Aldi does not have a published vision or mission statement. However there is a clear set of values and business philosophy which they adhere to. This philosophy is outlined by the statement which it continuously uses, ‘Top quality at incredibly low prices – guaranteed’. In its small levels of advertising Aldi elaborates on this philosophy by stating its five main principles; huge savings, excellent quality, outstanding value, superb specials and buy with confidence. These five principles were quoted as the ‘Aldi Pledge’. This outlines there key values namely to offer their customers high quality products at low prices. This is achieved by their low cost operations, which is well known and evident throughout its stores.
External Analysis (Threats and Opportunities)
The General Environment
The general environment is composed of factors that can have dramatic effects on firm strategy which include Demography, Socio-cultural, Political, Technological, Economical and Global factors, but it is complex, uncertain and undergoing rapid change, especially in its economic consideration.
Economic and Global
Australia’s economy continues to grow strongly, expanding by 3.3% in 2010 (ABS Statistics). Australia’s economy has not felt the economic downturn as harshly as other countries, rebounding after just one negative quarter of growth. Rising interest rates have lead more customers to Aldi, due to their lower prices, despite a decrease in spending power. Although, in the long term, high levels of household debt, falling house prices and possible increases in interest rates could yet impact on consumer confidence and spending over the next few years. Globally the economic downturn has impacted heavily on Europe and the US. Globalization, however, is the main reason for Aldi’s entry into the Australian grocery market.
Demographic and Socio Cultural
Australia’s population, as of 10am on 1pm on October the 24th, was 21,871,559, and its growth was only 1.6% in 2010, which is not a rapid as other countries. This is a clear limitation to demand, and could inhibit Aldi’s potential to increase its market share. Culturally Australia has a diverse mix of people, and, as of October 2011, the largest number of overseas born people in Australia was from Northwest Europe, southern and eastern Asia. The Competitive Environment
“Australia has the most concentrated grocery market in the developed world. From a competitor’s aspect, Woolworths and Coles jointly have 79 per cent of sales of Branded packaged grocery products.” .Referring to Figure 1 the Australian grocery Market is dominated by two competitors who represents 78% to 79% of market share and holds 59 billions of turnover. They have 1439 stores nationwide. Other competitors include IGA, Franklins (pick & pay), Food works, Ritchies and other independent retailers. who form 20% of the market.
From a consumer’s perspective according to PWC’s report to National Association of Retail Grocers of Australia, Grocery expenditure accounts for about 17.1 per cent of average total household expenditure and Supermarket and grocery turnover counts about 29 per cent of retail turnover - the largest component ha been consistently growing over the past 20 years.
Threat of New Entrants (Low)
Australian markets have considerable barriers to entry. From a microeconomic view the capital requirement of investment is fairly high and many private investors have limited access to distribution channels. From a macroeconomic perspective it is extremely hard to enter such a concentrated market, dominated as it is by Woolworths and Coles. The established market structure and consumer trust forms a sizeable barrier to entry, as does the resulting brand loyalty that is a consequence of a large market share.
Bargaining Power of Buyers (Low), Bargaining Power of Suppliers (Moderate)
There are only three major grocery wholesales and alternative products...