LDI Wishes to Grow in Australian Market and Gain A Larger Share of Market - Case Study Example

LDI Wishes to Grow in Australian Market and Gain A Larger share of Market Name: Class: Instructor: School, City: Date of submission: Introduction Growth in businesses depends on the strategies that they apply, the nature of the external and internal environment, the portfolio prices and products offered. The factors identified could either act as catalysts to better performance or act as deterring factors of growth (Hitt et.al, 2001). Currently, the company’s market in Germany is outstanding because the strategies used and the products offered are vastly accepted by the market. It offers grocery products, as well as, basic household goods. Most importantly, its market strategy has earned ALDI company ample market share of approximately 40% in Germany. One of the reasons behind the cumulative success of the company in Germany, unlike in Australia, is mainly based on the cost leadership strategy applied. The fact that respondents declare the products emerged from the company offer prices that are almost 20% less than those of the competitor's guarantees a right for market dominance is predominant. Market leadership is affiliated with numerous competitive features as well as propelling factors (Hittet.al, 2012). ALDI Company is extensively interested in capturing a better market section than the already earned 10% of the Australian grocery and household goods. This essay aims at depicting relevant strategy recommendations that ALDI Company should embrace to earn a better market share in Australia. Strategic Management and Strategic Competitiveness Being a highly competitive firm, dwelling in a very competitive industry, ALDI is subjected to competition from companies that have analysed the market demand clearly. Strategic management is required for a business to thrive (Dess, 2006). Accordingly, strategic competitiveness emerges after successful strategic management is practiced. First, strategic management is one of the most ‘hard skills’ in business operations. Most company or professionally established business entities formulate and implement specific goals, as well as, the company initiative (Anderson et.al, 2002). This process considers the availability of resources with reference to the nature of the external and internal economic environment of the business. A business is undergoing a process of strategic management analyses the business environment and refers to formal procedures that enable the entity to operate competitively. Initially, for a firm to gain competitive nature, it has to ensure that it carries out its analysis in a sure manner to ensure that it does not lose substantial market. Quite often, scholars insist that there are two steps incorporated in the process of strategic management. They are formulation and implementation. Successful project management and management competition has yielded stiff competition in the Australian supermarket industry. The Australian supermarkets, who consider ALDI Company to be a threat in the market, have come up with competitive parameters that deter the rate that the any business intends to take up the market. Most of the companies and supermarkets offering similar goods do so in the sense that they already privatized the labels. In addition, the analysis carried out by competitor firms confirms that the company uses intensive discounting strategy. Therefore, most of the supermarkets have adopted the strategy. The company, therefore, may find it hard to compete with the supermarkets efficiently. The strategies tend to skew the market towards domestic supermarkets and away from ALDI. Unlike in Germany, the level of sales is discoursing, owing to the fact that the company has intensively invested in the business, in a capital intensive manner. This calls for the organizations or companies in such an industry to devise new competitive strategies for them to survive within the industry in the long run (Jones, 2010). External Environment The macro-elements that are feasible occurring within the entity’s industry are all considered fatal if they yield negative or affirmative impact on the operations of the subject entity (Karagiannopoulos, 2005). Ideally, external environment is composed of factors such as the rate of exchange, entry of other global entities into the market, the cultural aspects of Australia, and the lack of intimate choice of the best supplier for the company. First, the rate of exchange of the currencies with respect to the Australian Dollar is not favourable. Prices are charged accordingly, irrespective of the conversion rate; ALDI is likely to face a market gain due to the high price that the exchange rate infers. Ideally, most of the local products do not consume much production or processing capital. Therefore, the cost is also relatively low. This creates a major face situation is that the supermarkets and entities such as ALDI be forced to reduce the profit margin which are expected for them to thrive in the market. This impact adversely affects ALDI by deterring the economic expectations. Analytically, the company faces several forces as expressed within the five porters’ model (Grundy, 2006). The major element is evident in the industry costs leadership rivalry. Accordingly, the rival supermarkets, under the influence of the impending currency defects, have imposed a war price on the company. That is; it is impossible for ALDI to elevate prices. Alternatively, the main supplier to the ALDI Company is the same one who supplies products, especially grocery, to other supermarkets as well. Despite the relentless efforts to earn the trust and commitment of the supplier, the supplier does not seem to give in. One of the reasons behind the refusal by supplier to engage in confined business operations with ALDI elevates towards maintaining the cost leadership advantage. This works at the disadvantage of ALDI. Conclusively, other factors such as technology have led toward intensive influence of the market. The competitor supermarkets have increasingly engaged in virtual supermarket strategy. This strategy supersedes the one that ALDI applies. Ideally, the technologically related activity of advertising the availability of the products does not compare with the online sale making. However, the virtual supermarket strategy has been adopted by rival firms where sales are made online. It is critical to state that entrants into the market make the industry overcrowded, hence increasing the level of competition. Internal Environment Every business entity has its internal way of functioning to ensure that there is a steadfast pace of competitiveness. Some of the entities make efforts, embodied in the primary operations of the business. ALDI is one of the well-structured businesses. First, it embraces a decentralized form of operation. The strategy was initially developed by the pioneers. Their professional intention was to create a suitable platform for the affirmative process of sharing strategies, rather than compromising. First, the organization management teams manage to share ideas on how and where to invest. The domestic strategy of decentralization has yielded the development of numerous outlet shops belonging to ALDI. In addition, the organization structure is flat, as well as, slender. Ideally, the personnel allocated in the headquarters of the business a few. This is facilitated by the deficiency of a planning department. Therefore, centralized managerial functions such as human resource management, control, marketing and public relations hardly exist. The responsibility of creating structures and strategies lies on the few personnel who are allocated the responsibility of working in the shops. The business, therefore, appreciates the delegation principle, which is part of the Harbinger- model. It is believed that ALDI carries out its activities in a manner that relieves superior operators to carry out their important tasks. This enables the business to enact and implement their activities in a less bureaucratic manner. One of the mainly addressed strategies that the business incorporates is the discount intensive method. Ideally, the strategy is essential in ensuring that the customers desire to purchase at a lower price is granted. The development of the business has its demerits that affect the operation ability of the company with respect to the stiff competition (Porter, 2011). For instance, lack of a proper centralized team of managers dissolves the ability of the business to develop proper plans that can enable the business rhyme with the competitor’s pace in Australia. For instance, the business should not only engage in online advertising, but, it should also engage in virtual marketing and sales. The micro-environment is discouraging prompt response to developments in the industry. Business Level Strategies The business level strategy entails the precise actions that manager take with the objective of achieving competitive advantage. This most occurs when the competition entails a single product market. Therefore, the strategy involves a portfolio of similar products. In this field, the subject organization ought to ask its self the query on “which strategy should the organization utilize to engage in competition?” this strategy is very crucial when it comes to achieving utmost competitive advantage. Ideally, there are several means through which the strategy can enable a business entity to accomplish the competitive advantage. The strategy incorporates adverse coordination of unit activities, utilization of human resources, the monitoring of product strategies and identification of market Niche. Accordingly, ALDI Australia may not have effectively carried out its economic activities as expected. However, ALDI first used the technology available to inform potential customers the products available in the shop. The business facilitated the quick access of the products. In addition, the use of discounts and sale of cheap products facilitated the development of the business. Additionally, the company’s strategy of following unit activities has been ultimately decentralization. Therefore, all the units have the chance to express their ideologies. However, these business level strategies may not be viable with the current market environment. Accordingly, centralization in supervision through units such as human resource management may have impact in the manner activities are carried out. Other factors include adoption of better technology advances towards market forces. Recommendations and Conclusion ALDI, as well as, other related businesses that use decentralized business strategies ought to monitor the level of freedom they give to the subordinate staff with reference to decision making. Ideally, a central decision and planning system is essential. That is; the business will have to develop a strategy that will enable the business to be at its toes due to changes in the external business environment and competitor’s strategies. For instance, the business had the capacity to incorporate the virtual operation strategy instead of waiting until the very strategy is used against it by other business entities within the industry. The external and internal environment of any business always influences the business’s demeanour to a large extent. For instance, the competitiveness of other firms against ALDI has influenced it to fall out of the competitive edge in Australia. For instance, precise objectives should be set vis-à-vis the ways to overcome destructive competition from competitor firms(Pfeffer, 2005). In addition, an analysis of the market parameters is essential in ensuring that the business stands out within any economy. For instance, ALDI should maintain performance consistency in Australia like it does in Germany. References Adner, Ron, and Daniel A. Levinthal. (2004).What is not a real option: Considering boundaries for the application of real options to business strategy. Academy of Management Review 29.1, 74-85. Andersson, U., Forsgren, M., & Holm, U. (2002). 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