Aldi is the German retail company that is operating in multiple nations of the world. In the present research study, deep research on the firm is done. In the research report, reasons due to which Aldi intend to do international expansion are explained in detail. In this regard, the economic factor, competition and profit factor in respect to Aldi are analyzed deeply. Apart from this, in the report possible strategic choices that are available to the company are also explained in detail (Kurnia, and et.al., 2015). By using Porter diamond model strategic choice of Nigeria and India is evaluated in a proper manner. India is selected as a strategic choice considering multiple factors and then its business environment analysis is done. Apart from this, probable marketing mix is also developed. Market entry options are explained in the report and the best one is selected for the Aldi. Further, organizational and managerial problem is also explained and solutions are recommended. In this way, entire research work is carried out.
Reasons for parent company international expansion
• Economic factor: Aldi intend to expand its business in the international market like India because it is growing economically. Aldi mainly operates in the European nations and condition of these nations is not good in terms of economy. European retail sales on an annual basis only grew by 2.2%. By expanding business to India firm can create an opportunity for it. India GDP growth rate is 3.1%, which is low, but its fundamentals are strong and it has potential to recover the growth rate of 7%. Moreover, Indian middle class people spend more now than before as economically this group becomes wealthier (Filimonau, and Gherbin, 2017). This makes Indian market lucrative. Retail sector in the India grows at an exponential rate on year on year and due to this reason, to capitalized opportunity Aldi intend to expand into international markets.
• Limited opportunity in domestic market or markets in which firm is already present: Aldi is operating in the multiple nations, but in those nations, there is limited opportunity to grow business as already multiple players are present there. Firm in these nations like the UK is in competitive position, but facing problems in elevating its growth rate. Aldi give tough competition to the Tesco, Morrison etc. Aldi is struggling to earn the target amount of profit in the business there and in respect to elevating market share in many markets. Thus, it becomes very important for the firm to find out new markets where ample opportunity is available in respect to business expansion.
• Gain competitive advantage: Rivals of the Aldi like Tesco, Lidl etc are also exploring new markets to create opportunity for themselves. By moving into new market before rivals like in the Indian or Nigeria market, Aldi will get first mover advantage in the business (Nguimkeu, 2016). Such kind of early step will give Aldi competitive advantage over its rivals.
• Currency difference: There is a huge currency value difference between Euro and INR, Euro and Nigerian Naira. When any company operates in the foreign market whose current value is lower then in that case when it bring back profit at its homeland profit value get increased in the domestic currency. Thus, it can be said that it is another reason due to which Aldi intend to expand its business in the international market.
• Improve profit: Aldi is struggling to achieve determined profit growth rate in the business. Like in the year 2018 Aldi sales grew, but profit decline. In the year 2019 also Aldi observe addition of £1.1 billion in its revenue, but its profit declined by 20%. Such kind of consistent negative or low growth rate in profit is the motivating factor for the Aldi to expand its business in the international market (Jere, Jere, and Aspeling, 2015). By expanding into the market where competition is less or retail industry grow at a rapid pace, firm can earn a large amount of profit in its business. There is less competition in the Indian market as it can be observed that in the Indian market organized retail has only 6% share. Thus, there are ample opportunities in the Indian market. However, in Nigeria there are multiple rival firms, but industry grows at 10% which make it lucrative market. By offering discount and offering more products under a single roof Aldi can earn huge profits in the Indian or Nigeria market. Currently, there is no retail chain in the Indian market that is known for offering an appropriate discount on the products. By starting a business in the India firm will get first mover advantage in the Indian market.
On the basis of the above discussion it is concluded that there are a number of reasons due to which Aldi intend to expand its business operations. Cut throat competition and low profit are one of them. Apart from this, less economic growth rate of EU nations is another main reason. Market conditions and external environment as well five forces are in favor of the Aldi and due to this reason firm must commence business operations in the Indian market. Indian Government is preparing business friendly policies and also reduce tax rate which will give boost to demand in the market. Moreover, the Indian retail organized sector is very small in size and due to this reason by entering into the Indian market Aldi will get first mover advantage. Currently, there is less competition in the Indian market and due to this reason, if Aldi comes today in the market it will be able to easily capture market and easily elevate market share in the industry. Aldi follow a low cost strategy in its business and its strategy is according to the value system of the Indians. This is the reason due to which Aldi will achieve huge success in the Indian market. Currently, in Indian market, there is no cut throat competition like seen in the UK and Aldi by offering low price product can gain significant share in the market. Focus will also need to be paid on subsidiary management and under this varied steps must be taken.
Books and Journals
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Caritte, V., Acha, S.. and Shah, N. 2015. Enhancing corporate environmental performance through reporting and roadmaps. Business Strategy and the Environment. 24(5). 289-308.
Cheah, S., Ho, Y. P.. and Li, S. 2018. Business model innovation for sustainable performance in retail and hospitality industries. Sustainability. 10(11). 3952.
Dixon-O’Mara, C.. and Ryan, L. 2018. Energy efficiency in the food retail sector: barriers, drivers and acceptable policies. Energy Efficiency. 11(2). 445-464.
Fernandez, A. I. and et.al., 2018. Distinctive competencies and competency-based management in regulated sectors: A methodological proposal applied to the pharmaceutical retail sector in Spain. Journal of Retailing and Consumer Services. 42. 29-36.
Fernie, J.. and Sparks, L., 2018. Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
Ferracuti, N. and et.al., 2019. A business application of RTLS technology in Intelligent Retail Environment: Defining the shopper’s preferred path and its segmentation. Journal of Retailing and Consumer Services. 47. 184-194.
Ferreira, A. and et.al., 2019. Decarbonizing strategies of the retail sector following the Paris Agreement. Energy Policy. 135. 110999.
Filimonau, V.. and Gherbin, A. 2017. An exploratory study of food waste management practices in the UK grocery retail sector. Journal of Cleaner Production. 167. 1184-1194.
Govinnage, D. Y.. and Sachitra, K. M. V. 2019. Factors affecting e-commerce adoption of small and medium enterprises in Sri Lanka: Evidence from retail sector. Asian Journal of Advanced Research and Reports. 1-10.
Hartmann, M., Klink, J.. and Simons, J. 2015. Cause related marketing in the German retail sector: Exploring the role of consumers’ trust. Food Policy. 52. 108-114.
Janda, K. B. and et.l., 2016. The evolution of green leases: towards inter-organizational environmental governance. Building Research & Information. 44(5-6). 660-674.