Aldi 's A Low Cost Strategy

The reputation and recognition make Aldi attractive in the marketing activities and this aspect needs to be improved in the future to compete with both existing and forthcoming rivals. Meanwhile, the high buying power and costs control would help Aldi to diversify its products and increase market penetration to serve diverse Australian population. This leads to the reconsideration of Aldi’s current strategy of limiting product range to adopt other strategies as a number of differentiation strategies has been used by other

Established in 1913 in Germany, ALDI operates what are known in the grocery business as "limited-assortment" stores or "hard discounters." ALDI has taken this retail concept, which features low overhead and scanty selection, to its leanest, meanest extreme.

As Aldi has already established itself as a large discount supermarket chain with over 10,000 stores in 18 different countries including Australia (2001), and holds a large market share in the grocery world due to its business culture and market leading initiatives. This report aims to provide the ALDI board of directors with:

1.3 Physical Resources & Capabilities The ALDI brothers took over the family business of their parents in 1946. World wide expansion led to enormous growth. This comprises around 9800 stores (1000 to 1500 SQM each). The layout is simple with wide ails designed to refill shelves in the fastest, most convenient way {Brands, D. 2003}. They offer a small assortment of mainly fast-moving items (approximately 700 food – including a slim and organic line- and non food products). Small warehouses are located at the back of each store. Affiliates are equipped with limited technology such as intelligent cash systems high-end product concerning quality and price and bottle deposit machines. ALDI won the 2008 energy management award for great results in terms of cooling systems, illumination etc. Most stores have about 100 parking space and a shopping cart area near the entrance. ALDI has a long history which implies that they have gained great experience over the years. The location and layout of stores are designed to support fast and efficient supply and not especially aimed at customer needs. This is a weakness. Stores advantageously located as there are in convenient reach for consumers. Their product range is adapted to various consumer needs (organic, healthy living). The technological equipments are of high quality enabling fast operations at the checkout (ALDI’s staff are two times faster compared with other similar operations). This is

(Please note: Task 1, 3 & 4 have been combined together into one report. Task 2 is separate and can be found on page 9)

From the time it opened, Aldi has expanded the number of product assortments that allow consumers to find nearly anything they need to supply and feed their families. Aldi developed a strong marketing program and decentralized their pricing and assortments that also include some well-known products. Aldi’s begins its value propositions to shoppers with its amazingly low prices. Their “hard” discount pricing, averages about 30% below standard supermarkets like Winn-Dixie or Kroger’s (Brick, 2016). They attribute their success and growth to the “hard discount” model as it has demonstrated to be highly effective. Aldi is different than “large” discounters like Walmart where Walmart’s varieties are limited in size and led by private label products, and investments are made in stores atmosphere, unfortunately, resulting in lackluster customer service. This allows “hard” discounters like Aldi to win the grocery price war by greater margins than Walmart, making Aldi a major competitor of Walmart (Bartone,

The layout of the products is very simple. In most of the stores (in Vancouver), it has fixed layout with Men’s section in the basement or underground floors and Women’s on the top floors. They have inside elevators and escalators for accessibility to different varieties within. The products are assorted in a simple manner which makes it easy for the customer to find the required item. The store has sales associates to assist customers during the purchase process as well.

This report is going to present the current culture of Aldi, critically examining its current culture and possible proposal for a change in culture. It identifies the current organisational culture, its strengths and weaknesses and make recommendations necessary for an organisational culture change.

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. But Aldi’s also uses the strategy of tricking its customers to do all the

6. Store Layout: Store layout is crucial for customers to move. Shoppers won’t need a map to navigate their local Aldi, with a 5 star rating for store lay out. Coles, IGA & Woolworths received 4 stars for their layout.

“The key elements of Costco strategy are extremely low prices, a limited selection of naturally branded and private label products, a treasure hunt shopping environment, strong emphasis on low operating costs, and ongoing expansion of its geographic network of store locations.” To provide low prices Costco caps its markup on brand merchandise at 14% compared to 20% to 50% at other supermarkets. The equals out to a sales revenue that only equales several million dollars. This number excludes all other operating factors including the membership fees. Another important element of the strategy is that unlike other retailers they don’t offer window displays or any other thrills with in the stores. They know because of the reputation and because of the value that they offer their customers that the items that they sell offer value over all else.

After researching news releases about the company, it has been determined that the company uses a backward vertical integration system. The company has close relations with their suppliers. Consequently, partaking in a close relationship with the buyers permits the company to create a store brand product that is close to or beats the name brand product. However, the company only offers one name brand product. Moreover, most of the store consists of the Aldi name brand products which conversely, follows the steps of many grocery chain retailers who also carry their

Aldi was first founded in Essen, Germany in 1913 by the Albrecht family. The Albrecht family started selling groceries in their small shop. With big

According to Survey by national consumer organization, CHOICE (2014), a comparable basket of goods at ALDI is 25% cheaper than at one of the MSCs. ALDI is estimated to hold 9.1% market share in 2015-16 as compared to other grocery stores (ibis). In terms of the strategy of ALDI, ALDI focus on reducing costs to the customer in such a manner that customer is convinced to continue shopping. However, on further analysis, the organization illustrates a differentiating strategy and prefers to distinguish itself from other major retailers the likes of Coles, Wesfarmers and Woolworths. For example, ALDI provides weekly specials like on gardening, camping, kids, and kitchen with discounted offers. ALDI is a low-cost player that stocks a less variety of popular grocery items. Over past five years, an incredible achievement contributes to ALDI 's rapid growth to which consumers have responded positively (ibis). Therefore, it can be said that in terms or corporate strategy, the organization has characteristics of both a cost leadership strategy as well as a differentiation strategy.

This dissertation is submitted in partial fulfillment of the requirements for the Degree in Marketing Practice