Goal: For you to demonstrate cognitive, technical and creative skills to investigate, analyse and synthesise complex information, problems, concepts and theories and to apply established theories to practice through interpretation of company strategy. Product: Written report Format: Choose a firm whose current business strategy situation you will analyse and answer the assigned questions, provided on Blackboard at the start of session. More detailed guidance will be provided on Blackboard. This is an individual assessment and needs to be submitted electronically through SafeAssign. Word count should not exceed 2500 words. Criteria • Selection of appropriate frameworks • Level of application of relevant theory using germane facts and figures. • Quality of analysis • Quality of presentation • Full assessment criteria will be posted on Blackboard
PowerPoint Presentation Task 1 information Mgt703 strategic management Dr wayne graham . 1 Assessment summary Task No.Assessment TasksIndividual or Group Weighting %What is the duration / length?When should I submit?Where should I submit it? 1Business Strategy ReportIndividual50%2500 wordsWeek 7, Friday, 11.59pm (AEST)SafeAssign 2Strategic Innovation ReportIndividual50%2500 wordsWeek 13, Friday 11.59pm (AEST)SafeAssign 100% 2 Assessment task 1 Business strategy report Goal: For you to demonstrate cognitive, technical and creative skills to investigate, analyse and synthesise complex information, problems, concepts and theories and to apply established theories to practice through interpretation of case studies. Product: Case study report Format:Choose a firm whose current business strategy situation you will analyse and answer the assigned questions, provided on Blackboard at the start of session. More detailed guidance will be provided on Blackboard. This is an individual or group assessment and needs to be submitted electronically through SafeAssign. Word count should be at least 2250 words and must not exceed 2750 words. Criteria Selection of appropriate frameworks Level of application of relevant theory Quality of analysis Quality of presentation Full assessment criteria (rubric) will be posted on Blackboard Generic skill assessedSkill assessment level Problem solvingGraduate OrganisationGraduate 3 The business to analyse – a living case study Choose a business (organisation) you are interested in or have access to Note: Aldi is not be used as it has been the worked example throughout the course. Analyse their strategy in the Australian (or one other) domestic market You must work on their strategy as a ‘plan’ for the next 5 years or as a ‘pattern’ covering the past 5 years The questions Evaluate the performance of their current (or past) strategy identify their vision, mission, values, objectives and strategy examine external fit examine internal fit assess potential impact of external fit and internal fit on performance against their objectives Recommend changes to improve their performance Analyse their strategic management of growth in that business identify the current growth strategy evaluate the current growth strategy recommend any changes that would result in higher level of growth performance 60 - 70% of content 30 - 40% of content Assessment criteria Selection of appropriate frameworks Level of application of relevant theory Using relevant facts and figures (analysis) Quality of presentation, including use of appropriate styles of referencing Tip: ensure analysis –> insights –> recommendations The recommendations should be “aligned” to the analysis The reader should be expecting what is recommended because it is an obvious conclusion given the analysis that has been presented information frameworks analysis insights Recommendations Source (figure): http://venturebeat.com/2015/10/14/4-key-tactics-to-improve-your-mobile-app-conversion-funnel/ 7 Tip: use frameworks and data, rigorously, to create insights Correctly applying frameworks by drawing on relevant data https://www.pinterest.com/pin/403353710350313636/ And recognising what it means sparksheet.com 8 Length requirements Provincial Letters : Letter XVI (4 December 1656) http://www.slideshare.net/Mintigo1/mintigo-webinar-how-docusign-built-a-worldclass-lead-nurturing-program References do not count Tables and Figures do not count Appendices will only be considered if their findings are included in the analysis Microsoft Word - Aldi current strategy Task 2 HD example - Feedback TASK 1: CASE STUDY REPORT USC MGT703 Strategic Management Semester 1 2016 MGT703 Task 1 Case Analysis 1 | P a g e Executive Summary This case analysis assesses and evaluates the business strategy of ALDI Stores Supermarkets Australia Pty Ltd, owned by German discount retail chain, which entered the $80.1 billion Australian retail supermarket sector in 2001. ALDI has since grown rapidly to capture 9.1% share of a market dominated by two industry leaders, Coles and Woolworths, with 72.9% market between them. Aldi plans a further 80 stores in 2016, taking its total to 476 nationally compared to Coles’ 776 and Woolworths’ 961. ALDI’s strong performance has been underpinned with a strongly differentiated business strategy, concentrating on its business model of eschewing branded products for a small range of quality private label products sold at very low prices consistent across all stores. ALDI also attracts price‐conscious customers with an endlessly changing selection of special buys which encompass a wide range of food, electronics, household goods and hardware at bargain prices. The low‐price business model is coupled with cost‐saving, minimalised customer service. Coles and Woolworths have responded with more private label products and national pricing, and the sector is experiencing food deflation of around 1 – 1.5% annually. While ALDI’s performance and high profitability has been remarkable in capturing value in the market place over the past 15 years, its product range is unlikely to satisfy the full supermarket shopping requirements of the average Australian household and the lack of customer service may also be a limitation. The analysis concludes with two recommendations. RECOMMENDATION 1 ALDI somewhat decrease the narrowness of its focus to increase its regularly stocked product range and better satisfy the supermarket shopping list of customers. RECOMMENDATION 2 ALDI maintain its no frills service to keep prices low but better train staff in customer relations to meet Australian consumer expectations. MGT703 Task 1 Case Analysis 2 | P a g e Contents 1. Introduction page 3 2. Assessment of ALDI’s Strategy page 4 2.1. Mission Statement page 4 2.2. Generic Strategy page 4 2.3. Business Model page 5 2.4. Value Curves page 7 3. Evaluation of ALDI’s Strategy page 9 3.1. Industry Context page 9 3.2. External Fit page 10 3.3. Internal Fit page 10 4. Conclusion and Recommendations page 11 References page 12 List of Figures Figure 1: Cost Leadership and Scope page 5 Figure 2: Value Curves: ALDI v. Coles and Woolworths page 8 Figure 3: PESTEL page 9 Figure 4: ALDI Value Chain page 10 MGT703 Task 1 Case Analysis 3 | P a g e CASE ANALYSIS – ALDI 1. Introduction This case analysis evaluates the strategic positioning of the Australian trading entity, ALDI Stores Supermarkets Australia Pty Ltd, owned by German discount retail chain, ALDI. The recent major entrant into the Australian 80.1 billion dollar (Ibisworld 2016) retail supermarket sector, ALDI opened its first Australian supermarket in New South Wales in 2001. It is much in evidence in the media and on the high street that ALDI, already with a market share of 9.1% (Ibisworld 2016), is accelerating its push to establish a significant presence in Australia by aggressively competing against the two dominant players, Coles and Woolworths. These two market leaders have had, in effect, duopolistic control of the Australian market ever since the beginning of the demise of low‐cost competitor, Franklins, from the early 2000s. Although Franklins’ stores were sold to Metcash, owner of the IGA supermarket franchise for independent operators, IGA has largely differentiated by localisation and convenience. It has generally not sought to compete directly with Coles and Woolworths. Therefore, although retail supermarkets are not a strongly globalised industry (Ibisworld), the Australian supermarket sector with its relatively high profit margins (Ibisworld 2016), despite a recently erupted price war between Woolworths and Coles, has arguably long been an attractive potential target for an international player to step into the market with a convincing business model. MGT703 Task 1 Case Analysis 4 | P a g e 2. Assessment of Aldi’s Strategy ALDI Stores Supermarkets Australia Pty Ltd’s current business strategy for the Australian market is examined and related to external fit and current and potential business performance. This study does not consider the objectives of the German parent company, or ALDI’s functional and organisational matters to deliver its business strategy. 2.1. MISSION STATEMENT ALDI Australia’s mission statement is bold in intent, communicated directly to customers. ‘At ALDI out mission is to provide you incredibly high quality at impossibly low prices’ (ALDI 2016). The statement suggests an offensive competitive strategy, describing the key elements of ALDI’s business model and suggesting objective, scope and advantage (Rukstad,M & Collis, D 2008). By any measure, a customer sampling products from ALDI would find the prices low, sometimes unexpectedly low, and the quality at least average and often better than average. In that sense, ALDI fulfills the promise of its mission statement but ALDI stores do not offer the scope and variety of regularly stocked products Australian consumers are used to from a major supermarket chain. 2.2 GENERIC STRATEGY Porter describes three generic strategies: overall cost leadership, differentiation and focus (Porter 1980). Typically, a low‐cost strategy requires high‐volume sales and will exclude differentiation but the focus may still be narrow or broad. Using Porter’s generic technique (Porter 1980), an assessment of ALDI’s positioning compared to the other biggest market players is presented in Figure 1. Aldi has positioned itself as the cost leader but, with a limited range of around a 1000 stocked products in‐store compared to the sector leaders’ 30,000, ALDI’s focus is narrow (Ibisworld 2016). The representation in Figure 1 of Coles having a price strategy ahead of Woolworths may not be reflected in the price of a basket of goods on a given day but it is acknowledged that Coles, amid controversy as to its conduct with suppliers, has driven a recent price‐war against Woolworths in a successful strategy to increase its market share (Ibisworld 2016). MGT703 Task 1 Case Analysis 5 | P a g e Figure 1: Cost‐Leadership and Scope 2..3. BUSINESS MODEL The type of Business Model considered is Who, What, How. WHO ALDI targets all consumers in the retail supermarket market segment but its emphasis on low‐ priced private label products has particularly attracted price‐conscious buyers from the two lowest income quintiles (Ibisworld 2016). Its ‘special buys’ lure bargain hunters. Early geographical distribution of ALDI stores evidently focussed on lower socio‐economic metropolitan areas where Woolworths or Coles did not have a local presence. As ALDI accelerated its store opening program over the past few years, the company is trading in more diverse locations, including regional towns, already serviced by the major players. For example, newer ALDI stores compete against Woolworths in Fortitude Valley in affluent inner‐ metropolitan Brisbane and in Leongatha in rural South Gippsland, while announcing a new store to open in nearby Wonthaggi already serviced by Coles (ALDI 2016). Broad Low Cost Differentiation Narrow MGT703 Task 1 Case Analysis 6 | P a g e WHAT Historically in Australia, ALDI has stocked almost exclusively low‐cost private label products, heavily undercutting comparable branded products and forcing Woolworths and Coles to respond by increasing their own discounted private label products. However, with the apparent aim to lessen its narrow focus and generate wider customer appeal, ALDI has recently begun to increase its range of branded products and introduced a bigger and regularly stocked range of fresh green groceries (Ibisworld 2016). Nevertheless, a visit to an ALDI store confirms that ALDI retains its no‐frills service with few cash registers, few staff and no free bags. In stark contrast to Woolworths and Coles, visitors to an ALDI store will find scant evidence that the company places value on presentation and staff‐to‐customer relations. This may be another area requiring some adaptation within ALDI’s strategy in Australia where, more than in Europe, customers have enjoyed and expect congenial and helpful service in the supermarket sector. HOW ALDI creates value by offering a small range of private label products in most product areas. These products are generally of sound quality at price levels not previously experienced in Australian supermarkets. Although the choice is limited and may not provide all the items on the average customer’s shopping list, the value is sufficient to attract many shoppers to ALDI stores, evidenced by ALDI’s rapid growth to take 9.1% of the market in just fifteen years (Ibisworld), while Moody’s research suggests 12.1% (ABC 2016). ALDI claims a significant Australian made content for its products, for instance, 100% for meat and laundry products, 93% for dairy and 91% for fresh green groceries. This suggests ALDI knows Australian customers perceive value in Australian made products. This may be of amplified importance for a foreign‐owned store. ALDI’s plans to open 80 stores in 2016, taking it to a national total of 476 (compared to Coles’ 776 and Woolworths’ 961). This rapid expansion is unprecedented in Australian supermarket history and aims to take advantage of Woolworth’s vulnerability to lower profitability in the MGT703 Task 1 Case Analysis 7 | P a g e face of ALDI’s and Coles’s sharpened competition, particularly from private label discount product lines (Greenblat 2015). In addition to its regularly stocked product lines, ALDI markets an ever‐changing range of special buys. These are a diverse selection of items including toys, food, hardware, electronics, and household goods. The special buys change as stocks sell out but are remarkably cheap, enticing customers with the chance of a bargain and seemingly aimed at impulse buys. 2.4. VALUE CURVES The supermarket sector in Australia is mature in its life‐cycle and well‐serviced. Very few locations that could support a supermarket are without one. Growth has been dependent on an increasing population, increased consumer spending power, aggressive competition against smaller players, and by the major supermarkets expanding their product range to encroach on the traditional territory of other businesses. The market could be described as ‘red ocean’, yet ALDI has entered the market place with a ‘blue ocean’ strategy by focussing on a narrow range of quality discount private label products in a sector traditionally dominated by big‐name branding. ALDI has broken the prevalent customer value expectation that low‐cost products deliver a compromise on quality and has triggered a shift in the way the other major players are doing business. In determining a profitable model to deliver a product and service mix customers value, ALDI has not just reduced prices. It has eliminated free carrier bags, reduced customer service, created an expectation for bargains, raised expectations of the quality of discount product lines and is increasing its geographical presence. Figure 2 illustrates an assessment of the value curves of ALDI and the other major supermarket chains, principally Coles and Woolworths. ALDI is operating a significantly differentiated strategy. MGT703 Task 1 Case Analysis 8 | P a g e Figure 2: Value Curves: ALDI v. Coles & Woolworths Relative Value ALDI Coles & Woolworths Low Price Value Expectation Product Range Customer Service MGT703 Task 1 Case Analysis 9 | P a g e 3. Evaluation of ALDI’s Strategy ALDI has entered the Australian retail supermarket sector with a genuinely differentiated strategy based on discounted pricing while exceeding expectations of low‐price product quality but offered with a no frills service. ALDI’s rapid increase in market share, doubling its sales revenue over the last 5 years to $8 billion with industry‐leading profitability (Ibisworld 2016, Greenblat 2015), demonstrates these differentiated attributes are providing customer value and meeting customer demand. ALDI has a genuinely successful business strategy which it is able to execute effectively and capture value in the market, evidenced as self‐ reinforcing through its high profitably and gains in market share. 3.1 INDUSTRY CONTEXT The Australian retail supermarket industry sector is dominated by Coles (33.4% market share) and Woolworths (39.5%). The sector generates $4.9 billion profits (5.56%) from $88.1 billion sales. Its annual growth rate for the past 5 years has been 3.8% but is predicted to slow to 2.2% over the forward 5‐year period (Ibisworld 2016). Porter’s Five Forces analysis illustrates domination by the two main players with intense rivalry between them, aggressive tactics to squeeze out smaller competitors, ruthless pressure applied to lower costs in the supply chain, high costs of entry protecting against new entrants and substitutes, and a significant absence of buyer bargaining power due to lack of choice. ALDI’s entry into the market place has changed the competitive dynamics in the sector with greater focus on customer value, more uniform pricing nationally, and 1 – 1.5% annual food price deflation (Letts 2016). A PESTEL analysis of the Australian trading environment follows at Figure 3. POLITICAL Stable Westminster‐type democracy. ECONOMIC Growth & inflation 2‐3%*. Labour, energy, transport, building costs high SOCIAL Population growth 1.3%**, relatively affluent, educated, diverse. TECHNOLOGY Advanced, good infrastructure but big distances between cities. LEGAL High level of governance, high level of regulations and standards. ENVIRONMENT Environmental protection, climate extremes, water expensive, recycling. Figure 3: PESTEL (Sources: * RBA 2016, **ABS 2016) MGT703 Task 1 Case Analysis 10 | P a g e 3.2 EXTERNAL FIT The external trading environment applies to all players in the sector. For example, all are subject to the same food standards regulations, the same issues of transportation over long distances and must provide car‐parking. ALDI’s external fit in the market is similar to other players in most respects and it is showing commitment to having a comparable geographic presence. However, it has differentiated by positioning in the otherwise unserved market segment of the supermarket sector by offering quality products at heavily discounted prices. 3.3 INTERNAL FIT While the industry value chain is broadly similar for the major supermarkets, there is scope for the internal approaches by the major competitors to differ. ALDI focusses on private label products sourced from selected suppliers for approaching 100% of its product range. This compares to Coles 25%, under stimulation from ALDI’s competition (Ibisworld 2016). Another factor is the supplier relationships developed in the value chain. Suppliers report that ALDI pays faster and is easier and more stable to do business with (Battersby 2013). Figure 4: ALDI Value Chain Fresh Foods & Specified Goods. Inbound logistics. Quality Control. Ordering. Pricing. Outbound Logistics. Stock Control. (Corporate Services) Store Management. In‐Store Sales & Customer Service. MGT703 Task 1 Case Analysis 11 | P a g e 4. Conclusion and Recommendations ALDI’s entry into the Australian retail supermarket sector in 2001 has been highly successful with 9.1% market share and industry‐leading profitability attained in just 15 years. ALDI used its quality, low‐cost, private label products business model to fill an unexploited gap in the Australian supermarket sector. The company has managed an accelerated program of expanding geographical presence with another 80 stores to be opened this year. It’s mission of providing high quality at significantly lower prices has resonated with Australian customers at a time when increasing living costs are eroding personal affluence, creating value for ALDI. This advantage looks set to continue for the foreseeable future. ALDI’s disruption to the sector has triggered an industry