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Background of the Company

Discuss about the Services Marketing Analysis of ALDI.

The following analysis highlights the marketing analysis of ALDI Australia which is a well known international grocery retailer. In spite of several challenges by Coles and Woolworths, ALDI can be able to secure its position in the international market successfully.

In this research study, to analyze the market of ALDI, the nature of marketing strategy of ALDI has been presented and criticized by Porter's Five Forces model. Moreover, its current position and SWOT analysis have been briefly stated to evaluate the strategic marketing options of ALDI.  

The well known supermarket chain ALDI was first established in the Essen town of German in 1913 as a small food shop. After that, it spread its 50th new stores and shops in Germany. In 1960, it divided into two parts namely ALDI Sud and ALDI Nord to carry out their business independently. At that time, this supermarket mainly provided fresh products namely yogurt, sausages and cheese along with fresh meat at competitive prices. Now-a-days, it has nearly more than 7,000 shops which serve approximately millions of people throughout the world (Corporate.aldi.com.au 2017).

In Australia, the supermarket ALDI has started its journey form 2001 by opening approximately 270 stores across VIC, QLD, ACT and NSW. Now, it secures the top 10 position in the Australian retailers. Exclusive branded products, grocery items, and other essential products are available in this supermarket along with improved quality and competitive price. Moreover, it creates employment opportunities, new investment source, new property and logistics (Corporate.aldi.com.au 2017).    

The grocery market industry in Australia is both competitive and concentrated, and it provides a tough competition to each other as well as the new entrant. In spite of these major challenges, the supermarket stores ALDI has been able to create its position. In this perspective, the strong and unique marketing strategies help them to accomplish the desired goal successfully.

At the first stage, the well known grocery stores Coles Myer, and Woolworths captured almost 76% of the Australian market. These two supermarket chains earned approximately $55 billion profit from the Australian economy. During this period, in 2001, ALDI appeared in the Australian economy as an international grocery store. However, the situation was difficult as the foreign retailer was banned in the Australian market economy. In spite of these problems, ALDI had secured near about 4% of NSW grocery industry along with 83 stores throughout the four states of Australia in 2004.

Marketing Analysis

During the opening period, to crack the highly competitive and concentrated grocery market industry in Australia, ALDI mainly concentrates on providing the high and improved quality products at the lower prices. At that time, the main marketing strategies to capture the grocery market provided exclusive and unique brand products, limited range, the price changing policy and focus (Corporate.aldi.com.au 2017).

The main and central focus of ALDI is to launch new, exclusive and unique brand products in the Australian grocery market. According to Ododo, Mulholland and Turner (2015), to sustain and get success in the competitive market industry, it is essential to make separate from other organization by proving new items to the customers with an affordable rate. Hence, ALDI deals a partnership business with the leading manufacturer organization to make own-brand products. High and improved quality is maintained along with low costs.

Limited range:

In the words of Metzger (2014), one of the successful marketing strategies is to focus on the target market and the choice, taste, and variety seeking attitudes of the customers. Now, to reduce the price of the products, the marketing strategy of ALDI is to provide the limited range of items. By following the market survey, they serve that type of products which has comparatively more demand at the competitive price. Furthermore, products are available according to their popularity, not in all sizes. As a result, ALDI can be able to capture the lead position in grocery retailer in the Australian market economy.  

As per the view of the price changing policy, ALDI provides the lower price to the customers when the cost is affordable. However, when the cost of the production increases, it raises its price of the products. The main reason behind the fact is that ALDI does not want to serve any low quality goods at any costs. As a result, when the cost rises, they also increase the price of their products but not compromise with its quality. This unique strategy is known as the value proposition marketing strategy by ALDI which gives the positive result.  

On the other hand, ALDI believes in the long-term approach to capturing the Australian grocery market successfully. As opined by Van den Steen and Lane (2014), the long-term partnership, trust and responsibility with the suppliers and small business firms help to grow the new entrant successfully in the competitive industry. ALDI develops a long-term relationship and partnership with the suppliers. Though the new suppliers want to deal with ALDI with a cheaper rate for their desired quality of the product, ALDI always gives the first preference to the existing suppliers. As a result, in the future prospect, it makes a strong relation which is needed to crack the industry.

The nature of ALDI's Marketing Strategy or Strategies since it began

The competitor of the grocery industry, Coles and Woolworths expand their business in different sectors such as liquor, online shopping, petrol and pharmaceuticals. On the contrary, ALDI only concentrates on its core business. They do not take this type of marketing strategy to expand their business. However, they launch a unique idea which makes them different from the other grocery stores. This is known as the “surprise buys” through which a batch of items such as computers or televisions are sold for the fixed period in the stores of the ALDI (Aldi.com.au 2017). With the help of this marketing strategy, a huge number of new customers attract towards them as they maintain both the high quality and lower price of the products.

Threats of the new entrants

Other competitors such as Tesco, Wal-Mart and Europe Lidl want to enter into the grocery industry in Australia which gives a tough competition to ALDI. It also creates a threat of copying the successful market strategies and implementation it by a better way. 

Threats of the substitution

Due to globalization in the grocery industry, the rivals of ALDI produce close substitutes for which the number of loyal customers gets reduced (Cameron et al. 2015).

Bargaining power of the suppliers

With the increased number of grocery stores, ALDI lowers its bargaining power to the customers for maintaining the sales amount.

Bargaining power of the buyers

As there are a huge number of sellers in the market, the bargaining power of the buyers is increased, and they can shift from the one brand to the other. However, ALDI has the advantage as it sets its marketing strategy as “best quality at the cheapest rate” (Ausfoodnews.com.au 2017).

Competitive rivalry

Due to the existence of a huge number of grocery stores, the competitive rivalry is high regarding price and quality of the products (Voigt, Buliga and Michl 2017).

Table 1: Porter’s Five Forces model of ALDI

Source: (Mortimer 2016)

Current Situation of ALDI:

ALDI Australia forecast to increase their profit by 90 percent to the $15 billion over next consecutive four years. From 2013 to 2016, the sales of ALDI rose 60 percent to the $8 billion. Moreover, due to an increase of the stores from 373 to near about 628, the sales are estimated to reach the amount $15 billion by the year 2020 (Mitchell 2017).

According to the report of IBIS World, the revenue of ALDI is $105 billion along with 4.1% annual growth in the year 2016. Furthermore, it creates approximately 332,038 employment opportunities and 2012 business in the Australian market (Ibisworld.com.au 2017).  

SWOT analysis:

With the help of SWOT analysis, the strengths and weaknesses of ALDI relating to the marketing strategies in the Australian grocery industry have been notified along with the associated threats and opportunities. 

Strengths

·         The Strong brand image along with increasing reputation regarding quality and price and the international recognition.

·         Simple and unique organizational culture and operational system.

·         A limited number of the quality items at a lower price compare to other stores.

·         Maintain a good and strong relationship with the suppliers and customers.

·         Low cost on advertising which helps to acquire the cost efficiency (Tseltsova and Bohnert 2015).

·         Most of the staffs are well trained and working hours is less.  

Weaknesses

·         The product range is limited which indicates the deficit of product differentiation.

·         Some manufacturers do not want to relate their name which creates the demotion of the brand name loyalty.

·         ALDI uses limited technology in their production process compare to the other competitors.

·         Advertising policy and the public relations is not so much significant (McMillan 2013).

·         The ability to borrow from the market is very low which sometimes hinders the potential growth of this organization.

Opportunities

·         ALDI has an opportunity to expand their business into the other markets namely house brands which are profitable.

·         By applying the diversification methods, ALDI can be able to earn more profits compared to the rivals.

·         Implementation of new systems helps to maintain the desired quality standards of the products (Bozhinova 2014).

·          The increase in market penetration ensures the growth of this organization.

·         The modern and advanced market trends along with increased number of Australian population enhance the diversification level in the business of ALDI.

·         The most important opportunity for ALDI is the value of Euro regarding dollar is much greater than the value of Australian dollar. As a result, ALDI gets the benefits of lower price and transaction cost in the international market.

Threats

·         Organization culture is not so much significant which could resist the massive expansion of ALDI.

·         Limited uses of the technology in the production procedure hold back to the growth of this organization.

·         The competitors can employ new and attractive marketing strategies to capture the market.

·         Globalization can play an important role to attract the rivals in near future.

·         The competitive advantage does not remain in favor for the growth of ALDI.

Table 2: SWOT analysis of marketing strategies of ALDI

Source: (As created by author)

Conclusion:

From the above analysis, it can be inferred that ALDI makes a significant position in the grocery industry of Australia with the remarkable marketing strategy of providing the highest quality at the cheapest rate. However, due to globalization, the numbers of competitors are increased which give ALDI a tough competition. Thus, to make it different and sustain in the industry ALDI needs to implement new and advanced technology, more advertising policy, innovative marketing strategy and revised organizational culture along with improved public relations.

Reference List:

Aldi.com.au. (2017). ALDI Initiatives - ALDI Australia. [online] Available at: https://www.aldi.com.au/en/about-aldi/aldi-initiatives/ [Accessed 18 Jan. 2017].

Ausfoodnews.com.au. (2017). Aldi tries a new strategy to grow bigger market share in Australia | Australian Food News. [online] Available at: https://www.ausfoodnews.com.au/2015/05/20/aldi-tries-new-strategy-to-grow-bigger-market-share-in-australia.html [Accessed 18 Jan. 2017].

Bozhinova, M., 2014. Private label–retailers’ competitive strategy. Global Journal of Management And Business Research, 13(10).

Cameron, A.J., Sayers, S.J., Sacks, G. and Thornton, L.E., 2015. Do the foods advertised in Australian supermarket catalogues reflect national dietary guidelines?. Health promotion international, p.dav089.

Corporate.aldi.com.au. (2017). About ALDI - ALDI Australia. [online] Available at: https://corporate.aldi.com.au/en/about-aldi/ [Accessed 18 Jan. 2017].

Corporate.aldi.com.au. (2017). ALDI History - ALDI Australia. [online] Available at: https://corporate.aldi.com.au/en/about-aldi/aldi-history/ [Accessed 18 Jan. 2017].

Corporate.aldi.com.au. (2017). Operations - ALDI Australia. [online] Available at: https://corporate.aldi.com.au/en/corporate-responsibility/operations/ [Accessed 18 Jan. 2017].

Ibisworld.com.au. (2017). Supermarkets and Grocery Stores in Australia Market Research | IBISWorld. [online] Available at: https://www.ibisworld.com.au/industry/supermarkets-and-grocery-stores.html [Accessed 18 Jan. 2017].

McMillan, J., 2013. The importance of market segments. McMillan Technology. Available on: https://www. mcmillantech. co. uk/articles/MarketSegments. pdf.

Metzger, K., 2014. International Management Analysis of ALDI.

Mitchell, S. (2017). Aldi Australia sales forecast to tip $15b by 2020. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/business/retail/aldi-australia-sales-forecast-to-tip-15b-by-2020-20160418-go8rmu.html [Accessed 18 Jan. 2017].

Mortimer, G., 2016. Woolies private label strategy will play directly into the hands of Aldi. The Conversation, (30).

Ododo, C., Mulholland, G. and Turner, J., 2015, November. Can Discount Pricing Be A Comeptitive Brand Strategy? An Evaluation of Aldi. In International Conference on Marketing and Business Development Journal (Vol. 1, No. 1, pp. 241-251). Bucharest University of Economic Studies Publishing House.

Tseltsova, A. and Bohnert, K., 2015. The international marketing strategy of grocery retailers–the strategy of adaptation and standardization.

Van den Steen, E. and Lane, D., 2014. Aldi: The Dark Horse Discounter.

Voigt, K.I., Buliga, O. and Michl, K., 2017. Striving for Customer Benefit: The Case of Aldi. In Business Model Pioneers (pp. 11-24). Springer International Publishing.

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