Positioning of Aldi in the Market Using Porter’s Five Forces Analysis

Question:

Discuss About The Australian Because Of Marketing Strategies?

Marketing is a concept that is used by business organisations to gain a better understanding of the consumers in the market and also to create a demand for their products or services in the market, using different sources of media, such as printed media, digital media, online sources, etc. (Silk, 2006) Marketing is considered to be an important part of the business because it allows business organisations to assure and remind their customers about their presence in the market and how the products and services being offered by them can satisfy the demand of the customers.

Aldi, officially known as ALDI, is a discount supermarket chain that operates in more than 18 countries. The company has around 10,000 stores in different parts of the world and has an estimate turnover of €50 billion. The company is headquartered in Germany and was founded by Karl and Theo Albrecht in 1946. The company started its global expansion during 1967 when it acquired Hofer, which was an Australian grocery chain. The company has been working hard to tap the Australian market and end the duopoly of two supermarket chains in Australia. The mission statement of the company – “provide you incredibly high quality at impossibly low prices” communicated the intent of the company. This report has been prepared to gain a deeper insight into the marketing strategies being used by Aldi supermarket chain in Australia.

Porter 5 force analysis is a strategic framework that helps in analysing the macro environment factors that have an impact on the business of an organisation. The five forces analysed in the model are threats of new market entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products and industrial rivalry. An analysis of Aldi’s position in Australia, using Porter’s five force model is given below:

Threats of new entrants à the threat of new market entrants to Aldi in Australia can be considered as high as it operates in the grocery industry, where it is relatively easier to enter the market using successful strategies of other brands. Even though there are certain legal obligations that are required to be fulfilled in order to enter the Australian market, Aldi is still likely to face competition from some major global supermarket brands, such as Wal-Mart, Tesco, etc. that are trying to enter the Australian market.

Marketing Strategies Used by Aldi in Australia

Threat of substitute products à the threat of substitute products can also be considered as high because there are a number of brands in Australia that can offer competitive products to Aldi’s competitors. Further, the cost to switch to other products is also not much for the customers, in case they are not satisfied with the products being offered in Aldi’s retail stores (Sharma, 2015). Overall, Aldi still has a upper hand in the market because of the mind set of people regarding Aldi, which is ‘low price, good quality.’

Bargaining power of suppliers à the bargaining power of suppliers is low in the industry in which Aldi operates because there are a number of competitive firms that can provide competitive products. Australian suppliers will be more than interested to get into business with a global firm like Aldi as it would offer them a clear advantage over the other suppliers (Carreno, et al., 2011). As a result, Aldi has an upper hand in the bargaining process when it comes to suppliers and can negotiate the prices of the products with ease. Furthermore, backward integration of large retailers in Australia has lowered the bargaining power of suppliers even more.

Bargaining power of buyers à the effect of bargaining power of buyers on Aldi can be considered as moderate because in the Australian market, there are a number of major supermarket stores and rival products. Further, the cost of switching to other brands and products is almost negligible, which poses a high threat to the company but the fact that the company is able offers better quality products at lower prices provides it a competitive edge over its rivals and the buyers are less likely to make a shift.

Competitive rivalry à The competitive rivalry in the supermarket industry of Australia is high because there were already a number of players established in the market even before Aldi started expanding its business (Smith, 2010). Further, the Australian supermarket might also face a risk from new market entrants in the near future because a number of global supermarket chains are trying to enter the Australian market and tap the market share of established Australian supermarkets.

Aldi entered the Australian market at a time when Coles and Woolworths had already established themselves as the industrial leaders. It has only been possible because of Aldi’s marketing strategies that it was able to tap such a great market share and give a tough competition to the Australian supermarket leaders (Jokaroh, 2016).

Future Marketing Strategies for Aldi in Australia

Since the very beginning, Aldi has been aiming at targeting a broader market, which has actually helped the company in capturing a sufficient volume of customers and achieve economies of scale. The company has divided its products into different categories i.e. basic discounted products, mid-range products and specialty goods. Offering products in different category has allowed Aldi in targeting different market segments in Australia (Australian Food News, 2017). Aldi has promoted itself as a low cost supermarket experience, which has allowed the brand to capture the interest of the customers and outperform its competitors, such as Coles, Woolworth and IGA on the basis of its pricing strategy. The pricing strategy of the company has been so aggressive that a research concluded that a basket comprising of 28 Aldi’s private labelled products was $26.56 cheaper than that of Coles and $31.72 less than that of Woolworth (Clemons, 2015).

The global business world is complex and even the industrial leaders have to strive hard to maintain their position in the market. Similarly, Aldi needs to work hard to maintain its market position in Australia and to continue on its path of growth. Certain marketing strategies that would help Aldi in gaining more success, throughout the next decade, are discussed below:

First of all, the strategy of the company to offer higher quality products at lower prices has helped the company in grabbing a greater market share in Australia. Thus, the company should continue to use this strategy in future and should use the same strategy and expand its business to other parts of Australia.

Secondly, the company uses a simple digital strategy in which it reminds its customers of its presence through e-mails and online based information, which should be upgraded as soon as possible. The modern day business world is highly dependent on digital or e-commerce business models and Aldi should introduce an e-commerce business model for its Australian customers as soon as possible. Starting offering products and services online will help Aldi to reach out to a greater customer base in Australia and even target those places where it hasn’t been able to expand its business till now. An e-commerce business model will also help Aldi in setting up a better market position and preparing to compete with global supermarket brands like Wal-Mart and Tesco, in case they start to expand their business in Australia.

Thirdly, Aldi can start promoting its brand and e-commerce model through online media sources, such as social media websites like Facebook, Twitter, etc. Such marketing activities will enable to the company to reach out to a greater number of customers in the market and direct them to their e-commerce home page, where they can display all the exclusive offers and convince the customer to make a buying decision.

Lastly, to gain a better competitive position in the Australian market and to sustain in the market for the next decade, Aldi needs to implement marketing strategies that would allow it to offer fresh products to its customers. The demand for unpackaged and fresh products is increasing at a very high rate in Australia and incorporating such products in its portfolio will help Aldi in targeting more customers and outperform supermarkets like Coles and Woolworths

Conclusion

Even though Aldi entered the Australian market at a much later stage when companies like Coles and Woolworths had already established themselves in the market, it has managed to grab a considerable share of the Australian market because of its marketing strategies. At present, Aldi holds strong position in the Australian market because of its ability to offer higher quality products at cheaper prices but is still at a risk when it comes to new market entrants. Aldi faces a threat from global companies like Wal-Mart and Tesco, that are eyeing the Australian market for business expansion. As a result, Aldi should implement certain strategies that will help it in sustaining the market competition in the coming decade

References

Australian Food News, 2017. Aldi announces new business strategy. [Online]
Available at: https://www.ausfoodnews.com.au/2017/05/15/aldi-announces-new-business-strategy.html[Accessed 2 October 2017].

Clemons, R., 2015. Which supermarket has the cheapest groceries?. [Online] Available at: https://www.choice.com.au/shopping/everyday-shopping/supermarkets/articles/ cheapest-groceries-australia[Accessed 2 October 2017].

Jokroh, 2016. ALDI’S AUDACIOUS MARKETING STRATEGY: IS THIS THE END OF SUPERMARKET DUOPOLY IN AUSTRALIA?. [Online] Available at: https://mpk732t12016clusterb.wordpress.com/2016/04/09/aldis-audacious-marketing-strategy-is-this-the-end-of-supermarket-duopoly-in-australia-4/[Accessed 2 October 2017].

Carreno, C., Almartmy, H. & Tyagi, S., 2011. Strategic HRM Group Report. [Online]
Available at: https://shitijtyagi.files.wordpress.com/2014/06/aldi_final_report.pdf
[ccessed 2 October 2017].

Smith, C., 2010. Aldi in Australia – Case Study Analysis. [Online] Available at: https://www.slideshare.net/ChrishanSmith/aldi-australia-case-part-1[Accessed 2 October 2017].

Sharma, R., 2015. PESTEL Framework & Porter’s Five Forces | Aldi. [Online] Available at: https://thinketc.com/pestel-framework-porters-five-forces-aldi/[Accessed 2 October 2017].

Silk, A. J., 2006. What is Marketing?. s.l.:Harvard Business Press.