ALDI in Australia
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The generic strategies adopted by ALDI in Australia
Designing a marketing generic strategy plan requires the knowledge of the current market on the field of products in subject. On the other hand, marketing design is highly essential in an organization since it is the fundamental to successful implementation of strategies and achievement of objectives. ALDI adopted excellent strategies that enabled the organization grow very fast in the Australian market. A company can generate superior returns if its primary determination is making profits and attracting more customers in the industry where the company operates. Managers adopt efficient business strategic operations and incorporate networking skills capable of adapting to the current situations towards demands for creation of long-term supply chains. Figure 1 shows the ingredients of a successful generic strategy. From the figure, the first thing is to have concerns the strategy that one intends to put in place. Secondly, the managers need to combine corporate strategy and supply chain strategy. Finally, the managers come up with the best alternatives defining the needs for a sustainable supply chain strategy (Cetinkaya, 2011).
Strategy: What, why, and which?
Need for a sustainable supply chain strategy
Link between corporate strategy and supply chain strategy
Figure 1: The generic Strategy-a critical success factor for sustainability business
According to Porter, the strength of a firm falls under two strategies; cost advantage and differentiation (2010). Organizations apply the generic strategies that are not firm based or industry based. To start with, ALDI planned on offering quality products at low cost to its customers. The above generic strategy will allow the company to produce low cost products but of high quality through selling at average industrial prices but earn higher profits above the competitors. The following strategy has enabled the organization to operate at reduced prices, offer simple operations, and incur low costs (Porter, 2010).
The second strategy that ALDI developed was plans to expand the businesses in Australia through establishing stores in different regions. Diversification of stores enables an organization to reach most of its customers and also ensures customers access the products always. An organization is liable for the well being of its customers through support of market promotions and ensuring that customers a have access to their goods and services at all times. ALDI company management realized a need to introduce consumer-driven supply network in order to compete well in packaged goods industry. The management ensures that customers will find whatever product they need in the display shelves (Gartner, 2002). According ALDI Website, the company had developed into 20 countries and operated more than 8,000 stores achieving worldwide sales of 70 billion US dollars (2011). ALDI already found two established retail companies in Australia by the time of entry. The two companies, Woolworth and Coles, controlled almost three-quarter of the Australian market.
Lastly, ALDI Company had a strategy of developing a stiff competitive environment in Australia. Porter developed a generic competitive strategy that aids the organizations on ways of competing among organizations in the same industry. Figure 2 shows a competitive strategy diagram that ALDI made use of to compete among Woolworth and Coles.
Figure 1: Competitive advantage
On the issue of competitive scope, ALDI developed many stores therefore expanding its market scope all over the country. This occurs through cost management strategies and differentiation. On the issue of differentiation, ALDI was unique in many ways in which it performed its activities that made it develop high competitive advantage among other companies. Low cost of operation enables an organization to achieve high profits even if the sale volume is small. In addition, ALDI wishes to adopt marketing structure aiming at attracting all customers from the region. The market structure adopted by an organization acts as an element of undertaking need analysis of the market share. In this, the market structure has to segment the potential market of the organization products for effective analysis of the needs, and formulation of measures that need adoption by the company. In addition, the market structure formulates an effective strategy for undertaking Business-to-Business (B2B) and Business-to-Customer (B2C) marketing respectively. Development of a correct distribution strategy is essential for every business. Distribution strategy helps businesses to concentrate and utilize the available resources and opportunities to realize profits and become competitive in the market (Armstrong and Kotler, 2008; Mullins, 2007).
How do the company’s activities support its strategies; which specific choices enable it to implement its strategies?
On establishing its business in Australia, ALDI developed many strategies and followed them strictly. In the process of accomplishing its strategies, ALDI carried out market analysis on Australian market. The Company Managing Director studied the country’s supermarkets and their shopping habits. Through this, the company management came up with a cost effective strategy that made the company offer its products at reduced prices in comparison to others. ALDI tried lowering the price of its products in order to compete favorably with the other companies. The illustration of strength in financial base of ALDI is its ability of to purchase unique products that are not present in the market thus creating a large number of customers. In addition, ALDI deregulation and operation strategy improves the company effectiveness and market share ownership. For the success of a business, strategies and their implementations must be decided by the supply chain management and executed at the corporate, business, and product level (Jacobs, n.d; Gale Bradley & Wood Robert, 1994). ALDI management decided on various strategies but implementation was done by the whole unit.
Moreover, the ability of the company to concentrate on the customer needs, maintenance of high quality of its products and services, and effective participation of employees in service delivery, contributes to market share ownership. This results in gain of revenues from the services that aid in strengthening the financial status of ALDI Company. As such, ALDI ventured into Australia since it has the necessary source of the fund to meet costs of an emerging market. For example, ALDI made use of hard discount by keeping the least stock that made use of fewer stores and few employees. This made the company operate at low costs while achieving high returns on sales. Even though the company faced several misconceptions on going by the hard discount way, it managed to achieve its objectives since by the end of year 2011 the company had made profits worth 70 billion US dollars (Stockdill, 2011).
I an effort to reduce the operation costs, the company supplied dried food as opposed to perishables since they incurred extra costs of refrigeration and observed handling. Through this, the company was assured of their products getting to targeted customers while in a perfect order. The company also employed strategy of availing every product to the customer doorsteps in a way that more sales took place when the amount of time on face-to-face contact more. It is clear that sales and production efficiency both compete for resource. Concentrating too much on production efficiency may lead to low sales opportunities while, on the other hand, giving so much focus on the sales opportunities may mean neglecting production efficiency (Amann & Tiez, 2010). ALDI has a way that seeks to balance between making sales and achieving production efficiency. The total customization allows an environment where free interaction between the clients and the professional service providers is possible. The customer or the seller initiates a conversation and customers have more opportunity to ask a question and get an immediate response. In face-to-face spec, the customers design and get an environment in which they can interact with the service providers but this time the service providers may be professionals or not; unlike in total customization where the product sellers providers are strictly professionals. In tight specs, the service provider performs some already specified routines where no much personal judgment or decision-making is needed. In Loose specs, designs the service provider may make small decisions, and personal judgment is needed (Bangs & David, 2011).
The company also strategized on creating a stiff competition among its rivals. The main reason for success of ALDI among its competitors is the use of an effective distribution strategy. According to Linton and Donnely, exclusive distribution is important for the business targets based on specific consumers due to the nature of the product. On the other hand, extensive distribution strategy does not limit product distribution to certain regions. This strategy is for products that do not have cultural specification and limitation. For instance, the use of a given model of vehicle is not limited to certain regions (2009). Production and operations management entails the decision-making process to ensure that goods and services creation occurs within the scheduled time, according to the stipulated specifications, and at a minimum cost. To facilitate extensive marketing, use of intermediaries is important. These include agents and dealers that are all over the globe. Deployment of various dealers all over the world ensures that the products are available to customers all over the world at every time. This has the effect of placing the business at better competitive grounds in comparison to other businesses (Shim, & Siegel, 1999). ALDI owned about 3.6% of Department Stores Market Share, which is the third best compared to other companies.
The most powerful ALDI competitors in Australia were Woolworth and Coles. In an effort to attract more customers, ALDI operated few stores that offered approximately 1,000 stock-keeping units (SKUs), in comparison with 30,000 owned by Coles and Woolworth outlets. In addition, ALDI restricted all their products according to their brands and sizes offered. ALDI believed in offering a single brand in one size only that customers prefer more. For example, the company offered one brand of orange juice that was available only in a 2-liters bottle. Other supermarkets staged various brands in different sizes that ended up filling the shelves but attracted few customers. ALDI made a market analysis on the most demanded brand placed them on their shelves, collecting a lot of profits from them. The best way to conquer competitors in a market is through offering a product that possesses the best quality and bench-mark it against the leading companies (Webb, 2008).
Another activity practiced by ALDI that contributed to its success in implementing the market strategies involved restricting other competing companies from opening stores near their premises. The company did this through acquiring a lease agreement that contained restricted provisions and any attempt to go against these rules led to prosecution. The Australian government came up with such restrictions, which seemed to favor ALDI and other small scale suppliers since the effort by big companies to phase-out the agreement failed. The situation brought about the supermarket wars in Australia whereby Coles and Woolworths had control of over 50% of all retail outlets but ALDI owned many stores that restricted them from occupying certain shopping centers. Previously, the two faced no competition but after the entry of ALDI, within ten years the impact was so big that even the Australian government intervened. The then Senator congratulated the efforts made by ALDI management in ensuring that they open many stores and take them to strategic locations creating a competitive environment among the food retail companies (Dyer, 2011).
ALDI also managed to implement their marketing strategies through providing brands that contained private labels. Most competitors lacked this strategy and this enabled ALDI to secure more customers as they believed in originality of a given brand. The main advantage of using these private labels was that they assisted in cost savings since they required no marketing budgets as opposed to regular brands. The research conducted by Speedy indicated that the gross margins for private labeled products went as high as 35 percent compared to 25 percent for regular manufacturer’s brands (Speedy, 2010). The use of private labels made ALDI products sell fast in the retail market since customers were assured of their attractive prices and also came from trusted manufacturers. On the other hand, most of ALDI stock came from Australia producers who offered these products at affordable prices. Consumers liked these products since they were home-made and, produced according to their tastes and preferences (ALDI Website, 2011).
In accomplishing these strategies ALDI developed different approaches and each choice turned out successful. To start with the company looked for the entry barriers to the market and destroyed them. This was through cost leadership, differentiation, and focusing on core functions. ALDI needed a lot of changes within the organization in order to achieve its goals. The core company core founders worked very hard in ensuring that all the operations ran accordingly. The issue of storage and production of fast moving goods brought about a lot of concern. The company took an option of storing nonperishable goods since there were limited cold storage rooms that were expensive to maintain. On the other hand, the company developed a good customer loyalty that discouraged potential entrants from tampering with their operations. ALDI ensured that all its products had multiple bar codes to safe cashiers’ time while at the counter. Moreover, the supermarkets had few staffs thus they came up with a strategy that ensured all shopping trolleys returned back to the stores. In achieving this, a buyer inserted a coin that was returned only if the customer gives back the trolley. These system enabled ALDI staffs concentrate more inside the supermarkets and avoid wasting time looking for lost trolleys.
ALDI employed experienced cashiers who had the capability of serving more than 50 items per minute, compared to those from convectional stores who could only manage 15 items. On the other hand, the management ensured no delays at the counter since customers took the responsibility of packing their items thus checkout operators concentrated more on scanning the items (Corsten & Kumar, 2006). Also, the company designated duties of planning, and marketing to line managers allowing the top management to concentrate on new innovations on how to lead the Australian market. A proper distribution strategy is required to execute the distribution plans to realize the marketing objectives. According to (Simchi, Kaminsky and Levi, 2003), different products require different distribution strategies due to their own nature and the nature of the market.
If you were MD Tom Daunt, what threats /risks facing Australia would be of concern to you and why?
Understanding of the market characteristics ensures that a business has full details, which makes it easier to compete in the market. Some of the factors determining market characteristics include the critical risks and the critical success factors. The strategizes in any business look for a risk free business determined by the competitor response to the new business entry, sales projections, suppliers, distributers, and business location. Doing business in Australia requires the entrepreneur to have perfect information on how markets operate and the competition nature of the businesses. ALDI entered Australia in 1990 and in a period of ten years the company has experienced a lot of challenges and threats (Datamonitor, 2010). In the first place, the company faced the threat of competition from the top retailers, Woolworth and Coles. Business organizations always perform an analysis that aids in market entry strategies formulation. The market, cost, competitive advantage and government forms the globalization drivers that the country analysis basis the focus. This depicts threats faced by a business while participating actively in the competitive market. Multinational business analysis, on the other hand, outlines the potentiality of the business to gain from the market participation. The analysis incorporates strategic levers such as marketing, location and product, and organization analysis such as culture, people, management and structure (MacDonald, 2007).
ALDI MD is also faced with the risk of coming up with the policy that restricts other retailers from operating stores in their shopping centers. ALDI top competitors are well established and have the capability of voting out such policies since the government recognizes them. This creates a situation whereby customers shift from ALDI stores and moves to Woolworth and Coles since they possess the necessary technology and customer attracting services. Moore and Pareek claim that, internet support by technology, has led to a cost-effective means of marketing that aims at interacting with the potential market, which could be one individual. Therefore, web marketing is more of direct marketing than mass marketing. In the interaction process of the internet, it involves one individual, although, the individual may gather pals around. This results in conveying the information directly to the individual. In addition, the individual may send the link to friends, and when they open, direct marketing occurs since the target person gets the information very fast (Schwalbe, 2009). This form of marketing leads to development of customer loyalty and obtaining immediate customer feedback (2010). Eventually ALDI becomes grounded and all its stores and supermarkets possessed by other big companies.
ALDI has the lowest number of employees among all companies in Australia. This might pose a threat to the company since the government might require them to hire more staff in order to create employment opportunities. This is a challenging situation bearing in mind that the company’s strategy is to achieve highest profits at lowest cost possible. Employing additional staff increases the cost of production since their salaries must be catered for. Moreover, adding extra staff requires the company to train them so that they fit into the system, which is time consuming and gives other competitors an opportunity to venture into the market and steal away their customers. In a business environment survival for the fittest is the rule since all businesses have a goal of winning the entire market but, the success is determined by the strategies used by individual companies. ALDI defeated their competitors through making use of few workforces, but the government has its rules that require a company to employ people according to its capacity. ALDI being a successful retail company has the capacity of holding more employees.
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