Aldis and Zara Most Significant Sustainable Competitive Advantages - Essay Example

?Final exam questions and discuss Aldi’s most significant sustainable competitive advantages.  Discuss the challenges Aldi would face in trying to transfer these advantages to international markets, especially emerging markets such as China and India. Answer: There are two most obvious sustainable competitive advantages of Aldi and these include efficient store operations and growing global network of limited assortment stores. These two advantages are primarily included as two of the general sources of competitive advantages in retail such as customer service and location. Efficient store operation of Aldi is a way to convey the best customer experience. This remarkably will give significant reputation for the entire store based on the ability of its customers to disseminate response about their experience. This what makes this competitive advantage sustainable and it is through this that customers are playing major role towards its great success in the future. Customers therefore are needed to be enhanced with high level of satisfaction and Aldi tries to get this by conveying the best customer experience through efficient store operations. This means that all aspects in the operation involving the issue of customer satisfaction are closely taken into account. On the other hand, the increasing network of limited assortment stores of Aldi is another important source of sustainable competitive advantage. In this way, there is a good chance to highly differentiate the products and services offerings of the company. In line with this, there is a great opportunity to increase the demand for products offered by Aldi in the global setting. This is also a good opportunity for the company to increase its chance to maximize the resources available from other countries. For one thing, China and India are good places for business as they are known to have cheap labor. However, for Aldi, the context of expansion deals primarily with business environmental factors. Under politics, it is important to consider existing policies for international business in both China and India. The aftermath of economic downturn is also a significant factor to consider prior to the global expansion of Aldi. This is going to be a challenge for Aldi’s competitive advantage knowing that China and India are also affected with economic recession across the globe. Putting up a business after all requires thorough consideration of economic activities and other factors. The next factor that would become a challenge for Aldi’s potential global expansion is the political environment. Various policies in business are determined by political settings of a country. In reality, this really affects how an international company would perform and adjust its internal business operation. Finally, another important factor that may be a great challenge for Aldi in its expansion is under the social context. China and India are home to huge consumers that have different preferences, geographic orientation and all other related social concerns. In particular, this is going to be a challenge for Aldi since this is going to take more time and effort to understand. There is a need to develop more systematic approach to identify how many exactly of the consumers are willing to go for limited assortment items. 2.      List and discuss all important characteristics of the fast response model used by Zara. Discuss key barriers limiting the company’s ability to duplicate this business model overseas, especially in Asia.  Answer: Zara is known for its fast response model. This is potentially a quite advantage for the company as far as the trend and buying behavior of consumers change over time. It is because of this that there is a need to list and discuss all important characteristics of the fast response model of Zara. The fast response model of Zara is determined based on its concept. The world is home to fast changing demand for designs, innovation and the like. Thus, there is a need to come up with fast fashion. Zara just wants to offer product offerings that are in line with the ongoing demand in the market. Customers are always the ones to suggest what they need. However, due to increasing competition, it is always a possibility that marketers always involve themselves to stimulate needs for their product and service offerings. Another characteristic of Zara’s fast response model is its positive advantage to exploit opportunities and implement strategic moves. Zara is good at determining timely production and delivery of its actual products. In line with this, Zara established strategic moves in order to cater the need for fast distribution of items. Zara ensures that its production is enough to cater the ever changing demand in the market. This is a good opportunity for the company to consider other important factors like choosing the best strategic location for its production activities. For example, Zara is considered having in-house control over its design and manufacturing activities. However, in order to supplement the changing needs in the market, it has also considered strategic partnership with its nearby headquarters. The next important characteristic of Zara’s fast response model is its capacity to maximize customer loyalty and brand recognition. Some of the key barriers that would hinder Zara from duplicating its fast response model overseas are again found in the business environment itself which potentially involves politics, economics, social and technology. Under political aspect, a fast response model is expected to adapt to new changes in the market trend due to adverse competition. Thus, various strategies may turn out to be politically motivated just to ensure success of achieving potential result. On the other hand, economic consideration is another important aspect. The economic downturn is said to create impact on the retail industry. Thus, a fast response model is without question a potential barrier to Zara’s fast response model. On the other hand, social considerations are also important. For instance, in the case of Japanese consumers, a fast response model of Zara may not be necessarily appropriate in its market due to higher number of older people who happened to be more conventional when it comes to fashion trend. In the same way, societies with poor exposure to technology such as internet may not be directly informed about the latest trend about Zara’s product offerings. 3.      What internal (pertaining to Gap’s own strategy and organization) and external (market and economic environment) factors might have made Paul Pressler’s major turnaround initiatives particularly successful in 2003?  What are the key lessons retailers can learn from such analyses?  (20 points) Answer: Internally, there was a strong transformation made. For instance, Gap has become so honest about improving the working conditions of its manufacturing department or garment factories. This resulted to promoting trust for its product offerings and eventually sustainable customer relationship in the long run. Trust and customer loyalty were the key motives behind of all the internal transformation made within Gap under the management of Paul Pressler. Another important factor is the outstanding evaluation made on performing and underperforming stores. Under financial consideration, it is important to close those underperforming stores in order to minimize cost. Revenue might be reduced in this process, but profit is ensured to be potentially achieved. Considering that Gap has become troubled about its low profit. The potential remedy would be to close under performing stores. This is basically part of the issue of control. Within this option, it is necessary to evaluate every contribution of segment under performance evaluation and productivity issues. Placing focus on customers and existing market trend is another important factor that contributed successful turn around in 2003. This was particularly implemented through substantial marketing research. Through marketing research activities, there is a great consideration on how to achieve optimum result for customer centricity program. In the midst of tough competition, it is very important to understand customers’ needs. Even though at some point, this is being overlooked due to the present trend of stimulating needs. In this case, it is not clear how exactly the need was formulated, but the bottom line is to know that the market has created a positive response. Thus, positive response is an indication that a certain offering is substantially of important use in the market and part of evaluating it is to understand how far the needs for them are stimulated. These three most important factors are the major considerations that created an impact on the success of Gap in 2003. These are underlying external and internal factors. Pressler was actually good at understanding the ongoing market trend. Thus, it only implies that retailing activity needs to be market oriented in the case of Gap. This is the bottom line of understanding more the current trend of consumer response to various strategies offered within the competition. In short, marketing activities is an integral part of the retailing activity. Pressler just proved that investigation is necessary in order to come up with the best result in general. Marketing effort in the case of customer centricity program is centered to understanding more about customers. In doing this, it is not only important to create specific focus on customers but along the way, it is necessary to substantially evaluate the capacity and condition of the concerned firm. 4.      Identify several positive as well as negative ways in which the operating environment has changed for many retailers as a result of the recent/current economic crisis (2008-now).  Briefly explain the necessity for retailers to adjust their retail strategies in reacting to the recession.  Use examples to show how retailers could change various components of their retail strategy to react to the recession. From 2008 up to present, the economic recession has created impact on the retail industry. One of the positive ways that changed the operating environment is the ability to evaluate how much profit is being generated. In this reason, there is a need to come up with segmentation analysis in order to find out which department or segment of the organization has contributed the standard output for the efficiency and productivity. Another positive ways is to ensure customer trust and loyalty in order to minimize customer erosion. In this case, customer relationship needs to be honed in detail. Another positive ways is to ensure understanding the actual need of the market and which product offerings need to be created to generate profit. However, the drawback of this is to limit production of other items which in general reduces diversified products to choose from. Some retail companies have to reduce man power just to sustain their business operation. This is a specific case of a negative way that will change a company’s operating environment. Not only that, production cost may be reduced which at some point may also decrease the quality of product offering. Retailing companies need to adjust to their strategies because this is the only way they could sustain their operation and without compromising their target profit. For instance, some retail companies need to cut their production cost because this is the only way that they could sustain their business operation while still ensuring considerable amount for their profit. In the midst of economic recession, customers will look forward to highly affordable product items. However, in order reduce the final amount of the product offering, value chain management is important. For instance, under production department, it is important to minimize cost by reducing number of manpower, go for alternative materials, go for cheap labor and so on. This only proves that there is something to be given up in order to achieve the desired amount for the product. Some retail companies result to consider price promotion strategy, in which the bottom line is to substantially stimulate needs and become overall cost leader in the industry. However, this strategy may be less sustainable; it works well in times like economic downturn when consumers prioritize things above what is just a want. Thus, depending on the nature or type of product offering, the final product price varies in general. Since there is a need to minimize manpower at some point, the retail company has strong market power to demand for efficient and productive employees. It is through this that employees need to substantially undergo thorough evaluation process. In the same way, retail companies need also to consider more inputs on control and management issues. 5.      Discuss the key benefits and costs of selling private labels as a strategy for retailers.  What internal and external conditions may make this strategy more or less desirable for a retailer?  How could national brands such as P&G and GE tackle such challenges? (20 points) 450 Selling private labels as a strategy for retailers incurs costs but also ensures benefits at some point. In general, prior to achieve important benefits, costs have to be incurred. In the case of a retailer company which emphasizes limited assorted items, private labels will essentially work out because it is definitely part of its strategic moves to highly stress brand names. This is highly expensive at some point because brand names usually are priced higher than any other. The benefit therefore is to achieve highly differentiated product offerings with substantial impact on consumers. However, this is moving forward to cultivate an atmosphere for highly selected product offerings recognized by specific market segment. Limited assorted items therefore need to be offered within a specific segment. On the other hand, this may not necessarily work out well in retail companies with diverse product items and no assortment. The tendency would not to emphasize selling private labels but only ensure diversified product offerings. The cost may not be too high because there is no focus given in detail on private labels. However, the benefits may include catering diverse market segments and thus encourage a perfect venue for other relevant marketing strategies. Private labels are desirable under internal conditions if the organization does not consider giving emphasis on product branding. On the other hand, this may also work out well if an organization is trying to create marketing potential for branding strategy. On the other hand, if the environment is not necessarily into private labels because of diverse competition, there is a tendency that customers are exposed to different product offerings. Thus, private labels may not necessarily work out to the fullest because of important market considerations. P&G and GE normally used different product brands and portfolio. This is to address diverse market segments. Consumers are normally looking forward to satisfy their needs. As a result, there are different product offerings to choose from. From the point of view of P&G for instance, there are different brands under detergent or powdered soaps. This is to guarantee that various market segments have to be offered with different offerings from P&G. However, what seems clear in here is the inclusion of product label which is the company itself. This means that under different brand portfolios, different brands are carried by a single company in order to offer diverse offerings to different market segments. This is how P&G and even GE try to offer their offerings and making advantage of their company brand. In this case, these companies need to work out the stability and reputation of their company name as an essential component of creating remarkable trust or loyalty for their product offerings. As a result, P&G and GE are known for their ability to develop diverse offerings to cater the general needs of the market. Read More