Professional Documents
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Bharat Gupta (191134) Chitwan Garg (191135) Kantika Gupta (191142) Nimira Singhal (191152) Rahul Upadhyay (191160) Sampada Mittal (191170)
Case Introduction
ALDI was set up by Albrecht siblings. Incorporated in 1948 as the Albrecht Discount Company. ALDIs USP is aimed at top quality at incredibly low prices guaranteed. ALDI opened its first supermarket style store in 1961. ALDI went in for international expansion in 1967.
International Expansions
ALDI started international operation by purchasing HOFER Chain of supermarkets in Austria. All the international store also followed the same strategy with very less differences according to locale. ALDI discount business model was not successful in all the countries. E.g. Ireland.
Future Prospects
There is a saturation perceived in Germany market. ALDIs nearest competitor growing at a faster rate and stronger at a lot other markets. Changing consumer behavior from just purchasing to complete shopping experience. ALDI has diversified from fast moving products to Land and property, Flower service, Travel, Photo Service, etc.
SWOT ANALYSIS
STRENGTHS Leader in the discount grocery market sector in Germany. Bulk Purchase Low labor cost Low overall cost Relationship with Vendors Similar products, one size High inventory turnover rate Retail own branded portfolio at discounted prices International expansion Self service Minimal Human Resource THREATS Competition Grocery sector is becoming saturated Differentiated products is a necessity Value added services Commodity shortage Grocery inflation
OPPORTUNITIES Tap a bigger market segment Recession hit consumers would buy low cost grocery Higher reductions in International Purchasing cost Selling Power of suppliers in control
WEAKNESSES No advertising Operational hours Small store size with no frills Global expansion: Adapting to local areas High Risk of new players in foreign countries. Over dependence on one or two suppliers Image of a low price low quality brand.
INDUSTRY FORCE
COST LEADERSHIP
Entry Barriers
Buyer Power
Supplier Power
Threats of Substitutes
Rivalry
Product strategy
Limited assortment of products
Products in only one size Stocked fast moving goods
Did not carry more than two different brands for each product
Small stores
Limited assortment Small sales area of around 15000 sq. ft. In Germany, stores located at shopping centers and other retail properties Cheaper than free-standing stores Sales per sq. metre were much higher as compared to traditional supermarkets Lower staffing and maintenance costs Customers liked smaller sized stores Could get in and out faster
No-Frills Setup
Stores simple with no unnecessary decoration Minimal artificial lighting instead, open neon lights used No fancy layouts and product displays Easy stock replenishment (shipped on pallets and cartons put open, some items sold loose) Did not provide grocery bags (no greeters and baggers) Low-cost way to manage use of shopping carts by customers No need to employ people for this Limited store hours Minimize labour costs No listed phone numbers Complaints only made by customer in person No need to employ person to attend calls
No Advertising
Minimum advertising Small weekly newsletter called Aldi Informiert (Aldi informs). Distributed in stores, direct mail to registered users on mailing list and sometimes printed in newspapers Minimal advertising expenditure as company believed its low prices were advertisement enough Slightly more focus on advertising in overseas markets
Simplified Operations
Limited assortment of products and small stores Cost-effective operations Low wage bill Only 3 employees-a store manager and two assistants Employees expected to multi-task No pay for overtime, holidays and night shifts because of limited working hours Easy and quick billing process Earlier accepted only cash, then moved to debit cards and electronic benefits transfer cards (food stamps)
Internal promotion policy Bare-bones approach to inventory management High inventory turnover rate supported by well-developed logistics system Regions had regional logistics centers All stores within 50 km radius All shipping expenses up to distribution centers borne by suppliers Cross docking Relationships with vendors (single vendor and worked closely with them to streamline packaging and lower costs) No collection of customer data to profile them
Germany thought to be home of the hard discounter German shoppers were extremely price-conscious Discount shopping not restricted to lower income groups, common for upper income groups as well No stigma attached to bargain stores Grocery retail market dominated by companies offering limited assortment of products at extremely low prices German consumers did not like to travel long distances for shopping Preferred small stores to get in and out easily
Major challenge for foreign retailers who could not adapt to the German market
Problems in Germany
Change in Strategy
Here a business seeks a lower-cost advantage in just on or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. This strategy will allow Aldi to leverage on its lowcost business model and product strategy of offering limited assortment of fast moving products.
EDLP Concept
Everyday low price ("EDLP") is a pricing strategy promising consumers a low price without the need to wait for sale price events or comparison shop. EDLP saves retail stores the effort and expense needed to mark down prices in the store during sale events, and to market these events; and is believed to generate shopper loyalty Aldi can adopt an EDLP concept as compared to its Weekly Special Buys. It also appeals to Aldis operational excellence in maintaining low costs and no advertising approach.
Contd..
Customer movement: quick and easy Keeping the store small also make the choice of a site easy (in case of place decisions) Simplicity of operations is one of its biggest strengths Limited variety helped in availing bulk discounts Competitive advantage
A Wider Assortment
The benefits of a wider assortment are: More variety for the consumer Supplement/ substitute availability Increase in the average bill size Impulse buying behavior However, the decision is case sensitive. Example: in a country like Ireland, consumers are not price sensitive. But for the present business model, the product line should not be expanded as the costs outweigh the benefits.
is known for its low cost model and stands out from its competitors for the same
Shoppers
perceive high quality, assortment and service from Aldi (comparable to traditional stores)
Though
new stores offer wider offerings and experiences but customers in Germany perceived it to be good value for money
Lidl
was growing in areas where Aldi had no presence (but more than 80 % germans lived within 20 minutes of an Aldi store- high presence)
Was not a uniform success in all the countries. Had to bring changes : Australia- Stock vegemite sandwich spread and Nescafe U.K. Stock marmite and sweet pickle called Branston Pickle Switzerland Stayed away from Toblerone chocolate and gourmet cheese Prepackaged fruits and vegetables in Australia, U.K., and U.S. Failed in Ireland- people were not so price conscious
1. 2. 3. 4.
Thus depended on country to country was a success somewhere and a failure somewhere