HI5014 - International Business of ALDI: A Comprehensive Analysis

This report provides a detailed analysis of ALDI's international business operations, focusing on its market entry strategy, competitive dynamics, and organizational structure. The report examines ALDI's approach to entering foreign markets, specifically highlighting its use of direct investments and Greenfield investments. It also analyzes the competitive landscape, including a SWOT analysis and Porter's Five Forces, to assess ALDI's strengths, weaknesses, opportunities, and threats in the global market. Furthermore, the report delves into ALDI's organizational structure, knowledge management practices, and innovation strategies, illustrating how these elements contribute to its success in the international arena. The report emphasizes ALDI's low-pricing strategy, brand recognition, and unique organizational design, providing a comprehensive overview of the company's international business model and its ability to thrive in a competitive global environment.

Running head: INTERNATIONAL BUSINESS OF ALDI
International Business of ALDI
Name of the Student:
Name of the University:
Author Note:

1INTERNATIONAL BUSINESS OF ALDI
Executive Summary:
The report explores the capability and the possible potential
of an MNE to do business overseas across the borders. The
MNE that was chosen was ALDI and the report analyses
every aspect of the factor that is required to be able to do
business internationally. The paper analyses ALDI’s foreign
market entry strategy, its competitive dynamics that would
help to know the striving capability of the company in
globalized market. The paper also puts forth the
organisational structure, knowledge management and
innovation techniques of the company to deduce the fact that
ALDI is indeed capable to run a business in the dynamic
globalized market.

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Table of Contents
Introduction:...........................................................................3
International Business across Border of ALDI:......................4
Foreign Entry Strategy:......................................................4
Competitive Dynamics:.......................................................6
Organizational Structure:..................................................10
Knowledge Management:.................................................13
Innovation:........................................................................15
Conclusion:..........................................................................18
References:..........................................................................19

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Introduction:
The trade of goods or services in a global or even
transnational level is what International business is all about.
There are two or more than two countries involved in the
transaction of the goods, services, capital or technology.
This international business that covers most parts of the
global world is referred to as Globalization (Reuber et al.
2018). In order to create one’s own brand in the era of
today’s globalization, it has become very difficult and
challenging. The level of competition is higher than usual
and there is the absolute necessity of forming proper
strategies by the companies to develop their business.
In order to conduct a business across borders, the
MNE’s need to fill the gap between separate markets in the
nation into one globalized marketplace. Two different macro-
scale factors determine the path to a greater globalization.
The first and foremost task is to erase the barriers of
communication and other issues to make the communication
between two nations easy; the second path to lead towards
a greater change is the acceptance of technological change
which takes place in the developments of transportation
technologies, communication and also most importantly in

4INTERNATIONAL BUSINESS OF ALDI
information technologies (Brandes and Brandes 2015). This
report focuses on the efforts and strategies of ALDI to
operate international business across the border by applying
proper and well-framed market entry strategies, knowledge
management and more. The paper will highlight the
competitive dynamics, organizational structure and also the
innovation of ALDI as a business to depict its place in a huge
competitive market place that covers global business areas.
International Business across Border of ALDI:
Foreign Entry Strategy:
It is necessary for firms to approach the international
market in a typical cautious manner. The market opportunity
must be analyzed thoroughly along with the firm’s internal
aptitude so that it can be decided which approach should be
taken in order to have a best outcome (Nuryanti and
Andreas 2017). The initial start is preceded with a low-risk
strategy so that the progress towards other strategies that
include additional investment and the risk plus additional
opportunities that comes along with it will prove to have
preliminary success. There are several approaches to get an
entry into the foreign markets some of which are done
through exporting, licensing or franchising, joint ventures,

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direct investments, U.S commercial centers and trade
intermediaries.
The low risk strategy that is preferred by almost all
business firms at their initial stage is the exporting. It is found
to be attractive by the businesses since it provides new
growth opportunities across borders (Cano et al. 2016). Not
only this strategy has proven to be less risky but also more
profitable which is why the smaller firms choose strategies
like exporting as the risk involved in this market entry
strategy is easily controlled (Armstrong et al. 2014). The
strategy of licensing is a process of granting a foreign firm
the right to utilize the firm’s manufacturing process, patent,
sales knowledge and brand name in return for the payment
that the foreign firm granted. Thirdly, joint venture is a
strategy in the form of partnership between a local and an
international firm. Both the firms share an ownership, invest
money together and share the control over the venture
(Donate and Pablo 2015). U.S Commercial Centers is
another such strategy to get entry in the international market
as it provides a lot of resources to promote exports of U.S.
services or commodities across borders. Trade
intermediaries help those firms who lacks in their resources
and need the necessary contacts that is utmost required to
build a relationship with firm in abroad.

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ALDI chose the market entry strategy of direct
investments through the help of Greenfield investments.
MNEs have the choice to engage in the production and the
business abroad by investing directly in the subsidiaries.
This approach to the foreign market has the outcome where
a company can directly find itself owning all the market
subsidiaries and manufacturing over the boundaries of
geographical area (Steenkamp 2017). ALDI chose this
approach to compete intensively overseas; however, this
method does require larger investments. ALDI wanted to
possess total control over its business along with promoting
its brand and have the potentiality to manage its own
business, and so ALDI did not have to share their profit with
any other entity (Deresky 2017). It is important to have a
better notion of the market in the oversea to have an
approach like direct investment which the MNE lacked.
Therefore, it was full of risk for the company which is why it
took several years for the company to know better about the
approach. Since direct investment approach requires a large
sum of money to be invested, it is not possible for small firms
to afford it and enter the global market in that way.
Competitive Dynamics:
For the expansion of an organization in a competitive
and new market the internal factors of the company must be

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analyzed. A comprehensive analysis of the internal factor will
give a clear idea of the resources which the company is
using in their strategic development. The unique resources
of the company as well as the capabilities of the company
will be discussed clearly. For analyzing the external working
environment, the external factors for the company must be
examined. This will help in pointing out the opportunities and
the threats the company might face in the overseas market
environment.
SWOT Analysis of ALDI:
Strength
 low-pricing strategy
 good quality products
 manufacturing
maximum products
with its own brand
 brand recognition
Opportunity
 Increased
opportunity in the
retail market.
 Development in the
global market in
china and other
Asian market.
Weakness
 stagnant business
Threats
 Existing retailers in

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principles
 constant change in
the outside
environment
the market and rising
competitors.
 Potential emergence
of largest retail
players of the world
like Tesco, Lidl and
others.
The biggest strength of the company while fighting
with the existing competitors in the foreign market is it low
pricing strategy and providing good quality products in that
price. The company manufactures and sells 90% of their
product with their brand name which is a great advantage for
them (Jenkins and Williamson 2015). Owing to the brand
recognition of the company the customers in the new market
can trust the company for good products.
The business management and the principles of the
company need to be changed as it has been stagnant for a
long time and to get better in the changing environment of
the foreign markets.
The consumption of the people is increasing rapidly
which is a great opportunity for supermarkets like ALDI to

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grow. There is great potential of the company in the
overseas market like Asia and China.
There is a huge increase in the competition among
the retailers. So, ALDI not only have to combat the local
retailers but also from global retail leaders namely Wal-Mart,
Tesco and Lidl (Schmid et al., 2018).
Porter’s five forces analysis
Threat of new entrants
(medium)
ALDI is a known brand in the
retailing stores. While the
company moves overseas to
expand its business it will be
facing a low competition from
the existing companies in the
target market but global
retailers can be a threat for
the company (Price 2016).
Threats of substitutions
(low)
The strategy of the company
to provide good quality
products with low price is a
huge challenge for the local
retailers. There is no

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competition for ALDI in this
aspect.
Suppliers bargaining
power (low)
ALDI purchases it products in
bulk quantities from its
suppliers. So, the company
has its own right of
bargaining power.
Buyer’s bargaining power
(high)
The competitors try to copy
each other’s products which
give the buyers to select
products from a wide range
of options.
Threat of existing rivalry
(medium)
By providing better products
in low cost ALDI is
maintaining its marketing
position against competitors
like TESCO, LIDL and others
(Wuet al., 2015).
.

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Organizational Structure:
Every organization is dependent on a proper and well-
framed organizational design to make it run. This structure
includes the capability of decision making, power distribution
and other specific roles and responsibilities that is necessary
within an organization. ALDI is a company that is still in a
learning phase; it has expenditures on capture, transfer,
create and mobilization of knowledge. This is optimistic in
the way that it facilitates company’s adaptation potentiality in
the dynamic world of globalization (Pioch and Gerhard
2014). It is one of the main objectives of ALDI to bring
improvement in their relationships with the employees and
the customers with effective communication system, better
decision-making potentiality and by implementing more
suitable methods of leadership (Swoboda and Elsner 2013).
This organization has a unique reputation in the market for
its opportunities that it grants for the career development of
various fields within the arena of the company.
There are five tools to maintain the productivity and
improve the organizational structure while utilizing work
groups, saving costs and using motivational practices to
achieve the goals. The structure would also explain the
direct relationship between rewards and high productivity of
the organization and also the instances in which cultural

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change is implemented. ALDI is known to use three out of
five tools in its organizational design (Verbeke 2013). The
company has tactics to empower its team of management to
come up with a support system of decision-making and
motivate its employees to be creative while formulating
solutions in the face of the problem (Ball et al. 2013). This
strategy gives the workers a sense of responsibility and also
ownership towards their work which eventually gives them a
job satisfaction and that result in higher production. Creating
workgroup has proved not only in the area of cost-
effectiveness but also it has resulted in the formation of a
better relationship among the co-workers that leads to the
expansion of expertise pool.
To improve their organizational structure, ALDI uses
the tool of soft sell motivation strategy which involves the
company to praise and advise workers in accordance to their
performance. There is another strategy of hard sell
motivation that includes the granting of incentives or
promotion to a higher rank (Chatterjee 2017). A combination
of both these strategies is utilized to improve the
organizational design along with the provision of
opportunities for career development which motivates the
workers to work harder and ALDI takes every successful
worker to a promoted position in new locations.

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The reward system is a beneficial tool to organize the
structure of the company since it has been repeatedly
proved that bonuses or uniform salary increments are
directly related to the performance of the individual in a
specified period of time. ALDI decides on the basis of fair
outcomes by the work effort of each employee and then
conducts performance appraisals. This helps in retaining
good workers to the organization and maintains the structure
as well as motivates the worker to work hard. This is how
ALDI keeps a track of its members of the organization and
never lets any single worker to miss an opportunity to prove
themselves, in the meantime the organizational design is
kept intact with all the hard work and efforts of the
employees to gain rewards or incentives.
Knowledge Management:
Knowledge management is of utmost necessity in any
organization; the knowledge of every aspect of the
organization like developing, sharing and capturing as well
utilizing the knowledge effectively is a part of the task (Kotler
et al. 2015). The reason of the vitality of this task is simple
since it effects the achievement of the objectives of that
particular company. Numerous organizational goals catch
the focus of the efforts of managing knowledge. There is a
definite way in which ALDI processes the task of managing

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knowledge of the company through consideration of both the
weakness and the strength of it. The aim of gaining apt
organization knowledge is to obtain more advantage in the
competitive nature of the market in domestic areas as well
as overseas.
With the help of some specific tools and methods
ALDI utilizes its knowledge management process, some of
which are also acquired by different techniques. Some of the
knowledge management tools and techniques that ALDI
follows are:
 Knowledge Discovery: it is the technique of
constructing explicit knowledge from data and
information or even from earlier fusion of knowledge.
The socialization is a factor upon which tacit
knowledge discovery is reliant whereas the explicit
knowledge discovery is seen to be dependent upon
combinations.
 Knowledge Capture: the phenomenon to convert the
tacit form of knowledge to explicit one and the other
way around with the aid of internationalization and
also sometimes externalization.
 Knowledge Sharing: this is the method that is used
by ALDI to communicate both forms of knowledge

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which are tacit and explicit. This process allows ALDI
to mentor new staffs.
 Knowledge Application: this is the process where
knowledge which has been made available by the
prior methods, is used effectively by ALDI in the task
of decision-making as well as in performance of tasks
bound in routines.
Knowledge management has been effective in improving
the deliverance of accountability and measurement, has
improved staff communication and most importantly,
employee get a good grasp of the knowledge they
require to engage themselves in a task. One strategic
issue that ALDI can improve itself in is that, it can
eradicate their habit of hoarding too much of information
and accept knowledge that is needed. The
implementation of the strategic planning can be followed
by a proper knowledge management. If ALDI is
successful in its ability to establish a proper knowledge
management system, it would provide the company with
an advantage in the competitive market.
Innovation:
Innovation was not in the list of ALDI’s to do list for
the initial years; however, the arrival of a competitor has

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compelled ALDI to take the concept of innovation more
seriously. One year, ALDI succeeded in remodeling all the
existing stores and add more to the number by opening up
new stores across the world (Arshad 2014). Those stores
not only were opened up brand new but they also expanded
the choices of premium as well as imported products. This
innovative technique broadened the appeal of ALDI. In
addition to the opening of new stores, it was also found that
ALDI has long term plans to continue and test more
innovative ways to make the experience of shopping better.
In a more recent news, it was found that ALDI is
combining its business with another food retail sector to
enhance the innovation of store shopping. For instance,
ALDI’s combining with Kohl’s stores in order to help them get
up from a bad stand in the market. Kohl’s stores had a
problem that they had too many stores spread across the
area that were too big in size. Nowadays when everything
goes on literally online, it was a stupid mistake to enlarge the
physical markets. Therefore, joining in with Kohl’s was
indeed a risk that ALDI took on the basis of innovating their
chances more. Across border marketing strategy was not
followed properly by ALDI in this time, therefore, this strategy
to innovation proved out to be anything but successful.

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From various surveys it was found that most of the
people shop once or twice in week at stores. A store is
chosen by the customer in accordance to their convenience,
the convenience reason would include the placement of the
store was nearby or that the customers know every aisle by
heart and it takes a lot less time to shop in it (Haar and Ernst
2016). But this was the scenario before internet shopping
came into the scene; upon its arrival, ALDI had a good
opportunity to show its innovative skill once more and make
a place in the global market. Therefore, the approach of
online shopping was adopted by the company yet not
immediately. Now the stores are in a convenient size and the
online store is also running smoothly, enhancing the
productivity of the company.
All the success that the company gained from innovation has
led it to take the innovation to a next new level that is of
questionable act for the benefit of the company. For
instance, keeping up with Lidl’s policy of providing the
customers with freshly baked goods, ALDI has put itself in a
dilemmatic position. The floor space of ALDI is not as big as
the Lidl’s which raises an important question that how would
ALDI manage to neutralize the situation by coping up with
Lidl. Innovation, no doubt, brings a positive change to a
company and that has been proved by ALDI from time to

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time; however, it must not be forgotten that in order to do
innovative business across the border in an international
scale, many aspects should be kept in mind like the aspect
of having a knowledge management set up and the
possession of detailed knowledge of the market outside the
boundary. If only these aspects are covered that innovation
will prove to be effective in a beneficial way.
Conclusion:
ALDI is an ambitious company that has full potential
to do business across border beyond the overseas. The
above analysis of ALDI proves the fact that ALDI has a
market value and proper market strategy to strive in a
dynamic market of globalization. With proper knowledge
management system and a deeper insight of implementation
of innovation in the system, ALDI will be able to make
broader appeal in the market overseas.

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