategies
This is another kind of strategic model that facilitates an organisation in concentrating on
chasing competitive benefits over a specific area. There are three main strategies under this
model and these include cost leadership, differentiation and focus strategy (Tseng and et.al.,
2022). These different strategies are explained as below in relation to Aldi:
 Cost Leadership: Through adopting such strategy, Aldi can increase its sales operations
by lowering the cost of its products and then selling them within marketplace to its
potential customers. This strategy helps company in chasing competitive edge on its
pricing strategy and attracts more number of market-base.
 Differentiation: It is another strategy that can be adopted by Aldi through developing
unique products offering great value to the customers. The organisation is needed to add
some more innovative and unique features and more benefits to its products that directly
satisfy customers needs and perceptions. This gives company more opportunities to
demand price as per technology used in introducing differentiated food products.
 Focus: This is last strategy of respective model that enable Aldi to get competitive scope
within retail industry. The respective organisation can adopt such strategy through
concentrating on narrow segment and within that segment tries to attain either a cost
advantage or differentiation within food products. Through making use of such strategy,
Aldi can enjoy extreme degree of customer loyalty towards company.
From above discussed all generic strategies, it is justified that Aldi can adopt cost
leadership strategy for attaining more customer-base and meeting organisational aspirations
effectively. This will also provide assistance to company in chasing high competitive benefits
over competitors within the marketplace.
M4 A strategic management plan having tangible and tactical strategic priorities and objectives
Strategic Management Plan
Strategies: Aldi can adopt market development strategy in order to achieve growth and success
of the company effectively. As per this strategy, the company will introduce new market
segments for selling its existing food and other products. The reason behind adopting such
strategy is that it will help organisation in capturing more market opportunities in a successful

manner. Furthermore, Aldi may also adopt cost leadership strategy for attracting more customers
towards products that are sold at less cost and organisation. This will also assist in achieving
higher growth and more development opportunities for the organisation.
Objectives: The objectives developed by Aldi are given as follows:
 To enhance the customer satisfaction by 15% in a year through providing food products
at superior quality to target market.
 To extend the selling of differentiated food products by 10% in a year within the retail
industry that will help the company in enhancing revenue.
Tactics: As per the set objectives, the tactics that are required to be adopted by Aldi for
conducting organisational functions are as under:
 The company must conduct appropriate management of funds so that it will help the
organisation in achieving pre-determined objectives effectively.
 This is also significant for respective organisation to recruit skilled, talented and
experienced manpower who can understand customers perceptions, their taste and
preferences and many more within marketplace.
Through adopting such tactics Aldi can enhance its business effectively and it will also facilitate
in adopting cost leadership strategy in a successful way for achieving set objectives.
D1 Critique and interpret information and data applying environmental and competitive analysis
to produce a set of valid strategic directions, objectives and tactical actions
The management of Aldi can adopt a large number of models, frameworks and strategies
that can provide assistance to the organisation in gaining the understanding of the potential and
competitive market for achieving objectives successfully (Vardarlier and Zafer, 2020). For
instance, the company can adopt Pestle Analysis for evaluating its external business environment
within retail industry. It will facilitate the company designing strategic plans as well as strategies
according to the analysation. Moreover, the management of Aldi can also adopt SWOT analysis
and VRIO model for analysing its internal business environment and capabilities of organisation
respectively. It can also make use of the different strategic models such as Ansoff matrix for
growth and success of business as well as porter;s generic strategies for chasing competitive edge
within marketplace. These different models and concepts will provide assistance to the
organisation in prioviding direction so that all the members of the company can work in an
effective and well-defined manner.