This report presents a Tactical International Marketing Plan, which focuses on the practical implementation issues facing Aldi Süd, a German discounter, which intends to enter the Italian market. Aldi, despite its widespread presence in Europe, Australia, and the US, the company is conspicuously absent in Italy yet new opportunities have emerged for hard discounters because of declining consumer spending power. The corporate objective is to achieve a turnover of €500 million within the next four years and to open 500 stores within the same timescale. The written report will be presented to the company’s Board of Directors.
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This tactical marketing plan covers marketing objectives include opening 100 stores and realising €100 million in sales within the year. Aldi target audience will include the middle, higher income, and low-end consumers while targeting strategy is focused on limited range, private label low-cost products
Product positioning is generally based on quality and low prices. Marketing tactics, both traditional and digital will include traditional media and social media such as television and Facebook advertisements with a consistent message delivered by customers.
Action plan gives Aldi opportunities to assess the market, launch, and review progress to improve performance across various metrics. Ethics and sustainability focus on ethical pricing strategies, labour practices, compensation, and environmental protection. Finally, controls, measurement, review, risks and contingencies, as well as budgets and financials are designed to mitigate market risks, capital risks, and operational risks.
This market plan is sufficiently comprehensive for international marketing and sales efforts of Aldi in Italy. It provides the best way to assess the business, the market, and the retail sector environment to formulate the best tactics and strategies to deliver low cost and efficiency to Italian consumers who have witnessed declining spending power over the years. It is will deliver profitability and sustainable business practices.
This marketing plan presents international marketing and sales for Aldi Süd, the German hard discounter retailer that intends to enter the Italian market because of the declining consumer power in Italy that has created opportunities for discounter retailers.
Tactical marketing objectives measured within one year after the launch of the company in Italy include the following:
- To realise about €100 million in sales within the first year
- To open about 100 stores within the first year
- To attain the expansion targets within the allocated period and time
In the new market, Aldi will also focus on the following objectives:
- To continue to advance its low pricing retail objective in Italy effectively by monitoring competitors’ pricing strategies
- To focus on growing sales and profit margins in Italy
- To expand markets and locate new suitable locations for further expansion
The planning process involves a specific tactical objective for every opportunity identified in the Italian market.
For the Italian market, Aldi corporate objective is to achieve a turnover of €500 million within the next four years and to open 500 stores within the same timescale. This objective provides a measure against which progress will be evaluated. Therefore, the corporate objective has vital elements. They include (1) the expected performance in the Italian market, including figures against which Aldi will evaluate its progress; (2) the timescale within which the company must open its retail outlets and realise the expected revenues; and (3) the number of several retail outlets expected to be opened and revenue to be generated after four years.
Given Aldi’s experiences in other markets outside Germany, it is believed that the company would be able to realise these tactical objectives within the year.
For entry into international markets, Aldi will face multiple challenges especially competition from Lidl and Eurospin, which could frustrate its low pricing strategy (Tănase 2011).
Target Audience and Targeting Strategy
After six years between 2008 and 2014, Italy reemerged from one of the worst recession. During this period, many consumers lost their spending power because the economy also lost significant points of its GDP (Gilli 2015).
To this end, Aldi will thrive through a careful strategy to target the middle and higher-income consumers in Italy. The retailer should stock high profile brands and other award-winning products.
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By targeting the middle class and other high-end shoppers, Aldi will strive to create a positive effect on shoppers who were hard hit by the economic crisis and are yet to recover fully. The company will also target low-end consumers who are sensitive to high prices offered by other large retailers.
Strategically, Aldi has always focused on offering the best products at relatively lower prices and will focus on the following.
Exclusive brand products – few exclusive brands will help Aldi to demonstrate that it can offer relatively lower prices with efficiency (Kumar 2006). That is, high-end and middle-class consumers who are concerned about efficiency do not have to consume much time in the store to select from a wide range of competing products. Instead, award-winning and other high profile brands will be available for such shoppers. These products are associated with the Grocer Own Label awards and Grocer of The Year, and they are Specially Selected range, such as “West Country cheddar, yoghurt, cheesecake and seeded sliced white bread” (Solloway 2014).
- Limited range – a limited range of products also allows the company to target middle class and high-end shoppers who are looking for convenience. Moreover, it is a cost-cutting strategy. The company will tend to focus on what consumers want in terms of size and variation in Italy and then work with partners who can deliver such products at competitive prices.
- Pricing – the company will also be keen to use a pricing strategy in the Italian retail market. In this regard, the company would use a low pricing strategy to pass a cost advantage to price-sensitive consumers who lost their spending power during the recession. While Aldi will adopt everyday low pricing or the so-call economy pricing, it will still have to account for a good profit margin after all expenses have been deducted using cost-plus strategy. Also, the pricing will attract the most price-conscious of consumers while large volumes of sales will generate sufficient profits.
The company understands consumers in developed countries, such as the UK, the US, and Germany, because those locations are central to its operations (Christoffer 2011). One must acknowledge that Aldi has never publicly communicated its strategy. Nevertheless, its positioning strategy is clear: High quality for low prices. While there are minimal variations across the country to country, some fundamental elements can be observed, which have helped to push the company’s strategy.
These include (1) increased consumer purchasing power delivered through high-quality products; (2) efficiency in service; and (3) better products. This approach has allowed the company to advance its low-cost, lean operations across all countries. In this regard, low price leadership has allowed the company to succeed in markets where other retailers have failed. Hence, a targeting strategy based on low prices is most likely to succeed in Italy.
Based on pricing strategy and international expansion, Aldi has mastered a critical success factor. That is, retailing is a low-profit margin business and returns can only be realised over time (Corstjens & Lal 2012). As such, Aldi must have a large network of retail outlets in Italy to leverage economies of scale, purchase, supply chain, and technologies that enhance productivity while keeping costs low.
It is however imperative to recognise that Aldi will enter the capital city and then move to other towns systematically. The process of building 500 retail outlets definitely would take considerable time and will require significant financial resources and other resource and, thus, it will take some years to make profits (Corstjens & Lal 2012).
Low-cost, efficient operations will reflect brand positioning in the Italian market. For instance, Aldi achieves efficient operations by maintaining a limited range, which guarantees quality and keeps prices low because the retailer buys such products in bulk for its nearly 10,000 stores globally (Creevy 2010).
Over the years, Aldi has grown and acquired its business strength through providing a limited range of products at extremely low prices, better quality, award-winning, and high profile products delivered from some isolated outlets (Mortimer 2015). In Italy, Aldi will impact the local market with its efficiency, simplicity and cost-saving, which are achieved by the limited assortment discount model, private label, and products of the same or higher quality relative to competition (Creevy 2010).
Aldi must offer new solutions to its target customers. Without any aspect of originality, it would be hard, if not unmanageable, for Aldi to overtake it, major competitors, including Lidl, which currently operates over 500 stores and Eurospin based in Verona with approximately 950 retail outlets and controls the market.
Value Proposition and USP
Over the years, Aldi has demonstrated its slow albeit consistent expansion to become among the global leaders using new value propositions in new markets to attract customers. It is observed that the German hard discount retailer proposition has worked successfully across different countries and regions better compared to other retailers because of large segments of target consumers who are more attracted to low prices, no-frills opportunities. By relying on its small retail outlets with limited products, Aldi has achieved success across Europe, the US, and Australia.
Positioning will still focus on simplicity and driving down the costs of operations to realise low costs in Italy. Its private label suppliers will deliver most products, thereby achieving economies of scale. It is estimated that Aldi can offer prices as low as 40 per cent relative to competitors. The stores are designed to enhance convenience while shoppers only consume limited time to shop at Aldi relative to other outlets that stock nearly all products from various manufacturers.
Timing is important. Aldi has carefully chosen the best time to enter the Italian retail market. Carrefour, for instance, attempted to enter some markets in the developed countries too early when the concept of hypermarket was not well developed in such markets. Moreover, it takes more time for retailers to acquire significant market shares in global markets. Retail business is capital-intensive, and it could leave some companies frustrated if there is no critical mass to drive sales. In the case of Aldi, the entry into the Italian market is timely because of the economic crisis and diminished spending power. Being hard discounter, Aldi could have entered the market at any time, but today, many shoppers are interested in value-for-money than previously seen because they are looking for opportunities to save.
Marketing Tactics, both Traditional and Digital
The business environment is now more dynamic and competitive. Consequently, shoppers now have enhanced power because many retailers present in different locations and offer nearly similar products and services. For Aldi to meet its tactical objectives, the company must focus on what Italian shoppers want and satisfy those needs. Effective application of the marketing mix will assist the company to attain a competitive edge.
Aldi will offer award-winning, high profile ‘Like Brands’ using the best suppliers. These are products, which many shoppers desire. Hence, they have high demands. Most important, Aldi will stock a limited range of products, which meet the needs of its local Italian shoppers. This implies that comprehending the market, the product, and competitors’ practices will give the company an edge on products.
The company is known for low prices across all its retail outlets. It achieves such prices without quality challenges. Determining the best price could be the most difficult task when creating the optimal marketing mix because pricing strategy should deliver profits after expense deduction.
With competitive pricing, Aldi will present challenges to some of its rivals. Competitive prices remain the only vital strategy for the company. By sourcing from reliable suppliers in large volumes, Aldi will leverage price advantage to attain economies of scale.
Some researchers have demonstrated that Italians are sensitive to prices, and factors related to profit sensitivity due to demand changes, consumers’ search for costs and competition are most likely to influence pricing strategies for most retailers (Fabiani, Gattuli, & Sabbatini 2004).
Aldi must identify the best location for its retail outlets in Italy, which should be simple to avoid wastage and ensure low costs. This implies that the company will attain a cost advantage and pass the same to consumers. Aldi will have to assess the following factors for its new outlets. The company must determine that a sufficient number of consumers is available to support its retail outlets. For instance, the area should have more than 50,000 people.
The precise location of the store should be at the edge of the town, close to the main road, away from intense competition, and highly visible and accessible from various points. The area should have sufficient means of public transportation and adequate parking space for customers. Aldi should target cities like Rome, Verona, Frosinone, Biandrate Novara, Catania, Ravenna, Bari, Pisa, Pordenone, Lodi, and Turin.
Aldi will use both traditional and current promotional strategies to promote its ‘Like Brands’ in Italy. Moreover, Swap and Save campaigns will significantly drive sales for the company.
Aldi must ensure that it only selects, recruits hire, and retains employees who will deliver efficiency to customers in Italy. The hiring manager should consider some Italians who understand the market and some cultural practices that influence shopping habits.
For customers who prefer convenience, Aldi must delivery positive experiences to such customers through effective processes. Any attempts to put Aldi’s convenience at the expense of the customer will fail and ultimately ruin the brand positioning element of efficiency. Hence, business processes must deliver optimal benefits and experiences to customers.
The physical environment will reflect the ‘right place’ to shop. Aldi must ensure that its stores and attendants are generally appealing to shoppers. Hence, elements, such as reception area, signage, advertising, brochures, and any other visible elements related to the company must stand out from the rest to create a good brand image in Italy.
The company will work with the best partners to deliver the best quality to customers. Hence, it will strive to supply award-winning, high-quality products every time.
Aldi will effectively use both traditional and digital platforms for advertisement and promotion. The company will only realise its objectives in Italy if the marketing mix integrates both traditional and digital media. For instance, the company will strive to enhance customer loyalty by communicating its low costs and efficient services to target market segments.
The company will use these channels to create awareness and enhance brand recognition in Italy; facilitate product demands; develop the brand image; and demonstrate its superior products and services.
To reach the low end, price-sensitive consumers, Aldi will use traditional media, including radio, television, newspaper, billboards, and magazines. It must, however, recognise that traditional advertisement and promotional platforms could be extremely costly. It will be important to use a combination of these platforms to reach all potential customers, including Swap & Save promotion, prize promotion, and give samples of high-quality Aldi Products in high traffic locations close the outlets, as it has done in Australia.
Further, Aldi will also use digital media and technologies to reach its target audience. For instance, Aldi will have its Italian Web site and introduce mobile phone SMS-based advertisements to interact directly with Italian consumers. The company will be able to target a specific audience using these platforms rather than a mass audience.
They will allow the company to exert significant control over its communication to the target audience. Aldi shall use various social media platforms, including Facebook, Twitter, YouTube, LinkedIn and others. Across these platforms, Aldi advertisement message, delivered by its Italian customers who have experienced some benefits, would emphasise top-quality produce and the best value, cost-saving, outstanding customer service, limited range, and private label. The message would be consistent for various consumer segments because it captures the core of the business practices of the retailer.
Aldi will also use endorsement and awards, as well as public and media relations to reach target market segments.
There are several fundamental activities, which Aldi must address to launch its operations in Italy. Given that this a tactical action plan, these activities need to take part within a year. They have therefore been scheduled to run throughout the year. Most importantly, these activities will overlap if necessary to save time and cost before the launch of the store. Aldi will conduct a regular assessment to identify unsuccessful efforts. The company will use an evaluation tool to accomplish this role. Appropriate steps will be adopted to facilitate the realisation of the objectives (see appendix).
Key steps in the implementation process
- Location assessment
- Establishing stores
- Advertising and Promotion
- Staff recruitment
- Staff recruitment
- Partner sourcing
- Progress Evaluation
- Store launching
- Sales/Performance Assessment
- Annual Evaluation
Ethics and Sustainability
Italian culture will significantly influence its ethical operations (Swaidan 2012; Griffith & Yaprak 2008). Italians are known for food retail sales, which are commanded by traditional traders at relatively high costs (Klug 2015). Aldi, being a value player, should generate strong margins and a clear competitive advantage without necessarily taking advantage of the high prices of foods in Italy. Besides, Italians are also known for bargain hunting, but Aldi should not use, for instance, predatory pricing (extremely low prices) to drive competitors, such as Lidl, out of the market.
The issue of fair compensation levels and working conditions are always present. Hence, Aldi will have to develop a standard compensation standard for the Italian economy and meet all legal requirements. It must offer the minimum expected for a living wage, health and safety of employees, as well as expected working hours.
The company will not hire any undocumented refugees or illegal immigrants as sources of cheap labour to serve in its stores.
Italy is known for its corrupt mafia and business cartels. Hence, payments to secure business deals could be rampant, which are cases of unethical behaviours not expected from multinational firms.
If the company finds out that corruption is a factor that hinders business operations in Italy, then it will have to reassess its decision to enter the market.
Italy is known to support human rights. Likewise, Aldi does not support abusive practices to stifle human development and advancement. Hence, its human rights policy will serve as a facilitator to promote basic freedoms, employee rights, and work to improve the current plight of illegal immigrants and refugees in Italy.
Aldi will strive to reduce its environmental footprint in Italy.
The company will run ethically and ensure that its activities do not result in any harmful effects on the environment (Javalgi & Russell 2015). Aldi has operated well in other countries, such as the US, with stringent anti-pollution laws and regulations, and studies show that ethical brands tend to dominate markets (MacLellan 2015).
Controls, Measurement, Review, Risks and Contingencies
The company will adopt the balanced scorecard. Many managers at the company have noted the importance of performance measurement, and the balanced scorecard is the most relevant tool to determine efforts, define, and communicate marketing plan objectives to managers, personnel, investors, and potential customers.
Critical Success Factors
- Simple, lean operation model – Aldi will offer optimal Stock Keeping Units (SKUs) of not more than 1,000. High SKU counts require larger distribution outlets, multiple suppliers to manage, higher levels of stocks, and more efforts for product availability management, which ultimately increase operating costs.
- Supply chain management – Aldi should enter the Italian market via Aldi Süd’s Hofer Austria, Slovenia, and Hungary to ensure that large volumes are supplied on the first day to attain infrastructural efficacy and competitive edge.
- Service factors – convenience is extremely important for Aldi. Personnel will be trained to ensure access convenience, transaction convenience, provide appropriate information to and assist customers effectively on product benefits.
- Location – the northern part of Italy is high-end, developed part with relatively high levels of affluence compared to the south, and it would be important for Aldi to secure locations there (Klug 2015, p. 1).
- Technology – Aldi will only introduce the best technologies to support its supply chain management and cut costs.
Key performance indicators (KPIs)
- Market share analysis after one year
- Quality control
- Sales analysis (volumes and revenues)
- Financial performances
- CRM – New customers acquired, retention
- Service levels
- Marketing information systems
- Brand awareness/impacts of ‘Like Brands’
- Benchmarking with the country’s best and peers
- Competitor performance
- Profitability analysis
Risks and Contingencies
- Financial risks – more capital may be required from the parent firm within the first year
- Supplier risks – the company will import from Germany, Austria, Slovenia, and Hungary before it can identify reliable suppliers. However, this could lead to high costs and reduced speed of delivery because of distance.
- Market risks – such risks are associated with intense competition from Lidl, Penny, Eurospin, as well as supermarkets and neighbourhood stores. Hence, Aldi will focus on intense advertisement and promotions to gain market share.
- Operational risks – Aldi will rely on qualified personnel and efficient technologies to deliver services. Technologies will ensure that the company runs a lean, simple, efficient supply chain while qualified personnel will assist customers with their needs, including explaining product benefits, access, and transaction convenience among others.
- Aldi will use a gap analysis tool to review the current position and expectation.
- Organisation – Aldi is ready to deliver limited range, private label at low costs relative to competition to realise its low-cost, efficient model
- Business processes – simple, lean, efficient processes
- Business marketing mix – use of the most effective advertisement and promotional tools
- Information technology – using technology to manage the supply chain efficiently and reducing costs
- Customer requirements against Aldi capability – Aldi can meet Italian customer expectations and observe the market potential for further expansion
- Aldi against the competition – Aldi will evaluate its performance against the above-mentioned competitors
Once measures and controls have been used to determine the exact picture of Aldi, feedback gathered would be used to improve tactical approaches.
The feedback should capture greater customer value over the competition, how to sustain them, and innovation that focuses on enhancing customer experience and cost-reduction. Cost control feedback will focus on the efficient and effective integration of the supply chain, including suppliers, producers, outlets, warehouse, and transportation to ensure lean, seamless operations.
Marketing Expense Budget
|Advertisements (both traditional and new media)||€ 5 m|
|Promotions||€ 2.5 m|
|Total||€ 7.5 m|
Sales estimate for the year
|Annual sales||€ 100 m|
|Expenses (Fixed and variables)||€ 35 m|
The Uppsala Marketing Model
The Uppsala model is a model that shows how companies progressively increase their activities in foreign markets (Kubíčková 2013). It starts by gaining experience in the domestic market, then the firm move to culturally and/or geographically close regions, and later move to distant countries. In the international market, traditional exports are used to support foreign operations until local suppliers and more subsidiaries are established.
Aldi Internationalisation Processes Using the Uppsala Model
- Internal growth or restricted expansion to countries with similar business practices and culturally similar countries (Australia)
- The most significant expansion into the US market (market outside Europe)
- Mass expansion across several countries with small stores and acquisitions
From the above-mentioned points, Aldi has been using the Uppsala marketing model for its internationalisation efforts. For instance, Aldi started its expansion strategy in the psychic nearby markets in Europe. In such markets, the company had advanced knowledge, effective resource control, and management. Aldi had gained much experience and developed massive resources, and it later expanded into the distance market outside Europe, the US. Distance, in this case, accounts for geographical location, cultures, politics, and challenges of acquiring market intelligence.
Evidence gathered from some firms suggests that the model is preferred in the retail sector (Mo 2015). Mo (2015) observed that different retailers, including Aldi, Gap, Body Shop, Zara, H&M, IKEA, and Toys ‘R’ US have applied elements of Uppsala in their expansion strategies based on organic growth approach noted in the Model and built their operations and market penetration in foreign markets over long-timescale by Greenfield investments (Dudovskiy 2012; Barclay 2002).
Efficient market knowledge leads to market commitment. Hence, market activities tend to reflect commitments and decisions (Verdier et al. 2010). The major attribute of the Model is that enhanced market knowledge generally results in revamped market commitment. Moreover, special knowledge for the international market is extremely important because it relates to specific activities of a given market, and it would be difficult to apply similar practices in a different market (Bianchi 2009).
Today, however, the Model faces criticism generally based on slow internationalisation or rapid internationalisation, reflected in the so-called Born Global firms (Mo 2015).
The rapid expansion in technologies and communication systems have been perhaps the most influencing factors in contemporary globalisation practices. Also, these factors have completely altered the business environment and offered new ways for organisations to react to such changes in quick and better ways (Kubíčková 2013).
Looking at the Model in the current business environment, one may notice why it is inadequate. It has failed to evolve with business practices and reflect current realities, especially in the service sector. The original Model generally focused on business internationalisation strictly based on internal resources while it failed to account for external environmental factors, such as competitive forces, market opportunities, and technologies among others (Evans, Mavondo, & Bridson 2008). Such new developments show that the Model can no longer meet the needs of Born Global Firms, which now integrate experimental knowledge with knowledge acquired from disparate sources to create knowledge of a foreign market. This approach contradicts the Model.
Overall, the Model can only meet the needs of Aldi if it will still focus on slow internationalisation, which could be high risk and require a straight commitment for long-term slow growth and profitability.
Aldi SWOT Analysis
Limited range, private labels
Supply chain excellence
Recruiting the best talent
Retail-ready packaging / cost-efficient model
Promotional innovation – each week with different promotion
Simple, lean operations
The last mover benefit e.g. in technology adoption
Limited range of products
Not keen on advanced technologies
Limited impact globally
Emerging new markets potentially in Central & Eastern Europe, China
Technology and innovation
Fierce competition from peers and industry leaders
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About Aldi Süd
Established in 1914 in a small town of Essen, Germany, the company served food to mining workers. After a few decades, it expanded to include an additional four stores spread across Germany. The company focused on its growth path and opened the first self-service store in 1954 in Essen- Schonnebeck in Germany. By 1967, Aldi had more than 200 stores, mainly in the South Locations. Later in 1976, Aldi established its first store in Southern Iowa, and the period after 1990s, it moved to Great Britain, Ireland, Australia, Slovenia, and Hungary (Aldi n.d). Also, Aldi has focused on sustained expansion through the opening of more divisions across the US.
Aldi has positioned itself as a low price grocery leader across Europe and other countries. The company model is based on creating efficiency at each level across store construction, distribution, and specific products sold (Aldi n.d). Aldi claims that each detail of its operations has been reconsidered and recreated to “optimise the product quality and promote saving for its customers” (Aldi n.d, p. 1).
The company is today a multi-billion-dollar retail firm with over 1,500 stores spread across 34 states in the US and meeting the needs of more than 32 million clients every month (Aldi n.d). Aldi reinforces the integrity of its business plan, customer satisfaction, staff and partners to ensure that it succeeds as the global leader in low pricing.
To date, Aldi operates about “4,700 stores in eight countries with most located in Europe” (Aldi n.d, p. 1). In addition to Aldi Nord, which currently runs independent stores, the retail chain boasts of more than 9,000 retail outlets in 17 countries (Knowles 2015). Recently, Aldi Nord entered the “Spanish market, and it now runs over 200 stores” (Aldi n.d, p. 1)