ALDI Supermarket: Porter's Five Forces and Value Chain Analysis

This report presents a comprehensive business analysis of ALDI Supermarket, examining its background, product offerings, and competitive environment. It utilizes Porter's Five Forces model to assess ALDI's position within the retail industry, considering factors such as industry rivalry, threats of substitution, new entrants, and the bargaining power of buyers and suppliers. The report further analyzes ALDI's value chain, focusing on inbound logistics, operations, and outbound logistics, as well as support activities. It identifies key value-adding activities and proposes innovative ideas for improving business processes and competitive advantage. Finally, the report explores the role of information technology in enhancing ALDI's operations and strategic decision-making, highlighting its impact on communication, inventory management, and customer relationship management. The report concludes with a summary of findings and recommendations for ALDI's continued success in a dynamic market.

REPORT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
COMPANY OVERVIEW..........................................................................................................1
Porter's Five Forces Model of ALDI...........................................................................................3
Analysis of inbound logistics, operations and outbound logistics of ALDI...............................5
Analysing support activities of Porter's Value Chain Model......................................................6
Key value adding activities perform by ALDI............................................................................7
Innovative ideas to improve business process and competitive advantage.................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
.......................................................................................................................................................11

INTRODUCTION
Business Environment is a summation of various internal and external forces such as
organization workforce, policies, objectives, working conditions, financial resources, customers,
competitors, supply and demand, interference of government, technology, social and market
trends so on (What Is Business Environment? - Definition & Factors, 2020). All these
surroundings have positive and negative impact over the operations and functional decision of
business. Marketers and business analysts required to examine such factors as these forces brings
immense opportunities and growth possibilities and valuable resources through which company
can tap new market and enhance its overall performance and profitability (Deasy and et. al.,
2016). Information Technology is plays a significant role in organization as it promote and
foster innovation. IT helps in improvising communication system within company by providing
effective digital platforms such as intranets software, video conferencing, Employees portals etc.
It become very useful in terms of operating business functions whether it is small or large
organization as it helps employees, managers to work more efficiently and address problems
easily and resolve complex issues. Information Technology helps through inventory
management, Management Information System and Customer Relationship Management
(Prajogo, 2016).
This project report exhibits detailed information about 'Supermarket Aldi'. It contains
brief overview regarding company in form of its background details and it products and services.
Report includes analysis of competitive environment through Porter's Five Forces model and
Porter's Value Chain framework. Further, it summarize all analytical study and interpretate how
IT processes is being used in improving business competitive position.
MAIN BODY
COMPANY OVERVIEW
ALDI is one of the leading German Supermarket Chain organization in which ALDI
represents ALbrecht-DIscount and having around 10,000 stores within 20 countries. Company is
known for its quality food products but also deals in non-food items. Product portfolio of firm
include groceries and household essential items. There are various brands under ALDI group
such as little journey deals in baby care products, Simply nature with feel good Ingredients,
Specially Selected-ALDI Gone Gourmet, Winking Owl Wine, LiveGfree, Elevation,

EarthGrowth, NeverANY, Fit&Active. ALDI hold competitive position because of its affordable
and cheap rates in market. Organization operates its business units under two names one is Aldi
Nord's which have 35 regional business entities and other one is ALDI Sud's which have 32
companies with almost 4100 stores in different areas of Germany.
Vision of ALDI is to provide customers quality products at less pay as shoppers can feel
and live richer. To offer customers a smart way to shop. Mission of ALDI is to attain competitive
market position by offering exceptional quality products and services. Core value of organization
contains Simplicity, Responsibility, Reliability with this philosophy ALDI has cultivated an
environment that focus on continuous growth and building brand reputation. Organization
formulates its strategies on basis of these three value as it follow lean production strategies in
order to eliminate wastage of resources and time. The stores of firm is designed in simple way
that enhance their similarities in turn brings consistency in operations. Company's management
is engaged in organizing training and development for its workforce and establish effective
supply chain which brings continuous improvements in business. Currently, ALDI is focuses on
expansion strategy in which company invested and opened new stores and reduces prices to
encourage sales in UK and Ireland due to which profits of firm fell down. Organization strategy
is to sell out its products through its stores only and offer limited selected items through its
online portals like wine and variety of merchandise. Aldi setting a target of opening new 1200
stores by 2025. In next few years, company is planning for investing around £1 billion in 100
new store as well as distribution centres. It has also established online electrical retail store under
name of AO.com for purpose of serving more non-food goods to reach out more customers. Aldi
is popular because of being cheap in terms of prices of products. Organization sustain and
maintain its discount market goodwill by offering 50% discounts on items as compare to its
competitors like Walmart. Company's business model focuses on doctrine of shopping
experience and manage its inventory with lean selection of private label items along with that
firm sell 90% of products under its own brand portfolio. Current, Aldi business strategy includes
launching biggest brand campaign to promote its discount retailer's and setting benchmark for
other supermarket retailing in industry. This strategy focuses on capturing new position under
name of 'Good Different'.

Porter's Five Forces Model of ALDI
Porter's Five Forces model is proposed by Michael E. Porter with purpose of measuring
and evaluating competitive strengths and position of organization within industry. This
mechanism is based on a concept that there are five factors prevailing inside specific industry in
which organization operates its business and serve its products in such market. These forces
ascertain two major things which builds competitive position of particular organization that is
Intensity of competition and Attractiveness of market (Bah and Fang, 2015). This model helps
in determining and understand strengths and weakness of enterprise and opportunities through
which organization expand its market share. This particular framework is used to evaluating
potential of new products and services as whether they are profitable enough or not. With proper
understanding of where power lies firm can able to identify its strengths that are favourable and
weakness so that they can be improved on time (Takata, 2016). ALDI is one of growing
supermarket organization in UK by having 6.8% market share and holds a position of fifth
biggest supermarket in UK. ALDI's aggressive expansion strategy affecting industry structure of
retailing and nature of competition in UK. Through Porter's Five forces Model, it can be easy to
understand competitive position of ALDi in supermarket industry along with consideration of
other rivals in industry. This can be examined by analysing the impact of five external forces on
operational decisions and position of organization.
1. Industry Rivalry: this force explains the intensity of competitive rivalry within industry
which influence competitiveness of organization. If there are large number of competitors
exists in market with strong core capabilities which offer diversified range of products in
turn influence market attractiveness. In such competitive industry, organizations
aggressively compete for attaining more market share which adversely affect on revenues
(Kanakulya and Jinzhao, 2017). In case of ALDI, impact of this factor is relatively high
since competition level in food retail industry is intense. Rivals of Aldi namely Tesco,
Asda are also offering identical products with same quality at lower prices due to which
company has to face fierce competition. For overcome from situation, ALDI is focusing
on lowering fixed cost so that prices of products that are being sold within its stores
remain low. This factor act as competitive advantage for company through which they
can able to compete with its rivals and gain relevant market share (Virglerova, Dobes and
Vojtovic, 2016).

2. Threats of Substitution: this force describe intensity of close relative products available
in market. Higher the force in turn increases chances of customers can switch over
different substitutes due to price extension. This force can become a hurdle for
organization if consumers can frequently identify alternative products with better quality
and rates. Firms that have no close substitutes for their products or services enjoys high
power to charge high prices for items. In case of ALDI, impact of this force is high which
is unfavourable for organization. ALDI indulge in such market where other competitors
are dealing with same products and identical features. Other retailers also focusing on
exclusive marketing strategy, price reduction polices and promotional campaigns which
brings options for customer to choose from different varieties. Products that are being
sold by firm is easily accessible in other supermarkets due to which threats of substitution
is high for Aldi (Khan and Quaddus, 2015).
3. Threats of New Entrants: this force justify how easily new firms enter in industry with
brand new products and services and compete for same market share. An organization
may face problems if there is high force of new entrants exists in market. An industry
having powerful barriers to entry is favourable existing firm since there is no sharing of
market share and firm can charge premium prices for its products. In context with ALDI,
affect of this force is moderate over competitive position of firm. To enter in such retail
industry new firms required high capital investment and resources which is not that easy
because of strong entry barriers (Groşanu and et. al., 2015). Aldi is well known
established organization and have been serving its huge loyal customer base from long
period of time which create difficulty for new entrants to become a threat to position of
Aldi. Further, there are number of barriers which required to consider by new firms like
huge amount of capital, strong distribution and supply chain networks, acquiring perfect
target market etc.
4. Bargaining Power of Buyers: this force describes degree at which consumers can
negotiate over prices. This refers to capabilities by which customers can able to bring
prices down offer by manufacturer. Buyers demand high quality goods at low rates. If
company has large customer base then power of buyers become low or vice versa. In case
of Aldi, the impact of this force is high because other giant companies also offers same
price goods and service which provides wide range of options to customers (Gavurova

and et. al., 2017). Due to this reason buyers can easily switch over other brands. Other
firms also provides different loyal schemes along with discount to customers that is not
offered by ALDI.
5. Bargaining Power of Suppliers: this last factors explains intensity of how frequently
suppliers can increase cost of inputs and charge high prices for raw materials. If there are
few number of suppliers exists in industry then there are high chances where company
depend on them which in turn they have more power to raise costs of raw materials. In
case of ALDI, the impact of this force is low cause there are many dealers who offers
identical raw products at less rates which provide power to Aldi to bargain for favourable
discounts from such suppliers. Aldi is big market leader with established brand image in
industry due to which suppliers power is less as they do not want to lose such big
organization (Erasmus, Strydom and Rudansky-Kloppers, 2016).
From above study it can be concluded that Aldi is competing in very fierce competitive
market where almost all forces are indicating high impact over position of company. Even
though threats of new entrants and supplier's power is low. Organization required to conduct
research programs to assess changing customers demands and trends. Also, develop innovative
measures which generates more loyal customers. In today's era, there is drastic change in buying
pattern of consumers due to online marketing, 24*7 hour shopping all these needs to be added in
current functions of ALDI operations for gaining long term competitive position.
Analysis of inbound logistics, operations and outbound logistics of ALDI.
Inbound logistics, operations and outbound logistics are the part of primary activities that
are perform by organization in order to ensure optimum level of inventory and flow of products.
Primary Activities of ALDI organization is involve in manufacturing and selling out finished
quality products to targeted end users (Kasemsap, 2018).
 Inbound Logistics: these logistics activities are emphasise on receiving, transporting and
storing of those goods which are coming 'IN' business premises. If these activities are
conducted and managed well then it result in efficient processing system. These activities
includes relationship with dealers and distributors who supply raw materials and
distribute products in market. In case of Aldi, firm require to focus on every factors
which helps in transforming raw material into final finished products. Aldi manages
efficient storage and transport facilities to ensure that raw materials and inputs are stored

properly. Without determining inbound logistics area, ALDI may face challenges in
phases of product development (Clarke, Li and Xu, 2016).
 Operations: these activities refers to process of converting and transforming raw
materials or inputs into outputs or finished quality products that are used to sold in
different areas of targeted market (Kolk, 2016). In case of ALDI, after receiving raw
materials firm process them into end product for purpose of delivering it in market. These
activities includes designing and featuring of products, packaging, labelling, assembling,
testing etc. proper functioning of operational activities is essential in enhancing
productivity level and maximising efficiency of ALDI.
 Outbound Logistics: these particular activities are related with delivering and transporting
finished product or service to ultimate consumers. This section involve collection,
storage, distribution systems. In case of ALDI, firm has collaboration with number of
transporters who help in transporting of finished goods from warehouses to their different
stores. ALDI management regularly analyse outbound logistics activities to manage cost
effective and efficient product delivery in terms of minimum or zero impact over quality.
Firm required to give more emphasize on these activities when it transport perishable
products (Buno, Nadanyiova and Hraskova, 2015).
Analysing support activities of Porter's Value Chain Model.
Porter's Value Chain model explains various set of tasks and activities that are used by
organization in order to manufacture and deliver unique as well as valuable products in target
market. This framework concern about how a company can produce separate products by
examine various events which arises in production process within company. This model states
that there are different chain of activities which occur straight from acquiring of materials till
delivery of finished products. These activities are divided under two categories: Primary
Activities and Support Activities. Support activities involved procurement, technology
development, human resource management and firm infrastructure. Two supported activities
perform by ALDI management are:
 Procurement: this activities refers to acquisition and purchasing of machines,
equipments, tools, raw materials, input resources for firm which are necessary for
manufacturing products (Kharub and Sharma, 2017).. This involves identification of
dealers and bargain for best prices. Aldi management carefully determine its purchasing

activities so that there must be optimum function of inbound, operational and outbound
value chain. Firm purchases it raw materials from best suppliers in order to maintain and
preserve best quality in products and enhance the overall performance of organization
effectively as well as efficiently.
 Technology Development: these activities refers to aligning and processing relevant
information in order to enhance knowledge base. This involve the updated version of
technology which are being used in transformation of raw materials into finished output
and it involve equipment, hardware, software, procedure etc. Aldi make use of advanced
technology in production, distribution, marketing and human resource activities.
Management segmented this technological activities into product and process so that
there must be fine operations take place in organization (Levi-Jakšić, Jovanović and
Petković, 2015).
Key value adding activities perform by ALDI.
Value adding activities are those which enhances performance of overall management of
organization also increases benefits of products and services to ultimate user. ALDI can raise its
profitability by analysing those activities which are adding value in overall productivity.
Moreover, eliminating those which are unnecessary and non-added value activities for firm.
There are various exclusive value added activities perform by ALDI management in order to
eliminate unnecessary wastage of resources and time. ALDI is concern about reducing or
minimizing store labour from their production process. Firm has introduce shelf ready system in
which all packaged products are being stored automatically in order to eliminate time of stocking
inventory (Prajogo and Oke, 2016). Moreover, large cartons are being placed directly on shelves.
To eliminate shopping cart labour organization has launched a coin function in shopping carts in
which buyers need to deposit coin to acquire that cart so to get back that coin customer require to
return them at correct positions. This helps firm to avoid unnecessary blockage and time as after
completing shopping individual left those carts anywhere. Aldi's checkout process is popular for
its efficiency as checkout staff do not pack purchased products on behalf of customers that must
be done by buyers only.
Innovative ideas to improve business process and competitive advantage.
ALDI is well established firm and known for its affordable rates of quality products.
From industry and business functions analysis with help of porter's five forces model and value

chain it is understandable that company can develop different innovative approaches or ideas
through which it can earn more revenues and enhance its production processes (Alotaibi and Liu,
2017). Information technology brings immense benefits for firm. Presently, it is an era of
digitalization so company can deploy updated technology by establishing e-commerce online
portals so that customers can purchase any product at anytime. This helps firm to work
according to the trend of 24*7 online shopping. With help of information technology company
can build effective supply chain network so that it can reduce unnecessary wastage items in
primary activities of value chain process such as inbound and outbound logistics, transportation
and storage processes. Information technology helps ALDI to enhance transparency within its
systems also track integrate system so that firm can obtain relevant customer and sales
information. It helps firm to record real time data to determine efficiency of inventory level.
Also, through radio frequency company can able to protect its shipments by tracking the entire
supply chain. ALDI can bring diversified product range to enhance its brand extension in order
to retain its loyal customers and sustain its competitive position. Aldi must adopt unique
promotional activities such as social marketing, effective advertisements through commercials
and print media so that more and more customers can attract towards organization offerings. To
enhance its production quality company can make use of robotic technology for purpose of
eliminating those activities which are time consuming for firm. This technology will enhance
overall transformation process of organization which in turn improve quality of products and
services. Further, firm can do collaboration with other small organization so that it become easier
to acquire scarce resources and relevant information which in turn result in large market share
and strong customer base (Mathooko and Ogutu, 2015).

CONCLUSION
From this research report, it can be concluded that business environment analysis is
significant for organizations in order to examine the strengths, weaknesses, opportunities and
threats of business in such climate. This environment consists various internal and external
factors which sometimes become favourable or unfavourable for operations of company.
Organization required to study these forces in order to develop effective policies as well as
strategies and enhance its decision making process. There are various models which help in
examine the micro and macro culture in which organization operates its business functions.
Moreover, information technology plays a crucial role as it helps in maintaining proper
production, inventory processes and provides relevant information about each factor.

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