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In the process of running a business properly, the organisation always aims at pertaining a grand hold on the international level, so that the needed business ground is attained by the organisation. However, the concept of internationalisation is not only about having the business getting expanded at the international level, in a percolating manner. This is also about understanding the international conditions of the market, which is essentially needed so that the business can perform in a profound manner (aldi.com, 2022). This assessment is written to introduce Aldi, a supermarket in the UK, in the business markets of Japan and India.
International Business Theory
As per Ghauri et al. (2021), the international business concept ultimately helps a company to understand international trade. The foundation of IB theories is the idea that goods and services have a physical reality and that open resources are inaccessible. Finally, the description of the theory demonstrates how effectively Aldi operates on its internal business platforms. As per Nielsen et al. (2020), international trade served as an example of the differences between global business and global trade. It provides all information that is available regarding the current global economic, social, and political situation.
The Uppsala model makes it simpler to evaluate a business's evolution in light of current conditions around the world. Dow et al. (2018), stated that there are sporadic decision-making processes involved, all of which concern the allocation of resources. The continuing processes of knowledge development, which include occupying knowledge and creating and cultivating trust, will undergo significant changes shortly.
Figure 1: Uppsala Model
(Source: research-methodology, 2021)
Networking model theory
This strategy promotes the relationship between each individual and business to aid in the ongoing expansion of trade in global markets. As stated by Newman, (2018), the use of this model facilitates the analysis of the production units and supply chain activity of Aldi.
The product life cycle model
As per Ren et al. (2019), there are four distinct phases: launch, growth tracking, peak sales, and sales decline. This framework allows Aldi to evaluate the product's progress in Indian and Japanese markets.
Figure 2: Product Life cycle
(Source: smartinsights, 2022)
Selection of the Eclectic Model Theory
A range of theoretical models from the eclectic model category will be used to conduct the investigation. Aldi may gain a better understanding of its place in the market by implementing the OLI paradigm. According to Ikiugu et al. (2019), this model theory is the best theoretical foundation for the study of international trade. Additionally, it helps a company learn how to maximise its FDI. This versatile fashion has gained such a following that it warrants Aldi's presence in every market. To look deeper into Aldi's achievements abroad, a PESTLE study is created (Paul and Benito, 2018). Since the model depicts the present market trend for new entrants, it may be used in any industry.
Figure 3: Eclectic Model Theory
(Source: corporatefinanceinstitute, 2022)
Assumption of the Theory
According to David et al. (2018), companies need to develop a comparative edge to succeed in the global market, and the Eclectic model theory can help them do just that. Companies, according to the literature, should seek to maximise their chances of success by capitalising on the three benefits it presents proprietorship, location, and internalisation. It's a fantastic resource for giving a business an advantage over rivals.
Aldi will benefit from the use of the Eclectic Model Theory in its operations as it grows and maintains its position in the global market. The model is created to comprehend the factors influencing any organisation's internationalisation. The business will have the freedom to choose its own operational and developmental plan thanks to the OLI framework. Businesses must consider tax rates, labour costs, and raw material availability while choosing a location. According to Pitelis and Teece, (2018), Aldi must invest abroad to avoid rising tariffs from remote trade barriers. Before internationalising, Aldi must assess the rewards. Aldi must also defend its brand and patents while growing worldwide. The ownership factor will work in Aldi's favour when the company's competitive advantage is large in comparison to that of potential foreign competitors. Aldi can use this model internally to gain insight into international expansion (Ghauri et al. 2021). It is believed that when norms, possibilities, and regulations are established, organisations can expand. Second, geography benefits.
Figure 4: Eclectic Paradigm
(Source: ebrary, 2020)
Partnerships and mergers will allow Aldi to reach India and Japan. Aldi should pursue acquisitions and mergers because it details financials. This plan should increase the business's market share in both areas. Aldi also benefits from licensing. Aldi will profit most from it (Oviatt and McDougall, 2018). This continual access adds a new dimension to Aldi's possible business strategy.
Selection of Market Why and How
Figure 5: Economic profile of India
(Source: archive.doingbusiness, 2023)
Market 1: India
Political and Legal Suitability
It is significant to note that as of 2021 the political stability index of India is - 0.62%. This shows that there is moderate stability in the country which will help all to expand the market in India. Moreover, this will help the company to get a licence for doing foreign trade which also helps in driving foreign direct investment for the company. This is one such strategy that will help the business organisation to accomplish all its goals in the target market and to enhance its level of profit and gain enhanced success in the marketplace. According to Luthans and Doh, (2018), the parliamentary elections which were held in 2019 led to the incumbent government led by Narendra Modi coming back to power with a greater majority. This government has promised to bring stability to the country against all the odds and to improve the position of India in terms of doing business. Moreover, the nationwide lockdown for 21 days since 25th March 2020, has affected the entire political system of the country and it has also led to a huge decline in the country's economy and the business sector was also ravaged (Appio et al. 2019). It is also noted that India also undertook certain combating measures due to the scaling disputes in the border with the Chinese government which has brought certain instability in the political system of India. It might be one of the reasons that all the will face certain difficulties in the Indian market to do business.
Figure 6: Political Stability Index of India
(Source: theglobaleconomy, 2022)
Economic and Financial Suitability
It was all due to the pandemic that India witnessed a booming year for foreign direct investment with a total FDI inflow of around $58.37 billion between April to November 2020.
Figure 7: Inflation Rate in India
(Source: theeconomictimes, 2022)
Significantly, the rate of inflation in India is 7.5% which is moderately high. This will pose a huge threat to the company as due to inflation customers will tend to buy only the essential products that are required to sustain life. Hence, customers of this country will not buy any luxurious products which will pose a threat to the company and it may face great losses in its annual revenue after its market expansion (Tiwari et al. 2019). Hence, the company must enable States to collect stamp duty on securities market instruments and with the help of the Stock Exchange so that it can achieve more success in the competitive market.
Social and Cultural Suitability
Aldi is one of the greatest supermarket chains in the UK poses differentiated products with the help of which it dries to meet the satisfaction of UK customers. Similarly, with its various types of retail products, it will try to cope with the needs of the Indian customers even though the choices and preferences of the Indian customers always change. Hence the company must implement certain strategies so that it can gain regular updates in feedback from the customers about its products (Purwani et al. 2020). Market analysis regularly will also be conducted by the company so that it can be able to get more ideas about the preferences of the customers.
Figure 8: Demographic Trends in India
(Source: britannica, 2021)
This will help the company to bring such items that will help in driving more profit for the company. Some of the social factors that affect the suitability of Aldi in the Indian market is its wide variety of products that can be able to satisfy the changing needs and preferences of Indian customers.
Figure 9: Hofstede Comparison between the UK and India
(Source: Hofstede Insights, 2022)
Technological and Infrastructural Suitability
It is observed that the internet penetration rate in India is 47% and there are almost 1.31 million active social media users in the country. This will help Aldi to promote its business on the social media platform with the help of YouTube, Facebook, Instagram and many more. This will also allow the company to get enhanced benefits in the competitive market. Through social media promotion, Aldi will be able to enhance brand awareness and reach a huge number of target audiences at a single point in time making them aware of the goods and services that the company offers (Makhmudov, 2020). This brand awareness will also help the company to increase its sales and to get maximum profit with the help of which the revenue of the company will also enhance.
It is with the definition of wholly owned entry mode, refers to the fact that an organisation that is capable of maintaining its stock on its own by the major parent company is usually called a wholly owned subsidiary company. The main aim of the central mode is that it usually helps organisations in controlling their assets and liabilities in the international business market (Akpapuna et al. 2020). Hence, the company by following this entry mode takes good decisions for its good planning and the beneficiary of the business.
Figure 10: The Wholly Owned Subsidiary model
(Source: wallstreetmojo, 2021)
With the help of the wholly-owned business model, it has confirmed a suitable entry mode for the company. Aldi usually puts more emphasis on the entry mode that assists the company to make separate welfare decisions regarding the maintenance of the company and to take certain decisions that will help the company to grow more in the target market (Nambisan, et al. 2019). Opting for this mode of entry also helps in the assurance of full control over the planning and execution of those plans so that the parent company will be able to bear all the risks in the target market.
Suitable application of the Wholly-owned subsidiary model usually helps to a certain minimum loss of liabilities in assets so that the company can earn a maximum profit (Purwani et al. 2020). It also refers to the proper planning and execution of the planning so that the company can be able to earn an enhanced profit margin in the competitive edge. All d by applying this model will come up with the financial statement such as balance sheets, income statements and expenditure statements together with knowledge regarding the growth or failure of the company.
Market 2: Japan
Figure 11: Economic profile of Japan
(Source: archive.doingbusiness, 2023)
Political and Legal Suitability
Figure 12: Political and legal sphere of Japan
(Source: theglobaleconomy, 2022)
The business market of Japan is observed to be politically just and pretty reliable. The legal system that a business needs to follow in Japan is quite harmonised and hence this will help Aldi in appropriately establishing its market hold, on the grounds of Japan (Akaha, 2021). The government of the country is observed to have improved the business environment and pays special attention to locomotive businesses so that they can develop adequately. Therefore, the comprehensive development of the regulatory measures and the adjacent implementation of the related reforms, are pretty measures for excelling in the reforms and performance of Aldi, in Japan (Wijaya, 2022). One of the political and legal advantages of Japan is that the legal system is fair and is also observed to be globally harmonised.
Economic and Financial Suitability
Figure 13: Economic conditions of Japan
(Source: asialinkbusiness, 2022)
The economic sphere of Japan is observed to be highly developed and hence can be stated as one of the highly concentrated economic zones for exclusively growing the business market. According to the market report, the Gross domestic product valuation of the country is noted to be 4.95 trillion USD, and the GDP per capita is 39,313.66 USD according to the reports of the World Bank, in 2021 (deloitte.com, 2021). The Gross national income is 5.7 trillion dollars according to the 2021 reports of the World Bank. This country will provide the needed financial asset to Japan for starting the business appropriately, since the inflation rate of the country is also observed to be "-0.1%" as per the fiscal records of 2021 (heritage.org, 2021). Despite facing considerable challenges, the Japanese economy has been observed to have developed over time and hence this will provide grounds for the business to develop subsequently.
Social and Cultural compatibility
Figure 14: Social and cultural suitability
(Source: Hofstede insights, 2021)
The cultural and social structure between the countries of Japan and the UK is observed to be quite different. Therefore, it can be stated that based on these assumptions, Japan will strategically face difficulties while entering the markets of Japan in terms of culture and social norms. From the graphical presentation it is observed that in Japan the power distance is quite high while in the UK, it is considerably low (Kasulis, 2022). The individualistic ratio in Japan is low while in the UK it is quite high. The people of Japan are highly initiated to avoid uncertainties, while in the United Kingdom, the ratio is quite low (Nguyen et al. 2019). Long-term orientation and Indulgence are opposite for both countries, hence signifying that there is a high possibility of Aldi facing difficulties while entering the markets of Japan.
Technological and Infrastructural Suitability
Figure 15: Technological suitability
(Source: oecd, 2022)
The science and technology of Japan are pretty advanced and hence this has led to rapid economic and concentrated development of industries, in this country. Japan is always observed to be one of the global leaders in terms of science and technology. Hence, this leads the companies performing in this country, to become exemplifying in their individualistic services. Japan was noted to rank 13th in the "Global Innovation Index" by the "World Intellectual Property Organisation", and is hence observed risen from the 13th rank to the topmost, since 2020 (Febrianty and Ricardo, 2019). This country will provide Aldi to adapt to robotics or technological means, to create a beneficial chain of supply for its materials and hence this will in turn help the company to flourish in a very significant manner.
From all the available ways and methods to start a business in a new business environment, the company Aldi will be observed to follow the method of "Merger and acquisition" as one of the best entry modes in the international market of Japan. This method will be considered by the company because, with the application of this method, Aldi will be able to sustain the typical differences in culture and will be also compatible enough to understand the business market (Christofi et al. 2019). Therefore merging with a local supermarket in Japan will help the company gain the needed grounds and hence expand in the target market, without facing much of the market risks in the process of the business ventures.
Figure 16: FDI in japan
(Source: japan.go, 2022)
The selection of the Japanese market has been done by Ladi to expand the business processes because this market promises exclusive technological and legal advancements, that will be needed by the company to superficially perform in the entire business market. Additionally, the economic market has been observed to be pretty advanced as the real GDP growth of the company is observed to be projected at 1.8% as of 2023 and this is to reach 0.4% as of 2024 (santandertrade.com, 2022). The country is also observed to have aligned free trade agreements, ensuring its market position in international business.
The company should focus on applying the entire process of merger and acquisition in entering the market of Japan (Čirjevskis, 2019). This is because, with the help of this process, the company will become able to get the needed knowledge about the market conditions and hence, grow sustainably, with increasing demand and avoiding troubles and differences.
Conclusion and Recommendations
Aldi in India must come up with more innovative products so that it can attract more customers. This is one such strategy application to which Aldi can be able to enhance its sales in the new market. Moreover, it will also help to generate more revenue. New product development will be another strategy that will work in the host country for Aldi (Cooper, 2019). Although, it can be said that new product development requires proper market analysis and a lot of capital investment for the process.
Significantly, in Japan, the company can use advanced technologies to come up with a wide variety of products so that the company can attain success in the market of the host country (Hardgrave, 2019). Although, Japan is a better option for Aldi to expand its market as Japan seems to be better than India in all aspects of the Hofstede Cultural Model.
From the above discussion, It can be concluded that Aldi which is one of the largest retail supermarkets in the UK is trying to expand its business in Japan and India. There are certain challenges that the company will be facing in both the host countries. Hence, there are entry modes which the company needs to follow in both countries. Several theoretical underpinnings were taken into consideration for an explanation of the entry mode in the host countries of Aldi. Some of them are the Uppsala model, the wholly-owned subsidiary model, the Hofstede model and many more. After taking into consideration all the models of interculturalism, it is to be noted that Japanese the most suitable country where the UK retail supergiant can open its business to gain more success. It is also not that in both countries the company must come up with a wide variety of products so that it can attract more customers so that the sales of the company can increase.
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