Aldi's Expansion Strategy
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Transcript of Aldi's Expansion Strategy
STRATEGIC MANAGEMENTApril 25, 2016
Austin Kilpatrick & Izmir VodinajProf. Vasudevan Ramanujam
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Current news: Expansion
The global village and how Aldi fits in it
Aldi in the US: Industry Analysis
Aldi’s competition in the US
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Aldi’s Interior Analysis
TODAY’S STORY
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THE EXPANSION STRATEGYFresh & Easy By TESCO
California, Nevada, Arizona Founded in 2007
Opened 200 stores in a year
Bankruptcy in 2013
Target133 locations in Canada
Supply Chain Issues
Over 2 billion in losses
ALDIRapid Growth
Small store size
600 new stores (next 3 years)
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THE GLOBAL GROCERY MARKET
2014 Sales Revenue (Largest Grocery Retailers)
ESTIMATED $2.5 – $4.5 Trillion
16%4%4%3%3%2%2%
67%$2000 B Others $55 B AEON $70 B Metro Group$80 B Aldi $93 B Tesco
$108 B Kroger$118 B Carrefour $476 B Walmart (USA)
Compare it to Automotive $9 Trillion
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ALDI AROUND THE WORLD
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GERMANY 1913
Expanding since 196214 countriesOver 8500 stores$64 billion in sales
Came in 197935 statesOver 1500 stores$10 billion in sales
Came in 2001Over 400 stores$6.4 billion in sales
80%
13% 8%
Europe US Australia
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ALDI IN THE US: COMPETITION
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WalmartKrogerCostcoPublix
AlbertsonsH-E-B
Whole FoodsAldi
0.0%5.0%
10.0%15.0%
20.0%25.0%
30.0%24.5%
12.9%7.6%
4.3%3.9%
3.4%2.4%
1.5%
Market Share 20141500
399363
22001115
48126004500
StoresStrategyLow Price; Efficiency
Organic FoodsCustomer Service/Local
Mergers and AcquisitionsCustomer Loyalty/ Regional
Membership BasedPremium Private Label
Low Price/One stop shop
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US MARKET CONDITIONPolitical
Food SubsidiesMinimum wage changes
Environmental Ethical Sourcing Waste DisposalElectricity/Green Initiatives
Technological Online Sales Electronic Payments
LegalLabeling Laws (Organic/ Natural) Compliance programs
Socio-CulturalEating Trends (Organic) Brand Names Consumer Loyalty
EconomicResilient IndustryLow skill labor Lower labor costs
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US INDUSTRY ATTRACTIVENESS
Threat of Entry High start-up costLow knowledgeGrowing Markets
Power of SubstitutesPrepared foods Higher Costs
Bargaining Power of SuppliersBrand Names Integrated Supply Chains
Bargaining Power of BuyersPrice sensitive Lots of options
Intensity of RivalryLots of Competition Brand Loyalty Geographic Location
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ALDI’S VALUE CHAIN
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Man
ufac
ture
rsDist
ribut
ion
Stor
e Sa
lesLocal
Suppliers
National Suppliers
International SuppliersM
anuf
actu
rers Centralized
Distribution Centers
Almost 90% of products include Aldi labels
Aldi stores all over the country
Well trained and paid sales associates
Supplier Relationships
Social Media
Local CouponsWebsite
Mar
ketin
g
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ALDI’S COMPETITIVE ADVANTAGE
Valuable Rare Hard to Imitate Advantage
Organized to Capture Value
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BRAND NAME
EFFICIENCY
LABELLING, EASY ACCESS
LABOR UTILIZATION, DISTRIBUTION,BAGS, CARTS
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ALDI’S STRUCTURE
Store Management
Divisional Office Support Staff
District Manager
District Manager
District Manager
Warehouse Employees
Warehouse Supervisors
Director of Administration
Director of Purchasing
Director of Operations
Director of Real Estate
Director of WH &
Transportation
Store Management
Store Management
Store Employees
StoreEmployees
Store Employees
• FUNCTIONAL
• MECHANISTIC
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Vice President
ALDI’S STORE EXPERIENCE
AVG US Grocery Store 45,000 sq ftAVG US ALDI store 15,000 sq ft
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ALDI’S SWOT ANALYSISEfficiency(LABOR UTILIZATION, DISTRIBUTION,BAGS, CARTS)
Quick shopping experience
Brand name
Limited goods
Customer service
Quality perception
Continue expansion
Use of technology
Customer relationships
Being noticed by large players
Changes in fuel prices
Online shopping
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Strengths Weaknesses
Opportunities Threats
A FINAL WORD ABOUT ALDI
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Aldi strategy has proved to be successful in developed markets worldwide
Aldi should pay close attention to consumer trends
Aldi should monitor it rapid growth strategy
Questions?15 of 15
STRATEGIC MANAGEMENTApril 25, 2016
Austin Kilpatrick & Izmir VodinajProf. Vasudevan Ramanujam
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APPENDIX 1: ALDI US DIVISIONS
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APPENDIX 2: PESTELFactor Political Economic Socio-Cultural Technological Ecological LegalThese trends areFAVORABLE to the industry
Farm Subsidies,Low fuel costs
Low fuel costs Health food and consumer consciousness
Point of sale systems, inventory management
Less Packaging Accepting WIC and Food stamps,
These trends exert are of NEUTRAL impact on the industry
Import Costs,Zoning laws
Economic Fluctuations, Exchange rates
Employees Storage, less packaging, Self-Checkout
Seasonal Products
Food Safety Standards, Health Regulations
These trends are UNFAVOURABLE to the industry
Selling regulations, licenses
Market Saturation, Competition
Wages paid Online sales High carbon emission,Low Fuel Costs
Food Labeling, Organic/ GMO Labeling
Overall impact of these trends
Favorable Neutral Favorable Neutral Neutral Neutral
Overall conclusions from the above PESTEL
In general the grocery industry is favorable, because it is a very stable industry which tends to remain stable despite varying economic conditions, and technological advancements. The companies that are able to adapt to new trends, are able to be successful in a variety of locations, across demographics, and despite new laws or regulations.
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APPENDIX 3: FIVE FORCESForce -> Threat of Entry Bargaining
Power of Suppliers
Intensity of Rivalry
Bargaining Power of Buyers
Power of Substitutes
These factors increase this force ->
Limited specialized knowledge
Name brand Products Lots of Competition Lots of competitionVery price sensitive
Lots of Restaurants
These trends exert are of NEUTRAL impact on this force ->
Number of stores will likely grow with increasing populations
Integrated supply chains, Consumer Trends
People tend to shop in small geographic area
Brand Loyalty,Shopper Experience
Consumer Trends/ Health Concerns
These factors reduce this force ->
Expensive to start Store Brand Products Brand Loyalty Location/ convenience of stores
Lower Cost
Overall strength of this force,LOW, MODERATE, HIGH
Fairly Low
Medium
High
Medium / High
Medium/Low
Overall conclusions from the above Five Forces analysis ->
The Grocery industry is hard to enter because of the large number of competitors and the high startup costs of operating a large store. Aldi is in a decent position because it has a number of store brand products which gives them some power over suppliers. Competition in this industry is high, and buyers are price sensitive and generally willing to take the lowest cost alternative. It is fairly hard to substitute the grocery industry for anything other than restaurants, which tend to cost more and be less healthy. In general it is a hard industry to enter, but once established competitors can do very well.
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APPENDIX 4: MANAGEMENTJason Hart, Chief Executive officer, Aldi Inc.; He has been the Chief Executive Officer of ALDI Inc. since April 1, 2015. Mr. Hart served as the Co-President of ALDI Inc., until March 31, 2015.
Charles E. Youngstrom, CO-president, Aldi Inc.; He is also known as Chuck, serves as Co- President of Aldi, Inc.
David Behm, Co-president, Aldi Inc.; He serves as Co-president of Aldi, Inc.
Scott Patton, Vice president; Scott Patton serves as Vice President of Batavia Division at ALDI Inc.
Bob grammer, Vice president of Center Valley Division; Bob Grammer serves as Vice President of Center Valley Division at ALDI Inc.
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APPENDIX 5: VRIO ANALYSIS Resource /Capability / Competence
Valuable? Rare? Imitability Organized to capture
competitive disadvantage, parity, or superiority?
Tangible -Physical Stores
YES
NO
Easy to Imitate
YES
Advantage
Inventory YES NO Easy to Imitate Neutral ParityStore Brand Products YES YES Somewhat hard YES AdvantageTransportation Fleet YES YES Easy to Imitate Neutral ParityIntangible –Brand name
YES
YES
Hard to Imitate
YES
Advantage
Low cost operations YES YES Hard to Imitate YES AdvantageCustomer Experience YES YES Hard to Imitate YES AdvantageStaff usage YES YES Hard to Imitate YES AdvantageCapabilities –Low Costs YES YES Hard to Imitate YES Advantage
Environmental Policy YES YES Hard to Imitate YES AdvantageInventory Management YES YES Hard to Imitate YES AdvantageThe firm’s distinctive competence, if any
Aldi is very good at providing low cost groceries, they have very lean operations and do not require a lot of employees which keeps cost down. Because of store size they have a limited selection, but offer the lowest costs on those items. Aldi is good at ensuring their stores run effectively, and they are hard to imitate because of their unique stocking and employment models. Their smaller store size also allows them to expand to areas that don’t have a ton of space, or where large store spaces are extremely costly.
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APPENDIX 6: MARKETING CONTENT
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APPENDIX 7: SWOTStrengths Weaknesses
● Low Cost Offerings● Lean Operations – Low costs● Good quality products● Positive Supplier relationships● Good environmental policy● Innovative sales model● Store Layouts● Store Locations
● Variety of goods offered● Customer service● Size of stores, ability to stock● Quality perception● Consumer Familiarity● Adaptability to technology● Store aesthetics
Opportunities Threats● Expand US and Abroad markets● Increase Brand Loyalty and awareness● Expand into offering Organic and more fresh food options● Expand urban presence● Increase use of technology in stores to improve shopping experience● Focus on customer relationships, and improve customer perception● Develop employees aand cross train them to be effective at all in store positions
● Larger competitors offering lower prices● Changes in fuel prices● Changes in government food subsidies● Changes in Import taxes● Increasing abilities to shop online● Consumers are very price sensitive● Low Brand Loyalty
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APPENDIX 8: Industry Ratios
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APPENDIX 9: Industry Numbers
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REFERENCEShttp://supermarketnews.com/aldi-usa-2015http://www.mergentintellect.com/index.php/search/companyDetails/6940423 M, Paulo. "Aldi Marketing." Slideshare, 10 Oct. 2014. Web. 27 Mar. 2016. Mergent Intellect. (n.d.). Retrieved February 23, 2016, from IBIS World US. Web. 27 Mar. 2016.www.aldi.comhttp://aldiuscareers.com/about-aldi/divisional-structurehttps://en.wikipedia.org/wiki/Costcohttp://supermarketnews.com/aldiStatista (Most of the data about industries and competition was taken from this database)IBISWORLD (Most of the data about industries and competition was taken from this database)