ALDI: Organizational Structure, Innovation and Performance Analysis

This report provides an in-depth analysis of ALDI's organizational structure, highlighting its decentralized nature and the strategic choices that contribute to its success. The study examines how ALDI's structure impacts management innovation, emphasizing its ability to adapt to local preferences and maintain strong relationships with suppliers. The report further explores the impact of this structure on overall business performance, detailing the strategies such as competitive pricing and private label brands that enable ALDI to achieve low prices and maintain profitability. It also offers recommendations for further improvements in innovation and performance, suggesting areas for product selection and market expansion. The report concludes with a comprehensive overview of ALDI's business model and its impact on the retail industry.

Running head: ALDI
Organizational Structure and Effectiveness
[Aldi]
Name of the student:
Name of the university:
Author note:

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Executive summary
Organizational structure often proves very decisive in terms of communication
effectiveness, practicing management principles and applying new ideas to business
practices. This study also has the purpose to describe the organizational structure of
Aldi. The study finds Aldi practicing a decentralized structure. The structure as found in
the study has been helpful for Aldi in the management of innovation and business
performance. Unlike many major retail brands, Aldi successfully used various
management strategies to operate differently. The exclusion of middle managers from
the hierarchy is one of these strategies. There are many other strategies discussed in
this study. The study finds that Aldi should use differentiation in its product selection
strategy.

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Table of Contents
Brief Introduction and background Information on Aldi.....................................................3
Section 1: Overview of Aldi's organizational structure and strategies...............................3
Organisational Structure................................................................................................3
Strategies.......................................................................................................................4
Section 2: Impact of Aldi's structure on management innovation.....................................5
Section 3: Impact of Aldi's structure on overall business performance.............................7
Recommendations on how to improve innovation and performance................................9
Conclusion.........................................................................................................................9
References.......................................................................................................................11

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Brief Introduction and background Information on Aldi
Aldi is a highly successful internationally operating organization, which follows
simple business principles and works according to the business essentials. The concept
of Aldi to offer quality products while always fulfilling its low-price strategy has helped it
become a renowned name in Germany and other parts of the world. The key to Aldi’s
success at the global level has been due to many reasons. On a much narrower note,
the key to success has been its ability to maintain a long-term relationship with the
industry-based business partners and effective employee management (Aldi.com 2019).
The corporate identity for the Company is due to its business principles, efficient
marketing activities, effective management of the supply chain operations, marketing
communication and effective organizational communication. Aldi has been and is able
to maintain a status of being internally famous for offering the highest quality at the
lowest prices (Aldi.com 2019).
Section 1: Overview of Aldi's organizational structure and strategies
Organisational Structure
Out of many organizational structures, Aldi is an outright follower of a
"Decentralised” structure. It is due to this structure there is less communication error
between the managers and more adaptation of essentials that helped it constantly
deliver a top performance. A conservative mode of financial planning has helped Aldi
become economically independent and strong as well. A decentralized structure has
been helpful to Aldi in various ways. The structure has helped Aldi spreading out the

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management decisions effectively among the lower and middle-level managers, the
employees and other subordinates (Wang et al. 2015). With this structure, Aldi employs
a Store Manager at each of its stores. They take care of certain decisions like sales
promotions and staffing. The store manager report to a regional or area manager. Aldi
makes decisions, which have high acceptance among its employees and are closer to
its customers as well (Lehner 2015). In this way, the decentralized structure helps make
high-quality decisions. The structure is helpful as well in responding effectively to local
circumstances. This means Aldi has high adaptability rate to local preferences for the
products and pricing (Çifci et al. 2016).
Aldi is also able to deliver a high quality of customer service. There are many
pieces of evidence on this. Aldi is the only retail brand to have broken the historical
duopoly of Woolworths and Coles in the Australian supermarket industry (Pantano et al.
2017). The sales figures and the market shares have both fallen for Woolworths and
Coles. On the other hand, Aldi is constantly climbing up the ladder of success with its
increasing sales figures and market shares in the Australian supermarket sector
(Pantano et al. 2017). Practicing a flatter hierarchy on a consistent note is one of the
major benefits Aldi has derived from following a decentralized organization structure
(Ismail et al. 2018). A flatter hierarchy helps to have no middle managers in the process.
It significantly improves the organizational communication process. This is also why Aldi
has been consistent through effective adoption of training practices and increased
motivation of employees (Moatti et al. 2015).
Strategies

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Aldi uses so many effective strategies to emerge differently than many other
major brands in the industry. Competitive pricing is one of these strategies. Many
factors help Aldi to keep the price range under a competitive bracket. Aldi makes
purchasing in bulk. This enables them to bargain with its suppliers. Moreover, Aldi pays
its dues within the committed timeframe. This has created a good image of theirs in
front of the suppliers. All these help in gaining a strong bargaining capability with its
suppliers (Botschen and Wegerer 2017). A bulk purchasing in this way is called the
economies of scale (Wells 2016). Aldi does not use a huge product portfolio as
compared to Woolworths and Coles. This strategy helps Aldi to save on stock-keeping
units. Additionally, Aldi sells less amount of branded products. It rather gives preference
to selling its private label brands. In this way, Aldi boosts its earning and reduces the
cost of operating the products (Wells 2016). All these and more help Aldi offer very
competitive pricing largely unmatchable from Woolworths and Coles.
Aldi instead of seasonal discount offers give reduced rates daily. It conducts a
weekly special sale through which it manages to sell products and avoid spending on
keeping these into stock those that are less sellable items (Fernie and Sparks 2018).
This is one of the reasons for how Aldi manages to reduce the operating cost and boost
the earnings. Aldi does charge for plastic bags and trolleys. This also helps to save on
money and increase the profit margin (Fernie and Sparks 2018).
Section 2: Impact of Aldi's structure on management innovation

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It is due to their unconventional style of doing business, which helped Aldi remain
different from many other major brands. Like other retail brands, Aldi always kept its eye
on the competition; however, it never used it to benchmark the practices. Instead, Aldi
always kept on setting its course of action. Unlike other major brands, Aldi does not
spend resources on budgets and forecasts. Aldi has always ensured strict adherence to
statutory regulations. Indeed, the leaders cannot set an example for others if they are
into the mismanagement of statutory regulations (Moussaoui et al. 2016). Aldi unlike
others never spend on market research and seeking help from the management
consultants. Indeed, Aldi does not have consultants for market research practices and
advertising (Moussaoui et al. 2016).
Aldi is globally popular for using innovative ideas into its business practices. A
decentralized structure such as one used by Aldi helps it practice various innovative
ideas rarely touched by its competitors. The use of strategy has been the result of a
dynamic process in Aldi driven by strategic decisions and intuition. Moreover, the
consequences had always been far from being foreseeable (Fang, Hou and Chen
2016). Aldi can transport three pallets simultaneously by forklift trucks. The design
for the system could be fulfilled by collaboratively working with the suppliers. Aldi
developed the boxes of ideal sizes by working closely with suppliers. Aldi instructed its
suppliers to attach the bar-code at three or even four different places. This helped in a
faster scan of the products. Every course of action has been the result of Aldi's guiding
principles and endorsement of its corporate values. Moreover, its strategy to be extreme
cost-conscious and avoidance towards waste has been essentially helpful (Paul,
Sankaranarayanan and Mekoth 2016).

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Aldi has the people who are doers. Aldi people don’t get tired in reaching out to
in-depth analysis of new ideas. There could not be a better driver of innovation than
having creative employees. Such employees try every opportunity to do absolutely
everything to serve the Company’s objectives (Wei et al. 2018). In spite of allocating
new products to its entire stores, Aldi goes with only three stores. It helps them prevent
the entire organization from suffering from failure. Instead, the loss will only be felt at
three stores. The strategy helps Aldi to deploy minimum efforts in testing a product. Aldi
could avoid getting indulged into asking several numbers of ‘Why’ questions. This is
where a few major companies do the blunder. Aldi has benefitted from not applying any
hardcore rules and policy in governing things. There are so many examples in the
Company, which explain the same. These are shelves, aisle widths, and even the width
and length of the store that are determined only concerning the principles of logistics
(Wei et al. 2018).
Section 3: Impact of Aldi's structure on overall business performance
The decentralization of the structure has extended benefits as can be observed
along with the overall business performance of Aldi. Aldi has been able to brand its
image as the business that offers low-price. Indeed, customers are not made to believe
that Aldi offers a low price. Aldi is, in fact, a business that offers low-price (Jarvis 2016).
Low-price is an inbuilt principle in Aldi. It never intended to sell products at the highest
possible prices by just taking advantage of the market competition. Indeed, Aldi enjoys
low-price in the long-term and is subject to alter only if there is any variation in the

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purchase prices. The only principle Aldi is following is to sell the products at the lowest
minimum prices instead of earning the maximum by selling the products (Jarvis 2016).
Aldi believes that suppliers should be treated the way they want to be treated.
This helped Aldi to establish and maintain an effective relationship with its suppliers.
Aldi works collaboratively with its suppliers and together they create an innovative
solution to cut on costs and increase the profit margin. In addition to such a strategic
collaboration, Aldi is also good with making the payments. It makes the payment in
several installments; however, within the given timeframe. The fairness towards
suppliers helped Aldi performed excellently well despite the presence of heavyweights
like Woolworths and Coles in Australia. It is due to all these Aldi could enjoy a decade
long collaboration with many of its suppliers (Jung 2017).
Any company can only survive in the long-term if it can maintain big profit
margins. There is no point in driving the partner firms into insolvency and affecting its
appetite for the business. Aldi is seen by its suppliers and other strategic partners in its
supply chain network as a true partner to work with. Aldi seems like having a good
understanding of things like earning money and letting others earn as well (Khan and
Rahman 2016). To summarise, Aldi has succeeded in areas where so many companies
in the past have failed. Many known brands have come and gone for not being strategic
enough towards managing its stakeholders. Major companies have struggled as well in
maintaining an effective relationship with suppliers. Some businesses have been into
success for years; however, very few of them do create the incredible business the way
Aldi does. Aldi's organizational structure focusses on attaining business efficiency. It
does through simple working principles, and by empowering self-control and

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responsibility among its employees. Therefore, Aldi does run and manage a very lean
organization (Khan and Rahman 2016).
Recommendations on how to improve innovation and performance
Aldi has been different from its competitors globally in terms of applying
innovative ideas to its operations. However, there is always room for improvement. Aldi
should further its excellence in terms of innovation and performance. Aldi should
innovate with their product selection strategy. It should consider offering new
products such as fresh vegetables, fruits, newspaper and many other items. Also, Aldi
should consider open new stores in Asian countries. The Asian customers are also
growing in awareness of buying from the supermarkets. Aldi has a competitive
advantage. It has continued its success in the Australian market as well. There should
not be much of a risk to be faced by Aldi in operating in the Asian region. By going with
the product selection strategy Aldi should be able to increase its market share, enhance
their brand image and boost its competitive position. However, Aldi needs to work on its
product selection strategy to be successful in the Asian countries.
Conclusion
To conclude, it can be said that Aldi has effectively been different from many
suppliers concerning practicing an efficient organizational structure and using it to good
effect to apply innovative ideas to practices. Aldi is achieving new milestones in
Germany and other parts of the world. The Company enjoys a very effective approach

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to relationship management with its suppliers and employees. As a result, Aldi enjoys
working collaboratively with its suppliers and its stakeholders. The suppliers have
helped introduce innovative ideas to cut on the cost. Similarly, the employees have
helped drive the ever-evolving innovation exercises in the Company. In spite of all
these, Aldi still needs to work on a few areas to constantly hold a competitive
advantage. By working on its product selection strategy, Aldi can differentiate its product
portfolio to offer products fulfilling the needs of a diverse customer base. By innovating
with the product selection strategy Aldi will create opportunities for it to enter the Asian
marketplace.

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References
Aldi.com 2019. Welcome to ALDI. [online] Aldi.com. Available at: https://aldi.com/
[Accessed 8 Sep. 2019].
Botschen, G. and Wegerer, P.K., 2017. Brand-driven retail format innovation: a
conceptual framework. International Journal of Retail & Distribution
Management, 45(7/8), pp.874-891.
Çifci, S., Ekinci, Y., Whyatt, G., Japutra, A., Molinillo, S. and Siala, H., 2016. A cross
validation of Consumer-Based Brand Equity models: Driving customer equity in retail
brands. Journal of Business Research, 69(9), pp.3740-3747.
Fang, L., Hou, Y. and Chen, Y., 2016. The Research on the Effect of Consumer Internal
Psychological Preference to the Retail Industry Inventory. Journal of Service Science
and Management, 9(05), p.398.
Fernie, J. and Sparks, L. eds., 2018. Logistics and retail management: emerging issues
and new challenges in the retail supply chain. Kogan page publishers.
Ismail, M.K., Kumaran, V.V., Sarifuddin, S., Gorondutse, A.H. and Sabarudin, N.A.,
2018. Sustainability in Retail Industry: Competition Factors among Small Retailers and
Supermarkets Agro-Food Business. International Journal of Entrepreneurship, 22(4),
pp.1-7.
Jarvis, J.E., 2016. Strategies for improving first-line supervisor problem-solving abilities
in the retail supermarket industry.