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Case Questions Aldi The Dark Horse Discounter

SUKKUR INSTITUTE OF BUSINESS ADMINISTRATION

FACULTY OF BUSINESS ADMINISTRATION

Corporate Strategy / Strategic Business Management

BBA Agri Business & BSc (Accounting & Finance)
Fall 2019
Aldi: The Dark Horse Discounter

In 2013, Aldi-the world's 8th largest retailer-planned to accelerate its US expansion. Aldi was a
German-based hard discounter that sold a limited assortment of private-label groceries and
household items in barebones stores. Despite its presence with 1200 stores in 32 states, Aldi was
still relatively unknown in the US. But it was often cited as one of the reasons for Walmart's exit
from Germany. Could it compete with Walmart in the US, Walmart's home market?

Case Questions

1. PESTEL Analysis and any identify key factors.

Pastel Identify/ Reasons

Political Aldi must collaborate with Government in order to take its most of
Government because when Aldi needs of Government then Government
will help out Aldi like if there is any issue occurred while importing 7
exporting goods with foreign country the Government will be there too sort
out the problem.
Economic Aldi brothers started to increase their business through investing more and
opened more outlets of Aldi because the economic conditions were
improving more & more in Germany which helped Aldi brothers to
enhance their business.

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Sociocultural Aldi can be socially described by customers as being a low first-class
company, keep with the belief that low price equals to the low-quality
product. it was studied that 95% have their own brand label. These products
specifically come from Germany.
Technology As we know now a days technology is a big opportunity fo everyone to
adapt because the one who is with new technology adaption is the more
advanced & well known company along with good image in market. So
Aldi must adapt new technology in order to be more efficient and
competitive among other competitors.

Legal Well when Aldi has to import things from foreign countries then Aldi must
follow the rules & regulations of that country because if Aldi doesn’t
follow the rules then Aldi can be in trouble while dealing with other
countries.

2. Analyze the changing industry structure in which Company is operating by using

Porter’s Five Forces Model. How did Company counter the changes and challenges
of the industry competitive forces in which Company is operating by using Porter’s
Five Forces Model?

Five Forces Who Level of Identify/ Reasons

They Threat/Bargaining
Are Power
Threat of Low In the grocery field, it's far the maximum favorable
entrance factor that there may be a low hazard of new entrants
because of the massive number of barriers in the way of
latest entrants in the retail industry. It is thought
that it’s a profitable & huge profits are earned by Aldi.
But in this industry, Aldi has to stand strong from the
already existent competitors

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Bargaining Low Aldi is a company that has more than 10,000 outlets
power of internationally, it buys the bulk quantity of material
suppliers from the suppliers. . Aldi does not change suppliers &
others to whom Aldi deals with from starting. so this is
the reason which retains suppliers coordination better
with Aldi and don't bargain too much.
Bargaining High
power of As we know, the Aldi has lot of competitors which are
buyers leading ahead than Aldi including Walmart’s services
etc., so Aldi has to improve their weakness in order to
retain customers because customers have more options
to switch to others.
Threat of Low to Medium Aldi is facing a substitution issue but it's far low to
substitute medium however there are chances of it to upward
thrust in the destiny because the competition is looking
to beat Aldi. Aldi is preserving the competitive
advantage of top best in low price charges. It is difficult
for the competition to offer an alternative on this kind
of low price like Aldi is providing because the prices of
Aldi merchandise are 20 to 30 percent less than the
market charges. Aldi is imposing new strategies to
reduce the effect of those threats.
Existing High Walmart, Tesco, Sainsbury are the competitors are Aldi
Rivalry and these can be tough for Aldi to face because of their
(Competition) strategies and products features, services, new
technology but Aldi is still stable because of low price
quality product strategy.

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 3: You are also advised to conduct a strength, weaknesses, opportunities and threats
(SWOT) analysis for Company and provide strategic suggestions based on analysis.

Identify
Strength  Aldi has strong coordination & association with supplier.
 Provide low cost quality products to customers.
 Main focus on CSR.
 More loyalty of customers to Aldi.

Weakness  Product in small range

 New Customers think of low price product as bad quality.
 Aldi is lacking in adapting new technology.
 Lack of advertisement
 No fine services of Aldi

Opportunities  Aldi can enhance its market through new offerings of products.
 Aldi can get good market share through more & more
advertisement of their products.
 Aldi can open new modern based stores to grab the customers
attention.

Threats  Customers salary is low and can shift to others.

 Customers can think low price product will be low quality.
 Aldi’s competitors are forward with technology and can easily
compete to Aldi.
 Competitors can be with high skilled labor & training
programs.

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4: How is the Company using its resources and capabilities to get competitive advantage
and why is it so successful in it?

Answer:
Their (ALDI)’s main focus is to work on reducing cost more & more through
performing different activities & in order to be more efficient. Well they believe in
simplicity instead of wasting on useless things and they even care of little things like
switching off light while leaving room etc and these are reasons of charging low price to
customers

5: Describe Company Business strategy?

Answer:

They are applying low cost strategy in which they charge low price and does more sales.

6: What would be the specific risks associated with using each business-level strategy?
Answer:
Differentiation Strategy:
As we know that everyone is busy in satisfying themselves, so means to say the company
should work on products through updating features & functions. so If the company is
stuck into old product and doesn’t bring change then customers will definitely shift to
others.

Low Cost Strategy :

Actually in low cost strategy, a company has greater focused on charging much less price
in the market. So they need to lower their cost occurring more in their business . For
instance, a company has to select limited employees for rendering offerings, less facility.
Customers also don't forget offerings while doing transaction, while the services they are
facilitating to customers are not so much affective and can lead customers to their
competitors . well new technology is also increasing on prices, upcoming generation can
be the reason to help competitors to lower their fees.

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7: Who are Company’s competitors?

Answer:

Following are the competitors of ALDI

 Walmart
 Sainsbury
 Warehouses Clubs
 Morrison
 Tesco

8: How does competitive rivalry, competitive behavior, and competitive dynamics effect
Company?

Answer:

Yes, the above factors Definity affect company because if the ALDI company is not
playing better roe against their competitors then there will be threat about customers
movement to others because there is very cut throat competition in market and always there
is need of updating of things to which customers prefer because customers are the any
company’s revenue.

9: What is the purpose of Company’s value chain?

Answer

Actually the purpose is to work more on improving the relation between the supplier who
provides raw material to manufacturing process and then to increase the speed of that final product
to distributor up to customers & also to analyze the process of product and to enhance it velocity
in order to minimize cost & maximize profit.

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10: Identify type’s value chain activities of Company’s?

Answer:

Inbound Logistics: Aldi actually purchase its material in bulk production which saves his
cost over products because bulk production purchasing is better than purchasing single product
and gives them a competitive advantage in market.

Operations: As Aldi has their own brand name so they can easily get their customers back to
their stores.

Outbound Logistics: In this Aldi carries its own logistics or transportation to convey the
product to customers

11: What are four specific criteria of sustainable competitive advantage Company’s? –
Capabilities that are:

These are under:

Valuable Capabilities & No substitutable Capabilities
Costly-to-Imitate capabilities & Rare of capabilities

12: Who are Aldi’s competitors?

Walmart

 Sainsbury
 Warehouses Clubs
 Morrison
 Tesco

13: Should Walmart be worried about Aldi? Discuss Pros and Cons
Yes Walmart should be worried because its stores offer the low prices on their
products at average 15-20% inexpensive or cheaper than Wal-Mart. Well the Walmart’s services

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& goods are quite better than Aldi but still wamart has to work on charging low pricing strategy
if they want customers attention to their stores.

14: Should Aldi be worried about Walmart? Discuss Pros and Cons
Yes definitely because as we know Walmart has more categories of product than Aldi ,
but here Aldi can beat the Walmart through improving its series to customers because this
factors is missing somewhere in Aldi’s strategy.

15: Is Aldi at competitive advantage or disadvantage relative to Walmart?

After analyzing whole case scenario, it’s quite clear that Aldi is at competitive advantage
because of their low cost pricing strategy along with qualitive product too towards
customers and customers are satisfies with purchasing high quality product in low price
charged.

16: What is Aldi’s Strategy? In two word

It’s Low Cost Strategy .

17: What is Walmart’s Strategy? In two word

It’s Low cost Strategy but somewhere it’s Differentiation strategy.

Case Study learning

Issues and analysis of situation for practical alternate solutions of problems, decisions
required with implementation plan and likely outcomes

18: What are the key issues?

 There is no more focus on R&D where as R&D is very essential for Aldi to
remain the part of market.
 They are lacking in facilitating good services to customers whereas Walmart is
better in services

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 Aldi should also focus on differentiation strategy because customers want
multiple & different products with innovative features.
 Aldi’s customers are moving to others because Aldi is stuck into thing and don’t
understand what customers actually want.
 Aldi has to sort out issues & problems internally first, as their employees who are
unhappy with salary they are getting and this factor can cause to employees
turnover from company, so Aldi should know and focus on these things in order
to retain the employees.
 By the passage of time, they should bring new technology in company to get good
result because this market values those who are well & good in new innovative
technology and to satisfy customers.

THE END

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