Global Marketing Management Assignment - A Global Strategic Marketing Plan
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Answer - Global Market Entry Strategy
Introduction
Once a business is well established it always looks towards the horizon for expanding it. Apart from the objective of accruing more revenues, there are also some pragmatic implications for expanding a business. It allows a business to reach out to a different market and customers. Particularly if a company wants to establish, it's a presence over the globe overseas market expansion achieves this goal. It also develops a new relationship of trust with the new base of customers. It reduces the competition that is likely to occur in case of saturation in prevalent markets with rival companies. Expanding the organisation also results in establishing a global brand name. By using such common and simple practices as franchising a relatively small or medium size organisation can step up to transform itself into a large organisation. Most importantly it increases the popularity of the brand attracting new customers. This adds up to the profits and revenues of the company.
Q1. Provide a case background including company size, competition and target market.
Providing the background of the organisation -
Aldi is a German company owned by two German families. It is a chain of discount supermarkets. Which means it is a chain of supermarkets which sells products with prices which are much lower compared to the normal market price. Aldi was founded by Albrecht brothers who took over their mother's store (Aldi.com 2019). Aldi was later split up into two parts. One is headquartered in Essen by the name of Aldi Nord. Another has its headquarters in Mulheim called Aldi Sud.
Company size
Aldi operates in over 20 countries and has approximately 10,000 stores. Aldi Nord operates in countries such as France, Denmark, Spain, Poland, and Portugal. While Aldi Sud operates in Great Britain , Ireland Switzerland, Hungary, Slovenia, Austria, Australia, Italy, and China. Aldi Nord and Aldi Sud both have almost 1,600 stores in the United States (Aldi.com 2019). The company is estimated to have a turnover of 50 billion euros. Aldi is an abbreviation for Albrecht Diskont one of the Albrecht brothers
Competition
Aldi faces stiff competition from Waitrose and Marks & Spencers. Lidl and Walmart are also big competitors of Aldi in the global market. Penny Market, Biedronka, Schwarz Gruppe are also renowned discount market chains and hence can give Aldi a run for their money. Tesco and Supervalu are organisations in the retail sector who compete with Aldi.
Target market
It is the aim of Aldi to provide quality and branded products at an affordable price. As such it can be said that the target market of Aldi consists of working class people. It also includes people from the upper strata of society. Purchasers' day by day is looking forward towards brands which provide products at smart prices without compromising on value or quality (Kotabe and Murray 2018). This is the target customer base for an organisation like Aldi which has brand value and market competitive prices for everyday products.
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Q2. Include information on your (2) chosen target countries with justification. (Analyse the macro-environments (PESTEL) & competitors, customers and market.
Including information on two chosen target countries with justification
Market and customers:
Aldi is looking to increase its number of stores over the world. The primary product of Aldi is groceries. Since rapid progress is happening in the countries of India and Saudi Arabia, these two countries have been chosen as a potential market for business expansions for Aldi in the future.
The retail industry of India:
The retail industry of India has experienced a tremendous boom in the last few years. It is one of the fastest paced and dynamically growing industries (Hitt, Li and Xu 2016). As of now, the retail industry in India contributes to ten percent of India's Gross Domestic Product. India stands at fifth place as the largest destination in retails space in the world. It came first in 2017's Global Retail Development Index. Retail sector accounts for eight percent of employment in India. It has been predicted that the retail market will increase by sixty percent in India by the year 2020. Several factors such as an increase in internet usage, rise in the income and change in the lifestyle of middle-class people have helped the retail sector thrive in India (Koncar and Lekovic 2016). The Government of India has taken steps and designed policies for the retail market in India to flourish further.
The retail industry of Saudi Arabia:
Saudi Arabia also has a retail industry with positive potential. Kearney's study depicting Global retails development Index showed that Saudi Arabia has solid growth in the retail sector and has a lot of untapped potentials. One of the factors for this stable growth is the trust level. Saudi Arabian consumers are some of the most willing consumers globally (Saudigazette.com.sa 2019). Since the level of disposable income is comparatively low for neighbouring locations of Saudi Arabia there is plenty of scope for growth in the retails sector. Another important fact contributing to retail growth is the huge amount of religious tourists visiting Saudi Arabia each year. This leads to further catering to diverse groups and a larger market (Panibratov 2017). However, the Saudi Arabian retails market has suffered a minor setback in recent times due to various new economic policies and restructuring (Ghosal 2015). The introduction of Value Added Tax and consumers opting for more economical products has stunted the retail industry of Saudi Arabia in recent times
PESTLE analysis
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Macro environment Indian retail market
Aldi is looking to expand its new store chain in India. To achieve a better understanding of the retail market in India a PESTLE analysis will help to grasp the scenario:
• Political: Government policies, taxations, and regulations affect the retail industry. It influences the economic condition of the nation and also the international chain of logistics. Here India has a clear advantage since GST has been introduced. This unified tax tool reduces complications and contributes to the retail industry's success. The government of India has allowed certain favourable policies so the retail industry is on solid footing in India from the political aspect (Rugman and Verbeke 2017).
• Economic: An economic factor is directly responsible for an international brand looking for expansion. Since the Indian Economy is growing at a fast rate it can be safely predicted that to invest in India will be a wise decision (Lasserre 2017). India's luxury and retail market are predicted to grow steadily. Hence it will be a good choice for Aldi to invest in India's retail sector. GDP growth of India 8.1% and India is 7th largest economy in India. Current GDP of India is $2.948 trillion and GDP per capita of India is $2,134 (Ibef.org 2019). Inflation rate in India is decreasing by 2.5% and labour force of India 527 million. Foreign Direct Investment declined in 2017-2018 and the figure touched $38 billion.
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Foreign Direct Investment
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2015
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2016
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2017
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FDI Inward Flow (in Million USD)
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44,065
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44,480
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39,910
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FDI Stock (in Million USD)
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282,616
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318,486
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377,685
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FDI Inwards
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7.2
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7.0
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n/a
|
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FDI Stock
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13.5
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14.1
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n/a
|
|
Table 1: Foreign Direct Investment in India
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• Social: Social factor is extremely important in the retail sector (Luo and Bu 2018). Here too India has a clear advantage. India's population primarily constitute the youth of India. The young population of India is hugely eager consumers'(Aithal 2016).A brand like Aldi which provides quality products at economic prices can lure the youth of India with its reputation as a global brand.
• Technological: Technological factor is important for the growth of any industry whether it is in retail or logistics. India is investing heavily right now in the digitization sector under the current government's policy (Pradhan and Kundu 2016). If Aldi is aiming to expand its business in India the technological up gradations happening in India will smooth all its operations and help in its success.
• Environmental: As with all other factors retails industry is also concerned with the reduction of waste, renewable energy, and packaging. Retail industry in India is gradually becoming more aware of this issue and looking into new policies to implement it.
• Legal: The laws concerned with employment, business and labour affect the retail industry. While maximum retail and employment laws are favourable regarding a global expansion of any brand in India the labour laws lag behind. Labour regulations and laws in India needs to be more flexible. The retail industry will experience much more growth if this shortcoming is dealt with.
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Macro-environment analysis of Saudi Arabia retail market
Saudi Arabia has excellent infrastructure and a fairly harmonious business environment making it a potential market for global investment. A PESTLE analysis of Saudi Arabia is as follows:
• Political: The political conditions of Saudi Arabia are favourable and stable for the last few years. Since the time of 2011, Saudi Arabia is facing the uprising, political stability of Saudi Arabia is -0.32 (World Bank).
• Economic: The economic factor in Saudi Arabia is very favourable in terms of global investment. It is one of the most prosperous countries in the Middle East. Strong banking and financial institutions have propelled it to a good position. It may look favourable for Aldi to expand its base in Saudi Arabia. GDP growth of Saudi Arabia 4.1% and GDP per capita $121,120 (Saudigazette.com.sa 2019). One important drawback is that the majority of Saudi Arabia's economic condition is based on oil. In the case of a single source of economic growth sudden recession in that particular industry may affect the retails industry severely. In Saudi Arabia, FDI in-flowed decreased from USD 7.4 to 1.4 billion between 2016 and 2017.
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Foreign Direct Investment
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2015
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2016
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2017
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FDI Inward Flow (in Million USD)
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8,141
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7,453
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1,421
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FDI Stock (in Million USD)
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224,050
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231,501
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232,208
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FDI Inwards
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4.2
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4.5
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n/a
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FDI Stock
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34.4
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35.6
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n/a
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Table 2: Foreign direct investment in Saudi Arabia
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• Social: While Saudi Arabia does not have the advantage like India of having a huge young population it must be noted that the country is an important religious and shopping destination for tourists (pestleanalysis.com). This definitely helps the retail sector is growing.
• Technological: Technologically too Saudi Arabia has invested heavily and is a good investment in the retail sector (Baruah and Ward 2015).
• Environmental: Saudi Arabia has designed several policies and plans for building a sustainable environment. Hence here too Saudi Arabia has a strong contender.
• Legal: This is the specific area where Saudi Arabia falls short despite having a stable political situation. It has failed to create jobs and engage more local people in its business. Employees migrating from other cultures may suffer due to poor cross-cultural management. In this case, it might not be favourable for Aldi to invest here.
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Porter's Five Forces analysis
Porters five force model is an analysis tool that helps us understand the level of competition in an industry and how much it stands to profit.
Competitive positioning of retail industry in India
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Factor
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Description
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Level
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Threat of Substitutes
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In the grocery retail market, the threat is low for food items while it is medium for non-food items.
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Medium
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The threat of New Entry
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The threat of new entry is comparatively low for a global brand like Aldi as it requires large capital investments to establish a brand name. Aldi has an edge already being an established brand.
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Low
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Buyer Power
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Bargaining powers for buyers are extremely high. In Indian market, local brands having more competitive price may induce a buyer to switch loyalties.
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High
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Supplier Power
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This is low in India since suppliers are more inclined to be associated with global brands by virtue of their exclusivity.
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Low
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Competitive Rivalry
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This is medium. While local brands such as Big Bazaar and Reliance Fresh may offer more competitive price Aldi with its edge of being an exclusive global brand name can move ahead with proper promotions and strategies.
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Medium
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Competitive positioning of retail industry in Saudi Arabia
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Factor
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Description
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Level
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Threat of Substitutes
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In the grocery retail market, the threat of substitutes is medium. Aldi being a new entrant has an advantage over substitute product with its fresh approach
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Medium
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The threat of New Entry
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The threat of new entry is comparatively low for a global brand like Aldi as it requires large capital investments to establish a brand name.
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Low
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Buyer Power
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Bargaining powers for buyers are extremely high. Even in times, economic prosperity buyers can change brands owing to lesser price or products.
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High
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Supplier Power
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This is high in Saudi Arabia. Suppliers in Saudi Arabia are aware of it being a potential market for other retail chains and will not compromise regarding in this area.
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High
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Competitive Rivalry
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This is medium. Other companies such as the Panda Retail Company of the Savola group and Arabian Food Supplies can give competition to a brand like Aldi.
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Medium
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Q3. Set your SMART global marketing objectives (3-5) for going international.
SMART is an abbreviation for 5 parts of specific, measurable, achievable, relevant and time-based goals.
SMART Objective 1:
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Objective
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Description
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Specific
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To acquire 3% in regional market share within 2 years
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Measurable
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The organisation will measure through accounting sales and profitability
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Achievable
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The organisation will do more promotions in India
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Relevant
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An increase in the number of stores will lead to increase in sales thus contributing to the market share.
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Time-Based
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Within 2 years
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SMART Objective 2
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Objective
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Description
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Specific
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To reach large customer base in India
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Measurable
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A survey should be conducted to find out strategic areas which have a higher customer concentration. More stores should be planned there
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Achievable
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Increase in a number of stores in strategic will lead to a 20% increase in customer base.
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Relevant
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An increase in the number of stores in areas which have a higher percentage of consumers who value branded product will lead to an increase in customer base.
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Time-Based
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Within 12 months
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SMART Objective 3:
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Objective
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Description
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Specific
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To grab 5% profitability by the end of 2022 in India
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Measurable
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To acquire at least 5% profitable retail brands and several independent stores.
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Achievable
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Designing a proper proposition will convince a local brand and stores to merge with a global brand
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Relevant
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A proper merger and acquisitions plan will help local brands understand the importance of the situation where companies can work together to target a larger customer base.
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Time-Based
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Within 2.5 years
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SMART Objective 4:
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Objective
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Description
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Specific
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To make a strong foothold on social media network so that brand loyalty of the organisation may increase
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Measurable
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To acquire at least a 30% increase in brand awareness
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Achievable
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Designing marketing plans to promote the brand such that consumers globally become more aware of the value and prestige attached with the brand.
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Relevant
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Planned marketing strategies and their timely execution will result in consumers being more aware of the brand.
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Time-Based
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Within 12 months
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Q4. Decide upon and justify your global market entry strategy (export, franchise, joint venture, etc). What are the implications (risks and opportunities) if your company would decide upon a different strategy?
There is no one particular strategy when a company is venturing into the global market. Aldi being a discount retail chain has various options. From the above it is clear that Aldi will benefit radically from venturing into the Indian market. It can collaborate with Avenue Supermarts Limited to foray into the Indian market. Avenue Supermarts Limited offers various personal products under one roof and hence can successfully work together with Aldi in India.
India can be chosen for Aldi as India provides better economic stature and India has large customer base. India has deep-rooted and highly effective democratic regime and it can ensure stable and calm politics. India provides ever growing consumer base for retail market and work force in India is educated also. Transparency International gave Indian companies the top ranking among emerging market multinationals in terms of transparency and compliance.
Global market entry strategy:
One of the vital global market entry strategies is partnering. Partnering can range from a simple arrangement where the partner company co-markets your products to complicated sophisticated alliances for manufacturing and distributing. An organisation should study the country and local companies' feedback thoroughly before making such a serious commitment
Partnership Strategy and its justifications
In certain countries where the culture is very different from that of the organisation's country partnering helps immensely. Also, the countries where business outlook or work policies are different such as India or Saudi Arabia with respect to Aldi partnering are beneficial. A company gets knowledge of how the market works from an already established brand. A partnering company also helps in garnering new contacts. Being an established known name there is no problem in an initial flow of customers. Aldi can make partnership with Aditya Birla Group (More) to enter Indian market. This partnership of Aldi would be more of strategic alliance as Aldi can exchange the technologies and the organisation can gain the idea of industry convergence.
Risk of the strategy:
There are some risks involved in a partnership business. A loss in autonomy is faced. Any decision needs to be shared or discussed before being put into action. There might be certain joint decisions which may clash with the interest of an individual organisation. Day to day activities of delivering collaborative programmes may become a tedious task owing to tracking and finalizing details. Also if anything goes wrong reputation of a partner may get affected.
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Opportunities:
Despite the drawbacks, a partnership is an immensely beneficial strategy in the global market if chosen wisely. It reduces the threat of risk and mistakes since partner has knowledge about the existing operations and risks involved. It gives immediate access to better technical skills, experience, expertise, and contacts. Costs are reduced due to sharing. Since partner already has an established reputation the company's image benefits from it with regards to the collaboration.
Q5. Global marketing strategies and tactics for this organisation. (Segmentation, Targeting, Positioning and Product, Price, Place, Promotion strategies). What are the implications of your choice (Cost, resources, timing, opportunities)?
STP analysis
Segmentation
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Different Segments
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Description
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Demographic
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In Demographic segmentation, managers identify groups of purchasers depending on a number of factors like education, monthly income of a family, gender, age, marital status and so on.
The company wants to target both male and female in India irrespective of their marital status (Kotler et al. 2015).
Aldi wants to target middle-class people of India who usually prefer to buy goods within the budget segment. In India, the comply wants to target the young college students mostly through their online shopping websites.
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Geographic
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Geographic Segmentation is a very common method and applying this method an organisation can identify people according to their location, country and towns. Applying this method marketing manager can divide the whole market into some fragmented areas if it is actually required.
Aldi aims to set its footprint in both the rural and urban India. However, the metro cities have always stood first in terms of the company's order of preference. In India, the company wants to attract people who fall under the age group of 22 to 35.
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Behavioural
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In this method, customers are divided based on their knowledge, experience, the rate of product usage, loyalty and so on.
In India Aldi want to target the groups of purchasers who always want quality product within the lower-budget range. The company also giving more priority to attracts those customers who do not prefer to purchase products from a well-advertised brand because of their high prices.
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Psychographic
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This type of segmentation is associated with the human psyche and it is widely used to different customers depending on their attitude, opinion, values, customs, and manners and so on.
In India, the target of the company has been set on those groups of customer who are not well acquainted with the range of the products and also with the service. As an essential part of its strategy, the company wants to provide better packaging experience using biodegradable materials in order to satisfy its Indian consumers.
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Targeting
Targeting involves a series of strategies by which marketers can select their potential customers (Morschett 2015). As a part of this strategy, the managers select the correct segment in order to influence the rate of selling products. In India as a part of its strategy, the company is predominantly focussing on the middle-class young people who fall between the age group of 22 to 45. The company is also willing to serve that group of people in India who are mostly young professionals, or government employee. India is a developing country; therefore, targeting middle class people will help Aldi to reach more potential customers.
Positioning
Creating a good image for the brand is an essential part of positioning and it helps a brand to create a place in the mind of its customers. In India, Aldi will offer a range of quality products within the budget segment to attract more and more customers to their retail stores. Also, the company will give more importance to whether its products are meeting the expected standards of the customers that will provide Aldi with a sharp edge among its competitors.
Marketing Mix
Product
Being a well-reputed brand Aldi will offer a number of products in India and in order to win the trust of its consumers, the company will offer free replacement and refund policy in India if the consumers find any product as defective. In India, Aldi will take Line-stretching strategy and as a part of this strategy, the company will launch new variants of the same products with some extra advantages. The company will offer fresh fruits, vegetables, stationery goods and beauty products in India at a reasonable price. It will offer those products that are almost the same in quality compared to other brands and the price of its product will be much lower compared to other brands.
Price
In India, the market of the consumers is extremely competitive because purchasers have a number of choices to select any suitable product for them. So the company will take a better pricing strategy in order to attract its Indian consumers. The company will consider offering a range of products that are regularly used by the customers under the budget segment without compromising their qualities. Aldi will take initially low-pricing strategy as India is a developing nation. Low-pricing strategy will help Aldi to acquire more customers. Also as a part of their marketing strategy, Aldi will keep the price of its product marginally lower in order to face the competitions.
Place
In India, Aldi will take a number of factors in their consideration before opening its outlets.It will focus on metro cities and those urban areas where better transportation will be available to them for developing a distribution network and supply chain. Further, the company will consider the availability of the private and public transports so that customers can reach the stores comfortably.
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Promotions
Promotion of products is playing a great role in marketing as it enables an organisation to achieve its objective. There are a number of methods of doing promotion and they are like advertising in social media, personal selling, direct marketing, digital promotion, sponsorship and so on (Lamey et al. 2018).
In India, a large number of people use social media and the number is rapidly increasing. Aldi will use a number of social media platforms like Facebook, YouTube, and Twitter and so on in order to carry out its communications with the consumers. Using those social media platforms Aldi will inspire its Indian consumers to take an active role in setting up a brand image. Aldi must use videos, engaging posts, content and images to attract the customers. Aldi can also start social media campaigning to attract more customers in their stores. In addition, Aldi can take the strategy of SEO (Search Engine Optimisation) in order to appear at the top of the people's search list on search engine and it can improve the brand image of the organisation.
As a part of its promotional strategy in India, Aldi will send promotional e-mail alerts to its customers in order to intimate them about its promotional offers. In its offline retail store, the company will take the method of merchandising to sell a series of products.
As a part of this strategy, Aldi will offer free samples of some products, on-spot product demonstration, shelf talkers and POS method. Also, as a part of the promotional strategy, the company will offer attractive cash-back on selected products in India.
In India, Aldi can start organising events to reach more customers.
The implication of choice
a. Cost
Costs can be explained as expenditure which is needed to run a start-up or business success. Aldi will use full-fledged accounting system in India in order to measure different types of costs associated with its business operation.
b. Resources
Financial Resources
The most important resource for starting a new venture is funding. Financial resources can be acquired from a number of sources. It may be drawn from individual savings of the founder of the organisation (Popova et al. 2016). In India, Aldi will draw its required financial resources partly from the company's own savings and partly from other sources like loans, a line of credit and so on.
Human Resources
In order to succeed in India, Aldi will hire a skilled professional with a distinguished track record that will ensure the company's success in India. The company will take help from staffing agencies, consultancies to find out talents who will work tirelessly to meet the company's objectives in India.
Physical resources
Every successful company need to have sufficient physical resources in order to carry out its operation successfully. In India, Aldi will set up a proper space for working, technology-based information systems and fruitful marketing materials (Rao-Nicholson and Khan 2017).
Emotional Resources
Starting a new business in a new country is not a very easy task and Aldi will set up a support team who will motivate and inspire its employees to work for the company efficiently.
c. Timing
Timing enables marketers to understand the current trends of the business cycle along with the economic cycle. It is also helpful to get an idea about potential demands and consumers' financial condition. In India, Aldi should take both the human resources and the financial resources in its consideration in order to avoid economic difficulties.
Conclusions
The report has presented a number of important factors that Aldi will consider in order to start its business operation in India. The company will target those people who belong to the middle class and who fall under the age group of 22 to 35. In India, the company will provide the quality product within budget range with a replacement guarantee if it is failed to meet the expectations of the consumers. As a part of their marketing strategy, Aldi will open its stores in such areas of India where both public and private transports are easily available. The report also presents the promotional strategy of the company like merchandising, sending personalised e-mail alerts and also social media marketing. The report also examines the necessity of having essential resources for starting a new operation in a new country.
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