Identify The International Market For Aldi †MyAssignmenthelp.com

Question: Discuss about the Identify The International Market For Aldi. Answer: Introduction The main aim of this task is to identify the international market for Aldi where it can expand its business progressively Aldi is a supermarket chain store based in Germany which was founded by two brothers Karl and Theo Albrecht. The discussion about the pestle analysis and the market entrance of Aldi in chosen market will be made. Moreover, porters five forces and internal analysis will be mentioned in this report to provide the clear understanding about the expected progress of Aldi in chosen country. Market entrance of Aldi in New Zealand New Zealand is the best suited market for the company Aldi to enter for the purpose of expansion. It shall be noted that the environment of the country is fit for the company to initiate their retail business (appendices 1). Further, the reasons due to which Aldi shall expand in the market of New Zealand are discussed below: Political: The country has stability in its political system which will provide an ease to the company in initiating their actions in the target market. This will positively help the company in running their business without the intervention of strict rules and regulations. The government of New Zealand is strict where the operations of Aldi can be operated in effective manner without any conflicts and corruptions. The policies of the New Zealand change in every three years which is long period that is why Aldi need to be aware about the changed policies for expanding its business. So, if the Aldi will expand its operations in New Zealand then political features will not hamper the growth of the company in the market (Ruffell, et. al., 2015). Economic: It should be noted that the GDP of the country is constantly increasing which impact on the business industry in the market. Apart from that, the company is ranked on the 13th position in the Global Competitive Index report. As Aldi is a retail chain store, thus the company will attain the benefit to increase their shares in the market as the per capita income in New Zealand is high. The company promotes the daily use products and services in the market, so with the population of 6-7 millions, the company earns the advantage to repeatedly increase their sales (Goldson, et. al., 2015). Social: The social factors of the country suggest that the community of the country is good but they depend upon other countries and business for growth and survival. As employment is provided to people by foreign company and countries due to which it can act as an advantage for the company to grow in the market of New Zealand. It has been analyzed that the estimated population of New Zealand is 4.9 million and the population of the company is more educated. It would be good opportunity for Aldi Company to expand its business in this country to get good environment within the organization. Also the lifestyle there says that they prefer being social which is also an opportunity to the company to increase their sales (Rothaermel, 2016). Technological: The technological aspect suggests that all people in the country are highly qualified and gain the efficiency to use technology in their business process. Also the company has global competitiveness in the international market as well. Further technology is one of major aspect which is required by a retail organization to grow in an international market, so if the company expands its business by implementing updated technology, it would be great opportunity to get customers in wide range because now a days people are more focused towards updated technology (Asiedu, 2015). Environmental: The environment of the country is clean and clear and Aldi can take step towards maintaining the healthy environment. The people of the country are concerned towards the environment and changes happening in it, due to which they prohibit the entrance of organization which pollute waste in the environment, it becomes difficult for the foreign organizations to enter in the market. But the company Aldi being placed in the retail business does not pollute waste but also help the communities in initiating better tomorrow. Further ecological system of the country is healthy which will help the company to transfer their employees in New Zealand (Ulubeyli, 2017). Legal: The legal factors of the country suggest that there is stability in the environment and not much intervention is made by the government of the country. Further the law and regulations of the country are strict and the government changes after every three years which raises the need of more focused towards the changed policies and procedures. Further it shall also be noted that the legal rule and regulations are not that strict but are applicable to all and if any organization disobey them then the government can take strict actions against them. Thus, these are the reason due to which New Zealand is more competent country for Aldi to expand. Porter five forces model Porter five forces framework helps a marketer to analyze the competition of business in the market. It helps in analyzing the potential of the industry through which an organization can gain competence. Further the five forces analysis of Aldi is discussed below: Competitive Rivalry: High The competition present in the retail industry is high which makes it difficult for the organization to retain their customers. The product price of the company is similar in the market due to which it depends on the discretion of the customers. They want to purchase the products from them (Hughes 2015). Coles, Kmart, Woolworths are some of the competitors of Aldi present in the market which provide similar services to the customers. These companies present in the retail market and have focus on only cost, price comparison is a routine activity among customers and a little different in the amount of products is highlighted by the competitors in the market. Further it becomes tough for the company to keep the prices of the products low when the marketing and advertising cost increases (Fernie, Fernie, and Moore 2015). Threat of entrants: Medium To become a part of retail industry, it is important for person to invest huge amount of capital in the business. Requirement of large capital makes it difficult for people to enter in this industry. Finding a new place, opening a store and establishing a brand requires time and investment due to which small players merge their business with other bigger organizations. But small lot of market share of Aldi is taken up by low-cost local supermarket selling groceries and home grown fresh products. It will have the impact on the market share of the company which influence on sales of the company also decrease. Resulting to which, there is medium degree of threat of entrants in the market for Aldi (Kew and Stredwick, 2017). Bargaining Power of Suppliers: Low The retail industry consists of suppliers who are ready to supply the same type of products at similar or even less prices to the giant market retailers such as Coles, Aldi in the market. As the retailers purchase products in many lots due to which they push the suppliers to provide discounts. Also there is no switching cost, the suppliers constantly find the retailers which provide them large orders in the market. The suppliers also provide discounts to the retailers. Thus, the suppliers do not have enough choice to force the retailers to sell products at high prices in the market (Chatterjee 2017). Bargaining Power of Buyers: High There is high degree of bargaining power in the market as the operation of the company revolves around the process of selling the products with less cost in the market. Further it shall also be noted that every other competitor of the company is trying to achieve the same due to which it gives a choice to the customers to choose the brand from which they want to purchase the product in the market (Crawford, et. al., 2017). The switching cost of it is low and consumers can transfer from one retail organization to another. Lower pricing strategy would be facilitated to Aldi to enter in New Zealand; also loyalty scheming process offers discounts to the returning customers but Aldi does not initiate such activities in their process, which makes it difficult for the company to operate. Threat of substitutes: High The products sold by the company do not hold any uniqueness due to which there is high degree of risk for the company to get substituted by another organization in the market. Exact same products with exact same prices are sold. Customers can purchase same type of products from different company as well, but the services and perks can attract the customers in the market and reduce high degree of substitution (Price 2016). VRIO analysis VRIO framework is contained the four question which asked about the capability to decide its competitive potential such as the question of value, the question of rarity, the question of imitability and the question of organization. It is considered as the important tool in the internal analysis to evaluate the capabilities and the resources within the organization as the competitive strength. It has resources and capabilities which have certain characteristics such as valuable, rare, inimitable and non-suitable. Tangible Resources Valuable Rare Inimitable Non-substitutable Competitive Outcome Performance Implications Stores of the company Opening Hours Product and service segregation Lower costs of labor Use of Manual systems Yes No No Yes No No No No Yes No No No No Yes No No No No Yes No Competitive Uniformity Drawback of competition - Sustainable Competitive advantage Competitive disadvantage Average return Come under below average returns - Significant returns The quantity of returns is not quite satisfactory Intangible Resources Valuable Rare Inimitable Non-substitutable Competitive Outcome Performance Implications Well known retailer in the world. Human Resources Bonding with suppliers Reputation in offering customer service Yes No Yes No Yes No No No Yes No No No Yes No No No Well-efficient Competitive advantage Competitive drawbacks Competitive Consistency Good Returns Below average returns - - Capabilities Valuable Rare Inimitable Non-substitutable Competitive Outcome Performance Implications Buying Power Satisfied employees with salary Lower pricing strategy Better quality products Distribution Prospective Yes Yes Yes Yes Yes Yes Yes Yes No No Yes Yes Yes No No Yes Yes Yes No - Competitive benefits Effective Competitive benefits Effective Competitive consistency Competitive consistency Expected returns Average returns Average returns Valuable It can be said after analyzing the above mentioned table that the resources of the company is more valuable if they support an organization in terms of satisfying the customer value. There are number of resources which are acquired by Aldi Company while entering in to new market. Tangible resources of Aldi Company is stores of the company, opening Hours, product and service segregation, lower costs of labor and Manual systems. The table has described that some of the resources of the company is valuable while some of them are not valuable. Retail outlets and labor costs are helpful resources to increase the value and attain the competitive advantages in New Zealand markets. Rare Rare are the component of VRIO framework which shows the rarity and the limpidity of the resources and the capabilities of the organization. It can be analyzed by above mentioned table that purchasing power, labor costs, suppliers etc are the rare resources at Aldi. These resources are facilitated the organization to establish the competitive uniformity (Warner, 2010). Inimitability It has been analyzed that the company that have the resources of nature of rare and valuable are considered as expensive to imitate. Aldi has several resources and capabilities which cannot be copied by others. It shows that the Aldi is capable to attain the competitive advantages in the new market that is New Zealand. It has been analyzed that the strategies and the models of Aldi is effective and can be imitated by other organizations in New Zealand. These resources will be helpful for the company to maintain the market share in the industry (Richardson, 2008). Non-substitutable There are so many resources and capabilities at Aldi which are non-substitutable. The resources and the organization cultures should be managed by Aldi in other country. Lower costs of labor cannot be surrogated by utilizing any substitute resource under tangible resources (Ododo, Mulholland and Turner, 2015). There are some resources and capabilities at Aldi such as higher wages to satisfy the employees, buying power and pricing strategy which cannot be substituted by the organization. It can be concluded after above analysis that there are several resources and capabilities of Aldi which acts as strategic requirements and strengths. Various competencies has been owned by Aldi to generate the more profit and to create the effective competitive advantages. These resources and capabilities will lead the organization to enter in the new market by providing efficient services to the customers (Khan, 2011). Modes of Entry It is vital for the organization to determine the mode of entry before expanding its business in international market. An entry mode into foreign market is considered as the significant channel that is occupied by the organization to get entry in the international market (Gunnarsson, 2011). A company focuses on the various options of entry under this process but recognizes that these options are diverse. Aldi will consider many options to get entry in the market of New Zealand, which will be facilitated for the organization in establishing the business in the country. The modes of entry chosen by Aldi are defined below: International franchising It is the process of expanding the local business into foreign nations and markets. It is considered as the complex method which requires certain things such as flexibility, adaptability and risks. The international franchising mode can be adopted by Aldi to enter in New Zealand market in which company need to make an agreement with an established brand and by using its brand trade organization can sell its grocery products. It will amplify the selling potentials in the New Zealand supermarket. This entry mode is effective entry mode for Aldi but it is more expensive in comparison of other entry modes (Swoboda, Elsner and Olejnik, 2015). Greenfield Investment A Greenfield investment is one of the most effective entry modes which can be used by Aldi to enter in New Zealand Market. This entry mode is a kind of international expansion where funds are invested in a market to initiate the business operations from the ground up. It is a kind of the Foreign Direct Investment (FDI), under which parent organization focuses to expand its operations on international level (Dudoviskey, 2012). This strategy is effective and Aldi would be able to construct its new retail stores and distribution centers. This entry of mode is more effective for Aldi which will bring up the more benefits for the organization. This mode of entry has some advantageous and disadvantageous factors as well. The most advantageous factor of this mode of entry is low cost of transportation which would be helpful for the company to offer the products to the population of New Zealand. It will facilitate the organization to avoid the disadvantages from exchange rate of fluctuations . Along with the benefits, company may have certain risks due to Greenfield investment entry mode like joint venture. Strategic Alliances Strategic alliances are another entry mode for Aldi to enter into New Zealand market which lies between two firms in the term of merger or acquisition. In this process, two companies get engaged with each other to earn mutual benefits. Aldi can partnership with developed retailers to get enough resources and production in the new market. Offline and online retailing can be included in the agreement of two firms (Harrison, 2011). It can be concluded after analyzing the number of entry modes for Aldi that Greenfield Investments is effective entry mode to expand the business in the new supermarket of New Zealand. This strategy will bring opportunities for the organization to expand its business in successful manner. This strategy can be encouraged by the host nation government by providing legal supports, tax relaxation etc. This strategy is helpful to attain the objectives of the company in an adequate manner and able to gain the government support for expanding the business (Harris, 2017). Conclusion Thus in the limelight of above mentioned events it shall be noted that Aldi supermarket shall expand their business in New Zealand as it will provide them more opportunities to growth and increase sales. Further the above mentioned repot justifies the requirements of the task. References Asiedu, E., 2015. A critical Assessment of the Strategic Position of Melcom within the Retail Industry in Ghana.Journal of Entrepreneurship Organization Management,4, p.137. Chatterjee, S., 2017. Two efficiency-driven networks on a collision course: ALDIs innovative grocery business model vsWalmart.Strategy Leadership,45(5), pp.18-25. 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