Business Project Report: Analyzing Aldi's Global Expansion Strategy

This report provides a comprehensive analysis of Aldi's international expansion strategy. It begins with an introduction that highlights the factors encouraging businesses to operate globally and the associated challenges, such as cultural differences and new regulations. The report then delves into a comparative analysis of Aldi's competitive position, examining the driving forces behind internationalization, including market size, growth potential, and resource access, as well as barriers such as competition and political constraints. The report further explores Aldi's organizational ethics, emphasizing its commitment to ethical standards like prohibiting child labor and maintaining high product quality. The analysis incorporates Porter's Five Forces model to assess Aldi's competitive position in both the UK and German markets, highlighting the bargaining power of buyers and suppliers, the threat of substitutes, competitive rivalry, and the threat of new entrants. The report concludes by summarizing Aldi's global strategy, competitive advantages, and ethical considerations, providing valuable insights into its international operations and market performance.

Business Project
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Table of Contents
INTRODUCTION...........................................................................................................................1
Comparative analysis of Company’s competitive position.........................................................2
Organizational ethics...................................................................................................................3
Considerations to be taken when trying to create social impact..................................................6
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
In present era, with the motive to operate efficiently every business enterprise has started
to carry out operations at international level so that overall brand presence can be improved
easily. Further, large numbers of factors are present which may encouxrage business to enter at
global level and this acts as a development tool for the industry. Apart from this, barriers are
present at global level which may prevent business from entering into the international market
and such challenges are culture, new laws, language etc. Therefore, it is necessary for them to
take corrective actions so that it is possible to deal with large number of challenges in the market.
Further, the option chosen by one company to enter into the international market is quite
effective as it also supports in economic development also which can be in the form of job
opportunities for the people who are living in the society etc.
So, this is also beneficial for the nation where business enterprise plans to expand and in
turn acts as a development tool for the entire economy (Adeyoyin, 2005). Apart from this, to
operate efficiently in the market, business enterprise must follow some ethics as it directly has
positive impact on the brand image of business. Further, ethical standards allow company to
satisfy need of its target market in efficient manner and this supports in dealing with the large
number of challenges in the market. On the other hand, various strategies are present which
business undertakes for sustaining in the market such as product development etc. It is not easy
for business to serve target customers in the competitive market. Due to this reason, different
strategies are undertaken by company so that overall performance can be enhanced easily in the
market. Further, social factors along with other type of market challenges have direct impact on
business performance at global level and by considering the same it is possible for enterprise to
gain competitive advantage (Banerjee, 2009).
For conducting the present study, organization chosen is Aldi which is a leading global
discount supermarket chain operating around 10,000 stores in 18 countries. At present, around
9,600 numbers of locations are served by this firm which has enhanced the brand presence of
firm at the international level (About us., 2016). Further, the list of counties where Aldi operates
is Australia, Germany, Denmark, France, Ireland, Poland, Portugal, United Kingdom,
Switzerland etc. Proper facilities are delivered to the target market with the help of stores that are
operated by business. Every business has developed effective marketing policies so that proper
information can be shared with target market which is beneficial for them also (Doole And
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Lowe, 2005). Apart from this, Aldi is the largest wine retailer in Germany. The present study
focuses on the factors that encourage Aldi to expand its operations at international level, barriers
in global market, analyzing competitive position of firm in various markets etc. Apart from this,
various theories have been applied so as to determine the overall performance of Aldi in different
market and on the basis of same business can improve its practices (Doole and Lowe, 2010).
Comparative analysis of Company’s competitive position
In order to know the overall performance of Aldi in different markets, it is necessary to
carry out comparative analysis. Further, large numbers of factors are present that drives
organization to go international where one of the major factors is wide market size. At global
level, market size is wide due to which organization can easily operate and this allows
management to grab large number of opportunities being present at global level. By performing
efficiently, it is possible for target market to enhance its brand image and it can allow business in
attracting large number of customers for longer period of time (Baker, 2007). Growth along with
profitability is also one of the major driving forces which encourage target market to operate at
an international level.
Further, it is well known fact that in foreign market, business can easily grow by serving
different types of customers and this has positive impact on the profitability of business. More
access to resource is also one of the major reasons which encourage Aldi to perform efficiently at
international level (Barnes, 2008). Resources such as human, capital and technological are easily
present which allows business to focus on its overall aims along with objectives in the market.
Further, it also provides opportunity to business to work with skilled workforce at international
level. Therefore, these are some of the main driving forces which encourage Aldi to operate at
global level so that range of opportunities present in the market can be grabbed easily and this is
beneficial for the entire business also.
On the other hand, business has to deal with large numbers of barriers that are present
while operating at international level. Major one is the competition as at global level large
numbers of companies are operating in market and they are offering substitute products due to
which it is not possible for business to accomplish its desired goals along with objectives. Aldi
carries out its operations in different countries such as Germany, Ireland, United Kingdom etc
and due to this reason firm has to face high competition in each and every market (Burke, 2015).
Further, development of effective strategy is must for management such as product
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differentiation through which sale of all the product range can be enhanced easily and this allows
firm to gain competitive advantage. Political barrier is also one of the main challenges which
Aldi has to face while operating at international level. Laws along with other type of duties vary
from one country to another (Carreno and Almartmy, 2011). Due to this reason, it is required for
business to comply with all the laws introduced and this in turn is beneficial for the company in
every possible manner. Further, culture barrier is also present where company has to serve
customers who differ in their culture and this also becomes difficult for business enterprise as
well. Language also acts as a barrier where Aldi has hired individual who belongs to different
community, religion etc and this acts as a hurdle during communication.
On the other hand, large number of engagements takes place at the time when Aldi
operates in a new market or at the time of expansion. One of the main engagements takes place
in the form of job opportunity which is being provided to individual who are living in the
society. Aldi employs large number of individuals when expansion takes place and this plays
major role in economic development of the nation (Cole, 2003). Demand for skilled workforce in
the retail sector is rising at faster pace and this is also favorable for individuals who are skilled.
Apart from this, inflow and outflow of currency is leading to development of economy. Carrying
out overall operations at an international level directly supports in development of the nation
where firm has expanded its operations.
Organizational ethics
With the motive to satisfy need and requirement of target market Aldi has developed
different ethical policies which represents business is carrying out operations in favor of market.
Ethical standards have been undertaken where child labor is prohibited and policies introduced
by business do not allow management to hire small children for conducting operation (Debrah,
2013). Further, unethical activities such as bribe, child labor are strictly against the policies of
business. Apart from this, quality is kept high where majority of the customers prefer to purchase
commodities whose quality is high and due to this basic reason main stress of Aldi is on quality
improvement and different measures have been taken by business so as to enhance satisfaction
level of customers by offering them right quality product. On the other hand, information shared
with target market linked with product etc is true and no such type of wrong data is highlighted
through advertising on the basis of which customers may purchase commodity of the company
(Gadde, 2000). This represents the overall ethical values of company where are strictly followed
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with the aim to satisfy need of target market in most effective manner. Apart from this, it has
enhanced brand loyalty of firm in the market where customers perceive Aldi positively as
company is capable enough of meeting with their requirements.
For analyzing competitive position of Aldi in market of UK porter five force as a model
has been chosen which has been shown below:
Bargaining power of buyer (High): In the market of UK well established players are already
present due to which buyers have power to dominate the market. Further, many companies are
operating in retail sector due to which buyers have many options present in case they have to
purchase any commodity (Hansen, 2011).
Bargaining power of supplier (Low): In case of retail products many suppliers are present in the
market who supplies products to company. Therefore, due to this basic reason they are not able
to dominate the market and products are offered to them at an affordable price.
Threat of substitutes (High): In case of Aldi threat of substitute is high where substitute of
products are easily present in the market. Further, each firm is offering product which has close
substitute of other. Therefore, in case of Aldi threat of substitute is high (Hitt, 2012.).
Competitive rivalry (High): Market where Aldi operates is highly competitive due to which it is
required for business to employ effective strategies so as to operate efficiently in the market.
Further, new companies are entering into the market which is having adverse impact on business.
Threat of new entrants (High): In retail no such laws and regulations are present which may
restrict companies from operating in this sector. Therefore, threat of new entrants is high where
Aldi has to take corrective measures so that its market performance may not be affected when
any new firm enters into this sector.
So, the porter five forces on Aldi in the market of UK represents the competitive position
of firm in the market where business is carrying out overall operations in effective manner but
their exist large number of challenges which business has to consider for enhancing overall
performance (Hoerst, 2009).
Further, porter five forces on Aldi in the market of Germany have been shown below:
Bargaining power of buyer (High): In the market of Germany large numbers of companies are
operating in retail sector due to which buyers are having many options especially at the time
when they purchase any commodity. Moreover, buyers strongly focus on the quality of product
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and it is kept high by Aldi so that loyal customers can be retained by business for longer period
of time.
Bargaining power of supplier (Low): In market of Germany very less suppliers are present who
provides products to retail companies (Huber, 2011). Therefore, suppliers in the market of
Germany posses’ power to dominate the market and companies have to purchase from them at
the price which is being charged by them.
Threat of substitutes (High): Due to high level of competition prevailing in the market substitute
of products are easily present in the market. Therefore, Aldi focuses on product differentiation as
a strategy with the motive to differentiate its commodities from those of competitors in the
market.
Competitive rivalry (High): In the market of Germany many companies are operating in retail
sector due to which all the products are offered keeping in view taste and requirement of target
market (Jarzabkowski, 2008). Further, sometimes high competition prevents business from
accomplishing desired aims along with objectives.
Threat of new entrants (Low): Retail sector of Germany is highly regulated and various laws are
present which businesses have to follow strictly. Therefore, threat of new entrant is low and this
is beneficial for Aldi in the market of Germany.
Therefore, the porter five forces on Aldi in the market of Germany have shown the
overall condition of business in the market. Further, in both the market overall performance of
company is up to the mark and customers are highly satisfied with the range of products offered
to them (Jelenc, 2010).
In order to better understand the concept of competitive position theory of competitive
advantage is quite effective which has been proposed by Michael porter. Four major
determinants of this model are:
 Factor condition
 Demand condition
 Related and supporting industries
 Firm strategy, structure and rivalry
Factor condition as one of the main determinant undertakes the different type of resources
which are required by business for producing goods and offering them to the target market. Aldi
operates in different type of markets and before operating at international level it is ensured by
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business that all the resources are present in adequate amount for conducting operations
smoothly (Kimura, 2005). Human is one of the resource where in every country skilled
workforce has been hired by business, physical which consider quality, water and other physical
traits. Knowledge is another key resource where employees working in Aldi are having proper
market knowledge so that customers can be served easily as per their actual need. Further,
demand condition is another major determinant which supports in knowing the overall demand
for retail products in different markets. Markets where Aldi operates are highly developed and
economic condition is also healthy. Due to this basic reason demand for entire range of products
is high and customers are ready to spend large amount on purchasing commodities. In short, Aldi
totally depends on the market conditions where products are only offered if their demand is
present in the market (Richard, 2001). Generally demand for every retail product is high in every
market and this is one of the main reason behind success of Aldi in each and every market where
it operates.
Related and supporting industries are one of the major determinant which supports in
knowing the range of companies who are operating in this sector which leads to rise in
competition level. Further, presence of many competitors encourages business to indulge into
practices of advanced technology so that maximum benefit can be gained through this. Apart
from this, business is highly indulged into research and development activities so that it is
possible to gain competitive advantage. Further, marketing activities of the business also
provides base in serving customers in unique manner (Satell, 2015). Larger the number of related
industries which posses competitive advantage in a nation. At last, firm strategy along with
structure also provides base to company in performing better. The strategy employed by Aldi is
effective especially product differentiation and it can be regarded as one of the reason behind
success of business in the market. Through appropriate structure along with strategy business is
able to accomplish its desired goals and objectives. It has also supported in increasing
productivity where majority of the customers are satisfied with the range of products being
offered to them (Siwatu, 2009). Therefore, these are some of the major determinants which can
support business in gaining competitive advantage.
Considerations to be taken when trying to create social impact
While trying to create social impact, various considerations are to be taken into account by
the company. Aldi is a global discount supermarket chain that operates in around 18 countries.
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Social impact is the net effect that the activities of organization have on the community as well
as the wellbeing of people. It is the logical consequence that plans, decisions and actions of Aldi
have on employees, customers and communities (Slack, 2007). Therefore, social impact
incorporates the efforts that are undertaken by a firm to make betterments for others there-by
creating systematic social improvements. The following are the considerations that Aldi has to
take into account while creating social impact: Creating a balance: Before Aldi decides to create social impact, it is essential that the
organization considers the ext6ent to which it should be good. This requires creation of a
balance between the efforts to be perfect as well as the costs to undertake those actions.
For creating social impact, there will be a need for Aldi to be transparent to the society,
communities, customers and its employees (Stensaker, 2014). However, it needs to take
into consideration that transparency costs a lot of money. This is because the retailer has
to consider the details about where its materials come from and how they are delivered to
the customers. Expectations of customers: When trying to create social impact, another consideration
that Aldi has to take into account is the expectation of customers. When an organization
makes efforts towards creating a social mission, the expectations of the customers, media
and investors rise (Whittington, 2010). This creates various barriers which Aldi should
consider while creating social impact. Business plans: To create social impact, Aldi has to consider its business plans which act
as a road map. Organizational focus and strategy are all defined by the business plans.
These provide guidelines for decision making regarding actions to be taken for creation
of social impact. Hence, a well-organized business plan is essential (Whittington, 2009).
A well – constructed business plan goes a long way in conveying a clear and compelling
story about Aldi’s target to improving its social impact. It also helps in securing the
acquisition of resources. Suitable revenue resources: Another consideration that Aldi should take into account
when creating social impact is securing predictable revenue sources. This is essential so
that financial sustainability can be achieved. It is also required for linking the funds to the
results. This helps in attracting funders who are ready to invest as well as reinvest in the
mission of the organization regarding social impact.
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 Social impact model: This is one of the most important considerations that Aldi should
reflect upon. Social impact model is vital for the organization because it provides the best
ways in which firm can address its social problems (Cole, 2003). It articulates the target
social problem with the mission of the organization as well as its intended impact.
Through this, Aldi will be able to incorporate the elements of opportunity, innovation and
accountability while creating social impact.
Theory of social impact
In order to better understand about the concept of social impact the theory linked with
this idea is beneficial and according to this theory the likelihood that a person will respond to
social influence which will enhance with three factors which are strength, immediacy and
number. Further, strength as a factor highlights how significant is the influencing group of
people, immediacy represents how close the group is and number represents the overall number
of people in a specific group (Debrah, 2013). So, this theory supports in understanding about the
key factors which influences consumers especially at the time when they purchase any specific
type of commodity in the market. Further, it is necessary for Aldi to create social impact in
appropriate manner so that customers can be easily influenced to purchase its products. Apart
from this, it is well known fact that when business is not able to serve customers on the basis of
social factor then it leads to decline in level of overall performance and firm has to deal with
large number of challenges in the market (Horoszowski, M., 2011).
Aldi carries out its operations in different type of countries where social factor has direct
impact on business performance. Further, customers vary from one another in the form of
culture, religion etc (Gadde, 2000). Therefore, to create social impact on target market is must
for business. Generally social impact is being done by business through online marketing where
social media practices of Aldi are quite effective. Promotion with the help of this source and
sharing crucial information with target market timely allows business to create social impact and
it has supported in enhancing brand loyalty. Apart from this, taste and overall requirement of
every customer is different due to which sometime it becomes difficult for business to create
social impact. At international level market size is wide due to which creating social impact on
the target market can be beneficial for the business and overall sales volume of the products can
be enhanced easily through this (Baker, 2007).
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In short, while creating social impact it is necessary for business to consider actual
requirement of customers for instance if Aldi has started to sell energy drink in the market then it
is necessary to identify what type of drink customers prefer to consume such as its ingredients
etc. Apart from this, business enterprise must consider marketing where it has to be ensured what
type of promotional tool to be adopted for promoting product. So, it also has social impact on the
customers of enterprise (Carreno and Almartmy, 2011). Further, quality is also one of the main
tool through which social influence is possible. Majority of the customers consider quality as one
of the most significant factor at the time when they purchase products. Therefore, Aldi ensures
that commodities being offered to the target market are of acceptable quality and is capable
enough of satisfying their needs. Quality improvement tools have been undertaken by business
with the help of which customer satisfaction level is raised and in turn it has positive impact on
the brand image of business (Coallier, 2012). Apart from this, other factors such as price and
other attributes in the products are also crucial which business has to consider while creating
social impact.
Target market of Aldi is every type of individual as retail products are purchased by
every person and due to this reason firm is being able to obtain positive response from the target
market (Constantinides, 2006). Further, for attaining competitive advantage the model proposed
by Michael porter is effective whose key strategies are as follows:
Cost leadership: This strategy has been undertaken by Aldi where all the products are purchased
from suppliers at low cost and this has supported in enhancing profitability level of the business.
Further, business is receiving large amount of benefits by offering products at low cost and it is
one of the main strategy being employed by business for operating efficiently in the market. One
of the main attribute of this strategy involves enhancing profitability level along with market
share by charging low price (Dibb and Simkin, 2013).
Differentiation strategy: It is also another type of strategy being employed by business where
Aldi differentiates its products from those of competitors in each and every market. Product
differentiation as a strategy is must for Aldi as through this it is possible to influence target
market for purchasing commodities (Donovan and Henley, 2010). Apart from this, significance
of this strategy is rising at faster pace due to rise in level of competition. Differentiation will
allow business to create more social impact on customers and it can also support in enhancing
brand loyalty. Apart from this, for any business to successfully use differentiation strategy it is
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necessary for business to carry out good research, delivering high quality products and indulging
into effective sales and marketing activities. Therefore, this can allow business to perform
efficiently in the market and this can act as development tool for the entire firm in the market.
Focus strategy: Aldi focuses on requirement of each and every type of customer and main stress
is on satisfying their needs so that they can be provided proper support. Further, this allows
business to operate efficiently in the market where range of challenges can be faced easily
(Dooley, Jones and Iverson, 2012). Apart from this, focus strategy is effective enough to create
social impact on target market and this supports in making market segment less attractive to
competitors. Due to this basic reason, Aldi strongly relies on focus strategy where main motive is
on meeting with the changing taste and overall need of customers.
Therefore, by undertaking different strategies it can be said that model proposed by
Michael porter is quite effective and all the strategies are beneficial for business as they provide
support in conducting business operations in appropriate manner. Apart from this, it is possible
to create social impact on customers which is one of the main motives of business. At
international level, it is must for business to undertake effective strategies as it can be lead to
favorable outcomes (Dwivedi, Jyoti Choudrie and Brinkman, 2006). Out of all these strategies
the most commonly used one by Aldi is product differentiation as in the retail market products
offered are close substitute of each other and it is required for business to highlight key benefits
of its products so that customers can be attracted easily. In the market of Germany, France, Italy
company strongly depends on product differentiation strategy as it provides reason to target
market while purchasing products of Aldi as compared with its competitors in the market
(Hankinson, 2007). In short, it has allowed business to grab the range of opportunities which are
being preset in the external environment.
Delivery channel of Aldi is quite effective through which business creates social impact.
Products are delivered to target market as per demand and there is no such delay. So, the type of
convenience provided by firm to its target market is also beneficial and it represents each and
every operation of business is effective (Greenberg, 2010). Further, business is having strong
relationship with its suppliers and it is one of the main reason due to which Aldi is operating
efficiently in the market. Company ensures that its suppliers are provided payment on time and
their no such delay. It is also having favorable social impact on target market and they does not
prefer to shift towards other brand in the market. In short, presence of effective delivery channel
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