Aldi Porters Five Forces Analysis 2018
Mariam Peyton is a professional Financial Analyst. She holds a Masters degree in Economics. She specialises in financial analysis and forecasting. Her expertise includes studying the financial performance of companies, markets and entire industries looking for trends, insights and information that can help you glean rich insights for use in academic and market research.
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The UK food retailing industry is currently highly competitive, characterized by price wars, heavy discounting and increased merger and acquisition activity as seen in the recent merger of Tesco and wholesaler Bookers Group in March 2018 and the much anticipated merger of Sainsburys and Asda (Sainsdas). The price-driven nature of the industry has in turn led to declining sales and market share especially among the Big Four and a squeeze on their profit margins. Using Porters Five Forces, this report looks at how the five forces of competition buyer power, supplier power, threat of substitutes, barriers to entry and nature of industry rivalry are driving competition in the UK food retailing industry.
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Aldi Business Strategy Case Study
Key Learning Outcomes
By the end of the case, students should be able to:
- Use Porters five forces model to analyse an industry on the basis of the five competitive forces.
- Analyse the UK food retailing industry and how the five forces have affected Aldi and rival supermarkets and the impact on industry structure, attractiveness, and profitability.
- Understand how Aldi has managed to defend against intense competition from Sainsburys, Lidl and Tesco and the strategies it uses to create 'blue oceans' that are defensible, helping it capture market share and maintain competitive advantage.
Analyse the competitive structure of the UK food retailing industry using Porters five forces.
1.0 INTRODUCTION
The UK food retail industry is highly competitive with four major players Tesco, Sainsburys, Asda and WM Morrisons supermarkets controlling a 69.8% of the UK’s grocery market. Aldi supermarket on the other hand is one of the fast-growing supermarkets in the UK with a 6.8% market share, making it fifth biggest supermarket in the UK, up from 11th (Mintel 2017b; Statista 2018). With over 700 stores currently across the UK and Ireland and a further 300 planned by 2022, Aldi's aggressive expansion plans are changing the industry structure of the UK food retailing industry and nature of rivalry (Mintel 2017b; Cox 2018). The analysis below shows how different competitive points affect Aldi supermarket.
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