Analyzing Aldi's Strategy Formulation and Responses to Challenges

This assignment critically analyzes Aldi's balance of emergent and deliberate approaches to strategy formulation, major industry and macro-environmental problems faced by the supermarket, and its responses to these challenges. It also uses Porter's value chain concept to assess Aldi's strategic capability and VRIO to evaluate the sustainability of its strategic capabilities.

STRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Critically analysing balance of emergent and deliberate approaches to strategy formulation
that has been adopted by Aldi in the past....................................................................................3
Critically assessing major industry and macro-environmental problems that supermarket has
faced in the past and its responses in regard to these as well as their effectiveness...................5
Using porter's value chain concept to critically analyse Aldi's strategic capability and VRIO to
assess sustainability of company's strategic capabilities.............................................................8
Critically examining previous strategies of Aldi by using Porter's generic strategy model and
Ansoff Matrix............................................................................................................................12
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Strategic management is described as procedure of setting aim, objectives and processes
in order to make organizations more competitive. It caters overall directions and appropriate
ways to a company, which it may use to gain current as well as further benefits in term of
gaining competitive edges and increasing sales even better than their competitors. It is also
defined as set of effective actions and practical decisions which management may undertake to
obtain desire outcomes. The current assignment will be base on Aldi, which falls under list of
leading supermarkets in the United States. The study will explain balance of deliberate and
emergent approaches to tactic formulation that has been adopted by organization in the past. It
will define extent to which that balance has been right and then suggestion based on analysis.
Furthermore, the report will justify major macro environmental and sector problems that firm has
faced earlier and its responses in context of these.
It will explain usage of porter's value chain framework to analyse strategic capability of
supermarket. Lastly, the assignment will clarify previous tactics of Aldi by using porter's generic
strategy framework and Ansoff Matrix. Moreover, it defines analysis on the basis of approach to
internationalization that company has adopted.
TASK
Critically analysing balance of emergent and deliberate approaches to strategy formulation that
has been adopted by Aldi in the past
Deliberate tactics are used to achieve set aims and objectives of a company, while
emergent strategies are utilized in context of absence of goals to create a new and effective ones
in the future (Krishna, Connaughton and Linabary, 2020). These types of strategies are
formulated by using specific model or concept. In the world of business varied models are
available, which Aldi used in past to formulate its strategy. For example, Blue Ocean Strategy
is one of the best business strategies and used in term of deliberate and emergent approach by
many companies, to formulate effective strategy. Aldi also adopted this method in the past to
gain competitive advantages and generate profits, which is quite essential. It is based on
alignment of three key tactic positions of value, people and profit. It helps organization to be
ahead of competition within retail sector. With this approach, company has taken effective and
appropriate decisions in term of strategy formulation related to reconstruct market limitations.

According to this, supermarket develop strategy to open an average of 30 new outlets annually.
Firm has adopted Blue ocean strategy as a model and efforts to formulate this tactic, which has
provided varied benefits to company in term of increasing its sales, and made it able to be a
strong competitor against other brands that are operating in retail sector from longer period
(Suhendi, 2020).
Along with that, in term of emergent approach, Aldi has formulated strong marketing
tactic, which is a combination of its emergent and deliberate tactics that help to generate brand
awareness within those places where it has established 30 new stores (Van Kampen and
Kirkham, 2020). Firm balance the both methods in effective manner in context of strategy
formulation that has been adopted by its venture in earlier period.
Extent to which that balance has been right and why-
As discussed above, in term of deliberate approach company has formulated strategy to
develop 30 outlets and in manner of emergent approach, Aldi has created strong & beneficial
marketing strategy. Both these tactics provide a lot of benefits to company, its management has
balanced these in systematic and excellent manner, in the way of high extent. The balance
between the above two approaches has been appropriate because opening a new store is not that
much touch, but to gain the attention of people towards purchase is much harder than any other
practices of companies. Aldi balance both activities in appropriate manner, by taking decision to
open new store and on the same time by developing strong marketing plan, which made it more
successful and boost its performance in the world of retail.
Suggestions and justifications-
It can be said that by considering more approaches, techniques and processes, a company
may get more opportunities related to growth and success of ventures. In context of Aldi, varied
forms of suggestions in term of above concepts available in the market that help to transformed
balance of deliberate & emergent approaches for the future.
 The balance of both methods related to strategy formulation should be transformed in the
future, by managing the existing shops and opening at emerging regions or nations,
where people seek to purchase quality items and services from well-known and the most
trusted brands in the world. Instead of establishing new outlets everywhere, firm can
focus on managing current ones and starting ventures at those places where the
requirements of quality products is reach at high extent. This kind of transformation

provides many benefits to supermarket in term of maximizing its sales more than rivals
and customer base as well, which is quite tough to increase for any company.
 Furthermore, along above recommendation, Aldi can also become more successful and
hold its position as key competitor for long by considering another recommendations in
term of actions, which made it able to transform balance of deliberate & emergent
methods for the future. For example, firm can use the advanced digital marketing
platforms in order to promote its new stores in a market, as it help to drive many
customers towards buy and then assist to increase sales, which is quite essential (Olson
and et.al, 2021). The approach is transformed in term of using social media platforms,
because in recent time and future, individual buyer prefer to collect information relate to
items and buy without going out of home or office area.
Support requires promoting development & recommended balance of organizational
tactics and plans-
In context of above suggested ways, varied things are required which may support to
promote development of above recommendations related to balance of Aldi plans and tactics.
The skilled and talented employees are needed, because they are able to contribute to get desire
outcomes by performing much better and providing valuable suggestions that help to balance
venture plans, strategies and activities related to these in effective manner. By using the abilities
and skills, individual candidate help to promote development in term of providing appropriate
services and delivering right products to consumers as per their demands and needs. It helps to
manage daily operations in systematic manner and give chance to establish new one, where also
workers may play vital role in managing daily activities.
Management, employees and departmental supports are requited to promote overall
development of suggested balance of plans and tactics of Aldi. For example, marketing team
may support in term of creating the most influencing and attractive content which goes direct to
mind of consumers and touch their heart in form of advertising tones.
Critically assessing major industry and macro-environmental problems that supermarket has
faced in the past and its responses in regard to these as well as their effectiveness
Aldi is a leading supermarket in the US, it has managed its growth in the market by
applying varied tactics and approaches in term of responses in the context of challenges that it
has been faced in the past, and that's are;

Macro-environmental and retail issues-
Political factor-
Trade regulations, changes in tax rates, political stability or instability and vulnerability
are included in list of political factors. In case of Aldi, Brexit is one of those major macro
environmental factors, which bring huge challenge for company as it put negative impact on
business expansion strategies as well as growth of supermarket. Due to this factor, firm has faced
varied issues in term of managing its venture progress and redeveloping tactics, which consumes
a lot of time and efforts as well.
Economic factor-
Unemployment rate, inflation, education level and slow economic growth, are those
factors that covers in list of economic forces. In context of Aldi, inflation is an economic factor
which put negative impact on sales and profits of company. Due to Brexit, inflation rate is high
within US and UK as well, it affects negatively and bring challenge for supermarket to retain
potential buyers for long. When Brexit decision has implemented into practical manner, it has
increased extent of inflation, which impact buying and spending behaviour of majority of
consumers that directly affect sales of supermarket.
Social factor-
Market trends, change in customer preferences and income level of consumers are the
best examples of social factors. Emerging market trend is one of those factors that affect Aldi
management practices and activities. It impacts the way company take decision to offer products
or services and also the manner firm take judgements related to product pricing. It drives the
attention of supermarket toward conducting varied actions and developing tactics.
Technology factor-
Technology advancement is the most beneficial and useful macro-environmental factor,
because it put positive impact on Aldi success and venture growth in term of making marketing
much stronger than ever in context of creating advertising content and plans, which they used to
promote range of products in market. It has made company able to reach at global level, where
profitable buyers and investors are accessible. Furthermore, it helps to drive the attention of
business investors who are interested to invest their money in profitable project or operations.
Environmental factor-

Customers and government concern in context of environment safety and sustainability,
affect Aldi and its management practices. This factor creates a new challenge or issue for
company, which impact overall activities of brand. Firm faced problem in context of complying
CSR policies and rules, which is quite important to follow in term of ethical business practices.
Legal factor-
Along with above issues or challenges, Aldi has faced more problems that has emerged
due to changes in equality acts, employment policies and regulations. For example, Equality Act
2010, drives the attention of management towards conducting ethical business practices in term
of providing fair and equal opportunities to existing and new workers related to growth.
Intense Competition in retail sector-
The biggest issue that Aldi has faced in the past while operating its venture within retail
sector is to manage its brand image, retain potential buyers and increase sales due high
competitive rivalry between existing players (Satria and Komara, 2020). It is one of those
industry problems that company has faced and which get impacted its entire business as well as
operational efficiency in negative manner. TESCO, Sainsbury, ASDA and Morrison's are the
main competitors of Aldi, who are giving tough competition to firm and increasing high pressure
on brand management. All these rivals are taking effective initiatives to gain competitive
advantages, which contribute to increase intense competitive environment within sector.
Evaluating responses of company in context of above problems and their effectiveness-
In context of Brexit as political factor, Aldi has response in term of making decision to
spend an extra 3.5 Billion on UK grown drink and food, it also contributes to support British
farmers who supply raw materials to company, which it sells in market and offer to target
customer. Furthermore, along with this, supermarket has also taken decision to handle the
situation of inflation in term of keeping grocery prices inflation low in nations where it has
operated its venture from longer period. This response is quite effective and beneficial for
productivity and profitability of brand as it help to boost its brand image in market successfully.
Aldi also response to social factor in term of identifying current market trends and
consumers needs which get impacted due to it. It attempts to offer those items and other grocery
products that potential buyers seeks to purchase. Moreover, it has taken decision to conduct CSR
practices in style of using recyclable materials in context of product packaging. Aldi also take
initiatives to comply business laws in which employment regulations are included. All its

responses are effective in term of increasing sales, revenue and boosting brand image all over the
world.
Impact of macro & competitive environmental issues-
As discussed above political, economic, environmental, high competitive environment
and legal factors put negative impact on Aldi. But still company has sustained and hold its
position in market by applying effective tactics in term of conducting market research and
making investment in context of advance technologies, which made it much stronger than last
few years to gain competitive benefits. This strategy may help company in the future and allow
to be a strong competitor against other supermarkets.
Using porter's value chain concept to critically analyse Aldi's strategic capability and VRIO to
assess sustainability of company's strategic capabilities
Aldi has varied strategic capabilities that have made it able to reach a global level and be
in this position for longer period. Here, Porter's Value chain framework is utilized that help to
determine the strategic capability of supermarket clearly.
Primary activities-
Inbound logistics-
By using this model, it can be analysed that Aldi is capable to manage inbound activities
successfully. Its management has received and stored materials at safe place where it stays fresh
for longer time period, which is quite beneficial for company as it enable it to offer fresh fruits
and vegetables to consumers (LeDoux and Vojnovic, 2021). Furthermore, organization and
workers take initiative to clear the entire place where raw materials are stored.
Operations-
Along with the above capability, Alid has more than it. For example, firm have its own
brand and warehouses where skilled workers contribute to increase the productivity and
profitability of firm. Organization has capability to get its customers back again and again in
context of its product purchase, which in return increase the sales and customer base even better
than rivals.
Outbound logistics-
Supermarket has successfully and effectively manage its outbound logistics practices in
term of transporting products to stores where potential buyers are reaching and continually
purchasing grocery products. By using own transport sources or modes, firm easily reach at

target customers, which saves its money and attempts in context of using other transportation
methods.
Marketing & sales-
Aldi has gained the attention of new customers while operating its venture at global level
by developing and implementing effective marketing tactics, which made company able to be
competitive for longer within retail sector (Schultz and et.al., 2021). The strategies of
supermarket related to sales and advertising save money of brand in all the ways and also
contribute to increase more than last few months or years.
Services-
In term of valuable services, Aldi provide chance to consumers to call its customers
services teams who are able to solve their queries and provide important information which
drives attention of individual consumer towards taking decision related to purchase. These types
of groups are available at workplace just for the consumers from Monday to Saturday. They
contribute to make people happy by solving their queries in regard to grocery products,
supermarket opening time, etc.
Supportive activities-
Illustration 1: Value Chain Model
(Source: Value Chain Analysis, 2018)

Firm infrastructure-
Aldi is capable to retain skilled applicants for longer and to gain the attention of new,
because its infrastructure is quite effective and appropriate in term of solving the queries and
understanding the concern of workers. Its Human resource department and legal section
contributes to make firm away from illegal issues or any kind of unethical matters, which is
actually quite essential.
Human resource management-
HRM within Aldi is able to enhance the productivity and improve the performance level
of employees, because they are using several strategies and methods which is quite beneficial for
company as well as its candidates. HR manager always taken initiatives to make employees
happy and stress free that is important to do as it affect productivity and morale of individual
worker.
Technology development-
The main reason behind success and excellent growth of Aldi is its capability in context
of making investment to use and implement advanced technologies which in return increase the
speed of brand in term of delivering quality items and manufacturing the same. Supermarket has
invested a lot of money to get into check out free retail technology game. Furthermore, its early
investments are supporting company to take on Walmart.
Procurement-
As discussed above, organization has successfully managed its inbound and other forms
of activities, its management has also contributed to grow brand even better. Its abilities and
administration effectiveness, allow company to manage procurement actions in effective manner,
which turns into increasing productivity, sales and performance of supermarket.
From above discussion, it has been identified that each activity in Value chain has
managed by Aldi, but particularly it has managed Inbound, outbound and marketing & sales.
VRIO framework-
Just like Value chain analysis, here, VRIO framework is also used for specific reason and
that is to assess sustainability of Aldi's strategic capability.

Resources Valuable Rare Inimitable Organized
Financial
resources
Pricing strategies
Track record of
leadership team
Global and local
presence
Supply chain
network
flexibility
Valuable-
By utilizing VRIO framework, it has identified that Aldi has capability to use its financial
resources in context getting more profits and success than its rivals, which is quite important and
useful for brand. Furthermore, in term of strategic capability, organization pricing strategy is
valuable, rare and helpful, but not inimitable because it has been used by many companies in
same sector to gain competitive benefits.
Illustration 2: VRIO Analysis
(Source: VRIO Framework, 2016)

Rare-
Leadership team, supply chain network flexibility, international and local presence of
company are included in list of value and rare resources, which Aldi has successfully managed.
But on the other hand, it identifies that all these assets are inimitable by other brands easily as
they are also capable to use these in context of gaining benefits.
Inimitable-
Other supermarkets in retail sector are able to imitate pricing tactics of Aldi, and also
have power to build strong global as well as local presence which contribute to increase their
sales, and allow building strong customers base, which is not that easy to build, but possible
when companies used effective approaches and techniques to do so.
Organized-
Aldi has organized its global presence, by using key tactics which is quite important and
effective. It has managed all above key resources that permit giving touch competition to brand
and giving power to handle further situations in impressive manner.
Critically examining previous strategies of Aldi by using Porter's generic strategy model and
Ansoff Matrix
In order to effectively analyse the Aldi's past strategies, Porter's Generic strategy and
Ansoff matrix is being utilized. In addition, it evaluates the impact of these strategies for the
future of the organization.
Porter's Generic Strategy
Cost leadership: Under this strategy, Aldi works on reducing its prices in order to grab
more customers. For instance, the company has been acquiring its stocks and supplies at the
lower cost which results into providing lower price products to the customers. The company has
buy low price land at the outskirts of the city and build up cheap warehouse (Porter's Model of
Generic Strategies for Competitive Advantage. 2020). This strategy will then help the company
in effectively meeting up with the business objectives and is helpful for its future as well. As it is
well aware how to price its product in order to attain the position of cost leader which will not be
an issue for it.
Cost focus: In this, Aldi focusses on just lowering its cost in order to take the advantage
of it. This is mainly done for targeting a one or two segments. The company has already
implemented this strategy in order grab the market. By putting focus on just one market will

result into effectively handling the business operation which is very fruitful for its from the
future dealing perspective.
Differentiation leadership: Aldi has separated itself from its competitors within the
supermarket industry and the benefits of it Aldi is already enjoying. It provides quality products
at the lower price which results into keeping existing customers loyal along with attracting the
new ones (Porter’s Generic Strategies. 2020). The brand loyalty which is being created helps the
company in retaining its customers away from its competitors. In addition to this, works on
discouraging new firms to enter the market.
Differentiation focus: According to this strategy, the firm works on differentiating itself
from the rivals in just one or small market segment to acquire. This is the niche marketing
strategy, which is being sued by the organization in order to establish themselves in the niche
market. Aldi has previously utilized this strategy for gaining a market share. For the purpose of
entering the new market Aldi used this strategy in order to attain a position within the target
market.
Therefore, all the four strategies is being utilized by the Aldi in the past with the purpose
of establishing itself in the market. By making use of all the strategies which are- cost leadership,
differentiation and focus strategies, it will very much beneficial for the brand for its future. These
strategies will support in retaining the position of cost leader along with the unique and
differentiated products which will be its USP pertaining to the creation of the new customer base
in the new or existing market. As the Aldi is already having experience in the usage of these
strategies therefore, it will not be difficult for it in implementing again. This prior experience
will be added advantage to the company which will result into attaining success.
Ansoff matrix
Aldi uses this strategy to develop their decisions that are related to the business growth (Ansoff
Matrix of ALDI, 2021). The model have four strategy that are:

Market penetration: It is used by Aldi to see the growth for their existing products and brands.
It is used by the company to increase their productivity capacity which will help them in
reaching more customers at same time. It will also result in increasing the marketing investment
and advertising the activities that are related to the market penetration. By this strategy they can
also explore innovative and new distribution methods. Also, they can introduce new competitive
pricing that will make them one step ahead from their competitor.
Market development: These strategies is used by Aldi to invest the time in research and
development to see what are the needs of the customers and to identify the new markets. It also
helps them to expand their business both in international and regional. The company also invests
its time in the activities that are related to building the brand awareness among the people.
Product development: strategy is used by the company to improve and modify their existing by
new offerings. They use NDP process to develop and launch their new products in the market.
By this they are engaged in introducing new product by introducing the goods that are made up
of good quality in the existing markets.
Diversification: It refers to the growth and development which is used by the company for
introducing new product in new markets. Aldi uses this to explore new ideas and option to
acquire the purpose of growth and development. Diversification allows the company to remain
innovative, competitive and competent in the consumers markets. It also helps them to explore
their business by entering new markets or merging with the existing companies.
Approach to internationalization that company has adopted-

Brand expansion is one of those approaches to internationalization that Aldi has adopted
in the past in context of business growth. This approach is appropriate at high extent because it
gives company excellent opportunities in term of building strongest brand image at all over the
world and also increasing customer base.
CONCLUSION
By summing up the above report it has been concluded that Strategic management is
termed as activity that is related to setting aim, objectives and processes for the organization so
that they can be one step ahead from their competitors. The above report have reflected that
deliberate tactics is used by Aldi to achieve the objectives of the company similar to
that emergent strategies are used in context of absence of goals and to create new and effective
one for the future. With the assistance of above studies porter's value chain concept is explained
by using VRIO analysis to know the Aldi strategic capability. Further the evaluation of above
report porter's generic and Ansoff metrics explained along with approach to internationalisation
that Aldi has adopted and their assess the extent to which that approach has been appropriate in
netter way.

REFERENCES
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