Faculty of Economics and Business

The University of Sydney

Individual Assessment Cover Sheet

(To be completed by students, signed, dated and attached to front of assessment)

Last name: TAO

First Name: Ye (Tom)

ID Number: 306257173

Email: Ytao6290@usyd.edu.au

Unit code: Work 6002 Unit name: Foundations of Strategic Management

Lecturer/Tutor’s name: Leanne Cutcher Lecture/Tutorial day/time: Monday 6:00-9:00

Full assessment title: Assignment B: Identify, evaluate and recommend no more than two key strategic

Initiatives our firm should pursue over the next 18 months Aldi Australia
Word limit of assessment: 1500 Word count: _______________________________

Due date: 12 / May / 2008 Time & date submitted: ________ 12 / May / 2008

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…Ye Tao… …12…/...May.../…2008…

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Individual Assessment Cover Sheet Semester 2, 2006 (Revised 28/07/06)

 TABLE OF CONTENT

1. Introduction

2. Strategy for sustaining growth

3. Short run strategy initiative

4. Long run strategy initiative

5. Conclusion

6. Reference

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1. INTRODUCTION

According to the analysis of report A of Aldi Australia, the growing popularity of private label

products can be viewed as both a threat and an opportunity fro Aldi. Further more considering

together with Aldi’s strength and weakness, it is widely believed that from both tangible and

Intangible resource point of view, Aldi should adopt new business strategy to sustaining

growth and maintain competitive advantage in not only Australia market but also world

widely. This report will address key business strategies that Aldi should adopt both in long run

and short run, namely merge, acquisition and brand empowerment. However giving the

capability of coordinating its resources and abilities to sustainability maintain the advantage.

These strategy are believed hard to implement and hard to execute. On the other hand

compare with Woolworth and Coles and other Australian grocers Aldi is a new entrant who is

still in its growth stage of business cycle, therefore all these strategy initiative are made for

purpose of sustaining growth.

2. STRATEGY FOR SUSTAINING GROWTH

There are many strategies to sustaining growth in broader view, however to address problem

in particular with Aldi and Aldi Australia, suggestions can be narrowed to: “Strengthen the

execution infrastructure by investing in 'safe bets’, Initiate a process to identify strategies

with a high probability for success, and Customer-Focused Growth Strategies(Liabotis,

Bill,2007) in another word, to invest means to purchase more lands for future development

and expansion, which is now in good favor of foreign groceries like Aldi . Given the fact that

Australia government is changing regulations and foreign investors would now allowed up to

five years to develop vacant land. (Jessica, SMH 2008) From Intangable point of view ,

further develop of home brand is a aproprate startegy in short run.Mr. Baker argued that

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"The strategy will be to continue with major investment in developing relevant and new

private label products to the market", "since the first generic brands focused on providing

low quality at low prices, which is no longer what consumers want." (IBIS World 2007)

Aldi as a pioneer on ‘home brand’ who should act fast on developing second generation of

high quality and low price ‘home brand’ for customer.

3. SHORT RUN STRATEGY INITIATIVE

According to IBIS World, Aldi’s private label products are becoming increasingly popular

with Australian households. It is widely believed that higher interest rates will affect people

in particular lower-income households, more and more people may begin shopping at Aldi

(IBIS world, 2008). However Aldi has a policy in Germany of not advertising, except weekly

newsletter of special prices called Aldi informiert.In Australia Aldi used two page coloured

advertising particularly in local suburban give-away newspapers. They have also delivered the

full colour leaflet used in store to householders' letterboxes in store localities.( Aldi, Wikipedia

,2008) This report suggest that for short run Aldi Australia could adopt startegy to promote

brand names and service quality by developing second generation of home brand and

investing in commercial Advertising on Television and Radio. The key for this strategy is to

invest funds in intangible assets, however It will be very hard to implement, and costly to

execute.

Despite significant growth in recent years, supermarkets' "house brand" products have failed

to live up to expectations. IBISWorld General Manager (Australia), Mr. Jason Baker, says

that several years ago (2004), the supermarket industry predicted the house brand segment

would contribute 30% of overall sales by this year. But it hasn't happened. Shoppers haven't

taken up the private label cause with quite the enthusiasm retailers envisaged. (IBISWorld

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2008) It is notable that in Australia brand loyalty and quality of service still plays important

role in the opinion of consumer. Therefore to spend on Advertising is very necessary to

stores like Audi although the business philosophy is focusing on lower cost.

Consequently, adopting a differentiated strategy is necessary. Furthermore the benefit of this

strategy is switching Aldi from global strategy to transformational strategy which integrate

variety of Australia society, exploit experience-based cost economies of Australian and transfer

distinctive competencies within the company, building on the stage of advertising ,

Second generation of ‘home brand’ will needed to back up the promotion, however by

promoting Aldi’s brand and service, it will not necessary influence cost , according to L.

Hamson: “The limited number of products enables Aldi to leverage its impressive buying

power and to control the Cost of its products by buying in large quantities. According to

Brands, Aldi has 30 to 100 times the Buying power of Wal-Mart.”(L. Hamson 2003). With

such strong buying power, developing second generation home brand is much easier in

contrast with other competitors. However implementing such strategy will consume huge

resource and time, and the coordinates of department are also need to make it happen, but it is

necessary and vital for Aldi to adopt such short term strategy on promoting brand quality and

develop second generation of home brand in order to switch to the ‘next gear’ of competition

in grocery industry.

4. LONG RUN STRATEGY INITIATIVE

It is argued by German market researchers: they have found evidence that discounters are

nearing their peak and the rapid upward trend is weakening and possibly even grinding to a

halt. The renowned Swiss Gottlieb-Duttweiler-Institute even wants to have determined, that

consumers are desperately unhappy about rock-bottom prices. And if discounters aren’t doing

5
too good other vendors hope that brand products are going to win with consumers. (Franz M.

Schmid-Preissler, 2006) Currently, a climate of change is prevailing in the German food trade.

The market has been stirred up through mergers and takeovers. This wave will come to

Australia sooner or later. Therefore new strategies are necessary for long term to address this

problem. It is suggested that acquisition of more land and properties are the next vital strategy

for Aldi in order to expand and growth in Australia in long run. Domestically speaking

Woolworth and Coles have dominant market of groceries; however with new government

ruling of foreign company on land development, it is rare opportunity to develop core

competitive advantage, by taking this chance and investing heavily on real estate. A

consequent pursuit of this strategy accounts for creating Aldi’s own competitive advantage

which was claimed by Barney that such competitive advantage can only be founded in rare,

imitable and non-substitutable resource that already controlled by the firm. (Barney, 1991;

117)

Internationally speaking, Aldi as market leader of discounters are facing new competitors.

“The takeover of controlling interest of the discounter Plus through Edeka marks the

beginning of the creation of the third largest low-cost supplier on the German market.

Tengelmann Group, which is still holding a minority interest of the discounter plus, is

merging in the discount segment with Edeka and its subsidiary Netto. With a network of

4,000 branches and a turnover of approximately € 11 billion, this is going to be the third-

largest discounter after Aldi and Lidl.”(Brief Letter 22, 2007) in respond to that, More

takeovers and acquisition should be proceeding as a long run strategy, considering in

conjunction with Changing competitive landscape of retail sector of market, and the threat of

other retail giants like Wal-Mart, Aldi wouldn’t survive by staying on its original track, further

more by acquiring new shops and inject Aldi’s unique culture which can’t be easily obtained

are key for this strategy. Furthermore, considering the fact that geographic factor is the main

6
reason that other international competitors haven’t enter Australia market, however from long

term point of view, it is a matter of fact that they will get their step in Australia. As a result

adopting developing strategy as mentioned above will help Aldi to pre-reserve locations that

most suitable for retail shop of its supermarket. To summarize from long run point of view

Aldi need to adopt developing strategy such as acquisition of vacant land and independent

grocery shops in Australia and internationally.

5. CONCLUSION

In conclusion considering all the factors and summarizing all the data from internal and

external analysis Aldi shall adopt short term strategy of promoting brand names and service

quality as well as developing second generation of home brand with quality and low price

within the next 18 month, given Australian retail giants have already launch their campaign of

private brand product. On the other hand from long run point of view, more funds should be

invested in property and acquisition for the purpose to keep sustainable competitive

advantage as well as benefiting future growth. In contrast with other current strategies

and considering capabilities of coordinates these strategies are difficult to implement

and execute, however it is vital for Aldi to adopt it before it is too late.

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Reference

Aldi, Wikipedia http://en.wikipedia.org/wiki/Aldi last modified on 10 May 2008, at 22:20

(accessed 5May 2008)

ALDI Australia, http://aldi.com.au/ (accessed 1.5.2008).

Brief Letter 22 week 52 2007 Literature for business leaders published by SchmidPreissler
International Strategy Consultants at the Lion’s House D-83703 Gmund am Tegernsee
http://www.briefletter.com/BL2007/BL07_22_en-Sale-Sale-Sale-Supermarkets-Discounters-
and-Aldi.htm (accessed 5 May 2008)

Data monitor “Food Retail in Australia” Industry Profile, May 2006 Reference Code: 0125-
2058

Food Magazine House brands: the future 26-Oct-2007

http://www.foodmag.com.au/articles/House-brands-the-future_z133749.htm (accessed 3May
2008)

Franz M. Schmid-Preissler, BriefLetter 18 Week 41/2006 “Wal-Mart and Aldi, often a

nightmare for suppliers, for consumers they are shops with decent goods at advantageous
prices.” http://www.briefletter.de/html/BL06_18_en-Wal-Mart-Aldi-nightmare-suppliers-
consumers.htm (accessed 4 May 2008)

IBIS world Press release RETAIL FORECAST FOR 2008, remember these names: Costco,
TIVO, ALDI 2007/12/12
http://www.ibisworld.com.au/pressrelease/pressrelease.aspx?prid=110 (accessed 1 May 2008)

IBIS world Press release HAVE SHOPPERS SNUBBED HOUSE BRANDS 23/10/2007
http://www.ibisworld.com.au/pressrelease/pressrelease.aspx?prid=102 (accessed 2 May 2008)

L. Hamson, ‘Inside Aldi’. The Grocer, 29 November, 2003, pp. 28–30.

Liabotis, Bill, 01-JUL-07 “Three strategies for achieving and sustaining growth”. Ivey
Business Journal Online http://goliath.ecnext.com/coms2/gi_0199-7043681/Three-strategies-
for-achieving-and.html#abstract (accessed 3 May 2008)

Jessica Irvine Economics Correspondent April 23, 2008 “labor’s deal to cut food pricies
Sydney morning hearld , http://www.smh.com.au/articles/2008/04/22/1208742940194.html
(accessed 3 May 2008)