Strategic Management Report: Analysis of Aldi's Business Strategies

This report presents a strategic analysis of Aldi, a major privately-owned company in the retail sector. It begins with an executive summary, followed by an introduction outlining Aldi's vision and mission. The report then delves into a value chain analysis, examining primary activities like inbound and outbound logistics, operations, marketing and sales, and service, as well as secondary activities including human resource management, technology development, firm infrastructure, and procurement. The analysis assesses Aldi's resources and capabilities, followed by an evaluation of its business and corporate-level strategies, including rivalry with competitors, the threat of substitutes, and the bargaining power of suppliers and consumers. The report also explores differentiation and focus differentiation strategies. Corporate strategies such as market and product development, and integration strategies are discussed. Finally, the report provides recommendations for improving business outcomes, concluding with a summary of the key findings.

Running head: Strategic management
Strategic management

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Executive summary
Aldi is one of the largest privately owned companies with more than 10,000 stores in 18
countries. The company expanded its operations by owning 13 stores in 1950 and 300 stores in
1961 across Germany. The company is based in Germany and it was founded by the two
brothers Karl and Theo Albrecht in 1946. Headquarter of the company is in Essen, Germany.
This report will consider many strategies for Aldi so that the company can easily uphold
strong presence in today's environment. In this report value chain analysis, business and
corporate level strategy and also recommendations will be made os that the activities of the
company can be conducted effectively.

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Table of Contents
Executive summary.....................................................................................................................................1
Introduction.................................................................................................................................................2
Value chain Analysis of Aldi.......................................................................................................................3
Primary activities.....................................................................................................................................4
Secondary activities.................................................................................................................................4
Resources and capabilities.......................................................................................................................5
Business and Corporate strategy assessment...............................................................................................5
Business level strategy.............................................................................................................................5
Rivalry with existing competitors............................................................................................................6
The threat of substitute products:.............................................................................................................6
Bargaining power of Suppliers................................................................................................................6
Bargaining power of consumers..............................................................................................................6
Threats of new entrants............................................................................................................................7
Differentiation Strategy...........................................................................................................................7
Focus differentiation................................................................................................................................7
Corporate level strategy...............................................................................................................................7
Market development................................................................................................................................7
Product development...............................................................................................................................7
Horizontal integration..............................................................................................................................8
Vertical integration..................................................................................................................................8
Recommendations for improving business outcomes..................................................................................8
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10

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Introduction
Aldi offers daily products, dairy food, vegetable and alcoholic products. There are many
clothing items also that are sold by the company. The store has a simple layout and offers many
products at low price. The vision of the company is – "The individuals should have the
opportunity to purchase the routine groceries of good quality at a low price". The Mission of the
company is – "To offer high quality of products at low prices ".
The focus will be on the activities that will help to generate value. Also, the report will
consider many concepts that will be related to Aldi ability to offer value to its customers and also
to improve the existing activities (Gielens, K., 2018). In the first phase of the report the
discussion will be made on the value chain of Aldi. In the next phase of the report corporate and
business strategies will be discussed. In the last phase of the report, recommendations are given
to enhance the overall outcome.

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Value chain Analysis of Aldi
The value chain is related to a chain of operations that the organization takes into
consideration so that products that effective product can be offered in the market. There are two
parts in Value chain. First is concerned to the primary activities and second is related to the
secondary activities. The first portion of primary activities takes into consideration the subparts
like inbound logistics, operational, outbound logistics, marketing and sales (Mudambi and Puck,
2016).
The second part is related to secondary activities that are firm infrastructure, human
resource management, technological development, and procurement. The activities that are
secondary are also known as support activities. This part emphasizes on many parts by
considering Aldi. Value chain helps the managers to evaluate the activities that are conducted in
the organization.
Aldi takes into consideration cost leadership strategy. It is seen that to create value by
reducing cost can improve the quality of products in both primary and secondary activities (van
Rompay, Deterink, and Fenko, 2016).

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Primary activities
a.) Inbound logistics: By considering the inbound logistics of Aldi it is seen that the
company purchase a bulk of materials to manufacture its own products with its brand
name. It saves cost and also helps to give a competitive advantage to the organization
over other competitors. Also in this, the company considers centralized warehousing that
protects the products in a proper manner (Cahill, 2017).
b.) Operations: It evaluates the lifecycle of products and services. The company has its own
brand name and they offer good services to their customers. By offering good products
and services the customers are induced to purchase it again and again. It is also seen that
the product cycle of the company is in the growth stage as it is more popular in the
market if the comparison is made with other competitors in the retail sector (Grundy,
2017).
c.) Outbound logistics: It is related to the production of products and services that can be
availed by the buyers. It is evaluated that the company has its own outbound logistics.
The company has its own personal transport system so that the products can be reached
easily to its customers (Steenkamp, 2017).
d.) Service: The Company offers services like easy availability of all the products so that the
satisfaction level of the customers can be enhanced. When effective services are given to
its customers in a proper way and on time then it can be easy to enhance the overall
satisfaction level of the customers (Zhang, Zhou and Xu, 2015).
e.) Marketing and sales: It is related to the products that are available for the products by
considering marketing and sales. The marketing and sales strategy of the company is to
save money in every possible way. The company has turned the market by considering
the other competitors like to follow the marketing strategy of reducing the cost and to
enhance the saving pattern of the customers (Berman, 2015).
Secondary activities
a.) Human resource management: Human resource plays a great role in conducting the
routine activities of the company. Without efficient employees, it is not possible for the
employees to accomplish goals and objectives. Aldi recruits efficient employees so that
the satisfaction level of the customers can be enhanced (Voigt, Buliga and Michl, 2017).

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b.) Technology development: It takes into consideration the information off the management
and also the knowledge of the organization. Aldi uses latest technologies like latest
billing machines so that proper services can be provided to the customers (Jakubovskis,
2017).
c.) Firm infrastructure: It is related to the support sections like quality, planning and senior
management. The company tries to manage all the information of the organization in a
strict way. It is seen that the company give less information to the public. It emphasizes
on maintaining the quality of the product and also considers top management so that
proper decisions can be taken (Crawford et al., 2017).
d.) Procurement: It is related to the activities that are conducted by the human resource
management of the organization. The human resource management gives assistance to its
customers by doing billing on time (Gassmann, Frankenberger and Csik, 2016).
Resources and capabilities
By considering the competitive implications from resources there are resources and
capabilities that are known as a strategic requirement. The strategic strength is the major
competencies possessed by the company and it has a sustainable competitive advantage that can
help to enhance the profitability and market share (Mitroulis and Kitsios, 2015). The strategic
requirement is to offer good quality products at fewer prices and also the size of the store should
be good so that the activities can be conducted smoothly. The resources and capabilities lead to
below average returns underperformance implications. The strategic weakness can be opening
hours and product differentiation (Kew and Stredwick, 2017).
Business and Corporate strategy assessment
Business level strategy
Threat of
new
entrants Bargainin
g power of
suppliers
Rivalry
among
competing
firms
Bargaining
power of
buyers
Threat of
substitute
products

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Rivalry with existing competitors
The competition level in the grocery industry is very high. Coles and Woolworth are
holding a large market share of 80 percent. There are also many global and local retailers in the
Australian market who offer similar types of products and services.
The threat of substitute products:
In the recent scenario, the Customers in Australia do not have any substitutes for products
that they buy from grocery stores. The customers are dependent on these products only. The
threat of substitute products is high as it is seen that customers are moving away from packages
of products and also towards local products that encourage the specialty at particular stores. The
switching cost can be low if the customers are not satisfied with the product they are switching
(Grant, 2016).
Bargaining power of Suppliers
There are some products like biscuits that have many suppliers where the supermarkets
can easily source their products. The bargaining power of supplier is low. As there are more
online businesses like Ozsale, the suppliers are achieving more avenues so that products can be
distributed. The bargaining power is low as there are many suppliers who offer same services
and provide products at low price. Backward integration of large retailers like Aldi has less
bargaining power of suppliers (Mortimer, 2016).
Bargaining power of consumers
It is seen that customer's preference and attitude have changed the industry. Consumers
have more expectation and demand from retailers. Buyers can easily switch from one retailer to
another just because of the close similarities of products given to many retailers. The decisions
of the consumers are made by considering the prices of the products. The expectation level of
the customers is more from retailers as it is seen that the customers purchase the products that are
attractive and unique. Woolworths and Coles have more than 80 percent market and Aldi has

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only 12 percent market that creates difficult to achieve large market share (Ododo, Mulholland
and Turner, 2015).
Threats of new entrants
Aldi has many competitors like Tesco, Asda, plus and Dia. It is seen that new entry has to
face the level of competition with an existing supermarket. It is seen that threat of new entrants is
high as grocery industry can be easily copied by the other competitors. Also, there are many
concerns if legal requirements are taken into consideration when entering the Australian market.
It is important for the company to be prepared as there is a rise in the new entrants to the market
(De Haas, Herold, and Schaefer, 2017).
Differentiation Strategy
The company adopts a product that is feasible and helps to offer a variety of products to
the customers. It is best for both customer and the company. It is seen that the company also
have effective promotional strategies that help to inform the customers about the products and
services offered to its customers.
Focus differentiation
Aldi emphasizes on attaining the overall goals and objectives by taking into consideration
specified target audience. Aldi can also open the store in the center of the city so that the
customers can easily purchase the products. It is seen that if there is differentiation in the
strategies of the company then large market share can be grabbed easily (D. Banker et al., 2014).
Corporate level strategy
Market development
The company emphasizes on market development so that the activities can be conducted
in a proper manner. It is seen that it is important for the company to enhance its operations in
many countries. The company is in 18 countries and should focus on enhancing the market share
by considering strategies like promotion (Caritte, Acha, and Shah, 2015).
Product development
The company should emphasize on product development by taking into consideration
unique services so that development can take place in a proper manner. It is seen that if a

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company want to develop a product then it is important to focus on unique services that can be
offered to the company (Solberg, 2017). Aldi can easily try to improve the interior of stores to
attract more customers towards the products and services offered by the company. It is seen that
the company can bring new changes so that overall objective can be achieved (Chatterjee, 2017).
Horizontal integration
In this step, the company should focus on acquiring the competitors so that profitability
can be enhanced. If the company offer unique products at low cost then it can be easy for the
company to acquire a large market share in an effective manner.
Vertical integration
In this factor, it is important to be the own supplier so that the distribution of products can
be done effectively. The company has a good distribution channel that helps to enhance the
overall profitability in a proper manner. The company should be the own supplier by taking into
consideration acquisition. It is seen that Aldi has its own outbound logistics. The company has its
own personal transport system so that the products can be reached easily to its customers
(Turban et al., 2018).
Recommendations for improving business outcomes
The business outcome can be enhanced if the company emphasizes on improving the
services and offering effective services. It is seen that for Aldi the company should adopt
assortment strategy so that product that is offered by the company can be differentiated. It also
helps to achieve overall profits so that the company can achieve success in long-term.
Aldi should also emphasize on the new strategies of moving into other regions by taking
into consideration store roll out programs as it will assist to enhance the overall profits and help
the company to compete in the competitive environment.
It is also essential for the company to offer good quality at low price. It can be known as
a sustainable competitive advantage for the organization over its competitors. It is seen that to
use the technology is not the core value of Aldi but it is important to use the technology by
considering proper strategies so that the products and services that are used can be more
competitive and unique.

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Aldi is known as one of the top stores in the grocery sector so it is important that the
company should look towards giving advertisements and publicity so that more consumers can
be attracted and existing clients can achieve the advantage of low price by considering good
quality.
It is also important for the company to encourage repeat purchases by simplifying the
process and also by ensuring that level of stock can be maintained by considering distribution
channel.
Market expansion strategy is also one of the strategies that can help to achieve large
market share. It helps to expand into the new segments so that large and new consumer group
can be captured. Product line expansion strategy is achieved by the company by taking into
consideration special buyers program so that the products that range from electronics to clothes
can be sold with daily grocery items at a low market price.
Digital marketing is also the strategy that plays a great role in the recent environment. So
it is important for the company to emphasize on the increase in the online consumerism. To
evaluate and understand the activities Aldi should consider online activities so that RACE model
can be considered. For Aldi, the digital marketing strategy is based on the email marketing. The
company does not conduct online sites to sell products and services. It is important for the
company to focus on digital marketing so that large audience can be grabbed effectively.
Aldi should also consider frontal attack strategy in the market so that the segments that
are not unaddressed can be considered. The market challenger is important to give a challenge to
the established organization as a sustainable competitive advantage. The company maintained a
competitive advantage by considering highly efficient activities that facilitate cost leadership
strategy. This strategy can be communicated by considering television advertisements where the
information compares the product that is of low price (Watkins, 2015).
Conclusion
By analyzing the report it is concluded that the company has a good position in the
grocery store industry by giving high-quality products at low price. In this report value chain of
Aldi is discussed in which the primary and secondary activities are taken into consideration. It is

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important for the company to emphasize on the activities as it will help to enhance the overall
profitability. In the next phase of the report, business level strategy is discussed in which porter
five force model is explained. In the last phase, corporate level strategy is discussed in which it is
important for the company to implement the strategies that can help to compete in the
competitive environment. In the last phase, recommendations are given so that business
outcomes can be improved. It is important for the company to consider digital marketing as it
helps the company to enhance the market share.
References
Berman, B., 2015. How to compete effectively against low-cost competitors. Business Horizons,
58(1), pp.87-97.
Cahill, J., 2017. Making a Difference in Marketing: The Foundation of Competitive Advantage.
Taylor & Francis.
Caritte, V., Acha, S. and Shah, N., 2015. Enhancing corporate environmental performance
through reporting and roadmaps. Business Strategy and the Environment, 24(5), pp.289-308.
Chatterjee, S., 2017. Two efficiency-driven networks on a collision course: ALDI's innovative
grocery business model vs Walmart. Strategy & Leadership, 45(5), pp.18-25.
Crawford, B., Byun, R., Mitchell, E., Thompson, S., Jalaludin, B. and Torvaldsen, S., 2017.
Socioeconomic differences in the cost, availability and quality of healthy food in Sydney.
Australian and New Zealand journal of public health, 41(6), pp.567-571.