Connected Products Transforming Companies -Myassignmenthelp.Com

Question: Discuss About The Connected Products Transforming Companies? Answer: Introduction The expansion is said to be the part of the business cycle at the time when a company moves from the trough to a peak level. It is referred as a time period when the business activitys level flows and GDP (gross domestic product) expands till it touches a highest point or peak. A period of expansion or development is also considered an economic recovery. The report is being projected to identify the potential influencing marketing for ALDIs future global expansion strategy. A justification will be provided for the chosen potential market with the help of macro analysis i.e. PESTLE. Along with this, the application of 5 Forces Model will be done to critically analyze the competitive intensity of the industry. Further, the report will perform the internal analysis on behalf of ALDI supermarket chain. In the end, it will suggest the various modes of entry for ALDI to enter the potential market. Overview of ALDI ALDI is the brand of two discount supermarket chain and has a leading position in the global market with stores in 18 countries. It has been estimated that the turnover of the supermarket is more than 50 billion. The supermarket is based in Germany and the chain was started in 1946 by Theo and Karl Albrecht brothers. ALDI is very famous in America and is counted in one of the favorite grocery stores. The growth success is recognized by the commitment of the company of making efficiencies at each level- from the construction of the store to the particular product. Every phase of their functions is reinvented in order to increase the product quality and customers savings (Aldi, 2018). About potential countries Czech Republic- Czechia is another name of Czech Republic. The country is placed in central Europe due to which the company has been selected for the expansion of the business. It includes the ancient provinces of Moravia and Bohemia along with the Silesias southern tip, cooperatively known as Czech Lands. The Czechia name was adopted in 2016 as a summarized, name for the Czech Republic (Trade Portal, 2018). New Zealand- New Zealand is an island country in the south-western Pacific Ocean. The country includes two main islands one South and North Island. The country has developed the country and has high rank while comparing it with the national performance in terms of health, education, and quality of life. The country is welcoming the international companies so that they can develop the better opportunities. Aldi Company needs the evaluation in which the 2 countries represent the most potentially attractive target market. Comparative PESTLE analysis of those macro-environmental factors of 2 countries that are relevant to Aldi is discussed in the Appendix. The rating to factor is given which helps in selecting the country for the expansion of the business in Appendix. Selection of country Aldi Company should expand its business in New Zealand market because the opportunity for growth is vast in the country. Though, this is the fact that Supermarkets of New Zealand found the fall in the past years during 2013-2014. Since then, the industry presented the modest growth every due to strengthening income and population migration. The annual growth is expected in the industry is 0.3% during 2013-2018. Aldi can bring the growth in the supermarket industry of New Zealand by providing facility to the customers who include online grocery shopping (IBIS World, 2017). New Zealand country is selected after the comparative analysis of both the country. There were few aspects which were good in the Czech Republic such as double population than New Zealand. The more population simple means the maximum purchase from supermarkets but this is also the fact that these people are migrated from different places which means that the supermarket might face difficulty in identifying the need of different consumer from a different background (Afonina and Chalupsk, 2012). Apart from this, the political instability in the country may lead to many other problems for the company. Therefore, New Zealand is the best selection for the Aldi Company. PESTLE analysis of New Zealand Political factors- The political factors include the rules and regulations formed by the government. New Zealand government is stable due to which the companies find the opportunity of success in the market. The rules and regulations in the country fluctuate after 3 years as the new government makes new rules and regulations (Faarup, 2010). In New Zealand, the business freedom is 99.9% and the trade freedom is 84.6% which reflects that New Zealand market is good for business and trading. Economic factors- The GDP of the country is expected to rise to $207 billion by the year 2018. This shows that the people can purchase the product due to high purchasing power in New Zealand. The economy of the country shows that if any company expand the business then they need to invest huge amount for generating profit. The above image shows that the economic aspects of the New Zealand which include the rise purchasing power of the people, GDP, national saving and in the service sector of the company. Social factors- The social factors of the country show that most of the people in the country are literate and know very well what they are buying from the market and at what price. The society of the country is good but this is also the fact that New Zealand is depended on business with other countries due to which they welcome new companies (Research and Markets, 2018). The population of the country is approximately 4,510,327 (by the year 2017 est. July). Out of these, 71.2% people are European, 14.1% are Maori, and 11.3% are Asian and rest are from different states. Considering the ethnicity of the country, every people in the country have their own perception, taste, choices which might affect the Aldi Company. Technological factors- The country has significantly developed in different types of product technology but for the new technology, the country is depended on other countries. Many international companies bring new technology in New Zealand then the company adopts those technologies in their country. It is suggested that there should be the presence of research and development centers in the country which will help the country in the technology advancement. Legal factors- The international business companies can do their business without any fear of the legal implication in the business activities. This will also provide the opportunity to the company to generate the profit. The legal system of New Zealand consists of common law system that is based on the English model with the special legislation and law courts for the Maori (Source: Central Intelligence Agency, 2018). Environmental factors- The company and society of country is responsible for the environmental obligations due to which they fulfill all their duty towards the environmental suitability. Though, the country is facing some of the environmental issues which include deforestation, soil erosion, native flora and fauna for which the country has brought new technology that helps the country to become pollution free (Haberer, 2010). Moreover, there are some agreements which are undertaken in New Zealand and these agreements include Antarctic-Environment Protocol, Antarctic Treaty, Endangered Species, Environmental Modification, Marine Dumping, Hazardous Wastes, Law of the Sea, Desertification, Ozone Layer Protection and many other (Source: Central Intelligence Agency, 2018). Porters Five Forces of Aldi in New Zealand Porters Five Forces is a tool that is essential for the companies to identify the analysis of the competitiveness of business (Rothaermel, 2015). Below given is an analysis of Aldi considering the selected market that is New Zealand: - Bargaining power of suppliers The retail industry suppliers provide the products at the fewer prices than the current market to the giant retailers like Aldi. Thus, the company finds low bargaining power of suppliers in New Zealand because if in case the suppliers ask for the high prices then the supermarkets offer the product to the customers at high prices which they wont be able to purchase (Porter, 2008). Therefore these results in a decrease in sales and revenue of retailers and suppliers due to which the suppliers offer the products at low prices. In addition, the suppliers of the country dont perform the tie-up with the new entrance and generally, they ask high amount from companies which lead to the problem for Aldi. Threats of New Entrants Opening store at the large level needs huge capital investment which decreases the new entrants in the market. Aldi has the medium threat of new entrants in the market of New Zealand because there is the presence of local farmers who sell their products to customers along with this there are many other supermarkets who are present in the country. Moreover, there are many international supermarkets across the world that can expand the business in New Zealand which is the biggest threat to the company (Kotler, 2015). This supermarket includes IGA, Whole foods, Lidl and many others. Bargaining threat of buyers The buyer of the company has high bargaining power because there are many companies in New Zealand that are involved in selling products at low prices. If in case the buyers find the high price of any product at Aldi then they can easily switch from one supermarket to another as most of the stores are located at the prime locations which give an opportunity to easily access them. Apart from it, there a number of stores who offer the loyalty points and rewards to their customers this help them in retaining the customers like Woolworths, countdown, FoodStuff, and many others. Aldi supermarket does not offer any such kind of offers to its customers which is one of the negative aspects of the company. Therefore, it is recommended to the company to offer discount and bonus to their loyal customers. Threat of Substitutes The products that are offered by the Aldi supermarket are similar than its competitors. Ever giant retailer has tie-ups with different brands due to which they are able to offer variety in the products to the customers (Porter, 2008). Similarly, in the New Zealand market, the company will offer the same products that are offered by the existing Supermarket of the country. Therefore, the customer can easily substitute their preference for the supermarket in the competitive market of New Zealand. The industry players of New Zealand perform the activities like advertising, marketing, price reduction, offers and many other things which will lead the problems of Aldi. Hence, the company will face the high threat of substitutes in the market. Competitive Rivalry The competition in the retail industry is aggressive because the competitors of the company offer the same products at same prices. Aldi will find the strong competition from the Countdown, a well-known full-service supermarket chain, and a subsidiary of PE (Progressive Enterprise) who is subsidiary of Woolworths Limited. Apart from Countdown, there are other companies who can give strong competition such as FoodStuff, New World, PaknSave, etc. All these supermarkets are currently focusing on the prices because of high competition (Euromonitor International, 2016). Even a difference of few cents will be highlighted by a competitor through marketing and advertisement which helps them in attracting the customers. Porters value chain A value chain is a strategic tool that is used by the companies to perform the internal analysis of the firm activities. According to Michael Porter, the value chain refers to as the framework that provides the analysis of specific internal activities of the company that create value and competitive advantage (Porter and Heppelmann, 2015). Below given is the value chain analysis of Aldi Company that is essential for the company to enter the chosen market. There are basically two major activities that are involved in the value chain activities and these activities are primary activities and support activities. Primary activities The aim of the primary activities of the value chain is to uphold the competitive advantage of delivery and production of the product. This activity plays a vital role in supporting the country to enter the new market (Riasi, 2015). The primary activity of the value chain includes the following: - Inbound logistics The inbound logistics are associated with the activities of receiving and storing the materials that are essential for producing goods. Over here, Aldi Company purchases the material in bulk to manufacture its own product with its own brand name. This shows that the company has its own production factories. Purchasing the material in bulk helps the company in saving the cost and ultimately prolongs a competitive advantage over the other competitors of New Zealand. Operations Operations show the lifecycle of the products and services offered by the company (Kotler, 2015). Aldi Company has its own brand so they are able to attract the customer to visit again and again to their stores for purchasing the non-compromising quality and services which will help the company in New Zealand. The company gets the products from their own manufacturing factors so they can ensure the quality of products at low cost. Outbound logistics These logistics are a concern with the accessibility of the offering of services and product to the customers. The company has its own transportation and distribution facility through which they will be able to provide the products. Aldi will open the stores at prime locations so that the customers can easily access the goods and services. In Addition, this is the fact that the company makes use of the vendor quality management system that helps in ensuring the quality and freshness of the products. Thus, this helps the company in establishing its place in the market of New Zealand. Marketing and Sales Every company makes use of marketing and sales strategies so that they can grab the attention of maximum customers and they can target the maximum audience (Wilson and Gilligan, 2012). Aldi also makes use of the marketing and sales strategy related to the save money in all the possible way. Though, the company is bringing the changes in the marketing strategy by cutting the cost and passing the saving to the customers ultimately. This strategy will also provide the support to the company to enter the selected market. Service This element includes the service that is offered by the company to its customers. Aldi is able to provide services through an online medium as this is one of the effective ways through which they can make the product accessible to the customers. The refund policies along with the less waiting time will help the company in generating customer satisfaction. The company should innovative new service in New Zealand to make good position and profit. Through, this service the aim of the company is to provide excellent satisfaction to the customers. Support activities Firm infrastructure The company has the good infrastructure at their stores which provide convenience to customers to fetch the products of different brands (Chernev, 2014). The infrastructure of stores is one of the effects through which the company can provide the satisfaction to the customers. Aldi should upgrade its store as this will make the appearance attractive for the customers in the New Zealand market. Human resource Aldi hires people having good knowledge of products in which company deals. Similarly, in New Zealand, the company will hire the skilled and educated person which is essential to understand the preference of people. The human resource will help the company in making a profit in the country. Technology development The development of the technology supports the Aldi to expand the business in the other markets. They make use of advanced technology to enhance the sales of the products and to generate the revenue. Procurement Procurement includes the procuring of good that is offered by the company to its customers. Aldi maintains a warehouse in which they store all the goods of different brands because the company purchases the goods in bulk from brands (Wang and Pizam, 2011). This is the only way through which the company can procure the goods in New Zealand as well. Mode of entry in the market There are different types of market mode of entry that are used by companies to enter the market such as joint venture, franchising, whole owned subsidiary, licensing and many others. Every market entry mode has its advantages and disadvantages but out of these modes of entry joint venture is suggested to the company. The joint venture is going be one of the effective ways with the help of which the company can enter into the market of New Zealand. The joint venture is a business entity that is formed between two or more parties generally characterized by shared ownership, shared returns and risks and shared governance (Hennart, Sheng, and Pimenta, 2015). Justification The reason behind the selection of joint venture as the mode of entry is because the company is not aware of the market of New Zealand. Joint venture with a company who is already established in the market of New Zealand will help the company in understanding the preference of customers so that they try to understand the needs and expectations of the customers. If the company will be able to meet the expectation of customers then they can gain the market easily. The major advantage that the company is going to get if the company select joint venture as a mode of entry is getting details of brands and smooth dealing with a supplier which is very much important for the business (Hennart, Sheng, and Pimenta, 2015). Apart from this, it is a fact that the market of Supermarket in New Zealand is fluctuating so if the company bear any loses they can distribute the loss and profit too. The joint venture will be effective as the company will be able to invest more amounts in establishing the business in New Zealand. More amounts will help the company in extending its services and marketing tactics in New Zealand. This is the fact the company is involving first time in the joint venture but this will be beneficial for the firm as they will get to know about the business agreements involved in joint ventures. Moreover, the company will find that this mode of entry is suitable for them or not after involving in the joint venture so that they can involve again in a joint venture for expanding business in other countries. This will also help them in improving the relationships between Australia and New Zealand governments along with this company don't have to spend the whole amount for the expansion. Thus, this will give rise to other companies to perform trading with New Zealand. In Addition, there is always a first time for the company to get involved in different modes of entry. Conclusion It can be concluded from the report that the Aldi should expand the business in New Zealand market as the company will not face any problem in terms of political, legal, technological and environmental factors. Though the company will not be able to generate the high profit which was possible to generate in the Czech Republic but then the company might not be able to perform the smooth operation. The selection is done considering the expected growth in the supermarket industry of New Zealand. Further, the report includes the detailed analysis on the basis of which decision is based and the appropriate market mode of entry. References Adamkasi (2016) PESTLE-PESTLE Analysis of New Zealand [online]. Available from: https://freepestelanalysis.com/pestel-pestle-analysis-of-new-zealand/ [Accessed 18th February 2018]. Adamkasi (2016) Porters Five Forces Analysis of Aldi [online]. 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