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Aldi future international expansion strategy

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Aldi International Expansion Strategy
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Aldi International Expansion Strategy
Introduction
Aldi is an established retail business well-known of its brand in the industry across the world. The retail business is powerful in Europe with approximately more than 10,000 outlets, distributed across 20 countries with an estimated return on investment of more than 50 billion Euros. The business does adopt low pricing strategy in addition to hard-discounts in all the stores. The market style is oriented with deep discounts at most to the lower and middle household income classes.
Task 2: Rationale for selected country and Justification
The Czech Republic is the most attractive market for Aldi since it has stable political environment, rapidly growing economy, and high population of literate people, readily adoption of the innovative technology and free movement of goods that seems to support the thriving of Aldi when investment is made. These factors are therefore categorized as “political, economic, social, technological, environmental, and legal” factors.
Political factors
According to Janicki and Wunnava (2004, p.6), the Czech Republic is one amongst the few countries which boast a stable government regarding political interferences. Besides, there are fair regulations for the entry modes in the country, and there is also every reason to believe that within the recent years, there have been no riots, signs of war or even indicators of coup d’ etat within the boundaries of Czech Republic (Kaufman 2007, p.

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111).
Aldi is keen on analyzing this country’s macro environment before embarking on any plans that might lead to investment. It is from the above political environment analysis that shows the stability of the Czech Republic regarding the political environment hence Aldi is likely to make huge profits from the conducive political environment that promotes thriving of the business activities (Bevan and Estrin 2004, p. 775).
Economic factors
Basing on Djankov and Hoekman (2000), the Czech Republic is considered to have the most stable market that is rich in Central Europe. To be precise, this country’s Gross Domestic Product was likely to grow from 214.6 billion that it produced in 2011 to 279 billion by the end of 2017 (Demekas, Horváth, Ribakova and Wu 2007). This, therefore, means that Aldi is likely to do well in an already stable rapid growing economy.
Furthermore, the country has a low labor cost requirements as compared to other countries in Western Europe (Carstensen and Toubal 2004). It is hence clear that the stable economic environment that is being enjoyed in the Czech Republic does provide a good business platform that Aldi will be able to thrive in its activities.
Social factors
The demographic distribution of Aldo’s target market comprised of people ranging from a teenage age of around 15 years old to the adults of around 65 years old. This is the group of people that are characterized by vigorous youths, working adults and the group of individuals that are still receiving their pension. According to government sources, the large percentage of the Czech Republic’s population is these individuals between 15 years old to 64 years old people hence a good ready market for Aldi in this European country.
Basing on Bandelj (2002), high level of education among the citizens and residents of the Czech Republic, in general, provides a good opportunity for Aldi to adapt fast and grow rapidly in its new market. This is simply because the high level of education goes hand in hand with strict adherence to the country’s rule of law hence a legal move for the Aldi will mean a high chance of success of the new company in the educated country.
Technological factors
According to Lengyel and Cadil (2009), there has been a significant tradition in the scientific field which has been running throughout the years of both academic and specialized projects of research that are now bringing the new forms of innovations and inventions in this country. The presence of numerous technology platforms in the Czech Republic thus provides a good opportunity for stabilizing the Information Technology platform regarding the Aldi equipment and computers. The adoption of the innovative technology in the Czech Republic is a good ground that Aldi is likely to utilize INA almost every aspect of its operation. The fact that businesses are embracing digital technology in the Czech Republic will mean that Aldi does explicitly exploit the innovations and inventions in marketing, data management, and communication among other daily business operational functions.
Environmental factors
Recycling is a major step that the Czech Republic has made measures of managing and conserving environment are concerned. Recycling refers to the process by which used materials or in this case wastes are collected and modified into other useful products. According to Vail (2007), Czech Republic has taken major steps in the recent past to curb both industrial and homestead wastes through recycling. All the recyclable wastes are collected and taken to various relevant firms.
Besides, the country also implements the so-called landfill taxes which mean that for an individual or a company to use the public dumping site, there is a fee that is supposed to be paid depending on the tonnage of the waste (Vail 2007). Since Aldi has already adopted the recycling mechanism as a way of reducing the environmental pollution, the business will be a good fit in the environmental conservation system within its new host country. It is also essential to note that Aldi does recycle around 98% of the waste.
Legal factors
Conducive matters of legality in the Czech Republic that promotes thriving of business within the country is also another factor that makes the Czech Republic be the most attractive market for Aldi. The Czech Republic is an established country where there is free trade movement of goods (Breuss 2001). It means that goods do not have restrictions while being transported within the country. This attractive legal factor is thus conducive to Aldi’s establishment in the Czech Republic.
Task 3: 5-Forces model
The threat of entry (High barriers- Low risks; Low barriers- High risks)
Aldi is a well-established business that aims at expanding its business. It is obvious that Aldi is a big company already operating in various parts of Europe, Australia, and the USA among others. According to the force of threat of entry into Czech Republic market, most of the barriers to the Aldi business are high although, some of the barriers are low within the Czech Republic market (Kosova 2010 p.874). There are certain high fixed costs that the Aldi will inquire, the likes of establishing the working premises, recruiting and training the staff to get aligned with the policies of the business.
Subsequently, the capital requirement of the entry is high within the republic as the acquisition of key resources for the Aldi within the market of Czech Republic is such involving. The economies of scale are still high within the environment such that the current businesses are enjoying fabulous benefits an increase in sells in regards to seasons (Dries, Reardon and Swinnen 2004 p.535). The access to the ready supply of required resources and the distribution channel is above average. The provisions of policies governing supply operations make the barrier high.
Nevertheless, the customer switching cost is low as well as the overall government regulations (Senauer and Seltzer, 2010 p4). Therefore it can be denoted that the high barriers are associated with low risks to the business, unlike the low barrier that seems to attract high risks.
Bargaining power of the buyers (High risk)
Czech Republic market requires a high level of standardization of the product to suit the customer quality demand and other requirements such as pricing. It outlines how the Aldi must study and understand the demands of the customers to get their products standardized to suit the customer. It is clear that the customer has powers in controlling the market (Grégoire, Laufer and Tripp 2010 p.748).
Aldi does provide a line of products from beverages to snacks and other fast foods. The desires and wishes of the Czech Republic target market do vary based on their favors. There is a different group of customers that Aldi will target thus their priorities will be given consideration. Therefore, the environment can be referred to as an international hub.
The global has advanced technologically, and there are many applications developed to the facilitated better interaction between the business and its customers (Edosomwan, Prakasan, Kouame Watson and Seymour 2011 p.79.). Aldi business will have no otherwise but give a priority of considering the appropriate online approach of maintaining the customer loyalty thus the sustenance of online new trends in regards to Uncles, Dowling and Hammond (2003 p.296). Customer switching power is undetermined. Therefore, the bargaining power of buyers is high thus exposing the business to high risk.
Threat of Substitutes (High risk)
The power of convincing targeted customers to switch to underlined product or service require aggressive and intense approaches that are relevant within the given context. The Czech Republic has a defined character amongst its citizens who are the target of Aldi business. As a considerate factor, establishing convenience stores across the specific hotspot locations and giving discounts to the customers may impact the power of retaining the customer loyalty and at the same time winning them as new customers if at all is done well as described by Nieri and Roth (2009 n.p). The establishment of the mentioned is wanting regarding resources thus remaining a threat to the establishment of the business.
At the same time, an approach of adapting and innovating according to the market has a great impact on the way of winning customers who have some loyalty to the competitor. The aspect of innovation requires intense research of determining the unique convincing component. According to Srholec (2005 n.p), the Czech Republic market environment requires massive innovation and integration of various activities for easy adaptation in the competitive market. It is, therefore, unhealthy for the business as the threat of substitutes has a high risk.
Bargaining Power of Suppliers (Medium Risk)
The Aldi business will have a favorable mode of accessing and acquiring the required resources. Primarily, Czech Republic has plenty of local production which means the demand for suppliers by Aldi business is minimal for example the country produces 40% of total fruits and vegetables. Most businesses do not depend highly on suppliers. The products required from far places are limited thus the efficiency of operations without the involvement of suppliers (Vlckova 2011 p.5). The supply of required products is easy and faster because the proximity to other countries where Aldi is established is easy and less costly those making the compensation of suppliers limited as according to Makhija (2003 p.449). Therefore, it can be deduced that the bargaining power of the suppliers has a medium risk to Aldi business.
The Extent of Rivalry between Competitors (High)
The Czech Republic has some big international business names already established. The likes of Tesco, Lidl, Penny Market, Kaufland, Lidl, Globus, Billa, and 1 local (Coop) are already operational. The attractive aspect of more than 42% of the Czech households depending on hypermarkets which offer discounts of up to25% is the remarkable determining factor (Colle 2003 p.11). These businesses are doing well for example Lidl recording 50% profit increase as at 2015. Therefore, the rivalry level is high (Starr 2017 n.p).
Task 4: Value Chain Analysis:
Value Chain Analysis does indicate how the business outperforms the competitor within the market grid. There are two activities engaged while conducting value chain analysis as defined by Porter and they include value chain activities and the operations (Porter 1985). The primary value chain activities have the specific objective of upholding the competitive advantage on the activities of production and delivery of the respective product.
Inbound Logistics: The inbound logistics are concerned with the actions of receiving and keeping materials that are required for the manufacture of the respective product. The Aldi business always makes sure that a bulk of materials is purchased to produce its respective product in its identifiable brand name (Haleem and Jehangir 2017 p. 4). By doing so, the Aldi enterprise can save cost and in the long run prolong a competitive advantage in the industry over other competitors is achieved as according to Franke (1999 p.8).
Operations: It is the second segment as defined under value chain analysis. The part defines the product and service’s lifecycle. Aldi business has developed and maintained their brand of which they are free to interact with their customers, again and again, move to their store to acquire the product with the non-compromising quality and services as intended. The Aldi business product lifecycle can be termed as the growth stage because it is at present well acknowledged in the market with the business competitor in retailing sector (Durand and Paché 2005 p.23).
Outbound Logistics: The attribute has defined the appropriate and eloquent ways by which the produced and readily available goods and services are ferried to reach the targeted market or the buyers (Lawley and Birch 2014 p.3). It can be observed that Aldi has its own defined outbound logistics such as the exclusive transport system used to reach the product and service to the respective customer (Fernández 2010 p.23).
Marketing and Sales: the section is such critical to the success of the business as it marks the stability of the enterprise in regards to maintaining customer loyalty and acquiring new clients. The primary purpose of the aspect is to provide a better way of the business products being made known to the current and new customers via identical marketing and sales mechanisms in regards to Jobber (2004). Aldi has a marketing and sales strategy that aims at saving money and other resources in all possible way. The approach has twisted the market with the Aldi’s competitor by cutting the cost of marketing and passing the savings to the consumer in due course.
Task 5: Aldi Market Entry Strategy
A business must be consumer-centric to make sure that they are at easy of understanding the future developments to retain the customer. Customer loyalty is critical on the basis that more sales are made to already existing customers much easier and relatively cheap because of the power of client retention when compared to searching and selling for targeted new consumers of the business (Lee-Kelley, Gilbert and Mannicom 2003 p.242). However, having customers does not mean that new ones should be acquired; they should be outsourced as it is of great significance to the growth and expansion of the business. Nevertheless, retention of new customers requires the business to invest more to meet loyalty requirements (Duke 1993 p.35).
Service delivery: The primary goal of the customer service is to make sure that customers are fully satisfied with excellent service delivered. According to Carraher, Parnell and Spillan (2009 p. 262), Aldi should define an excellent strategy with the purpose of retaining the competitive advantage in consideration of the issue of incredible courtesy at all times. Aldi can perform better than the other Operators with intense use of incredible courtesy by the employees and provide satisfactory customer service. The business local store managers should be available and responsible for solving all the frequent issues affecting customers at their convenience.
Other secondary activities can incredibly increase the efficiency and effectiveness despite not directly getting engaged with production. Some of the activities that Aldi business should consider engaging in include procurement, human resource, technology embracement, and infrastructure. The procurement aspect defines the resource management for the better operations of the Aldi business. The company must have a well-defined procurement (Brandes 2005 p.26) which is well informed to do with matters of resource management. The human resource has the role of recruiting the business employees. While entering the new market, Aldi human resource should be engaged in recruiting staff that is efficient and eligible in respective sections and provide good incentives as it has done in UK (Davies 2017 n.p).
Technology has remained the core drive of every business. Aldi must embrace technology development by ensuring that advanced interaction sites are adopted. Above it all, the business must ensure advanced management of generated information as well as management of the knowledge for the benefit of the business through the business analytics practice. Infrastructure segment must be viewed positively to make sure that business sections such as planning, senior management, and quality receive the necessary support. Just the same way it has done, Aldi do manage the available resources more efficiently for the easy operation of the enterprise (Haberer 2008). It always recruits staffs that are efficient thus satisfying customers and running the store efficiently. The information of the enterprise is well managed with appropriate security extended to it.

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Appendices
Appendix A: Comparative PESTEL analysis for Czech Republic and New Zealand
PESTEL Analysis
FACTORS CZECH REPUBLIC NEW ZEALAND
Political Very stable Highly stable
Economical Highly strong Very strong
Socio-economic Very strong Strong
Technological Very strong Strong
Legal Very good Excellent
Environment Good Very poor

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