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Why the company expands worldwide

Categories: BusinessCompany

Aldi is part of the food & grocery industry, which includes the sale of all food products, including packages, unpackaged, beverages such as juices, soft drinks, and alcoholic drinks, household as well as an assortment of technical items. In terms of market share in Australia, according to (Anon., 2018) the grocery and food industry has over with over 1,500 businesses set up within the industry employing over 300,000 individuals. The industry generates $1.03 billion in revenue in 2017, with an annual growth of 2.1% expecting in the next 5 years due to the increasing demand for organic and fresh products.

In terms of market share, Woolworths is an Australian owned company that opened its doors in the 1920s the company holds a market share of 37.2% making it the largest in the Australian market, the company employs over 165,000. Coles again an Australian company is the second largest grocery store holding 30.3% market share with an estimated 145,000 employed, Aldi holding 9.2% (Crothers, 2017; Media, 2018; Anon., 2018) . What are the future prospects for the industry moving forward

Firm Study

Aldi was initially established in 1913 by Anna Albrecht in Essen, Germany.

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In 1948 the then single discounted store was taken over by her two sons Theo and Albrecht, who expanded the business to four stores throughout Germany, which were known as “Albrecht Discount”. This was later shortened to “Aldi” (Anon., 2018; Tyler, 2018). Since 1913 Aldi has established itself as one of the most recognisable discounted grocery retailers across the globe. The main focus of the company is on the house holds of lower income earners, therefore their prices as competitively lower, store delivers a wide verity of high quality products to consumers, ranging from baked good to baby products, fresh meat, fresh produce, wines, beers and home good.

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The company was originally a single company but split into two as a result of an argument between the two brothers Aldi Nord, and Aldi Sud. Aldi Sud has expanded to Australia, the UK and Ireland, Slovenia, Switzerland and the US, which Aldi Nord as expanded to Belgium, Denmark, France, Luxembourg, The Netherlands, Portugal and Spain. For the purpose of the assignment I will be focussing on Aldi Sud and referring to “Aldi Sud” as “Aldi” throughout. Aldi has a simple goal; ‘To provide our customers with the products they buy regularly and ensure that those products are of the highest possible quality at guaranteed (line, 2018)’. Aldi’s headquarters are currently located in Essen Germany the company is a private company, therefore not registered on the stock market; as a result, the stock price cannot be accessed. Aldi group has stores set up 10,000 stores worldwide with 150 stores operating in Ireland, 585 stores in the UK and 1117 operating in Germany according to (Anon., 2014). The exact number of employees is currently unknown but according to (CRH, 2018) across 4,789 European stores there is an estimated 108,091 employees as of 2016, according to Aldi official website there is a combined number of 30,000 employees in the UK and Ireland with that number expecting to grow by 2020 (Anon., 2018). Aldi holds an of 9.2 % market share within Australia according to (Anon., 2017) with opening its 500th in 2018, the company employs more than 11,500 Australians and 1000 Australian suppliers.

Why the company expands worldwide (Australia), mode of entry? Strategy the firm is pursuing? What the function of the plant

Although the global market is a challenge for any company that wants to create their own brand, be successful, notable and become powerful, many factors can influence company reasons for expanding worldwide, factors beginning economic and political factors in the home country, negligible growth and market saturation within the economy. When Aldi first went global they didn’t stray too far from home, they opened up their doors in neighbouring country Austria just after the Second World War, at the time Aldi was already big enough therefore expansion was reasonable and mainly influenced by saturation within the German market, the reduction in trade barrier, goods and production factors could move freely from one country to another, additionally Austria’s culture was heavily influenced by German culture so it was a good move on Aldi’s part to expand to into the neighbouring country in other to gain relevant experience (Ghauri & Cateora, 2010). In terms of Aldi expanding to Australia there is no official information that is accessible detailing the reasons as to why the company expanded ie profits, market share, increase sales etc. What we do know is after the closure of Franklin’s Australia, a company very similar in nature to Aldi, created a gap in the market for the discounted store, as Franklin exited that market, Aldi filled the gap (Mortimer, 2015) you could assume that Aldi’s reasons for expansion was the potential opportunity of market share in Australia. Due to the highly concentrated and competitive market of the Australian grocery industry it proposes is a challenge for any potential entrant (Dunford, et al., 2005; PaperAp, 2017) According to (Harzing, 2001; Marinescu, 2016) When a firm decides to expand into a foreign market a firm must identify a firm specific, industry-specific and host country specific factors that can affect the choice of entry. Aldi’s choice of entry was by means of greenfield entry.

Identified through a case study that no foreign-owned retailer had established a successful greenfield operation in Australia until it was achieved by Aldi.

Green-field investment is a type of expansion method/ strategy where a firm buys land and build from the ground up. Aldi’s investment strategy was to locate in areas that remote as the property cost is low this was done in order to keep the costs minimised and gains maximised. Aldi investment strategy helped

Fun Facts about Aldi

Originally Aldi was a single company but now consists of two companies; the spit was due to a disagreement between the two bothers over the sale of cigarette, as a result the bothers decided to split into Aldi Nord which cells cigarettes and Aldi Sud does not.

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Why the company expands worldwide. (2019, Nov 28). Retrieved from

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