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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Strengths of Aldi include their low cost strategy that differentiates them from the competitors as well as selling top quality products. The low costs are due to low operating costs as ALDI has made deals with different suppliers, purchasing straight from the manufacturers, adding their own label to it, hence decreasing the ‘brand cost' of the products. For example, customers are purchasing Heinz ketchup, that produced in the same manufacturing plant but it just contains an ALDI label, which makes it cheaper to purchase but the quality stays the same. ALDI has a strong presence in Germany with over 2500 stores and their presence here in the U.S. keeps on growing. Another strength is that there is only four employee roles in ALDI. These positions include store manager, assistant store manager, store assistant, and caretaker. This offers an advantage due to the fact that it is easier to delegate, train, and assign mandatory tasks for each staff member.

    Weaknesses of ALDI would be that they do not have a large set of staff in-store available to help the customers out if needed. This means that their in-store customer service isn't as high quality. Also, oftentimes people associate low prices to low quality and avoid going to stores like that. Aldi is still relatively small compared to other U.S. grocery chains. Lastly, one of Aldi's weaknesses is that it offer private label brands that can be easily overtaken by the success of established brands in the marketplace.

   ALDI has a large opportunity to spread in the U.S. Right now the company is located mainly on the East Coast side of the U.S. but a lot of opportunities arise in the middle states like Wyoming and Kansas where incomes aren't as high so people have incentives to switch from store to store looking for the cheapest price. ALDI has an opportunity to invest in advertising and promotion, that will spread brand awareness throughout the U.S.

   Aldi's biggest threat is the competition in the U.S. That competition includes Walmart and Costco who have already established a strong customer base in the country. Walmart also has a low pricing strategy, which is why Aldi needs to try and focus on advertising more in the American market. Another competition is E-retail, whose popularity increases each year. Currently, e-commerce makes up 12.7% of total retail sales and this number keeps on increasing each year. Especially now, that Amazon took over Whole Foods, the supermarket industry is waiting to see, how they re-strategize their place in the marketplace and how they dominate globally.

Portfolio analysis

    Aldi would be considered a question mark in the BCG matrix, because it has a low relative market share in the U.S. industry, a high growth rate and a medium revenue stream. The question mark has to make the strategic decisions to become a star in the marketplace with a high market share of the industry. Walmart is Aldi's main competitor at the moment and has the highest market share of the industry.

    Market penetration is a growth strategy where a business focuses on selling existing products in an existing market. One of Aldi's main objectives in this is to increase its market share of current products by having competitive pricing strategies, having prices extremely low and below competitors'. This kind of strategy is a lot about doing business the way it's been done for a while, and focusing on products that the business knows well. In this growth strategy, good information on competitors and customer needs is needed and should be kept up-to-date.

Trading area analysis

   Aldi wants its trade area to be very dense within the first 3 miles from the store. This means that according to the segments of the trading area, the customers within the the inner circle should be located relatively close by. Due to the fact that ALDI is a grocery store as well as a convenient supply super market, they want their products to be as fresh as possible to ensure quality. They want to be conveniently located to their customers, as brand loyalty is not a factor that will drive customers from a distance.

Site selection

    Aldi has a certain lot layout criteria, that they are using to pick a site. They want the size of the store to be plus/minus 70,000 square feet with at least 85 parking spots available. They want to site to be located in a community or regional shopping district with an easy access to population and they want to daily traffic count to be at least 20,000 vehicles a day. This type of location is easily available in suburban shopping mall areas, especially in the states where population isn't as dense and a space as big as that can be utilized.

Retail organization

    Aldi uses a geographic organizational chart where jobs are classified according to spread of the organization in several cities or states. This way an employee can be assigned a job that is relatively close to their home. That employee or store manager is then aware of the locality preferences and purchasing behavior. Aldi has a set of district managers that control a district and then a store manager for each store location set up according to each geographical location. Because Aldi doesn't offer much of apparel or items besides food products, separate managers for each product category isn't necessary. This is also a factor that enables Aldi to keep their costs low.

Human resource management

   Aldi's human resource management focuses on delivering an industry-leading training package. Superior human resource management in retailing requires that a firm hire and train good employees but the firm must also keep them motivated (Berman). People that are hired are highly motivated and recruited based on motivation and skill. One of the things to consider is that there are a rather small amount of workers at each location, which means that the human resource department can be picky and pick the best of the best. In terms of career progression, there is opportunities of internal promotion that give incentives to work hard in the workplace. That being said, Aldi's focuses on long-term or intermediate employees who are committed to the goals of the organization. A unique aspect about Aldi is that it doesn't have marketing, human resources, information systems or a public relations department, so each individual task is dealt through each separate district and store location. This first of all, keeps the costs low, but also provides an undivided

Strategic capability

First, Aldi successfully saves the cost of hiring employees. In each grocery store, Aldi only employs less than six employees to work per day. Although few people work for Aldi, services for customers have never been more delayed, for example, if there is a long line waiting for checking out, a special ring is used to call other colleagues to open the other line. Making the productivity higher and shifts going smoothly.

Furthermore, Aldi efficiently saves the cost of building up stores. Kumar (2006) states that “Another efficiency stems from the fact that Aldi sets up outlets on side streets in downtown areas and in suburbs, where real estate is relatively inexpensive. Since it uses small spaces, the company's start-up costs are low, which enables it to blanket markets: Aldi now owns 4,100 stores in Germany and 7,500 worldwide”.

Aldi also presents other strategic capabilities which help it to successfully reach its goal. According to Kumar (2006), “Aldi's stores display products on pallets rather than shelves in order to cut restocking time and save money”. In addition, consumers need to bring their bags or purchase bags while they are shopping in Aldi's shops (Kumar, 2006).

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