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PESTLE and SWOT analysis of Aldi 2017-2018

By: Prudence K Magezi & Patricia Nanjekhe


The UK food retailing industry is characterized by price wars, heavy discounting and increased merger and acquisition activity as seen in the recent merger of Tesco and wholesaler Bookers Group as well as the much anticipated merger of Sainsburys and Asda (Sainsdas). While a Brexit-led lull in consumer spending has played a part in creating this state of affairs for UK supermarkets especially the Big Four, it is Aldi and to a lesser extent Lidl, who have played a massive part in shaking up the UK food retailing industry. They are the only two food retailers in the UK who have been recording double digit growth rates since 2010, during a time when sales and market shares of the Big Four were in freefall. Since 2010, Aldi has increased its market share from 1.6% to 6.8% in 2018, taking it from the 11th largest grocer to now 5th and predicted to overtake Wm Morrisons. Using Pestle, Swot, BCG Matrix and Porters Five Forces analysis, this report examines the macro environment and industry structure of the UK food retailing industry to understand the forces and trends driving competition and how Aldi has been responding. While some trends such as UK consumers continuing to trade down favour it, others such as digitisation innovations and internal weaknesses including its limited product assortment, may hamper future growth in the UK and other key markets such as the US and Australia.

Analyse the internal and external environment of Aldi and the UK supermarket industry using Pestel, Swot, Porters five forces & BCG

 

1.0 INTRODUCTION 

Aldi is a German international discount store opened in the UK in 1990 and in Ireland 9 years later. Aldi has experienced rapid growth in the UK becoming the fifth largest grocer over taking co-op (Butler 2017).The company owns more than 726 stores only in the UK with market shares of approximately 6.9% ahead of co-op which has 6% as of 2017( Davay 2017; BBC 2017).

2.0 Aldi Pestel analysis 2017-2018 (Opportunities and threats)

PESTLE is used as a strategy to analyze the macro environment and identify how future trends in political, social, economic, environmental and legal environments may impact on the company (Johnson et al.2008).This analysis helps identify the key drivers of change; These key drivers constitute of opportunities and threats in the firm’s external environment and they can be overcome by focusing on the opportunities to overcome the threats. PESTLE can be used alongside SWOT to utilize the core competences of companies like Aldi so as to take advantage of emerging opportunities and overcome any threats.

2.1 Political environment

2.1.1 The impact of Brexit on Aldi operations in the UK

According to Mintel (2017a), Brexit uncertainty has continued to plague most UK supermarkets even post Brexit. In 2017, the weakening Sterling came with rising inflation which forced UK customers to cut back on their spending especially on non-essentials, with their biggest worry being the increasing retail prices post Brexit (Mintel 2017a; Mintel 2017b). There was an increase from 45% in February 2017 to 49% in May 2017 with customers thinking Brexit would impact prices negatively (Mintel 2017a). However, even with the tough times characterised by

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