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7/22/2017

Case Study - Aldi


Case study - Aldi
 Introduction:
A grocery store in 1948 is opened by brothers Theo & Karl with the name of “Albrecht
Discounts” called Aldi. Aldi store provided great deal of products at the low price and had a
simple layout. Theo and Karl in 1961, divided the company into North Aldi that Theo runs &
South Aldi that Karl runs. As said by Dieter Brandes, the previous director management of
Aldi, the reasons behind this division of Aldi, were the different opinions about business
strategies and how they can develop the business. Though, Theo & Karl usually exchanged the
information about a variety of concerns like, current & potential suppliers, performance & cost
figures and they lead joint negotiations as well with the suppliers. Both brothers resigned as
CEOs in 2003. The Theo Albrecht Jr, Theo's son, now runs North Aldi, and the Juergen Kroll
& Norbert Podschlapp run the South Aldi. By more than 10,000 store branches in eighteen
countries the Aldi Company grew rapidly, and the projected shared turnover is more than fifty
billion euros. Bearing in mind this situation, it would be stimulating to recognize & analyze
Aldi’s business strategies.

Task 1 – Strategic planning


Mission of Aldi: Aldi focus on the comfort and safety of thier customers.

Vision of Aldi: In simple, reliable & responsible manner Aldi will endure to establish the
standards for the retail-food industry & market position of Aldi is strengthening continuously.

Values of Aldi:

 They treat people the way they would like to be treated themselves: in a spirit of
partnership and with respect.
 They are characterized by openness, honesty and reliability.
 Traditional trading values shape their understanding of management and business and
guide their actions.

Three core values of Aldi: Simplicity, Responsibility & Reliability.

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 Analysis of their mission, vision and values:

Aldi, a highly efficient & successful, discount company operating across many countries,
follow a simple business principle for working accordingly, focused on the fundamentals for
the customers benefit. Their concentrated product range selection, combines the sophisticated
concept of quality with the lasting low-price strategy, has made Aldi the opinion leader in the
Germany. Long-term business relationships and a high level of employee attachment have
always made a significant contribution towards the success of their management-led family
business.

The character of their corporate brand has been established through their corporate identity
which in turn has grown from their business principle and is marked by identical building
specifications, store designs including marketing activities, and communications. They are
traditional tradespeople and are known in the industry as results-oriented, honest and fair.
Consumers’ confirm the trustworthiness of ALDI and the fact that they reliably deliver on their
promise of “the highest quality and the lowest prices.”

They know how to consistently combine their high quality requirements with their own
discount principle. A decentralized structure, flat hierarchies and constantly optimized
processes make them act quickly and effectively. They concentrate on the essentials and are
always ready to deliver a top performance. Their conservative financial planning makes them
economically strong and independent.

They need to obligate their competence & experiences, in those areas where it is valuable and
in character with them, to create an improved understanding of the quality which progressively
takes into account the environmental & social criteria. They want their employees, their
suppliers & business partners together with their customers to feel the comfort with ALDI and
to know that they are fairly able to rely on Aldi in all respect.

 Organizational Audit:

Strengths:

1. Aldi claims to supply the products of top quality.


2. Aldi offers the products at most reasonable prices.
3. Aldi has strong existence in the Germany with more than 2500 store branches.
4. Aldi preserves the low operating costs.

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5. In Europe and other countries Aldi has round about 16,000 Branches.
6. Aldi operates in more than 18 countries around the world.

Weaknesses:

1. As compared to other store brands Aldi is still relatively small.


2. Aldi hasn’t have the ability of global impact as compared to other chain stores.
3. Occasionally Aldi allegedly has viewed as a store for cheap & low quality products.

Opportunities:

1. Aldi desires to capitalize more in advertising to beat the competition.


2. Have the ability to grow into economies like Africa & Asia etc.
3. Technological developments brings opportunity to grow.

Threats:

1. Aldi do not have the ability to cater the shoppers that are expecting for the “Complete
Shopping Experience”.
2. Large no. of other retailers are giving tough competitions.
3. Private Brands of Aldi can be tossed away by the established competing brands.

Environmental Analysis:

 PEST Analysis:

There are a number of factors which Aldi need to consider for analysis of the marketplace.

The Political Environment

 The legislations of employment are continuously changing, this has already seen in
2015 that substantial variations with the overview of shared parental leave are made
(ACAS, 2015). These variations have an economic influence on the business but also
produce risk that workforce may take the case to tribunal.

 In 2015, it’s projected that the zero-hour agreements will be eliminated (ACAS, 2015),
being a supermarket it is probable that the seasonal staffing is used. Deprived of zero
hour agreements this could come to be harder to staff & more luxurious.

 Being European company, the legislation is also a big factor that should consider, as
any variation at the EU level will also have the direct influence on the company.

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The Economic Environment

 There could be an increased chance of change in buying behaviour from the low-cost
stores back to the mainstream supermarkets, as the European economy moves out of
the recession. The detrimental effect on the market share could cause by this shift. In
such conditions Aldi may need to consider how to compete.

 Consumers turn to the inexpensive food suppliers throughout times of financial pressure
(Skordili, 2013), this has contributed to Aldi’s growth has create an ideal market for it
in the UK.

 In this order it may change the supply, demand, & fundamentally affect pricing creating
unpredictability in Aldi as the consumers go back to the higher priced competitors.

 The changes in government can also create changes in tax requirements, and it could
become more expensive.

 With the help of finely tuned supply chain the success is created, the distribution &
logistical capability are becoming one of the key competitive weapons that are available
(Sandberg, 2013).

The Social Environment

 The discount store chains could met with the degree of the social stigma, the result of
rises in the economy individuals may need to shop at more luxurious leading brands
that include Sainsbury's, Tesco, or Waitrose.

 There’s a mature population (Cracknell, 2010), an older labour force may be more
expensive in terms of illness, it present extra problems for the employers. By the starter
of auto-enrolment for the schemes like pension, this adds an additional expense to the
business as the employers will have to contribute some amount to the pensions of
employee.

 The competitors like Tesco, Asda, & Sainsbury's present a more diverse variety of
products that include clothing, opticians, non-food items, travel agencies, chemists, &
many more which can see the alteration of buying behaviour.

 The competitors of Aldi offer an opening service of 24 hours, in this way the people
work becomes more varied over the time, this will see a change in the customer’s habits

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of buying. In a technique to maintain market share Aldi may require to consider this
strategy because this will carry the increased expenses in terms of overheads & the
staffing costs.

 A number of international companies highlighted in the social media and press due to
the accounting practice they have established and they pay their tax (Barford and Holt,
2013) this can lead to a favourable change by customers and they may sense increased
loyalty to the firms that are established.

 Aldi has stimulated from abundance of the choice & created a rationalised experience
of shopping by working with the small range of product. This tactic of making the
process of shopping faster & more focused may bring advantage for the busy family
life.

The Technological Environment

 The mobile & online shopping is increasingly becoming more popular (Butler, 2013),
at present it is not presented by the Aldi but this is an important strategy that should be
considered. This need to be boosted with the additional technology led initiatives
similar to the in-store media, the access to Wi-Fi & self-checkout.

 The infrastructures of technology are the key factors of the supply chain of the up-to-
date business, intelligent management of stock & supply is crucial for the success.

 The checkout amenities & the point of sale structures are considerably diverse in larger
stores, Aldi currently runs an out-of-date conveyor belt method with limited choices for
the self-service. The improved facility from the competitors like offering to, pack the
bags up, for the clients can create difference in the experience though per person
average time will increase.

 Five Forces Analysis:

The sector of grocery stores faces severe competitive rivalry. The micro-analysis of this rivalry
is presented below:

Threat of New Entrants: Low

The new entrant’s threat is relatively low because of the high expense of entry & the high
competition.

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The requirement of cost in the market is high for the latest brand to inaugurate itself. It will take
significant investment to build a large retail estate network that is attached with the levels of
stoke.

Tesco enters in a decline phase, because of widely considered practice as unethical, worst
management of financial issues and power exploitation (Proud, 2015). This may results in a
favour decrease by consumer and will lead to merger and acquisition opportunities for Aldi.

 Substitute Products threat is medium / high by supplying a limited range of goods, Aldi
always remains open to the changing trends of market. With the occurrence of changing
the trends in market, the products features and range should be transformed quickly.

 Aldi works in quite small stores and this is because they are controlling the limits of the
number of products that can be supplied. The larger competitive stores can offer
substitutes, because they have more space to supply an increased range of improved
products.

The Bargaining Power of Suppliers: Low

 Bargaining power is greater in the supermarkets as compared to the suppliers, often


insisting for the favourable terms and the discounts because of the scale of the power of
buying (Proud, 2015).

 The Aldi suppliers may support the orders that are larger from the bigger competitors,
so they are less willing to give discounts & offers to the chain of Aldi. Though Aldi still
runs a chain of the 500 stores so Aldi have the buying power in its own right. There is
also an option for Aldi to get the additional power by buying from multiple countries
in order to get the reasonable terms.

The Bargaining Power of Buyers: High

 The buyers have the option of making choices that from which supermarket they can
buy easily, based on accessibility of required products, offers and the ease of access.

 The Aldi does not offer any scheme of loyalty for that reason the customers do not get
any additional incentive with buying again and again.

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Rivalry among Existing Firms: High

 The supermarket sector is facing intense rivalry which is focused on the cost of
products. Many brands are offering to match the prices with their competitors and are
undertaking the activities like, price comparison. This vicious rivalry is causing
aggressive campaigns of marketing where all players are trying to win the market share
from the other player. The additional costs are caused by these increased competitive
activities like advertising & marketing in addition to leading to the reduced prices
(Linstead, Fulop and Lilley, 2004).

 Aldi works with the low level of the fixed costs in order to supply the lower priced
goods, and this point of lower prices is also targeted by their competitors and this
becomes a cause of risk to Aldi if they are not able or willing to make investments in
the advertising to address likely activity.

Task 2 – Strategic evaluation and choice

 Strategies implemented by Aldi:

There is a continual growth in new stores with enlarged size between 10,000 and 15,000 sq.ft
in all countries Aldi is operating (Fitzgerald, 2013). Backward vertical integration is applied in
Aldi by manufacturing inexpensive luxury goods to attract those consumers who are
substituting the expensive luxury brands (Grocery.com; Fitzgerald, 2013). Aldi is renovating
& expanding the existing stores (Fitzgerald, 2013). Aldi starts the campaigns of advertisement
to attract more up-market customers to promote the luxury brand labels that is deviating from
its previous strategies (Butler and Bowers, 2013). It increase its checkout points & level of staff
in the stores to satisfy the new one million customers coming to the stores from all over Europe
(Steiner, 2013).

Aldi delivers high value through transportation efficiency, presentation & packaging to
customers that are finding cheaper deals (Steiner, 2013). Online sales & apps for appealing
internet savvy consumer & engaging the customers with the help of social networking (Aldi
App, 2013). Sustainable sources & reduced environmental impact with the help of recycling &
minimum packaging (Aldi Nord, 2013).

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 Critical Evaluation of the Strategies:

According to Aldi Inc.’s SWOT & other approaches it has applied we can say that these are
sync strategies with Aldi’s rapidly fluctuating environment and that it is captivating advantage
from the strengths & minimizing weaknesses. With the expansion of store sizes, refurbishing
& transforming its current stores & opening different stores of bigger sizes Aldi is trying to
reduce weakness of less modern stores. With the continuous inauguration of new stores Aldi is
taking advantage of the rapidly increasing population that results in the rise of footfall of the
customer (Fitzgerald, 2013). Aldi is taking care of its weakness of low staff level and it is
increasing its staff level (Steiner, 2013). Aldi elevated its market positioning and started the
rolling out by the help of advertising campaigns to attract the luxury customers & by retailing
the luxury products & changing its reputation of retailer of the low worth products (Butler and
Bowers, 2013).

Aldi is progressively moving from the discount store to the convenient store, Aldi is
inaugurating new stores in well-off sites, offers the luxury goods & deliver value & quality to
extend the base of consumer (Naslund, D. 2013). Aldi, with the help of vertical backward
integration, is taking benefits of the opportunity offered by the shifting of the consumer from
the expensive luxury goods to comparatively the cheaper luxury goods by manufacturing
Aldi’s luxury label offering them at less price. Widen its customer base by opening the stores
in well-off locations & changing its positioning to convenient stores, to take the benefits from
economic recoveries in the developed countries. Aldi is sustaining the competitive advantage
of cost efficiency by reducing the costs incurred in packaging, transportation & offering the
cherry deals. Applications of Aldi aid Commerce, and also trades online and then interacts with
customers by the use of social networks, and Aldi takes advantage of the digital-media
technology.

 Suitable strategy for ALDI:

The advantages of the opportunities has not fully taken by Aldi, like, it can take advantage of
growing in the Asian market, Aldi is functioning merely in the Australia and it is not yet move
in the Asian countries. In those countries high growth is predictable and many governments
there have unlocked the foreign direct investment in the retailing. Aldi is ready to come into
the China market, & the broader Asia. Aldi in Asian market will primarily sell foodstuffs &
wine via online selling to China, this year, and the stores will open later. This online website

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will sell shelf-stable foodstuffs & wine, and maximum goods are sourced from Aldi’s
Australian suppliers. A retail blog in Germany by Lebensmittel Zeitung, said that Aldi aims to
generate “a truly local assortment” with German goods as “topping”. Australian spokeswoman
said that there is a robust demand amongst consumers in China for the Australian-made goods.
“Aldi remains active in the Chinese market for a number of years and undertake the feasibility
studies in detail regarding probable market-entry routes. This work of feasibility studies results
in the verdict to initiate the retailing work in the Chinese market with an electronic-commerce
offering.” Australian spokeswoman said that Aldi will initiate sales with the variety of
everyday food items it is very carefully selected for Chinese consumers through a website, and
the goods will be delivered to homes of consumers. Aldi already have presence all over Europe,
Australia, Britain & the US therefore to maintain its growth levels it is turning to the Asian
market.

Aldi should go on to grow its business in the Asian countries and should focus on increasing
the product range as the new markets demand new products. So, according to the above analysis
and discussion the most suitable strategy for Aldi’s growth is the “Diversification Strategy”.

"Diversification take place when an organization choose to create new products and enters into
new markets" (Johnson et al., 2008). The diversification have two types. In related
diversification Aldi will stay present in the familiar market / industry. Unrelated diversification
means to have no previous industry or experience. In the case of Aldi, they should implement
the related diversification strategy. Aldi should grow its store chain in Asian countries and
should increase the product range according to the increasing demand in the new market.

Task 3 – Strategic Implementation

 Roles and Responsibilities for Strategy Implementation:

The strategy implementation accomplishment in the fresh business environment powerfully


pivots on strong leadership of management. Strategic leadership necessitates that the CEO
holds & implement the new strategy. While doing this, the leader should clarify the strategic
intent. The future objective of Aldi should be mentioned in the strategic intent. In this respects,
clear vision should start out by the leader. Leaders of Aldi, when clarifying the strategic
intention should be aware of the shareholder's expectations.

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Team cohesion means that the subsequent of all the forces acting on members to stay in the
group, also it offers the friendships that grip a team together (Pittsburgh, 2012). The benefits
of team cohesion are the team-members acquaintance, shared values, effective communication,
& group loyalty.

Responsibility charting should be used in Aldi to check that employees are clear regarding their
responsibilities. It will help them to use responsibility charting to explain any confusion &
misinterpretations. Also variety of issues can be identified with it, it includes gaps in
responsibility & areas where many staff members are given the same responsibility. Effective
communication during all course of the organisation is the keys to effective implementation of
the strategy.

Having the series of roles with their own responsibilities in an organisation can provide
numerous advantages, and ensure that the business remains ethical and encourage the strong &
effective communication. It is necessary to have the specific roles & responsibilities in an
organisation for the upholding of proper records. Help in preserving the moral standards is one
of the major benefits to have clear roles & responsibilities. The main responsibility of the
business & its managers, to completely understand the standards of the organisation, its
procedures & prospects.

 Resource Requirements to Implement the New Strategy:

The strategy implementation efficiency is established on the workforces of an establishment.


Aldi Company therefore seeking the best talents & value it in order to get success in
implementation of new strategy. To make the strategic implementation successful Aldi while
constructing strategy should consider the factor of human resource.

Aldi should analyse the strategy with respect to the financial resources it should be concerning
about the capabilities of the business to invest in the selected strategy. The information
resources should also be considered to find ways by which they can keep all the necessary
information about the customers and manage all the accounts information, from the policy to
ordering, billing, recording, funding and reporting of network performance to take full
advantage of efficiencies and costs control.

Though, the human resource department of the Aldi Company aims at recruiting
knowledgeable staff members. The fulfilment of employees also be guaranteed and they are
also be responsible for the provision of good working conditions for the employees. Aldi

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reward its employees when they successfully complete the given responsibilities. The steps
that are essential for the implementation of the new strategy should be informed to all
employees of the company to make them enable to successfully achieve their jobs. The
supervisors can be employed that are to be responsible for the complete process of
implementation of strategy. The managers of Aldi Company should be completely conscious
about impacts the new strategy entails on the employees.

S.M.A.R.T. goal setting:

The Smart goal setting for Aldi involves the consideration of following questions:

 What exactly do we want to achieve: Aldi wants to achieve the substantive growth.
 Where: In Asian Countries.
 How: Through Differentiation Strategy.
 When: In the next 5 years.

What are the conditions and limitations: The difference of needs and demands of the new
market, the difference of taste, and to manage the vast geographical coverage may limit the
success. These goals simply and clearly describes the whole situation and helps the company
to be focused towards the growth.

 Conclusion:
In Aldi Inc. strategies are developed & implemented to take benefit of opportunities & impede
the existing threats in the environment by playing on its strengths and eliminating the
weaknesses. Aldi Inc. is experiencing the big achievement with continuously increasing profits
& sales in comparison with other chains of supermarkets. Though Aldi may not remain able to
maintain its competitive advantage since the prices & costs are growing because in developed
countries the retail market is saturated. Aldi should enlarge its set-ups in the new potential
markets for maintaining the growth & market leader position. The most suitable strategy for
Aldi growth is the differentiation strategy, the most suitable market place for the expansion is
the Asian countries, and it should introduce new products that are demanded in the Asian
countries. By applying the differentiation strategy Aldi can sustain its competitive advantage
and increase its market share.

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 References:
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