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Aldi: The Dark Horse Discounter – Case Solution

Aldi was a hard discounter based in Germany that sells a variety of private-label groceries and household items in several stores. It was the world's 8th largest retailer. In 2013, Aldi initiated moving fast with its US expansion. While it has more than a thousand stores in various states, Aldi was still not popular in the US. It is said to be the same reason why Walmart did not make it in Germany. Since the US is Walmart's home market, could Aldi make it through the competition with Walmart in the US?

​Eric Van Den Steen; David Lane Harvard Business Review ( 714474-PDF-ENG ) February 07, 2014

Case questions answered:

Case study questions answered in the first solution:

  • Please identify the strategic issues and problems to be solved, describe the necessary analyses and conclusions, and present recommendations and implications. Do whatever analysis is needed to solve the problem you have identified.

C ase study questions answered in the second solution:

  • What are the key business problems Aldi is facing competing in the USA?
  • Who are the key stakeholders in these problems?
  • What is Aldi’s business-level strategy, and what are the activities that support this strategy?
  • How well is the company performing, particularly in terms of efficiency and profitability?
  • Does Aldi have a source of competitive advantage relative to Walmart?
  • Identify three solutions Aldi can use to address the business problems it faces, with the pros and cons of each solution.
  • Which solution do you recommend, and why?

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Aldi: The Dark Horse Discounter Case Answers

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EXECUTIVE SUMMARY – ALDI

An international brand with a rich history, Aldi is known for its low prices and no-frills grocery shopping experience. While Aldi has seen substantial success in European markets, they seem to have trouble integrating into the U.S. and understanding the ideologies of the American consumer.

Aldi has developed a presence in the U.S., spreading over 32 states and 1,200 stores. Despite this, they are still virtually unknown. Looking forward, Aldi wants to expand their organic food offerings and expand their presence in the U.S.

Some of the most notable threats in the grocery industry are Walmart and Target, incredibly large brands with immense customer loyalty that can leverage their size to negotiate low prices with suppliers. With trends in the U.S. constantly evolving, niche grocery stores focused on organic and health foods and wholesale stores are prominent competitors.

A holistic analysis of the macro environment in the U.S. is necessary to understand trends and American consumer behavior. Discount retail is a very competitive industry to navigate, with revenues of the top ten retailers totaling over $1 trillion.

Aldi has unique, inimitable resources that can aid it in its mission, such as its unique staffing levels, low-cost structure, and private-label products. With this advantage, Aldi needs to implement the right global expansion strategy to succeed in the U.S., creating the core question of what specific measures Aldi must take to differentiate itself in the market.

It is recommended that Aldi emphasize their customer retention efforts with a customer loyalty program, increase its presence in urban markets, and adopt innovative technology such as self-checkout. These three strategic insights will help guide Aldi through a successful expansion in the United States.

CASE ANALYSIS

Aldi has maintained a strong sense of industry leader regarding discount grocers, attributing its success to its reputation as a frugal, consistent grocery shopping experience.

The firm has stayed committed to its value of operational excellence, with an average number of 10 employees per store and its emphasis on private label products, which make up approximately 95% of its product offerings.

Many international brands struggle with being cognizant of the local culture, often choosing the wrong global expansion strategy and ending with failure. We have seen this with Walmart and its entry into Germany.

Exhibit A outlines the market conditions of the U.S., highlighting different trends and regulations that directly affect Aldi’s operations. It is crucial to assess all trends to be proactive in identifying opportunities and threats. Failing to take into account any of these factors can be detrimental to Aldi’s expansion.

This analysis shows that the grocery industry in the U.S. is relatively stable, and with groceries being a necessity, the industry will still thrive through economic boom and bust cycles. The firms that can adapt to trends quickly are the ones that succeed.

One prevalent trend is that of online ordering and self-checkout, feeding into the sensation of instant gratification that is common in the American consumer.

The scope of Aldi’s expansion efforts is incredibly ambitious, aiming to open 650 new stores by 2018. While they are trying to replicate initiatives that have been successful overseas, such as their successful expansion into Australia with over 270 stores, Aldi needs to tailor their expansion efforts to the U.S.’ unique business environment. What specific measures can Aldi take to differentiate itself in the market?

Industry Analysis

Exhibit B addresses various parameters of the competitive structure of the grocery industry and how they affect Aldi. There is a high barrier to entry due to the tremendous number of competitors and the high start-up costs associated with building an effective distribution network and establishing a brick-and-mortar store.

With various big players already in the space, it is…

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Aldi’s Generic Competitive Strategy & Growth Strategies

Aldi generic competitive strategy, intensive growth strategies, competitive advantages, Porter, Ansoff, retail business analysis case study

Aldi’s competitive strategy involves cost-based advantages that enable retail business growth strategies. The discount supermarket chain continues to grow internationally despite strong competitors and market saturation. This generic competitive strategy and the intensive growth strategies help bring the goals of Aldi’s vision statement and mission statement to fruition. For example, the company’s competitive advantages and revenue growth strengthen capabilities for reaching strategic goals for retail business success. While Aldi faces competitive challenges, its generic strategy maintains competitive advantages for attracting target customers and ensuring profitable operations despite low selling prices. Aldi’s growth strategies aim for a stronger market presence and higher sales figures based on a larger market share.

Based on Michael E. Porter’s generic strategies for competitive advantage, Aldi focuses on cost as a defining factor in doing business. The company’s brand image and merchandise prices depend on this competitive strategy. Based on Igor Ansoff’s matrix of intensive growth strategies, Aldi focuses on attaining a larger share of its target markets. The company’s expansion depends on these growth strategies for its multinational retail business.

Aldi’s Generic Competitive Strategy

Aldi’s competitive strategy is cost leadership , which translates to low business costs and the ability to offer low and competitive selling prices. In Michael E. Porter’s model, this generic competitive strategy requires that the discount supermarket chain maintain low operating costs. Competitive advantages based on low business costs mean that Aldi’s generic strategy ensures competitiveness against other retailers, including Lidl, Whole Foods , Costco , Walmart , and Amazon ’s e-commerce and brick-and-mortar stores. This competitive strategy also helps deter Home Depot , which is not a direct competitor, from diversifying to offer food products through new business operations similar to Aldi’s.

Aldi’s business model involves low costs that support low prices for private-label products that are alternatives to many mainstream brands that are more expensive. With cost leadership as a generic competitive strategy, cost-effective operations lead to competitive advantages, including the business strengths described in the SWOT analysis of Aldi . These strengths empower the company, especially in competing with big-box retailers that offer low prices. The Five Forces analysis of Aldi depicts a highly competitive market where effective cost leadership as a competitive strategy can support long-term business growth and success. This generic competitive strategy determines cost limits and the productivity and process efficiency targets in Aldi’s operations management.

Aldi’s Growth Strategies

Aldi’s primary growth strategy is market penetration involving additional stores, such as the ones in the United States. In Igor Ansoff’s matrix, this intensive growth strategy has the goal of generating more sales revenues from the same target customers in the company’s current retail markets. For example, adding new grocery stores in the U.S. can increase Aldi’s revenues and grow the business. Also, the company can sell more merchandise to the same customers through enhanced marketing and related strategies. Aldi’s marketing mix (4P) reflects business efforts in implementing this intensive growth strategy. New store locations based on market penetration as a growth strategy can lead to changes in Aldi’s business structure (company structure) , especially geographic divisions for operations in various markets.

Aldi also relies on product development as an intensive growth strategy, although to a limited extent. This strategy aims to grow the retail business through new products for more sales. For example, Aldi introduces private-label products whose close alternatives are difficult to find elsewhere. Through this growth strategy, the company attracts buyers to its stores. External factors, like the ones described in the PESTLE/PESTEL analysis of Aldi , inform decisions about the kinds and characteristics of new products to develop in implementing this intensive growth strategy.

  • Aldi History .
  • Aldi’s Products .
  • America’s Low-Price Leader ALDI Expands Footprint Nationwide with 800 New Stores by the End of 2028 .
  • Gupta, A., Pachar, N., Jain, A., Govindan, K., & Jha, P. C. (2023). Resource reallocation strategies for sustainable efficiency improvement of retail chains. Journal of Retailing and Consumer Services, 73 , 103309.
  • Leppänen, P., George, G., & Alexy, O. (2023). When do novel business models lead to high performance? A configurational approach to value drivers, competitive strategy, and firm environment. Academy of Management Journal, 66 (1), 164-194.
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How a cheap, brutally efficient grocery chain is upending America's supermarkets

Story by Nathaniel Meyersohn , CNN Business Video by Bronte Lord, CNN Business Photographs by Dina Litovsky

Published May 17, 2019

Running a supermarket in America has never been harder.

Profits are razor thin. Online shopping and home delivery are changing the way people buy their food. Dollar stores and drugstores are selling more groceries . Pressures are so intense that regional chains like Southeastern Grocers, the owner of Winn-Dixie and Bi-Lo, filed for bankruptcy. Large companies increasingly control the industry, which had long operated as a dispersed network of smaller, local grocers. And even Walmart — the largest player of all — faces new competition from Amazon, which bought Whole Foods in 2017 for almost $14 billion.

But when Walmart’s US CEO Greg Foran invokes words like “fierce,” “good” and “clever” in speaking almost admiringly  about one of his competitors, he’s not referring to Amazon. He isn’t pointing to large chains like Kroger or Albertsons, dollar stores like Dollar General or online entrants like FreshDirect and Instacart.

Foran is describing Aldi, the no-frills German discount grocery chain that’s growing aggressively in the United States and reshaping the industry along the way.

In recent years, Aldi has expanded its produce and organic offerings to draw in more customers.

New customers may be jolted at first by the experience of shopping at an Aldi, which expects its customers to endure a number of minor inconveniences not typical at other American grocery stores. Shoppers need a quarter to rent a shopping cart. Plastic and paper bags are available only for a fee. And at checkout, cashiers hurry shoppers away, expecting them to bag their own groceries in a separate location away from the cash register.

But Aldi has built a cult-like following. When it enters a new town, it’s not uncommon for hundreds of people to turn out for the grand opening. The allure is all in the rock-bottom prices, which are so cheap that Aldi often beats Walmart at its own low-price game.

"I am willing to do the extra work because the prices are amazing,” said Diane Youngpeter, who runs a fan blog about the grocer called the Aldi Nerd and an Aldi Facebook group with 50,000 members . “There’s a lot of Aldi nerds out there,” she said. “I didn’t realize that there were so many of us.”

aldi case study slideshare

Aldi has more than 1,800 stores in 35 states and is focused on growing in the Midwest, the Mid-Atlantic, Florida and California. It’s on track to become America’s third largest supermarket chain behind Walmart and Kroger, with 2,500 stores by the end of 2022 . Its close competitor Lidl, another German grocer with a similar low-cost business model, is racing to grow in the United States, too.

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Amid their aggressive growth push, the two discount chains have forced the rest of the grocery industry to make big changes to hold onto their customers. Aldi has even encroached on Walmart’s turf— literally. As if throwing down a gauntlet, in October Aldi opened a store in Bentonville, Arkansas, just a mile from Walmart’s corporate headquarters.

"I never underestimate them," Foran said at an industry conference in March . “I've been competing against Aldi for 20-plus years. They are fierce and they are good.”

But as competitors fight back, can the company hold on to its low-cost advantage? Can it stick to what it calls the “Aldi way?”

The Aldi way: How the chain beats Walmart on price

There’s no secret to how Aldi keeps its prices so low: The company strips down the shopping experience in an unapologetically and brutally efficient way.

“They are able to drive out every fractional cent of cost without compromising on quality,” said Katrijn Gielens, professor of marketing at UNC's Kenan-Flagler Business School.

Aldi is privately held, and through a spokesperson, the company declined to make its executives available for interviews. But Gielens estimates that its operating costs are about half those of mainstream retailers. The company also operates at a lower profit margin than competitors, she said.

From a customer’s point of view, the distinct experience starts at the shopping carts, which Aldi keeps locked up.

25-cent deposit

Aldi locks up its shopping carts to save on labor costs. Customers deposit a quarter, which they get back when they return the carts.

25-cent deposit

Rather than employ a team of runners to retrieve carts from the parking lot all day, Aldi expects its customers to return carts to the store after each shopping trip. It forces that behavior by charging customers a quarter deposit that they get back when they return their carts.

This is not a novel idea. Several American grocers tried it in the 1980s and 1990s, but abandoned the practice after it annoyed customers who had come to expect more services at  their grocery stores. Aldi, which opened its first US store in Iowa in 1976 , has stuck with the model, insisting the deposit system is key to its low-price strategy. The store’s most die-hard fans even celebrate it, heralding when Aldi offers “quarter keeper” keychains from time to time. Some fans even knit their own versions. A search on Etsy for “Aldi quarter keeper” turns up more than 500 results .

“I never underestimate them. I've been competing against Aldi for 20-plus years. They are fierce and they are good.”

The quirks don’t stop there.

When customers enter stores, they’ll notice they look almost nothing like traditional supermarkets in the United States. With five or six super-wide aisles, Aldi only stocks around 1,400 items  — compared to around 40,000 at traditional supermarkets and more than 100,000 at Walmart supercenters.

Aldi displays products in their original cardboard shipping boxes, rather than stacking them individually, to save employees time stocking shelves.

For time-strapped shoppers like Youngpeter, Aldi’s simple layouts and limited selection save her time. “I’m a busy mom. I don’t have time to navigate a huge grocery store with kids begging to get out and go home,” she said. “I can get in and out of an Aldi in no time. I’m not sifting through 50 different varieties of salsa.”

And good luck trying to find major name brands. More than 90% of the brands Aldi sells are its own private labels like Simply Nature organic products, Millville cereals, Burman’s ketchup and Specially Selected bread. (If this sounds like Trader Joe’s, that’s not a coincidence. The two companies share a common history.)

The packaging on these items sometimes looks so similar to  brand-name alternatives that customers find themselves doing a double-take. Aldi's Honey Nut Crispy Oats, for example, come in a box nearly the same shades of orange, yellow and brown as General Mills’ Honey Nut Cheerios, and with a similar font, too. Aldi sells its Tandil laundry detergent in an orange plastic jug with blue and yellow graphics reminiscent of Tide. The Millville Toaster Tarts, an Aldi house brand, look strikingly similar to Pop-Tarts — but a 12-pack of the Millville version is $1.85 while a 12-pack of Pop-Tarts costs $2.75.

More than 90% of the products Aldi sells are its own private labels. In many cases, the packaging closely resembles familiar brands.

“I’m like, ‘these corn flakes are just as good, if not better, than the ones that have a chicken on the box! They’re the same exact ones,’” said Allison Robicelli, a food writer in Baltimore who describes herself as an Aldi loyalist.

Although it may not be obvious at first glance, Aldi employs several key design details that maximize efficiency at checkout, too. On many of its products, barcodes are either supersized or printed on multiple sides to speed up the scanning process. After groceries are rung up, there’s nowhere for them to linger. The cashier drops them directly into a shopping cart below. Aldi doesn’t waste time bagging groceries. Customers must wheel away their shopping carts to bag their own groceries in a separate section at the front. Since stores don’t offer free bags, customers often scour the store for empty cardboard boxes to use instead.

“Those lines fly. You’re not waiting for people to bag. They’re not messing around there,” said Robicelli. “Once you see that kind of efficiency, it makes going to other supermarkets really annoying and really tedious.”

Speedy cashiers

Another labor-saving trick: Cashiers don’t bag groceries. Instead, they drop items directly into customers’ carts.

Speedy cashiers

Aldi has other tactics to keep real estate and labor costs down. Size is one factor. A Walmart supercenter averages around 178,000 square feet. Costco warehouses  average around 145,000 square feet. Aldi’s small box stores, however, take up just a fraction of that space, at 12,000 square feet on average.

Aldi only stocks about 1,400 items compared to 40,000 at traditional supermarkets.

1,400 VS 40,000

Aldi only stocks about 1,400 items compared to 40,000 at traditional supermarkets.

And unlike other stores, where there’s a clear division of labor — runners retrieve carts, cashiers ring up customers and clerks stock shelves — Aldi employees are cross-trained to perform every function. Their duties are also streamlined. Aldi displays products in their original cardboard shipping boxes, rather than stacking them individually, to save employees time stocking shelves. Most stores don’t list their phone numbers publicly because Aldi doesn’t want its workers to spend time answering calls.

The result: A single Aldi might have only three to five employees in the store at any given time, and only 15 to 20 on the entire payroll. The company claims to pay its workers above the industry average, but still saves on overall labor costs simply by having fewer people.

All of these cost savings add up and are passed on to customers. Aldi claims its prices are up to 50% cheaper than traditional supermarkets, and independent analysis by Wolfe Research shows its prices are around 15% cheaper than Walmart in markets like Houston and Chicago.

Aldi is investing $1.9 billion in remodeling 1,300 US stores, including expanded frozen and refrigerated sections.

"They've driven prices down, cleverly," Walmart's Foran said. Last year, he noted  that when he visited Aldi, a gallon of milk and a dozen eggs each cost 99 cents. Foran said he and his team could not risk losing on those popular items.

Despite the stripped-down store experience, Aldi scores higher on customer satisfaction surveys  and benefits far more from word-of-mouth marketing than Walmart and other supermarkets. It has one of the highest Net Promoter Scores — a key measure of how likely customers are to recommend the brand to their friends and family — in the grocery industry, according to Bain & Company.

Cheap kombucha on the shelves, BMWs in the parking lots

After Aldi first entered the United States, it took two decades for the company to expand to 500 stores.

Now, in its rapid growth phase, Aldi is on track to open more than 130 new stores just this year alone.

It’s not uncommon to see luxury cars in Aldi’s parking lots — a detail even a top Walmart executive has noted.

The Great Recession and its slow recovery helped the discount grocer gain popularity among budget-conscious shoppers in the United States. Aldi’s latest expansion builds on that momentum. "Over the last 10 years, they’ve really flourished in the US,” said Mikey Vu, partner at Bain. “There’s instability in the economy. People are worried. They’re paying much closer attention to pennies on their grocery purchases than ever before.”

85% of US shoppers say they're open to trying store brands.

85% 85% of US shoppers say they're open to trying store brands.

Source: Bain & Company survey

Of course, Aldi is not the only discount store growing in retail. TJMaxx, Ross and Burlington are all opening new doors, and their cheap prices have put pressure on department stores. Ollie’s Bargain Outlet  and Five Below are growing rapidly. Dollar General has opened up thousands  of stores in recent years.

For Aldi, part of its success lies in appealing not only to low or mid-income shoppers, but to wealthier ones as well. Aldi’s core shopper tends to make more money and have a slightly higher education level than the overall grocery shopper, according to Bain. On a recent trip to an Aldi in Hackensack, New Jersey, luxury vehicles, including a $50,000 Jaguar and an $80,000 Tesla Model X, dotted the small parking lot alongside Toyotas, Fords and Hondas. Walmart’s Foran has marveled that when he visited an Aldi in Australia, BMWs and Mercedes were in the parking lot there, too.

“People love saving money on staples. And it would apply to every single person in this room,” he said to an audience of investors and retail executives at a Four Seasons Hotel in Boston. “You feel pretty good if you can save $10 on your grocery bill because it makes you feel better when you go out for dinner on Saturday night and spend $200 at a restaurant.”

In recent years, Aldi has ramped up its efforts to appeal to high-income shoppers by offering more fresh, organic produce as well as imported items like Irish cheese, brioche from France  and pastas from Italy. The stores now offer private-label versions of kombucha, cold-pressed juices, an array of gluten-free products and peanut butter powder.

“It used to be the white label knock-off stuff that you were a little bit embarrassed to buy, but it was cheap. Now, people don't care anymore about the big brands the way they used to. That plays right into the Aldi playbook.”

Aldi is investing $1.9 billion to remodel 1,300 stores with natural lighting and refreshed produce, dairy and meat sections. Since 2017, its new stores have been concentrated in more populous, upper middle-class suburbs, according to Bain. Aldi’s new stores are in zip codes with a $65,822 household income on average — about $4,500 above the national average. “They’re clearly trying to go after a more upmarket customer,” Vu said.

aldi case study slideshare

Part of Aldi’s appeal is not in a lower grocery bill alone, but in the way Aldi cleverly markets its discounts, UNC’s Gielens said. Bargain hunters across the income ladder end up feeling like they’re outsmarting other, higher-priced supermarkets and big brands when they see their grocery receipts. Aiming to be the "smart shopping alternative,” Aldi wants to "spread the message that traditional grocers and brands simply rip off consumers,” she said.

Aldi hammers home that message on its signs in stores. “The same is always better when it costs less.” “New deals every week. Find them here. Brag like crazy.” Aldi encourages customers to ditch their grocery stores: “Switch and save.”

Americans are listening. Last year, 19% of shoppers who switched retailers started buying at Aldi, according to a Morgan Stanley survey. That was second only to Walmart.

More Barcodes

On many products, barcodes are either super large or they're printed on multiple sides to speed up the scanning process at the cash register.

More Barcodes

Aldi’s reliance on private-label brands is also helping it win Millennials, who are increasingly brand-agnostic and are instead drawn to lower prices and convenience, according to Bain data. Private-label products have undergone a renaissance in recent years and are now growing faster at supermarkets than the top 20 national brands, Nielsen data shows .

Stores like Trader Joe’s and Costco have built empires selling their own brands. Costco’s Kirkland Signature , for example, raked in nearly $40 billion last year, an 11% increase from 2017. Kirkland’s sales last year beat out Campbell Soup, Kellogg and Hershey put together. Retailers’ brands challenge these consumer goods heavyweights, which spend billions marketing their products.

“It used to be the white label knock-off stuff that you were a little bit embarrassed to buy, but it was cheap,” Vu said of store brands. Now, Bain customer surveys show that 85% of US shoppers say they’re open to trying private label products. “People don't care anymore about the big brands the way they used to," he said. "That plays right into the Aldi playbook."

The “Aldi Finds” aisle, which includes seasonal and quirky items, is popular among regular shoppers.

It all began with a thrifty family

Aldi’s obsession with frugality comes from its early owners: brothers Theo and Karl Albrecht , who took over the family grocery business in Essen, Germany after World War II. Out of necessity, early stores initially stocked only a handful of items, but the brothers planned to expand the selection as the business grew. Over time, however, they recognized that they could be successful selling a narrow range of basics. “If we did not want to offer customers a wide range of products, then we had at least to offer them some other advantage. From that point on, we sold our products for decisively less,” Karl said in 1953, according to a book by former Aldi manager Dieter Brandes .

Theo was so insistent on keeping costs low that he was known to take notes on both sides of a piece of paper and to turn off the lights at stores during the daytime. The brothers purposefully kept store aesthetics to a Spartan minimum. “There are no decorations in stores,” Karl said in 1953. “All of our promotional efforts are put into discount prices.”

In 1961, the brothers split the business in two, reportedly over a dispute over whether to sell cigarettes in stores. Karl took southern Germany, and Theo ran the North. To this day, Aldi Süd and Aldi Nord remain separate companies, with the dividing line between the two in Germany known as the “Aldi Equator.”

Aldi’s stores are smaller than traditional supermarkets and feature wide aisles.

Aldi Süd is the company that’s expanding rapidly now in the United States, as well as throughout Europe. Aldi Nord also has an American presence through Trader Joe’s, which it acquired in 1979 — but its growth is less ambitious than that of its cousin company. Trader Joe’s had 484 stores in United States at the end of 2018.

The Albrecht brothers both passed away within the last decade. Now, the two chains operate in 18 countries, bringing in an estimated $98 billion in combined sales last year, according to Deloitte.  That revenue makes the Aldi companies not only one of the largest grocers, but also the eighth biggest retailer in the world. The two Aldis combined are now larger than CVS or Tesco, and just a few rungs down from Amazon, Home Depot and Walgreens Boots Alliance.

Competitors react

Aldi Süd’s rapid growth in the United States mimics its broader international expansion in places like Ireland, Hungary, Switzerland, Australia and even China. The company has also grown quickly in the United Kingdom, where many local grocers ignored Aldi until it was too late.

But as Aldi scales in the United States, there are real concerns about whether it can maintain its low-cost advantage. American competitors have learned to respond faster when Aldi lowers prices, which could blunt its impact.

Customers bag their own groceries at Aldi. It’s yet another way the store saves on labor costs.

“They’ve taken Aldi as a much more credible threat,” Vu said.

Walmart has narrowed its price gap with Aldi since July 2017, according to a study conducted by Wolfe Research analyst Scott Mushkin , who recorded prices of 40 top-selling items at a Houston Walmart and an Aldi across the street from one another. Walmart also narrowed that gap with Aldi in Chicago-area stores, he found.

To counter Walmart and other grocers’ moves, Aldi has started compromising its bare-bones approach. In September, it launched a national advertising campaign , including television commercials, to drive the message that it sells high-quality products. Aldi also recently pledged to cut plastic and transition to 100% sustainable packaging by 2025 — not a cheap endeavor. Aldi increased its fresh food offerings by 40% in 2018 by expanding its produce selection and adding new vegan and vegetarian options. And it started offering more alternative milks, including soy and almond.

Those changes are expensive and could eat away at Aldi’s margins. “The model only works if they are the actual cheapest,” said Simon Johnstone, analyst at Kantar.

“Those lines fly. You’re not waiting for people to bag. They’re not messing around there,” said Allison Robicelli, a frequent Aldi shopper.

Customers also say they’re starting to notice a few more brand-name goods on the shelves, such as Coca-Cola, Tide and Old Spice deodorant. “I honestly don’t like it when they bring in national brands. I like the sanctity of Aldi,” Robicelli said, adding that she worries prices might go up.

At the same time, Aldi faces heightened competition from its closest rival, Lidl. Lidl cut the ribbon on its first US stores in Virginia, North Carolina and South Carolina in 2017 and recently opened three stores outside of Atlanta. It’s expanding in upper income communities, too. Now, Lidl operates more than 60 stores in the country.

Aldi is closely monitoring Lidl’s growth. In a federal lawsuit filed in March , Aldi alleged that two of its former US employees illegally shared confidential information about its sales, future store locations and real estate strategy with Lidl.

A spokesperson for Lidl said the company "believes in fair competition and the allegations in the lawsuit are not consistent with our business practices and values. We are looking into the claims, which we take seriously."

Other American grocers have tried shopping cart deposits but abandoned the practice after it irritated shoppers. Aldi has stuck with the model, insisting it’s core to the store’s low-cost strategy.

Aldi’s lasting impact: Lower prices and fewer grocers

Although huge competitors can reduce prices to compete with Aldi, regional supermarkets are getting squeezed by the grocery price war.

Tops Markets and Southeastern Grocers, the owner of Winn-Dixie and Bi-Lo, have recently filed for bankruptcy . Save-A-Lot, the second-largest discount grocery chain in the United States after Aldi, is deep in debt and can’t afford to continue lowering prices without sacrificing profit.

“Aldi and Lidl will be a significant disrupting force in the US, threatening smaller regional supermarket chains and forcing larger players to cut prices,” Fitch Solutions said in a research report in March.

More bankruptcies are on the way for America’s grocery stores, analysts predict. "The US has a much bigger tranche of second and third tier grocery retailers,” said Vu from Bain. “Those are the ones that are dying off.”

With smaller grocers disappearing, there’s probably room for both Walmart and Aldi to pick up the pieces, Vu added. In the meantime, Aldi will keep leading the price wars, putting pressure on the bigger players, too.

"They're incredibly successful," he said. "We haven't seen a disrupter in the grocery space like this in a long time."

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How Aldi Became A Global Supermarket Giant

Table of contents.

The Albrecht brothers had a vision to bring affordable food and goods to the people of Germany at the end of World War II. Their unique approach to bring a low-cost, no-frills business model has helped them stand out with their loyal customer base. Important Stats to Know About Aldi:

  • Aldi employs 203,600 employees around the world
  • Headquartered in Essen and Mülheim, Germany
  • The combined brand generates about $80 billion each year
  • Operates over 12,000 grocery stores worldwide
  • Aldi is family-owned and not publicly traded

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The History of Aldi

aldi case study slideshare

In 1913, Anna Albrecht opened a small grocery store in Essen, Germany. The store remained relatively unchanged and even survived the widespread bombings and destruction in Germany during World War II. In 1946, her sons, Karl and Theo Albrecht took over the business with the goal of expanding its operations. By 1950, the brothers had grown the business to 13 locations across the Ruhr Valley.

Aldi’s Early Discount Strategy

The economic conditions in Germany following the war were difficult. The Albrecht brothers were frugal people and believed that consumers should have the opportunity to purchase high-quality food and goods at affordable prices.

At the time, people who wanted to purchase inexpensive goods would normally participate in a discount cooperative. These cooperatives would provide members with rebate stamps with each purchase that could be redeemed at a later date to get a portion of their money back. The challenge was that this process was time-consuming and painful to track. The Albrecht brothers decided on a different approach. Instead of making their customers pay full price and get their money returned later, they decided to offer the discount before the sale. This discount was restricted to 3% which was the maximum legal rebate amount allowed at the time. Thus, making Aldi one of the first discount stores on the planet.

The brothers were diligent to monitor their inventory to identify which products sold quickly and removed those that didn’t sell. Other retailers would often lose money if a product didn’t sell. In order to get the unpopular item off their shelves, they would have to spend money on advertising or discount them. Karl and Theo Albrecht refused to pay for any advertisements at all and removed items from their shelves that didn’t sell easily.

Times after the war were tough in Germany. The brothers chose to carry only non-perishable food items. This benefited the grocery store chain by reducing the risk of losing money from spoilage.

Another strategy was to keep the average store small compared to some of its competitors. With a smaller store, there was no need to spend large amounts of money on inventory to keep the shelves full. The brothers also didn't have the overhead (rent, utilities, etc.) of a larger commercial space. This allowed them to focus on keeping their shelves full of only the most popular items.

Interesting Fact

The albrecht brothers refused to pay for telephones to be installed in their stores until the 1990s. until this time, employees were required to use a local payphone to make business calls., splitting the company and creation of the aldi brand.

aldi case study slideshare

By 1960, the brothers had about 300 locations in operation. As the chain continued to expand, the Albrecht brothers needed to make some decisions to continue growing the company. Theo proposed that the stores start carrying cigarettes and other tobacco products to boost sales. Karl disagreed and felt that carrying these types of products would attract shoplifters.

This dispute led to the brothers making the decision to amicably split the company. While the two brothers would operate their own grocery store chains, they chose to both operate under a unified brand name. In 1962, the name Aldi (often shown in all caps, ALDI) was introduced as a shortened version of Albrecht Diskont . By 1966, the company was officially financially and legally separated.

Key Takeaways

  • Karl and Theo Albrecht understood that the people of post-World War II Germany needed access to inexpensive products. They launched the first discount store that was not formed as a cooperative by offering discounts before the sale rather than post-sale rebates.
  • The chain of stores focused on a no-frills experience to keep costs down. Strategies included removing unpopular items from shelves, reducing overhead through smaller stores, and spending no money on advertising.
  • Despite its popularity, the Albrecht brothers chose to divide the company after a dispute over whether to sell cigarettes. The brothers wisely chose to continue operating the two separate companies under the same brand name — Aldi.

Two Companies, One Brand

When Aldi split into two entities, the companies were officially named Aldi Süd and Aldi Nord. Aldi Süd took the stores that were located in the south of Germany, while Aldi Nord took the northern stores. This dividing line is commonly referred to as the Aldi-Äquator (which literally means Aldi equator).

Both companies took a similar approach in the way they organized their extensive network of grocery stores. Stores are divided into regions. These regions are operated as limited partnerships that are managed by a regional manager. The regional manager then reports directly to the parent company headquarters — Aldi Nord in Essen or Aldi Süd in Mülheim. In Germany, Aldi Nord consists of 35 regional branches that operate approximately 2,500 stores. Aldi Süd comprises 31 regional branches with about 1,900 stores.

Although the two companies operate separately, they do work together in some respects. For example, they share many of the same marketing and store design strategies. The company even has a common company website — www.aldi.com — which redirects users to the appropriate site depending on the country they select. This effort appears seamless and has helped the Aldi brand reach millions of customers in numerous markets.

International Expansion of the Aldi Brand

Aldi began expanding beyond the borders of Germany in 1967 when Aldi Süd purchased the Hofer grocery chain in Austria. Aldi Nord followed suit shortly after and opened its first international location in the Netherlands in 1973.

In its early years, Germany was still separated into East and West Germany. This limited Aldi’s ability to expand internationally, but once the Iron Curtain fell and Germany was reunified in 1990, growth accelerated rapidly.

To avoid competing against one another, Aldi Nord and Aldi Süd avoid operating in the same markets or countries. Today, Aldi Nord operates in Denmark, France, Benelux (Belgium, Netherlands, and Luxembourg), Portugal, Spain, Poland. Aldi Sud operates in Ireland, the UK, Hungary, Switzerland, Australia, China, Italy, Austria, and Slovenia.

The combined Aldi brand currently has over 12,000 locations around the globe. Aldi Nord and Aldi Süd together make up the fourth-largest grocery chain by the number of stores.

Growth in the United States

Outside of Germany, the only shared market is the United States. Aldi Süd opened the first US-based Aldi store in Iowa in 1976. Aldi stores quickly expanded throughout the Midwest and Eastern United States.

Aldi Nord also expanded operations to the United States in the same year but chose a different approach. Instead of using the Aldi name, Theo Albrecht found that the California-based Trader Joe’s had a loyal customer base and was committed to a similar mission to providing its customers with low-priced goods. In 1976, Aldi Nord purchased Trader Joe’s.

Between the Aldi and Trader Joe’s brand, the US operation makes up about 10 percent of Aldi’s global footprint.

Current Ownership of Aldi

The companies continue to be privately owned and are not traded on any public stock exchange. The Albrecht brothers ran their respective companies as CEO until they both retired in 1993. Upon their retirement, the control of the company was transferred to private family foundations. The Siepmann Foundation controls Aldi Süd and the Markus, Jakovus, and Lukas Foundation controls both Aldi Nord and Trader Joe’s.

The significant growth of the Aldi brand has led to Karl and Theo Albrecht being ranked among the wealthiest people on the planet. In 2010, Theo was ranked by Forbes magazine as the 31st richest person with a net worth of over $16 billion. Around the same time, Karl was ranked as the 21st richest person by the Hurun Report. Today, the Albrecht family is estimated to be worth a combined $53.5 billion.

Having a lot of money made the Albrecht brothers a target. In 1971, two kidnappers successfully abducted Theo and held him for ransom for 17 days. A ransom of 7 million Deutschmarks (about $3.5 million) was paid for his release. Following the incident, the brothers became very reclusive and would travel in armored cars to and from the office.

  • With the company split into Aldi Nord and Aldi Süd, the Albrecht brothers agreed to divide the territory and work under a unified brand.
  • Both companies focused their growth on international markets and agreed to not operate in the same countries to reduce competition with one another (Germany and the United States are the exceptions).
  • In the United States, Aldi Süd opened stores under the Aldi name. Aldi Nord purchased the small grocery chain Trader Joe’s and expanded operations under this brand.

Trader Joe’s Recipe for Success

aldi case study slideshare

Theo Albrecht’s decision to purchase Trader Joe’s was a smashing success. What started as a handful of stores in Southern California has expanded to over 500 locations nationwide. The brand is recognized as having one of the highest sales per square foot of store space compared to its competitors. Despite making up less than 5 percent of the total number of Aldi-owned stores, Trader Joe’s accounts for approximately 16 percent of the total revenue. While Trader Joe’s does follow some of the similar strategies of the Aldi brand, there are a few differences.

Fun Atmosphere

When a customer walks into Trader Joe’s, they will immediately notice the island or tiki-themed decor. The brand works hard to give their customers a feel-good experience when they shop. Employees are referred to as “crew members” and can be seen wearing Hawaiian shirts (managers are called “captains”). They also have nautical bells that they use to communicate instead of the traditional PA system found in most grocery stores.

The original owner, Joe Coulombe, felt that his stores were too similar to boring convenience stores at the time. He set out to create something unique and different that customers would remember. Joe was obsessed with the South Pacific, so he went with that theme. While the island theme is found in all Trader Joe’s stores, most mix in elements from the local community. For example, a Trader Joe’s in Denver might feature artwork that has mountains.

Unique and Specialty Products

Trader Joe’s has a wide range of products that you can't find anywhere else such as their apple chicken sausage links or Indonesian salsa. They are big on having plenty of specialty options that are vegetarian, vegan, gluten-free, and other dietary restrictions. Customers can usually find free samples throughout the store. Employees are encouraged to try as many of the store’s products as possible so they can easily describe or make recommendations to customers.

Low Prices Through Trader Joe’s Branding

In a Trader Joe’s store, customers won’t see a lot of name-brand products. The reason for this is that about 80 percent of products sold in the store carry the Trader Joe’s brand. Many of these products are name-brand goods under the generic label. This helps Trader Joe’s secure lower pricing from its suppliers. Trader Joe’s has strict privacy agreements with its suppliers to not make their relationship known to the public.

Cult Following

While the Aldi and Trader Joe’s brands are known for low prices, they both attract a different type of crowd. Aldi is popular among low-income or blue-collar workers. Trader Joe’s has focused on catering to higher-income families and college students. They do this by constructing stores in more affluent neighborhoods. This has attracted more of a cult following. Trader Joe’s customers are extremely loyal to the brand.

Social Responsibility

Trader Joe’s is known for responding well to feedback and criticism from the local community. For example, it removed some Chinese-based food products due to consumer health concerns.

The chain also eliminated six unsustainable fish species from its shelves to help protect the environment. This helped earn Trader Joe’s the 3rd spot (up from the 15th spot) on Greenpeace’s CATO (Carting Away from Oceans) scale.

  • Trader Joe’s has become a significant contributor to Aldi’s annual revenue by offering a unique set of products, catering to a specific customer base, and deploying a memorable tiki-theme in their stores.
  • Their strategic placement of stores in affluent neighborhoods and near college campuses has allowed them to secure a cult following in many areas around the country.

A Brand Built on Frugality

There isn’t much known about the Albrecht brothers outside of their involvement in building the Aldi brand. However, they are known for being extremely frugal individuals despite being worth billions of dollars at the peak of their lives. This frugality bled over into their business model helping them create a company that was dedicated to keeping prices low while minimizing risk and overhead costs.

No Frills Shopping Experience

Theo and Karl Albrecht understood that every business expense must be charged back to the customer. For this reason, Aldi has focused on creating a shopping environment that provides customers with high quality, low-cost products, and nothing more.

Aldi has historically viewed any form of advertising as a wasted expense. Outside of their sales ad that shows the deals going on that week and social media presence, very little money is spent on marketing or advertising. Aldi has stuck to this stance from the very beginning. When you enter an Aldi store, you will see promotion of the company’s mission and value statement but nothing advertising the actual products.

While the brand has recently started investing money in the look of their stores, many traditional Aldi locations display goods in their original shipping boxes. This reduces the cost of paying store clerks to transfer the goods from boxes to the shelves.

Aldi also encourages its shoppers to bring their own grocery bags. Even in areas where this is now mandated by law, Aldi is historically charged for plastic or paper bags. Customers are also responsible for bagging their own groceries saving the salary of a bagger. Customers will often simply use empty or discarded boxes found throughout the store. This also reduces the cost for the store for garbage disposal.

Most grocery stores are forced to hire staff to go into the parking lot to collect shopping carts and bring them back for the next customers to use. Aldi took a unique approach to this by installing devices on the carts that lock them together. When a customer wants to use the cart, they must insert a coin (like a quarter). The customer then gets this coin back when they return the cart. Example below.

Aldi also carries far fewer products than a traditional grocery store. Many popular competitors can carry tens of thousands of different products. For Aldi, the store size is kept small (about 12,000 square feet) with approximately 1,400 products. Many of these products are displayed with Aldi’s brand name on the packaging. This helps keep the costs of goods low since customers aren’t paying for popular name brands.

  • The Albrecht brothers were known for being extremely frugal. These practices heavily influenced the way that Aldi is operated and has led to much of its success.
  • The interior of Aldi stores provides a no-frills experience with food displayed in shipping boxes and no advertising. This helps to keep the cost low for consumers.
  • Aldi relies on the customer to provide their own bags and labor to keep costs low. For example, customers participate in bagging their own groceries, removing empty boxes from the store, and returning shopping carts for the next customer.

The Future and Innovation of the Aldi Brand

aldi case study slideshare

Aldi has an ambitious goal to continue growing in the near future. This is especially true in the United States. Aldi US (Aldi Süd’s United States division) announced that it planned to become the third-largest grocery chain in the United States after Walmart and Kroger by the end of 2022. Aldi currently ranks 9th when compared by revenue to other grocery store chains in the United States. The company hopes to achieve this by focusing on new opportunities to expand services and take advantage of e-commerce. They also plan to rapidly expand the number of operating stores.

Embracing the COVID-19 Pandemic

Aldi has taken advantage of and adapted well to the COVID-19 pandemic. With workers across the globe transitioning to remote work, there has been a higher demand for groceries. While other foodservice businesses struggled, Aldi US seized the opportunity to expand their services to capture new market share including curbside pickup at hundreds of stores, alcohol sales, Instacart deliveries, and other e-commerce initiatives.

Expanding Product Lines

In 2020, Aldi announced that it would break from its approach of stocking many non-perishable food items and expand fresh food options by 40%. Due to consumer demands and changing diets, Aldi has made additional produce, meat, organic items, and prepared foods available to its customers. This is especially critical as Aldi expands into agriculture hubs like California that is known for its readily available fresh fruits and vegetables.

Creating Strategic Partnerships

Aldi is known for coming up with creative solutions to keep costs low and tackle challenges. The labor shortage coming out of the COVID-19 pandemic is no exception. With many companies laying off workers or reducing hours, Aldi partnered with the fast-food giant McDonald’s to share employee resources. This was a win-win for everyone involved — Aldi could get much-needed help with increased demand for groceries, employees would be able to maintain their income, and McDonald’s would be able to retain those employees for when economic conditions improved.

Rumors of a Consolidation

Since Aldi is privately owned, they don’t often share their strategies openly with the public. However, both Aldi Nord and Aldi Süd have made efforts in recent years to better align their product offerings to be more similar. Many speculate that this could be an indicator that the two entities plan to combine once more in the near future.

The company could potentially benefit from being publicly traded. An IPO (Initial Public Offering) could help generate some additional funding to be used toward the expansion and remodeling of existing stores.

  • Aldi plans to continue to grow its market share by opening a large number of new stores by the end of 2022.
  • The brand has worked diligently to adapt and capture new opportunities that came with the COVID-19 pandemic including curbside pickup, e-commerce, and labor sharing partnerships.
  • Some rumors exist that Aldi could be making moves to boost its market strength by combining Aldi Nord and Aldi Süd into a single entity.

Final Thoughts and Key Takeaways

The Aldi brand is a true powerhouse in the grocery store industry. While other brands have focused their efforts on traditional approaches such as paying for expensive advertising or trying to stock the largest variety of products, Aldi has taken the opposite approach. From its frugal beginnings, the brand has captured the attention of consumers across the globe. In many cases, Aldi’s strategy has kept pricing so low that competitors have been forced to slash their prices. This has helped Aldi continue to gain a foothold in new markets around the world.

Quick Comparison of Aldi Brands

  • The Aldi brand started as a small, family-owned grocery store owned by Anna Albrecht. Once her sons took over the business in the 1940s, the business grew rapidly and expanded across Germany.
  • The early strategy was to offer discounts to customers before the sale. This was a new approach at the time as most consumers purchased inexpensive food products from cooperatives.
  • The Albrecht brothers decided to split the business into two separate companies after a dispute over whether to sell tobacco products. The two companies would continue to operate under the combined brand Aldi (short for Albrecht Diskont).
  • The two Aldi companies avoid operating in the same countries to avoid competition. The only exception is Germany and the United States. In the US, Aldi Nord operates under the Trader Joe’s brand while Aldi Süd uses the Aldi name.
  • Both Aldi companies are still family-owned and have never been publicly traded.
  • The Trader Joe’s brand is extremely popular in the United States and makes up a sizable portion of the brand’s annual revenue.
  • Aldi gives its customers a no-frills shopping experience to keep costs low including generic brands, products displayed in original shipping boxes, and making customers bag their own groceries.
  • Aldi stores are much smaller than their competitors and carry far fewer products. This allows them to focus their efforts on stocking only products that sell quickly.
  • The Aldi brand plans to continue rapid expansion efforts around the globe. In the United States, the brand plans to open hundreds of new locations, securing them the number three spot after Walmart and Kroger.
  • Aldi has used the pandemic to launch new initiatives and create special partnerships to strengthen and grow the brand.

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Case study -aldi Case study ALDI STRATEGIC MANAGEMENT

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ALDI Strategy Case Study Analysis

Introduction.

Business enterprises employ various initiatives to maximize returns and achieve competitive advantage over competitors in there respective industries (Kafalas, 1981) . On this note, ALDI Australia has adopted unique strategic management principles that have helped it to gain and maintain competitiveness amidst various challenges faced in the industry. This paper examines in brief the concepts of strategic management and strategic competitiveness in relation to ALDA Australia. Further, it explores the external and internal environments as well as the Business Level Strategy (BLS) of ALDI. Finally, a conclusion and several recommendations to the current strategies of this company are made.

Strategic management and strategic competitiveness

Strategic management refers to coordinated and integrated set of actions and commitments by an organization’s leadership designed to steer the organization to maximize returns and to gain competitive advantage over competitors (Rogers & Caswell, 1988). On the other hand, strategic competitiveness describes a situation where an enterprise successfully develops and implements a value-adding strategy (Hitt et al , 1994). As – noted, the level of competitive rivalry in Australian food and grocery industry is high due to high level of similarity in the products offered by different players. However, different retailers have developed different strategies to enable them gain competitive edge in the market while others compete along similar dimensions. For instance, Woolworths, IGAall and Coles-Myer focus on product and market differentiation strategies. ALDI’s strategy involves offering high quality products at lower prices in comparison with those offered by competitors (Kleeman, 2012).

External Environment

According to Porter (as cited in Kourteli, 2005), the purpose of external analysis on a firm’s structure is to understand the effectiveness of its sources of competitive advantage. This analysis is based on the Porter’s five forces Model. As mentioned earlier, the level of competitive rivalry in Australian food and grocery industry is high as there are numerous global and local retailers offering similar products and services to those that are provided by ALDI. The bargaining power of customers for ALDI can be said to be moderate. Buyers are able to switch from one retailer to another due to close similarities of products offered by different retailers (Kleeman, 2012). However, they are price sensitive and this is an added advantage to ALDI since the buyers have a notion that this enterprise offers quality and cheaper goods.

The bargaining power of suppliers for ALDI is low since there are numerous suppliers offering similar products. ALDI has different options and goes for suppliers with cheapest prices. However, ALDI Australia currently sources its products from local suppliers, which are more expensive than imported products. The lack of strong preference for specific brands by consumers makes it easy for new entrants to survive in the industry (Kleeman, 2012). According to Cardwell (2008), this threat is heightened by the fact that it is easy for a competitor to copy the strategies of another competitor and to implement them in the market. The threat of substitutes in his industry is considerably high due to high level of similarity of products offered by different competitors. Consumers can easily switch from one retailer to another.

Internal Environment

According to Chen, and Mohamed (2008) , the strength of the internal environment of an enterprise is determined by the effectiveness of its current strategies and how well resources are mobilized in support of the strategies.  ALDI has adopted simple and less complicated organization structure which has contributed effectively in cost saving. The company focuses on core operations only in locations that are deemed to be profitable; limits the number of personnel in each store; their store layouts are designed in a simple manner; and adheres to restricted opening and closing hours (Haberer, 2010) . This enables the enterprise to offer high quality products at low costs. The enterprise produces its own products and brands, making it to have a high control over them. Apart from this, this organization has listed all of its products and their prices online (Kleeman, 2012) . This has made it easy for the consumers to gain useful information about the firm. However, the reliance on a small number of trained workers can be considered a weakness. Also, the limited range of products offered by the enterprise can also be deemed as a weakness since it limits consumer choices (Haberer, 2010).

BLS refers to a set of actions taken by an enterprise in order to satisfy the needs of customers and hence, achieve competitive advantage in the future. Hua et al (2011) explains that, “a business enterprise can benefit from BSL by exploiting core competences in specific, individual product or service markets.” ALDI’s BLS focuses on offering quality products at lower costs to their customers. This is achieved through adopting an organizational structure that minimizes costs. They are also able to conduct a quality control of their products due to the narrow range of product categories (Haberer, 2010). This strategy can be considered as a sustainable source of competitive advantage for this enterprise.

Recommendations and Conclusion

Based on the above analysis, various recommendations can be made. First, ALDI needs to focus more on product diversification in order to add more choices for customers. Secondly, they should focus on expanding its operations within Australia through a store rollout program. As well, this company should maintain its strategy that focuses on offering high quality products at lower prices. Another suggestion is to increase percentage of imported supplies and hence, raise profits. It is essential for this firm to catch up with the developing technology by developing an online system that includes a platform for transaction and delivery.

In conclusion, this paper has addressed the current strategies adopted by ALDI. The paper has examined the competitive position ALDI’s, internal and external environments and its business level strategies. As noted in the paper, it is necessary for ALDI to reconsider its strategies and take into account the recommendations stated above in order to gain and maintain competitive edge over competitors in the long–run.

Also Study: Joint Business Venture of ALDI Multinational Company in China’s Market

References;

  • Cardwell, P. (2008), Adwatch.(ALDI Group’s brand strategy overview). Marketing . 23
  • Chen, L. & Mohamed, S., (2008), Impact of the internal business environment on knowledge management within construction organisations. Construction Innovation 8(1), pp. 61 – 81, DOI 10.1108/14714170810846521
  • Haberer, J. (2010), Strategic management , Sydney: GRIN Verlag
  • Hitt, M. A., Hoskisson, R. E., Harrison, J. S. & Summers, T. P. (1994), Human Capital and Strategic Competitiveness in the 1990s. Journal of Management Development . 13(1), pp. 35 – 46
  • Hua, S., Chatterjee, S. R.,&  Jingliang, C., (2011) Achieving competitive advantage in service supply chain: evidence from the Chinese steel industry, Chinese Management Studies , 5( 1), pp.68 – 81
  • Kafalas, A. G., (1981), Analyzing changes in the external business environment, Strategy & Leadership, 9(4), pp. 26 – 46, DOI: 10.1108/eb053956
  • Kleeman, F. C., (2012), Supply Chain Strategy Analysis for Aldi: Supply Chain Management Im
  • Kourteli, L., (2005), Scanning the business external environment for information: evidence from Greece. Information Research: An international electronic journal . 11(1), Pp. 242-257
  • Einzelhandel: Eine Strategische Analyse Des Discounters ALDI. Sydney: GRIN Verlag
  • Rogers, T. T. & Caswell, J. A., (1988), Strategic management and the internal organization of food marketing firms, Agribusiness .  4 (1), pp. 3 – 10, DOI: 10.1002/1520-6297(198801)4:1<3::AID-AGR2720040103>3.0.CO;2-S

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The Aldi Brand Harvard Case Solution & Analysis

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The Aldi Brand Case Study Solution

On the other hand, Coles and Wool worths were initially just focused on selling national brands with an extensive product line to a large consumer base.  Both of the brands hadn’t put any emphasis on private label brands initially, but now both the brands are considering to shift their focus on private label brands, with Coles considering a single while Wool worths considering multiple private label brands.

Other two new entrants including Amazon and Lidl are also focused at private label brands. This implies that the segment in which Aldi has a strong foothold is now susceptible to change with the entrance of certain new and old players in the market segment.  In this scenario, Aldi must consider different and innovative as well as highly efficient strategic initiatives to deal with the situation.

Value Propositions:

Another major area that could be discussed for evaluating the business model of Aldi and its peers is the evaluation of the value preposition that Aldi and its competitors provide to their customers through selling products via various techniques.  Aldi is focused on value preposition to its customers who seek competitive products at lower prices. The company offers limited lines which are dominated by private labels in order to meet the needs of the value conscious customers and to provide them a superior quality products in order to create value to its customers. Aldi’s strategy is to focus on providing high quality food at discount rates or low prices in order to reduce the daily expenses of the consumers, and to create value to the end customers. (Osterwalde, Pigneur, Bernarda,, & Smith)

Customer Relationships:

Aldi has a strong relationship with its customer. Aldi has captured those consumers who seek low priced quality products. The company offers competitive products at lower prices and continuously offers its products with lucrative discount offers for the discount seeking grocery shoppers in order to reduce their daily expenses and increase their value for money spending and satisfaction.(unknown, n.d.)

Key Partnerships:

Aldi has a strong long term relationship with their supplier in order to produce the quality product and meet the standards. As the continuous growth in the sales of the company, the company buys the raw material and the products in bulk quantity by which the company could easily avail the discount and provide low cots to their end consumers. Aldi has been narrowing the range of the products in order to maintain the quality and the cost associated with the logistics and distribution. It has built simple warehouses in order to reduce the cost. The strong association with the company’s supplier enables Aldi to provide high quality products at low prices. The strong long term relationship with the suppliers will help the company inretaining the potential consumer along with the consistent quality products at lower prices.

Organizational Structure:

The structure of the Aldi is composed of formal structure and minimization of functions. Staff of the company is also known as internal stake holders which can help the company in order to build the culture and efficiencies. In order to avoid misunderstand and quick decision making the company has formal and clear reporting lines in which each staff knows when and to whom to report, and rules and regulations about reporting. Aldi is not using so many functions in order to reduce the complexity and minimization of cost. The layout of the company’s stores are simple. It has small super markets around the globe, while its competitors have bigger stores. The company produces in bulk quantity while narrowing the range in order to reduce the cost linked with stocks and logistics and increase the operational efficiencies. The company is also using a low technology in order to reduce the complexity and cost.

Recommendations

From the above analysis, it could be said that although the value proposition strategies and the business model followed by Aldi including its strong partnership relations, customers’ focused strategies, cost leadership, led to the company’s growth for two decades, but, in the changing industry environment, Aldi must put efforts to change its strategic position in long run to mitigate the external risks posed by the new entrants and the existing competitors. Aldi must revise its current strategic position. In this situation, Bowman Model could be implemented to explore various strategic positions for Aldi to come up with these market risks.  (Fernando, 2017)

As stated above, Aldi is currently positioned as low price brand in the Bowman Clock. However, the firm could also explore various other strategic position using the Bowman clock. Aldi would also position themselves on hybrid (combination of low price and differentiation). By using the hybrid position Aldi would sell its products at competitive prices and to retain their customers by differentiating (value adding) its products from its competitors’. The company could also use the differentiation position for their products in which the prices of the company’s product is relatively moderate in order to provide the different product to their consumer in comparison to their competitors’. Aldi can also use the focused differentiation in which the prices of the products are relatively high in comparison to the competitors’ but the customers buy the product due to high perceived value, which is not considered in the other competitors’ product.

BOWMAN Model

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aldi case study slideshare

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aldi case study slideshare

IMAGES

  1. Case Study 1 ALDI

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  2. NBC Aldi & DSP Construction Case Study

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  3. Case Study: ALDI

    aldi case study slideshare

  4. Aldi Case Study. Introduction: A Case Study looking at…

    aldi case study slideshare

  5. BM 2021 ALDI Case Study

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  6. ALDI CASE STUDY

    aldi case study slideshare

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COMMENTS

  1. ALDI CASE STUDY

    ALDI CASE STUDY. 1. Introduction In increasingly competitive markets, consumers have a greater choice over where they buy their goods and services. For an organisation to meet its business objectives, it has to find out what consumers require and then identify the best way in which it can satisfy these needs and wants.

  2. Aldi Marketing

    Aldi is growing, introducing new stores around new areas and Aldi considers the following when introducing new stores The amount of people living in the area e.g. above 30000 (demographic) The position of the store, such as Aldi may want their store to be placed on a main road where a large amount of people may be able to see the store.

  3. Aldi's Business Structure (Company Structure): An Organizational Design

    Aldi's business structure represents the nature of the company and its multinational operations focused on low costs and competitive selling prices. The supermarket chain thrives with its company structure, which has similarities to many other large corporations in the retail industry. The operations of grocery stores and other support ...

  4. Aldi: The Dark Horse Discounter

    Case questions answered: Case study questions answered in the first solution: Please identify the strategic issues and problems to be solved, describe the necessary analyses and conclusions, and present recommendations and implications. Do whatever analysis is needed to solve the problem you have identified.

  5. Aldi Five Forces Analysis & Recommendations (Porter's Model)

    The grocery store chain uses this competitive environment to determine the best strategies for business growth. The following are the intensities of the five forces impacting Aldi: Bargaining power of buyers/customers: Strong. Bargaining power of suppliers: Weak to moderate. Threat of substitutes: Weak.

  6. Aldi's Generic Competitive Strategy & Growth Strategies

    Aldi's competitive strategy is cost leadership, which translates to low business costs and the ability to offer low and competitive selling prices. In Michael E. Porter's model, this generic competitive strategy requires that the discount supermarket chain maintain low operating costs. Competitive advantages based on low business costs mean ...

  7. How Aldi, a brutally efficient grocery chain, is beating Walmart ...

    The Millville Toaster Tarts, an Aldi house brand, look strikingly similar to Pop-Tarts — but a 12-pack of the Millville version is $1.85 while a 12-pack of Pop-Tarts costs $2.75. More than 90% ...

  8. Aldi

    Loyalists The Loyalists are avid ALDI shoppers -Likely to recommend ALDI to friends -Don't need national labels -Like ALDI's suprising selction Prospects The Prospects have never been to ALDI, but are willing to give it a try -Heard about the great prices and the wonderful selection of wine and cheese. -Skeptical or unaware of the quarter ...

  9. Strategy Study: How Aldi Became A Global Supermarket Giant

    Important Stats to Know About Aldi: Aldi employs 203,600 employees around the world. Headquartered in Essen and Mülheim, Germany. The combined brand generates about $80 billion each year. Operates over 12,000 grocery stores worldwide. Aldi is family-owned and not publicly traded.

  10. Case study -aldi Case study ALDI STRATEGIC MANAGEMENT

    See Full PDFDownload PDF. Case study ALDI STRATEGIC MANAGEMENT f Case Study - ALDI Brief Overview of ALDI: In Essen Germany, Aldi was founded by 2 brothers Karl & Theo Albrecht in 1013. In 1960 they had 300 stores in Germany, they work hard and put all their efforts in making best retailer of grocery in Germany.

  11. Business Environment Analysis: ALDI Case Study

    negative impact which the microenvironment is having on the operations of business with the. help of using PESTLE analysis. With the help of SWOT analysis, the internal, as well as external. analysis of the company, will be identified in this report that will also help in identifying the. strength as well as weaknesses.

  12. Case study

    This case study will demonstrate how Aldi uses a lean approach to its business operations to offer its customers quality products at competitive prices. Since opening its first store in 1913, Aldi has established itself as a reputable retailer operating in international markets including Germany, Australia and the U. Aldi has over 7,000 stores ...

  13. Aldi: The dark horse discounter Harvard Case Solution & Analysis

    Aldi: The dark horse discounter Case Study Solution Aldi's Strategy: Aldi follows its own set of standard actions as well as values making it unique organizational strategy. The strategy of business and operating model revolves around 3 core factors i.e. low prices, strong culture and efficient operations.

  14. Aldi Case Study.docx

    Ben Blumenthal Aldi Case Assignment Intro to Marketing 20 September 2020 1. Aldi creates value in a few key ways. First, it maintains strong supplier relationships through bans on discounts and flexible contracts. This gives them an advantage because they can both hold suppliers to higher standards, while also getting good food for the customer. ...

  15. ALDI Strategy Case Study Analysis

    ALDI's strategy involves offering high quality products at lower prices in comparison with those offered by competitors (Kleeman, 2012). External Environment According to Porter (as cited in Kourteli, 2005), the purpose of external analysis on a firm's structure is to understand the effectiveness of its sources of competitive advantage.

  16. The Aldi Brand Case Solution And Analysis, HBR Case Study Solution

    From the above analysis, it could be said that although the value proposition strategies and the business model followed by Aldi including its strong partnership relations, customers' focused strategies, cost leadership, led to the company's growth for two decades, but, in the changing industry environment, Aldi must put efforts to change ...

  17. Aldi Case Study Slideshare

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  19. Aldi Case Study Slideshare

    Aldi Case Study Slideshare - Package Plan. Flexible discount program. Specifically, buying papers from us you can get 5%, 10%, or 15% discount. Creative Writing on Business. 725 . Customer Reviews. 409 . Customer Reviews. Aldi Case Study Slideshare: KONTAK KAMI. Original Drafts. 4.8/5. 4.7/5. 44 Customer reviews. User ID: 109254 ...