Strategic Management of Aldi Supermarket - Essay Example

Strategic Management - Aldi Supermarket Introduction: The term Aldis is the abbreviated form of Albrecht Discounts stores that commenced operations in Germany, way in the1960’s, by two brothers- Karl Albrecht and Theo Albrecht. These stores are geographically divided into two zones- Nord and Sud. “The Aldi Nord group currently consists of 35 independent regional branches with approximately 2,500 stores. Aldi Süd is made up of 31 companies with 1,600 stores.” (Aldi 2008, para.4). One of the main reasons for its success has been it is a no-frills stores selling products at heavy discounted rates. The stores is able to pass on the benefits of low costs in terms of onto the customer, and this policy has earned them rich benefits, especially during post war periods and recessionary times. Your firms value chain and vertical boundaries: what value chain activities does it perform in-house, what activities are outsourced and WHY? Fundamentally this is a food and grocery store, having its own branded goods. Most of their products are their own labeled brands, and perhaps, there would only be one or two other kinds of competing brands for each kind of product. While this restricts the choice of customers regarding variety, it induces greater sale and movement of goods. Thus, the need for having a large number of tagged brands (which may not even be moving products) is obviated, and only products that sell fast are kept on pallets. Perhaps one of the distinguishing aspects regarding Aldi’s type of business is that goods are stocked in pallets, customers pick up their required items from these pallets, and load into their trolleys, which are to be compulsorily used after paying a refundable token towards use of trolley. After the pallet is empty, these are again refurbished, and the process goes on. Most of the products found are Aldi’s own labeled and branded products, and not much of other competing products or brands are found in Aldi stores. This reduces inventory carrying costs and the economic risks of having to stock a large number of brands, which may or may not sell. “The impact of using Value Chain Analysis by is that it provides cheaper products to the consumers. In the past months, according to the Centre for Retail Studies, (2006) the cheaper products that Aldi gave the consumers impacted both the two biggest supermarkets in Australia, the Coles Myer and Woolworths. The companies came up with different strategies like Everyday low pricing (EDLP) and Save Everyday strategies.” (Undertake a full value chain (complementors) analysis of the Australian supermarket industry and its implications on the each of the three super market chains (Woolwoths, Coles and Aldi) 2009, para.19). The vertical boundaries of the firm indicate which product lines are produced independently by it rather than outsourced from other locations. In the case of Aldi products, keeping the quality and cost considerations in mind, most of the products are produced internally and not outsourced from third parties. This is in order to give maximum quality and price benefits to the ultimate consumers and not compromise on these critical marketing aspects in food business, upon which the entire structure of the business hinges. Besides, it is seen that the most attractive aspect about Aldi is the pricing which is much lesser compared to others like Asda, Woolworths, etc. As far as Aldi’s business policies are concerned, they are transparent, and without any frills. Their costs are the cheapest in the town and the quality professed to be among the best. Their marketing strategies are simple and they do not believe in stocking or merchandising a large number of items. For instance a typical Aldi stores would have just around 600 items, which creates efficiencies both for the sellers and the buyers. Having a large number of products leads to complexities and inventory control issues; these way things are short, simple and manageable, and buyers are not confused on what to buy and what to refuse. The key to Aldi’s success has been lowered overheads costs due to lesser number of articles, no décor or advertisements costs, just the bare minimum of fittings and excellent quality at rock bottom prices. Any cooperative arrangements (alliances, JVs, etc) it has in its value chain and WHY; relationships with suppliers, distributors, retailers, etc and WHY? The Regional Branches are operated by through managers who reports to the head office. The arrangement is in terms of requisitions being placed by individual branches to distribution centers which arrange for the dispatch of goods to various locations. Thus, logistics management, control and monitoring of inbound and outbound transports and many other factors impinge upon business growth and development. As such, Aldi stores are divided into two independent entities- Aldi North and Aldi South. “Aldi Nord is responsible for the markets in Belgium, the Netherlands, Luxembourg, France, Spain, Portugal and Denmark. Aldi Süd caters to the markets of Austria, the United Kingdom, Ireland, the United States, Australia, Switzerland and Slovenia. Aldi Süd currently is expanding in Switzerland, where the first stores opened in 2005.” ((Aldi 2008, para.5). What are its core/distinctive capabilities/competencies? Some of the major capabilities of this store stems from the fact that it has a specific cost oriented approach to business. It usually buys land, usually in the outskirts of any city; build a store, and sells goods at economic prices, due to low investments and maintenance costs. These savings they are able to pass on to the ultimate customer by way of much reduced costs as compared to their more ostentious business rivals like Woolworths, Asda, and others. Perhaps their key competitiveness’ are their low pricing, which attracts a lot of customers. People argue that when they are getting same, or better quality for lesser prices, while pay more? Labour relations, human resource management, and agency issues: Since Aldi run their own stores throughout the world, the question of any extra costs does not arise. They pay good emoluments to their employees and work force, as a result of which the staff and labour attrition is also minimal. “As a member of BSCI, all of the European operations of the Aldi South Group, including our suppliers, are committed to implementing the principles of the BSCI code of conduct.” (Business social compliance initiative 2009, para.3). The relations between management and its suppliers and vendors are governed under their common membership with BSCI. Thus, the norms and regulatory procedures underpin our agreements with them. Under the Business Social Compliance Initiative, it is seen that “a development oriented approach through which we help suppliers to implement social requirements progressively. To find sustainable solutions to the problems, we support suppliers with training and capacity building activities.” (Our objectives 2008, para.4). Conclusions: The main aspect that has endured Aldi to the consuming public all over the world has been its no-frills approach and strong commitment to quality and service. Its ethical business sense is evident from the fact that the trolley rent used by customers is returned to them once the use is over and the trolley returned to its bay. Its ethical and customer focused approach is a major contributor for its continued success all over the world. Reference List Aldi, 2008. NationMaster.com. [online]. Available at: http://www.statemaster.com/encyclopedia/Aldi [Accessed 4 December 2009]. Business social compliance initiative, 2009. ALDI. [online]. Available at: http://www.aldi.co.uk/uk/html/company/10173.htm?WT.z_src=main [Accessed 4 December 2009]. Our objectives, 2008. BSCI. [online]. Available at: http://bsci-eu.org/index.php?id=2009 [Accessed 4 December 2009]. Undertake a full value chain (complementors) analysis of the Australian supermarket industry and its implications on the each of the three super market chains (Woolwoths, Coles and Aldi), 2009. Thinking Made Essay. [online]. Available at: http://ivythesis.typepad.com/term_paper_topics/2009/06/undertake-a-full-value-chain-complementors-analysis-of-the-australian-supermarket-industry-and-its-i.html [Accessed 4 December 2009]. Read More