Aldi SWOT Analysis and Marketing Strategies

This assignment provides a detailed SWOT analysis of Aldi, including its internal strengths and weaknesses as well as external opportunities and threats. It also explores the company's market penetration, development, product development, and diversification strategies. Additionally, it examines the firm's resource-based view (VRIO) analysis, McKinsey 7S model, and Porter's Five Forces analysis. The assignment aims to provide a comprehensive understanding of Aldi's competitive advantages and challenges in the supermarket industry.

Critically analyse

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................2
Diminishing operating profits the key strategic issue in Aldi, UK........................................2
The rationale behind the initiation of the change process......................................................3
The key stages involved in the change process......................................................................4
Challenges that threatened to derail the change process........................................................6
Strategic Models.....................................................................................................................7
SWOT Analysis............................................................................................................8
PESTLE Analysis.......................................................................................................10
Porter Five Force Analysis..........................................................................................12
Ansoff Matrix..............................................................................................................14
McKinsey 7S Model...................................................................................................15
VRIO Analysis............................................................................................................17
End Result............................................................................................................................17
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................19

INTRODUCTION
Strategies and plans are developed by the management of firms in order to enhance the
existing performance and robust the position in the market. The present era is characterised by
intense competition due to drastic change in taste and preference of consumers as well as
increase in globalisation. In order to sustain in the competitive environment, it is vitally
important for firm to develop precise and appropriate strategies. In this context, the present study
will be focus on analysing corporate strategies and structure of Aldi which undergoes major
changes that affects its profitability.
Aldi has reported record sales in the UK and Ireland for last year but its profits have
fallen sharply amid a fierce price war among supermarkets. In this context, the key strategic
issues in the organisation will be described in the study and rationale behind the initiation of
change process will be explained. The key stages in the change process will be demonstrated in
the study which has been implemented by the organisation and by using specific strategic models
like PESTLE, SWOT, Porter Five Forces, Ansoff Matrix, McKinsey 7S model and VRIO
analysis, the recommendation to organisation will be provided.
MAIN BODY
Diminishing operating profits the key strategic issue in Aldi, UK
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Aldi is one of the biggest discount supermarket chain with over 10000 stores in more
than 20 countries. Aldi's headquarter is in Germany and it is expanded in different countries like
Australia, China, United States, United Kingdom, etc. In the market economy of United
Kingdom, the firm was able to capture immense attraction of consumer by offering them quality
products at lowest price as possible (Fazli and Shulman, 2018). This strategy becomes its core
issues due to which the firm was not able to attain its target. Despite, the company able to record
sales in UK and Ireland in year 2017, its profits have diminished sharply amid a fierce price war
among supermarkets.
The management of Aldi contends that sales for year 2016 rose by 13.5 per cent to 8.7
billion pound but the operating profit dropped by 17 per cent (Aldi reports record sales but
profits drop amid price war. 2017). The reason for frequent diminishing profits stated by the top
management was continuous investment in developing price strategies, infrastructure and
installing advance technologies. Aldi in United Kingdom faced stiff competition with giants like
Tesco, Morrisons, Asda and Lidl. Moreover, with agile governmental policies, many new small
and medium scale supermarkets have been emerged in the economy that were able to attract
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Illustration 1: Aldi profits fall by almost a fifth as supermarket price war takes toll
(Source: Armstrong, 2017)

customers more effectively and efficiently. Aldi has undergone several changes and
transformations like developing new infrastructure, implementing digital technologies, re-
designing business operations, etc. in order to strengthen its existing performance and
profitability. Despite of undertaking these changes, the firm was not able to accomplish its
desired targets due to varied reasons.
According to Armstrong (2017) the profits of Aldi have been declining for the third year
in a row after the discount supermarket invested money into developing and opening new stores
and also offers more discount to customers in order to gain competitive advantage. This strategy
indeed work as it surpasses big 4 supermarkets; Tesco, Asda. Sainsbury and Morrisons in terms
of price.
After the recession in United Kingdom, the cash-strapped consumers move towards
stores of Aldi as the organisation provides quality products at relatively lower price. Moreover,
the organisation opens hundred more stores whereas its rivals closed down few stores in UK. At
the same time, Aldi lured middle-class customers with more upmarket products such as Prosecco
and pastrami (Yan and Cao, 2017). The sales have been substantially increased in United
Kingdom by 13.5 per cent after attracting new shoppers and the market share of the organisation
rose by 6.9 per cent.
The focus of Aldi is on providing high discounted products and rampant store expansion
strategy dragged its overall operating profits down. With over 726 operating stores in United
Kingdom, the organisation able to enhance its customer base effectively and efficiently.
However, the pricing strategy and new infrastructure development greatly impacted on the
profitability of the firm. In order to enhance its profitability, the firm needs to concentrates on
improving its strategy. This strategic issue faced by the firm affects its profits and revenue in
United Kingdom.
The rationale behind the initiation of the change process.
Organisational change and transformation is done for the purpose of growth and
development. Change is necessary process of firms and in order to sustain in the competitive
environment it is essential to make necessary change and transformations (Draheim and Franke,
2017). The major motive of initiating change within the firm is to develop the existing work
process and business operations into more robust and efficient structure so that desired goals and
objectives of the organisation can be attained. The top management of Aldi in United Kingdom
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in order to stay ahead of its competitors, firm initiated several transformations in their existing
strategies and policies. The motive was to gain competitive advantage and enhancing customer
base within United Kingdom. The organisational change turns out to be successful as customer
base and competitive advantages has been gained within the market economy (Jenkins and
Williamson, 2015). However, it indeed compromised its operating profits and revenue as 2017
became third consecutive year where profits of Aldi declined substantially. Albeit, the top
management stated that all the changes and transformations in the past was made in view of
future perspective.
The investment done in establishing stores will surely cover all the loss and also assists in
raising the operating profits of the firm. Organisational transformation is necessary as it helps the
business to thrive in the global competitive environment. If transformation has been done
properly and in precise manner, then there is higher possibility for any organisation to sustain
their business and profits effectively and efficiently. Managing change is complex part as
management has to carry out extensive research and analysis before articulating and
implementing change in the organisation.
Theorists and philosophers like John Kotter and Kurt Lewin have developed various change
management theories which can be utilised by the organisations in order to implement and
manage change within firm. Transformation is done for a reason and in case of Aldi, the reason
for transformation in strategies was to gain competitive advantages in United Kingdom. With
competitors like Tesco, Sainsbury, Morrisons and Asda it becomes difficult for the firm to gain
customer's attraction (Borland and et.al., 2016). In order to enhance attraction of consumers of
United Kingdom, the change has been initiated by the firm.
The key stages involved in the change process.
Change is not a single step process as organisation has to undergo various steps to successfully
implement the transformation. In order to successfully implement the transformation within firm,
the management applied concepts from Kotter 8 steps change management theory. In this
context, the key steps in the change are provided below:
Creating an urgency
The first step in change process is developing sense of urgency by making employees
aware about the need and necessity of change within the organisation (Simon, Fischbach and
Schoder, 2014). In Aldi, the managers first explain the benefits of change to the employees in
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order to gain their consent. Employees plays major role in bolstering change within the
organisation and it is essential for the firm to elaborate them everything explicitly and efficiently.
The change and strategies have been discussed with employees at Aldi before initiating change
within the firm.
Building guiding coalition
In order to implement change successfully within the firm, managers develop a project
team which underpin the transformation effectively. The team will be responsible for managing
change within the organisation (Rosenbaum-Elliott, Percy and Pervan, 2015). Preferably, this
coalition is made up from employees working in different jobs and positions so that all
employees can rely on the group and identify themselves with the team members. This the next
step which has been followed by Aldi in order to implement the change within the organisation.
They have formulated a team which supports in various activities related with the change.
Developing vision
Developing a strong vision can assist employees to comprehend what firm is trying to
accomplish within the agreed time frame. The change becomes more concrete and strong vision
helps in implementing change more effectively (Christopher, 2016). The vision is often shared
by the top management of the firm in order to motivate employees towards change process. At
Aldi, the chief executives articulated the vision to the employees in order to boost up their
motivation and morale so that change can be implemented successfully.
Communicating vision
Communicating vision is most important objective and step in the change management
process according to Kotter. Management needs to interact with employees the new vision which
could lead the organisation towards growth and development. In this context, the managers at
Aldi interact with employees and team members in order to enhance their comprehensive
understanding about the change process (Friedl and Biagosch, 2018). This provides great
assistance to the management in implementing change within firm.
Removing Obstacles
Eradicating obstacles and hurdles in the process of implementation of change is
necessary. By interacting with employees, managers can identify the employees who are
resisting towards change. It is the duty and responsibility of managers to communicate with
those employees who resists to change and make them understand about the benefits of change
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that could help in accomplishing the set goals and targets of the firm. The top management of
Aldi in change management process elaborated employees regarding benefits of change in order
to gain their consent. They explained employees the future benefits that will be obtained after
initiating new strategies.
Creating Short-term wins
Managers must create short term goals which can be achievable in shorter time frames.
Employees will get motivated if they find that the strategies firm implemented helps in
developing organisation. Short term goals have been established by the managers at Aldi and
guided employees to work collaboratively in order to accomplish them (Burmann and et.al.,
2017). The motivation of employees at Aldi, UK got enhanced when they found that the new
strategies helps in improving the business operations and capabilities.
Consolidating Gains
Change is slow going process and many transformations trajectories fails as management
declared victory too early. Change must be driven into the overall organisational culture. Short-
term gains are the part of long term change process. In order to manage the change effectively,
the management of Aldi must look for improvement areas so that organisation can move towards
right direction and change can be synchronised with goals and objectives of the firm.
Anchoring Change
Anchoring change is the last step of change management model. Change become part of
the corporate culture as it become a part of core of the organisation. After undergoing various
stages, managers at Aldi eventually implemented the new strategies and change within the
corporate framework (Burmann and et.al., 2017). They have increased the store size in United
Kingdom and lower the prices of the products by offering high incentives and discount. This
helps the firm in increasing their customer base and sales.
Challenges that threatened to derail the change process
In the process of change, management of Aldi faced countless challenges and issues
which threatened to derail the change process. From resistance to employees to dynamic business
environment, management faced ample of issues such as competitive pressures, legal obligations,
etc. that affects the productivity and profitability of business. Change is the complex process and
it requires enormous planning and efforts of the manager so that it can be implemented
successfully and adequately within the firm (Keegan and Campus, 2016). Managers faces
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difficulties while implementing change within the firm that ultimately affects the corporate
culture and employee's performance. In this context, challenges faced by Aldi are described
below: Resistance of Employees: Employee's resistance at Aldi affects the change process
within the firm. At first, when new strategies were proposed to senior managers and
manager at Aldi, employees become reluctant to adopt new strategies (Moutinho and
Phillips, 2018). Implementation of new strategies became key area of contention between
employees and managers of Aldi. In order to cope up with the challenge, managers
interact with employees and articulated benefits and advantages of new strategies and
changes that drive the firm towards apex point in the market.
 Lack of Consensus: Lack of consensus was another issue that affects the implementation
of new strategy within the corporate framework at Aldi. Management found difficulties
in obtaining consensus as few managers within the firm was not agreed with the new
strategic proposal (Schrempf-Stirling, Palazzo and Phillips, 2016). In order to gain total
consensus, management at Aldi called for meeting and significance of strategies has been
discussed with the managers. This greatly benefits management in obtaining the
consensus of managers.
Strategic Models
Strategic models are developed with the motive to assists strategic thinker and decision
makers of the firms where they can analyse and develop precise strategies that guide firm
towards growth and development (Glauner, 2016). There are several strategic models developed
by different researchers, organisations and philosophers which are extensively used by today's
organisation in order to thrive in the competitive market environment. In the present research
study, the appropriate strategic applications which can link with Aldi's new strategies are
described below:
SWOT Analysis
SWOT (Strengths, Weakness, Opportunities and Threats) analysis is the framework
which is utilised by firm in order to obtain and evaluate firms internal strategic position. It is an
efficient tool that describe the internal capabilities of the firm (Dalton, 2016). By obtaining
internal capabilities, a firm can know what they are capable of and what they are not, the
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opportunities that can be captured and threats which influence the business. The SWOT analysis
of Aldi is described below:
 
 
Strengths
As compared to its competitors, Aldi provides products and services at relatively lower
price that provides competitive advantages to the firm. Moreover, good and efficient quality of
products has been provided by the organisation to firm in order to enhance their attraction and
retention (Fazli and Shulman, 2018). Positive supplier relationship is another strength that assist
firm in reducing hurdles in supply chain management process. Aldi has over 726 stores operating
in United Kingdom which helps in increasing customer base of firm. All the above discussed
strengths of cited organisation assist it to overcome issues related to changing customer demands
and increasing competition within the market by helping the firm in producing and supplying
goods to their customer effectively and efficiently.
Weaknesses
The weaknesses identified was lack of efficient post sales services provided to the
customers, quality in perception and adaptability to new technologies. It was identified that top
management increased the number of stores but unable to recruit skilled workforce within the
organisation. The lack of skilled workforce and poor post sales services may negatively affect
overall performance of ALDI. It would fail to overcome and adopt the changes in the business
environment and market which is a major issue for the organisation in present scenario.
Opportunities
Aldi has immense opportunities to establish infrastructure in developing countries of Asia
and Africa (Yan and Cao, 2017). Furthermore, they can enhance their brand loyalty and
awareness by providing efficient quality of products and services to their target market. Newer
technologies can be used by the firm in order to enhance the business operations. Adopting
innovative and latest technology may help Aldi to produce high quality of goods which can help
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in achieving customer satisfaction by full-filing their changing needs. New methods of
production can also assist in achieving a good position in the market among its competitors
which is an important opportunity for the cited organisation.
Threats
Threats of increasing competition with the rapid increase in emerging firms and domestic
players can affect the profitability of the firm. Changes in governmental policies and reforms
after Brexit influence the policies and strategies of Aldi and management had synchronised their
new policies accordingly (Draheim and Franke, 2017). Online shopping in UK substantially
increased after the revolution in internet and digital technologies. This give threat to offline
shopping patterns of the firm. The changing legislations and increasing competitors level within
global market is a major threat for degrading performance of the Aldi.
Reason for choosing this model
SWOT Analysis is an essential tool or method to analyse various internal factors which
lies within an organisation such as Aldi. In order to understand and overcome the changes in the
business environment it is very important to understand the positive and negative factors
affecting the organisation which can be identifies using SWOT analysis. Therefore, this business
model has been used in this examination.
PESTLE Analysis
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In order to assess the influence of external environment surrounding business, PESTLE
analysis is used widely. It helps in analysing different external environmental factors like
political, economic, social, technological, legal and environmental which influence the
organisational productivity and profitability greatly. In this regard, the PESTLE analysis of Aldi
is described below: Political Factors: Political factors include governmental policies, government term and
change, lobbying and pressure groups, internal political issues etc. Political factors
greatly influence the strategic decision making of Aldi (Jenkins and Williamson, 2015).
After Brexit, the management of organisation has changed its trading policies and its
supply chain management practices in order to operate in market economy of United
Kingdom. Management further aligned its reforms and practices with governmental
policies. The political factors such as changing policies, governments can affect Aldi both
positively and negatively that further influences the organisation to meet the changes in
the business environment such as changing demands, increasing competition etc.
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Illustration 2: Pestle Analysis
Source: Pestle Analysis Examples to Unlock Business Growth, 2017)

 Economic Factors: Economic factors relates to economic policies and economic
structures which includes local economy, taxation, economy trends, international
exchange rates, etc. Economic factors influence on profitability of the firm as actions that
involve the production, distribution and consumption of goods and services greatly
affects in any transformations in economic policies . Since, global financial crisis of
2007-2008, the economic conditions of UK got unstable. Moreover, Brexit impact
negatively impact on economic conditions and inflation rate in country as many big
corporations like HSBC Bank, etc. shifted there headquarter from the country. Changes
in economy also affects the ability of Aldi to meet changes in the global business
environment, for example – lack of funds does not let the organisation to implement new
technologies for producing more innovative and high quality products. Social Factors: Social factors includes cultural aspects, attitudes, beliefs of people and
society that affect the demand for company's products. Societal tastes and preferences are
dynamic in nature and in order to enhance sales and profits, it is essential for firm to
analyse the needs and expectation of consumers (Borland and et.al., 2016). Consumers at
UK prefer less expensive but more quality products. In order to fulfil their needs, Aldi
provides customers wide range of quality products at relatively lower price. The above
social factors needs to be considered by Aldi for meeting various fluctuations or changes
within customer perceptions, their needs and desires related to the goods & services
provided by the organisation. It can be a major factor to minimise the impact of changes
on performance based on a society and its citizens. Technological Factors: Technological factors relates to the technological aspects,
innovations barriers and its impact on the business. In present globalised era, immense
development in the field of technologies influenced the daily business operations of firm.
From production to distribution, managing human resource to marketing, technologies
reduce time, efforts and cost of the organisation (Simon, Fischbach and Schoder, 2014).
Aldi is beginning to invest in digitalisation of its in-store experience. Shelf-stacking and
digital robots for floor cleaning will be installed in the stores of UK and newer
applications for customer relationship management will be used in the organisation. It
can be determined from this discussion technology plays an important role in every
business or organisation to achieve growth and development that should be given special
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consideration in order to overcome issues related to changes in business environment,
production of innovative products and increase profitability of the firm. Legal Factors: In UK, the supermarket industry was accused of scandals concerning the
content of food products and quality of groceries. In United Kingdom, Aldi was found in
legal consequences as an outcome of misrepresenting its sales of herbs with watchdogs
finding olive leaves in oregano products (Rosenbaum-Elliott, Percy and Pervan, 2015). In
order to operate sustainably in United Kingdom, the management of Aldi has followed
various acts including the Companies Act 2006, Product liability and safety law,
Environmental protection act 1990, etc. Legal factors plays an important role in any
business, strict legislation can bond Aldi while performing business activities such as
export and import which can increase the problem related to low profitability. Environmental Factors: With increase in industrial activities and transportations, the
natural environment has been degraded substantially. Government of UK is working in
protecting the environment by reducing pollutions, reducing the amount of waste and
enforcing regulations which are mandatory for organisations to follow. Aldi implemented
preventive measures for reducing carbon emission by going digital and doing paperless
work. Furthermore, sustainable supply chain methods have been used by the firm in order
to reduce emission of carbon dioxide and sulphur in the environment.
Reason for choosing this model
The main reason for choosing this model or tool is that it helps in analysing external
environment and factors influencing an organisation or business. Theses factors helps in
identifying key elements which can affect business functions or performance of Aldi. Therefore,
researcher used this model to analyse the business environment for the cited firm.
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Porter Five Force Analysis
Porter five force analysis is the framework which applied by the firm in order to assess the
competitive position in the market place. The model is used for analysing the five industry force
which determine the intensity of competition in an industry and its profitability level. In this
context, the Porter Five Force Analysis for Aldi is described below: Bargaining Power of buyer (High): Threats of buyers is high for Aldi due to high level
of competition in the supermarket segment in United Kingdom. Buyers have high power
to influence the price of products and services of the organisation (Christopher, 2016).
Furthermore, consumers in United Kingdom are price sensitive which influence the
pricing strategy of the firm. In order to attract customers, management of Aldi offers
them wider variety of goods at relatively lower price. This force has a major impact on
any organisation in order to overcome the issue related to decreasing profit level and
customer dissatisfaction it is important for Aldi to focus managing bargaining power of
the customers by effective pricing strategies.
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Illustration 3: Porters Five Forces
(Source: CIMA E2: Porters Five Forces, 2016)

 Threats of Substitutes (Moderate): Substitutes in supermarket industry are easily
available for buyers in United Kingdom. The threat of substitution moderately affects
Aldi. Due to its low cost price strategies and large number of stores in United Kingdom,
the management of Aldi able to prevent this threat adequately. Substitutes refers to the
competitors of a firm, it is very important for the cited organisation to design and develop
unique products which can not be imitated so that threat of substitutes can be reduced. Bargaining power of suppliers (Low): The bargaining power of suppliers is low as Aldi
focus on British suppliers and maintain effective relationship with them (Friedl and
Biagosch, 2018). The organisation has made contract with specific suppliers in order to
maintain continuous flow of goods and services. This force has a low impact on Aldi's
functions or performance but in order to achieve customer satisfaction and global reach
the organisation needs to build effective relationship with suppliers. It also assist in
reducing cost of production leading towards increased profit. Threat of new entry (moderate): New entrants are emerging in UK supermarket
segments. With agile governmental policies and focus on developing small and medium
size sector of UK, new grocery stores are rapidly opening in the country. Aldi has
moderate threat of new entrants. With its giant business network and robust customer
base, the organisation is able to prevent intense impact of this threat. In order to
overcome the issues related to increasing competitors Aldi should focus on improving the
quality of its products and enhancing its product line which can help the organisation to
reduce negative impact of this force. Industry Rivalry (High): Industry rivalry refers to the competition level which prevails in
the marketplace. The key competitors of Aldi are Tesco, Sainsbury, Asda, Morrisons and
Lidl. Aldi faced stiff competition in United Kingdom (Burmann and et.al., 2017). In order
to sustain in the competitive environment, management of Aldi has implemented
strategies like price strategy where firm offers products at lower price as compared with
its competitors. There are many competitors of Aldi who are giving a tough competition
and negatively affecting profitability of the firm. It factor must be considered in order to
sustain the position and profit level in the market.
Reason for choosing this model
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The Porter's five force model helps in identifying various forces or factors that influence
a business and its performance, the various drivers such as bargaining power of customers and
suppliers, threat of substitutes etc needs to be monitored and managed in order to make effective
strategies to manage these forces so that profitability and performance of Aldi can not get
affected.
Ansoff Matrix
Ansoff Matrix is the strategic model which helps the firm in determining its product and market
growth strategy. The product and market growth strategy with respect to Aldi is described below: Market Penetration: Under market penetration, firms seek to penetrate within existing
market by offering existing products. The motive is to enhance the retention of customers
and improve the brand loyalty within the marketplace (Burmann and et.al., 2017).
Management of Aldi needs to focus on marketing strategies and promote its offers to
customers by using precise marketing platform such as online marketing, social media
marketing etc. Through this, the management will be able to increase its market share and
operating profits. Using this tool the cited organisation can control its profit level in
overall market place and sustain their relationship with the customers to manage the
changes in business environment.
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Illustration 4:
Ansoff Matrix
(Source: Ansoff Matrix, 2017)

 Market Development: In market development strategies, firm seeks to develop newer
market by providing existing products and services (Keegan and Campus, 2016). It is
considered as slightly risky strategy as in order to develop market in new area, firm must
requires developing its brand image and goodwill. This strategy has been implemented by
Aldi greatly as in UK the firm has 726 operating stores. Development of new market can
increase profitability of Aldi and help to overcome the problem or issues as identified in
this research. Product Development: Under product development strategy firm introduce newer
products in existing market. In order to attract customers, this strategy is used by the
management of Aldi where they develop new competencies and focus on research and
development. Differentiated products has been offered to the customers in order to
sustain in the competitive environment. The issue related to increasing competition can
be resolved by developing a new and innovative product as it can help in attracting more
customers and gaining visibility in the market. Diversification: This strategy is considered as most risky strategy where firms offer
diverse products in newer market. An honest assessment of risk must be undertaken by
the organisation in order to successfully implement this strategy (Moutinho and Phillips,
2018). Management of Aldi offers diversified products in different markets in order to
increase customer base and sales. Diversification is an essential technique to increase
sales by selling new products in different markets. This method can assist in attracting
new customers and increasing profit through increase number of markets.
Reason for choosing this model
This model consists various methods such as market penetration, market development,
product development that helps to increase sales, profit and customer base of Aldi which can be
useful to overcome issues such as decreasing profitability and changing perceptions of
customers.
McKinsey 7S Model
McKinsey 7S model is used for determining organisational design by analysing 7 key
internal elements such as strategy, systems, shared values, style, staff, skills and structure so that
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management could be easily able to identify whether each element is aligned effectively or not.
The internal analysis of Aldi by using this approach is discussed below:
1. Strategy: Strategies are the plans formulated by firm in order to sustain in the competitive
market by gaining competitive advantage. The pricing strategies devised by Aldi helps
the organisation to increase their sales and customer base. It has been successfully
aligned with other key elements of the firm.
2. System: These are the process and procedure of the firm which helps in carrying out daily
activities of business. It determines the way of doing business and main focus for
managers during organisational transformations (Schrempf-Stirling, Palazzo and Phillips,
2016). Aldi's systems are structured and robust enough that helps them in managing
change within the firm.
3. Structure: It shows the arrangement of different business units and divisions and also
provides information of manager’s accountability. Hierarchy organisational structure has
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Illustration 5: McKinsey 7S model
(Source: Hanlon, 2014)

been followed at Aldi where top management is responsible for developing and
implementing important decisions and strategies.
4. Style: Democratic leadership style has been followed at Aldi where management
provides opportunities to employees to participate in decision making process. This style
has been successfully aligned with other elements which helps the organisation to achieve
goals and objectives.
5. Staff: It is concerned with the manpower employed within the firm. Aldi utilised both
internal and external source of recruitment and provides training to the employees in
order to raise their skills and capabilities (Glauner, 2016).
6. Skills: These are the abilities of employees which helps the firm to achieve its goal. In
order to raise skills and competencies of employees, both on the job and off the methods
has been used by the Aldi. Through this, skill element able to aligned with other core
elements.
7. Shared Value: Shared values are the norms and standards which guide employee
behaviour and company action and are the foundation of every organisation (Dalton,
2016). In Aldi, all employees have to follow the rules and regulations which helps in
developing peaceful and harmonious environment.
Reason for choosing this model
This business model is appropriate with context to the problem statement or issues such
low profitability and changing needs of customers. Aldi can focus on 7 key elements Strategy,
System, Structure, Style, Staff, Skills and Shared Value in order to develop and maintain
effective functioning of the organisation. It can be very helpful in overcoming the challenges or
issues identified.
VRIO Analysis
VRIO analysis is the technique which is used for evaluation of company's resources and also
helps in ascertaining competitive advantages. VRIO analysis of Aldi is described below: Value: The resource employed such as integrated systems and inventory management
tool in Aldi are valuable which helps the firm to gain competitive advantages (Fazli and
Shulman, 2018). With the help of these resources, firm is able to exploit opportunities
and neutralise the outside threats effectively.
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 Rarity: Resources used at Aldi are not rare as rival firms also utilised these resources in
order to create competition within the firm. Though, Aldi utilised these resources in
unique manner which enhances the value of resources. Imitable: The resources used by the firm are not easily imitable as some of the systems
like shelf-stacking systems are patented under organisation name. This make resources
unique and prevent them to imitate. Organisation: The resources within Aldi are systematically organised which helps the
firm to attain its goals and objectives (Yan and Cao, 2017). Management exploits the
resources in precise manner which helps in obtaining competitive advantage to the firm.
Reason for choosing this model
VRIO analysis is also an essential tool through which Aldi can meet the objectives to
overcome organisations issues. The organisation can improve its profitability by focusing on
value, rarity, imitability and organisational resources to increase the performance and achieve
competitive advantages in the market.
End Result
The operating profits surely declined after the implementation of new strategies within
Aldi but the firm was able to enhance their customer base and sales respectively. The new
strategies devised by the firm helps in increasing the motivation of employees as by opening new
stores provides greater opportunities to employees to work with the organisation (Draheim and
Franke, 2017). Stores expansion and change in pricing strategies will ensure that Aldi's
operating profits will substantially increased in coming years. The change will ensure future
success of the firm as in UK, intense competition can be witnessed in supermarket industry and
essential measures has been taken by the firm to sustain in the competitive scenario.
CONCLUSION
In summing up, it can be said that Aldi's new price and market development strategy
helps in increasing the customer base and sales but it eventually declined its profitability. The
company witnessed rapid declined of 17 per cent in profits margin for the third consecutive year.
The report primarily focused on analysing the key strategic issues which impacts on the
profitability of the firm. With this respect the rationale for initiation change has been provided in
the report and key stages involved in the change process by using Kotter 8 Step change
management theory has been discussed. By using various strategic tools and models, the
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competitive position, internal capabilities and influence of external environment on Aldi has
been determined.
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REFERENCES
Books and Journals
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Online
Aldi reports record sales but profits drop amid price war. 2017. [Online]. Available
through:<https://www.bbc.com/news/business-41384179>
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supermarket-price-war-takes-toll/>
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growth/>
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APPENDIX
SWOT ANALYSIS
Strengths Weaknesses
 Low cost provider
 Lean Operations
 Effective quality of products
 Effective relationship with suppliers
 Innovative sales model
 Large Customer base
 Huge number of stores worldwide
 Robust environmental policies
 Customer Services are not up to the
mark.
 Quality perception
 Store aesthetics
 Lack of adaptability to technologies
 Lack of skilled employees
Opportunities Threats
 Global expansion in developing
countries.
 Enhancing brand awareness and loyalty
 Focus on developing effective
relationship with customers and also
improving customer perception.
 Development of employees through
training in all store positions.
 Implementation of new technologies
 Increased competition
 Transformations in governmental
policies and reforms
 Low brand loyalty
 Increase online shopping
PESTLE ANALYSIS
Political Factors: Political factors include governmental policies, government term and change,
lobbying and pressure groups, internal political issues etc.
Economic Factors: Economic factors relates to economic policies and economic structures
which includes local economy, taxation, economy trends, international exchange rates, etc
Social Factors: Social factors includes cultural aspects, attitudes, beliefs of people and society
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that affect the demand for company's products. Societal tastes and preferences are dynamic in
nature and in order to enhance sales and profits
Technological Factors: Technological factors relates to the technological aspects, innovations
barriers and its impact on the business. In present globalised era, immense development in the
field of technologies influenced the daily business operations of firm. From production to
distribution, managing human resource to marketing, technologies reduce time, efforts and cost
of the organisation
Legal Factors: In UK, the supermarket industry was accused of scandals concerning the
content of food products and quality of groceries. In United Kingdom, Aldi was found in legal
consequences as an outcome of misrepresenting its sales of herbs with watchdogs finding olive
leaves in oregano products
Environmental Factors: With increase in industrial activities and transportations, the natural
environment has been degraded substantially. Government of UK is working in protecting the
environment by reducing pollutions, reducing the amount of waste and enforcing regulations
which are mandatory for organisations to follow.
PORTER'S FIVE FORCES
Bargaining Power of buyer (High): Threats of buyers is high for Aldi due to high level of
competition in the supermarket segment in United Kingdom. Buyers have high power to
influence the price of products and services of the organisation
Threats of Substitutes (Moderate): Substitutes in supermarket industry are easily available for
buyers in United Kingdom
Bargaining power of suppliers (Low): The bargaining power of suppliers is low as Aldi focus
on British suppliers and maintain effective relationship with them
Threat of new entry (moderate): New entrants are emerging in UK supermarket segments.
With agile governmental policies and focus on developing small and medium size sector of UK,
new grocery stores are rapidly opening in the country
Industry Rivalry (High): Industry rivalry refers to the competition level which prevails in the
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marketplace. The key competitors of Aldi are Tesco, Sainsbury, Asda, Morrisons and Lidl.
ANSOFF MATRIX
Market Penetration: Under market penetration, firms seek to penetrate within existing market
by offering existing products
Market Development: In market development strategies, firm seeks to develop newer market
by providing existing products and services
Product Development: Under product development strategy firm introduce newer products in
existing market.
Diversification: This strategy is considered as most risky strategy where firms offer diverse
products in newer market.
VRIO Analysis
Value: The resource employed such as integrated systems and inventory management tool in
Aldi are valuable which helps the firm to gain competitive advantages
Rarity: Resources used at Aldi are not rare as rival firms also utilised these resources in order to
create competition within the firm.
Imitable: The resources used by the firm are not easily imitable as some of the systems like
shelf-stacking systems are patented under organisation name
Organisation: The resources within Aldi are systematically organised which helps the firm to
attain its goals and objectives
McKinsey 7S Model
Strategy: Strategies are the plans formulated by firm in order to sustain in the competitive
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market by gaining competitive advantage
System: These are the process and procedure of the firm which helps in carrying out daily
activities of business
Structure: It shows the arrangement of different business units and divisions and also provides
information of manager’s accountability.
Style: Democratic leadership style has been followed at Aldi where management provides
opportunities to employees to participate in decision making process
Staff: It is concerned with the manpower employed within the firm
Skills: These are the abilities of employees which helps the firm to achieve its goal
Shared Value: Shared values are the norms and standards which guide employee behaviour and
company action and are the foundation of every organisation
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