1. Executive Summary
This report is not only described how Aldi is affected by current PESTLE, it also shown Aldi’s strategies achieve its success. Furthermore, it will explain Aldi’s culture support its strategies. Finally, it will explain the long-term prospect of Aldi in UK and what they should do to continue expand in UK.
Aldi is an international discount supermarket chain found in 1913. It is growing rapidly and running over 9000 stores worldwide including UK (Aild.2010).It provide a wide range of high quality products with lower price. Their slogan is ‘spend a little, live a lot’.(The grocery Trader,2008) It won the prestigious Grocer Gold Award 2013, beating off other competition such as Tesco and Sainsbury’s. The main purpose of this report is to explain how the current political, economic and social affects the UK supermarket industry including Aldi. Also it will look at Aldi use the cost leadership strategy to to increase their competitive advantage and compare with other supermarkets such as Tesco, Sainsbury’s, Asda or Morrison’s. Finally, this report will evaluate the model of management and how the culture of Aldi supports its strategies.
3. PESTLE with Aldi
3.1 Economic with Aldi
When economic is recovering, people would prefer to choose discount supermarket. People need to plan their budget in their life when their disposable income under pressure and life costs is rising. The government statistician said last week the average household’s disposable income had shrunk from ??526 to ??489 a week (Guardian News, 2013). .Shopping in supermarket is a huge spending part of their life cost. People can shop in discount supermarket to save their money. Over 50% of UK households shopped at Aldi or Lidl during October to December 2013(Guardian News, 2013). The UK economic climate is suitable for discount supermarket such as Aldi or Lidl. Aldi’s sales were increasing 31.1% in the 12 week period, which is compared to the san period last year. (Guardian News, 2013)
3.2 Political with Aldi
Aldi adopted time based management to reduce its salaries cost. Firstly, Aldi’s staff is trained to do a variety of tasks in the store. However their wages is near ??9.2 per hours(Aldi, 2013), it is higher than UK minimum wage which is ??6.31 per hours (open Government Licence v2.0, 2014) .Aldi do not need many store assistant because their employee can do whatever tasks they need to do .Secondly, Aldi only opening during the busiest time of the day. Compare to other supermarket such as Tesco. Tesco’s Service Assistants are paid ??6.88 per hours (PayScale, 2014) and Tesco is open 24 hours. Aldi can save its money from its salaries cost and passed on to customers to increase their competitive.
3.3 Social with Aldi
Disposable income is an important factor to affect their shopping habbit. Most people will prefer to look for bargains under the downturn in UK. A recent survey shows majority of consumers (80%) have changed their shopping habits because their budget is under pressures (Chira T, 2013). People would shop in big supermarket once a week before, but now they shop in small supermarket in the city centre to control their budget. In addition, Aldi is the best choice for elder to save their money. The medical improvement is expanding human lifetime. People can live longer than before. There is 10 million people in the UK are over 65 years old (Parliamentary, 2013).Most of their income is pension. It is hard to maintain their life under the high inflation. They need to reduce their life costs as far as possible sot Aldi is a good way to save their money. They can get a good value and quality in Aldi.
4. Cost leadership strategy rise Aldi competitive
Aldi uses cost leadership strategy to its business. Aldi can offer their consumers a good value without reducing the quality of their products. Aldi can reduce their cost not only because their business are efficiently, but also saving time, space, effort and energy. Aldi save these cost and passed on to their customers, this is why they can growth rapidly and compete with big four in UK.
4.1 Just-in-time production
Aldi was adopted just-in-time production to manage their stock. Aldi save a huge money from this approach. They just buy the stock their needs at time. There are two main benefits: one is Aldi do not need an expensive rent for warehouse. Also they do not need many staff to monitor warehouse stock. It means the approach reduce the cost of managing the stock. Another one is their working capital is improved. If you hold a huge stock, you can’t use them before they sold. It just like you put a sum of money in bank without interest and you can not take it. However, the approach eliminates this issue. It means Aldi have more money to flow.
4.2 Time based management
The principle of time based management help Aldi to save cost and gain the competitive advantage.To begin with, Aldi purchase from location where possible.(THE TIMES.2013) This action can decrease the time and cost of delivery. Then, training staff enables Aldi to reduce elimination of waste and cutting of cost. Staffs are trained to do a lot of different tasks in Aldi. Staffs know more knowledge about their stores. They can provide better service to their consumers. It reduce staff cost. Furthermore, Aldi only focuses fewer differentiation of each product. This is not only takes benefit of economies of scale, it also save the time of display its products. Finally, Aldi is only opening during the busiest times of the day. It is from 8am until 8pm from Monday to Saturday and from 10 am until 4pm on Sunday. This approach can save staff costs and power costs.
4.3 Total quality management
Aldi train their staffs to take a variety of different jobs. Employees can undertake whatever tasks that their need to do. Aldi’s staffs are paid high salaries within UK supermarket. Aldi Service Assistants are paid £9.2 per hours. It is higher than Tesco’s Service Assistants who are paid £6.88 per hours (PayScale, 2014) and Asda’s Service Assistant who are paid £6.75 per hours (Glassdoor, 2014). All of them motivate their staff more responsibility
5. Aldi’s success
Aldi’s approach is cost leadership strategy. They have clear aim which is providing good production and service with lower price. Aldi achieves this aim by its lean production and core values. So Aldi can increase its sales rapidly in UK and compete with other big supermarkets.
5.1 Rational goal model
The rational goal model is best one to stand for Aldi’s approach. Firstly, Aldi’s managers try to maximum their productivity. They train their employees who enable to do a number of different roles around Aldi. So, Aldi need fewer staff in their store and reduce their wages cost. It means Aldi use less resource to increase their output. Secondly, Aldi’s goal is clear and direction. They are simplicity, consistency and responsibility. Their stores are similarly designed and smaller than traditional large supermarket. Their quality are consistent .They also eliminates unnecessary costs come from rent, wedges and advertising. All of their doing is responsible to their consumers. They offer the lowest possible price with the best quality productions. The goal of Aldi is to save cost and pass on to their customers in the lower price production. The rational goal model is that adopt clear goal to create their production. It is best suitable to represent Aldi’s approach.
5.2 Aldi’s culture support its strategies
The culture of Aldi is gives people a very real sense of satisfaction, self-confidence and pride in what they do (Aldi, 2010). There are some area which is help create Aldi’s culture: lack of bureaucracy , operation simple and work hard , ownership and commitment make their working satisfying and high levels of responsibility. First of all, lacking of bureaucracy means Aldi only need fewer senior officers in their administrative system. It is not only efficiency and flexibility, but also save their costs of wedge. They can concentrate to their customer.
Furthermore, the total quality management is used by Aldi’s managers and their operation is uncomplex. Therefore everyone of their employee undertake multi-skilled and work hard for the company and customers. After this, Aldi’s staffs are enjoying to take ownership and commitment very seriously. Alxeandra Poorova (Aldi, 2010) who is store manager of Aldi said the job varies a lot and you had to be prepared for that when applied, but it is something that she truly enjoyed. Finally, Aldi’s employees are high levels of responsibility. They are paid more salary than other supermarket and there are no minimum-wage workers in Aldi. High wages motivate they work hard and be responsible. All of the factors achieve Aldi’s culture which helps to reduce cost and provide high quality products for their consumers.
Aldi eliminating waste and reducing costs and offers its customer with high level of quality products at lower prices. The fact that it is expanding rapidly in UK is shown how its strategies success under the support of its culture. However, in long term prospect of Aldi, there is a lot of real challenge in UK. The UK economic is recovering and disposable income is increasing. People will care about the quality more than the price. Aldi will lose their strength after economic is recovery. Aldi have to prepare well for future. They should keep their brand stand in good quality with lower prices. Also they need to promote luxury to target other consumer group.
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