The Core Elements of Aldis Retail Strategy - Assignment Example

The Comprehensive Case – Aldi Discussion Questions Describe the core elements of Aldi’s retail strategy (target market, retail mix, and key valuepropositions). Answer For how many years in its operation, Aldi was actually able to hit its target market and these are consumers who are highly price conscious and at the same time looking out for quality and high level of satisfaction. The decision of Aldi to satisfy customer needs is tantamount to its ability to formulate good retail strategies in the different aspect of the retail mix. These strategies are strongly in line with the company’s goal to provide offerings at lower cost but with high quality standard. The reason why customers should buy the products of Aldi is due to the firm’s success in instilling products into the market at a lower cost but with high quality standard. This is just a way of saying that at a lower cost, Aldi does not compromise the quality of its products. This can be the company’s competitive edge and it adds value to its value particularly for those customers who are after of good quality at a reasonable price. Aldi’s lines of offerings are viewed cheaper but of high quality and this perception has significantly created specific value to particular customers. 2. How are different components of Aldi’s retail strategy aligned with one another? Answer As mentioned in the case, Aldi tries to apply limited assortment for its merchandise and it particularly adheres to principle that the increase of item actually increases expenditure (Aldi: A German Retailing Icon 3). Product pricing for Aldi’s offerings is said to be 20 to 30 percent below those of regular supermarkets (3-4). Its basic design for store and open display adhere to one of its core principles, simplicity at a minimal cost (2). The communication of its products is said to apply minimal ads through its flyers and website (3-4). Its location is particularly located off land which is its own so as to ensure minimizing cost (4). Its service is through fast check out through cash and there is inclusion of entertaining returns at high speed (5). The case of Aldi simply shows that in maintaining overall cost leadership as its competitive strategy, there is a need to actually control the costs that have to be incurred in the operation. It is clear that in order for Aldi to come up with lower cost but not to sacrifice quality of service and product offering, there is a need to consider minimizing costs that are not actually creating significant impact on product quality. This is how in particular the different components of Aldi’s strategy are aligned with each other. 3. Explain the key internal and external reasons why the company has been so successful over the past decades. Answer Aldi’s success over the past decades is due to its successful entry in the market. Part of this successful entry is its proper aligning of the different components in its retail strategy. As an effect, Aldi is creating competitive strategy which is remarkably in line with overall cost leadership. This in particular has created value not just to the company but to the customers who are after of cheaper products but with high quality. Thus, this enables the company to come up with products that are highly differentiated when it comes to price and quality. The extent of this is the achievement of specific market focus which is a market segment that over time, Aldi is willing to serve with its line of offerings. Over the course of time, this develops customer loyalty as one of Aldi’s external factors for success. This customer loyalty is a sustainable competitive advantage of the company and through this; the company has remarkably gained high buying power which means that it can further demand for low price. In return, this added to the capacity of the company to maintain its competitive edge when it comes to overall cost leadership. As it can be observed, the combined effects of both external and internal factors for Aldi’s success have further contributed to its success at present time. 4. What are key challenges for Aldi’s expansion into other countries? Answer Just like in the case of Wal-Mart in its attempt to enter in Germany, Aldi can also encounter the same problems in other countries considering the different business environment. Wal-Mart in particular encountered legal problems in Germany the moment it attempted to enter in the market. The same problem can possibly be encountered by Aldi in its attempt to enter into other countries. Considering that there are different aspect sin business environment, Aldi can possibly experience some problems not just on the legal aspect, but as well as on political, economic, social, technological and other environmental aspects. Even if Aldi will be given chance to successfully enter into a new market in other countries, there might still be a problem when it comes to acceptance of the local customers and the reaction of competitors. Considering for instance that Aldi’s product pricing is 20 to 30 percent below those of regular supermarket, competitors might actually react on this at some point and the legal and political aspects in the country might be possibly used against the company just like in the case of Wal-Mart’s attempt to enter into the German market (Aldi: A German Retailing Icon 9-10). 5. Can Aldi successfully replicate its business model in the US and other countries? Why or why not? Answer There is a good chance that Aldi’s business model can be replicated in the United States considering that the same business model has been exercised by Wal-Mart. On the other hand, there is also a good chance that Aldi can replicate its business model in other countries especially those that demand high quality like Japan. Furthermore, it can also be replicated in developing countries where consumers are highly sensitive to price. The problem however may be encountered through the reaction of competitors. In this case, the success of replicating the business model may not be an issue but its actual implementation may become an issue. There is a good chance that Aldi will be accepted by customers and develop loyalty with them. However, there is no assurance that the business model can successfully survive considering the different business environments in different countries. Replicating of the business model may just be an easy part for Aldi because it is used to it. However, its successful implementation in other countries has no assurance to succeed due to the presence of competition and the difference of business environment. 6. Will Aldi continue to be successful? Why or why not? Answer In Germany, Aldi will continue to be successful in its own way due to its competitive advantage which is in line with becoming an overall cost leader in its industry. What Aldi is offering are products that are basic necessities and there is an assurance that customers will always find for them in a regular manner. Aldi is very conservative to adjusting costs that could affect the final price of the products. This is due to the fact that it maintains its image as a company providing high quality products at a substantially lower cost. This sounds good to hear and this has created significant impact and value to the customers. This is the gateway to creating customer loyalty. If Aldi is willing to expand as an integral part of its success, then there is a need to change a little bit for its strategy considering the wider scope it has to go through. For example, it is noted that the company has minimal consideration for the use of technology whereas it is a different story in the case of what Wal-Mart has tried (9-10). Another point, Aldi has to be aggressive in its expansion. This is one of the ways it needs to do so as to be successful in its international expansion just like in the case of Lidll (11). In an international setting, Lidl is carrying more products than Aldi does, its employees are paid less than Aldi’s, and there is a fast-pace expansion in the case of Lidl (11). Basically, Aldi has to learn some of these basic things in order to be successful in the international context of retailing. Reference Aldi: A German Retailer Icon Read More