How German firms push

international boundaries
HHL Leipzig Graduate School of Management
Prof. Dr. Tobias Dauth
Chair of International Management

Leipzig, 4. April 2020

 Content

1 Introduction: Who is your seminar partner?

2 Understanding the strategies of Aldi and Lidl

3 Recent changes to the business models of Aldi and Lidl

4 Future challenges for Aldi/Lidl and their competitors

5 Wrap up and take-aways

2 April 6, 2020
 Prof. Dr. Tobias Dauth
_ Studies in Business Administration, Pforzheim University, Germany
_ Studies in Public Relations, Pforzheim University, Germany
_ Studies in Business Administration, Indiana University, USA
_ Senior Consultant at BBDO Consulting, Germany
_ Research Assistant and Post-Doctoral Fellow at ESCP Europe, Germany
_ PhD in International Management
_ Assistant Professor at Rouen Business School, France (Management & Strategy Department)
_ Chair of International Management at HHL Leipzig Graduate School of Managment
_ Academic Director HHL Executive Education
_ Associated Professor at Fraunhofer Center for International Management and Knowledge Economy

_ Research interests:
 Corporate Governance, Top Management Teams, Intercultural Management

3 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 What is the concept of this seminar?

This seminar shall:

_ make you familiar with conceptual and theoretical approaches of
international management illustrated via practical examples
_ be mixture of a lecture and interactive group work
_ have clear structure presented in a comprehensible way
_ have a strong practical focus

I am happy to respond to your questions and to consider your wishes as

far as possible!

4 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 What if there are any questions?

Please e-mail me: tobias.dauth@hhl.de

5 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 Content

1 Introduction: Who is your seminar partner?

2 Understanding the strategies of Aldi and Lidl

3 Recent changes to the business models of Aldi and Lidl

4 Future challenges for Aldi/Lidl and their competitors

5 Wrap up and take-aways

6 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 Let‘s have a first look at the similarities and
differences of Aldi and Lidl (1/2).

– Aldi – – Lidl –

7 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 Let‘s have a first look at the similarities and
differences of Aldi and Lidl (2/2).

8 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 At first sight it seems that Aldi and Lidl are neglecting
the „old-style way“ of strategy…

– A very common illustration of a strategy process –

Plan Develop Execute Evaluate

9 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 …and rather implement a system of „trial and error“.

– This is how Aldi and Lidl act in reality –

„Lidl left the

Norwegian market in
„They have no
2008 because they had
budgets…Budgets
are just toys for top selected the wrong
managers…“ locations for their
stores…“

„The two Albrecht

„Well, I think it is time
brothers invented the
for being present in
hard discount business
the US market…“
model by accident…“

10 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 The marketing strategy of Aldi and Lidl is also
characterized by „trial and error“.

_ Local, more upscale products in the UK only after

Product people refused to buy at a „underclass discounter“
strategy _ Pure private label strategy did not work in Poland

_ Higher prices in Switzerland „by accident“

Pricing (due to customers‘ higher willingness to pay)
strategy _ Changes in pricing strategy in the UK
(low prices = poor quality)
CULTURE
_ Lidl left Norway after severe problems in the logistics
Distribution processes (wrong location/low population density)
strategy _ Stores in UK suburban areas generated the image of
an „underclass store“

_ Strictly no TV advertising in Germany

Promotion (at least for a very long time)
strategy _ TV ads in other countries like Poland and Spain

11 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
12 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 So do we need a strategy at all?

_ Both Aldi and Lidl seem to be very successful without having an

elaborated (marketing) strategy. Do you agree? How do you explain
this? Please share your thoughts.

13 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 Content

1 Introduction: Who is your seminar partner?

2 Understanding the strategies of Aldi and Lidl

3 Recent changes to the business models of Aldi and Lidl

4 Future challenges for Aldi/Lidl and their competitors

5 Wrap up and take-aways

14 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 Are Aldi and Lidl becoming too diverse?

15 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 Some thoughts on Aldi‘s and Lidl‘s business portfolio.

_ In Germany, Aldi and Lidl are expanding their business portfolio by

adding online flower shops, travel services, telecommunications
services, etc. Would this strategy be successful in other European
countries? Please share your thoughts.

_ While Aldi relies on its stores as the only sales channel for groceries,
Lidl also offers online sales (in Germany). Would you recommend
 Aldi to follow Lidl’s online sales strategy?
 Both discounters to set up online sales in other European countries?

16 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 Content

1 Introduction: Who is your seminar partner?

2 Understanding the strategies of Aldi and Lidl

3 Recent changes to the business models of Aldi and Lidl

4 Future challenges for Aldi/Lidl and their competitors

5 Wrap up and take-aways

17 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 Group discussion on the US market entry of Lidl

In 2017, Lidl entered the US-market.

Please prepare a bullet-point-style presentation in which you answer the question:

“Was the US-market entry of Lidl a smart move?”

In your answer you need to elaborate on factors that help you to assess the
attractiveness of the US-market.

Time: 15
minutes

18 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
 Take-away: The CAGE-framework
The Idea:
Administrative
Geographic
Cultural Distance and Political Economic Distance
Look beyond the Distance
Distance
synergy potential of
a merger candidate Distance • Different • Absence of • Lack of common • Different
(or beyond the between languages, shared monetary border, water consumer
two ethnicities, or political way access, incomes
sales potential of a
countries/ religions, social association adequate • Different costs
foreign country) firms norms • Political hostilities transportation or and quality of
and analyze the increases • Lack of • Weak legal and communication natural, financial,
probable impact of with… connective ethnic financial links and human
distance. or social networks institutions • Physical resources
remoteness • Different
• Different climates information or
knowledge
But don‘t focus only
on the geographical Distance • With high • That a foreign • With low value- • For which
most linguistic content government to-weight ratio demand varies by
dimension of
affects (TV) views as staples (cement) income (cars)
distance. Consider industries • Related to (electricity), as • That are fragile or • In which labor
also cultural or national identity building national perishable (fruit) and other cost
distance, products (food) reputations • In which differences
administrative … • Carrying country- (aerospace), or communications matter
specific quality as vital to are vital (financial (garments)
distance and
associations national security services)
economic distance. (wines) (telecommuni-
cations)

19 HHL Leipzig Graduate School of Management – Case Study Aldi & Lidl – Prof. Dr. Tobias Dauth April 6, 2020
How German firms push
international boundaries
HHL Leipzig Graduate School of Management
Prof. Dr. Tobias Dauth
Chair of International Management

Leipzig, 4. April 2020