Mar 7, 2019 in Marketing

Introduction

To begin with, we would like to provide some background information about the company under consideration. ALDI is a German company that specializes in discounting. The full name of the company is Albrecht-Discount. The company was found in 1948 and has become one of the leaders of the regional market since that time. The reason for the company’s foundation was that poor citizens of the country required cheap products after the World War II. The company was characterized by vast scopes. For example, it occupied almost 50% of national market in 1960. That is why it was forced to look for new markets. It has changed the character of the company. Now it can be considered an international company, with branches in many countries around the world. Some additional information about the company can be received from the following quote:

ALDI keeps it cheap so shoppers can, too. How has discount food retailer ALDI Group become one of the world's biggest grocery chains, running more than 9,800 stores worldwide? By offering deeply discounted prices on about 1,400 popular food items (a typical grocery store has 30,000). ALDI (short for "Albrecht Discounts") buys cheap land mostly on city outskirts, builds cheap warehouses, employs a tiny staff, and carries mostly (95%) private-label items, displaying them on pallets rather than shelves. ALDI has some 1,200 stores in 30-plus US states, but Germany (where ALDI has about 4,300 stores) accounts for about two-thirds of sales (“ALDI Company Profile”).

Therefore, we can say that the company is among the regional and even global leaders in the industry. Such role puts forward a lot of requirements to the company and its business strategy. It is going to be considered below.

Key Issues

According to the words of the representatives of the company, the organization’s mission can be described with the following words: making life of people better via providing them with cheap and available goods. This mission was formed in the difficult times, but it still remains the same. Thus, the company’s mission is not simply getting money, but rather improving external environment. The company believes that better surrounding environment can be beneficial for the company itself and for the whole society.

However, it is a mission from the so-called external perspective. In this essay, we have to talk about the organization’s mission from perspective of the internal business process (IBP). The essence of mission and strategy in the sphere of integral business process can be described with the following words:

The strategic focus of the IBP perspective is to determine the business processes an organization must excel at to satisfy both its shareholders and customers (“Internal Business Process”).

Thus, the internal business processes that need improvement should be determined for the purpose of increasing the organization’s efficiency and customers’ satisfaction. As for the company discussed, the three main objectives for improving the organization's internal business processes are as follows: pricing, delivery, and post-sale services.

These strategic objectives relate to the following measures: pricing – total cost to a customer, delivery – delivery on time, and post-sale services – numbers of returned goods.

All these objectives have also some expected level of performance, or a target, in other words. The expected level of performance in pricing is the growth of the company’s turnover. The target of improvement of the delivery business process is the reduction of the logistic expenditures of the company. Finally, the expected level of performance of the post-sale services is a growing number of standing customers.

Of course, for the purpose of improving these business processes, some actions should be taken. For example, a new pricing strategy should be implemented and taken into account while elaborating the organization’s financial plan.

For the purpose of improving the delivery area, the company has to adopt a new logistic strategy by using brand new econometric and other methods. Finally, the post-sale services require a clear policy in this sphere. The company has to clearly define the terms of such services, their scope etc.

All of the mentioned objectives correspond to the objectives mentioned in the previous modules, the fulfillment of which means satisfying customer-oriented objectives, since the improvement of internal business processes provides foundations for the improvement of the customer services.

Secondary Issues

Those have been the internal problems of the company. However, the company is planning the expansion on the global markets. That is why we should evaluate its strategy. First of all, we are going to conduct SWOT analysis of this strategy. A formal definition of the term “SWOT analysis” or simply “SWOT” is the following:

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control” (“SWOT Analysis”).

SWOT analysis is probably the most renowned tool for the analysis of a company’s internal and external environment, forces that influence its performance etc. It is used to define the company’s position on a market and build an effective strategy of its development and growth.

Now it is time to move on to the analysis of the particular strengths, weaknesses, opportunities, and threats for the company under consideration. These are provided in the table below.

Strengths:

One of the most well-known discounted retailers in the country;

One of the largest companies in the country;

High degree of diversification of stores;

Broad territory is covered;

Huge human resources;

Charity programs that improve the image of the company;

Opportunities:

Focus only on decreasing operational costs;

Private labeled products;

Expansion to other countries;

 

Weaknesses:

Focus mainly on the regional market;

Bad influence by the global financial crisis in 2008;

Huge number of lawsuits;

Threats:

Economic slowdown because of the global financial crisis;

Tough competition;

Increasing interest rates and taxes;

All the factors that define the company’s external and internal environment are provided in the table above. There is no need to explain all of them. This should be a task of a more detailed research and business analysis. However, bigger attention should be paid to some of them.

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Strong financial performance and innovative approach to business are the greatest strengths of the company under consideration. The company has been always characterized by innovative approach to doing business. Technological improvements helped the company to gain competitive advantages. This factor has become especially important in the modern conditions, when success of the business is defined by its ability to surprise a customer.

Such approach resulted in the growth of financial indicators of the company. However, such situation is also a result of effective financial management. Responsible financial management and support from the holding are among the main keys of the company’s success. Of course, the company had some financial losses because of the global financial crisis. However, those losses would have been worse if the level of financial management had been low.

On the other hand, the biggest weakness of the company is financial difficulties caused by the global financial crisis. The crisis declined the demand for products. Consequently, it resulted in the decrease of sales. The situation is improving now, but it is going to take a few years to return to the previous positions.

Probably, the biggest opportunity for the company is its potential expansion to the global market. This will help the company to get new customers. On the other hand, the company will be able to increase the degree of diversification. Of course, such step requires significant initial investments. However, potential benefits are going to be much higher. This step is worth doing.

Finally, the most dangerous threat for the company is a potential economic slowdown. It is quite difficult to say whether the global financial crisis is over. There are still some significant problems. For example, governmental debt problems and the growing pace of inflation are significant risks in all the countries, especially in Europe. They may result in a global economic slowdown that will only create new financial difficulties for the company.

Linkage to Theory & Concepts

Thus, the ALDI Company is one of the national leaders in retail industry. However, it is influenced by internal and external factors, just like any other company. These environments are characterized by strengths, weaknesses, opportunities, and threats. Analysis of these factors is the main task of SWOT. SWOT analysis of the company under consideration has been carried out in this paper. The results were provided in the table.

Entering the global market, the company should be ready to face different environments. Therefore, the company should adapt the so called environmentally adaptive approach in its business strategy. This approach and the concept in general have been developed quite recently. In fact, high pace of globalization has been probably the main reason for such trend. The so-called transnational companies have begun to look for new markets for their products, since national ones were really saturated. They have begun to enter new countries, which were characterized with the different cultural, social and even natural environment. In order to be successful transnational companies were forced to develop adaptive business strategy. In fact, they have developed the different strategies according to the features of every separate national market. As a result, the concept of environmental analysis has occurred. We believe that this concept should be used by the company under consideration.

It is very important to handle these changes in order to be successful. The modern natural environment is characterized with severe climate changes. The most important change is the global warming. This process is inevitable, taking into account the growing pressure on natural environment, and may lead to significant natural disasters. This can be proven by the growing number of natural disasters in the recent years.

These negative changes may affect the company in two ways: first of all, they are able to destroy its infrastructure or other physical assets; secondly, they may harm its consumers and decrease their purchasing power. Also, we should not exclude the possibility that the company will be forced to invest some money in the improvement of natural environment. We believe that the modern business should be socially and environmentally responsible.

Cultural environment also plays a crucial role in any business. The changes in culture may affect the consumers’ purchasing habits. As we have already said, one of the most important changes of the recent years is the changes of natural environment. Frankly speaking, these changes question mankind’s existence. That is why modern people are really anxious about their health and their nature. We believe that this trend should be accounted for by the company. The company should be socially and environmentally responsible and propose healthy and ecologically-neutral products.

The most significant trend in the technological development of the recent years is the fast development of the Internet. Internet, in general, has changed the character of any business. First of all, modern businesses can monitor the performance of their branches using the Internet alone. Secondly, today it is possible to sell products on the Internet. It surely should be accounted by the company. Thirdly, Internet has become the main space for advertisement. We believe that it is going to replace the newspapers and TV in the nearest future.

Talking about macroeconomic environment, one should mention the recent global economic crisis. The crisis harmed the positions of every business, but some industries have suffered most. We believe that the retail business was among those.

As we know, the global economic crisis is mainly associated with the problems in the financial system. These problems have made it impossible for some businesses and companies to take loans and refinance the existing debts. Usually the retailers are characterized by a high level of leverage. That is why the retailers experienced a lot of problems with refinancing their debts because of the crisis.

Among the main changes in the legal and regulative environment we should mention the tax increase on the national level and the tax changes on e-commerce purchases. These changes may significantly influence the analyzed business, because they are able to change the company’s pricing strategy.

As we have already mentioned in this research paper, the company tries to be really loyal to its customers. That is why we can assume that it is not going to increase the prices to compensate the tax increases. As a result, the company will be forced to look for other ways of compensation of this increase for the purpose of keeping profitable levels.

At last, we are able to analyze the trends in the governmental environment. As we have already mentioned, governmental environment is usually associated with the changes of the governmental policies related to business. Among such changes we may differentiate the following ones: credit card fee debates, organized retail theft investigation, changes in taxation etc.

After analyzing the trends in all the mentioned environments, we would like to say that these environments should be analyzed in complex, since they are interdependent and influence each other. For example, the development of the Internet influences the purchasing habits of the modern consumers that want to buy the needed products on the Internet. The situation is the same with the natural and macroeconomic environments. The recent climate changes require that the governments invest more money in the improvement of the natural environment. They also require that the businesses are socially and environmentally responsible.

Relationship with the Chosen Articles

The analyzed concept has been considered and discussed in a lot of articles and other professional literature. We have chosen two articles in order to analyze the case under consideration. These articles are the following: High and Low Levels of Organizational Adaptation: An Empirical Analysis of Strategy, Structure, and Performance by Daniel F. Jennings, Samuel L. Seaman (Strategic Management Journal, Vol. 15, No. 6 (Jul., 1994), pp. 459-475), and An Institution-Based View of International Business Strategy: A Focus on Emerging Economies by Mike W. Peng, Denis Y. L. Wang, Yi Jiang (Journal of International Business Studies, Vol. 39, No. 5 (Jul. - Aug., 2008), pp. 920-936). As we can see from the names of the articles they analyze business strategy of a company and its ability to adaptation to the different business and social environment. The company in the case is going to enter international business area. That is why it will be forced to adapt its performance to the different environments and develop effective international marketing strategy. Thus, it is the strongest relation between the mentioned articles and the case under consideration. The first article describes the most effective ways of organizational adaptation in the modern business conditions. The second article considers the features of international business strategy and marketing strategy. The emphasis is made on emerging economies. We have chosen this article, sine emerging markets are not saturated and can propose a lot of opportunities for the company under consideration.

Conclusions

ALDI is a German company that specializes in discounting. The full name of the company is Albrecht-Discount. The company was found in 1948 and has become one of the leaders of the regional market since that time.

The company was characterized by vast scopes. For example, it occupied almost 50% of national market in 1960. That is why it was forced to look for new markets. It has changed the character of the company. Now it can be considered an international company, with branches in many countries around the world. The company is looking for new opportunities for business growth. That is why it needs to develop effective international business strategy. The main features of this process and strategy have been considered in this report.

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