Aldi in China: Market Entry Strategies and Challenges Analysis

This report analyzes Aldi's potential expansion into Mainland China, considering the current business environment and challenges. It begins with a situational analysis of Aldi, highlighting its strengths, weaknesses, opportunities, and threats, followed by a PESTLE analysis of China to identify potential issues. Relevant international marketing theories, including Porter's Five Forces, are applied to support the analysis. The report also addresses challenges such as inventory control and competition from other international brands. Finally, it recommends market entry strategies for Aldi, such as partnering with domestic businesses and leveraging third-party resources, to navigate the complexities of the Chinese retail market. This document is available on Desklib, a platform offering study tools and solved assignments for students.

Running head: INTERNATIONAL MARKETING REPORT
International Marketing Report
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Executive Summary
In the global competitive business environment, it is quite common for the
international organization to build their capacity and invest in other economies in order to
create additional income opportunities. In this light, it can be said that there are different
kinds of opportunities for global expansion in both the developing and the developed
countries. Needless to say, that the organizations need planning their global strategies
according to the respective country’s business situation. The retail sector has experienced
globalization few decades back, Aldi is no such exception. Aldi, a German retail chain, has
been considered as the biggest supermarket brand offering great discounts to customers and
they are offering mostly their home brands within budget range prices. So far Aldi has
captured the Europe, Australia and USA market and its performance has been quite
impressive. Considering the current scenario, the management of Aldi now wants to expand
their business in Mainland China. Therefore this report discusses the current situational
analysis of the brand along with the present business scenario of china and identifies the
relevant problems that can act as a hindrance in the expansion procedure. This report also
applies various related marketing theories, principles and frameworks in order to support
these analyses. Furthermore, this report also provides recommendations to enter this new
business market for Aldi.

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Table of Contents
Situational Analysis...................................................................................................................3
PESTLE Analysis.......................................................................................................................5
International Marketing Theories...............................................................................................7
Recommendations of Market Entry Strategies..........................................................................8
Reference list............................................................................................................................10

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Situational Analysis
Aldi is an internationally known brand that is famous for offering great discount to the
customers amongst various supermarket chains. This chain has its business in more than
twenty countries. The brand sells a varied range of products including groceries, everyday
collections, wines, special buys and garden products. Having its first store launched in the
year 1913, the brand has so far gained immense popularity and is considered to be one of the
biggest supermarket chains in the global market. Recent data indicates that the organization
has gained USD 70 billion of revenues in one financial year with the international retail
market share of approximately 6.9% (Dujak, Franjković & Šebalj, 2014). The company also
employs thousands of people on a global scale. In order to analyse the present situation of
Aldi, it is necessary to look at the specific strengths and weakness along with the forthcoming
opportunities and threats.
Strength
It is noteworthy to mention that Aldi is a discount store which has low pricing as its
main USP in the market. The primary reason behind Aldi’s survival is the low price rate that
they are capable of offering to their consumers. Most of the products that are sold by Aldi are
offered at a significantly low price range than any other conventional supermarket chains in
the global market (Rahman, 2015). This strategy has made them develop as a highly
successful brand in the retail business. In addition to that, like any other discount supermarket
chain, Aldi has also built a strong ecosystem that has contributed in altering most of the
crucial parameters in the food retailing business. The brand also offers a positive shopping
convenience by setting up its stores at multiple locations and offers a variety range of
products which helps the customers to buy their necessary products without wasting a long

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time in the queue. Aldi also enjoys a great support from its existing customer base as they
offer a wide range of retail products within affordable price range. The brand also offers few
products on rotational basis and informed to the customers through advertisements
(Sivalingam, 2015). The major component of Aldi product mix is the regular merchandise
that covers up 25% of their product range. Along with the discounted product range, the
brand also offers the premium brands without any significant discount which indicates that
they also target a wide range of customers with different preferences.
Weakness
Like any other discount stores, Aldi is also dependent on the volume of sales due to
their low margin. It is also seen that the brand has indulged unethical business practices like
treating their suppliers in a bad way and price discrimination in order to ensure consistent
profit margin (Moutinho & Phillips, 2018). It can also be said that the organization requires
greater employee satisfaction in order to survive in the competitive market. It can be seen that
the employees have to work in multiple shifts and in some countries they are paid a lot lesser
than any other brand in the market. This indicates to a great dissatisfaction among their
employees which results into higher attrition rate.
Opportunity
It should be mentioned that the requirements of the consumers are developing which
gives them a higher propensity for spending for the products they need on a regular basis.
The consumers are ready to pay premium prices for the products and services, therefore
discount stores like Aldi has a high chance to offer good quality service to their target
consumers. They can also expand their product range to meet the expectations of customers
(Rahman, 2015).

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Threat
Aldi tends to face huge competition in the global market as there are numbers of retail
companies in the market. Also moving of organizations like Amazon into groceries give
potential threats to the brand.
PESTLE Analysis
As Aldi is planning to enter the Chinese market, it is necessary to analyse the present
situation of mainland China in order to find out the potential issues that can rise while
expanding its business.
Political
Currently China is one of the most powerful economies in the entire world. It is the 4th
largest land area around the globe that secures a permanent place in the Security Council of
United Nations. Communist Party of China is the ruling political organization in the country
and it enjoys an almost stable political scenario however a major area of concern is the major
lack of the political freedom in the country (Bereda, Paduch-Cichal & Dąbrowska, 2017).
Therefore there are major questions rising regarding the openness of the political system of
China. However it is noteworthy to mention that the stable political environment offers
enhanced infrastructure and cheap labour.
Economic
Being the 2nd largest economy in the world with nominal GDP, China is also
considered as the largest economy in the world on the basis of the purchasing power of the
customers (Cai et al., 2016). There have been several economic reforms that have
strengthened the economic growth of the country. It has also seen that the country has shifted
to a market based economy from a centrally planned one with a GDP growth of 10% on an

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average. However, the rapid economic development has also portrayed several challenges
such as fast urbanism, higher inequality and significant damages in the environment. It is
beneficial for the international brands to expand their business in China due to the major
availability of labour at a cheap price (Fields et al., 2018). However, many indicate that the
rapid economic growth has increased its labour prices as well. The standard income tax rate
for corporate is 25% however the government has reduced the rate to 15% for various
qualified businesses.
Social
China is the country with most population in the world with almost 1.4 billion people.
Therefore it is a massive market for the industries like retail. There is a major increase in the
spending power of the consumers of China in the recent times. With a higher literacy rate,
96.4%, the population considers luxury items to be a major sign of being successful. The
country has also lifted more than 68 million people from the poverty level. The country aims
to eradicate absolute poverty within 2020 (Kotabe & Helsen, 2014).
Technological
China also has the largest online population in the entire world. It has also set its
vision to be an international leader in the technological sector. The government has launched
several programs like ‘mass entrepreneurship and innovation’ in the year 2015. This also
indicates that the country emphasizes on spending more on entrepreneurship and making it an
innovation driven economy (Ortega et al., 2015).
Legal
There are various rules and regulations in the country that regulates the employment
and business practices in China. The country encourages foreign direct investments as well.

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Environmental
It can be found out that the fast economic development in China has affected the
natural environment in various ways. The air and water pollution are on rise along with the
increased rate of deforestation, industrial wastage and brings major changes in climate (Hu &
Xie, 2014). However the government has taken several initiatives in order to address the
significant environmental concerns.
International Marketing Theories
Other than the previously applied theories and concepts, few other international
marketing theories can be applied for understanding the way of business expansion of Aldi in
China. Considering Porter’s Five Forces Analysis, it can be said that the bargaining power of
the buyers are low in China due to that lack of information amongst them. Therefore there is
also low cost of change for consumers in China. The bargaining power of the suppliers is
higher therefore it impacts the final cost of the product to a great extent. The growth of the
retail industry in China is high; therefore there is high rivalry in the market along with higher
switching costs (He et al., 2016). There is also a higher probability for changing and a higher
threat of substitute products and substitutes in the China market. Also, several other
international brands are targeting the China market for their expansion as well which
indicates to higher competition in the market. Therefore the company has to ensure that they
offer maximum services and products at a minimum price for capturing this new market.
However, from the above analysis it can be found out that the organization may have to face
several challenges in China such as lack of controls over the inventories and no such central
control over the organizational operations (Wang et al., 2017). The controlled operations only
take place at the store level; therefore Aldi has to pay extra fees to the suppliers as well.

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However at the same time, Aldi gets a more dynamic market with a higher employee turnover
and can utilise the part time workers in different operational segments.
Recommendations of Market Entry Strategies
From the previous analysis, it can be understood that Aldi require proper strategies t
entry the new Chinese market. China is considered to be one of the profitable and attractive
economies around the world in terms of the foreign retail chains. This is due to the
continuously developing economy and developing size of consumer market. Therefore Aldi
can utilize several market strategies for employing so that they achieve success within the
complicated retail market in China. Therefore the recommendations for the market entry
strategies of Aldi are as follows:
 At first, the organization should ensure that they partner with the domestic businesses
within the retail market so that they can deal with the high end products. This is
because the domestic organizations are at the same level with the foreign
organizations and they can ensure the supply of the important resources that are
available in the market. Therefore Aldi can be beneficial of the government relations
and the existing business network that the local organizations already have. In long
term, Aldi can also be offered of a partnership with the government which will make
sure than the agitated competition in the retail market is curbed and it can also provide
a huge market entry for Aldi in the Chinese market.
 Aldi can also apply another strategy in order to ensure that it is offered various
services from the third party resources to their counterparts in China. It is worthwhile
to mention that in order to achieve success in the complicated Chinese economy; the
retail business should have a strong support from their competitive and efficient
business partners. Therefore, the company can utilize third part service in terms of

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managing logistics, distribution of products, wholesale service etc. This will also help
them to get attractive government partnerships later.
Therefore it can be said with a perfect combination of both these strategies, Aldi can
ensure that they get their desired success in the Chinese market. It should also be mentioned
that the market of China is mostly driven by its cultural differences; therefore Aldi can take
advantage of its varied choice of products and incorporate that in their business strategy while
expanding in Chinese market.

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Reference list
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allexiviruses identified on garlic from China, Spain and Poland commercially available on the
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Cai, Y., Tao, J., Jiao, Y., Fei, X., Zhou, L., Wang, Y., ... & Jiao, X. (2016). Phenotypic
characteristics and genotypic correlation between Salmonella isolates from a slaughterhouse
and retail markets in Yangzhou, China. International journal of food microbiology, 222, 56-
64.
Corsi, A. M., Cohen, J., & Lockshin, L. (2017). Store image perception of retail outlets for wine in
China. In The Wine Value Chain in China (pp. 81-99).
Dujak, D., Franjković, J., & Šebalj, D. (2014, January). The Impact of Retail Ready Packaging on
FMCG Supply Chain Members. In The 5th International Students Symposium Logistics and
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Chapman, D. D. (2018). Species composition of the international shark fin trade assessed
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Hu, Y., & Xie, Y. (2014). e-retail market characteristics: evidence from comparisons with USA, UK,
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Kotabe, M., & Helsen, K. (2014). Global marketing management.
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