Comparing and Contrasting Trader Joes to ALDI Store - Case Study Example

Assignment A brief Introduction: Trader Joe’s has become second best supermarket chain in US. It deals in organic and kosher food products. Today, it is owned by “Albrecht family trust” which also operates a European grocery chain Aldi. There are more than 300 Trader Joe’s stores in United States. Aldi is operational in not only Germany but also in Belgium, Austria, Great Britain, Slovenia, Denmark, France, Luxembourg, Portugal, Spain etc. Management Functions: Trader Joe’s: It seems that Trader Joe’s strongly focuses on Planning function which refers to deciding goals and defining strategies to accomplish them. This business unit has a mission to bring its customers the best food and beverage values they can find anywhere. For this purpose, Traders Joe’ strongly focuses on offering quality foods products, price and cleanliness to ensure customer value and satisfaction. It believes in proper market segmentation, Product differentiation and Innovation, Branding and Rational pricing strategy to make its products unique, distinctive and cheap (medium sized) in comparison to its competitors. As far as the Organizing is concerned, management assigns the tasks into departments and allocates necessary resources to personnel. Trader Joe’s has a separate team of experienced buyers which is involved in extensive traveling and research before bringing new products into stores. Similarly, there is an organized quality and control department, mainly responsible to test and taste products before undergoing any market offerings. Leading refers to motivation of employees in order to improve efficiency and effectiveness. Leading at Trader Joe’s becomes evident when customers deal with helpful “crew” (employees) members, captains (store mangers) and mates (assistant managers) who are always willing to assist customers in gaining information about different products and resolving their issues, if any. In fact, this cooperation among bosses and subordinates represents the implementation of this management function. Trader Joe’s also believes in employee independence and empowerment. In short, there is an employee-friendly culture. Trader Joe’s is very much focused on controlling its operations and checking whether the business units are run efficiently and effectively or not. It avoids middlemen in its supply chain and prefers to deal directly with suppliers and manufacturers to ensure that it is able to maintain strict control over price and quality of products it offers. Aldi: The management’s approach at Aldi has often been distilled into four essential attributes: simplicity, high quality, frugality and confidentiality. Aldi aims to cater mammoth US retail market by offering quality products at extremely cheap prices. It also believes in Product differentiation, improvement, development and innovation; however, most of the changes in US based Aldi were observed when it tried to make the most of benefits it received, after current recession. Aldi today focuses more on offering its products to middle and upper middle classes compared to its Planning strategy of catering lower income groups. Unlike Trader Joe’s, Aldi doesn’t really have separate buying teams for researching and bringing new products however, it does, like other business units, have quality administrators for ensuring quality. Management groups tasks into departments and involves in activities that include selection of suppliers, scouting locations to build and operate stores, transportation etc. Management at Aldi places strong emphasis on Leading. Since, it aims to offer its products at extremely lower prices; its average employee rate per store is almost five. Without any proper communication and coordination, it is impossible to run a fairly large retail store with only 3-5 employees; therefore, Leading at Aldi becomes evident when it runs its stores successfully with such a small group of employees who are inclined to remain at their best. Aldi has strong control over its operations. It has more than 1000 stores across USA and it’s still working to expand its operations to cater its all market segments which demand cheap and quality products. The company tests its all food and beverage products six times a year to ensure high quality. Moreover, it offers a limited assortment of individual brands to ensure better control over quality and prices. Organizational Culture: In my opinion, Trader Joe’s has an “adaptability culture” because the managers in this business unit are concerned about their customers and those internal people and processes that bring about useful change. On the other hand, it seems as if Aldi has focused more on “achievement culture” because it is concerned with serving specific customers (usually lower income groups in US), without the intense need for flexibility and rapid change unlike Trader Joe’s which adapts to changes. But now after reaping extra profits in recession, Aldi’s management is shifting away from its traditional achievement culture to adaptability culture because it perceives that globalization and dissemination of information has greatly affected the perceptions of people and a large number of educated and learned segment has appeared on the stage. Opening stores in expensive areas endorses this point. Diversity: Trader Joe’s is mainly concerned with selling organic and kosher products therefore it becomes crystal clear that managers at this super store don’t believe in diversification instead they are interested in product development. On the other hand, Aldi is also a retail grocery store which not only introduces new food and beverages brands but also its “special purchased items” such as electronic goods, clothing, furniture, skin-care products etc which shows that managers at Aldi are, to some extent, interested in Diversification. Roles of Teams: Trader Joe’s has a team of “Category Leaders” (buyers) who perpetually travel the world visiting all kinds of food businesses and for conducting research to enter new and appealing products in TJ stores. Similarly, Trader Joe’s has a “Tasting Panel” that consists of regional managers and other executives who taste the new products, suggest changes in flavors to improve taste, and finally make decisions whether to stock them in stores. Moreover, there is a team, responsible for sampling booths, where customers taste new arrivals before placing any order. Also there are crew members who inform customers about products and make shopping an entertaining and pleasant experience at Trader Joe’s stores. On the contrary, Aldi has store management teams comprising of 3-6 employees responsible for inventory management and routine day-to-day store operations. In addition, there are ‘Purchase teams” responsible for purchasing products in bulk to ensure lesser prices as compared to competitors. Core Competency/Competitive Advantage: Managers at Trader Joe’s are always willing to innovate their existing products, develop new products and differentiate them in such a way that consumers get clear and distinctive image of those products in their minds. According to Dane bane, a CEO of Trader Joes, “its differentiation is so strong and inimitable as to constitute its core competence and competitive advantage.” Aldi is all about saving costs. Aldi stores have no furniture or decorations. They are equipped with simple shelving units and a row of freezers. Low overheads and a streamlined product line allow Aldi to offer the lowest prices of any competing grocery chain. Giving “Value” to customers by offering quality products including “fresh meat, fresh vegetables, specialty purchase products, and even beer and wine in some locations” at lower than average market prices is Aldis competitive edge. BCG Matrix: Trader Joe’s can be represented as a “Cash Cow” by having a reasonably large market share but not very attractive growth. Today, Trader Joe’s has almost 337 stores (2009) in United States and according to Supermarket News (SN) which is a US retail industry publication, estimated sales of TJ in 2008 touched approximately 7.2 billion $ and was 23rd largest grocery retailer in the United States. The growth rate is slow because Trader Joe’s is very cautious in expanding its operations, opening only a few stores every year. In contrast, Aldi can be considered as a “Question Mark” because it has a low market share but an attractive high growth rate. It’s worthwhile to mention that Aldi is operating over 1000 stores in US presently and is determined to launch new stores soon. Its estimated sales in 2006 and 2007 were 5.3 and 5.8 billion dollars respectively followed by an increase during recessionary period in 2008-09. This depicts the popularity of Aldi among customers. SWOT Analysis: Trader Joe’s: As far as the strengths (internal advantages) are concerned, Trader Joe’s has a unique organizational culture by having a nautical theme, Hawaiian shirts for employees, food-sampling booths and stores with unique displays. Employees at TJ are very motivated and committed to their jobs since they get huge salaries for their contributions. Moreover, TJ is in very strong financial position because it doesn’t rely on external debts. TJ has strongly implemented the concept of Product Differentiation and innovation. On the flip side, the first weakness of TJ is limited number of products so it is not “one-stop shopping” experience for shoppers. Secondly, perishable products such as meat and fresh produce are not up to standard of other retailers in the industry. Third, products are suddenly taken off the shelves that cause disappointment among customers looking for particular products. Finally, there is limited parking space which makes shopping a nightmare at weekends. Opportunities include - Trader Joe’s has enough room for expanding its operations because of its market share, product quality, reasonable prices, and customer satisfaction. It has efficient distribution channel and its 80-90% products are privately labeled against industry average of 16%. Threats - It might face stiff competition with other retailers especially Aldi because of its low prices and aggressive expansion plans and British based Tesco. Aldi: Strengths include - Selling Quality products at approximately 30-40% lower rates compared to industry average is perhaps Aldi’s biggest strength. It has a big parking area in comparison to Trader Joe’s which facilitates consumers to shop anytime. The company has presently changed layout of some of its stores so that they look bigger than its usual stores in US. Staff is helpful and friendly. Weaknesses – Still, most of stores are small and unattractive. It is offering limited number of products compared to its competitors. Differentiation is not very strong than that of Trader Joe’s. Small employee teams sometimes fail to deliver quality services to its customers. Cheque and Credit cards are accepted in only few stores. Opportunities - It has also started operating stores in reasonably posh areas and affluent neighborhoods to serve wealthy customers who were reluctant (before) to shop from Aldi stores. More privately labeled products are added to its stores in connection with change in its Product strategy so that it could have advantage over other competitors and could easily undergo aggressive expansion plans. Threats – Increase in property prices after gradual economic recovery in US may adversely affect its aggressive expansion plans. Works Cited Sachon, Marc & Jordan Mitchell. “Aldi: A Supermarket With a Reason to Celebrate”. Bettermanagement.com. n.d. Dieter Brandes. “Bare Essentials: The ALDI Way of Retailing”. Amazon.com. August 30, 2004. n.a. “Aldi and Lidls global expansion strategies.” Thefreelibrary.com. June 22, 2008. Len Lewis. “Fostering a Loyal Workforce at Trader Joes”. workforce.com. n.d. Keith Bailey. “Store reviews: ALDI food store”. helium.com. n.d. Read More