Business Strategy: A Case Study of ALDI

Explore the strategic planning processes of ALDI, one of the largest supermarket chains globally. Analyze their missions, visions, and objectives, and propose new strategies for sustainable growth. Understand the significance of stakeholder analysis and SMART targets in achieving strategic objectives.

Business Strategy: A case study of ALDI
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Table of contents
Introduction................................................................................................................................3
Part 1: Evaluating the strategy...................................................................................................4
1.1 Provide an assessment of the extent to which Aldi’s missions, visions, objectives, goals,
core competencies inform strategic planning.............................................................................4
1.2 Analyse the factors to be considered by Aldi when formulating their strategic plans.........5
1.3 Using evidence to support your answer evaluate the worth or usefulness of techniques
used when businesses develop their strategic plans...................................................................8
2.1 Carry out an organisational audit for ALDI and provide an analysis of their current
strategic position......................................................................................................................11
2.2 Carry out an environmental audit for ALDI showing both micro and macro environment.
..................................................................................................................................................12
2.3 Assess the significance of stakeholder analysis for ALDI when formulating new strategy.
..................................................................................................................................................14
2.4 Using the research and information collected about ALDI, present a new strategy ALDI
can follow.................................................................................................................................15
Part 2: Making a strategic choice.............................................................................................17
3.1 Identify a market (new or existing) and analyse the appropriateness of suitable strategy
for ALDI in relation to substantive growth, limited growth or retrenchment..........................17
3.2 Provide a justification of one of the strategies for market entry and growth that you have
discussed in 3.1........................................................................................................................17
Part 3 – Implementing the strategy..........................................................................................18
4.1 Provide an assessment of the roles and responsibilities of personnel who are involved
with the implementation of the strategy...................................................................................18
4.2 Provide an analysis of the resource requirements for the implementation of the strategy.18
4.3 Evaluate how the use of SMART targets (give examples) can contribute to achieving the
strategic objectives...................................................................................................................19
Conclusion................................................................................................................................21
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Reference List..........................................................................................................................22
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Introduction
In the present scenario, it has become increasingly important for organizations to have a well-
defined plan in front of them so that they can maximize their profits. Most large organizations
now make use of think tanks who are assigned the tasks of coming up with various different
strategies that should not only help a company maintain its competitive advantage but help
them in aspects of sustainability as well. All of these processes that a company undertakes to
function as optimally as possible are generally referred to as strategic planning. It
encompasses the formulation of various new approaches that an organization could undertake
and at the same time, focuses on the correct distribution of resources as well.
This study shall shed light on the many processes that are included in the vast field of
strategic planning. The organization that will be referred to is Aldi, one of the largest
supermarket chains in the world. For better understanding and correlation, the study has been
divided into different parts which shall help the reader in grabbing the most important factors
that companies have to look after for their sustained functioning.
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Part 1: Evaluating the strategy
1.1 Provide an assessment of the extent to which Aldi’s missions, visions, objectives,
goals, core competencies inform strategic planning.
Aldi, one of the leading supermarket chains in the world, has combined revenue of more than
€ 50 billion and functions in more than 18 countries across the globe (Aldi.us, 2018). Their
functioning as well as their success in this field is highly attributed to their strictly followed
framework. This framework not only lets them prepare for unforeseen circumstances, but
they are able to maintain a healthy competitive advantage at present at well. Discussed below
are some of the factors that shall help the reader understand Aldi’s way of strategic planning,
better.
Mission:
 To be the largest groceries and food retailers in the world.
 To treat all consumers with respect and not to discriminate amongst them on any
grounds.
 To have the highest regards for their stakeholders
 To focus on the health and safety on their officials, employees and managers alike
Visions:
 To make the whole shopping experience cheaper for their global consumers
 To provide the best quality products at the cheapest prices possible
 To make the consumers “feel rich” whilst paying minimum for the products
Objectives:
 To grow in market shares on a global basis
 To maintain excellent relationships with their consumers
 To emphasize on all received feedback from both their employees and well as their
consumers
 To create a sustainable future by emphasizing on the needs of recycling, reuse etc.
Goals:
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 To ensure the eradication of hunger and health hazards arising from cheap and low
quality food products Promote gender equality and empowerment of women Promote and ensure sustainable development through proper and efficient functioning Reduce the carbon footprint by enabling various environmental measures in their day
to day functioning
Core competencies:
 A strict focus on pricing- Aldi has always sought to maintain competitive advantage
in the market through their effective pricing strategies. Offering high quality goods at
very affordable prices is something that has made it a consumer favourite.
 Emphasis on own brands- Aldi has always maintained a high regard for the brands
that they themselves have developed. Doing this not only helps them for their own
policies and pricing strategies, but it also allows them to remain independent of
outside pressures (Steenkamp, 2017).
 Focus on consumer as well as employee satisfaction- Aldi function with a high regard
for their employees and treat them more as assets than liabilities. They are the only
supermarket chain in the world that provides chairs to the employees at checkout and
payment stalls.
 Optimal labour costs- Aldi are known not to employ any additional staff. Casual staff
is almost inexistent and the salaries paid are comparable to those of other similar
businesses. This allows for a higher profit margin even if sales are low.
1.2 Analyse the factors to be considered by Aldi when formulating their strategic plans.
There are various factors that have to be taken into consideration before any company can
formulate their strategies. In case of Aldi as well, this fact is not devoid from their
organization. Discussed below are some of the factors that affect Aldi’s strategic planning.
Market Position: It was observed that when consumers began focusing on convenience rather
than range, the “Big Four” of the UK grocery retail market were hit very hard. At such a
time, supermarket chains like Aldi and Lidl made it into the UK market and have never
turned back ever since. According to reports, by the end of 2017, Aldi was in command of
more than 6.8% of all grocery stores in the UK. Lidl was second, with 5%. In terms of
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combined influence, Aldi and Lidl have grown by almost 80% since their arrival (Metzger,
2014).
Figure 1: Aldi and Lidl market share over the years
(Source: Aldi.us, 2018)
This should be a great boost for Aldi and they will feel highly confident while formulating
their strategies based on the fact that for so long they have been quite successful in terms of
planning and implementing those plans. However, Aldi also need to keep in mind that the
consumer base they cater to is huge which makes it increasingly difficult to cope with
changes. The market share that Aldi commands right now is commendable and shall prompt
them to develop strategies that can maintain this growth or at the very least, sustain it.
Customer demands: Although a European brand in particular, Aldi has seen great growth in
its offshore markets as well. The two biggest factors that have prompted Aldi’s high customer
demands are the “affordable products” and the recession in particular. Aldi mainly rose to the
occasion when the recession struck the European markets hard and prompted the consumers
to turn to something cheaper than the already existing Tesco, Asda, etc. According to sources,
although this was the case in the beginning, Aldi is no longer limited to the low income
buyers. Statistics show that more than 70% of Aldi shoppers belong to the medium to high
income individuals. According to experts, Aldi’s way of providing a premium experience
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through their affordable products is what forms the backbone of their success (Zentes et al.,
2017).
Competitive Advantage: Aldi looks to maintain competitive advantage in the sector through
their high emphasis on innovative development as well as by increasing their efficiency in
meeting demands of their consumers. Their principles of lean management have had a direct
impact in helping the company stick to the basics of competitive advantage. Their ways of
Just In time inventory management helps the company to keep overhead costs in check
(Gassmann et al., 2016). Also, the various ways of maintaining competitive advantage are
inculcated in the very values that the organization believes in. Consistency, simplicity and
responsibility are the very basics the company makes use of to portray their beliefs. For
example, consumers have always preferred Aldi stores irrespective of where they are located
because all of their stores have a similar look and feel.
To understand the prospect of strategic planning better, the Ansoff’s Growth Vector Matrix
would be very suitable to assess the factors that play a part in Aldi’s formulation of the same.
Created by strategist Igor Ansoff in the year 1957, the matrix first appeared in the Harvard
Business Review. The two aspects of this matrix are based on products as well as markets.
The comparison or the analysis is done on the basis of a product’s entry or development into
an already existing market or a new one.
Figure 2: Ansoff’s Growth Vector Matrix
(Source: Darroch, 2014)
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The four different parts of the Ansoff Matrix and their impact on Aldi have been discussed
below.
Market Penetration: In Aldi’ case, their strategies could help them dominate an existing
market with the range and choices of products that they offer to their consumers. From a
business perspective, this would be the least risky. Aldi could also increase their consumer
bases by focusing on this aspect because the consumers of the retail sector trust the word of
mouth. Functioning in a market that is already established and strengthening their current
position would be the backbone of all of Aldi’s strategies (GURCAYLILAR-YENIDOGAN,
and AKSOY, 2018).
Product development: As has been mentioned earlier, Aldi have always emphasized on
innovative development to maintain competitive advantage. For product development, Aldi
should formulate strategies that make it considerably easier for their new products to enter a
market that is already accustomed with the company. This shall not only help Aldi attract
new consumers but it will have an impact on their market share as well.
Market development: It refers to the introduction of already existing products into a new
market. Focusing on this aspect could help Aldi successfully expand into a new country.
Although this might be a potentially risky move; Aldi, with their stores across the globe have
proven to be quite different from other players in the market (Spicka, 2016). It should be
stated here that market development is a mixture of previous strategies because without
proper penetration in a parent country, Aldi would definitely not launch it in their foreign
venture.
Diversification: This is again another expansion strategy with the major difference that in
this case, Aldi would not have any data from trial runs of their new products. A new product
in a new market could pose serious threats to the business’ sustainability (Schott, 2016).
However, with great understanding of consumer needs, Aldi could very well formulate
strategies that help them expand into markets without complete information about the same.
1.3 Using evidence to support your answer evaluate the worth or usefulness of
techniques used when businesses develop their strategic plans.
Developing strategies for global businesses is not an easy task and one that requires extensive
use of models or techniques for their successful formulation as well as implementation. For
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Aldi, their strategic planning can be made even more efficient if models such as the BCG
Matrix and SPACE Matrix are used. These techniques have different approaches and
predefine a set of guideline which shall enable Aldi to formulate their plans in new as well as
existing markets.
BCG Matrix
The BCG growth share matrix was developed by the Boston Consulting Group back in the
1970s. Initially constructed as a portfolio planning matrix, the BCG matrix shall find enough
usage in ALdi’s strategic planning issues. According to this matrix, there are four different
products that a company sells. Namely they are stars, cash cows, dogs and question marks.
Figure 3: The BCG matrix
(Source: Palia et al., 2014)
Stars are the products which have a high growth rate as well as a high market share. This
pulls in a lot of revenue from the organization but gives returns as well. Stars generally
convert themselves into cash cows when the growth rate of the product falls. Cash cows are
seen as the most profitable products because they do not consume much revenue but have a
high return rate. Question marks are products that have had a great growth rate but a very
poor market share. These generally refer to the products that consume huge amounts of
revenue from the company but do not give enough returns. Dogs are seen as cash traps
because revenues are generally stuck up in these products with almost no returns at all.
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In terms of cash cows, Aldi’s fresh produce section and the meat section are always in high
demand across all of their retail stores in the world. Since this department requires very less
investment, it is considered to be very profitable. In this aspect, Aldi can focus less on market
penetration and development for this particular sector of their business. Strategically, Aldi
should focus more on maintaining this advantage which shall help them maintain
sustainability.
There are some products in Aldi that are considered to be dogs as well. Mostly the dairy
products that the company sells have not seen any increase in sales in the many years that the
company has been functioning. Although this particular department does not require much
investment to sustain it, it does not bring in much revenue for the company as well (Bourne,
2016). This is a section of sales in Aldi which has a lot of revenue trapped in it because there
is not much return on investment. In terms of strategic planning, Aldi shall have to focus on
market development more than market penetration. At the same time, since the product has
been in the market for quite some time now, Aldi could focus on introducing the said
products in a new market.
Space Matrix
According to the SPACE matrix, there are two categories of strategic dimensions, internal
and external. Assessing Aldi’s current position, it is seen that they are a part of the aggressive
quadrant. However, since this is not absolute, it could be said that Aldi shall have to make use
of a mildly aggressive marketing strategy.
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Aldi
Conservative
Defensive Competitive
Aggressive
Table 1: SPACE matrix for Aldi
(Source: Created by author)
2.1 Carry out an organisational audit for ALDI and provide an analysis of their current
strategic position.
Having analysed the aspects of strategic planning based on the BCG and SPACE matrix
given above, it is now increasingly important to understand the present conditions persistent
within the organization. To assess the organization’s internal environment, the SWOT
analysis will be used.
Strengths
- Quality products at affordable pries
- Low operating costs
- Global brand
- More than 8000 stores on a global
basis
- Operates in more than 18
international countries spanned
throughout Europe and other parts of
Weaknesses
- Compared to Tesco, its largest
competitor, Aldi is relatively small.
- Their supermarket chains are not
functional everyone, with very few
stores in certain countries
- Dissonance amongst the consumers
regarding the cost and quality of their
products
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the world.
Opportunities
- Aldi has an almost unexplored field
of advertisements and promotions.
- New developing economies all
around the world
- Events such as the BREXIT have
crippled the competitors and now are
a very good time for Aldi to up their
ante.
Threats
- The general trend of a complete
shopping experience cannot be
provided by Aldi
- There are certain discrepancies within
the organization regarding the many
established brands
- Aldi is limited to a particular product
lien which reduces their USPs
From the above audit, it is clear that Aldi have been successful in their domestic functioning,
however, their international expansions are kind of questionable. This means that Aldi should
try and focus more on their market development for their offshore markets.
2.2 Carry out an environmental audit for ALDI showing both micro and macro
environment.
The environmental audit shall comprise of PESTEL as well as Porter’s Five Forces analysis.
This will help the company in formulating their strategies from an eternal perspective.
Attribute Details
Political Aldi works on a global scale hence its operations are
dependent on the political scenario of the countries in which
it has its base. It has to depend on the laws of import and
export of the nations in order to carry out their operations. It
has to abide by the taxes that are imposed on several aspects.
It has to change its mode of operation depending on the
change in laws and acts of the nations. The same would have
direct impact on the customer’s requirements. Seamless mode
of operation helps meet the requirements of the organisations,
which in turn are the customer requirements, in an effective
manner.
Economic Global economic recession in 2007 hit several organisations
in the past and Aldi was no exception. Global recession is
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expected to hit the UK in 2030. It would be essential on their
part to secure funds well in advance of the event. It has to be
meticulous about customer analysis in order to have adequate
revenue.
Social Aldi maintains quality care of customer. It takes feedbacks
from them and tries to sell products that meet the
sophisticated requirements of the customers. Aldi should
keep by the same. Data analysis of customer reviews and
feedbacks would enhance the aspect for Aldi.
Technological Aldi mainly sells by virtue of its stores. It would be essential
on their part of have quality ecommerce facility. The same
would enable them to enhance on its customer base.
Legal Aldi works on a global scale hence it needs to abide by laws
and regulations of different nations in which it operates. It
should have stern knowledge about the same to operate in a
smooth manner.
Environmental Aldi has ensured that none of the wastes it produced till 204
went directly to the landfill. In the last 12 months the
customers have raised 1.2 million GBP for charity. Aldi
should keep up the same in order to earn brand value and
more customer loyalty.
Porter’s Five Forces Analysis
Industry Rivalry The retail supermarket chain comprises of
many organizations in a domestic as well as
global scenario. This makes this force quite
high.
Bargaining power of suppliers In Aldi’s case, they manufacture their own
products with very little raw materials from
suppliers. This makes the bargaining power
of suppliers quite low.
Bargaining power of buyers The buyers have a huge say in retail chain
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supermarket’s business. Although not very
high, the bargaining power of buyers is
moderate.
Threat of new entrants Although there are many choices for the
consumers, the level at which Aldi performs,
there are not much companies which can
enter the market. Therefore, the threat of new
entrants is low.
Threat of substitutes The threat of new substitutes is high because
of the fact that consumers are highly
knowledgeable about their options and they
shall not withstand any shortcomings in their
preferred brand.
2.3 Assess the significance of stakeholder analysis for ALDI when formulating new
strategy.
Making use of the stakeholder analysis for Aldi shall help in formulating future strategies.
The reason for its importance as well as efficient formulation shall greatly be enhanced by
using this analysis. There are three steps for the stakeholder analysis, which have been
discussed below keeping in mind Aldi’s current situation.
Stakeholder Identification Aldi’s chief stakeholders are their consumers,
the employees (both management and staff),
the government, partners, shareholders, trade
associations etc.
Stakeholder prioritizing In terms of internal and external stakeholders,
Aldi lays down equal focus on their
consumers as well as employees.
Understanding key stakeholders The key stakeholders are the consumers, the
employees, the trade associations and the
government.
In terms of strategic planning, Aldi will have to lay down emphasis on their stakeholders,
both internal and external. However, the company should also focus on correct distribution of
resources amongst the various aspects of their external stakeholders (Ayres et al., 2014).
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2.4 Using the research and information collected about ALDI, present a new strategy
ALDI can follow.
Having done the research in previous sections of the study, the focus will now be shifted
towards a new strategy. Taking examples from the company’s strengths, the best strategy for
Aldi as of now would be to inculcate a higher degree of online presence for better sales
growth.
Where are we now?
Aldi, in the current scenario, is quite successful. However, a weaker international growth
structure shall prompt the company to take on challenging issues even if they have potential
risks. Although experts are of the view that Aldi have been absolutely strict in sticking to
their pricing methods, Aldi’s visions and goals need to be altered a bit.
Where are we going?
Aldi has always maintained competitive advantage by delivering quality products at
affordable prices. However, the company wishes to grow in size, both revenue and consumer
base wise. This has prompted the company to make a few changes in their existing plans.
How will we get there?
The company will initially have to focus on building a great online presence and then attract
consumers to their various websites. This will help the company in building a stronger
international market, irrespective of the fact of their physical presence in that country.
Objectives
 To build a stronger international consumer base
 To increase their brand awareness in countries where they are not physically present
 To compete with similar organizations in the same field
Goals
Aldi wishes to introduce their online stores which will be functioning on a worldwide basis.
They want to provide their consumers with even greater choices and bring down the overall
cost of living.
Action Items
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 Creating a well informing as well as diverse website Extensive use of SEO to improve their results Creating web based applications Promotional activities
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Part 2: Making a strategic choice
3.1 Identify a market (new or existing) and analyse the appropriateness of suitable strategy for
ALDI in relation to substantive growth, limited growth or retrenchment.
In terms of Aldi, they could focus on their existing markets in Asia to form suitable strategies
for their substantive growth. Although they have a good presence in those markets, they
could still use the strategy of mergers and acquisitions to expand their reach and in turn, their
consumer base. A merger shall not only help Aldi in increasing the above two factors, but it
would also help the company in achieving their new objectives even better (Stock and
Seliger, 2016). While a merger is supposed to happen amongst two similar sized companies,
Aldi could make use of similar domestic retail supermarkets to increase the trust factor
amongst their consumers.
For substantive growth, Aldi could make use of the horizontal integration strategy. Similar to
mergers, horizontal integration would enable Aldi to make use of the various efficiency
factors that have for so long helped businesses in the continent. At the same time, Aldi could
also make use of the existing personnel and gain from their expertise and skills.
3.2 Provide a justification of one of the strategies for market entry and growth that you have
discussed in 3.1
The most important reason Aldi should focus on mergers and not acquisitions to begin with,
is because of the underlying notion that people generally have faith in the company which
helps pre-existing businesses and does not try to overturn them. Expanding in an already
exiting market can be tricky because people are generally on guard and worried about the
new products that the company might bring in. However, a merger with a reputed company
of the land shall help the company to overcome these mental blocks.
The most important reason for choosing horizontal integration as a mode of growth is
because Aldi have already used the aspect of vertical integration. However, judging from the
company’s present international scenario, it would suffice to say that they have not been able
to do it quite efficiently.
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Part 3 – Implementing the strategy
4.1 Provide an assessment of the roles and responsibilities of personnel who are involved
with the implementation of the strategy.
Department concerned Roles and responsibilities
IT  Development of websites
 Mobile based applications
 Overall online presence
Marketing  Studying the current market scenario
of the new market
 Developing strategies for attracting
consumers
 Deciding on the possible mergers that
could take place
Board of Directors  Making the merger(s) happen
 Allocation of resources to the correct
departments
 Supervising all relevant actions taking
place
Front-end staff  Catering to all of the consumers
requirements
 Focusing on consumer satisfaction
through behavioural as well as ethical
mannerisms
4.2 Provide an analysis of the resource requirements for the implementation of the
strategy.
Various resources will be required to successfully implement the required changes. They
have been mentioned below.
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 Aldi does not have a HR department. This means that the company will have to make
use of other recruitment strategies so that they can get hold of skilled as well as
experienced personnel.
 The company will have to make use of all technological aspects to come up with a
perfectly customized online website. This means that taking help of other third party
application developers. This shall also encompass an aspect of revenue.
 The most important resource however, in the present scenario of Aldi, is time. They
need to make the necessary changes in a short span of time which means that the
precision and accuracy of the implemented changes may be low.
 The company shall have to spend revenue in order to train their existing employees
for the new, better online presence; preparing them to deal with the consumers on a
whole new platform.
4.3 Evaluate how the use of SMART targets (give examples) can contribute to achieving
the strategic objectives.
Attribute Description
Specific  Aldi has to employ more employees for data analysis and
business analysis in order to better harness customer data
 Aldi should build on its ecommerce facility so that it can
cover ranges of 5 kilometres in its radius
Measurable  It should employ 100 people in its data analysis
department
 It should have an user friendly ecommerce facility
Achievable  Aldi should start recruiting experienced employees from
other organisations. The sector is proliferating and
professionals have acquired knowledge in the field.
 Aldi should consult with ecommerce giants to get an idea
of it the designing and implementation of the ecommerce
facility
Relevant  The world is moving forwards towards advancement in
technologies and automation hence the time is right for
the mentioned endeavours
 In order to compete with the proliferating market of the
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retail sector it is essential for Aldi to acquire
technological advancements
Time 6 months
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Conclusion
The study has shed light on the various aspects of strategies planning with reference to the
case study of Aldi’s functioning. This study has proved that although Aldi has functioned
with the utmost regard for consumers, they have not been successful enough in their
international markets. In the run with Tesco, Aldi falls short on some very crucial factors.
The strategies that have been recommended in the later parts of the report have tried to
overcome those shortcomings and shall help the company in functioning with even more
efficiency. All the data and statistics that have been mentioned in the report are completely
credible and authentic. Any suggestions aimed at increasing the same, are welcome.
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