SWOT Analysis

Aldi Group has been highlighted as a leading grocery chain store with more than 7,500 stores across the globe[1]. The company has its roots in Germany that has remained its strongest market over the years with 40% market share in food retail segment, while aggressive expansion has been undertaken into other European countries and the US[2]. Aldi is a privately held company that operates as Aldi North and Aldi South, with its headquarter in Essen, Germany.

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The accession of some major countries like China to the WTO made it easier for Western food retailing companies to penetrate lucrative markets worldwide[3]. Moreover, the joining of the ten Eastern European and Baltic states to the EU in 2004 similarly facilitated the entry of Western companies into these markets[4]. This suggests that supermarkets would be able to strengthen their supply chains by leveraging upon economies of scale and scope, therefore an increase in supplies is expected in the future.

The health of economy is a vital influence on the extent of discretionary buying and how much is spent on necessity purchases. The trends in personal disposable income has seen steady rise of 14% in the period of 2002-2006[5]. This growth has been assisted by low unemployment, low inflation and falling interest rates for much of the period. The following graph and the table of figures have been made with the help of data taken from Mintel[6] and ONS[7].

The inflation in UK remained at historically low levels between 2002 and 2006, and is forecast to continue at around 2 – 2. 5% till 2010[8]. The Retail Price Index (RPI) measures price inflation in consumer goods and according to that the rate of inflation on food purchases has generally remained at a lower level than that for all items in the past few years, turning negative in 2000 (deflation)[9] and showing only 0. 6% growth in prices in 2004[10]. Analysts held price competition between retail superstores responsible for this low level of inflation.

An analysis of the UK population shows that the fastest growth between 2002 and 2006 is among those aged 55-64, representing the ‘Baby Boom’ generation[11]. This is somewhat discouraging for supermarket groups as such consumers are less likely than their younger counterparts to travel to out-of-town superstores to shop. The change in life style has increased the use of organic food due to its potential effects on health. In 2003, shoppers in UK spent i?? 1. 1 billion on organic food and drinks. This trend is expected to rise to i?? 1. 6 billion by 2007[12].