Management: Competitive Advantage and Growth Strategies of Aldi

This paper explores the competitive advantage and growth strategies of Aldi, a German retail organization. It discusses the strengths, weaknesses, opportunities, and threats faced by Aldi, along with an analysis of its communication strategies and specific objectives for growth.

Running head: MANAGEMENT
Management
Name of the Student
Name of the University
Author Note

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Introduction:
The modern business industry is observed to be notably competitive and growing as
well. The intense competition of the market is pretty visible with the organizations lowering
the pricing of the products and the services that they offer to the customers. One of the prime
reason of the increasing competition in the business industry is observe to be the increment in
the number of new organizations entering the market (Thomassen et al. 2017). The entry of
the new organizations with the lucrative offers and discounts for the customers is seen to
produce notable amount of difficulty in the survival and growth of the existing organizations.
Under such situation, the organizations are seen to be left with two options that are the
improvement of the quality of the products and the services and the application of the
competitive pricing policy to make sure that the survival of the other organizations become
difficult (Rhodes and Brien 2014). It is observed to be difficult to apply both for a company,
however, there are notable amount of benefits for the organizations that are capable of
applying both the strategies in a simultaneous fashion (Kim, Suresh and Kocabasoglu-
Hillmer 2013).
In addition to this, it can be said that there are significantly limited number of
organizations that are capable of applying both the strategies simultaneously and the German
organization Aldi is one of them. The paper is focused in the elaboration of the various
aspects of the business conduction of the chosen organization Aldi, that are capable of
producing the much required competitive advantage to the chosen organization over the
competitor organizations. Adding to this, the paper includes an external and internal
evaluation of the chosen organization to state the strengths and weaknesses of the
organization along with the condition of the market in which it is currently operating. The
paper assesses the communication strategies of the organization for the formation of the path

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of improvement and along with that, the paper also elaborates the specific objectives and the
motives that have contributed to the rapid growth of the organization.
Organizational Overview:
The chosen organization operas in the retail industry and is a common brand that is
created by two family owned discount supermarket chains. The company was established in
the year 1946 when two brothers, Karl Hans Albrecht and Theo Paul Albrecht took over the
store of their mother which was there in Essen from the year 1913 (Aldi.com. 2019).
However, the organization was observed to be divided into two entity in the year 1960 and in
the year 1962, both the divisions in the form of Aldi Nord and Aldi Sud achieved significant
amount of market limelight (Aldi.com. 2019). The organization was observed to offer mainly
food and beverage products to the customers of it. However, the list also included household
essentials and the sanitary products as well. The gross revenue of the organization in the base
country is observed to be 30.453 billion Euro in the year 2017 where Aldi Sud contributed
16.952 billion Euro and Aldi Nord contributed 13.501 billion Euro (Aldi.com. 2019). The
company is observed to have two different headquarters for the improved business operations
of the mentioned units and one of them were observed to be in Essen, Germany and the other
one was located in Mulheim, Germany (Aldi.com. 2019).
Internal Evaluation:
Strengths:
The application of the low pricing strategy is observed to be one of the key strength of
the chosen organization and it is also considered to be one of the prime reason for such large
customer base of the organization. With 10000 stores in 20 different countries, the
organization is seen to reach to the doorsteps of the customers (Aldi.com. 2019). Along with
that, there are notably limited number of competitor organizations that have the potential to

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match the pricing of the mentioned organization even after producing quality in the product
and the services that they offer to the customers.
Increased product chain:
The organization is seen to be capable of providing a wide range of products to the
customers and majority of them are observed to be essential need of the customers which are
consumed on a regular basis (Pechey and Monsivais 2015). Hence the repetitive purchases
from the part of the customers of the organization is seen to be notably helpful for the
organization in generating larger amount of profits.
Expansion of business:
The chosen organization is seen to have a strong presence in the base country with
2500 number of operational stores and along with that, the global business conduction of the
organization has also improved over the years in a significant manner and that is pretty
evident with the opening of 10000 stores in the various nations of Europe and in other parts
of the globe (Skordili 2013).
Improved Level of Customer Support:
The organization is seen to be significantly efficient in meeting the varying
preferences of the customers. The organization is seen to be capable providing the daily
needs of the customers in a considerably affordable price. Along with that, majority of the
customers of the organization were seen to be delighted with the after sales services of the
organization which is instrumental in the generation of the increased amount of customers’
satisfaction that triggers the customers in repetitive purchasing of the products of the chosen
organization (Empen, Loy and Weiss 2015).

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In spite of maintaining higher quality in the products and the services, the
organization is seen to limit the operational cost in an efficient manner which enables the
organization to achieve an expressively high margin of profit.
Weakness:
The organization is seen to be dependent on the sales volume in a significant manner
as the discount stores thrive on low margins. This forces the organization to conduct
unethical business operations at times such as the price discrimination and ill-mannered
treatment towards suppliers of the organization in an attempt to ensure consistent margin of
profit.
Stressed Workforce:
As mentioned earlier, Aldi needs to be highly productive in order to make sure that
they be able to maintain a consistent margin of profit and that is significant in the increment
of the work pressure amongst the employees of the organization. As the survival of the
chosen organization is seen to be dependent of the production of the organization, the
mentioned company is seen to force the employees to operate in multiple shifts and with a
considerably lesser amount of compensation in comparison to other organizations. This was
significant in the generation of the job dissatisfaction amongst the employees of the
organization (Humphreys et al. 2017).
Ineffective strategy for the high income groups:
The main focus of the discount stores of the chosen organization is observed to be on
the customers of the low and medium income group and that is pretty evident with the pricing
of products of the mentioned organization. However, the organization is seen to suffer from
the absence of the high income groups penetration policy for achieving higher profitability.

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Opportunities:
The organization is observed to offer such products to the customers which are
considered to be the daily needs of them. As the organization offers the much required
products to the customers, it is seen that the customers are willing to spend higher sums for
the achievement of the premium quality services and products from the part of the chosen
organization. This provides the crucial opportunity to the management of the chosen
organization in improving the quality of the services and the products that they offer to their
customers for the generation of larger amount of profit (Vijayan et al. 2014). Apart from that,
number of new product categories that are designed by the chosen organization is seen to be
significant in increasing the effectiveness of the organization.
Apart from that, the organization is in need to undertake considerable number of
marketing and promotional campaigns to introduce the new products of the chosen
organization. The company has the chance to expand their businesses more and more towards
the developing countries of the globe.
Threats:
The significant amount of market competition is observed to be one of the
fundamental treats for the chosen organization. The market leaders such as Walmart or Best
Buy are seen to produce tough competition to the chosen organization. Adding to this, the
initiation of the operations for moving the grocery from the part of the e-retailing
organization, Amazon is seen to be significant for the organization in increasing potential
threat of competition to the chosen organization.
External Evaluation:
Porte’s Five Forces:

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Competitive Rivalry: High
The global retail industry was observed to face a significantly fierce competition
where almost all the market leading organizations were seen to be notably close in terms of
pricing and market penetration. The main competitors of the chosen organization was
observed to be Walmart, Woolworths, Coles, Testco, Costco Wholesale and Amazon
(Walmart.com. 2019). The main basis of competition is observed to be the pricing. However,
with the application of the low pricing strategy by majority of the above mentioned
organizations, the mentioned tactics has become a routine strategy and on the other hand, the
organizations were seen to be conduct the marketing and the promotional campaigns with
notable amount of aggressiveness in an attempt to capture the market share. However, the
chosen organization is seen to minimize the fixed costs in an efficient manner under the
experience of the high competitive rivalry.

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Threat of new entrants: Moderate
The concerns such as the requirements for the large infrastructural establishment,
capital investment, establishment of a lucrative brand within a short period of time along with
the achievement of the economy of sales are seen to be significant for the new entries in
terms of opening new business. However, low cost local supermarket or the local farmers
who is interested in selling his or her own products, can consider taking up the market share
of the chosen company in the small or medium sized cities which will have the potential to
increase the sales of Aldi. Hence the impact is moderate.
Bargaining power of the Buyers: High
As mentioned earlier, the industry may experience limited number of new entries,
however with existence of the above mentioned competitor organizations and the application
of the relatively similar pricing tactics, the organizations have provided sufficient number of
options to the customers and that makes bargaining power of the customers high.
Bargaining Power of the Suppliers: Low
The retail industry is seen to experience the representation of notable number of
suppliers’ organizations who are capable to provide quality materials in a significantly low
cost and are expressively responsible with the accurate supply and on time delivery (Levy
2013). The suppliers are observed to search for the retail organizations who are capable of
bulk purchasing and the organizations are seen to be happy to offer to those organizations and
their impact on the retail organization individually is seen to be low.
Threat of Substitutes: High
As mentioned earlier, the industry is seen to experience the representation of
considerable number of market leaders and their same sort of business strategy indicates

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notable amount of threat for them in getting substituted by other organizations. As majority
of the organizations are seen to focus on the application of the lower pricing strategy, the
customers have the advantage of choosing from a pool of organizations and that portrays the
high threat of being substituted by other organizations.
Competitive Advantage and Specific Objectives that increased the growth:
The company is seen to have a significantly strong impression on the customers of the
organization with the application of the low pricing strategy for the products and the services
that they are offering to the customers. The chosen organization offers the daily needs of the
customers and that is instrumental in the continuous purchasing from the part of the
customers. As it is pretty evident that there is a genuine need for the products of the chosen
organization, the application of low pricing strategy with the maintenance of the optimum
quality of the products is seen to offer a strong competitive advantage to the chosen
organization over the competitor organizations (Goetsch and Davis 2014). Adding to this, the
increased number of outlets of the chosen organization proves to be significant for the
organization in terms of reaching to the customers across the globe with the products and the
services that they offer to the customers. The spreading of the business in the various
continents and sub continents is a notably influential factor in the generation of the higher
profit for the chosen organization. Along with that, the improved quality of the customer
service from the part of the organization with specific focus on the after sales services is seen
to put the organization some extra steps ahead in comparison to the competitors in the race of
market domination (Wrigley and Lowe 2014).
The company had the objective of serving the customers in accordance to the needs of
them which is seen to be crucial in the formation of the customers’ satisfaction and produces
the intention of repetitive purchases amongst the customers of the organization. Adding to the

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excellence of the product mix, the company’s aim of providing the products and the services
in a significantly competitive price along with maintaining the optimum quality of the
products is evaluated to be one of the major objective of the chosen organization that has
tremendous amount of influence in the increment of the growth of the organization
(Topalović 2015). Adding to this, the company’s aim to reach out to the customers across the
globe is seen to be of great significance in the increment of the consumption of products and
the services of the company.
Communication Strategy:
The mission of the company is to provide the customers with the products that they
buy on regular basis and along with that, provide the products with the highest possible
qualities and in guaranteed low prices. Along with that, the chosen organization is seen to
have the vision that is guided by several principles which make sure that the top quality
products are guaranteed in significantly low prices from the part of the company. Along with
that, the main ideologies of the chosen organization is seen to be considerable amount of
savings, optimum quality products, improved value of the products, improved and special
buys for the customers along with the formation of the trust amongst the customers of the
organization.
The communication strategy of the organization is seen to be dependent on the
promotional activities and marketing campaigns that the particular organization is able to
conduct over the years. However, the sigifiacnt formation of the brand of a company that
lasted more than 100 years is seen to be less dependent on the promotional activities for the
formation of a recognisable brand that will have the potential to attract the customers. Having
said that, the organization requires the promotional and the marketing activities to
communicate regarding the features and the quality of the products that they offer to the

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customers of the organization with a specific focus on the products that are new in the
product chain of the organization (Armstrong et al. 2015).
The recommendation for the organization will be to improve the online promotional
and marketing activities for the products that are new in the product chain of the organization.
It is much required for the organization in terms of managing the customers’ knowledge
regarding the new product and the services of the company. Hence the organization is in need
to focus on the improvement of the promotional and the marketing strategies to allow the new
products in the achievement of the much required market limelight for the increased
consumption by the customers.
Implications on the company’s stakeholders:
Three of the issues that have significant amount of impact on the operation of the
organization is seen to be dissatisfied employees, poor strategies in terms of penetrating the
high income groups along with the inappropriate business conduction with the suppliers of
the organization (Hugos 2018). The shareholders of the organization needs to improve the
pay structures and the rewarding policy of the organization to make sure that the employees
of the organization are motivated as the organization cannot afford to lower down the work
pressure of the employees. Adding to this, the management of the organization is in need to
make sure that they be able to formulate effective strategies for the improved penetration in
the high income groups. Apart from that, the organization needs to increase their
responsibility towards the suppliers of the organization in order to make sure that they be able
to source quality materials for the manufacturing of the quality products (Fernie and Sparks
2018). The incorporation of ethics in the business conduction of the organization with the
suppliers has the potential to improve the reach of the organization in manufacturing quality
products which leads to the formation of the customer satisfaction.

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Conclusion:
On a concluding note, the organization has the potential to maintain the position of
the market leader in the future as well. However, it needs to improve the business conduction
with the suppliers along with increment of the offerings for the employees from the part of
the organization. Adding to this, the improved formation of the strategies for targeting the
customers belonging to the high income groups has the potential to improve the financial
statement of the chosen organization.

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