CASE STUDY

ALDI

STRATEGIC MANAGEMENT
 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. They achieve it and become very popular in Germany and
then make business expansion. The most important factor in their success and popularity are
affordable prices and great quality. Karl & Theo decide to split the Aldi operations in two
groups Nord and Sud because they have encountered a small misunderstanding regarding the
sale of cigarettes in the store. This issue becomes the main reason of dispute among them and
they had separated. The Nord Aldi operates in the north Germany and the Sud Aldi operates
in the south Germany. In 1967 the Sud Aldi expands its operations and started opening stores
in Austria. In 1973 the Nord Aldi starts its expansion by opening stores in Netherland and
other countries.

Now Aldi has more than 10,000 Branches all over the world in almost 70 countries. It’s been
in last few years that Aldi has gained its market share (Kantar, 2015). In 2010, Aldi is not
performing its full potential, at-least not on potential level in accordance to their expectations.
Aldi wins “Which? Supermarket of the Year Award 2015”. Which? Its a magazine that focus
on searching the best products and savings for customers and is a very well respected and
coveted award in the supermarket sector.

Aldi’s mission, vision, objectives and core values

o Mission is to deliver the best quality products to its customers which fulfill the needs &
wants of the customers in a more satisfactory way.
o Vision is to facilitate to its buyers so that they can enjoy the flavor of rich life by paying
low prices and the key purpose is to provide the opportunity to peoples for using the
quality products at the equal level. Aldi offers their customers a smoother way to
purchasing the goods.
o Goals and objectives are to provide quality and value through fairness and efficiency in
all systems and to achieve growth in market share.
o Core Values include consistency, simplicity and responsibility that will lead to
reliability, efficiency and commitment respectively.

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On the basis of the mission, vision, core values and objectives, Aldi acknowledges the need
of employees with great caliber so as to construct a perfect culture of customer service for
customers of Aldi. Aldi gives importance to the training and development of their employees.
Aldi aims to offer necessary skills and knowledge to the employees for the performance of
their roles effectively and also aims for the development of their workers throughout their job
period in Aldi, so as to gain employee retention.

 Factors to be considered while formulating strategies:

Guardian (2017) indicates that market share of Aldi will grow by 19.8 percent in the 12
weeks to May 21 2017 whereas the 4 big rivals like Sainsbury’s, Tesco, Asda & Morrison’s
will grow mutually by 1.6 % only. In this situation Aldi should plan and implement new
strategies for its growth, the following factors should be considered while planning for new
strategies:

o Workers:

Workers are type of stakeholders for Aldi and they can also be called as internal stakeholders.
Aldi encourage the employees and expect hard work from them, work honestly and also
fulfill their responsibilities and ensure commitment.

o Delegation

In the delegation process Aldi allocates responsibilities among all the workers in accordance
with the hierarchy.

o Resources

Aldi owns the important resources and it’s the strength of Aldi. Strategic strength plays an
important role in success of a company and is known as strategic necessities such as good
quality at low cost.

 BCG Growth Matrix of Aldi:

To examine product line in growth opportunity terms BCG matrix is developed and is as
follows:

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o Star stage

Aldi is positioned in the star box of the matrix as it has the high market share and growth rate.
Aldi is the market leader and also endowed to maintenance of the leadership position and
decides to continue operations for longer.

o Question mark

The question mark refers to relatively lower market share & high growth rate and it’s not
profitable for firm, it also affects cash flows.

o Cash cow

The cash cow shows high profitability and low investment. It also displays relatively high
market share and lower growth. The excess of cash is employed to fund the stars & question
marks.

o Dogs

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Products or brands in this category are sufficiently weak so they can’t achieve dominance in
market and have low growth and they started developing negative cash flows.

Organizational Audit

 SWOT Analysis for Aldi:

The SWOT analysis of Aldi is as follows:

o Strengths
 Strong associations with supplier
 Low priced quality products
 Focuses on CSR
 Ethical trade & protect the environment
 Make efforts for well-being & development of workers.
 Operating costs is kept as low as possible.
 Loyal customers
o Weaknesses
 Smaller range of product
 Assumption in consumers that the products of low prices have poor quality.
 The use of “Just-In-Time” production system. It means that when store runs-out of
any product it’s possible that they may have to wait for a number of days for the
delivery
 Not utilizing technology for operations
 Advertisement is less focused by Aldi

British people do not accept change easily and don’t give attention to the products
that are not cultivated in British Isles
o Opportunities
 To expand the market share through new offerings
 Can increase customer by introducing loyalty programs
 Can take advantage of increase in market share through high advertisement.
 Can use business expansion to grow in other countries that are not targeted at
present.
 They can open new modern store to attract more customers.

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o Threats        
 Low Price Low Quality perception
 Competitive rivalry
 Price war with other brands
 Other brands are taking advantage of latest technology
 Competitors have highly skilled labor.
 PESTEL Analysis of Aldi:
o Political Influences

The governments of all over the world have become increasingly worried about the future
terrorist attacks around the world as 130 people in Paris have been died recently. Thus they
start to introduce new legislation that have a major influence on the organization. That
legislation must be followed by all companies in the UK and non-adherence to these
legislation may result into fines upto £500,000 that may result into revenue loss and can
damage the corporate image (commissioner’s office information, 2015)

Tax can be increase as the value added tax was risen by 17.5% to 20% in the tax year
2011/12.This had a great impact on Aldi because it rises the product price by at least 2.5%.
This impact can’t be avoided by anyone in the UK. To survive for this tax increase, Aldi had
to keep their operational cost low to maintain their competitive advantage over their
competitors. This indicates that Aldi value their employees.

Aldi can be affected by National minimum wage that it employs. They believe that UK
national minimum wage rate of £6.70 is not enough to survive in the UK so Clements (2015)
argue that Aldi pays it employees the living wage with sights to rise it to at least £8.40 in
2016

o Economical Influences
Recession has a greater impact on Aldi’s strategy indicating fewer disposable income in the
UK and that customers were shrinking their budgets. It means that they were just shopping
for important items. Aldi was able to make their influence on the market by this point.
Another main influence was the price war with the big four super markets i.e. Morrison’s,
Sainsbury’s, Tesco and Asda. These are huge organizations having capacity to sell up to
25,000 products (Ruddick, 2014) in each store while Aldi have a 1350 product’s capacity. To
keep cost down Aldi has adopted such a strategy of offering a small range. That enable them

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the customers to do savings. Aldi has competed against the price war with these big four by
keeping the same margin. It has again lowered their price by noticing that Asda and Tesco
have down their prices to be competitive with the price range. Close margin could result into
loss of competitive advantage for Aldi. This has a well effect on Aldi.

o Social Influences

Aldi can be socially defined as being a low quality shop with the assumption that low price
equals to low quality. Harrison (2014) studied that 95% of their products have their own
label. These products especially comes from Germany. The part of British fear of change is
trying a new product from a different country which has been overcome by using a market
campaign of Aldi brands that are “like brands only cheaper”.

After market research that indicated Aldi is a top up shop and people use the big four super
markets for their main shop. Ruddick (2014) studied Aldi’s has changed the public opinion
by increasing 800 to 1350 new products range of fresh fruits, newspapers, flowers and
nappies in 2013 to encourage and rise the amount of customers doing their main shopping at
Aldi.

o Technological Influences
There is also a big impact of Technology. The use of credit/debit cards without a surplus
modification as recent as September 2014 has introduced by Aldi (Wikipedia, 2015). It
means shopping process could be increased for the customer. Aldi has a competitive
disadvantage with The Big Four as they do not offer online shopping services which can
result into percentage loss of market. But it’s a part of Aldi cost saving strategy that remains
effective.

o Environmental Influences

Aldi is really aware of the environmental effects of their organization & have established the
corporate responsibility policy about the different issues related to environment and are
devoted to reduce their environment footprint. There are six pillars of CRP (Aldi UK, 2015)

1. Consumers: focus on three things i.e. healthy lifestyles, product safety and responsible
drinking
2. Suppliers: emphasis on Ethical working conditions

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 3. Resources for Aldi’s products: concentrate upon several areas including fish, palm oil,
packaging, cocoa, forestry, detergents.
4. Operations: concentrate upon decreasing their carbon footprint, being energy
efficient, meeting global standards for reducing and recycling their waste.
5. Our people: focus upon delivering high quality, developing opportunities and
structured training programmers.
6. Communities: emphasis upon a number of different charity- based activities through
charitable organizations

Aldi’s reputation can be improve by emphasizing upon these pillars and operational cost can
be reduce
o Legal Influences

In context of legal influences, there are several things that Aldi require to adhere by. Aldi
imports goods into the UK from another country so they must follow UK and EU legislation
for testing foods and checking to ensure that they follow legislation on food additives,
irradiated foods, labelling and licences. Aldi follows legislation i.e. the food Standards Act
1999 to ensure the food standards, how they are made. Reputation and organization funding
can be affected by not following the legislation. So it is essential to ensure customers return

 Porter’s 5 Forces Analysis:

The examination of Aldi under the porter’s five forces model is as follows:

o Threat of new Entrants: (Low)

In the grocery business it is the most favorable point that there is a low threat of new comers
due to the large number of barriers in the way of new entrants in the retail industry. It is
known that it’s a profitable business and in this business huge profits are earned by Aldi. But
in this industry Aldi has to face tough competition from the already existent competitors.

o Threats of Substitution: (From Low to Medium)

Aldi is facing a substitution threat but it is low to medium but there are chances of it to rise in
the future because the competitors are trying to beat Aldi. Aldi is maintaining the competitive

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advantage of great quality in low prices by this they are dealing with this threat. It is difficult
for the competitors to provide substitute on such a low price like Aldi is providing as the
prices of Aldi products are 20 to 30 percent lower than the market prices. Aldi is
implementing new strategies to reduce the impact of these threats.

o Suppliers’ bargaining Power: (Low)

Aldi is a company that operates more than 10,000 store worldwide, it purchase in the bulk
quantity from the suppliers and have in its own right the buying power. To get more power
and favorable terms they buy from multiple countries. Aldi does not change their suppliers
since starting, they have the shipping and bundling coordination with the suppliers for their
own advantage. The suppliers help them to control the cost and to win the competition from
rivals.

o Buyers’ Bargaining Power: (High)

The buyer are called “king” as they always have the highest power. The customers have
many options to buy, because there is a large number of sellers. The competitors try to copy
each other’s products, it increases the similarity in the products. This situation increases the
power of buyers as it only depends of their choice that which product they select. Aldi in
coping with this situation by providing high quality in less prices.

o Threat of Existing Rivalry: (Medium)

The threat from existing rivals is medium as other than Aldi there are a number of retailers in
the industry worldwide. The rivals of Aldi includes TESCO, LIDL and many others. But Aldi
is maintaining its position in this competition through keeping the cost low and by providing
quality good at less prices. Aldi is achieving more and more success from their unique
strategies that are efficiently implemented.

Strategic Evaluation and Choice

The Britain recession forced people to reduce their shopping expense and Aldi is well known
for its discount retailing. Therefore it became the reason for Aldi’s success. People are
offered by quality goods in low prices. But there is a social stigma in Britain that the low
priced products are lower in quality also and therefor Aldi is considered to be a place for
lower class of customer (Steiner, 2013). For this reason Aldi has worked hard for the

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improvement of quality of their products and they achieved success. In recent times Aldi is
known for its high quality products (Skordili, S. 2013).

Aldi’s strategic focus is on keeping cost low and improving quality, and through this they
focuses on increasing the market share. Customers only wants a brand of high quality that
provides great services to customers, a brand on which customers can rely on. According to
Harrison (2014) Aldi is able to grab the market share from their competitors, if they work on
improving the strategies and achieves customer loyalty they will become the biggest retailer
in the industry.

Aldi’s strategy of keeping prices as low as possible requires to keep controlling the cost of
operations, therefore their main focus is on cost control (Witcher & Chau, 2014). For this
purpose they use the lean working system, it is about receiving more by investing less. Lean
working system uses many efficiency programs that include:

o Continuous Improvement: All the employees should persistently involve in making

quality improvements. Employees should understand importance of continuous
improvement so that the organization will run smoothly. Aldi clearly defines and
implement the improvement strategies.
o Just In Time Production: Aldi hold only the needed stock because the stock is
expensive and this results in the upped capital because it’s not tied up in stock. The
negative effect of this strategy is that the store has to wait for long time to get the
products delivered, it wastes the time and may become a reason for decrease in sales.
o Time Based Management: To reduce the time wasted in operations the employees
should be skilled and flexible in their duties. Aldi provides a training programme for the
development of new, and to polish the existing skills. Time management can reduce the
cost and ensures efficiency in the whole system.
o Total Quality Management: This is associated with the Continuous Improvement of
Aldi. Its rules or codes are linked with improvement in quality of products or services to
meet the customers’ needs. TQM approach helps the organization to build strong
relationship among Aldi and their suppliers and hence, they ultimately move towards the
continuous improvement.

Aldi should control its cost to be lower than the competitors. They works on the leadership
strategy, they can become the market leader when their competitors couldn’t beat them on

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prices. If they successfully achieve the market share they will also achieve greater scope and
economies of scale (Witcher and Chau 2015). All of these applied strategies together enable
Aldi to keep the cost low, to increase level of quality and to become a tough competitor in the
retail industry. Aldi also controls cost through keeping the layout of stores simple, small size
of stores and by employing less staff (Sandberg, E. 2013).

Based on the above discussion Aldi is suggested to apply the differentiation strategy. The
Matthew Barnes and Roman Heini, new director of Aldi want change in the company to grow
and to achieve success and to win the competition (Burrows, T. 2014). So they are suggested
to use the differentiation strategy and to introduce the new products like fresh vegetables &
fruits and newspaper and many other products that they can develop and to open new stores
in Asian market. Use an approach under which Aldi will develop and market new and unique
products for different customer segments. They have a competitive advantage and they
should grow and take risk of entering into a new market with new products. It will enhance
their image, increase their market share and competitive position. Aldi should move towards
the Asian countries with the new products that are in accordance with the choices of customer
in these countries. There is a great demand in Asian countries for such products of low prices
and high quality which is the main strategy of Aldi.

Strategic Implementation

 Roles and Responsibilities for Implementing a Strategy:

Aldi guarantees to deliver items of high quality that are worthy and it is concerned with the
wellbeing of customers (Skordili, S. 2013). It’s a dependable firm. They develops trust among
consumers and fulfill their needs. Aldi provides great executive support in the
implementation process of strategies. They assign responsibilities and duties among all
employees. Charting process for the allocation of responsibilities are used in Aldi for the
purpose of ensuring that employees are clear about their duties. The responsibility charting
helps in explaining and resolving all misinterpretations and confusions. All issues in the
system, the gaps of responsibilities distribution and the situations where two employees are
given with the same duty are identified through this technique. The effective process of
communication among all departments of an organization is the key to success. The more
efficient the process of communication is the more successfully the strategy will be
implemented.

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It is the responsibility of the administration of Aldi to implement the strategy and to make it
successful. They divide the duties among employees and conduct meeting and gatherings to
discuss the issues and to motivate the employees. They gather vital information and new
ideas from the employees and later analyze them. The chief financial officer is responsible
for the development of spending plans, smooth funding and to control all the financial issues.
All the managers oversees the operations and make them to work efficiently. The HR
department ensures the availability of staff, motivate them and to access their workings. The
marketing department is responsible for the successful promotion of the new strategy and for
the development of effective advertisement policies. A strategy will get successful if all the
departments work together and if there is a team cohesion in the organization. It’s the
combined effort of all the employee to make a strategy successful.

 Requirements of Resource for Implementation of New Strategy:

In the process of implementing a new strategy, the availability of the key resources is very
important factor. Aldi should estimate and ensure the availability of necessary resources
before starting the implementation process. The resources essential for the implementation of
the differentiation strategy includes, the availability of funds, bank loans, human capital,
equity and the most important resource for a company is its loyal customers. Human capital
means the efficient and knowledgeable employees, they play key role in the successful
implementation. According to Armstrong and Armstrong (2011) finance is the most essential
factor because it is used for the payment of wages and salaries, bills of electricity, telephone
& internet, and for the stationary and maintenance cost. All of these resources should be
available for the implementation of new strategy.

 The SMART Goals Evaluation:

Setting the smart goal is method which is used worldwide in the implementation process of a
new strategy. It requires the answer to a question that where do we want to go.

o Specific: The objective is to grow in other countries

o Measurable: The implementation of differentiation strategy.

o Achievable: willingness to work hard.

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 o Realistic: Have the sufficient resources for the achievement of objectives.

o Time frame: The estimated time is the next 4 years.

 Conclusion:
In conclusion, we can say that Aldi is a strategically stable firm, and they wins this position
in the retail market after years of fighting, struggle & wondering. Their use of Cost
Leadership & Differentiation strategy mixed with the Production development & Market
penetration strategies ensures the success of Aldi, and with the implementation of new
strategy they could expect for further progress. For the further success the following
recommendation should be followed by Aldi, they make them able to strengthen their
position in the market. Aldi is recommended to change their stores’ layout. The stores of Aldi
seems messy because of their settings. By giving extra space for the setting of products on the
shelf help customers to see them clearly and the customers will enjoy the shopping when the
store look good and well-arranged. Aldi is also recommended to start loyalty schemes for
customers, they should start introducing a reward system, and it will encourage customers to
shop again and again.

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 References:
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nord.de/unternehmen.html, Accessed September 16, 2017.
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https://unternehmen.aldi-sued.de/de/ueber-aldi-sued/unternehmen/, Accessed
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 15. Steiner, (2013) Aldi outshine rivals as its profits double (retrieved from:
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