Aldi - German Supermarket Chain - Pestel Analysis

Aldi pestel

Aldi is a German supermarket chain operating in Australia. Its operations can be better understood by using the PESTEL analysis which is used to evaluate macro-environment factors in market. In utilizing the PESTEL framework, there are 3 factors that management needs to consider if they want to expand Aldi’s market share in Australia.

Economic factors impact on supply and demand in the industry and will influence profit in the future. Gross Domestic Product(GDP), the sum of consumption, investment, net export and government expenditure, represents aggregate demand in a country. Increasing GDP usually signifies rising demand for good and services. According to forecasts, Australian GDP will steadily grow at an annual rate of about 2.5% through 2022-2023. As a result, Aldi will benefit from the healthy economy and will be able to recognize growing profit from private consumption. The healthy economy means that all businesses in the sector, including Aldi, can expect to see continued growth.

However, social factors provide negative outlook for Aldi’s investment. Cultural differences will be a challenge for management. The main differences between Germany and Australia are long-term orientation and indulgence. The German long-term orientation indicates it’s a pragmatic country; the management from Germany prefer to save and invest to achieve long term results. When most Australian investors consider short-term returns, Aldi may not finance it capital budget easily. In addition, the German culture is restrained in nature. Managers may not want employees to put much emphasis on leisure time and control their desires. The culture difference in indulgence may lead to mutual incomprehension between management and employees.

The last factor is government policies that government may adopt in future. Government, the invisible hand in economy, has the ability to control the trend of market and national economy and may choose to intervene in some circumstances. The governments apply expansionary or discretionary policy to meet the object of control growth rate of GDP by changing government budget. However, the fiscal policy is usually adopted when economic growth is declining. In condition that Australian economy will steadily grow in next few years, it is unlikely that Australian government will change their fiscal policy. Moreover, corporation tax policy is another issue that Aldi needs to evaluate. Tax is a part of cost and pulls up the minimum price to recover cost. As a result, the Aldi may lose its competitive advantage of cost leadership with other small grocery stores. As it is happened in the UK, councils had exerting pressure on government to protect its local small businesses. It’s likely that Australian government will increase corporation tax to protect their small businesses. As a result, the political factor suggests that Aldi may develop well when government doesn’t practice new policies.