Strategic Management

Authors: (B00185272)

Module: Strategic Management

Module Code: BUSN09044
Date of Submission: 12/12/2014
Word Count: 7,043

B00185272 1
1 T ABLE OF C ONTENTS
2 executive summary.............................................................................................................. 3
3 Background......................................................................................................................... 3
3.1 LEADERSHIP...............................................................................................................................................................7
3.2 BLUE OCEAN ANALYSIS ...............................................................................................................................................8

4 PESTEL ................................................................................................................................ 9
4.1 POLITICAL ANALYSIS...................................................................................................................................................9
4.2 ECONOMICAL ANAYSIS .............................................................................................................................................10
4.3 SOCIAL/CULTURAL ANALYSIS.....................................................................................................................................10
4.4 TECHNOLOGICAL ANALYSIS.......................................................................................................................................11
4.5 ENVIRONMENTAL ANALYSIS......................................................................................................................................13
4.6 LEGISLATIVE ANALYSIS..............................................................................................................................................15

5 Competitive advantage through efficiency ...........................................................................16

5.1 JUST-IN-TIME...........................................................................................................................................................17
5.2 Employees...............................................................................................................................................................18
5.3 Suppliers .................................................................................................................................................................20
5.4 HEALTH RANGE........................................................................................................................................................21
5.5 UK & Ireland ............................................................................................................................................................21
5.6 Corporate Social Responsibility (CSR) .........................................................................................................................22
5.7 AIDA(R) MODULE: Customers ....................................................................................................................................22
5.8 BENCHMARKING......................................................................................................................................................23

6 SWOT ANALYSIS .................................................................................................................24

7 PORTER’S FIVE FORCES .......................................................................................................25
8 PORTERS GENERIC STRATEGIES ...........................................................................................25
9 STAKEHOLDERS ..................................................................................................................26
9.1 Targeting Strategy....................................................................................................................................................27
9.2 Current Positioning ..................................................................................................................................................28
9.3 Scorecard: Performance ...........................................................................................................................................30
9.4 Strategies adopted in future......................................................................................................................................32
9.5 ANSOFF MATRIX ......................................................................................................................................................33

10 APPENDIX.......................................................................................................................40
10.1 Company Background...............................................................................................................................................40
10.2 SWOT ANALYSIS.............................................................................................................. Error! Bookmark not defined.
10.3 Porters Five Forces .......................................................................................................... Error! Bookmark not defined.
10.4 Aldi Awards .............................................................................................................................................................45

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2 EXECUTIVE SUMMARY

This paper is based on a retail company, Aldi, who have been in existence since 1913 and

have more than 9,000 stores worldwide, within that time, changes to their strategic direction

over a period of 10 years has taken place. A number of areas influencing potential change;

strategic direction, structure culture, market forces and environment and strategic

leadership

This paper will analyse the above company by assessing its in-depth strategy’s over a 10

year period by looking at the external changes that have influenced the organisation and

how the organisation has responded to external change and what approach has been taken

by the organisation. Assessing the success of the organisation using strategy development

and implementation and measuring the organisation’s performance and what strategies

may be adopted in the future of Aldi

3 B ACKGROUND
The first store was born in Essen, Germany in 1948 by Karl and Theo Albrecht (brothers)

on the back of a family grocery business in 1914 (Aldi, 2014). The Albrecht family are a

private family which reflects Aldi values, therefore the business do not have to impress

private investors or shareholders, unlike its competitors. The grocery store was known in

the grocery business as “limited-assortment” or “hard discounters”. Aldi are Germany’s

main grocery organisation but also are a competitor in the global retail food markets.

Aldi supports on a global scale located mainly in Europe, The United States (U.S) Australia

and the UK, amongst other European countries (Mintel, 2014)

Aldi’s objectives is to expand its share in the market around the globe, focusing on

providing brands of a certain quality, adding value for its customers. The organisation’s

website state” provide our customers with the products they buy regularly and ensure that

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those products are of the highest possible quality at guaranteed low prices” (Aldi, 2014).

The 90’s saw the organisation operating nearly 3,000 stores under the Aldi brand, in a

number of countries naming a few, Austria, Belgium, Denmark, Netherlands, USA and UK.

As Aldi developed in the UK in the early 90’s, Aldi grew its stores numbers by 36% per year

(NatWest Securities, 2014). The timeline below demonstrates their increase in stores in the

UK for a period of 9 years, however it’s worth noting that this figure may have increased

since 1999.

Source: NatWest Securities (2014)

As a reputation of offering everyday low prices, rather than “buy one get one free” offers,

concentrating on their own-brand products. Aldi introduced its organisation to Belgium,

achieving US$1 billion sales by 1992 having a major influence with 260 stores. On the back

of its success of Belgium, in 1993 Aldi expanded its American operations increasing to

nearly 400 stores which the organisation registered sales of an estimated US$1.2 billion. In

1998, Aldi reached sales of US$35 billion, reaching eighth place in the retail world

(reference for business, 2014).

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 Source: M&M Eurodata; ACNielsen; Hoovers; the Food Institute; Others

The core purpose of the organisation is providing quality and value to its customers by

being fair and efficient in all areas. The organisation’s methodology is based on three core

values which are responsibility, simplicity consistency (Aldi, 2014)

Source: Aldi.com

Aldi have consistency when dealing with consumers, product, cost and all other factors in

their professional daily life. Effortlessness creates effectiveness, precision and clear

orientation within the organisation and it’s also Aldi’s responsibility to provide assurance to

towards consumers, people of the business, partners and the environment offering

principles such as impartiality, honesty and friendliness (Aldi, 2014).

Aldi promise its customers, value products for the best possible price, understanding the

customers’ needs. Allowing the customer to make informed choices, Aldi have a good

foundation, operating its grocery business as “hard discounters” which allows the leanest

measures allowing low overheads, this will be discussed in more detail within the paper.

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The Aldi Timeline provides an insight of the progress the company has made and

expanding to a number of countries.

Source: Aldi.com

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3.1 LEADERSHIP

Paul Foley, Appointed UK managing director in 2000 - 2009.

Paul Foley was appointed as UK managing director in 2000. He was born in Fulham,

London, England being educated at Watford Grammar School; West Hertfordshire College.

The story began at Aldi with him being a Management trainee, holding roles in Germany,

Australia and the UK (Finch, 2008). Proving a wealth of experience of 13 years’ worth,

working as a Sales director for the Iceland retail group, he joined Aldi to be part of the

international management board, responsible for identifying and applying new opportunities

within the business covering e-commerce and geographies (LinkedIn, 2014)

Opening its first store in the 90’s in the UK, their style of food retailing was unheard, till Aldi

continued to expand during the reign of Mr. Foley.

Under his leadership, Aldi has seen continued growth in the UK and established a market

percentage against the other leading supermarkets. Aldi has seen 460 stores establish in

the UK and Ireland with continued expansion planned (Finch, 2008)

The implementation of stores has allowed to build a foundation for further strategic

development. The key areas, Paul Foley focuses on its strategic planning is based on:

Everyday low prices: Just cheap groceries, no special offers and no short-term

promotions

One product: offering consumers one type of product, rather than 16 different types.

Sales Increase: Introducing themed promotions on a weekly basis on non-food range

ranging from aerodynamic backpacks for motorcyclists to air compressors.

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As Mr. Foley focuses on the latest campaign and attracting new customers, it’s claimed that

a fifth of the total stores takings can be accounted by the new campaigns (this is money,

2009). After the success of Mr. Foley’s career at Aldi, he decided to leave for new business

interests on the back of his success which saw Tesco launching its own discounter range to

compete (Creevy, 2009)

His announcement to leave Aldi sent shock waves through the grocery world when he

made his surprise exit with Matthew Barnes (joint) role with Roman Henini filling the role,

taking control of Aldi UK and Ireland, leaving his current position of director of buying in

Australia and Swiss operations. Mr. Barns will have to raise the companies profile should

he wish to maintain or excel the organisations strategic planning in an already crowded

market (The Grocer, 2010)

3.2 BLUE OCEAN ANALYSIS

W.Chan Kim and Renee Mauborgne (Blue Ocean Strategy, 2014) argue that an over-

crowded markets should not be competed in as it’s known as “Bloody” red Ocean strategy.

Organisation’s to compete in a market must create “blue oceans of uncontested space”

(Witcher & Chau, 2014).

Aldi have taken advantage of this uncontested space within the “Bloody red ocean” strategy

market by offering products of a similar or same quality at a cheaper offering in the same

market with others in the same market struggling to keep up.

An example, is Morrison’s supermarket, offering a scheme called “Match & More” allowing

customers money back, if their shopping bill was cheaper at Aldi in attempt to take on the

Aldi brand and reverse the decline in sales (telegraph, 2014). It’s still to be seen whether

such a scheme will work for Morrison’s.

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4 PESTEL
Based on the performance, there is a number of factors that the organisation can consider

to stay competitive and be able to plan a strategy in a globalized environment. The

P.E.S.T.E.L (Political, economic, social and technological, environmental and legal) structure,

(Witcher & Chau, 2014) helps look for sources and general opportunities and risks which

can lead to a transformation of industries over a period of time.

4.1 POLITICAL ANALYSIS

Aldi operating in a global market is influenced by a number of factors (Political and

Legislative) including the European Union (EU). Government’s decisions can affect

business, in particular, all business must obey with the law and consider the impact on their

own operations which may result in taking consideration and action before enforcing such

legislation.

The EU was founded in March 1957 (Europa, 2014) helps the retail market transfer foods

from each members without concern which includes France, Germany, Italy, Belgium,

Luxembourg and Netherlands, allowing Aldi to transfer goods to each country.

The EU and the UK have some differences in respect of competition policy laws with the

UK banning restrictive practices regardless of its impact of customers, however EU

legislation only operates if such customer is harmed by the practice. In such instance of the

two, the EU legislation will claim superiority that of the UK (Sturridge & Gillespie, 2004).

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4.2 ECONOMICAL ANAYSIS

Many economic factors are out with the control of the organisation. As an International

business, its expectation is to continue to grow and contribute to Aldi’s profits in future

years. As the UK is still in economic recovery, this can be seen as a concern by the

organisation as this can influence demand, price and profits. One of the influential factors

with poor economy is the high unemployment rate, which impacts society’s demand for

goods, affecting the demand and requirement to produce products.

As the UK enters its Quarterly three forecast, The British Chambers of Commerce (BCC,

2014) has increased the GDP growth forecast for 2014 and 2015. The GDP was reported at

3.1% for 2014, on course for another poor performance however this has increased to 3.2%

resulting in the 1st increase in growth since 2007, exceeding 3%.

As employment figures and higher growth is expected in 2014 than previously forecast, this

news can only be a positive sign which Aldi can take advantage of this in the UK. The

organisation’s, joint managing director Matthew Barnes quoted “if you look at our staffing

situation alone, we are going to go from 12,000 employees at the end of 2012 to 24,000 in

2014” (telegraph, 2014). As the organisation continues to work tirelessly and committed,

Aldi has turned up the heat on the British supermarket industry which has seen faster

growth than any other food retailer.

4.3 SOCIAL/CULTURAL ANALYSIS

The UK’s population is aging, which may lead to a decline in labour in the market, allowing

a rise in medical and education services (economics, 2013). The government would have

to impact on society’s benefits, pensions and seek to increase taxes to provide more

funding for health care. These demographic changes can impact on retail businesses.

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The continued rise of expenses and slow increase in incomes is affecting UK’s society and

buying behaviour, forcing society to compromise on cost and quality. As Society is getting

less for their money, Aldi acknowledge the market conditions by segmentation by identifying

realistic prospects within the retail market. When implementing a market strategy, Aldi can

improve the marketing method. The marketing method consists the four P’s that consist the

following; promotion, product, place and price (Hooley, 2012). An example of the

organisation using the marketing method, is the product mix, adapting and expanding its

range of foods to organic products as customer’s attitudes towards foods consistently

changing (startribune, 2013)

The organisation can take advantage of existing and new customers, allowing Aldi to exploit

the four P’s to produce a process were the correct product is sold with the correct price, at

the precise place highlighting the best possible approaches. The economic downturn has

allowed Aldi to expand its presence within the UK market and make other supermarkets

(Morrison’s) compete by attempting to reduce their costs to price match Aldi. (Telegraph,

2014).

4.4 TECHNOLOGICAL ANALYSIS

As Aldi continue to offer cheaper products than its competitors, customers are more price

cautious and seek for a more convenient experience using technology which can enhance

the overall experience in shopping.

As the internet continues to develop, retailers can take advantage and attract customers

through e-commerce, which is an example of the below the line promotion; smart phones

and tablets and this allows customers to compare prices for products and find the “best

value for money” (supermarket, 2014).

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Aldi use internet services to engage to its customers by the method of social media, Face

book and Twitter and mobile apps. Allowing customers to swap branded products with their

own brand, saving up to 40% on price.

For Aldi to continue to support the demand by customers, offering cheaper brands, the

organisation can adapt using new technology to continue the offerings and to maintain a

market position which has allowed Aldi adapted an app to calculate savings before

shopping (IGD, 2014). Aldi are in the advanced stages of opening a “super-efficient”

warehouse store and a distribution center, in England (kingspan energy, 2014)

The multi-pound development will have installed insulated panels and roof mounted system

with office space totalling 52,000m2. The new operation is expected to be open 24/7, 365

days a year offering high performance and environmentally friendly solutions with a key

result of low running costs (kingspan energy, 2014)

Source: kingspanpanels.com

This new development will support Aldi to compete with its competitors in means of storage

and office space allowing to churn more stock at a quicker pace to stores which can include

chilled foods. On the back of such project, it supports an environmental advantage for the

organisation.

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4.5 ENVIRONMENTAL ANALYSIS

The organisation will have kingspan insulated panels with high performance and a roof

mounted PV system installed at the distribution centre with a friendly solution with low

running costs which can continue reducing running costs and improve the energy

performance of the building, providing electricity with 1.2 GWh of per annum, allowing the

organisation to expand and compete further in the UK market (kingspan energy, 2014).

ISD Solutions managing director Tony Wall was quoted “We have been working with Aldi

across a number of in-store frozen and chilled food storage solutions and this is our first

standalone warehouse project for the Group. The range of composite panel technology

incorporated in this project, together with the solar PV system, makes this a truly state-of art

warehouse structure.” This news will be welcomed by The Intergovernmental Panel (TIP),

in that greenhouse gas emissions are required to be condensed by 90% by the year 2050

which will impact other organisations (Witcher & Chau, 2010)

Source: kingspanpanels.com

As Aldi take consideration to its buildings and designs, Aldi play a major role in helping

reduce the environmental impact it has on the environment through a number of campaigns

involving its customers. A key factor is Aldi plastic bag policy. Aldi have encouraged their

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customers to bring their own bags or Aldi can offer a durable bag at a costing, which is

100% recycled material and can be kept and reused on each visit to the store.

The Aldi website state “we are particularly proud of our plastic bag policy. We encourage

our customers to bring their own shopping bags, or alternatively they can purchase durable

shopping bags from Aldi which can be reused time and time again” (Aldi, 2014).

Aldi.com

As part of Aldi green deal, the organisation took the decision to stop the production of

phosphate laundry powder as part of the green plan. Phosphates is a product that can be

used to help against hard water to make the water softer which can be used in dishwasher,

laundry products to help dissolve dirt but when the water in released, it can result in

producing a substance that can prevent marine life (Aldi, 2014)

(Sydney Morning Herald, 2011) report that Australian supermarket has decided to take

action and remove the product from their supermarket, confirmed by Stefan Kopp,

Managing director of buying, “ALDI Australia is proud to announce that as of the 16th of

February 2013 all of its exclusively branded everyday laundry products will be Australian

made and phosphate Free” “We understand that phosphates can harm Australia’s

waterways as well as Australia’s beautiful marine life”.

Aldi.com

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4.6 LEGISLATIVE ANALYSIS

In the UK, the European commission has made it mandatory for eatable products to display

nutrition facts within the retail industry by 2016, allowing consumers to help choose a better

balanced diet (food.Gov, 2014).

Codex Alimentarius suggests a number of standards for food and agricultural products,

internationally, allowing consumer protection which can impact Aldi on a global level. An

example of this protection is a recent article by Adegoke (2014) in that Aldi decided to

change the name of its cut-price ‘Beluga’ after food experts raised questions that the

product didn’t meet the requirements for the famous delicacy.

The codex for international food standards provides a guideline for the ‘Beluga’ caviar

which includes guidelines for labelling hybrid caviar from different sturgeons. As the

species take from 18 to 35 years to mature, Aldi are unable to produce ‘Beluga’ as the

costs are too expensive and none of their sturgeons used to produce the caviar have “Huso

Huso” (Adegoke, 2014). Therefore, this is the reason for Aldi changing the products name.

Organisational Culture

The Organisational culture can impact the attitudes of its employees towards the business,

product and their work. In the case of Aldi, the Albrecht family are the “characters” which

support a culture they favor allowing leadership within the organisation, which all

employees have an understanding of what’s expected.

The culture at Aldi has never been documented on paper apart from the organisations

goals, which are defined in the job description (N. Brandes and D. Brandes, 2013).

Aldi has cultural requirements which includes agenda and control programs due to the

Organisational costs which plays a daily and important role within. N. Brandes and D.

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Brandes explains “In the end there is no control more effective than a distinctive,

homogeneous corporate culture. If the general direction is right, the details can be

entrusted to decentralized self-organisation. Time-consuming coordination and control

systems can be dropped.”

The organisation supports the same guidelines and follows the same line of success

throughout Aldi, as Brandes describes “Decisive for a good organisation is that everyone is

playing the same tune” which can include job descriptions and expected to be honored by

employees (N. Brandes and D. Brandes, 2004)

Aldi acknowledge that the main focus is their customers. Customers bring credibility, within

credibility, brings relationships between people and this can be the same for managers and

employees. Aldi abide by the key principles by offering quality products at the lowest price

possible. In turn this allows the customer to build relationship and trust with the organisation

(N. Brandes and D. Brandes, 2004)

As Aldi continue to build trust and relationships with its customers in the UK, they have

learned that media advertising is required unlike its German stores. To increase customers

within the UK, Aldi have taken advantage of the situation by offering meat, fruit and bakery

to maintain their custom allowing the organisation to adapt to change to reflect the

customer culture (Yahoo Finance, 2012)

5 C OMPETITIVE ADVANTAGE THROUGH EFFICIENCY

Aldi aim to “provide value and quality to customers” as a core purpose and to meet its

business objectives by working efficiently and keeping costs low, allowing to reinvest any

profits back into Aldi. Continuous improvement supported by lean thinking is a key tool for

Aldi to continue growth, allowing new store developments, employment and suppliers.

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Saving space, time and energy and effort, allows to minimise its costs by the principles of

lean thinking which has a no-nonsense approach. Aldi core purpose is to “provide value

and quality to our customers by being fair and efficient in all we do” (Aldi, 2014)

Aldi.com

Lean thinking is a strategy that has to be continued allowing Aldi to be constantly improving

the way it meets its business objectives. The lean process is about accomplishing more

from less. Its main objectives of lean processes, is to reduce the quantity and provide

products for customers, making the organisation more efficient using less materials. This

process eliminating waste and in turn reduces costs. Once these savings has been

achieved, Aldi can then pass any savings on to its customers (Aldi, 2014)

Continuous improvement: An environment that all employees are involved to improve

quality consistently.

Just in Time Production: Stock received only when required, reducing stock levels

Total quality management (TQM): Quality assurance involving all employees, providing

responsibility to achieve “on the 1st instance”

5.1 JUST-IN-TIME

A prime example of Aldi exercising the “Just-in-time” (JIT) approach by management is the

amount of stock held within a store.

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All stores share the same outlay with the warehouses designed smaller than the store, this

design works to Aldi advantage and it keeps stock levels to a minimum, keeping staffing

levels low which allows the organisation to maintain low costs. By having such a limited

amount of space, allows Aldi to purchase stock only when required. Maintaining a lean

process when stock levels are low, the organisation’s capital improves allowing to

repurchase more stock to improve profit (Jobber, et al, 2006).

Aldi.com

5.2 E MPLOYEES

The employees of Aldi understand the organisations objectives and management support

this process in the means of personal development building relationships on their principles

of cooperation, accountability and support.

A combination of total quality management (TQM) procedures ensure employees take

responsibility for their own job roles, having a good impact on waste reduction.

Aldi has a vision, that all employees is achieving their upmost, rewarding its people to

achieve a fulfilling career allowing their people to develop and mature and in turn, will offer

salary packages considerably above the retail industry.

Employees have the opportunity to participate in structured training programs to fulfil

individual roles successfully with Managers taking responsibility to motivate and develop

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employees with continued excellent performance and improvement which allows the

business to stay competitive.

Aldi (2014) support a culture in that employees have pride in their work and feel valued,

encouraging a culture of openness and transparency with employee’s being engaged,

allowing to them to be more productive.

Aldi (2014) claim that survey results continue to improve with unsatisfied employees leave

the organisation quickly, therefore measuring employee satisfaction is an important

process. To demonstrate the satisfaction survey, it’s suggested that in 2011, the UK Store

Managers was only 6% turnover.

This can be reinforced by the “Times Top 100 Graduate Employers 2013”, in which Aldi

was categorized in sixth place with Aldi winning the award “Employer of Choice for General

Management”.

Aldi also support diversity with its employees coming from a wide range of backgrounds

and ages, offering a wide range of knowledge and experience is basis for creativity and

new innovations for the organisation. Aldi also have 48% of employees in the UK that are

female with 28% of UK Directors female which is above the industry average (Aldi, 2014)

To continue offering quality products, the organisation must adapt and work with their

suppliers to get the best possible price to continue the offering to its customers. This is

supported by Managing Director of Corporate buying Tony Baines stating “This process is

dealt with two new members of the Aldi team, who will handle new suppliers and their

enquires” (The Grocer, 2012)

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5.3 S UPPLIERS
As the organisation expands within the UK, a new website has been designed for the

recruitment of suppliers, due to Aldi wishing to increase the amount of produce by British

suppliers it offers in its stores.

Aldi’s Managing director of corporate buying Tony Baines explains” We need more than

one supplier for one product, “our suppliers will benefit from the growth – the incumbent

doesn’t lose out if we do split the contract because of our growth. It means we have an

alternative” (The Grocery, 2012).

The grocery (2012) explains that UK consumers have a misconception that Aldi being a

German company, they lack British produce, however Aldi offer its UK consumers 48% of

British food with its fresh meat being offered is British. The remainder of the 52% is

products that cannot be produced in Britain, this can include; French Wine and Pineapples.

Aldi believe that everyone in the production line should be treated fairly without exploitation

and strive to maintain standards set by the Corporate Responsibility policy reflecting the

minimum requirements.

The success of the organisation will be influenced by raw materials of that the organisation

sourced in a sustainable way, minimizing the resource of produce and its environmental

impacts, allowing to work with suppliers to concentrate on in the following areas

 Seafood

 Oil

 Welfare

 Detergents and cleaners

 Products packaging and waste

 Organic products (Aldi, 2014)

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5.4 HEALTH RANGE

Working with suppliers and bonding a good relationship, allows Aldi to generate a new

product range as suppliers acknowledge Aldi have a good relationship and happy to supply

to. In 2005, Aldi launches a premium health range in the UK, upgrading its cosmetic range

also, promising customer’s quality at affordable prices. On the success of Aldi in Germany

and considering consumers habits, the organisation extended its range in specialist foods in

2006, under the Bio range which includes vegan and vegetarian with these brands

approved by Vegetarian Union Germany. On the back of the product launch, Aldi have

confronted challenges, resulting in losses for the company (retail-week, 2012)

5.5 UK & IRELAND

Aldi demonstrated growth in the market share from 2006 up to 2009, with a slight dip, due

to the UK and Ireland market, resulting in a pre-tax loss of £54million in 2009. In the same

year, the organisation lost Managing director Paul Foley (Mintel, 2013)

While Aldi have taken advantage of the

credit crunch, their market share has
continued to increase from 2006 to
2009.

The turning point for Aldi was Nov 2009

(as above) when their share reduced
from 3.1% to 2.8% by February 2010.

Holland (2012) report that Companies

House demonstrated that Aldi’s turnover
grew by 4.6% to £2.1bn in 2010 with its
operating profit soared to £18.7m on the
back of 2009 of £21.2m with the share
increasing back up, reaching 3.2%

Source: Retail-Week.com

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5.6 C ORPORATE SOCIAL RESPONSIBILITY (CSR)

CSR has a major part to play for organisations that offer a corporate and global citizen role

Witcher and Chu (2010). This includes how the organisation pursues profit and what

impact they have on the environment which can have ever lasting impact on the

organisations image as a global brand. Aldi also take consideration to the CSR which

includes the wider community, its employees and society, this allows Aldi to support many

diverse charities. An example is the Barnardo’s charity that supports transforming

children’s lives, in 2011, was Aldi’s charity of the year (Aldi, 2014)

5.7 AIDA(R) MODULE: CUSTOMERS

Aldi uses a variety of methods and channels to achieve a short-long competitive advantage.

The AIDA module can be used to identify the following; Awareness, Interest, Desire and

Action and Retention which is used internally to identify new and existing customers by

creating brand awareness for customers to encourage them and research products further

with the objective of the customer wanting rather than liking products (business case

studies, 2014). Once Aldi has attracted the customer, it’s imperative to retain the customer

by its “Retention” processes which can be achieved through Media coverage, Newsletters

and Social Media and the organisation’s own customers, by word of mouth.

If consumers are satisfied with the products and quality of the products, this allows a vote of

confidence and can attract new customers to the organisation, which will have an impact on

their competitors. To continue offering quality products, the organisation must adapt and

work with their suppliers to get the best possible price to continue the offering to its

customers. To consider each products and to stay competitive within the market, the

organisation also uses Benchmarking practices to maintain quality.

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 Source: Google.com

5.8 BENCHMARKING

The Aldi team exercise daily team meetings in the supermarket’s “test kitchen” allowing for

tweaks and refined quality of foods before its released to the general public which is

required to be tried and tried again and once the product goes on offer, the team sample

the product once a year, when a competitor launches a similar product. This process

allows producing products at a cheaper costing without impacting on the taste of its own

branding and offering a cheaper alternative to the main brands (The Telegraph, 2013).

An example of this process was examined by the telegraphs reporter Tom Rowley, who

was invited to join the meeting to test Aldi Christmas range which included a number of

products from oak-smoked Scottish salmon to ready meals (healthy) to be launched. Aldi

products are then compared to their competitors, Marks & Spencer (M&S) and Waitrose

with the testers of the products ignoring the value for money but on how similar the product

is to the “benchmark”. Matthew Barnes, managing director states “insist on sampling every

product before it’s allowed to go on sale as it gives us a final check that we’re happy with it.”

(The Telegraph, 2013) By exercising this process, it encourages consumers lured by Aldi

by low costing may continue shopping with the organisation. On the success of such

modules and benchmarking, the analysis of SWOT can expose the strengths and

weaknesses of the organisation can use and improve on.

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 Google.com

6 SWOT ANALYSIS

Aldi to complete a SWOT analysis allows the organisation to establish their own unique

resource, competencies and capabilities highlighting strengths and weakness. The SWOT

analysis is a powerful tool to understand the organisation’s strengths and weaknesses, and

for assessing the opportunities and threats the organisation’s faces, which can assist in

carving a justifiable niche within the market.

This is supported by Witcher & Chau (2014) states that “a SWOT Analysis helps you

evaluate the Strengths, Weaknesses, Opportunities and Threats (SWOT) involved in any

business at a specific point in time.” (Appendix 10.2). The Porter’s 5 forces is another tool

which is an effective way for having an understanding where the power lies within an

organisation.

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7 PORTER’S FIVE FORCES
The organisation can have a clear understanding of its strengths of its competitive position

and the strength of the chosen market the organisation is considering moving into. By

taking advantage of its strengths and improving its weakness avoiding taking potential

wrong steps, this can play a strategic role in planning the organisation. (Appendix 10.3).

8 PORTERS GENERIC STRATEGIES

The Economic Times (2014) describes Michael Porter developed in 1980 a generic

strategies which allows to gain a completive advantage. The strategies have three key

areas; Cost leadership, differentiation and focus. Aldi have taken advantage the three

strategies:

Google.com

Cost leadership: Aldi gain a competitive advantage due to the overall production of their

products, this is being achieved through suppliers, stock churning and marketing,

maintaining a reduction of waste.

Differentiation: Aldi create a varied amount of private label products without compromising

on quality and promoted in a way that it can provide one choice at the same level of main

brands as its competitors (Aldi, 2014)

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Focus: Aldi does not have an overall competitor advantage but can achieve a certain

target to customers with an offering of private brands which its competitors are struggling to

offer at the same quality.

9 STAKEHOLDERS
Any strategic decisions are made by an executive board which is ran by Aldi North and the

southern branch. Legally, the regional companies are separate from each other with any

profits flowing into two foundations separated by both entities, for Aldi North and the

southern branch (Spiegel online International, 2010)

This allows the brothers to keep their business from competitors but also prevents the

selling of the organisation. The actions and decisions of such organisation is of an interest

of its stakeholders. Aldi stakeholders can consist of the Albrecht family, the management

and employees and customers and suppliers

Aldi established its secrecy possibly due to the harrowing kidnapping of Theo Albrecht in

1971. The German founders went to great lengths not to discuss anything which appeared

to be outrageous, with questions to the Aldi management team issued by fax. Amann and

Tietz (2010) claim that its founders wouldn’t discuss anything as they were concentrating on

daily activities of the business and the company expanded due to the business not feeding

society company news (Spiegel online International, 2010).

Aldi focus their stores on the bare essentials with limited shelving, allowing stock to be

placed on shop floor from the warehouse unwrapped. Amann and Tietz (2010) state this

philosophy was passed through the organisation with executive managers using old pencils

when the founders visited stores, to stop unnecessary concern of wasting office supplies.

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The employees of Aldi would be expected to learn each product codes by memory as the

organisation didn’t have a scanning system, allowing cashiers to complete the customers

shopping more efficiently, without having to look for a product bar-code.

Aldi offers its suppliers the same principles, this was demonstrated when Aldi stopped using

an Italian manufacture, that provides kitchen rolls, paper tissues etc. It’s suggested that the

paper manufacture didn’t meet Aldi’s sustainability certification promptly enough.

The Aldi group concentrate on offering the customer, cheaper quality products, therefore

the full process is reviewed from start to finish about their own procedures, looking at the

smallest detail, weak areas, solutions and product sampling to allow improvements to be

made.

Taken into account some of the daily processes of the business, its apparent that the

organisation is a hardworking and efficient with strict guidelines for all concerned. By

achieving the organisations values and goals, this provides consistency, trust, security with

the end result, value for the customer. By preserving their values, this allows to continue to

adapt and change to the environment. Targeting customers can be challenging and

organisations can benefit from using a number of tools available.

9.1 T ARGETING STRATEGY

Targeting tools can be used as an advantage for organisations allowing to target key areas

of the business. This process can be implemented within key areas that may require

attention as described Dibb et al (2012). The three strategies for targeting a market is

undifferentiated, Concentrated, Multi-Segment. Based on the type of market Aldi are

operating in, the concentrated approach would be suited, as this allows to focus on a

particular market, concentrating on the customers’ needs and wants allowing the

organisation to compete effectively against Aldi’s competitors i.e. Morrison’s and Asda.

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9.2 C URRENT POSITIONING

A perceptual map is a geometric evaluation of how products are observed (Baines et al,

2008). Diagram (1) is customer perception of the UK supermarkets. The perceptual

mapping demonstrates that Aldi have built up customer confidence which has impacted

customer demand and behaviour. This process has allowed Aldi to take advantage of the

market share competing with Morrison’s and Asda. Due to the Financial crisis in the last

three months in 2008 (BBC, 2009). Positioning is an important process in a way that allows

goods and services to be differentiated from each other and provides a reason for

customers to buy. Customers are more cautious and seek value for money, therefore this

can be taken advantage of as customers consider lower quality brands over high quality

brands allowing more for your earned income (Baines et al, 2008).

Diagram 1: Com pany positioning by customer perception

A prime example of more for your money is demonstrating one product “Jaffa Cakes”

McVitie’s brand from Morrison’s at a price of £2.19 and Aldi own brand of Jaffa Cakes for

£0.95 with both boxes providing 24 segments. In this prime example, the cost can be

supported by visiting www.mysupermarket.co.uk. Aldi are exercising a strategy using the

economic concerns of customers by providing private brands at cheaper offering, resulting

in customer retention overall providing opportunity for company profit (Business case

studies, 2014).

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As Aldi “Discounters” continue to offer cheaper alternatives, Aldi support a strong presence

within the UK retail market with £10.8bn sales (Diagram 2). This figure demonstrates that

their strategy is working in a positive manner against their competitors. If the organisation

continues penetrating the market as it’s been achieving in recent years, the sales figures

can only rise and allow Aldi to may develop into one of the big players within the UK

market.

Source: IGD UK Grocery: Market and channel forecasts 2014-2019

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9.3 S CORECARD: PERFORMANCE

Based on the current performance of Aldi, they can use the scorecard to support their

success and continue to take the success forward. Witcher and Chu (2010) explain, the

scorecard is to assist companies to establish an account of their financial and strategic

objectives using lagged and lead measures which also allow to analysis productivity and

perceptions of customers and the management and development of employees.

The objectives and measurements can be reviewed in four perspectives;

Financial outlook: The recession has allowed Aldi to succeed financially with a profit of

£57.8m in 2011 with UK profit rising by 200%. As the organisation is privately owned, the

family business has no shareholders, therefore any profits goes direct to Aldi (sky News,

2012)

Customer outlook: Aldi achieve their vision by targeting a certain market due to the

recession. In the UK, the middle classes have been particular responsible for the increase

in profits, providing similar products at a cheaper costing, without compromising on the

quality, allowing retention of customer and brand awareness, as Aldi products are private

brands (Daily Mail, 2013)

Internal business outlook: Aldi excel at providing quality products at a low costing,

providing a cheaper alternative to its competitor brands which continues to meet customer’s

needs.

Learning and growth outlook: Aldi having the ability to sustain their position and change

and improve by introducing new stores within the UK, allowing recruitment and new skills to

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be learned through development and progression, supporting competitive salary. Existing

stores being upgraded due to the demand.

External Challenges

It’s without doubt that the organisation has taken advantage of the recent recession within

the UK market, attracting customers looking to save on their shop, allowing Aldi to grow and

expand.

Aldi support a good foundation across Europe, demonstrated by (Diagram 3) and of course,

Aldi have raised the competition within the UK, rivaling some of the household names in the

grocery market.

The challenges of the future is the economic recovery with disposable income increasing

with the organisation struggling to maintain middle-class shoppers, they appealed to, during

the economic hardship (The Grocery, 2014)

Diagram 3: Source: The Grocery

Aldi’s strategic planning, moving the organisation forward will need to be adapted to support

the economic recovery if they wish to continue to maintain their customer support and

market share in the UK.

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One way of achieving, is a focus on the quality of its products and providing a wider range

of products than ever before. It will be a tough achievement for the discounters however

with the correct strategy in place, this would hopefully allow the organisation to maintain its

stronghold within the UK.

9.4 S TRATEGIES ADOPTED IN FUTURE

The recession has provided a key opening for Aldi to take advantage of an already crowded

market with the other competitors, Asda, Morrison’s and Tesco’s having a greater market

share in the UK.

It’s clear from this paper that Aldi have grown from Strength to strength with a slight dip in

2009. The organisation has quickly recovered their position, reaching 3.6% market share in

2011 in the UK, with sales reaching £57.8bn in the same year (retail-week, 2012)

The sales have increased as consumers consider their shopping habits, as the price of food

prices continue to rise, increased inflation and lack of salary increases.

Diagram 4: Source: Defra

Axa Big Money Index, claim that a wide range of consumers from middle class within the

50’s and 60’s age bracket, supporting a high disposable income and mortgage free are

using the discount stores such as Aldi and others to save.

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(Diagram 4) demonstrates the movement in share of spending on drink and food in UK

households and low incomes from 2003 – 2010 (retail-week, 2012).

IGD claim that the discount sector in the grocery sector will be certain to double in size

within the next five years, prompting sales to increase from £9.5bn to £18.6bn (The

Telegraph, 2014)

Aldi can define its future strategy preparation by identifying key area’s and its core business

on how the organisation should be managed on the back of Theo Albrecht death.

Providing Aldi continue to provide quality products at a cheaper offering and with the

announcement that the interest rates are due to increase in 2015, household incomes will

be stretched further (This is Money, 2014) allowing Aldi to expand its market share.

9.5 ANSOFF MATRIX

As mentioned above about the current success of Aldi, the continued success of Aldi can

be achieved by maximizing future opportunities and performance and growth. Using the

Ansoff Matrix tool, will allow the organisation to take advantage of the marketing strategies

to determine its products and market growth (Witcher & Chau, 2010). The strategy was

invented by Igor Ansoff, who was a mathematician and involves four segments (Diagram 5)

Market penetration, market development, diversification and product development (Ansoff,

2007).

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 Diagram 5: Source: Google.com

Market penetration

Aldi can take advantage of the existing product range to increase their market place, by

taking advantage of such a market. It’s the least hazardous strategy with Aldi managing to

continue to get existing customers to purchase more products as well as attracting new

customers by the method of price. Roman Heini, Managing director of Aldi UK states” We

have gained more market share during the price war than prior to the price war, which just

indicates that the more consumers are led to focus on price, actually the more we benefit”

(FT, 2014)

Market development

Aldi can continue to open stores within the UK and Ireland, however as a global discount

retailer, they may wish to expand into other countries to become more dominant. As Aldi

have launched in America, Europe and Australia, the consideration of China investment

could be possible with Aldi already securing stores from Belgian retailer Delhaize which

was worth £9.4m deal (retail-week).

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Diversification (unrelated)

This is the most hazardous process, introducing new services to new markets. This process

requires innovation and opportunities. Aldi have entered into the online service for photos,

allowing customers to purchase Photo books, Prints, wall decorations, greeting cards and

calendars online and uploading personal photos (Aldi, 2014). Aldi may consider expanding

and using advertising to increase sales.

Product development

Aldi have continued to offer private labels which is estimated at 95% of Aldi products. Due

to the deepness of the recession, Aldi acknowledge and understand their customers’ needs

and behavior’s and offer similar products at a cheaper offering (retail-week).

If Aldi take the Ansoff module forward, this may lead to continued reputation and retaining

customers and attracting new customers, leading to an increase in the market share,

however a consideration of the external challenges that may influence the organisation

must be considered.

Consideration of new products being added to the Aldi range, building its reputation for

quality products, working efficiently and expanding the global consumer base while

continuing to offer cheaper brandings than its competitors, may allow the Aldi group to

expand its market share further in the UK and continue to develop internationally.

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 10 APPENDIX

10.1 C OMPANY BACKGROUND

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10.4 A LDI AWARDS

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