Internal Environment Audit
Internal and external analyzes are critical to acquiring a holistic picture of a company’s environment and developing an effective strategy that will enable the organization to attain success (Pride, Ferrell, Lukas, Schembri, Niininen, & Casidy, 2017). According to Williams (2016), an internal scan examines a firm’s interior milieu to determine its core competencies and strengths. Aldi’s core competencies include efficiency in product sourcing and supply-chain management, which enables the German discount chain to develop and implement its strategy around the delivery of quality, low-priced merchandise in the supermarket business (Pride et al., 2017). Small-sized, stand-alone stores comprise another of Aldi’s core capabilities, which allow the discount retailer to open shops and operate in dense, urban settings, where large retail stores such as Target and Walmart often find it difficult to expand. Additionally, Aldi prides itself on selling private-brand items – that is, products that the supermarket chain buys and sells itself (Williams, 2016). All these core competencies enable Aldi to offer prices that are significantly lower than are those of competitors, making it an attractive place for India’s middle-class city dwellers to shop.
Strengths
Aldi’s strengths comprise its private-company status, which allows its owners to have full control over all organizational operations. The power includes the freedom to make decisions regarding business expansion, even to risk but high-ROI markets, without having to persuade shareholders or directors. Another strong point associated with Aldi is that the supermarket chain offers high-quality products at low prices that enable it to attract and retain a significant number of customers. Additionally, the discount retailer has built a reliable and robust distribution network that ensures the company can reach its target market conveniently with its product offering. Moreover, Aldi boasts of remarkable expertise of penetrating new markets, as evidenced by its superb performance in the novel marketplaces that it has made an entry, such as the British and American souks (D. Brandes & N. Brandes, 2015). According to Williams (2016), other strengths that Aldi has include, a well-built brand portfolio, an outstanding proficiency of integrating complimentary companies through acquisition and mergers, reliable raw material suppliers, and operations automation, which ensures consistency in product quality.
External Environment Audit
Since Aldi is a discount retailer planning to expand to India, the analysis of the external environment should focus on the Indian retail industry. With a population of over 1 billion and a growing middle-class segment of more than 300 million consumers, India stands out as among the largest consumer markets worldwide, second only to China (Vedamani, 2018). India’s large middle-class population and the burgeoning number of cosmopolitan and metropolitan cities imply that the Indian market has a high spending potential that makes it an excellent target souk for retailers such as Aldi. However, given that Aldi is a German supermarket chain, the company might find it challenging to operate in the Indian market due to cultural differences, which make consumers’ and employees’ behavior and expectations in India different from those in Germany. The Indian retail sector also features stiff competition from retail giants such as Walmart, Tesco, and Metro, as well as mom-and-pop stores, referred to as “Kiranas” in India (Raj, 2015). According to Forbes (2019), emerging technology, such as the “Internet of Things,” which will put many household items that Aldi and other retailers offer on automatic replenishment, also stands out as a significant force in the external environment. Consequently, this influence will have a substantial impact on Aldi as it enters the Indian market.
Problem Analysis
Although expansion to the Indian retail market provides numerous opportunities for Aldi to grow and succeed, it also offers various challenges that the discount retailer must consider. Firstly, the German discount chain will likely face language and cultural hurdles because of the cultural differences between Germany and India. Secondly, the Indian retail sector is characterized by intense competition from both local and foreign retailers, which could derail Aldi’s success in the Indian souk. Thirdly, Aldi will have to deal with numerous tax codes and various compliance issues, which can create additional costs for the supermarket chain (Grosse, 2015). Lastly, Williams (2016) states that expanding to new markets also features supply chain risks and operational risks inherent in the hiring new workers.
Recommendations and Implementation Costs
To counter the challenge of language and cultural barriers, Aldi should strive to adapt to the Indian foreign environment by overhauling its marketing practices to meet the Indian consumer’s demands and expectations. As concerns the issues of intense competition in the Indian retail sector and supply chain risks, Aldi should find the right business partners and build strong relationships with local suppliers and enterprises. Moreover, the company should conduct due diligence and meet all the legal requirements of operating a retail business in India (Groose, 2015). However, Aldi will have to incur personnel-related costs in hiring new employees or sending home-country workers to work in India. According to FEI Daily Staff (2015), other expenses that Aldi will incur as it expands to the Indian retail market include real estate outlay, translation expenses, business security and employee safety costs, as well as corporate tax.