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PM106 Business Strategy t Level 5 Plymouth University

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Various factors of Business Strategy

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INTRODUCTION

The term business strategy refers to plans and procedures of firms to achieve its objectives in a sustainable manner thereby making profits and enhancing scale of operations. Strategic planning is a concept of business which is related with those activities which strengthen business operations and help in controlling its activities. It includes planning for strategies for the organisation and involves continuous process done by managers. Every organization thus needs to plan strategies in order to attain competitive advantage.

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Aldi is one of the leading discount supermarket chains based in Germany, founded by two brothers, Karl and Theo Albrecht with around 10000 stores globally. The company earned a revenue of €53 billion in the year 2010. Such a big supermarket store needs to plan its strategies so as to perform well in the long run making profits for their shareholders. Thus, Aldi needs to manage its stores thereby planning and formulating business strategies which will be covered in the report.

PART 1: EVALUATING THE STRATEGY

a) Impact of mission, vision, objectives, goals and core competencies on Aldi's strategic planning

Strategic planning is an essential part of an organization which involves formulating plans so as to achieve organizational objectives and goals (Schot and Geels, 2008). It involves strategic decisions as well as resources required to formulate plans to achieve competitive advantage. Aldi uses a variety of strategic programs so as to compete with others and thereby making profits. These incorporates its mission, vision, goals and core strategies.

Mission - A mission statement of Aldi reflects its main purpose of operations which gives people an insight about its existence. It helps in meeting the ends with set standards and analysing market size (Malhotra, 2015). Company focuses on success and the growth by building efficiency at each step whether construction or distribution.

Vision - It is something which provides a long term aspect about an organization. Aldi's vision about future motivated its employees and stakeholders by maintaining cordial relations and through working in harmony. Aldi being a discounted supermarket has a vision of providing great quality products at lower prices (Huang, 2009).

Goals - This refers to the end perspective of any organization which directs towards generation of profits (Luan and Sudhir, 2010). Aldi has set goals for both short and long time periods which everyone needs to fulfil thereby meeting standards and correcting deviations. This not only accomplishes tasks but improves enhances the performance of stores as well.

Core Competencies - These are the objectives which organizations set up to achieve competitive advantage over competitors. These strategies make a distinction in between two homogeneous companies. Aldi has many competitors serving grocery products all over the globe but it has a distinct competency of selling discounted quality products which makes it different from others (Huang, 2009).

All these processes help in planning strategy for business and thus, helps in achieving targets for company. Aldi has a set of business mission and vision for its stakeholders to view and follow the same and thereby undertaking operations. The goals and objectives of the company help employees to move in a particular direction for enhancing performance.

b) Various factors for formulating strategic plans for Aldi

The proper management of financial, human and technological resources is based on strategic plans developed at initial stage. Strategic business plans are essential to forecast the future and take actions according to that (Jenyo and Soyoye, 2015). Aldi incorporates various factors so as to enhance strategic planning which is essential to attain the set targets. Factors to be kept in mind while formulating strategies are:

People - They play a key role in determining strategies as well as its implementation. Right number of people are necessary to achieve the targets (Luan and Sudhir, 2010). Aldi has a critical setup for determining right people for the right post and fill in the vacant position either internally or externally so as to enhance operations thereby providing training and development facilities.

Resources - Allocation of resources in a sustainable manner is an essential strategy that every organization needs to design. Aldi undergoes a statistical financial planning for procuring resources and its allocation to various departments in order to attain the end goals. Time being an essential resource at Aldi is planned and managed in a strategic way (Jenyo and Soyoye, 2015).

Culture - Aldi constitutes a culture of harmony where everyone with diverse group or society work towards attaining common objective. This helps in making employees feel comfortable thereby bringing necessary changes and implementing business strategy seemingly. Such a culture at Aldi helps workers to take up actions and accountability for their work to increase productivity.

Structure - Aldi has clear and concise structure with defined lines of authority and responsibility. Each person has a stipulated supervisor which he or she needs to report in a formal manner (Huang, 2009). Such a hierarchical structure is followed at Aldi so as to carry out operations in a defined way. Managers at Aldi are ensuring clear lines of communication so that strategies will be formulated and implemented in a correct way.

Systems - Aldi has predefined systems and processes to manage work and obtain output. Each project is completed on the priority basis thereby ensuring commitment and involvement of employees (Luan and Sudhir, 2010).

c) Techniques used to evaluate Aldi's strategic plans and procedures.

The Boston Consultancy Growth Share Matrix is a tool for analysing business strategy in order to achieve sustainable competitive advantage. It assesses a product or business in two categories mainly the relative market share which the new product or business firm will have in compliance with others and market growth potential that they would grab with time (Huang, 2009). Aldi uses BCG matrix technique to assess and evaluate its position in the market. The four components of BCG matrix are:

Question mark - It implies the way in which business will perform in the market. It is also known as problem child with high growth and low market share. Aldi since its inception was a part of Question mark category as it is building its operations and basis of performance in the market amongst competitors. It is the growing stage which takes a lot of liquidity and thereby, capturing cash resources of firm (Malhotra, 2015).

Star – Today, with the growing demand and structure, Aldi is a part of the star box category of the BCG matrix. This part of matrix has a high growth rate as well as high market share which helps business firms to enhance their operations and productions as this stage will generate profits (Schot and Geels, 2008). This stage provided Aldi a competitive advantage as people are recognizing the brand and more innovation of products was incorporated. Aldi in the long run may take the position of Cash cows (Huang, 2009).

Cash Cows - The cash cows represent high market share thereby generating profits but a relative low growth. At this stage, Aldi generates ample amount of funds which could be used to invest in new projects or rebuilding and renovating older projects.

Dogs - These are the projects that business needs to disinvest in as they generate low profits with low market share and growth (Malhotra, 2015). Aldi has to look into the segment of its products and quickly takes an action on stopping its production so as to give proper assistance to other products and services thereby maintaining competitive advantage.

d) Organizational Audit and Analysis of current strategic position of Aldi.

The internal strengths and weaknesses of Aldi provides a means to formulate strategies accordingly which will enhance its scale of operations (Jenyo and Soyoye, 2015). The external environment is changing continuously providing various opportunities and posing threats to operate strategically which needs to be considered while formulating business strategy. The SWOT analysis of Aldi will identify different perspectives the company should focus on.

Strengths - Aldi has a strong USP which turns to be its strength is its quality products and services at reasonable and affordable prices. Being a German based company has a strong base with 2500 stores which helps in keeping its overall cost of operations minimum. The rapid growth of Aldi has seen its market share rising to approx 12% with an increase in its online and store customers ton a huge number (Malhotra, 2015).

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Weaknesses - The company has to face restrictions which affects its overall operations. Despite being a discounted supermarket store, Aldi has to raise its essential grocery item prices with the depreciation inn the value of pound becoming its major weakness. Aldi has enhanced its market growth but still lagging behind the four most leading grocery stores of British such as Tesco, Sainsbury, Asda and Morrisons (Jenyo and Soyoye, 2015).

Opportunities - Certain Aldi products have the capacity to become the best selling items which provides Aldi a competitive advantage over other rivalry firms. Aldi has a strategic plan to employ more than 4000 people in the UK thereby expanding its operations and increasing its stores. It has an opportunity to invest in advertising through various channels and forms which will enhance its overall image.

Threats - Aldi has a limited variety and substitutes of products which forces customers to take up other stores such as Lidl and Tesco which enhances their shopping experience. A huge risk is associated with the suppliers of Aldi in the UK market (Malhotra, 2015).

e) Environmental Audit of Aldi.

Analysing the environment, external and internal elements provides an overview about the firm’s strengths and weaknesses and its operational performance.

Porters five forces Model

The porter's five forces concept is used to evaluate the Aldi competitive environment and its position in the industry (Jenyo and Soyoye, 2015). This analysis focuses on sustaining profits in the company by negotiating prices from suppliers, demanding more prices from customers, creating barriers for new firms and producing differentiated products to create competitive advantage in the long run.

Bargaining power of suppliers - Aldi is a big retail chain has a low impact of suppliers power as there are many suppliers who wants to sell raw materials at low prices. Thus Aldi has bargaining power over suppliers to ask for discounted prices thereby negotiating with them. The switching cost is also low providing Aldi a comprehensive power over suppliers of raw materials (Bryson, 2018).

Bargaining power of customers - Aldi faces a huge competition in the UK market by four leading grocery stores such as Tesco, Sainsbury, Asda and Morrisons serving customers and providing identical products (Jenyo and Soyoye, 2015). Thus Aldi faces a huge bargaining power of buyers as competition is high. Aldi cannot exercise or attempt to rise prices as switching cost of buyers is low.

Threat on new entrants - Aldi faces a low to medium threat of new entrants as to establish a big multinational grocery store the new firm will require huge capital and infrastructure to compete. Thus, opening a new firm/brand requires a lot of time and it is seen that they often end up being a victim of mergers or acquisitions by others.

Threat of substitutes - Aldi faces a huge threat of substitutes and innovative products in the market of UK as various retailers and supermarket stores posses variety of homogeneous products with distinct features. Thus, products sold by Aldi could be easily available at other stores with better features or packaging which attracts customers to switch to those products or brands affecting Aldi's overall sales (Huang, 2009).

Competitive rivalry - Aldi has a high degree of rivalry amongst firms as there are many leading grocery stores in the British market providing identical products and rendering similar services. Woolworth, Coles and Wal-mart are the competitors of Aldi who focuses on cost minimizing thereby providing quality items.

f) Stakeholders analysis for Aldi while formulating strategy.

A stakeholder is any person or group that has an interest in the success of a business. Aldi’s focus on its stakeholders and focuses on fulfilling their individual needs which is main reason of success for the organization (Bryson, 2018). Stakeholders comprises of investors, customers, suppliers, shareholders, employees and government as well as community surrounding the company. They are vital to an organization and ensures smooth functioning in a sustainable manner.

Aldi has developed strong and long term relationship with its suppliers of raw materials and other intermediaries as trust and belief are important for achieving heights in the long run. Employees are supported throughout their time at Aldi and the business is always keen to be at the forefront of recruitment and training systems (Huang, 2009). Aldi also takes a responsible attitude to the communities in which it works, with all activities framed by its Corporate Responsibility policy.

Aldi has a keen interest in technology and uses it to review its products and operations. With the help of internet and social media sites Aldi takes in feedback of customers and improve products thereby maintaining good relationship with its consumers (Bolton and et.al., 2009). Aldi invests huge amount in the research and development as well as training programs to enhance its image and increase its scale of operations so as top obtain competitive advantage.

Thus, stakeholders plays an important role at Aldi while formulating and implementing strategies for successful business operations. And its is crucial to maintain good relationship with stakeholders which will enhance brand image and reputation at Aldi.

g) New strategy for Aldi.

(i) Current position in the UK market

The current strategy of the company focusses on the higher quality of the products which have been provided at a lower price. Aldi is on the fifth position in the UK market competing with four important and leading brands of British.

Names of Supermarkets

Market Share (in percentage)

Tesco

28.1

Sainsbury

16.5

Asda

15.6

Morrison

16.9

ALDI

6.2

Lidl

4.5

All this is possible because of Aldi's marketing strategies which played a big role in positioning its image in the UK market (Malhotra, 2015). The future of Aldi has been seen amongst the three largest brands including M&S and Sainsbury with such a speedy growth.

(ii) Aldi’s competitive advantage

The quality and value has made Aldi a biggest retailer and it is keen to position itself as a brand rather than a supermarket chain thereby incorporating in house brands of various products. All such activities has gained competitive advantage to Aldi over others thereby positioning it amongst the five biggest brands of UK (Bryson, 2018). It has started to advertise at large scale thereby signing Jonny Brownlee to give high profile ads to attract customers to buy its products. Thus, The strength is the competency where Aldi can pose and create the sustainable competitive advantage to earn the average returns. The resources and the capabilities include the opening hours, product differentiation and the reputation in providing better services to the customer.

PART 2 – MAKING A STRATEGIC CHOICE

a) Identifying a suitable market in relation to substantive growth of Aldi.

An organization in order to grow and compete uses different approaches and new strategies to enter new markets with substantive growth, limited growth, retrenchment etc.

Market Entry

Aldi in order to grow and expand needs to identify a new market and growth strategy. Market entry refers to as a new business with high level of competition and restrictions from government which might hamper growth and profitability. Aldi needs to enter new market so as to formulate better strategies to grown and improve (Bolton and et.al., 2009). Being a global producer of grocery, Aldi needs to carry out an extensive market research and formulate strategies to manage risks. Aldi has a substantial business model which allows the firm to sell products at lower prices to consumers. The organization is engaged in improving and enhancing efficiency at each level of operations by small size of stores, quick distribution network and discounted products (Schot and Geels, 2008).

Substantive Growth

Developing and implementing a strategy is essential for an organization like Aldi. Aldi has a cost leadership strategy thereby standardizing stores (Bryson, 2018). Aldi has a focus on developed markets as it provides ample opportunities to grow and expand thereby increasing profit margins. The term Substantive growth refers to a strategy of an organization which focuses on exponential growth boosting profits thereby becoming a leading global brand. Aldi focuses on substantive growth strategy to be formulated and implemented so as to become the leading brand amongst the British brands dealing in the market. Such strategy provides ample support to organization to enhance and maintains its position in the global market.

The substantive growth strategy is further divided into horizontal and vertical integration . Aldi focuses on such type of integration by acquiring big brands and suppliers so as to enhance its position in the UK market dealing in grocery stores (Schot and Geels, 2008). The company has future plans of opening more stores in British as well as other developed countries to compete generously with others thereby enhancing competitive advantage in the long run.

Customer loyalty is another focus of Aldi which the company enhances by providing quality services and after services to customers 24 hours a week. The company has a simple motive as to retain customers as new customers involve more expenses. ALDI manages its resources efficiently for the operation of its business .It recruit the efficient staffs to satisfy the customers and to run the store efficiently (Bolton and et.al., 2009).

b) Justifying substantive growth and market entry undertaken at Aldi.

Aldi has undertaken diverse and developed market which has substantive growth strategy for future production and operations purpose. Aldi closely observe activities of its competitors and small firms and has prepared this strategy so as to earn profits as well as market share which will provide better brand image and reputation to the company (Bolton and et.al., 2009). Substantive growth helps Aldi in achieving success and competitive advantage in the long run. It will help company to multiply wealth in an exponential manner through quality production. Substantive growth will help Aldi ensures effective competition. With substantive growth strategy, Aldi will be able to define clear steps and procedures to enhance operations and productivity. Goals can be prioritized based on the extent to which they will achieve substantive growth (Schot and Geels, 2008).

It is recommended that Aldi should incorporate innovation and technology in production for quick availability of products in an newer forms than its competitors. Thus, Aldi needs to incorporate R&D on various parts and products and should also bring in new and distinct products into the market so as to gain competitive advantage over others (Huang, 2009). The company is planning to enter new markets and thus needs to emphasize on mergers, acquisition and joint ventures strategies to build a better position and image in the new market thereby gaining a competitive edge.

PART 3 – IMPLEMENTING THE STRATEGY

a) Roles and responsibilities of personnel involved in implementing strategy at Aldi.

Teams are required to implement strategies in an organization for effective and efficient outcome. At Aldi, various personnel from all the departments are focused with the strategic implementation of various plans is done so as to enhance output of activities. Different talent, skills and abilities of persons helps in proper implementation of strategy (The Impact Of Micro and Macro Environment Factors on Marketing, 2014). A successful plan is possible to implement through effective communication, employees encouragement and planning and monitoring of each steps. The personnels are responsible for reviewing the strategies and eliminating deviations so that organisations goals and objectives are achieved efficiently. The various personnel responsible for implementing strategies at Aldi are:

Top Management level - The top personnel are responsible for planning the strategies and undertaking approval and undergoing discussion with the overseas team since Aldi is a global organization (Bolton and et.al., 2009). These top level management persons includes directors, Chairman, boar members and shareholders who checks in the financial status of the company and availability of liquid money to enhance and implement such a strategy which will provide benefits in the future. Aldi has a critical top level team which possess the required talent and skills to formulate business plan for the organization keeping in mind the tough competition faced by the company.

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Middle Management level - After the business strategy of Aldi is formulated at the top level it is then been discussed with the middle managers in a meeting where clear goals and objectives are made in order to attain targets efficiently and effectively (Marketing management philosophies, 2018). These mainly comprises of department heads and executives which provide orders to line managers. In order to support the implementation of strategic plans clear duties and responsibilities needs to be assigned by the middle level management to their subordinates so that effective goals and targets are met efficiently. These managers are responsible to provide feedback and reviews to the top personnel in order to check and improve quality of products at Aldi.

Front Line Management level - These includes the Aldi store managers and supervisors who are responsible for checking and maintaining stocks and other facilities in the store (Schot and Geels, 2008). They are responsible for enhancing customers experience inside the stores by proving quick and easy availability of products and self checkout counters. They take responsibilities from the executives of Aldi and work accordingly (James and Jorgensen, 2009).

b) Resources requirement for the Implementation of the strategy

ALDI is the brand who leading supermarkets that involve resources to implement the strategy. Those resources who are handled all the functionality of ALDI (Luan and Sudhir, 2010). Resources of ALDI is human resource manager, the supervisor and some other employees who handled all the bushiness of ALDI. The following resource:

  • Manger- The manger of ALDI handled all the management of the company and they handled strategic decision who beneficial for the company. The ALDI has adopts the stores of supermarket, so the manger helps see the all management activities in the all store (Huang, 2009).
  • Employees- The employees of ALDI takes tactics decision and implement into their works. The employees are the main resource of the company. They trying to implement their innovation ideas and implement them (Schot and Geels, 2008).
  • Clients- The clients are also the important resource of the company, they established the deals and full fill them. Played main roles to take strategic decisions and implement them. They examine all the needs of customers and make planes for implementation.
  • Customers- Customers are key of any business, they are playing crucial roles in the business The ALDI company takes strategic decision according the customer's satisfaction (Bolton and et.al., 2009).

c) SMART Technique.

Smart target are which who increase the company's growth and helps to achieve goals. They define objective to how the achieved goals how to implement in there business. The ALDI company also adopts smart goals in there business. The four main smart goals are:

  • Specific- The specific goals define what exactly company want to achieve, the description about the company. What are the limitation to achieving goals and what the specific goals company achieve. The ALDI company specifically adopts what goals and what challenges they have to faced. The smart target define in this stage that what the ALDI company achieve in there business (Schot and Geels, 2008).
  • Measurable- It means what exactly company adopts the goals and how they feel after they achieving the goals. The ALDI company need to identify that what kinds of elements used in the aching the goals.
  • Attainable- It means the goals what achieve is really acceptable not. In the ALDI company who achieve the goals is acceptable for the company of not (Kaplow, 2015).
  • Relevant- It defines that the goal who achieve is relevant to the company or not. As the same the ALDI company include the goals who they acceptable is relevant to the company not.
  • Timely- The timely goals refers that each goals has content timely. The ALDI company refers that the goals achieved timely and according to the company (James and Jorgensen, 2009).

CONCLUSION

The report shows the importance of strategy which organizations needs to plan and implement in order to achieve competitive advantage. Aldi has incorporated various strategies and plans to become the first leading brand in the British engaged in selling grocery products at discount prices with best quality than its competitors. Aldi has set its mission, vision and core competencies in the direction to become the leading grocery provider of UK. It is on a continuous evaluation of techniques and innovation through R&D which will help Aldi in gaining an edge over others. Being on the fifth position currently Aldi has evolved substantive growth market to enhance its image by incorporating extensive advertising and promotional techniques to enhance its overall reputation in the global market.

REFERENCES

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  • Huang, H. C., 2009. Designing a knowledge-based system for strategic planning: A balanced scorecard perspective. Expert Systems with Applications. 36(1). pp.209-218.
  • James, T. E. and Jorgensen, P. D., 2009. Policy knowledge, policy formulation, and change: Revisiting a foundational question. Policy Studies Journal. 37(1). pp.141-162.
  • Jenyo, K. and Soyoye M., 2015. Online Marketing and Consumer Purchase Behaviour: A Study of Nigerian Firms. British Journal of Marketing Studies. 3(7). pp.1-14.
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