Strategic Analysis of Aldi's Business: UK Market and Beyond

This report provides a comprehensive strategic analysis of Aldi, a prominent discount supermarket chain. It begins with an examination of Aldi's strategic approach, balancing deliberate and emergent strategies in the UK market. The report then evaluates the macro-environmental and industry issues Aldi faces, using PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors. A key focus is on the impact of these issues on Aldi's sustainability and market position. The analysis further delves into Aldi's strategic capabilities through Porter’s Value Chain framework and VRIO framework, assessing its competitive advantages. Additionally, Porter's generic strategies and the Ansoff matrix are employed to evaluate Aldi's past strategies and their implications for future growth and market share. The report highlights Aldi's focus on low-cost, limited product range, and efficient operations, along with its challenges in adapting to technological advancements and evolving consumer preferences. The report concludes with an overview of Aldi's strategies and its position in the competitive UK market.

Strategic Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Analysis of balance of deliberate and emergent approaches to strategy formulation.............3
2. Evaluation of the macro-environmental and industry issues faced by Aldi............................5
3. Impact of major macro and competitive environmental issues faced by Aldi........................7
4. Analysis of Aldi's strategic capabilities through Porter’s Value Chain framework...............8
5. VRIO Framework analysis....................................................................................................10
6. Porter's generic strategy framework analysis for Aldi..........................................................10
7. Ansoff matrix........................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
This report highlights the critical analysis and current business environment. Along with
its strategic capabilities. An analysis is made on the deliberate and emergent approaches to Aldi's
strategy formulation, major macro-environmental and industry issues faced by Aldi. Along with
the analysis through Porter's Value Chain framework and VRIO framework to asses the
sustainability of the company (chilling and Shankar, 2019). At the end the use of Porter's generic
strategy and Ansoff Matrix to evaluate Aldi's previous strategies and its future effects from
implications of those strategies are presented.
MAIN BODY
1. Analysis of balance of deliberate and emergent approaches to strategy formulation
The Aldi arrived in Britain in April 1990 and had stock of basic 600 items to offer. The
pricing was low and unfamiliar brands of the products were offered. There are no single
advertisement of the new arrival. Aldi at its initial days offers customers to borrow a trolley at £1
and only cash was accepted for payments. The quality of the receipts are not up to the
satisfaction. Aldi was recognised as the least attracted discount stores. Two decades later in the
UK the market share of Aldi in grocery chains was at 2%.
In 2017, Aldi takeover Co-op and become UK's number fifth grocery chain. Recently,
Aldi has 7.5% market share in UK. The grocery chain Morrison and Lidl are at 4th and 6th place
then. The german owned company giving competition to the four of the largest supermarket
chains in UK. Aldi also offers local culinary items that attracts customers that have previously
not prefer Aldi. The stores offers only single type of ketchup still today. The items range has
increased to near 2000 but most of the items are of private companies sold by the Aldi. Although
the appearance of the stores are of more rocky and not very appealing. Merchandise displayed by
the stores are on pallets, crates or in cardboard boxes that reduce the appeal of the discounted
stores. Aldi has introduce more comfortable and relaxing space like aisle, for the customers to
spent more time in stores. The Aldi stores has introduced barcode technology for the products
and products have more than one barcodes to quickly scan and read the code to provide
customers less time spent shopping experience (The Aldi effect: how one discount supermarket
transformed the way Britain shops, 2021). Which brings the customers a sense of satisfaction.
Aldi has no online grocery services and its low-tech. Aldi has use the strategy of narrow product

range and low price which makes it one of the successful discount supermarket stores. Aldi
owners offered selective range of cheap and fast selling goods that help to keep their cost down
and increase in cash-flow. The supermarket stores chain use just in time approach of inventory
management that helps the stores to cut-off holding costs of the products. The market of UK is
important for the Aldi as the country has wealth and the people did not compromise from the
food type they eat. The locally cheap produced products are important for the Aldi as most of the
people eat bread, cheese and cereals. Aldi has developed products of their own to rival the
established brands. UK's standard allows high wage rate to the labour that makes a large part of
any supermarket operating expenses. But for the Aldi it is seen as the competitive advantage as
they offer cheap, small range of products with low efficient workers and low labour costs. Aldi
offers good labour wage rate on comparison of the other supermarket chain companies in UK
around £9.10 per hour which helps in the increasing the reputation of the company (Wheelen and
et.al, 2017). The emerging approaches to the supermarket chains includes expansion of business
abroad, online shopping services, online services provide via mobile applications. Although,
Aldi is still operating in a local mainstream and and less technology adaptive. Aldi is hiring fresh
talents to bring new and fresh ideas to the business recently. The shops are upgrading providing
bright and more space for fresh and cold food, which attracts more customers. The customers
tend to purchase more Aldi products more because of the consumers tastes and preferences are
changed and Aldi are able to manage an equilibrium between costs and consumer demands. Aldi
stores have the range of products that only produce by private companies and had their labelled
pasted on the products that is not common practice in supermarket stores. Aldi's product supply
comes from the single manufactures that made its operations on product run which did not
changed. So in the past years from starting a shop in Birmingham to currently number of Aldi
supermarket stores all over UK the strategies of the supermarket store has not much changed.
Although Aldi has embedded new changes with the emerging new technological change. The use
of cheap pricing and limited product strategy has provided the Aldi stores an advantage over its
competitors in the long run as the preferences and tastes of the people shifted to low priced and
quality groceries products. The appearance of the supermarket stores has not much changed up to
recently as they started to hire new and fresh talents which brings in the idea to upgrade the
appeal of the supermarket stores which brings in new customers (Lasserre, P., 2017). The speed
checkout process made the customers feel a little uncomforted because the customers cannot

pack their goods rapidly. But the Aldi's mangement stick to this strategy because according to
management the process helps to give customers an experience of the less spending and waiting
time in supermarket lines and stores. Also the cheap pricing helps the Aldi to make customers
move to their stores as they are able to buy loads of products by not providing much burden upon
their pockets. The company has a stable pricing and customer retention rate but as the time is
advancing the need for the incorporation of the technologies in the production and business
processes has increased. Aldi has yet not adopted much marketing and promotion methods. Use
of digital media for marketing has increasing and it also helps the company to generate more
brand value. Digital marketing need promotional activities of the products and brands via use of
various electronic medium. The company needs to locate the possibilities of the brand promotion
with the help of digital marketing that helps to create brand awareness. The service quality of the
Aldi stores are better than other supermarket brands as they are more focused on providing
branded, expensive and huge varieties of products. This strategy helps the Aldi to save variable
expenses as the product range provided by the stores are narrow. The company is in a need to
expand its reach as to maintain their market positions.
2. Evaluation of the macro-environmental and industry issues faced by Aldi.
Aldi offers unfamiliar products brands from its establishment. The two brands Tesco and
Sainsbury's branded products have the dominance over the British grocery industry.
Supermarkets are the important elements of the British economy (Perera, R., 2017). For the
analysis of the issues PESTLE Analysis of Aldi is been made.
PESTLE Analysis
Political
The conflict situations arises between the countries and the non-compliance of the
government policies affects the existence and sustainability of Aldi. Britain turn out from the
European Union turns the prices of the grocery products in UK and the people shifted toward the
discount supermarket stores which provides an advantage to Aldi as its customer base has
increases.
Economical
By the year 2009, Aldi's market share in UK was around 2%. In year 2017 the company
acquire Co-op and converted into fifth largest retail supermarket store chain in UK. In 2019, Aldi
had 7.5% market share. The four largest supermarkets of UK took significant measures.

Morrison had its stores closed and its workers leave. Two other supermarket store Sansbury's and
Asda announced a merger and Tesco reduced its product range.
Social
Aldi with the introduction in the new market has the low labour cost advantage which the
company boost. The company advertise their advantage that they provide its store staff better pay
than other supermarket stores. The store assistance would be paid £9.10 an hour which is the
highest among the industry. While a graduate as an area manager will get £44,000 and additional
perks like an Audi car from the company. It provides the company to get reputation benefit.
Technological
Technology is constantly improving and the business are rapidly using and implement
those technologies in their business operations. Aldi as a supermarket store have not much
technology user. They have recently launched its online website and online home delivery
services. Embedding Online technology to the business is the common practice in 21st century.
Tesco and Sainsbury's the two major competitors have already implemented online shopping,
phone services and banking through online media. While Aldi was lag behind in understanding
the rapid technological changes.
Legal
The legal environment is consist of the rules and regulations of the countries imposed by
the governments. Although the company Aldi has made its reputation in the markets of UK. But
the company did not open to provide appropriate information to about its global supply chain.
Aldi was trying to appear more British by displaying advertisements having union jacks. To
expand more and operations outside the boundaries of the countries Aldi has to go for the
complexities of the government policies and maintaining the standards set by them. In 1990, Aldi
tries to copy a product Kitkat and later they tried to copy more of the products and introduced it
in their own brand name which gave them big trouble and the company has to go the high courts
which ruins the brand image of the company (The Aldi effect: how one discount supermarket
transformed the way Britain shops, 2021).
Environmental
Aldi buys their products from the local merchants and put their own branding on the
products. The company has provided its 3 aims to reduce the environmental harm i.e. Greener,
Healthier and Fairer. The company is continuously working on sustainability, food waste, selling

healthier food at low prices. The company also working to reduce carbon footprint by investing
in various projects. Aldi also installing solar panels all over UK stores to increase sustainability
development of green electricity through renewable sources of energy production.
3. Impact of major macro and competitive environmental issues faced by Aldi
The major impact on Aldi is to maintain its sustainability and position in the market of
UK. The company is in 5th position in the major supermarket chains store companies in UK. The
company has to look to its internal and external processes to search for the areas and the
possibilities where development and improvements can be made. Although Aldi is constantly
growing but the company has to implement new methods and technologies that provide the
company an advantage over its competitors. From the above PESTLE analysis it has been seen
that the company is trying to develop its new products by copying the high demanding existing
products offered by other brands. This trial turn out to be a problem for the company as it has to
face major legal consequences and results in the loss of the brand reputation. Although the
company is able to improve and achieve 7.5% market share in the year 2019 (Issah, M. and
Antwi, S., 2017).
One of the major issues of the company is that it is slow to implement new technological
changes from its competitors. In the initial period company is not imposing technology in its
business functions. The company is making brand promotion through advertising Union jack and
had recently establish its online website to provide online purchasing of groceries from the
stores. Supermarkets are said to be the one of the biggest source of increasing plastic pollution
and carbon emission. The use of less plastic in packaging and developing new products to reduce
pollution is one of the major initiative the supermarket stores companies are taking into account.
Aldi has its own designed and labelled packaging that make customer recognise the brand easily.
But copying other company's products and sell it under its own brand name can be troublesome.
In 2017 Aldi has a revenue of €52 billion. The company has only 2% grocery market share in
2017 which the company wants to increase. Aldi is increasingly trying to expand its reach
outside the UK which is the challenging task as other big brands serve as a threat to the
company. Food safety and climate change is also a big challenge for the supermarkets as they
made available variety of products in packaging and its for the single use purpose only. The
pollution from these packaging are increasing and possessing threats for the environment and
marine life. The company to overcome this issue invest in projects that helps to reduce waste and

recycle of the packaging. The company has made certain initiative to make its brand packaging
100% recyclable by the year 2022. Food industries in UK waste around 3.6 million tonnes of
food every year. The company has to take effective measures to reduce food wastage as it is a
global issue and major part of it formed by the food industries in UK.
4. Analysis of Aldi's strategic capabilities through Porter’s Value Chain framework
The value chain is a network of processes that links the company to the activities that are
used to generate value for the customers. A value chain analysis is made that helps to find out the
competitive advantage of the company over its competitors. The frame work is divided into two
types of activities i.e. primary activities and supporting activities (Teixeira and Piechota, 2019).
Primary activities
 Inbound Logistics
Aldi purchase its products from the local farms and companies that produces local
products in UK. The products are mostly labelled privately manufactured specially for Aldi. For
the company it is important to manage continuous supply of the products and it is created
through building good relations with the suppliers. The company has to made an analysis of its
in-bound logistics network as the company may face issue at the time of increasing demand
situations as if the supplies are hindered the company may face challenge in fulfil demand.
 Operations
Once the supplies are delivered to the Aldi's facilities the operations begins to reduce
cost, time, space and energy. Aldi uses just in time approach to manage its inventory and total
quality management approach in is operations. Products are labelled precisely to provide all
necessry information to its customers. Analysis and implementation of the operations are
important business function. If the operations are smooth and efficient the company will be able
to maximise its productivity.
 Outbound Logistics
Those activities that are performed to deliver the products from the Aldi facilities to the
end customers. These activities required transportation, warehousing, inventory, scheduling and
delivery of products. If these activities are performed effectively and accurately will help Aldi to
reduce costs, improving product quality and services. As most of the companies products are of
perishable nature timely delivery of the product to the customer helps to generate satisfaction in
the minds of customers.

 Marketing and Sales
Marketing helps in the rise of sales of the products and results in increasing revenue for
the company. Marketing activities include advertisement, promotional activities, selection of
channel of marketing, development and pricing of the product and so on. By using various means
and digital marketing company can increase its brand value and awareness. This will helps to
attract more customers and sales will increase with it.
 Services
The services provided by Aldi to its customers helps to maintain brand loyalty. Aldi
provide post sales services that is an important element to retain customers and marketing of the
brand. Aldi has its stores created Aisles that provide the customers the chance of exploring the
place and buy more products from the stores. Aldi has a fast checkout process that helps the
customers to reduce time in the checkout line. This will provide an edge over its competitors as
more customers will attract to the stores as they have much more time to explore the stores and
less standing time in long lines.
Supporting Activities
 Company infrastructure
The infrastructure of the company consists of functions and activities that are used to
perform management of the company and by different departments of the company viz. finance,
operations, public relations, etc. These activities provide support to the smooth creation and
functioning of the value chain. The company infrastructure's effectiveness helps in the reduction
of the cost (Teixeira and Piechota, 2019).
 Human resource management
In the supermarket stores the cost of hiring and training of the employees is high. Aldi
also has team of trained colleagues which creates assets for the company. By analysing the cost
of recruiting and training of the employees Aldi will be able to reduce cost and to make effective
strategies to improve the customer interaction.
 Technology development
Technology in the modern era is embedded in every activities of the business. Value
chain is not an exception. Aldi by implementation of the new and refined technologies into the
value chain creation process increase its efficiency.
 Procurement

Procurement of the materials for the production of end products will be made
strategically by the company to reduce holding cost and maintain optimum level of inventory.
Aldi has a network of suppliers from where they procure raw materials in time. Quality of the
product will improve if the procurement is made in an effective manner.
5. VRIO Framework analysis
This frame work of the analysis of the strategic management is developed by Barney in
1991 which allows the companies to perceive competitive advantage through operational
capabilities of the Aldi (Ariyani and Daryanto, 2018). VRIO stand for valuable, rarity, imitable,
organised.
Valuable
The company has its resources available from the local suppliers that produce fresh
products. These products delivered at the Aldi's stores as per the requirement and demand of the
customers. The company is a discount supermarket store chain that provide cheap and quality
products to its customers.
Rare
The products offered by the company is not rare as the products available are the local
supplies available to other companies also. The human resource of the company are skilled and
trained according to the companies requirements and standards which is the rarity of Aldi.
Imitable
The financial resources and supply chain network are not easily imitated as the resources
are costly. Aldi also has a store design and patents that are also costly and cannot be imitated
easily.
Organise
The value chain and logistics system of the company is well organised as it caters
products and services timely and efficiently to its customers. Aldi's strategically developed stores
with aisle help to lure customers and increase store spent time which increase sales as customers
tend to buy more products.
6. Porter's generic strategy framework analysis for Aldi
Cost leadership

Aldi has been a hard discounted store in terms of cost leadership strategy. This has been
done to reduce the cost of operations of the grocery store. These are some examples of company
using cost leadership strategy:
a) Aldi purchases land at low price mostly at outskirts of the city where cheap warehouse is built.
b) Few stocks of products are displayed which are of household requirements generally of
eatables.
c) The small size of the store makes it cheaper.
d) The store employs few employees compared to other supermarkets, thus saving on the salary
component.
e) Unnecessary costs are avoided by the company.
Differentiation strategy
The company keeps the cost cutting measures intact but ensures that the product quality
is not compromised and employees also get a good salary. The following points illustrate the
point:
a) The company pays the store assistant higher than the marketing standards resulting in
employee satisfaction and efficiency.
b) The prices of products of general use are less compared to that of other supermarkets.
c) The strategy of the brand with low price and product of high quality keeps the customers loyal
and also through word of mouth attracts new customers (Islami and et.al, 2020). This also helps
evade competition and discourages new entrants taking up company's share.
Focus strategy
This strategy is based on companies to concentrate on resources to expand the narrowly
targeted segments. Aldi has used the focus strategy in terms of low price strategy and offering
the best value. The low cost strategy is adopted to serve the targeted market segment at lowest
price possible. Also, the products are based on the tastes and habits prevalent in customers. Aldi
revised the branding strategies and brings changes continuously in product designing. The
packaging component has also been revised to bring changes in the same.
These strategies are appropriate for the future as the company has already positioned
itself as the one with low pricing and has been able to achieve the same through cost stringent
measures in operations which very few companies can do. It is further using those costs in

product innovation and salary component of employees thus achieving both employee and
customer satisfaction.
7. Ansoff matrix
The company makes use of the matrix for international growth. Considering the factors, they are:
Market penetration
This strategy is used for increasing sales of existing products.
Increase in capacity of production:
a) Increased production capacity will help Aldi to gain more market share. Although, Aldi stores
do not have excess of products.
b) The overhead costs controlled work in company's favour and this way product pricing is also
maintained.
c) Increased promotion of the product will further help company achieve sales.
d) Aldi can increase investment in marketing and advertising activities to achieve market
penetration.
Market development
Aldi can enhance business growth by introducing the existing products in the new
markets. This will require research and development to identify the new markets and thus the
culture, tastes and habits of the people residing at the particular place have to be researched. The
other option which Aldi can exercise is expansion regionally (Loredana, E.M., 2017). The
expansion can be regionally to cities or within the geographic region locally.
Product Development
Aldi has wide range of product portfolio that is been offered to the customers. Analysis
and development of the products are made by the company according to the information of the
demand of the product in the market and changing trends of the customers. New product
development is a critical task as the product's packaging and the appearance plays an important
role to attract the customers and also helps to show the creativity of the company to its
customers. Launch of new products helps Aldi to create more customer base and generate brand
value.
Diversification