Bbusiness Model of ALDI - Case Study Example

Executive Summary ALDI has developed their business model after looking at both the internal and external factors and the manner they influence decision making. ALDI has thereby looked at penetration pricing by providing products at low cost so that better satisfaction of customers becomes possible. While looking to do so ALDI has identified the different internal resources and looked at using them wisely so that effectiveness can be gained. This has helped ALDI to develop their marketing strategies which will further strengthen when they look at creating awareness and devising ways through which overall satisfaction can be achieved. Working on the same business model and developing the entire process will help ALDI in the future and will ensure that the business is able to gain efficiency and satisfy the needs and requirements of the customers. Table of Contents Introduction 3 About the Organization 3 Internal Analysis 4 External Analysis 6 SWOT Analysis 7 Strategic Fit for the business 8 Market Opportunity & Justification 9 Conclusion 9 References 10 Introduction Organizations tend to develop strategies based on the different internal and external factors and the manner the factors influences decision making. This makes it imperative that better understanding of the environment is created so that it helps in the generation of positive results. This report thereby analyzes both the internal and external environment analysis for ALDI, which is an Australian retail chain player. This has been followed by the SWOT analysis and the strategic competitiveness which will help to identify one area of marketing and develop strategies to improve the process of carrying out business. The overall process thereby aims at understanding the external environment and developing marketing strategies so that the business resources are used on the most productive manner. About the Organization ALDI is one of the leading retail players in Australia which started its operations in 2001 and since than has grown its business and has over 300 stores locally and over 8000 stores worldwide. ALDI has developed their business strategy by focusing on satisfying the needs of the customers by providing products at the minimum possible price at the same time ensuring quality and maximum market penetration. The strategy has helped ALDI to develop its business and has become one of top 10 retail chain provider in Australia (ALDI. 2013). The competitive business strategy which ALDI focuses on is market penetration which has provided higher returns for the business and working on the same business model will further help to consolidate its position in the Australian market. Working on aspect which looks at improving technology will thereby help to improve the overall performance and provide better results. Internal Analysis The internal environment analysis looks at analyzing the manner in which ALDI uses its resources so that based on it strengths the business can achieve maximum chances of growth (Laric & Lynagh, 2009). The same has been demonstrated through a Value Chain Analysis The primary objectives which ALDI aims to achieve are as Inbound Logistics: ALDI has used its resources in gaining efficiency as the organizations looks at having two renowned brands for the same products in addition to the local brands. The stores also use JIT to ensure that an inventory are held for a minimum period and has thereby been able to reduce the amount of investment made in inventories. Operations: ALDI uses both outsourcing and in house mechanism to supply products to its customers. Some of the products are made by ALDI under their own brand name but most of the finished products are outsourced by having agreements with different suppliers to ensure consistency is quality and to have strong supply chain network (Chen, 2003). Outbound Logistics: ALDI deals in different products which includes necessities as well as luxury items as competitive price at every location. In addition to it ALDI ensures different variety of the same products under different brand names providing an opportunity to the consumers to choose from the different options which is available Marketing & Sales: ALDI uses different marketing strategies like promotions and advertisements which help to create awareness among the customers. The main point of sale occurs when the customer directly comes in contact with the product and due to easy availability of complete information the different sales personnel assist the customers in choosing the right product (Cateora, Mary & Graham, 2009). Services: ALDI looks at providing quality services by displaying all the products which are being offered by the department. This allows the customers to choose the product directly and is also assisted by the different sales staff on the floor to choose the one they require. The focus thereby lies on ensuring better customer satisfaction through quality product and service The primary objectives are assisted by the secondary objectives and helps the business to use the resources effectively as Infrastructure of Firm: ALDI had designed their stores to ensure maximum visibility for the customers and ensures easy movement of customers (Bateman & Snell, 2004). This has been supported by proper tools which will facilitate in the customer experience to purchase the product Human Resource Management: ALDI has hired the best staff who have the required knowledge about the different offerings and are able to satisfy the needs and requirements of the customers (Cable & Judge, 2006) by being kind to them Technology: ALDI uses the latest technology and has incorporated JIT along with DFID technology ensuring smooth operations Procurement: ALDI ensures that products sold be them are as per the customer needs for which the organization relies on in house and outsourcing products. External Analysis The external environment looks at factors beyond the control of the organization and will help to understand the manner in which it influences all business and the strategies that have to be developed to deal with those. It is provide through the Porter Five Force Model Threat of Entry of New Player: The threat of new player is high as the retail industry is growing rapidly providing an opportunity for other players to enter the market. The fact that Australian dollar is continuously fluctuating has made import cheaper ensuring availability of goods (Firoziyan, Hasangoli & Stiri, 2009). It has been supported by the growth the non branded products are slowly gaining and provides an opportunity for the new players to capture the huge market. Threat of Substitute Product: The threat of substitute products is high as every retail chain looks at have different brands of the same products which includes in house as well as developed products. Customers as a result have different options based on which they can take their purchase decisions (Fletcher and Crawford, 2011) Customer Bargaining Power: Customers have a low bargaining power as they have to accept the different prices which are offered by the customers. This has been matched by increased customer base which allows the opportunity to sell products to different players and thereby ensures an opportunity to influence the customers (Fletcher and Crawford, 2011) Suppliers Bargaining Power: Since, ALDI purchases the products from all around the globe which includes local manufacturers, international suppliers and other places the suppliers have a low bargaining power. This has ensured that the prices charged is competitive and has helped ALDI to develop their business model properly Degree of Rivalry among Competitors: Since all players offer similar products and aim at the same segment of the customers it has intensified the degree of rivalry between competitors. Since, there is very little differentiation between the different players it has resulted in high degree of competition as players look to capture the same market share. SWOT Analysis The SWOT analysis for ALDI is as follows Strengths Cost advantage as the organization purchases in bulk quantity gaining economies of advantage Innovation through new promotional schemes which aims to attract and retain customers Market share leadership as the organization has a substantial market share Competitive pricing which aims at maximum penetration by having products for all segment of the society Weakness Lack of online presence High risk due to lack of diversification No reward for loyal customers like loyalty bonus Lack of advertising Opportunities Using technology and working as an online medium Working in different emerging markets which have a high disposable income Better customer services through better schemes and promotional tools Threats Increasing competition Economic slowdown Product substitution Strategic Fit for the business The strategy which ALDI had adopted for its business as it aims to be a cost leader where they offer quality products at the most competitive rates. This strategy has helped them to penetrate the market and create a sense of differentiation from others (Alvarez & Casielles, 2005). This has to be matched by the fact that their strategy should aim at offering something extra to the customers through different offers and promotional schemes so that they are able to attract and retain them for long term. Market Opportunity & Justification ALDI needs to focus on their strength and work on the same business model where they will look to offer customers products at competitive rates at the same time ensuring quality in the products being offered. This will act as a point through which overall marketing strategy will be designed which will focus on promotional schemes and other schemes to attract and retain customers. The marketing strategy will work well as the organization is already performing on similar business model and better advertisement and awareness will ensure that the model which has been already tested works well. This will also ensure that the marketing strategies don’t backfire and will increase the chances of being successful. Conclusion ALDI has thus looked at both the external and internal factors and based on it developed a business model which has given them success. Working on the same business model through increased and better advertising will help to improve the reach and ensure that the overall productivity for the organization increases which will thereby increase the chances of being successful. References Alvarez, B. & Casielles, R. (2005). Consumer evaluations of sales promotion: the effect on brand choice, European Journal of Marketing, 39 (1/2), pp. 54-70. ALDI. (2013). ALDI, Australia. Retrieved on June 27, 2013 from http://www.aldi.com.au/au/html/company/3775.htm Bateman, T. & Snell, S. (2004). Management: The New Competitive Landscape. 6th Edition, McGraw Hill, New York Cable, D. & Judge, T. (2006). Person-organization fit, job choice decisions, and organizational entry. Organizational Behavior and Human Decision Processes, 67(3), 294–311 Cateora, P.R. & Mary, C. G. & Graham, J.L. (2009). International Marketing, 14th edn. Irwin: McGraw-Hill. Chen, I. (2003). Understanding Customer relationship management: people, process and technology. Business Process Management Journal, 9 (5), 672-688 Firoziyan, M., Hasangoli, T. & Stiri, M. (2009). Investigation of the effectiveness of the services on different processes affecting consumer decision. Commercial Management Magazine, 1 (3), pp.125-146. Fletcher, R. and Crawford, H. (2011), International Marketing: An Asia-Pacific Perspective, PearsonAustralia. Laric, V. & Lynagh, M. (2009). The New Marketing, IMC and the role of Online Promotion, Proceedings of ASBBS, ASBBS Annual Conference: Las Vegas, 16 (1) Read More