International_Marketing

MKTG301 Case Study Analysis – ALDI: Survival of the German Giant Case study, ALDI: Survival of the German Giant, discusses the strategies and implications of ALDI’s entry into the Australian grocery industry. ALDI’s success in the European and US market is extremely notable, with over 5000 stores in operation over the last 50 years. Their strategy to expand globally has been done so in a bid to replace local markets and competitors. ALDI saw Australia as a market which obtained significant opportunity for global expansion beyond the European marketplace. They were aware of the lack of competition offering low prices on quality items, which are locally manufactured, so they plunged into the Australian market with high expectations for success – despite the looming high barriers to entry and the possible inability to gain market share. When ALDI first entered into the Australian marketplace, they had hoped to achieve 1000 outlets annually. This goal proved to be extremely ambitious, with only 200 stores currently operating throughout the country. Despite this, ALDI’s low-cost business model has resulted in survival in the tough grocery industry. When they entered into the market in 2001, they had a very clear strategic objective: to offer of top quality products at the lowest prices. Ways to keep costs to a minimum included the use of private label brands, locally manufactured and produced goods, limited advertising and marketing, and limited services. It was soon apparent that this strategy, although proving a success at the time, was far too easy for grocery giants to imitate. Supermarket giants saw ALDIs tactics as a competitive threat and responded accordingly. Sooner rather than later, Coles and Woolworths were hitting back at ALDI, by offering similar prices, an aggressive rollout of quality private label products, pushing advertising on their local produce, and increasing their services with longer trading hours. Together, Woolworths and Coles/Myer had a massive 79 per cent of the supermarket sector, so any new entrant is to face high barriers. Currently, ALDI’s greatest threat is the conversion of sixty-five Coles-owned BiLo stores to operate as a discount format providing a limited private label range. This could potentially convert current and future consumers from shopping at ALDI, which in turn, would reduce sales and ultimately lead to the failure of the company. Further obstacles that ALDI faced when entering the Australian market were the limitations on the acquisitions of sites for expansions. ALDI’s strategy for location is focused outside metropolitan areas, which enables them to keep rental costs low, provide a larger parking area for customers, and are generally situated in areas where the average household income is lower to those living in the central metropolitan areas. With the recent development of satellite cities such as Northlake’s on Brisbane’s north side, ALDI has a genuine opportunity to expand and succeed. The price of property in these areas are significantly cheaper than those in metropolitan areas, and it is probable that the local consumers are more money conscious, and treat the grocery shopping decision making process with a cognitive approach. Despite all of this, if property regulations were to restrict ALDI stores from expanding into these areas, they could face a serious threat to their survival. For ALDI to increase their chances of survival in Australia’s highly dominated supermarket industry, they should be considering ways to further stimulate demand from the Australian consumer. By modifying their strategy in a way that increases the number of consumers’ spending, ALDI will be able to gain more share in the grocery market. A recent tactic by ALDI is their National Pricing scheme – where the price of a particular item is the same across all stores in Australia. ALDI is the first grocery retailer in Australia to introduce national pricing, so it will be interesting to see whether this is successful or not. Limited media coverage has been provided about ALDI’s new approach, so to get the word across to their consumer base and the general public, it may be beneficial for ALDI to advertise this through TV and radio commercials, rather than just having a small section on their website explaining this. ALDI’s national pricing scheme could prove successful given the fluctuation of goods across states, especially for frequent travellers. If ALDI were to target consumers who travel interstate often, they may be able to gain further customer loyalty as people would be aware that the prices in the hometown are going to be the same as prices in the city they are travelling to. Today’s modern grocery shopper places a strong emphasis on convenience, easy access and flexible opening hours to cater to time constraints and busy lifestyles. The average number of shopping visits is declining, which highlights the need for brand building strategies of grocery stores, to ensure they gain loyal customers. Working parents, especially single parents, aim to spend as little time as possible in grocery stores. As found by ABS (2009), there was a 76.9 per cent increase in single parent families during the period 1995-2007. This significant jump opens up doors for grocery stores like ALDI to target single parent consumers aggressively. To add to their current strategy of offering top quality products at the lowest prices, ALDI should invest in direct marketing to reach their customer base in a more effective way. With advanced technology available, ALDI should utilize their online presence further, and offer online grocery shopping with a small delivery fee, or send out weekly newsletters to their consumers. By having a small survey for consumers to fill in as they sign up to the newsletters, ALDI would be able to find out more information on the consumers living arrangements (ie, single parent, one-person household etc). If ALDI were more aware of the status of their consumer base, they’d be able to offer direct marketing through specialized ads, specific promotions (such as bulk buy goods for single parents), and loyalty discounts. This would potentially increase ALDI’s brand equity and ultimately increase customer loyalty. Another trend that has been apparent in the Australian supermarket industry is the increase of one-person households purchasing private labels. With the current economic conditions in Australia, the level of disposable income has decreased, and as a result, the decision making processes associated with grocery shopping are far more thought out. With one-person households purchasing private labels, there is a new target audience for the supermarket industry. ALDI should be focusing on enhancing the look and quality of their private labels, so that they are appealing to the consumers eye. As private labels take up approximately 80 per cent of ALDI products, it’s imperitive that they maximise sales. By positing their private labels in the consumers eye as a higher quality, lower priced product (that also looks like it), then there is a high chance sales will increase and ultimately so will profits, brand equity and customer loyalty.