SUKKUR INSTITUTE OF BUSINESS ADMINISTRATION

FACULTY OF BUSINESS ADMINISTRATION

Name: Prem Kumar
CMS: 123-16-0010
Strategic Business Management
BS VII (A&F)

Aldi Case Answers:

Case Questions

1. Pastel Analysis and any identify key factors. (EACH COMPANY)

Pastel define Identify Reasons Counter (Strategies)

Political These  Change in  As the  The UK
factors verify t governmen governing elections in
he extent t tax policy political May 2015 may
to that a  Establishin parties result in a
government mi g standards changes the change of
ght influence on food taxation government. A
the economy and policies new
or a beverage according to government
precise trade. their agendas may impose
 Governmen
t policy to it could be new
protect considered as legislation, tax
home an uncertain implications
country factor and market
products  standards on conditions.
 Australian food and  It is proposed
employmen beverage that zero-hour
t policy. industry affect contracts will
 Industry the grocery be abolished in
protectionis industry in 2015, as a
m& many ways it supermarket it
support creates a is likely that
through barriers to new seasonal
AFGC entrants and staffing is used
give close in busy
 Growing
supervision periods such
concerns
for  As the as Christmas.
government Without zero
packaged
intervenes hour contracts
food
with this could

protectionism become harder
measures like to staff and
tariffs to more
protect expensive so
Australian we should
products and consider this
brands and factor.
that may have
 an impact for
Aldi's future
growth in
Australia.
 According to
the investment
policy any
international
firm can carry
out operations
if they are
providing
employment to
the Australians
 As the
Australian
food &
grocery
council
combines all
the packaged
food drinks
and the
grocery
products
manufactures
it would be
very much
effective to
have the
industry going
positively.
 As the
concerns are
high on the
packaged
grocery
industry the
legal
requirements
would also be
high and the
government
will have a
much closer
intervention
through
policies &
procedures in
the future to
provide best
quality
products.
Economical These  Investmen  Australia is  As the UK
factors are ts in ranked as the economy
determinants foreign sixth fastest moves out of
of associate trade. growing new recession,
degree econom economy there could be
y’s  Current
traders and a change of
performance unemploy
that has buying
that directly ment rate attracted behaviour
impacts a is worldwide from low-cost
corporation an increasing. investments in stores back to
d  High fuel to Australia. mainstream
have ringing lo prices  Australian supermarkets.
ng run effects. economic This shift
 No could have a
growth rate is
fluctuation detrimental
2.7%
s in dollar according to effect on
or dollar is the Australian market share.
strong. department of Aldi may need
 Increase in foreign trade. to consider
disposable  The current how to
income unemployment compete in
and rate is at 4.9% such
and it is conditions, if
interest
predicted to be at all.
rate.
increased  During times
 High fuel of financial
prices ·will pressure
definitely have consumers
a direct impact turn to
on the low cheaper food
price strategy supplier,
and as to the which has
competitivene created an
ss of the
ideal market
market it
would have a for Aldi in
negative the UK and
impact to Aldi. has
 In the past few contributed
months to its growth.
Australian  This may in
dollar being turn change
strong without demand,
much supply and
fluctuations fundamentall
could be y affect
considered as
pricing
a positive
economic creating
factor for Aldi. instability in
 Average the company
disposable as customers
house hold go back to
income and higher priced
possible competitors.
increase in  A change in
interest rate government
would also may also
have a greater
create a
impact.
different in

tax
requirements,
which could
become more
costly.
Social These factors  Increased  Increased  The UK has an
scrutinize the demand for demand for aging
social setting o the the packaged population
f the market, packaged grocery items (Cracknell,
and gauge grocery in the recent 2010), an older
determinants items past as to the workforce may
like cultural  Population changing life be more costly
trends, is diverse style patterns in terms of
demographics, of the sickness and
and population

Australian present further
analytics. population. problems for
Higher employers.
preference for With the
the home introduction of
made products auto-
and brands. enrolment for
 The pension
population schemes this
could be adds a further
considered as cost to the
very diverse business as
population and employers will
as the number have to
is increasing it contribute to
could create employees
some pensions.
opportunities  As competitors
 Low spending such as Asda,
culture along Tesco and
with the Sainsbury’s
market trends introduce a
and health more diverse
conscious range of
culture. products
 Australians are including
more clothing, non
ecofriendly as food items,
well as opticians,
concerned chemists,
about ethics travel agencies
and practices and more
such which could
procedures so see a change
the of buying
organizations behaviour.
that follows  Competitors
such also offer a 24
procedures hour opening
will be service, as the
benefited. way people
work becomes
more diverse
over time will
this see a
change in
buying habits.
Aldi may need
to consider
this strategy as
a way to
 maintain
market share.
This will carry
increased costs
both in terms
of overheads
and staffing
costs.
Environment These  Eco-  Australian are  Increasing
al factors embod friendly more eco- worldwide
y all those environme friendly concerns over
who influence nt despite being a environmental
or are determi very diverse pollution
ned by the  Environm
nation. should force
encompassing  ental  People as well
pollution the relevant
setting. as number of
 Not using authorities to
organizations
polythene change the
saying no to
bags. polythene bags laws in
 Support to or has reduce Australia.
local the usage in 
producers. the recent past.
 Aldi
increasingly
stock their
products from
local British
producers and
farmers,
helping to
support local
producers and
ensure the
sustainability
of the local
areas in that
they are
operating.
Technological These factors  Upgrading  Online  Online and
pertain to of Online shopping mobile
innovations in shopping systems could shopping is
technology wh system be upgraded in becoming
ich will have the grocery increasingly
an effect  Innovation
industry in popular
on the in Australia. (Butler, 2013),
operations of products  New currently not
the trade. and packaging offered by
packaging innovations Aldi this may
 Advertisi could be done be a strategy
ng through in order to that needs to
social upgrade the be considered.
media or quality of the This may also
online products and need to be
channels. at the same enhanced with
time to other
 Provide differentiate technology led
other the initiatives such
technologi products/brand as in-store
cal s. media, self-
facilities  Advertising checkout and
 to through access to Wifi
customers. internet and  Point of sale
 emails could systems and
be practiced checkout
more often facilities are
using viral significantly
marketing different in
could be a larger stores,
vita) in the Aldi operates a
competitive traditional
industry. conveyor belt
 Provide other approach with
technological no options for
facilities that self service.
would be Enhanced
helpful while service from
shopping to competitors
add some such as
unique offering to
features pack up bags
 for consumers
creates a
different in
store
experience
however the
average time
per person will
increase.

2. Analyze the changing industry structure in which EACH Company is operating by using Porter’s Five
Forces Model. How did Company counter the changes and challenges of the industry competitive forces
in which Company is operating by using Porter’s Five Forces Model?
Five Forces Level of Reasons Counter(Strategies)
Threat/Bargaining
Power

Threat of 
substitute Moderate There is virtually
no product substitutes
products in this industry.
 Aldi specializes in
daily basic food items
so for this reason the
replacement of the
goods is almost
impossible.
 An alternative
could be a way of
selling such as
shopping at the
conventional
supermarkets,
specialty stores,
directly from farmers
or through Internet.
 Aldi’s competitive
strength is the high
 quality at the lowest
possible prices that are
often 20 to 30 percent
below these kinds of
stores or regular
supermarkets.
 As the
b u y i n g  products of
the same quality from
the farmers for such a
low price is most
unlikely, because
Aldi purchases the
products at wholesale
prices.
 In our opinion, the
real threat may be
only online shopping
which provides
another alternative
because it is so
different and the
customer can gain
price and time
advantages, but to
date the e-commerce
mostly applies to the
nonfood products.
 Although the Product
except food product
sold by Aldi can
easily be purchased
from the other
retailers’.
 By offering a
narrow product
range, Aldi remains
agile to changing
trends. Products can
be changed quickly
in the event of
changing market
trends.
 Aldi operates
relatively small
stores therefore
limiting the number
of products that can
be offered.
Substituted could
therefore be offered
by larger stores,
with more space to
offer an increased
product range.
Threat of new 
entrants Low The
industry
supermarket
is a
 profitable market
and it is pretty
attractive area to
new enterprises.
 Despite that, the
barriers to entry are
really high. It
requires large capital
costs, complying
with established
government policy,
huge investments in
marketing in order
to create product
demand and besides,
it will take many
years to build up a
new brand name and
get a significant
number of loyal
customers.
 There are already
loads of giant
players existed in
this market for a
long time and it
could be really hard
to steal a sizable
percentage of
market share from
them.
 As specifically for
Aldi, the threat
comes from the
existing competitors
more than from a
possibility of new
entrants to appear.
 Any competitor who
can offer the lowest
possible price can
enter the market and
compete with the
big multiples.
Bargaining 
power of Low Supermarkets have
greater bargaining
suppliers power than
suppliers, often
pushing for
discounts and
favourable terms
due to the scale of
buying power.
 Suppliers may
favour larger orders
 from the bigger
competitors,
therefore are less
willing to offer
discounts and offers
to the Aldi chain.
 However Aldi still
operates a chain of
500 stores so has a
degree of buying
power in its own
right. It also has the
additional power to
buy across multiple
countries in order to
get favourable
terms.
 Aldi could not switch
its suppliers since they
invest their time and
effort on teaching
them important
requirements for
shipping, packaging
and other logistics,
which makes
the business
successful.
 Aldi’s buying power
is extremely high
which allows it to
demand low prices to
suppliers, making
suppliers be a low
pressure for them.
 It is fundamental
for Aldi to have a
certain control over
suppliers by not
allowing re
negotiating contracts.
 Usually, on the
supermarket industry
suppliers supply
the basic common
consumer goods.
This means that
suppliers have no
valued or unique
product differences
that have a special
attribute.
 Consequently,
changing from one
supplier to another is
relatively easy since
most of the suppliers
on the supermarket
 industry offer the
same types of
products.
 Suppliers have
control over the
industry because
they decide over
prices and
negotiations making it
risky for
supermarkets.
 Also, the products that
suppliers offer to
supermarkets play an
important role on
differentiating
supermarkets from its
competitors
Bargaining 
power of High Aldi customers have
relatively high
buyers bargaining power due
to low switching costs
associated with
shopping among the
low priced
supermarkets like
Tesco, Asda, Iceland
or other convenience
formats such as Spar
and Londis.
 Such a wide choice
gives food retailing
consumers a lot of
power to choose
between various
supermarkets when
shopping around,
which is exactly what
they do.
 Buyers can make
choices about which
supermarket to use
very easily based on
offers, availability of
items and ease of
access.
 Aldi does not offer a
loyalty scheme so
there is no additional
incentive to return
week on week.

Intensity of  
competitive High Competition in the
UK food retail
rivalry industry is high.

 The intense
competition has led
 to price wars,
massive discounting
and a flurry of
mergers and
acquisitions
culminating in
Tesco merging with
Bookers Wholesale
as well as the
upcoming merger of
Sainsbury’s and
Asda .

 Competition in the
food retailing
industry in UK is
relatively high
because other
supermarkets like
Tesco, Asda, also
have similar quality
products at low
prices, giving
customers the power
to choose between a
variety of rival
offers within the
same price ranges
hence Aldi faces
stiff competition.

 This intense
competition has led
to price wars,
innovation of new
products, excessive
advertisement,
among others.
 The sector is subject
to intense rivalry with
a focus on cost.
 Many brands offer to
match prices of their
competitors and
undertake price
comparison activities.
 This fierce rivalry
leads to aggressive
marketing campaigns
with each player
trying to win market
share from the other.
 This increase
competitive activity
creates additional
 costs through
advertising and
marketing as well as
leading to reduced
prices.
 Aldi operates on a low
level of fixed costs in
order to deliver lower
priced products, with
competitors also
targeting this lower
price point this
presents a risk to Aldi
if they are not able or
willing to invest in
advertising to address
such activity.

3. You are also advised to conduct a strength, weaknesses, opportunities and threats (SWOT)
analysis for EACH Company and provide strategic suggestions based on analysis.

Opportunities:  Expansion to other states of U .S. and other countries of the

world which have the demand for low priced products
 Acquire technology to save more costs
 Go into premium segment for those who are Brand
conscious
Threats:  Competitors are able to copy Aldi's Strategies
 People's preferences may change from private label to
Branded ones
 Increase of taxes may affect the profitability

Strength:  Low-Cost Model

 High revenues
 Quick Expansion Capabilities
 Cash in Hand
 Smart SKUs (Limited number of SKUs was easy to handle)
 Suppliers' Support
 Knowledge (Success in Germany , U.K and other countries)
 Well trained staff and management
 Owned warehouses
 Secrecy in workplace
Weakness:  Unbranded Products
 No any proper advertisements
 No major technological use in operations
 Lack of Brand Awareness (Least Known discount grocers)
 Ambience was not standard

4. Describe Aldi Business strategy?

The business model of the Aldi is based on the simplicity and the efficiency. They want to provide the
products of premium quality at low prices, so to provide at low price their strategy is to invest low on fixed
cost like advertisement, ambiance etc. and in terms of product its strategy is to keep limited amount of
FMCGs.

5. What would be the specific risks associated with using each business-level strategy?
As the strategy is to keep fewer products so it will create problems for them because they will not cater the
demand of the customers who looking for complete shopping experience. The second strategy is to invest
less on fixed cost so if they are not investing upon the advertisements so people will not aware about its
presence and the brand name will be diminish over the period of time and the business conituinuty become
threat.

6. Using Aldi's experiences develop a new business-level strategy of Aldi in order to create competitive
position in the coming years by using cost leadership, Differentiation, focused cost leadership, focused
differentiation, and integrated cost leadership/differentiation business-level strategies?
As currently they are using cost leadership strategy so they can continue with it but they should bring some
changes in product strategy like they should add product line or we can say bring some extinction in product
line so they can cater the demand of those customers come for complete shopping, secondly they should
invest more on the advertisement through people will aware about their brand and their continuity will not
be in threat. Moreover they should increase the operating hours too increase the revenues.

7. Who are Aldi's competitors?

 Walmart
 Carrefour
 Tesco
 metro
 Kroger
 Costco
 Walgreens.

8. How does competitive rivalry, competitive behavior, and competitive dynamics effect Aldi?
Competitive rivalry is a set of actions that a company take to compete with the the competitors and maintain
market position so in the case of Aldi like the other competitors are investing more on the advertisement so
as a result the Aldi will also think to invest more on the advertisement and increase product line to response
the competitors.
Competitive behavior defines as set of actions firm take to build and maintain its competitive advantages
and market positions. So as there are many grocers so Aldi has to be proactive and do competitive analysis
to easily response to the any move take n by the competitors.
Competitive dynamics is the set of action taken by firm to compete within market. Here it's important for
Aldi to keep eye on each and every competitor's strategy so it will enable them to create the core
competencies by knowing the weakness of others and Aldi will grab the opportunity by addressing the
demand of customers which is not fulfilled by any others.

9. What is market commonality and resource similarity?

It defines as the number of market within which the firm and competitors are jointly involved and this is
called multimarket competition. When firm operate in more than one market rarely it take attack on any firm
but if other attack on it so the firm will initiate aggressive actions to response the competitors.
Resource similarity defines as the level at which the competitors and a firms resources are similar weather
it's tangible or intangible. Due to similar resources their weakness and strength are also same. So in the case
of Aldi and Walmart both are famous brand ,both have loyal customers, both using low pricing strategy,
both have reliable suppliers, both have similar technology ( scanners )

10. How do awareness, motivation, and ability affect the Aldi competitive behavior?
Awareness about the competitors is the key to response against their strategies or weakness until and unless
Aldi is not aware about the Walmart or other competitors it will not response against their moves. And then
motivation and ability comes to compete within in market motivation and ability is very much important,
until and unless the management is not motivated it will not perform well even may be able to compete but
due to lack of motivation they will not perform so the innovation in products and system will suffer and
company will lose its position in market.

11. Which cycle markets of the case Aldi?

The market cycle in which the Aldi is standard cycle. It keeps its all information secrete instead of it its
model is somehow copied from the domestic competitors so we can say the company lies in standard cycle.

12. Should Aldi be worried about Walmart? Discuss Pros and Cons
Yes Aldi worried about the Walmart because the Walmart is prominent retail store and following the same
low price strategy and targeted market is also same, Walmart is investing much on advertisement then Aldi
so people are worldwide aware about its brand image and currently its market share is very high and
providing vast amount of products and its using advanced technologies to ensure the quality additionally
they have their own warehouse logistic to get work done on time, they have high revenues as compared to
other retail stores that's why their capital investment is also high which will negatively impact on Aldi.

13. What is Aldi's Strategy?

The main concentration of Aldi is to offer products at lowest possible prices to customers and for that focus
is to minimize the fixed operating cost of stores and low investment on advertisement. And they are
investing much on opening new stores and logistic supply.

14. Draft and present strategies

Aldi's strategy is good to keep prices low because the market is already saturated so if it increase the price
people will shift towards Walmart. But they should bring some changes in the strategy, first of all the must
invest on advertisements to aware people about its presences and then work on increase brand loyalty of
customers by offering discount on products, giving rewards for references. Then put more budget on
ambiance to attract more customers and finally open stores at large place where the customers have no
parking issues and also increase it product line.

15. Formulate and evaluate strategies.

As I have earlier mention that they should focus on advertisement so for that they chose the most
appropriate method which will influence on its profitability and market share ,now a days the people are
using more social sites like Facebook Instagram so this is better option to advertise over there. Or on
television.
 Develop innovative business solutions.
 They should also go with online retailing.
 They accept the credit cards too which will boost their sales.
 They should give services in term of payment like Aldi payment system through which customers
pay.
They take the customer's order on phone and send them at their home without charging carriage cost offer
member cards and gives discounts to member.

16. What are the key issues?

Key issues which they are facing is less awareness about Aldi, still the brand is less brand loyalty. The
market is already saturated. People prefer nationals and the salary which they are offering to employees are
more than the national average salary so it increases its cost.

17. Which are the cycle markets of the case companies?

They are falling in fast cycle because the business model or strategies are easily copied, and they all are
aware about each other's weakness and strengths so they are taking actions to response each other. And
learning from each other's wrong strategies.

18. Value chain analysis for Aldi?

Inbound Logistics:

AIDI purchase a bulk of materials to produce its product in its own brand name which save cost and
ultimately prolong a competitive advantage in the business over other competitors.

Operations:

ALDI have their own brand and they are able to get back their customer again and again to their store to
purchase with the non-compromising quality and services they are offering. In consideration of the product
cycle the product life cycle of ADLI is in the growth stage because it is already well recognized in the
market with the other competitor in retailing.

Outbound Logistics:

It is concerned with how the produced goods and services are made reachable to buyers .ALDI has its own
outbound logistics like own transport system to reach the product to the customer

Marketing and Sales:

ALDI’s marketing and sales strategy is to save money in all possible way. ALDI have twisted the market
with the other competitor like by following the marketing strategy of cutting the cost and pass the savings to
the consumer ultimately. 
Service:

ALDI has excellent strategy in order to sustain the competitive advantage considering this issues.. Incredible
courtesy every day. ALDI have beaten the’ big four’ Operators with the incredible courtesy of the
employees and satisfactory customer service .local store managers are liable to solve all the customers
frequent issues to ask for their convenience.

ALDI manages its resources efficiently for the operation of its business .It recruit the efficient staffs to
satisfy the customers and to run the store efficiently. ALDI manages its information in very restrict way. A
very few exposure of the information of the business is done to the public .It controls the quality of the
product and deals with the senior management in non-bureaucratic way which we have mentioned earlier.

19. What are Recommendations for Aldi?

The best alternative is to do promotional activities because until and unless people are not aware about its
brand they will not boost the sales so they promote it by investing more on advertisements. It’s the basic
question? How to do it - w hat to do when, or timing of First of all they should make agreement with any
social site that will show its add on that site and to promote they must offer discount to the customers once
the people aware about its product and become loyal then the reduce on advertisement. And this is the right
time to do because if the Walmart chase its price strategy it could be difficult for them to survive.