Introduction – ALDI Business Strategy Case Study

The process undertaken by the managers and leaders of an organization to set a long-term vision for the company along with the goals and objectives is known as strategic planning. It is defined as the process of planning and achieving the long-term goals of the company for fulfillment of the objectives. In this assignment, the learner has analyzed the concept and steps of strategic planning concerning Aldi, a supermarket chain.

Description of the company – ALDI

Aldi is a leading supermarket chain with its headquarters in Essen, Germany for Aldi Nord and Mulheim, Germany for Aldi Sud. The company was incorporated in the year 1946 and now has more than 10,000 stores across the world. It is a global discount chain of stores which was established after Theo and Karl Albrecht started managing the operations at their mother’s store. The company was launched in the United Kingdom in the year 1990 and now it has grown to several 550 stores in the country. The company enjoys a global presence and is also considered as one of the fastest-growing organizations around the world. In the United Kingdom, it owns a market share of 3.6 percent but is fast considered a fast-growing firm.

 

 

Task 1 – Strategic planning

1. a) Provide an assessment of the extent to which Aldi’s missions, visions, objectives, goals, and core competencies inform strategic planning. (AC1.1)

The tool of strategic planning helps the management to focus and lay emphasis on the achievement of the organization’s goals and objectives so that the company can attain higher profits and revenue figures. Therefore, the management of Aldi has also used strategic planning to assess its mission, vision, goals, and core competencies.

Mission:

The mission of Aldi is to provide premium quality to their customers at low prices. The mission statement of the company helps the management in forming strategies and plans for the achievement of organizational goals and objectives by using the tool of strategic planning (Neugebauer et al., 2016). The strategic planning will be alignment with the mission of providing premium quality products at low prices.

Vision:

The vision of the company is to make the consumers of the United Kingdom able to live a life that is better and richer by decreasing their expenditures. Therefore, it can be concluded that the company’s vision and mission statements are aligned as they want to offer good quality products are low prices.

Objectives:

The objective of the company is to expand its market share in the United Kingdom’s grocery market and also increase its revenue and profit figures. For achieving the objective, the company has priced their products low, which has helped them to attract and retain their customers hence, gaining customer loyalty (Wiedemann and Gewald, 2017).

 

Goals: The goal of Aldi is to ensure that the products they are offering to the customers are of high quality and low prices with easy availability. The goal of the company has an effect on the strategic planning of the company as some of the products are obtained from different suppliers and later sold under the brand name of Aldi.

Core Competencies: The core competency is the superior quality of products offered by Aldi at low prices giving them a competitive edge in the market.

1. c) In a situation like this, analyze the factors that Aldi will have to consider when formulating their strategic plans. (AC 1.2)

As per the data provided in the case study, Aldi’s and Lidl’s have increased consistently by a margin of 17.6 and 17.9 percent respectively. However, the market share of four leading supermarket brands Tesco, Asda, Morrison, and Sainsbury has grown collectively by 1.6 percent. The management of Aldi has considered the above-stated percentages and other factors while devising strategic plans which have been listed down below:

Changing requirements of the consumers – After the recent event of Brexit, Britain is going through a recession and the consumers are preferring premium quality products at a cheap price. The consumers also prefer purchasing all the products under one roof so the management of Aldi has to consider all this while forming strategic plans.

Shortage of credit availability – Brexit has led to a weakening of the economic market of Britain leading to a shortage of funds in the economy. The supermarkets in the retail sector are facing a shortage of funds and therefore, Aldi will have to arrange funds from different sources to sustain in the market. The management will have to find new sources to obtain credit and funds from (Afza and Ahmed, 2017).

Retaining the competitive edge – Aldi has several rivals in the market who occupy a larger market share. Therefore, Aldi will have to formulate strategies to retain their market share and customers along with capturing more market share. Aldi will have to come up with strategies to enhance customer satisfaction.

1. d) Using evidence to support your answer evaluate the worth or usefulness of techniques used when businesses develop their strategic plans. (AC1.3)

Out of the many techniques used to evaluate the usefulness or worth of the strategic plans formulated for the business, the management of Aldi has chosen BCG Matrix. The BCG or Boston Consulting Group Matrix was presented by Bruce Henderson in 1970. The management of Aldi has decided to use this matrix for measuring their rate of growth in the market so that they can determine their company’s performance in the market along with an evaluation of the present market share. The company will be using the BCG matrix to evaluate its existing product portfolio so that it can understand which sectors are performing well and which ones are lacking. The evaluation process will help in formulating strategic plans for product improvement and enhancement of performance (Dahlberg et al., 2016).

Figure 2: BCG Matrix

(Source: Bentley-Goode et al., 2017)

• Star – It corresponds to the companies that have a high growth rate but a low share in the market. Such organizations are unable to make use of the market opportunities for increasing the profits and revenue of the company hence, stopping them from being the market leaders.
• Question mark – The companies that occupy a small share in the market which is fast growing and developing are known as question marks. The organizations in this axis require the necessary and adequate resources to become successful in the market and move to the position of stars where the company can achieve a high growth rate in the market (Chen et al., 2016).
• Cash Cow – The organizations that are considered cash cows have a slow rate of growth in an industry despite acquiring a large share of the market. The cash cow firms generate huge amounts of cash and revenue at low investment which can be utilized by the other firms also.
• Dog: Operations of the business organizations are conducted within an industry, which is mature and includes a small share in the market. As there is no need for extra cash investment in these enterprises, this capital can be used and can get blocked in industrial matters, and also somewhere else this capital can be useful.

It is clear from the BCG matrix Aldi has its position in the star quadrant. The only reason for this is that the industrial growth is rapid and includes a very large target market. Besides that, the company has a very low amount of market share. If compared in terms of market share, Aldi has an extremely high market growth although there are many other companies in the same department and they are running ahead of Aldi (Gumusluoglu and Acur, 2016).

2. e) Carry out an organizational audit for ALDI and provide an analysis of their current strategic position. (AC 2.1)

If the scope of development needs to be determined, the current strategic position of Aldi is required. The current strategic position as in, scope for the improvements and availability of the market opportunities. To attain the current strategic positioning of the company a SWOT analysis is done by the learner.

Strengths It is the second growing company after Lidl and the pace of growth is real fast. Aldi has the strength of providing high-quality products at cheap prices. If considered worldwide it includes more than 10,000 stores. In more than 15 countries, this company has its operations running. Besides that, this company includes low operation costs and high discounts on products.	Weaknesses Although the company has a rapid growth it still is unable to undertake a proper amount of market shares. In the UK, Aldi has only several 550 stores. Based on feedback from some of the Aldi customers, it was discovered that some of the products are of low quality and cheap as well.
Opportunities The chance for the company is great at open more stores in the UK market with the help of rapidly growing market shares. With the help of promotional activities as in advertisement and other options, Aldi has the capability of beating its competitors. Aldi also has the option to expand and grow its business in the improving economies as in Asia and Africa.	Threats There are four big and popular supermarkets in the market, where Aldi has less chance as it holds less market share than all four of these. Tesco and Sainsbury’s provide products of much more range than Aldi.

Table: SWOT analysis of Aldi

 

2. f) Carry out an environmental audit for ALDI showing both micro and macro environment. (AC 2.2)

The environmental analysis includes the PESTLE of Aldi. It is stated below in the table.

Components	Analysis of Aldi
Political	Aldi can increase its business perspectives with the help of favorable governmental policies. A good relationship is maintained with the ruling parties.
Economic	As a retail industry, Aldi needs to grow with the help of favorable economy The British exit from the European Union might affect the business of this sector.
Social	There is a high demand for individualism in the countries, and British-made products are prioritized mainly. According to Aldi, most of the products are locally manufactured.
Technological	The implementation of online purchasing options became popular among consumers. People can check out after purchasing their selves. These self-checkout options can also make the customers convenient.
Environmental	Prevention of plastic bags and instead the customers must be encouraged to use reusable bags. The main focus is on organic products. Battery recycling services are also provided as a choice.
Legal	The laws and legislations of the UK are very strict for the retail sectors. Organizations have a requirement to follow rules to protect customer rights. Supplier exploitation is also avoided by the company.

Table: PESTLE analysis of Aldi

 

Porter’s Five Forces

Porter’s five forces are applicable for a company to analyze the situation of the company to make better decisions and accordingly make strategies for development and increase the sales figures. Porter’s five forces include,

1. Competition between the existing organizations: This competition in the market is high as there exists the main four retail supermarkets in the markets of UK.
2. Bargaining power of the suppliers: It can be stated that the suppliers have low bargaining powers as Aldi includes a lot of other sources and they do not depend on the existing suppliers only (Ghemawat, 2016).
3. Bargaining power of the buyers: Buyers include high powers and they also include a lot of options other than the existing supermarkets.
4. Threats from subsidiaries: Aldi includes medium threats from the substitutes as the customers know that they will not get any discount from other supermarkets.
5. Threats from the new entrants: Several new entrants in the market have just started their retail business. The only threat they get from those entrants is if they set their pricing strategies cheaper than Aldi (Olson et al., 2016).

    

2. g) Assess the significance of stakeholder analysis for ALDI when formulating a new strategy. (AC 2.3)

The people and also the gathering of individuals for whom the association is being worked are known as the partners of the organization. The negative and positive execution of the organization is a result of the moves made by the partners, and it influences them specifically or by implication. Financial specialists, clients, proprietors, workers and government shape the partners of Aldi.

Partner investigation is an apparatus that is utilized for seeing how the undertaking capacities and nature in which it is working. For leading an investigation of the partners of an organization, a rundown must be made of the considerable number of partners alongside their association with Aldi. Partners’ investigation will be useful for the organization, as the administration will have the capacity to comprehend the people will’s identity influenced in a roundabout way or specifically by the procedures that will be received by the organization. In the event that an investigation of the partners is done, at that point Aldi will have the capacity to comprehend the necessities of its partners and define its systems in like manner. This will enable the organization in evaluating the necessities and prerequisites of its clients and in like manner to make new procedures to engage them (Beckmann and Paul, 2016).

Currently, Aldi has a market share of 12 percent in the grocery market of the United Kingdom. Their mission, vision and values are:

• Mission – “At ALDI our mission is to provide you incredibly high quality at impossibly low prices.”
• Vision – According to the vision statement of the company, Aldi wants to ensure that British shoppers can lead enhanced lives by having to spend less.
• Values – The Company’s main core values are responsibility, consistency, and simplicity.

Aldi has been fulfilling its mission and vision by providing high-quality products and services to its customers, at high discounts and offers. Additionally, it has also been following its values, which shows in the design of its stores. The Aldi stores are designed simply and the designs are consistent in all stores. Furthermore, the employees and customer executives know their roles and carry them out responsibly (Boone et al., 2017).

Aldi has various features due to which it has gained an advantage over its competitors. The company is increasing at an extremely fast pace, whereas the top four supermarkets of the UK have grown cumulatively by 1.6 percent. Furthermore, the company gives good discounts and offers along with providing products of high quality, which gives it an advantage over others. The company is slowly becoming one of the best supermarket chains in the United Kingdom.

However, to become the best supermarket chain in the grocery market of the country, the company needs to set new objectives, goals, and action items. The new objectives of the company should be to increase its sales by approximately 15 percent in the next 2 years and its main goal should be to increase the sales by approximately 30 percent over the coming 5 years. This can be done by setting a new action plan according to which, Aldi should increase the number of stores by almost 100 in the next 5 years, and increase the range of products offered by them. This will help the customers in getting an increased number of products in the same store, which will lead to an increase in customers and revenue. Furthermore, with an increase in the number of stores, customers will be able to access Aldi easily, and will not settle for other supermarket chains like Lidl or Sainsbury’s (Mahmood et al., 2017).

 

 

Task 2- Strategic Evaluation and Choices

3. a) Identify a market (new or existing) and analyse the appropriateness of suitable strategy for ALDI in relation to substantive growth, limited growth or retrenchment. (AC 3.1)

Vital decisions incorporate understanding the reason for choosing a system for the future. An organization needs to extend or differentiate to develop its piece of the pie. There are distinctive sorts of development techniques that can be embraced by the multinational store chain, Aldi. This incorporates:

Substantive Growth Strategies

• Even reconciliation – In this, Aldi can converge with or obtain another organization show in the basic supply market of the United Kingdom so it can expand its piece of the pie (Chang and Chuang, 2011). After the merger or procurement is done, at that point Aldi will acquire aggressive power that will help substantive development.
• Vertical Integration – This happens when the association turns into its own particular merchant or provider to decrease its reliance on the providers. Along these lines, if Aldi obtains its very own provider, it is known as back vertical joining and if the outlet in which the item is sold is procured, at that point it is known as forward vertical reconciliation.
• Diversifying – This is another business technique that has been broadly embraced by different business associations (Soltanizadeh et al., 2016). Diversifying distinctive outlets of Aldi will enable the organization in accomplishing substantive development without  contribute much.
• Broadening – This happens when the business association expands and wanders into different areas. Aldi can go for this methodology by enhancing its business and going into apparel retail or other electronic things.

 

Constrained Growth Strategies

• Market Penetration – according to this methodology, the current results of Aldi is promoted to its current clients to build its piece of the overall industry. In this, the current scope of items are repositioned or advanced by spending on commercials.
• Item Development – The current items will be supplanted by Aldi or new items will be created for existing clients (Boyer et al. 2010). This will help in pulling in them and expanding the income of the organization.
• Market Development – According to this methodology, the current scope of items will be advertised by the organization in another market. Aldi can wander into various nations like Asia and Africa and open stores in those nations.
• Advancement – Innovation is identified with the three techniques that have been portrayed above; nonetheless, a few more changes are made to the items that will be offered (Oltra and Luisa Flor, 2010). Aldi can supplant a couple of items or administrations offered by it, with better items that have been overhauled.

Conservation Strategies

• Pivot – This is a kind of conservation methodology that can be utilized by Aldi to fix the harms that have been brought about by the organization given a wrong choice taken by the administration (Boies et al. 2011).
• Liquidation – This is the last technique that can be received by a business association when no other system will work. Aldi can offer of its benefits and twist up its operations if the market picture is ruined or future open doors for the organization are lost.
• Divestment – This is another type of conservation system in which the extent of the business association is cut back (Parnell, 2010). Aldi can take after the technique of divestment by exchanging or offering a part of its association or a noteworthy division to settle its money-related position.

The multinational organization can utilize any of these procedures as and when required for developing or limiting its misfortunes.

3. b) Justify one of the strategies for market entry and growth that you have discussed in 3.1. (AC 3.2)

Aldi can adapt one strategy, which is a substantive growth strategy. Depending on the strategies, it can be acknowledged that franchising and horizontal integration would be the best strategies for market entrance. On the other hand, the market share of Aldi is low and the horizontal integration will be of help toward increasing it. Tesco, and Sainsbury’s, these are the main competitors of Aldi in the markets of UK. As these supermarkets mainly hold the maximum of the market shares, it can be stated and recommended by the learner, that franchising and horizontal strategy can help the company in increasing their market shares and making them developed in the market (Buckley et al., 2016).

 

Task 3 – Strategic Implementation

a) Provide an assessment of the roles and responsibilities of personnel who are involved with the implementation of the strategy. (AC 4.1)

The company should hire efficient and experienced employees for their company so that the strategic plans can be formulated as per the organizational goals and objectives. The Chief Executive Officer (CEO) is entrusted with the task of implementing the strategic plan made and hence, the CEO should be competent and responsible enough to manage all the duties and responsibilities associated with the post.

The task of strategic planning includes planning, organizing, controlling and executing the plans and processes devised for achieving the goals and objectives set for the company. Therefore, to achieve the goals, it has to be properly communicated to the personnel. The personnel involved will have to prioritize the goals for the employees and provide them with the necessary infrastructure and resources so that they can complete their tasks. The CEO will have to create a vision that has to be communicated to all the employees. The strategic plan of Aldi is based on horizontal integration and franchise and therefore, the personnel should have considerable idea regarding it.

The work should be delegated to different departments so that each personnel is well informed about the work to be done. The task of the personnel would be to choose the most efficient employees for the project who are creative, flexible, and hardworking by nature. The work done by each employee has to be managed and supervised by the personnel at regular intervals.

b) Provide an analysis of the resource requirements for the implementation of the strategy. (AC 4.2)

The company needs a capable and efficient workforce to achieve the goals and objectives set by using the tool of strategic marketing. The company will have to establish proper workforce management to motivate their employees to work properly and achieve the set targets on time. The employees should possess the required skills and qualifications for the job role they are hired for. The management of Aldi should use the tool of performance management to motivate their employees. The salary and compensation should be linked with the employee’s performance so that they can work harder for other financial and non-financial benefits.

Apart from that, the company also needs to arrange the market data required for entering a franchise business. The market data will be obtained by conducting a market survey which will help the company to understand the tastes and preferences of the customers and the recent market trends. Data analytics is also an important part of data collection. Analyzing the data will help the company identify its target market and audience so that it can use efficient marketing strategies to reach out to its customers. Therefore, it can be said that the resources required by the company for the accomplishment of any task are employees, financial resources, data analysis, market information, and others.

c) Evaluate how the use of SMART targets (give examples) can contribute to achieving the strategic objectives. (AC 4.3)

The setting of the SMART target would help the management of Aldi to create a proper and clearer vision mission statement and strategy for the company so that the aims and objectives set from the target are quantified in nature. It makes the aims and objectives clear and more understandable for the employees of the company. The management of Aldi will be able to manage the use of resources, capital, and investments in a better manner so that they can reduce the wastage and increase their returns on investment and capital contributed. The SMART targets are set for a specified period so that the management and the employees are aware of the time limit within which they have to achieve their targets and goals. For example, the management of the company wants to carry out its corporate responsibility towards society by reducing the emission of carbon footprints in its manufacturing process. Therefore, setting SMART targets will help the company to modify its aims and goals as per the changing society and also achieve it on time. It helps in the timely accomplishment of goals without missing out on any step.

 

Conclusion

In this assignment, the learner has analyzed various aspects associated with the strategic planning of Aldi, a multinational discount supermarket. Aldi is a supermarket chain of stores operating across the world. The learner has discussed the aims, objectives, goals, mission, vision and core competencies of Aldi based on which the strategic planning is done. The learner has identified and discussed the effect that the internal and external environment has on the organization so that the competitive advantage gained by the company in the market can be identified. Aldi aims to sell premium quality products at low and affordable prices to their customers which makes them a customer favourite company. Aldi is looking for franchise form of a business so that they can expand themselves further. Lastly, the learner has discussed the various growth opportunities present with the company in the market so that they can increase their sales revenue and profit figures by rendering customer satisfaction. The resource requirements of the planning process have been discussed with respect to human resource needs of the company.

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