Essay \"Strategic marketing management approach of aldi within australia \" - grade 78% PDF

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Strategic marketing management approach of ALDI within Australia ...

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ALDI - Strategic Marketing Plan ! !

! ! ! ! ! ! ! ! ! ! ! ! Candice Parkes c3163089!

James Robards c3167891!

Grace Kay 3183246!

Tim Dickson c3116161!

Grace Willoughby c3182553!

Matthew Robinson c3193301!

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Executive Summary ! The main purpose of the following report is to analyse Aldi’s strategic marketing plan, positioning and performance towards their targeted customer segment comparable to competitors. ! Efficiency empowers Aldi to pass savings onto their consumers via their cost cutting methodology. Exploration into exactly how Aldi leverage this sustainable competitive advantage by avoiding direct competition amongst the Australian oligopoly between Woolworth's and Coles is investigated in depth. The following analysis will look at ! how Aldi’s marketing scheme incorporates the Corporate and Business Strategy, identification of market segments and positioning parallel to market attractiveness, Aldi’s internal and external environment and their interaction with competition are factors considered during research. Greater detail of these findings can be found in the appendices.! The report concludes that Aldi has a strong market presence with both strengths and weaknesses that can be maximised and addressed to continue their strategic competitive advantage. Aldi’s low cost model was discovered to be their major differential strength!

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ALDI - Strategic Marketing Plan !

1!

Executive Summary !

2!

1. Introduction !

4!

2. Background !

5!

3. Corporate & Business Strategy!

7!

Vision!

7!

Mission !

7!

3.1 Strategy Overview !

7!

4. Market Segments and Positioning !

10!

4.1 Market Segments !

10!

4.2 Positioning !

11!

4.3 External PESTEL analysis !

12!

4.4 Specific Environment !

15!

4.6 Internal Analysis!

18!

5. Market Strategy Implementation and Evaluation!

19!

5.1 Growth Market !

19!

5.2 Market Leader!

19!

5.3 Market Challenger !

22!

5.4 Digital Marketing Strategy !

24!

6. Conclusion!

27!

References!

29!

Appendices !

35

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1. Introduction ! The following report will provide comprehensive insight into Aldi by exploring several strategies that have been successfully executed by the multinational whilst upholding strong market presence in today’s competitive supermarket industry. Emphasis is placed on the firm’s activities to generate value. The report will encompass theories, models, analytical figures and concepts relative to Aldi’s ability to deliver continuous value, accompanied by improvements and recommendations!

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2. Background !

In the German mining town of Essen Anna Albrecht laid Aldi’s first foundations by opening the small food store in 1914 (ALDI, 2016). Her little 'service store' grew tremendously in popularity. By 1948, Aldi expanded to 4 locations under the reign of her two sons. During the '40s more Aldi stores were opened during implementation of their expansion program. By 1954, the brothers celebrated the opening of the 50th store in Germany (Ritson, 2015). ! After a disagreement regarding the sale of cigarettes, the prosperous family business was divided into two independent companies. “Aldi Süd”"servicing the South and “Aldi Nord” for the North. Karl took control of “Aldi Süd” (IDCH, 1996). Currently, he is in his 90s and ranked by Forbes as the richest man in Germany. Aldi created a shift in the grocery store market in the '60s as customers were able to take advantage of the same high quality products as before although now they could purchase them at"much more competitive prices (Ritson, 2015). In 1962, “Albrecht Discount” was shortened to “ALDI”. Five years later in 1967 more than 200 Aldi South Locations existed. ALDI Süd began frozen distribution depots and stocked fresh goods such as cheese and yoghurt in 1983 (IDCH, 1996). Aldi, over time continues to diversify and adapt to the ever-evolving taste of the modern consumer.!

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Aldi tapped into Great Britain’s market in 1990 then to Ireland in 1999. Exponential global growth followed two years later when Aldi expanded to Australia in 2001, Slovenia in 2005 and Hungary in 2008. New divisions opened in American cities such as Connecticut and Florida, Texas in 2010 and Georgia in 2011 (ALDI, 2016). In the United Kingdom, Aldi won “Supermarket of the Year” two years in a row in 2012 & 2013 (The Guardian, 2015). In April 2015, Aldi overtook Waitrose to become the United Kingdom's sixth-largest supermarket chain. Aldi sells low cost liquor, up until March 2016, Aldi had an online liquor website serving the east coast of Australia which has since been closed down. This approach wishes to focus on"expanding the supermarket chain across Australia by citing liquor in-store (IDCH, 1996). ! Originally, Aldi stores were often ridiculed as being cheap shops selling low-quality goods, whose customers could not afford to shop elsewhere. However, today their rapidly growing network has more than 7,000 stores and serves masses of people across three continents proves their monumental success (Ritson, 2015). Aldi has achieved enormous expansion goals and global market domination. Future plans are the continuation of expansion to lucrative pockets of the world (ALDI, 2016). (See Appendix 1.1 for Company history timeline)!

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3. Corporate & Business Strategy!

Vision!

Aldi’s vision – “All people, wherever they live, should have the opportunity to buy everyday groceries of the highest quality at the lowest possible price” (Aldi, 2016).!

Mission !

Aldi’s core mission" is to" ‘provide you incredibly high quality at impossibly low prices’ (Aldi, 2016).!

3.1 Strategy Overview !

Aldi has an overarching mission to “provide you incredibly high quality at impossibly low prices” (Customer Information - ALDI, 2016). Having a well thought out corporate strategy is vital for businesses in today’s fluctuating market. It provides firms with a clear direction on their operations but can also restrict business level activities. Thus it is important to have a corporate strategy that reflects the organisations goals and objectives, development strategy and environmental factors the firm is faced with. For ALDI their corporate strategy involves providing high quality ‘home brand’ goods but at a reduced price. This is achieved through a range of practices that aim to lower all overhead costs. For example, product packaging that doubles as product displays, saving money on both stocking and replenishment. Aldi Australia is currently operating solely in the grocery

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industry focusing their total resources on providing high quality products at lower costs to achieve a sustainable competitive advantage through the pursuit of a cost leadership business strategy. ALDI’s corporate resources are aimed at further expansion of their current businesses for example they have recently opened four concept stores which have a stronger focus on fresh produce as well as improved store layouts and heightened environmental concerns. This could be seen as a corporate response to the Australian consumer market becoming more environmentally, health and time conscious (Australian Food News, 2016). " At a business level, strategy focuses on each business unit’s individual objectives, the competitive strategy they operate under and the way in which resources are deployed to achieve those objectives. Aldi successfully competes within Australia’s grocery industry by simultaneously leading the low cost market as well as adopting strategies to compete against retail giants Coles and Woolworths. They capitalise on their internal strengths to maintain a strong position in the Australian grocery industry. For example, having such a large backing allows Aldi to achieve effective distribution channels which both cover Australia’s expansive locations whilst lowering costs through economies of scale (Murphy, 2015). This shows the effective allocation of resources to achieve the corporate strategies of maintaining high quality but at a lower price as they are able to source and implement quality control from their suppliers as well as lowering overhead costs through a streamlined business model (Kleemann, 2013). " According to Miles & Snow (1978) Aldi’s corporate strategy was aggressively aimed at the Analyzer culture (See Appendix 2.1). The Analyser culture allowed ALDI to benefit from

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the firm’s core competencies of efficiency and simplicity (Richards, 2016). The expansion of their private label products as well as pre-established distribution frameworks, from Europe into Australia, provided ALDI with the ability to effectively allocate resources and negate risk, during new-market entry as well as during their continued growth within Australia." " Aldi’s marketing strategy is effective in reflecting their overall corporate and business strategies. They have managed to communicate through their position within the market as well as communication strategies, a commitment to providing higher quality at lower prices. This is reflected in their cost leadership position within the market. The gain a competitive advantage by providing lower costs to a broad target. When looking at Walker et al., n.d (2015) comparison of competitive strategies it is clear that ALDI falls under a low-cost provider as they have good basic offerings, that are of acceptable quality but limited in number, lower costs than competitors and are continuously searching for cost reductions and maintenance of quality. (See Appendix 2.2 for table)!

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4. Market Segments and Positioning ! 4.1 Market Segments !

Aldi Australia competes in the highly-competitive grocery store industry and faces strong competition from market leaders Coles and Woolworths (IBISWorld, 2016). Arguably, Aldi adopts a broader-market target strategy whereby aiming to capture sufficient volume of customers which enables them to achieve economies of scale and a cost advantage (Walker, Mullins, Mavondo, Gountas, Kriz & Osborne , 2015). Aldi designs separate products and marketing programs to capture a range of segments within a broad market such as selling basic discounted products, mid-range products such as organic produce and specialty goods (ALDI, 2016). In this marketing approach, they are able to tap into three distinct segments of the market through distinct offerings. This suggests they fall around the “multiple-segments” position on the graph depicted in appendix 3.1. This is consistent with their mission statement where they state they target “all people” (ALDI, 2016). ! In the alternative, Aldi adopts a niche targeting strategy, positioned at the “single segment” on the same graph in appendix 3.1 whereby they aim to serve a specific segment within the grocery store industry, in order to avoid direct competition from the dominant players; Woolworths and Coles. They do this by seeking to serve specific segments within the broader market through offering specialised benefits (Walker, Mullins, Mavondo, Gountas, Kriz & Osborne, 2015). By applying this line of thought to their market offering,

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Aldi targets people seeking a low-cost and no-frills supermarket experience. They consistently communicate the benefit of shopping with Aldi as offering low-cost grocery products, as can be seen in appendices 3.2, which effectively differentiates themselves from their competitors and puts them into a niche segment of the market (Business Case Studies LLP, 1995-2016). !

4.2 Positioning !

Aldi’s position in relation to its main competitors within Australia; Coles, Woolworth's and IGA is depicted on the perceptual map that can be seen in appendix 3.3. On the vertical axis is price, and Aldi position’s is significantly lower than that of its competitors. Research revealed that on average a basket, made up of 28 products, of Aldi’s private labelled products was $26.56 cheaper than that of Coles and $31.72 less than Woolworth’s private labelled goods (Clemons, 2016). This supports their position on the Y axis. The X axis illustrates the level of customer service and help from staff the brands offer to consumers. Here Aldi is relatively on par with IGA in regards to consumer service; both of these businesses have limited staff present on duty therefore consumer service is relatively low compared to that of Coles and Woolworths who have staff in almost every section of the store ready to help customers. These two factors help to provide Aldi with a unique position within the market, effectively differentiating themselves from their competitors. ! !

Aldi’s vision statement states “All people, wherever they live, should have the

opportunity to buy everyday groceries of the highest quality at the lowest possible price” (ALDI,

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2016). Through this statement, Aldi effectively positions themselves as providing high quality at the lowest possible price. Supporting this position is their pricing strategies which gave them 12 “Product of the Year” awards in 2016 (ALDI, 2016). Underpinning their position within the market is consumer value which is derived from the benefits the customer receives which is based upon providing excellent quality at low prices (Walker et al., 2015). This effectively differentiates the brand from competitors whose prices, generally, are significantly higher as can be seen in appendices 3.4!

4.3 External PESTEL analysis !

4.3.1 Market Attractiveness ! The PESTEL model is an analytical tool used to understand the attractiveness of the market in which Aldi operates by analysing the macro-environmental trends impacting the market (Walker, Mullins, Mavondo, Gountas, Kriz & Osborne , 2015). These trends are divided into six specific segments as can be seen below. ! 4.3.2 Population/Demographic ! Australia is and has been experiencing a steady increase in population with the ADS showing an increase of 1.4% during the year ended 31 March 2016 and the proportion of Australians over 65 years growing from 8% in 1970-71 to 13% in 2001-02 (Australian Demographic Statistics, 2016). For Aldi this reflects an opportunity to provide grocery as well as lifestyle products that will be sought after by a financially conscious market.! 4.3.3 Sociocultural environment !

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Consumers, across all generations, are becoming increasingly health conscious and are demanding goods such as GMO free, organic produce and artificial free products. Eighty eight percent of consumers polled in a market research activity said that they were willing to pay more for such products (Gagliardi, 2015). This indicates a shift in customer preferences which Aldi is responding to by offering such products, including their own home brand organic items.! It has also been suggested that discount supermarkets, such as Aldi and Lidl, have educated consumers to anticipate more from supermarkets. Consumers are not willing to pay inflated prices for goods just because of their branding, they seek, value and expect businesses to be ethical as well (UBS, 2015). This provides an opportunity for Aldi to gain an advantage by emphasising their commitment to environmentally friendly practices for example in the recent concept stores all lights are LED in the bid to reduce energy consumption (Australian Food News, 2016)! 4.3.4 Economic Environment ! The grocery industry is predicted to grow by 4.1% annually over the next 5 years to reach $105.1 billion at the end of the period (IBISWorld, 2016). This projection is favourable for Aldi as it indicates it is operating within a growing market. " The Australian economy has experienced continual growth for the last 25 years (AFGC, 2016). However, it has still not fully recovered from the Global Financial Crisis and the retails real growth rate is below the average 3.3% rate of growth (AFGC, 2016). Over the period 2014-2015 household expenditure increased by 2.5 % (AFGC, 2016). However, as

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products offered in this market are essentially a necessity for most people, ALDI’s products are inelastic and therefore will always be in demand, this coupled with their low cost business model, will play in favour to a recovering economy.! 4.3.5 Political/legal environment! To regulate the industry, the ACCC has enforced laws for businesses to abide by when dealing with customers and suppliers through the Competition and Consumer Act 2010 (ACCC, 2016). Businesses within this market have the obligation to abide by these laws. The industry is also supported by the Australian Food and Grocery which works toward supporting the growth of the industry by working (AFGC, 2016). All of these bodies have the ability to impact positively or negatively on businesses within this industry and can pose a threat if Aldi does not stay up to date on all laws including packaging and nutritional information which may prove to be difficult when designing and importing their own products. ! 4.3.6 Technological environment! New technologies provide opportunities for business to be more efficient in their processes and allow the recording of sale items to be easier, faster and more precise (IBISWorld, 2016). New technologies also provide better research and development activities which provide businesses with opportunities for innovation within their processes and capabilities (Walker, Mullins, Mavondo, Gountas, Kriz & Osborne , 2015). A major trend in the macro-environment is the provision of online services to customers (Vadillo, 2016). This trend encourages supermarkets to develop and expand their online

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services with the focus to provide greater efficiency and convenience to their customers (Vadillo, 2016).! 4.3.7 Natural environment! The Australian government encourages businesses to act in ways which promote environmentally sustainability to fight issues such as global warming and decreasing carbon emissions (Australian Trade and Investment Commission, 2016). Ecofriendly standards such as the nonexistence of supermarket plastic bags are implemented to lower their costs and uphold credible corporate social responsibility (ALDI, 2016). This is a major trend in the environment which has the ability to influence businesses in all industries which businesses need to respond to effectively to remain operative. !

4.4 Specific Environment !

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These five forces collectively determine an industry’s long-term attractiveness. " It explains why some industries are consistently more profitable and provides insights into which resources are required and which strategies should be adopted (Walker, Mullins, Mavondo, Gountas, Kriz & Osborne, 2015). (See appendix 3.5)! 4.4.1 Threat of new entrants ! The fourth largest retailer, Lidl, first registered its trademark in Australia in 2000, established an office in Melbourne and registered its businesses name with ASIC but has yet made the move (Mitchell, 2015). Analysts suggest that the organisation has not been able to secure store sites or major supply agreements (Mitchell, 2015). These prerequisites

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