ALDI: THE DARK HORSE

DISCOUNTER, CASE
SOLUTION
Submitted by: anjli panjwani

Submitted To:
Sir Adnan Kehar
1. Pastel Analysis and any identify key factors.
Pastel Define Identify/ Reasons Counter (Strategies)
Political The political segment is the arena  For employment  Aldi employs large
in which organizations and legislations, the numbers of; student,
interest groups compete for government disabled and elderly
attention, resources, and a voice encourages retailers workers
in overseeing the body of laws to provide a mix of  Aldi pays generous
and regulations guiding job opportunities wages and other
interactions among nations as from flexible, lower- benefits that are
well as between firms and paid and locally- significantly higher
various local governmental based jobs to highly- than the national
agencies. skilled, higher-paid average in different
and centrally-located countries, that is the
jobs good strategy to
remain secure from
labor laws in
different countries
Economical  Increasing Inflation  Should innovate its
in the grocery market stores and products
The economic environment refers  The overall growth  It should maintains
to the nature and direction of the for the grocery its lower prices
economy in which a firm market as of May  Increase private label
competes or it may compete. 2017 is 3.8% year on products
 Inflation rates year, indicating that  Expand its business
 Interest rates etc as the market to respond to
expands, demand increasing demand
will rise
Sociocultural  By 2020, Aldi aims  With buying patterns
to teach 1.2 million moving towards 24
children in the UK hour shopping, online
healthy eating habits marketing and self-
The sociocultural segment is through their Get Set service, consideration
concerned with a society’s to Eat Fresh needs to be made
attitudes and cultural values Initiatives around whether this
needs to be included
in Aldi’s long term
strategy.
Technological Technological factors affect  Supermarkets are  Aldi should invest in
organizations and the increasingly turning technological
management thereof in three to technology to aid innovations and
distinct ways: their service improvements to
 New ways of producing propositions, with an make the processes
goods and services increasing number of more fast and
 New ways of distributing consumers expecting convenient for
goods and services the efficient self- employees and
 New ways of service checkouts customers
communicating with target from grocery
markets providers

Environmental The physical Environment  Aldi increasingly  Aldi should continue

segment refers to potential and stock their products to thrive in the
actual changes in the physical from local British market, Focus on
environment and business producers and retention of market
practices that are intended to farmers, helping to share needs to be
 positively respond to and deal support local integrated into the
with those changes. producers and ensure strategic
 Energy consumption the sustainability of sustainability plans,
 Practices used to develop the local areas that particularly in the
energy sources they operate in absence of any
 Renewable energy efforts loyalty schemes.
 Producing
environmentally friendly
products

2. Analyze the changing industry structure in which Company is operating by using Porter’s Five
Forces Model. How did Company counter the changes and challenges of the industry competitive
forces in which Company is operating by using Porter’s Five Forces Model?
Five Forces Who Level of Reasons Counter (Strategies)
They Threat/Bargaining
Are Power
Bargaining Moderate to Low  Supermarkets have  Aldi should maintain the
Power of greater bargaining power relations with its suppliers
Suppliers than suppliers, often  They can coordinate their
pushing for discounts efforts to reduce costs
and favorable terms due
to the scale of buying
power.
 Aldi operates a chain of
500 stores so has a
degree of buying power
in its own right. It also
has the additional power
to buy across multiple
countries in order to get
favorable terms.
Bargaining High  Buyers can make  Aldi should continue to
Power of choices about which thrive in the market,
Customers supermarket to use very Focus on retention of
easily based on offers, market share needs to be
availability of items and integrated into the
ease of access. strategic sustainability
 Aldi does not offer a plans, particularly in the
loyalty scheme so there absence of any loyalty
is no additional schemes.
incentive to return week  Consideration needs to be
on week. made around what
consumers want from
their experience. By
undertaking market
research and focus groups
Aldi will be able to
understand what is
working and what may be
useful to start to consider.
Threat of Low  The industry is  Whilst new entrants are
New entrant characterized by strong unlikely there is a clear
rivalry and price need to explore changing
 sensitivity. Therefore, customer buying trends
new entrants may well and how interactive routes
face retaliation to market contribute to
 The cost requirement for customer loyalty.
a new brand to establish
itself in the market is
high. Building a large
retail estate network
coupled with stock
levels will take
significant investment.

Threat of High to Moderate  By offering a narrow  The Aldi should continue
Substitute product range, Aldi adding more products to
remains agile to its private label portfolio
changing trends. because they are more
Products can be changed popular.
quickly in the event of
changing market trends.
 Aldi operates relatively
small stores therefore
limiting the number of
products that can be
offered. Substituted
could therefore be
offered by larger stores,
with more space to offer
an increased product
range.
Competitor/ High  This increase  Continual development
Rivalry competitive activity and alignment to its target
creates additional costs market is critically
through advertising and important to maintain
marketing as well as market share and
leading to reduced ultimately survive.
prices.
 The sector is subject to
intense rivalry with a
focus on cost. Many
brands offer to match
prices of their
competitors and
undertake price
comparison activities.

3.You are also advised to conduct a strength, weaknesses, opportunities and threats (SWOT) analysis
for Company and provide strategic suggestions based on analysis.
Identify Counter (Strategies)
Opportunities:  Global expansion  The Company should
 By advertising it increase the sale increase its private label
 Offer online shopping. product portfolio
 They should use their
 successful strategies
across all countries if
they fit in that culture
Threats:  After Amazon took over American grocers Whole  The Aldi should
Foods, the supermarket industry of the U.K is anxious increase its online
that a takeover of market share by Amazon could occur presence
 Increase number of competitor.  They should invest in
 The current success of Aldi in terms of growth may be marketing to make
compromised by shoppers preferring cheaper brand image
alternatives from Lidl or home brands.
Strength:  Market share  It should maintain its
 Aldi culture (simplicity ,desire to serve customer) quality product
 Offer product at lower price with quality oriented. portfolio
 No of shopping visiting Aldi increased by 16%  They should implement
 Cross trend employee technologically advance
system to remain
successful

Weakness:  Limited range of products  Invest more in

 Minimal investments in marketing and advertising advertising to beat
 Less use of technology competitors and
increase brand
awareness
 Invest in technology
 Increase product
portfolio

3. Describe Company Business strategy?

ALDI has a cost leadership strategy based on minimizing costs to the customer in such a way that the
customer would be induced to inculcate repeat purchase behavior. However, on further analysis, the
organization prefers to differentiate itself from other major retailers including the likes of Coles
Wesfarmers and Woolworths and thereby illustrating a differentiating strategy. The main focus of Aldi is
to offer the lowest possible price to the customer while operating their stores at the lowest cost as well. I
have already stated how Aldi does not invest in advertising or any research of any kind and the main
investment is in building new stores or logistics to supply those stores.
4. Who are Company’s competitors?
 Walmart’s Sam’s Club
 Tesco
 Kroger’s
 Metro
 Costco
 BJ’s wholesale club
 Trader Joe’s
 Walgreens
5. How does competitive rivalry, competitive behavior, and competitive dynamics effect Company?
Competitive rivalry:
 The action which any company takes to respond its competitors is called competitive rivalry. As the
companies have similar target market and they were competing almost the same product categories.
So here the intensity of rivalry is very high because other firms are performing outstanding.

Competitive behavior
  The actions taken by the companies to sustain its competitive advantage over its rival and also try to
maintain its position in market is called competitive behavior.

Competitive dynamics
 The action taken by the company in order to respond to market conditions so here if the market
changes, the preferences of customers change, or restrictions on the industry changes, they have to
respond accordingly.

6. What is the purpose of Company’s value chain?

 Efficiency is the connection among information sources and relating yields. For Aldi working
effectively includes lessening costs in every aspect of the business. A portion of the key regions
where Aldi can limit expenses are by sparing time, space, exertion and vitality. Aldi's way to deal
with doing this is to maintain its business around the standards of lean reasoning.
 Aldi has a simple way to deal with maintaining its business. While other sustenance retailers have
expand shows, extra administrations and advancements that draw customer into the business, Aldi's
center object is to 'offer some benefit and quality to our clients by being reasonable and effective in
everything we do' . Everything Aldi does is engaged around giving its clients esteem for cash.
Through being effective and cutting expenses Aldi would then be able to put benefits over into the
business. They would then be able to be utilized to further meet its business goals for development.
 Efficiency isn't something that is accomplished medium-term. Lean reasoning is a consistent
procedure that continually empowers Aldi to improve the manner by which it meets its business
goals. This empowers Aldi to build up a driven venture program to grow new properties and
providers just as to give advantages to representatives.
7. Identify type’s value chain activities of Company’s?
There are two types of activities while performing value chain analysis according to Porter and it can
be stated as:
Primary Value Chain Activities: The main objective of primary value chain activities is to uphold
the competitive advantage on production and delivery of product.
 Inbound Logistics:. AIDI purchase a bulk of materials to produce its product in its own brand
name which save cost and ultimately prolong a competitive advantage in the business over other
competitors.
 Operations ALDI have their own image and they can get back their customer over and over to
their store to buy with the non-bargaining quality and administrations they are advertising. In
light of the item cycle the item life cycle of ADLI is in the development arrange on the grounds
that it is as of now all around perceived in the market with the other rival in retailing.
 Outbound Logistics: It is concerned with how the produced goods and services are made
reachable to buyers .ALDI has its own outbound logistics like own transport system to reach the
product to the customer
 Marketing and Sales: It is fundamentally worried on how the items are made know to the
customer through showcasing and deals. ALDI's showcasing and deals procedure is to set aside
cash in all conceivable manner. ALDI have turned the market with. In any case, new customer
requires greater venture to make them faithful. The other contender like by following the
advertising procedure of cutting the expense and pass the reserve funds to the customer at last..
Customer loyalty matters because selling more to existing customer is much easier, and cheaper,
than looking for and selling to new customers. On the other hand, it is significant to obtain new
customers
 Service: The aim of the customer service is to satisfy the customer with excellent service. ALDI
has excellent strategy in order to sustain the competitive advantage considering this issues.
Incredible courtesy every day. ALDI have beaten the’ big four’ Operators with the incredible
 courtesy of the employees and satisfactory customer service .local store managers are liable to
solve all the customers frequent issues to ask for their convenience.
Secondary Activities: Activities which increases the efficiency but not directly involved with
production. The activities are stated as follows:
 Procurement: It relates to the resources management for the operation of the business.
 Human Resource: It relates to the recruitment of the efficient and eligible staff in particular
sections.
 Technology Development: It involves to the management of the information and knowledge of
the business.
 Infrastructure: It concern with support sections such as Quality, Planning, and senior
management.

8. What would be the specific risk associated with using each business level strategy?
 The specific risk related with utilizing every business level technique is that, in the event that we talk
about the minimal effort system is that as a result of this their edges become low, second client feel that
they are giving low quality due to low value, third is the supportability that how much time they
continue in the ease strategy
 The second technique is center procedure and hazard related with this is they have less number of items
when contrasted with their rivals and this can hurt such that client are heading off to that store which are
giving enormous number of items.
 The third is entrance technique the hazard partner with this methodology is that in the event that they
enter in the US showcase the huge goliath Walmart can diminish the cost in US since they are settled,
because of this Aldi may confront issue in US advertise.

9. What factors affects the likelihood these case companies will initiate a competitive response to the
action taken by a competitor?
Competitive reaction taken by Aldi that because of the activities of contenders could be effective
conveyance systems (as Walmart has), because of low costs of Walmart Aldi may likewise go with
structure more warehouse and buy in mass
10. What is market commonality?
Market shared trait can be describe as the quantity of business sectors in which firms contend. A firm in
an industry can rival various markets. For instance, Walmart was giving marked and private named
items through retail .and online stores. While Aldi was just worried about physical store having just
private named items. In this private named item advertise there were likewise number of contenders. So
more the market shared trait, more the challenge will occur.
11. What is resource similarity of Aldi and Walmart?
Resource similarity is the degree to which the company's tangible and intangible assets are similar to a
rival's as far as both sort and sum. Firms with comparative sorts and measures of assets are probably
going to have comparative qualities and shortcomings and utilize comparable strategy. In this setting
Walmart and Aldi have practically comparative assets as Aldi was cost pioneer in the business. Though,
Walmart was attempting to decrease its expenses and contend with Aldi.

12. How are these similar or different from each other?

Aldi Walma1t
  Retail store with limited offerings  Retail store with multiple offerings
 Managed to come on 81 without such  World Market Leader having highest share
huge investments.  Cost leaders but were expensive than Aldi
 Cost Leadership  Offered Branded Products
 Offered Private Labeled Products  Highly technology intensive
 Less technologically implementations
(Information and Inventory management
systems)

13. What factors affects the likelihood these case companies will initiate a competitive response to the
action taken by a competitor?
Aldi was the late mover in the U.S. market but had a lot of experiences indifferent countries. Late
movers have the advantage of competing with a unique way. Aldi had unique system of reducing cost
and attracting customers. Moreover, they were having quality products in their shelves which outclassed
them from otl1ers in the industry. People preferred their products more than others in the market.
Walmart, in return, will attack to this likelihood on the basis of the reputation that it has built over the
years in U.S. because it is the market on which Walmart is dependent on and have strong position in it.

14. Which cycle markets of the case Aldi?

Competitors have almost similar resources and market is likely common for all. The competitive
advantages are somehow easy to imitate and competition is intense among rivals. These all things
indicate that Aldi is in the fast-cycle market.
Case Additional Questions
15. Should Walmart be worried about Aldi? Discuss Pros and Cons
Walmart ought to be stressed over Aldi, on the grounds that Walmart pulled out of Germany in 2006
due to the poor activity in Germany where Aldi's nation of origin is and Aldi works very well both in
Germany and US (Walmart's nation of origin).
As such, Aldi has an extraordinary activity mode and a superior versatility than Walmart during the
universal development. In this way, Aldi might be a danger to Walmart later on.
prons: By doing this Walmart will most likely contend and decrease the effect of Aldi's systems in the
market.
Cons: It will cause costs and will influence organization's gainfulness.

16. Should Aldi be worried about Walmart? Discuss Pros and Cons.

Aldi ought to be stressed over Walmart, on the grounds that Walmart additionally work effectively
around the globe aside from in Germany. In spite of the fact that the two worth low cost and top
quality, Walmart can fulfilled one quit shopping to its clients since it has more item classes than Aldi.
Likewise, Aldi works its retail bind with no adaption to a local market and simply do what it did in
Germany (home nation). At the point when customer can't discover the items they need in the store
and they won't come back again next time.
17. Is Aldi at competitive advantage or disadvantage relative to Walmart?
Both Walmart and Aldi ought to be stressed over one another in light of the fact that both have
particular points of interest over one another in getting clients. Aldi's preferred position is that its
stores furnish the most minimal costs around the local area with their items being all things considered
15-20% less expensive than Wal-Mart. The fact of the matter is that the two stores have focal points
and weaknesses that the other can abuse, however Aldi has competitive advantage over Walmart. The
motivation behind why Aldi appears to have the upper hand is that Aldi plainly gives the most
reduced conceivable cost to every one of their items, which Walmart would never coordinate. Why
this is significant is on the grounds that the two stores main customer base will in general be more
work class to lower white collar class. Wl1y this is significant on the grounds that with this client base
 the main concern will in general be cost and less on customary worries of comfort and quality.
Additionally despite the fact that Wal-Mart gives more products and administration and are
increasingly able to adjust to the customer trends. Aldi works at a much lower costs and can work and
assemble new stores at a small amount of the expense Walmart would which be able to can be
essential if an offering war where to break out and fulfillment in another market Aldi is all around
ready to contend and beat Walmart and ought to be a power to come in the retail business.
Q18. What ARE THE KEYS ISSUES?
Following are key issues.
1. Lack of understanding of US market dynamic.
2. Lack of marketing and don’t create brand image.
• No public appearance
• No publicity No public relations
3. Aggressive on radical growth rather than focus on optimal result
4. Forecasting issues
• No budget forecast No external research Lack of innovation in term of product and service.
• No customer surveys.
5. Lack of involvement of middle manager in decision making.