USC MGT704: Analysis of Aldi's Global Business Strategy

This report analyzes Aldi's global business strategy, focusing on its performance and responses to external forces. The report employs strategic management frameworks, including the resource-based view, industry-based view (Porter's Five Forces), and institutional-based view (CAGE an...Read More

Running head: GLOBAL BUSINESS MANAGEMENT
GLOBAL BUSINESS MANAGEMENT
Name of the Student
Name of the University
Author Note

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Executive Summary
The primary objective of the report is to discuss the case of Aldi and analyze the ways by which
the company has been performing and dealing with external forces. The methodology that has
been used in his report involves the various strategic management framework along with the
Resource based model, Institution based model along with the Industry based model. After
through analyzing of the organization, it has been found that the company lags in certain areas
like connectivity that is why it has been recommended to create a technological connectivity
along with the management of the organization.

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Table of Contents
Executive Summary.........................................................................................................................1
1.0 Introduction................................................................................................................................4
1.1 Authorization.........................................................................................................................4
1.2 Limitations.............................................................................................................................4
1.3 Scope......................................................................................................................................4
1.4 Methodology..........................................................................................................................4
1.5 About the company................................................................................................................5
2.0 Resources base view of the Firm...............................................................................................6
2.1 Firm’s Resources....................................................................................................................6
2.2 Firms Capabilities..................................................................................................................7
2.3 Firms Value Chain.................................................................................................................8
2.4 VRIO Analysis.......................................................................................................................9
3.0 Industry based view of the Firm..............................................................................................10
3.1 Porters Five Forces...............................................................................................................10
4.0 Institutional Based View of the Firm.......................................................................................11
4.1 Formal Institutions...............................................................................................................11
4.2 Informal Institutions.............................................................................................................12

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4.3 CAGE Framework...............................................................................................................13
4.5 Porters Diamond Model.......................................................................................................13
5.0 Current Strategy.......................................................................................................................14
5.1 Porters Generic Strategy......................................................................................................14
6.0 Analysis...................................................................................................................................14
7.0 Recommendations....................................................................................................................15
8.0 Conclusion...............................................................................................................................15
9.0 References................................................................................................................................17

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1.0 Introduction
1.1 Authorization
The report has been authorized by Course Coordinator of MGT704 Global Business
Management, at the USC, Australia.
The primary aim of this report is to understand and analyze the business of Aldi. The
multinational companydeals with supermarket chains across the world and is one of the largest
retailers of the world with more than 10,000 retailers in more than 20 countries.
1.2 Limitations
The main limitations that were faced during the creating of the assignment are as follows:
- The report focuses on secondary reports mainly as the there are limited primary
sources
- The report did not provide a direct access to the core information of the organization.
1.3 Scope
The topic of the report is to study the business of Aldi. They currently operate through
over 1000 stores and have a workforce of over 115,000 employees across the county. They also
have distribution centers and support offices to provide their customers with high value and
quality products for daily use (Ghalebeigi 2015). The report will briefly highlight the details
about the company and which would be followed by resourced based analysis as well as the
method to adapt external firm.

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1.4 Methodology
The research methodology that is used would be highlighted as follows:
- The model would be based on the view model that would help in understanding the
resources, capabilities, value chain and the VRIO analysis (Ododo et al., 2017).
- The use of Porters five forces will be implemented.
- The research would also analyze the diamond framework and the cage framework
model.
1.5 About the company
Aldi is a major Australian company that has its retail market throughout throughout the
world in 20 different countries. The company was founded in the year of 1913 and ever since
then, it has maintained its status as one of the largest retailers of the world. It is a Garman based
supermarket business.

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2.0 Resources base view of the Firm
2.1 Firm’s Resources
The resources of the company can be described as follows:
Financial Resources – As Aldi operates in more than one country, it can be described as
a multinational company. The capital structure of the company is massive as it has been recover
that from the 20 different locations, an estimated combination of $50 billion has been turned
over.
Human Resources – Being a multinational company, Aldi’swork-forceexist across all of
it sectors. By having multiple business across the business the company expanded more and
more till the point it wasglobally incorporated.
Technological Resources – As the company has its business supermarket chains, the
business has grown to an exceptional level that would require high end technological equipments
like advance CCTV cameras and cyber promotional approaches.
Intellectual Property Rights – The company has the rights that would let them to agree
with other countries along with various intellectual rights which is private to the firm (Harleman
2015).

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2.2 Firms Capabilities
With other resources in place, Aldi is one of the very few businesses in Australia that is
capable of possessing capabilities which can be analyzed and those of which are only private to
the firm. Some of such services include:
Specialized in retail business: The company is the largest retailer business in Australia as
they have a chain of supermarkets which maintain a 12.6% of market share (Fuseini et al., 2017).
Specialized in networking business: The company has its mobile virtual networking
service set up in Australia called Aldi mobile and it uses the Telstra’s networking service.
Infrastructure: Not only the company has access to technological aspects but physical
infrastructure as well.
Global brand name: Due to a popular global brand name, the company has the opportunity to
expand its business to other countries.
Stores and customer service: As they already deal with liquor takeaway, mobile service
and retailing service across the country, it is known that the Aldi provides one of the best
customer service operations.
Excellent marketing and innovation facilities: In all of the three businesses that Aldi deals
with, it requires intensive customer service and because of that innovation is required (Jacenko
and Gunasekera 2005) The retailer section has supermarkets all across the country and also the
liquor shops and mobile networking service business uses improvisations in innovation
techniques.

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2.3 Firms Value Chain
The value chain analysis of the firm helps in the understanding of the activity procedure
of the firm as having been applied by the company. This concept is divided into two activities
which is the primary and the secondary.
Support activities
Firm’s infrastructure: Each department of the firm like legal, financial and managerial are
operational.
Human Resource Management: The company has more than 104400 employees working and
contributing towards a positive culture.
Technology Development: The organization`s core advantage is the technology development
as it aims to prepare value by emerging in areas like digital marketing.
Procurement: The company procures IT Network equipment and other related equipment’s
from the various suppliers and purchase spectrum of a great bandwidth
Inbound
logistics:
The inbound
logistics are the
components of
network like the
tin, tungsten and
gold.
Operations:
In this scenario,
the new domains
of connectivity
are developed
and maintained
(Bjørner et al.,
2004)
Outbound
logistics:
The products are
transported to
various
warehouses and
then to the retail
stores for
operations.
Sales and
Marketing:
The products are
sold directly at
the stores and
the installation
services ae
provided
Service and
support:
There are
various online
centers as well
as business
centers which
enhance the
experience of the
customers.

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Primary activities
2.4 VRIO Analysis
The VRIO framework helps in the understanding of the capability of the resources as possess by
Aldi.
Resource or
capability
Valuable Rare Imitabl
e or
Non-
substitu
table
Organized
to Exploit
Competitive Implication
Strong
brand name
Yes Yes No Yes High competitive advantage
Customer
service and
base
Yes Yes Yes Yes High competitive advantage
Financial
excellence
Yes No Yes No High
Marketing No No Yes Yes High competitive advantage
Brand
presence
Yes Yes No Yes High competitive advantage

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3.0 Industry based view of the Firm
3.1 Porters Five Forces
Bargain Power
Due to the aspect of low switching costs, Aldi customers have high bargaining power (Sanin
2015). Thi is more so because of their rivals who undergo the same strategy like Tesom Asda or
Spar and Londis.
Supplier Power
Due to low power of bargaining, Aldi had the fear to lose the contracts of their business to a
different supplier in term of supermarkets. This is turn provided Aldi the power to receive
products from the suppliers at the lowest price so that it would improve the profit margin.
Buyer Power
The power of the buyers is excessive when related to Aldi. As the supermarkets are mainly low
cost based, therefore the buyer has most of the control over the products (Bernet and Stricker
2001). Aldi provides a wide range of products for the buyers to select from.
Threat of Substitution
The grocery market is normally low for food items and this is more common in Aldi. As
there are niche food products, supplements are used as the means of substitute for food market.
When people start to eat herbs and supplements as a meal, the threat for Ali remains very
minimal.
Threat of New Entry

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As Aldi is part of the Big 4 retailers of the country, therefore they are practically immune
to newcomers in the market. As their profits are already protected, they have massive investment
in distribution.
4.0 Institutional Based View of the Firm
4.1 Formal Institutions
In the last ten years, most grocery retailers have achieved institutional investors as the process
was stable and consistent requirement for food mean that Aldi offers regular and predictable
income. There have also been instances when the retailers are forced to book asset values due to
decrease in sales profit (Wu et al., 2015).
LAW: AlDI is a German company that has expanded its operations in Australia hence the
company has to abide by all the legal jurisdictions by which other organisations in the industry
are bound. Tax laws, labour laws, property laws, import and export laws, licensing laws etc are
some of the basic legal jurisdiction the government of Australia has over the company. Aldi also
has to abide by the competition law of the country.
REGULATIONS: AlDI does not associate with a political organisation or propaganda,
however, the company supports sponsorship. The company also abides by the Australian
Consumer Law regulations such as manufacturer’s warranty etc (Corporate.aldi.com.au 2018).
RULES: The company has strict rules against bribery, the employees of the company are
restrained to take private benefits from professional relationships. Apart from that ALDI ensures
that the facilities that manufacture the in-house brand is audited by recognised authorities like

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Global Food Safety Initiative (GFSI), as well as Harmonised Australian Retailer Produce
Scheme (HARPS) which helps the company to align with the made in Australia program .
4.2 Informal Institutions
In terms on informal institutions, Aldi have shown many consumers alternative in relation to
the traditional type of supermarkets. These type of discount based supermarkets provide a small
range of products that comes with a low price.
NORMS: The norms that the company follow in Australia are aligned with the core values
and principles by which the organisation has been established and is run in the host country
(Aldi.com.au 2018).
CULTURE: The culture of the company revolves around the assurance of quality and price
that they offer the Australian market. The company has penetrated the Australian market in 2001
and since then there has a significant development of brand value among the target market in the
country (Corporate.aldi.com.au 2018).
ETHICS: ALDI Australia follows the employee welfare and human rights ethics for the
people who are associated with the company. There are a number of information of the
customers which are stored in the database of the company and the organisation ensures that this
data is secured. Protection of trade secrets and abiding general principles are some of the major
ethical considerations for the company (Corporate.aldi.com.au 2018).

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4.3 CAGE Framework
Cultural
Distance
Administrative
Distance
Geographic
Distance
Economic
Distance
Country level Different
languages
Different value
systems
Lack of shared
regional trading
bloc
Lack of common
currency
Physical
distance
Differences in
income and
labor costs
Country level Traditionalism Home biasness
Societal conflict
Geographical
size
Economic size
4.5 Porters Diamond Model
The diamond model haps in asserting a competitive advantage in regards to come certain factors.
Factor Conditions
Aldi has a great access towards raw materials as they have series of supermarket chains across
the world (Mortimer and Grimmer 2018).
Demand Conditions
The market size for the communications for the products used in the supermarket is very high
Firm’s Strategy, Structure and Rivalry

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The organization’s structure and strategy are followed by Aldi and providing excellent service
with lower cost.
Related and Supporting Industries
The related industries are for gas station, mobile network and alcohol takeaways.
5.0 Current Strategy
5.1 Porters Generic Strategy
The generic strategy that is used by Aldi is the Cost leadership strategy through which the
organization provides products at lowest price to its customers. The strategy of the company is to
provide the customers with good quality products with recognised authorities’ quality assurance
at the lowest price possible. As the company has the resource and capability to provide the
customers with a low price in the products the company as well as is backed up with an efficient
supply and logistic chain.
6.0 Analysis
Aldi in the time of operation has achieved remarkable position in the market. Form the above
analysis it can be said that the company is operating in an intense competitive industry, where
players like Woolworth and Coles already had strong role in the industry before ALDI entered
the Australian market. The company has the resource and capabilities to keep up with the
changes in the market and align the strategies with the principles and core values that the
company follows. The company has over the years developed techniques and invest on
innovation in order to provide the customers with the best quality product at the lowest price
possible.

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7.0 Recommendations
Some of the recommendation plans are:
- Maintaining different strategy and be open for new ideas.
- By investing more capital towards the process of marketing.
- By understanding what the customer wants and setting up the business accordingly.
- Reducing the time of wait at the counter.
- By making lucrative offers for the customers other than the discounts.
- Valuing customer feedback.
8.0 Conclusion
In conclusion, it can be said that the Aldi is a multinational organization that caters to
both local and global populations. Being one of the largest supermarket chains in the country,
Aldi aims to capture the market from low cost. The business operates in over 8000 stores
worldwide and one of the largest market controllers in Germany. In some countries, Aldi has
been criticized of being a cheap brand that deals in low quality of goods and materials. Recently,
the company has made advances not only inside but outside as well. There have been many
awareness programs that were funded by the company and which have made significant impacts.
In Australia, the promotional methods are also very common as the company is well known
across all sectors. Though it is not the best supermarket chain in Australia, it is certainly one of
the best.

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9.0 References
Aldi.com.au 2018. About ALDI. [online] Aldi.com.au. Available at:
https://www.aldi.com.au/en/about-aldi/responsibility-at-aldi/[Accessed 29 Aug. 2018].
Bernet, A. and Stricker, S., 2001, February. German wineries on the web: A survey of web sites
of Mosel-Saar-Ruwer and Pfalz wineries. In Submitted for the 75th European Seminar of the
EAAE (pp. 1-8).
Bjørner, T.B., Hansen, L.G. and Russell, C.S., 2004. Environmental labeling and consumers’
choice—an empirical analysis of the effect of the Nordic Swan. Journal of Environmental
Economics and Management, 47(3), pp.411-434.
Corporate.aldi.com.au 2018. Code of Conduct. [online] Corporate.aldi.com.au. Available at:
https://corporate.aldi.com.au/fileadmin/fm-dam/pdf/CoC_AUS_screen.pdf [Accessed 29 Aug.
2018].
Fuseini, A., Wotton, S.B., Knowles, T.G. and Hadley, P.J., 2017. Halal meat fraud and safety
issues in the UK: A review in the context of the European union. Food Ethics, 1(2), pp.127-142.
Ghalebeigi, A., 2015. Option Contracts for Supermarket Fruit Supply Chains: Theory and
Practice (Doctoral dissertation, Victoria University).
Harleman, R.F., 2015. National brands in the discount supermarket: does brand image transfer
occur on national brands whe
Jacenko, A. and Gunasekera, D., 2005, May. Australia’s retail food sector’. In Pacific Food
System Outlook Conference, Kunming, China (pp. 11-13).

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Mohdaly, A.A., Smetanska, I., Ramadan, M.F., Sarhan, M.A. and Mahmoud, A., 2011.
Antioxidant potential of sesame (Sesamum indicum) cake extract in stabilization of sunflower
and soybean oils. Industrial Crops and Products, 34(1), pp.952-959.
Mortimer, G. and Grimmer, L., 2018. Love them or loathe them, private label products are taking
over supermarket shelves. The Conversation, (19).
Ododo, C., Mulholland, G. and Turner, J., 2015, November. Can Discount Pricing Be A
Comeptitive Brand Strategy? An Evaluation of Aldi. In International Conference on Marketing
and Business Development (Vol. 1, No. 1, pp. 241-251). Bucharest University of Economic
Studies Publishing House.
Sanin, J.D., 2015. A BIG RESPONSIBILITY! The Moralization of markets and Rise of
supermarket patriotism. Sites: a journal of social anthropology and cultural studies, 12(1), pp.83-
106.
Shannon, J., 2016. Beyond the supermarket solution: Linking food deserts, neighborhood
context, and everyday mobility. Annals of the American Association of Geographers, 106(1),
pp.186-202.
Wu, J.H., Neal, B., Trevena, H., Crino, M., Stuart-Smith, W., Faulkner-Hogg, K., Louie, J.C.Y.
and Dunford, E., 2015. Are gluten-free foods healthier than non-gluten-free foods? An
evaluation of supermarket products in Australia. British Journal of Nutrition, 114(3), pp.448-454.