Aldi Five Forces

The reputation and recognition make Aldi attractive in the marketing activities and this aspect needs to be improved in the future to compete with both existing and forthcoming rivals. Meanwhile, the high buying power and costs control would help Aldi to diversify its products and increase market penetration to serve diverse Australian population. This leads to the reconsideration of Aldi’s current strategy of limiting product range to adopt other strategies as a number of differentiation strategies has been used by other

The fourth Force is the threat of entrants, which refers to the threat existing competitors face when new competitors enter an industry due to an increase in competition. In order to prevent all competitors to freely enter and exit and to prevent rivalry, barriers to entry are set. ALDI would therefore have a strong threat of new entrants because it is an easy business to

In times of recession people tend to be very conservative when spending and the people see that ALDI offers value add to their spending by saving them money in their groceries.

As Aldi has already established itself as a large discount supermarket chain with over 10,000 stores in 18 different countries including Australia (2001), and holds a large market share in the grocery world due to its business culture and market leading initiatives. This report aims to provide the ALDI board of directors with:

In the St. Louis metropolitan region there is a wide variety of grocery retailers, from which consumers purchase their groceries. With many grocery stores spread throughout the regional area offering good merchandise and competitive prices there are two chains that are frequented, Aldi’s and Trader Joe’s. Both of these companies share the same parent company, Albrecht Brothers, and have stores nationwide. Both Aldi and Trader Joe’s are owned by one company; however, they share commonalities and differences.

The case is about Loblaw companies Inc., a highly successful grocery chain in Canada. Loblaw is Canada’s largest food distributor. The major issue is the emergence of Wal-Mart, who is looking to pursue expanding their grocery line chain in the Canadian market. According to Yunna (2014), porter’s five forces model has been widely applied to analyze industry competition in various markets. Using Porter’s 5 Forces to analysis the issues of the case can be a useful tool in summarizing the attractiveness of the market or industry. According to Dobbs (2012), the five forces are the threats posed by competitive rivalry, powerful buyers, powerful suppliers, potential new entrants, and substitute products. The analysis of Porter’s five forces framework can be viewed in figure 1. The case describes the retailer-supplier relationships as power plays. As the scale would tilt in favor of the one wielding the most clout at a point in time. There are numerous manufacturers with various substitutions among the grocery store. However, a supermarket would lease out shelf space for rent. The manufacturers would pay the grocery store a combination of different allowance to obtain secure shelf and warehouse positions for its products. Ultimately the category manager had the final word, which left the manufacturers with little to no bargaining power.

The threat of entry of the supermarket industry in US is low, which base on the analysis of the three major sources that related to the entry barriers. The first barrier is the economies of scale of the existing large supermarkets. When these incumbents achieved larger volume sales, they can have lower unit costs than new entrants, and it will very difficult for those new entrants to compete with them (Johnson, Whittington, &Scholes 2011). For example, Wal-Mart had invested in innovative procurement, automated distribution centre and bar coding to increase its economies of scale, and these investments created a great barriers for new small retailers to enter into the supermarket industry (Porter 2008). The second barrier is the incumbency advantages, which mean the incumbents established their own strengths that cannot be used by competitors (Porter 2008). For example, the top ten supermarkets in US have accumulated extensive experiences on how to run their businesses more efficiently than new entrants (Johnson, Whittington, &Scholes 2011). The subtle differentiation between the products that sold in supermarkets is the third barrier for new entrants. Because most of the product assortment is same or similar between each supermarket,

From the time it opened, Aldi has expanded the number of product assortments that allow consumers to find nearly anything they need to supply and feed their families. Aldi developed a strong marketing program and decentralized their pricing and assortments that also include some well-known products. Aldi’s begins its value propositions to shoppers with its amazingly low prices. Their “hard” discount pricing, averages about 30% below standard supermarkets like Winn-Dixie or Kroger’s (Brick, 2016). They attribute their success and growth to the “hard discount” model as it has demonstrated to be highly effective. Aldi is different than “large” discounters like Walmart where Walmart’s varieties are limited in size and led by private label products, and investments are made in stores atmosphere, unfortunately, resulting in lackluster customer service. This allows “hard” discounters like Aldi to win the grocery price war by greater margins than Walmart, making Aldi a major competitor of Walmart (Bartone,

The reason why Aldi seems to have the competitive advantage is that Aldi clearly provides the lowest possible price for all their products, which Walmart could never match. Why this is important is because both stores main customer base tend to be more work class to lower middle class. Why this is important because with this customer base the number one concern tends to be price and less on traditional concerns of convenience and quality. Also even though Wal-Mart provides more goods and service and are more capable to adapt to the customers' trends, Aldi operates at a much lower price and can operate and build new stores at a fraction of the cost Walmart can which can be vital if a bidding war where to break out and completion in a new market. Aldi is well poised to compete and beat Walmart and should be a force to come in the retail business.

In this assignment I will identify what competitive factors and changes Tesco faces in the retail sector and how it might respond to these under the following headings; retail environment using PESTEL, and competitive environment based on overcoming barriers to entry, pricing, new markets and mobile population. In this assignment I will be talking about how Porter’s five forces are being used by Tesco.

Exhibit A shows Porter’s Five forces analysis for Trader Joe’s. Competition within the incumbents is high. Trader Joe’s biggest competitor would be Whole foods, nation’s largest retailer of organic and natural

2. Price: Once again, Aldi triumphs with a 5 star rating for price. IGA, Woolworths & Coles received 3 stars each for price.

1. ALDI Manly is the most recent store to undergo a trial upgrade, and while we have plans to introduce similar upgrades to three additional ALDI stores on the eastern seaboard, we are not yet able to confirm exact locations, the Aldi spokesperson said. As part of the trial process, we will review these upgrades and continue to listen to feedback before determining what could be broadly implemented to make the Aldi shopping experience even more enjoyable for our customers, the spokesperson added. Also ALDI has a market share of 8.2 percent of Australias grocery sector according to IBISWorlds July 2015 Supermarkets and Grocery Stores in Australia report.

Aldi price is far lower than the majority of retailers in Europe. For example, in the U.K “The budget chain was at least 27 per cent cheaper than the ‘big four’ – Tesco, Asda, Sainsbury’s and Morrisons.” (Poulter 2016). I feel that Aldi can increase this strength further through expansion. The more Aldi expands the more buying power they attain.

Competitive Forces Analysis. Amazon, Google, and Apple each have competitive advantages in various markets; however, one specific market proved difficult for Amazon to cultivate a competitive advantage. Shaping competition, the five forces, known as threats of new entrants, power of suppliers, power of buyers, threats of substitutes, and existing rivalry, determine industry profitability and influence the ability to gain competitive advantage (Rothaermel, 2017). Notably, failing to understand the forces can results in negative gains.