7206MKT - International Marketing: Aldi's China Market Entry

This case study examines Aldi's potential expansion into the Chinese market, considering the company's current international standing and the unique challenges presented by the Chinese business environment. It analyzes Aldi's strengths, weaknesses, opportunities, and threats, followed by a PESTEL analysis of China, covering political, economic, social, technological, environmental, and legal factors. The study also explores how Aldi can build brand value in China through segmentation, targeting, and positioning strategies, focusing on understanding Chinese consumer behavior and competition from local supermarkets. Recommendations for successful market entry include targeting a broader customer base, offering online shopping, and thoroughly understanding Chinese regulations and payment systems. The report concludes that while Aldi has a strong market position, careful planning and adaptation are crucial for success in China.

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ALDI- business in china

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Table of Contents
INTRODUCTION....................................................................................................................1
ALDI CURRENT SITUATION IN INTERNATIONAL MARKET........................................3
Strength-...............................................................................................................................3
Weaknesses-.........................................................................................................................3
OPPOURTUNITIES-...........................................................................................................4
Threats-.................................................................................................................................4
ANALYSIS OF CHINESE MARKET-....................................................................................5
PESTEL ANALYSIS OF CHINA............................................................................................5
BRAND VALUE CHAIN IN CHINA......................................................................................8
RECOMMENDATION AND CONCLUSION........................................................................9
REFERENCES-......................................................................................................................11

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INTRODUCTION
ALDI – biggest supermarket of Germany which was started in 1946 by two brothers
Karl and Theo Albrecht. It has 20,000 stores in 20 countries. Aldi business is divided into
groups Aldi Nord which has stores in North of Germany and Aldi Sud which has stores in
South of Germany (Ruddick, 2013). In this report, discussion will be done on- current status
of Aldi sin the market, how their cut down price model make them come under world’s two
best retailers (Davey, 2018). Issues faced by Aldi in order to start its business in China like
understanding China local laws which will affect their business, culture of people in China
(Australian Trade and Business Commission, 2018). After that discussion will be carried on
segmentation, targeting and positioning. In last, recommendation is given to Aldi for
successful operation of business in China like targeting those customers that will increase the
demand of goods of Aldi.

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ALDI CURRENT SITUATION IN INTERNATIONAL MARKET
Market condition of Aldi is very prosperous, its market share has been risen from 5.3
percent to 7.3 percent as well as sales of Aldi also raised by 2.5 percent (Chapman, 2018). It
has set up British biggest four grocery stores and ruled 7.3 percent grocery market of UK
(Gale, 2018). Aldi has attracted almost one million households during last three years. The
supermarkets are continuously attracting most of the citizen due to its low prices (Cox, 2018).
It has almost 8000 stores all over the world. Aldi is one of the largest private company of the
world. It scored 8th rank in ‘Stores Media's 2015 survey’ (Marum, 2016). Moreover current
situation of Aldi can be seen better by SWOT analysis of the company-
Strength-
1. It offers good quality product at affordable prices which can easily attract more and
more customers towards it.
2. Operating cost of the company is minimum.
3. It has its business in 20 countries which is major strength for Aldi.
4. Customer support is the main strength which Aldi is having because it offers product
at low prices.
Weaknesses-
1. Employee satisfaction is not appropriate in Aldi, the article on Aldi says that
employees working hours are too long in Aldi (Rodionova, 2017).
2. Aldi offer their products to low and middle class so high class people mostly do not
prefer their product which is major disadvantage to the company.

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OPPOURTUNITIES-
1. By providing better services to customers they can charge higher prices which can
increase their profit.
2. Growth opportunities are in countries such as Asia and Africa because these countries
are growing economies (International Monetary Fund, 2017).
3. It can set up its business in various states due to its market share, it can easily attract
customers due to its reputation
Threats-
1. Aldi has to face high competition from Woolworths and Coles which are big
companies in Australia.
2. It has to face risk that are associated with its suppliers.

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ANALYSIS OF CHINESE MARKET-
If Aldi wants to set up its location in China there are various challenges it will face
which are discussed below-
1. Language differentiation- the language which they are using in Australian market is
different from Chinese market so before setting up new business in China, Aldi has to
understand the language preference of the people of China which can be a major task for
Aldi.
2. Use of Web is totally different- while using websites, Westerners read them from left of
the top to right of the bottom on the other hand Chinese consumers read them from centre of
the top to centre of the bottom. Chinese speakers adopt services like WeChat, Weibo on the
other hand Westerners adopt services like Twitter, Facebook, Google (Freed, 2016).
Besides above mentioned points, following things must be taken into consideration such as
analysis of competitors of China before setting business in China- Aldi has to face
competition from various China’s supermarkets like Wal-Mart, Tesco, Lotus, Carrefour so a
careful understanding of these supermarkets is necessary to successful in Chinese market.
PESTEL ANALYSIS OF CHINA-
The model of PESTEL analysis is quite helpful in today’s business environment. This
helps in analyzing business environment (Perara, 2017).
A. POLITICAL FACTORS- Government regulation of China will majorly affect the Aldi
way of working. The government of China focus on E-Commerce which is major thing in
which Aldi has to make changes for setting business in China. So before starting business in
China, Aldi have to take in consideration the political issues which are in China (Adamkasi,
2015).

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B. ECONOMIC FACTORS- Economic factor of China has both positive and negative impact
on Aldi. Positive factors in China are- increment in consumers purchasing power and
labour cost in China is very low so this is good idea to start business in China by Aldi but
there are economic issues of high inflation rate (banks of China has huge interest rate
which can be depressing situation for Aldi) and high property prices (prices of property is
huge this will increase the capital investment of Aldi. So before starting business in China,
Aldi have to take care of these two points (Adamkasi, 2015).
C. SOCIAL FACTORS-Social factors like consumers lifestyle, age, religion is different in
China. Most of people in China prefer doing shopping online because 90% of the people
in China are literate which can adversely affect the Aldi supermarket but also there are
some people prefer doing shopping at supermarkets because of the risk associated with
online shopping so in order to start business in China, Aldi has to see the ratio of people
who prefer shopping from supermarkets (Adamkasi, 2015).
D. TECHNOLOGICAL FACTORS- There are various technological factors which will
affect the Aldi supermarket like they do not have safe online payment system, the most
used payment system credit card not have much acceptance in China (because people do
not get safety regarding using credit card) (Adamkasi, 2015).
E. ENVIRONMENTAL FACTORS- Environmental factor of China will have huge impact
on Aldi. In China there is a provision for shopping online rather than visiting the shop,
reason for shop online is that only few vehicles will be used which in turn result in less
pollution in the country. So to set up business in China, Aldi has to understand all the norms
of China related to environment protection (Adamkasi, 2015).
F. LEGAL FACTORS- There are various legal factors which will affect Aldi to enter in
Chinese market-

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Every company requires Form of Representation in China. Without it companies are
not allowed to distribute profit
There is legal restriction on selling some goods, this requires licensing requirement so
before selling any hazardous goods companies has to take license and permission
from legal authorities.
Taxation system of China is somewhat different from other countries so this has to
taken in consideration before starting business in China (Huschblackwell, 2018).
In China, every company has to specify the scope of its business in registration
documents of its business. Such as if Aldi want to start its business operation in China
it has to draft that its business scope will not be done outside the approved business
scope.

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BRAND VALUE CHAIN IN CHINA
Aldi can put its brand value in China by Segmentation, Targeting and
Positioning.
Segmentation- The process of dividing market into smaller groups is called
Segmentation. Aldi before launching its supermarket should aware of people choice
or lifestyle in China. As Chinese consumers are growing so fast, they are becoming
distinct so in this case Aldi should divide its consumer into classes and should know
each class preferences (Erickson, 2017). Aldi can earn huge profit if its market is
divided into different classes of people that is different segment for child, middle age
people and adults.
Targeting- Target customers in China for Aldi are mostly low and middle class
people. They should also target high class people so that they can earn huge profit by
segmenting counters for men and women. As some Chinese consumers are brand
addicted so Aldi can also charge high prices by providing good quality to high class
people (Yu, 2014).
Positioning- To make difference from other competitors in the market, Aldi launched
ad that shows that the brand which they offering is something different from others.
The ad shows a woman dancing with her shopping cart and she rotate and grab the
trolley which reveals that Aldi customers are happy (Samios, 2017). Besides this Aldi
offer better quality products at lowest prices so that more customers can grab the
products.
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RECOMMENDATION AND CONCLUSION
From the above discussed report it can recommended that-
Aldi should offer its product to high class people besides low and middle class people.
High class people can increase the profit as well as growth of Aldi. It should start a
segment for high class people by providing better and good brand to these people, this
will attract more and more high class people (Jing Daily, 2014).
Online shopping facility should also start by Aldi as Chinese consumers mostly prefer
shopping online. They believe that with the growth of online platform, they can easily
purchase their necessity items (Fibre2Fashion, 2017).
Pricing should be kept in such situation which will benefit both Aldi as well as
consumers.
Before moving to China, Aldi should know properly the language of China as well as
payment system of China as Chinese consumers do not use credit card facility for
payment.
Aldi should understand all the legal issues which are lying in China for starting a
business like laws related to property rights, local taxes which are lying in China,
registration procedure as well as licensing requirement.
A brief analysis of competitors in China has to be done for successful business
operation in China, so that smooth and efficient operation of business can be done.
From the above explained report, it can be concluded that Aldi has successful
business operation in its location, Aldi mainly have product line for low and middle
class people which offers good product at low prices. It is also explained in the report

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that the market position of Aldi is worth with many growth opportunities. Further
discussion was carried on challenges like language problem and different web system
which was there for starting business in China with the help of pestle analysis.

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REFERENCES-
Australian Trade and Investment Commission. (2018). Business risks. Retrieved from:
https://www.austrade.gov.au/Australian/Export/Export-markets/Countries/China/
Doing-business/Business-risks
Champan, B. (2018). Aldi and Lidl reach record market share as shoppers continue to look
for low prices. Retrieved from:
https://www.independent.co.uk/news/business/news/aldi-lidl-market-share-record-
high-supermarket-figures-shoppers-discount-low-prices-a8288011.html
Cox, J. (2018). Lidl and Aldi share title of Britain’s fastest growing supermarket, data
reveals. Retrieved from: https://www.independent.co.uk/news/business/news/lidl-
aldi-uk-fastest-growing-supermarkets-joint-top-germany-budget-discount-new-stores-
a8149071.html
Davey, J. (2018). Aldi and Lidl dig deeper into Britain's grocery market. Retrieved from:
https://www.reuters.com/article/us-britain-grocers-discounters/aldi-and-lidl-dig-
deeper-into-britains-grocery-market-idUSKBN1H108I
Erickson, J. (2017). CHINA’S CONSUMERS ARE SEGMENTING INTO DISTINCT
GROUPS: A FIELD GUIDE. Retrieved from: http://www.alizila.com/chinas-
consumers-are-splintering-into-distinct-groups-a-field-guide/
Fibre2Fashion. (2018). Chinese consumers prefer online shopping: report. Retrieved from:
http://www.fibre2fashion.com/news/textile-news/chinese-consumers-prefer-online-
shopping-report-228885-newsdetails.htm