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ID Number: 306257173
Email: ytao6290@usyd.edu.au
Full assessment title: CASE Study Report A: External & Internal Analysis Aldi Australia
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Executive Summary
Aldi Australia is a new entrant of Australia grocery Market, who had a strong base in German.
Aldi is growing rapidly all over the world, its most famous Philosophy is
Providing people highest quality groceries at the lowest possible price no matter where they
live. (Aldi Australia, 2008), which was represent by over 600 own-brand products. In Australia
Aldi currently have market share of 1%-2% and operates 160 stores national wide.
Grocery Market of Australia is concentrated and hard for new entrant to compete, however,
Moderate economic growth and low unemployment rate will help generate more sales.
On top of its famous low price product, Aldi also owns advanced distributaries technology and
facilities, which shows Aldi’s capacity to compete with the big three and other independent
retailers. Besides, Intangible assets such as reputation and organizational process are also
valuable strength. This report will address Aldi’s Strength, Weakness, Opportunity and Threats
in details. The major Findings can be summarized as. Aldi has Sustainable strength of low price
The significant opportunities form external environment are increase of interest rate and slow
down of economic, however, concentrated market structure is the biggest threat that Aldi
faces.
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Table of Contents
1.0 Part I -Overview
1.1 Introduction
2.1.2 Global
2.1.3 Demographic
2.1.4 Socio-Culture
Resource Analysis
3.1.1 Financial
3.1.2 Physical
3.1.3 Organisational
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3.2.3 Reputation
3.3.1 Logistics
Reference
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1.1 Introduction
Aldi was first established by the brothers Theo and Karl Albrecht In 1948, which was a
grocery store called ‘Albrecht Discounts’ (ALDI). Today, it becomes one of the world’s
biggest global giants with more than 7000 stores over 18 countries and has an estimated
annual turnover of more than 36 billion euro. (Wikipedia,2008) Aldi Australia belongs to
Aldi Süd who operates in Australia UK, Austria, USA Australia German, Slovenia, Ireland,
and Switzerland. Aldi Australia opens its first shop in 2001 in Sydney, within 7 years time 160
stores has been established across nation. This Report is structured according to SWOT
Aldi’s Mission statement and goals was not clearly published like other companies, instead it
expressed its vision by a stand still philosophy of providing highest quality groceries with
lowest possible price to everybody in Australia, which can be extend to huge savings,
guaranteed quality, outstanding value and special buys.( Aldi, Australia, 2008)
Compare with its American philosophy: “Incredible Value Every Day.” Which have been used
since ‘1976’ , the year that ALDI enters the States(ALDI, US,2008) This vision is clear and
simple and it is understood not only through out the company but also well known all over the
world. Aldi is achieving its philosophy by being cost-conscious in every aspect of the
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According to the forecast of AC Nielsen, Aldi could own over 300 stores and capture 10 per
cent of the Australian packaged grocery dollar market by 2010. (AC Nielsen Grocery Report
2006, p. 12.) Which is understand as long term objectives, it is consisted with its short term
aims of goals such as national pricing, refund policies, and the aim of establishing relationship
with suppliers. The attitude of Aldi when dealing with stakeholders are fair and clear, career
The general environment is composed of factors that can have dramatic effects on firm
strategy (Dean, T.J., Brown, R.L., &Bamford, C.E.1998) which include Demography, Socio-
cultural, Political, Technological, Economical and Global factors, but it is complex, uncertain
2.1.1 Economic
increased by 0.6% in the December quarter Through the year growth was 3.9% in both trend
and seasonally adjusted terms (ABS, 2007) but The UN's Economic and Social Commission
for Asia and the Pacific expects economic growth in Australia to fall to 3.2 per cent in 2008,
from 4.3 per cent last year (SMH, March 2008) which means this year Australia’s economic
growth will be beyound focast buy Reserve Bank of Australia. On the other Hand , ABS also
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reported a Consumer Price Index (CPI) of 1.60 of eight capital cities, (ABS, 6410.0) which
means that one doller sixty cents today equals to one doller of last year., with such high
inflation and moderate economic growth, we are expecting strong competitions among
business.
2.1.2 Global
Globalisation is one of the main reason that ALDI Süd Enters Australia, which demonstrates
threats to local business, at the same time it also attract competition from other supermarket
“Australia is as far from Aldi's home base as possible. And it has been this geographic
isolation and a relatively small population of 19 million spread over a vast continent that has
kept other big international food players at bay.” (Barry Flanagan, 2000)
But the advance of technology and repaid increase of globalization make competitions
possible.
2.1.3 Demographic
Australia’s population on 13 April 2008 at 14:34:56 (Canberra time), was 21,271,675, which
represents a growth rate of 1.2%, however, compare to the rest of the world it is very small
2.1.4 Socio-Cultural
Australians are a unique and culturally diverse mix of people (Foreign affair, 2008) as at June
2005, the largest number of overseas-born people in Australia was from north-west Europe,
southern and Eastern Europe, South-East Asia, north-east Asia, North Africa and the Middle
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“culture of Australia at present however, keeping in pace with the changing times, has come to
“Australia has the most concentrated grocery market in the developed world. In competitors
aspect, Woolworths and Coles jointly have 79 per cent of sales of branded packaged grocery
products.” ( Share Ken, 2005) .Referring to Figure 1 . Australian Market was domainted by
two Gaints who resprents 78% to 79% of market share and holds 59 billions of turnover
jointly. They have had 1439 stores nation wide. Other competitors include IGA, Frankins (pick
& pay), Food works, Ritchies and other indenpend retailers. Who totally froms 20% of the
market.
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 and consistently growing over the past 20 years.(PWC report to
NARGA, 2007)
In supplier’s aspect, Given such concentrated market and big spending on grocery goods ,
suppliers trend to
According to IBIS World’s press releases “Aldi with its private label products becoming
increasingly popular with Australian households. Mr. Baker said that as higher interest rates
continue to affect lower-income households, more and more people may begin shopping at
Aldi. And given the chain’s expansion plans, IBISWorld expects revenue to increase at a
Aldi’s further industry competition analysis and elements of industry structure can be shown
Australian markets have considerable high barriers to entry. From a Micro-economic point of
view, capital requirement of investment is relevant high for investors; many private investors
have limited access to distribution channel. From Macro-Economic point of view, given that
Australian market is mature and gradually decline, Economic of scale is deterrent. It as very
hard to enter such a concentrated market (with Woolworth and Coles took 79% of market
share) and already established market structure and consumer trust forms great barrier to
enter. Other factors such as product differentiation and switching cost is also a considerable
barrier because of the strong evidence of brand loyalty and limited access of ‘Own’ brand.
According to ACCC’s inquiry there are three major grocery wholesalers, two of which are
structure, Individual retailer and consumer has less power as buyer, alternative product such as
fresh food and frozen ones is available but not popular at all.
Suppliers do have some power to bargain because there are some large suppliers in Australia
market, such as Inghams, Nestle, Arnott's, Kimberly-Clark and George Weston. These giants
are big, however, Australia has one of the most concentred grocery market,which means these
suppliers’ channels are also limited , although they have huge weight of suppliers’ market share
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for instance Inghams counts 30% of Australia’s 30 per cent of the poultry
market.(SMH,2008/04/01), compare to retail giants they are still tiny.“….. many suppliers are
unwilling to speak out for fear of putting the retailing giants offside”
(SMH,2008/04/01)
In Australia the threat of substitute is very low. High labour rate and culture of families are
main factors. Possible substitute such as restaurant, Take away shops, Fish & chips and salad
Bar do exist but there compete effect as threat are minor to supermarket retailers.
Competition of Australia market is very high with already established market structure and
concentrated market share; it is very hard for Aldi as a relevant new entrant to compete with
the big two, furthermore, Referring to figure three which shows that besides the big two there
are still 1209 IGA stores and 1531 of other independent Stores to compete with Aldi. (ABS,
850101)
Threat Opportunities
Value of Euro-dollar is greater
Slow Economic threaten sales than Australia dollar
Globalization will attract Increasing interest Rate
more competitors lead more customer to Aldi
Medium Bargaining power of supplier Low threat of New Entrants due to high barriers
post potential threat of supply chain problem to enter
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When comparing firms within same industry, internal analysis is employed which includes
Value chain analysis, Resource based point of view and evaluation of capabilities, Part III of
this report will address ALDI’s internal issues under each analysis.
Resource Analysis
Under resource point of view of company, firm resource includes all assets, and other value-
added items and non-items, which can be divided into two categories: Tangible and intangible
resources.
3.1.1 Financial
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Aldi’s financial assets includes its cash account which have been minimised because of
company’s “Just in Time” Inventory policy, but Firm’s ability and capacity to borrow is high,
due to its reputation, How ever given that Aldi is privately owned company, The borrow
function from public such as shares haven’t been utilised. Therefore the weakness of financial
3.1.2 Physical
The Physical Resource of Aldi Australia Includes: Its Morden plant and facilities such as
366,000 square feet distribution centre worth $43 million, in sight of the main distribution
centre for Woolworth’s, Australia's largest food retailer (Berry, 2000) other physical asset also
include retail sites of around 75,320 square feet, other machinery and equipment for logistic
and storage.
3.1.3 Organisational
On Organisational point of view Aldi holds effective strategic planning process, Excellent
evaluation and control system such as mentioned before the PDA in store ordering system,
Unique in-store layout and Low turnover Inventory System, These organisational presses and
According to Berry that Adli attract many talented people including retail managers, property
experts and others since its opening, at the same time Aldi Australia is recruiting individuals
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from all aspects such as university graduates, publics and internal employees, Aldi status that
:” we want the best and we're willing to do what it takes to keep you. That's why we offer
extensive training programs at all levels of employment. And to ensure career success and
progression, we recruit internally when we can for management roles. That way, all our
employees are given the opportunity to develop their careers.(ALDI,2008) The company
culture is known as the ‘Aldi way’, we can refer to Figure 4 Aldi’s divisional structure of
United Status, which will give us a indication of organizational structural of Aldi Australia.
Which is relatively simple compare to other global giants, managerial tasks has been divided in
simple and effective Human resource strategy is a valuable intangible Resource. However the
Aldi already demonstrate a unique innovation and creative ability in retail industry, namely:
Self serve packaging, trolley renting system, free-standing, purpose-built structures and
managers are using “a wireless PDA style device that is linked to the back office computer
“(wikipedia, 2008), such intangible assets are valuable strength. On the other hand weakness
3.2.3 Reputation
Originally Aldi stores were often ridiculed as being cheap shops selling low-quality goods and
that Aldi's customers were all poor people who cannot afford to shop from elsewhere
(wikipedia,2008), but due to its strategy of aggressively recruiting managemant staff at top
UK institutions as the University of Warwick and others, publish series of cookbooks that only
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used Aldi ingredients in German and fulfill the void that Franklins ceased trading in 2002 in
Australia.Its reputation havs been changed not only in German but also all over the world. Its
reputation is growing. Nevertheless, its long established reputation of “lowest price” retailer is
3.3.1 Logistics
Logistic and supply chain are the most important component of retail business, which was
form paper and company information “Aldi will have the capacity to easily service a mooted
100 stores in its initial thrust into New South Wales ...”( Barry Flanagan,2000) which indicated
In Australia Aldi is using local give-away newspapers and delivering full color leaflet to
householders letter box as well as e mail subscription of newsletter. But no like other
supermarkets Aldi haven’t spend lots of fund on TV and other high cost Advertisements.
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Aldi Australia selling more than 600 own-brand product, it strategy and development direction
is focused on own-brand and keeping develop it, which could gain greater market share,
Aldi is privately owned company, it operated in Australia with no Alliances and Joint Ventures
how ever instead of acquire Franklins Aldi full fill the gap that Franklins left.
The core competitive of Aldi Australia is its unique Own-brand product and super low price on
advanced logistic technology, quality reputation, and human resource asset, but these
Strength Weakness
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In conclusion Aldi Australia faces significant threat of concentrated market structure and
High intensity among competitors, but opportunities such as increase of interest rate
and little choice of substitutes means the external environment is still favors Aldi. On the
other hand more than 600 “own-brand” product joint with low price reputation and
however, according to the Failure of Franklins, service should never be out aside, which
significant weakness, the External environment shows more opportunities that threats,
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5.0 Appendix
Figure 1
The economic contribution of small to medium size grocery retailer to the Australian economy,
with a particular focuses on Western Australia June 2007.National Association of Retail
Grocers of Australia by PriceWaterhouseCoopers
Figure 2
Break down of components of retail turnover
ABS, Cat. 850101 & 526006. Retail trade calculated on the basis of Industry Turnover, GDP
calculated according to Gross Value Added to the economy.
Figure 3
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Figure 4
Aldi’s divisional structure of United Status
Figure 5
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ABS 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Dec
2007 Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 05/03/2008 Reference
5206.9
Figure 6
Consumer Price Index (Inflation)
CPI, All groups index numbers and percentage changes
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Reference
“A gorilla scares Oz” Barry Flanagan. Grocer. Crawley: Aug 12, 2000.
Vol. 223, Issue. 7466; page. 34, 2 pgs
ABS 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Dec
2007 Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 05/03/2008 Reference
5206.9
Australian Competition and Consumer Commission inquiry into the competitiveness of retail
prices for standard groceries 11 February 2008
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Australia Bureau of Stastic, Cat. 850101 & 526006. Retail trade calculated on the basis of
Industry Turnover, GDP calculated according to Gross Value Added to the economy.
Dean.t.J Brown.R.L &Bamford.C.E 1998 “Difference in large and small firm responses to
environmental context”: strategicimplication from a comparative analysis of business
formation. Strategy management journal19:709-728
Data monitor “Food Retail in Australia” Industry Profile, May 2006 Reference Code: 0125-
2058
“NARGA releases major research report into impact of retail grocery industry on national
economy NARGA news release 2 July 2007
Share Ken “Who determines grocery market shares?” August 2005 Competition Law Reform
http://www.narga.net.au/?p=10
The economic contribution of small to medium size grocery retailer to the Australian economy,
with a particular focuses on Western Australia June 2007.National Association of Retail
Grocers of Australia by PriceWaterhouseCoopers
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