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PESTEL Analysis & Porter’s five forces – ALDI
1.0 INDUSTRY ANALYSIS: PESTEL FRAMEWORK
1.1 Political Factors
Aldi, short for “Albrecht Discount”, operating in a globalized environment with stores all around the UK. It is a German multinational headquartered in Essen (reference). Hence Aldi’s performance is highly influenced by the political and legislative conditions of these countries, including the European Union (EU).
Political situation in UK is stable. Her Majesty’s Government, led by Prime Minister, David Cameron, from the Conservative Party is mainly concerned about the financial crisis affecting economies all over the world and to strengthen the economic position of UK globally(**ref**).
For employment legislations, the government encourages retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs (Balchin, 1994). Also to meet the demand from population categories such as students, working parents and senior citizens. Aldi understands that retailing has a great impact on jobs and people factors (new store developments are often seen as destroying other jobs in the retail sector as traditional stores go out of business or are forced to cut costs to compete), being an inherently local and labour-intensive sector. Aldi employs large numbers of; student, disabled and elderly workers, often paying them lower rates. In an industry with a typically high staff turnover, these workers offer a higher level of loyalty and therefore represent desirable employees.
1.2 Economical Factors
UK’s economy is strong and have been able to avoid recession in 2008, but there are high unemployment and uncertainty in the economic conditions. UK’s economy will grow 0.2 % in 2012 and 2 % in 2013 said CBI Director-General John Cridland (Hamilton, 2012). GDP down to -0.4 % in 2008, Recovery is in full swing, with 1.1 % GDP in 2011 as per the data by OECD (OECD, 2012).
The GDP will grow to 2.5 % in 2012 as per data by BCC (British Chambers of Commerce), Quarterly report of BCC states that growth is slow in short term but will eventually pick up for the end of 2013. It also indicated the unemployment to peak 2.62m in quarter 4 of 2012 from 2.6m in quarter 2 of 2012 (BCC, 2011).
Banks may increase rate of interest by the end of 2013 to safeguard their interest (Pettinger, 2012).
Economic factors are of concern to Aldi, because they are likely to influence demand, costs, prices and profits. One of the most influential factors on the economy is high unemployment levels, which decreases the effective demand for many goods, adversely affecting the demand required to produce such goods.
These economic factors are largely outside the control of the company, but their effects on performance and the marketing mix can be profound. Although international business is still growing (Appendix A), and is expected to contribute greater amounts to Aldi’s profits over the next few years, the company is still highly dependent on the UK market. Hence, Aldi would be badly affected by any slowdown in the UK food market and are exposed to market concentration risks.
1.3 Social/Cultural Factors
UK’s population is shrinking and aging (**ref**). Impact of population shrinking on UK could lead to shortage of labour in the market place and rising expenses in services like medical services, education services. Eventually government will have to cut down on benefits and pension, or increase tax to provide to pay higher contributions and health insurance.
The trend of rising expenses is affecting UK’s shoppers buying behaviour, and affecting their nature and forcing them to compromising on quality(**ref**).Current trends indicate that British customers have moved towards ‘one-stop’ and ‘bulk’ shopping, which is due to a variety of social...