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Question: Discuss About The Foreign Market Strategic Management Journal? Answer: Introduction The comparative Pestle Analysis of the two countries New Zealand and Czech Republic are conducted. This is accompanied by a grading system regarding all the six macro-environmental factors in case of both the countries. Refer to the appendix for the solution. Aldi is one of the most famous brands of Global Supermarket Chains, which have more than 10,000 stores in around 18 countries. It has a huge estimated turnover. The policy of the Aldi group has contributed to its success, which complies with the principle that great quality needs to come at affordable prices instead of prices out of the reach of the common people. This is because they are the major consumers of such products. According to the Global Competitiveness Report, the overall ranking of New Zealand is at number 13 while Czech Republic is at number 31. The score of New Zealand is at 5.31 whereas the score of Czech Republic is at 4.72. The chosen market for the expansion of market strategy out of New Zealand and Czech Republic is that of Czech Republic. This is because the country has made remarkable progress in the recent past and made several new changes in the country in order to uplift the political system and the financial condition of the country. According to the comparative pestle analysis of both the countries, it is seen that the political factors are highly stable in New Zealand for the foray of Aldi in the New Zealand Market in comparison to the reasonably stable conditions in Czech Republic. However, the overall score in the country of Czech Republic is more and thus this particular country is feasible for Aldi to expand its business further. The following are the rationale that are responsible for the identification and selection of Czech Republic as the ideal market for Aldi along with the application of a detailed macro-environmental factor analysis (Yksel 2012). The political situation of any country is extremely important for any company to enter into that particular market. There is a politically stable government in Czech Republic. The rules and regulations for the mode of entry are fair and there has not been any case of any riot or any sign of war or any major issue of concern in the country for several years in the past. Aldi has put a major amount of emphasis on the analysis of the macro environment of Czech Republic before making any sort of investment plans and from the political analysis discussed above it shows Czech Republic possess a stable political environment for Aldi to profit from (Yksel 2012). The country has the most stable as well as rich market in the whole of Central Europe. It is extremely well known and popular all over. It has produced a GDP of $214.6 billion in the year 2011. It reached an even higher mark of $279 billion in the year 2017. Czech Republic also has low labour costs in comparison to the other countries of Western Europe. The country has a significant PPP value of $28715 and is ranked at 34 in the entire world. The facts which have been discussed, show that the economic environment of the country is stable for Aldi to thrive in. Czech Republic has a high population demographic of young and working class people. The population falls in the age group of 15-64 years which falls in between the Aldi target market. The people who reside in Czech Republic are highly educated and usually abide by the rules and regulations of the country and for Ali to be successful in opening their franchise in Czech Republic, they need to be patient and follow the rules strictly (Grnig and Khn 2015). There is a significant scientific tradition in the country Czech Republic which is prevalent through several years of academic and specialized research which is responsible for bringing about new innovations and inventions. There are certain technological platforms that Aldi can benefit from. There is also facility for the stable equipments and computers for Aldi. Czech Republic is ranked quite high in the recycling field and in this regard it can be said that the recycling within the country has been increased from 1% to 16% over a decade and is steadily increasing at present and landfill taxes have also been enforced in the country. Aldi has also produced certain guidelines for the suppliers which indicate reusing, recycling and packaging whenever possible. Aldi now recycles 98% of its waste from landfill (Grnig and Khn 2015). In case of the legal factors it can be stated that there is a free trade movement of goods in Czech Republic, these striking legal factors are conducive to the ALDI investment in the Czech Republic (SUPERMARKET 2012). The five forces analysis for the discussion on the industrial environment of Czech Republic and the conditions favourable for Aldi is discussed. The threat of entrants is considered first. The barriers are low for big companies and high for small companies. There are high barriers and low risk factors which include high fixed costs, capital requirement of entry, economies of scale, access to supply and distribution channels and also the factors of retaliation. There are also low barrier and high risk scenarios which include the customer switching cost, regulation and these are to be kept in mind by the company (Rothaermel 2015). ALDI has been operating within the grocery industry and it is a promising area where the increasing population would be bound to impact the demand in the future. It can also be said that when there are businesses or innovations to the market; it also looks towards the increase of the population. It can be stated in this regard that the small scale markets would have certain problems in entering the market as the economies of scale play a huge role in the industry and they require a significant amount of capital and technology for their survival. The retail turnover in different segments also plays a chief function in the attraction of more competitors in the market under consideration. In relation to the bargaining power of buyer it can be said that there is a high risk with respect to the forces. There are certain standardised products, customer switching power and international hubs there are also a distinct group of customers. It is a known fact that more or less every person is a potential customer for the grocery industry and the demand is also considerably high. Due to the fact that the grocery products are low or medium involvement products the buyers would be bargaining for the high quality products and the greater levels of service for a lower cost. In case the needs of the customers are not met they have the chance of switching to another company as there is not much of an involvement of switching cost. Most of the grocery products are undifferentiated or standardized. The buyers can pose a threat in case they can integrate backward in the industry of the seller (Dobbs 2012). The threat of substitutes is also extremely high and this needs to be analysed well by the Company. There are several convenience stores and discount centres and the adaptation and innovation needs to be devised by the market. The large scale supermarkets and shopping malls are the prime threats for the retail stores are the alternative products range in the supermarkets is bound to be much greater. These would not only focus on the national brands but will also offer home brands for much cheaper rates in the form of substitutes. In addition to this it can be stated that the new and more innovative technologies stores and supermarkets will not hesitate to bring forward certain substitutes for the grocery and other household items which have lower costs with much greater performance and quality. The fast food outlets such as Mc Donalds and Subway would be the substitutes for the food items of the grocery industry (Chung 2015). With regard to the bargaining power of suppliers there can be said to be a medium risk. There are few products and lesser amount of dependency on the suppliers up to 40% of fruits and vegetables are locally produced and there is also a certain proximity to the countries which Aldi operates in. The competitive firms focus on the cost reduction and therefore the bargaining power of the suppliers is thought to be low. In addition to this it can be mentioned that there are large organisations in the industry with strategies for improvement of the efficiency and reduction of costs. There is a tendency where the prices are reduced for many national brands for the reduction of their costs (Dobbs 2012). The extent of rivalry among the competitors is also quite high. There are several big international names which include Tesco, Lidl, Penny Market and other hypermarkets are also there which comprise of 43% of the Czech Republic households. There are certain offered discounts which amount to around 25%. Most of the grocery stores are undifferentiated and they are easy to imitate. Due to this there are chances of intensification of rivalry and the purchasing decisions are bound to be based primarily on the prices and very less on the nature of service (Chung 2015). A VRIO framework helps in the understanding of the strengths which can be gained from the resources of as company. It comprises of four parts which include the criteria of being valuable, rare, unique or scarce, inimitable and suitable organisation. The resource of the company should be valuable, otherwise this will not pave the way for newer and better opportunities. The resources need to be rare in order to provide the company with a certain amount of competitive advantage. It should be inimitable by other competitors and immersed in the values of organisation. The resources of ALDI can be categorised as financial, technological, organisational and human resources. The company has a turnover of more than $50 billion and therefore it has the economic capability to enter into the new market. In addition to this it can be stated that the human resources are also the biggest asset for ALDI (Lin et al. 2013). ALDI also possesses immense experience in case of the international business and can utilize their present strategic frameworks to assist them in obtaining a competitive advantage over other existent rivals in Czech Republic (Jurevicius 2013). The technological resources are also used to enhance the technological resources which can be applied by the company in Czech Republic. By the application of the VRIO framework it can be said that several components can be described as follows: The economic resources can help the company to pursue the expansion strategies much more aggressively in order to achieve a definite competitive advantage. The organisation can also take advantage of their human resources and also the technologically advanced supermarkets in the new market. The employees are also technologically savvy and they also help in training the local people who are hired to work on part of the company. This helps in the standardisation of the whole operation. The company needs to focus on the existing technological operations and the resources need to be handled effectively and the rest of the management needs to be handed over to the marketing department (Andjelkovic Pesic, Jankovic Milic and Stankovic 2013). It can be stated in this regard that the company needs to put in place certain advanced processes in their respective outlets which might be difficult for their rivals to copy. Then it can be assured that other organisational resources are utilized as an advantage (Rothaermel 2015). Based on the conducted VRIO Analysis it can be sated that ALDI focuses on the creation of value for the customers by the reduction of cost and enhancement of the quality of its products (Rothaermel 2015). The VRIO and the analysis of the strategic capabilities of ALDI shows that it possesses certain resources and capabilities which act as key necessities and some are the key qualities (Kozlenkova, Samaha and Palmatier 2014). The most crucial qualities are the dominating competencies and these include the low labour cost, high buying power and a uniform price system which ALDI possesses. This has prompted an income of an above average return. It can be said that the key necessities are the basic skills which are required to operate in the market which include the size of a store, the capability of distribution, proper quality of products with low costs and this has led to earnings of average returns (Knott 2015). These factors, point to a sustainable competitive advantage for ALDI in Czech Republic. There are several possible modes of entry into certain foreign markets. The different modes of entry into the foreign market include exporting, licensing, management contracts, contract manufacturing, franchising, joint ventures or strategic alliances and finally that of full acquisition. Out of the different modes of entry into a foreign market, one of the oldest methods of entry is by exporting. By this procedure the goods and services of one country are sold in other countries. There are both methods of direct and indirect exporting. In the method if indirect exporting, there is the least amount of risk involved. The method of direct export needs to be applied once the organisations have gained a certain amount of experience. Contractual agreements are considered at the time when the firms have to approve more responsibility for their entry into the foreign market. Franchising is another possible option in the context of the foreign market entry. In case of franchising, the partic ular organisation can franchise its operations in another suitable company which is done in exchange for a share of profits (Chung 2015). The mode of entry which is most suitable in the case of ALDI in Czech Republic is that of joint venture or strategic alliance. After a proper study of the market in Czech Republic it can be stated that the best mode of entry of Aldi is by means of joint ventures or strategic alliances in the country. In case of joint ventures or strategic alliances, the firms who are internationally expanding must decide which of the markets can be entered into. The factors which affect the choice of entry mode covers factors like transport costs, trade barriers, political risks, economic risks, strategy of the firm and also the costs. The timing of entry must be chosen logically such that the company ultimately benefits from its choice (Laufs and Schwens 2014). The concept of the choice of joint venture can be attractive because the firms benefit from the knowledge of the local partner the cultural language, political systems and the business systems. The costs and the risks of opening a foreign mar ket are shared. These actually satisfy the political considerations for the entry into the market (Chung 2015). However it also needs to be kept in mind that the firms also risk the control of its technology to its partner. The firm also might not have a significantly tight control to realize the experience curve or the location economies. The shared ownership in this case can lead to conflicts and there are also battles for control in case the goals and the objectives differ or change over a period of time. The core competencies of the firm also help in the suitable analysis of whether the entry is suitable in a particular existing market (Laufs and Schwens 2014). For a successful entry into the market of the Czech Republic, at first the existing market needs to be properly analysed. The country is characterised by extensive population dispersion. Over 10 percent of the population is centred in Prague, the only city with more than a million inhabitants, on the other hand, majority of the Czechs live close to other major commercial and industrial hubs. Urban consumers in general have a greater purchasing power than the rural counterparts. Success in the market also requires an in-country presence such as a particular agent or distributor or any representative office. The local distributors usually take responsibility for handling customers, dealing with established wholesalers or retailers and marketing the product directly to major corporations or the government and handling the after sales service (Janda, Michalikov and Skuhrovec 2013). Price is also one of the crucial factors at the time of positioning a product or a particular service for s ale (Ang, Benischke and Doh 2015). Many competitors in the grocery industry follow a similar strategy which is to provide high quality products for low costs. At present, Aldi has one of the positions as a cost leader and continues a battle for its maintenance. At first the entry into a new market is tough but the strategic analysis is crucial for the survival in the market. References: Andjelkovic Pesic, M., Jankovic Milic, V. and Stankovic, J., 2013. APPLICATION OF VRIO FRAMEWORK FOR ANALYZING HUMAN RESOURCESROLE IN PROVIDING COMPETITIVE ADVANTAGE.Tourism Management Studies,2. Ang, S.H., Benischke, M.H. and Doh, J.P., 2015. The interactions of institutions on foreign market entry mode.Strategic Management Journal,36(10), pp.1536-1553. Chung, F., 2015. The Supermarket switch is on as Aldi takes top award in customer satisfaction.Business retail July,21, p.2015. Chung, F., 2015. 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