ALDI Strategy – Case Study
ALDI Strategy – Case Study. Business enterprises employ various initiatives to maximize returns and achieve competitive advantage over competitors in their respective industries (Kefalas, 1981). On this note, ALDI Australia has adopted unique strategic management principles that have helped it to gain and maintain competitiveness amidst various challenges faced in the industry. This paper briefly examines the concepts of strategic management and strategic competitiveness of ALDA Australia. Further, it explores ALDI’s external and internal environments and the Business Level Strategy (BLS). Finally, a conclusion and several recommendations for the current strategies of this company are made.
Strategic management and strategic competitiveness
Strategic management refers to a coordinated and integrated set of actions and commitments by an organization’s leadership designed to steer the organization to maximize returns and gain a competitive advantage over competitors (Rogers & Caswell, 1988). On the other hand, strategic competitiveness describes a situation where an enterprise successfully develops and implements a value-adding strategy (Hitt et al., 1994). As – noted, the level of competitive rivalry in the Australian food and grocery industry is high due to the high similarity in the products offered by different prayers. However, different retailers have developed different strategies to gain a competitive edge in the market while others compete along similar dimensions. For instance, Woolworths, IGAall, and Coles-Myer focus on product and market differentiation strategies. ALDI’s strategy involves offering high-quality products at lower prices than competitors (Kleeman, 2012).
According to Porter (as cited in Kourteli, 2005), the purpose of external analysis of a firm’s structure is to understand the effectiveness of its sources of competitive advantage. This analysis is based on Porter’s five forces Model. As mentioned earlier, the level of competitive rivalry in the Australian food and grocery industry is high as numerous global and local retailers offer similar products and services to those that ALDI provides. The bargaining power of customers for ALDI can be said to be moderate. Buyers can switch from one retailer to another due to close similarities of products offered by different retailers (Kleeman, 2012). However, they are price sensitive, which is an added advantage to ALDI since the buyers know that this enterprise offers quality and cheaper goods.
The bargaining power of suppliers for ALDI is low since numerous suppliers are offering similar products. ALDI has different options and goes for suppliers with the lowest prices. However, ALDI Australia currently sources its products from local suppliers, which are more expensive than imported products. Consumers’ lack of strong preference for specific brands makes it easy for new entrants to survive in the industry (Kleeman, 2012). According to Cardwell (2008), this threat is heightened because it is easy for a competitor to copy another competitor’s strategies and implement them in the market. The threat of substitutes in his industry is considerably high due to the high level of similarity of products offered by different competitors. Consumers can easily switch from one retailer to another.
According to Chen, and Mohamed (2008), the strength of the internal environment of an enterprise is determined by the effectiveness of its current strategies and how well resources are mobilized in support of the strategies. ALDI has adopted a simple and less complicated organizational structure, contributing effectively to cost savings. The company focuses on core operations only in profitable locations and limits the number of personnel in each store, and their store layouts are designed. They adhere to restricted opening and closing hours (Haberer, 2010). This enables the enterprise to offer high-quality products at low costs. The enterprise produces its products and brands, giving it high control over them. This organization has also listed all of its products and their prices online (Kleeman, 2012). This has made it easy for consumers to gain helpful information about the firm. However, relying on a small number of trained workers can be considered a weakness. Also, the limited range of products offered by the enterprise can be deemed a weakness since it limits consumer choices (Haberer, 2010).
BLS refers to an enterprise’s actions to satisfy customers’ needs and, hence, achieve a competitive advantage in the future. Hua et al. (2011) explain that “a business enterprise can benefit from BSL by exploiting core competencies in specific, individual product or service markets.” ALDI’s BLS focuses on offering its customers quality products at lower costs. This is achieved through adopting an organizational structure that minimizes costs. They can also conduct quality control of their products due to the narrow range of product categories (Haberer, 2010). This strategy can be considered a sustainable source of competitive advantage for this enterprise.
Recommendations and Conclusion
Based on the above analysis, various recommendations can be made. First, ALDI needs to focus more on product diversification to add more customer choices. Secondly, it should focus on expanding its operations within Australia through a store rollout program. This company should also maintain its strategy that focuses on offering high-quality products at lower prices. Another suggestion is to increase the percentage of imported supplies and raise profits. This firm needs to catch up with the developing technology by developing an online system with a platform for transactions and delivery.
In conclusion, this paper has addressed the current strategies adopted by ALDI. The paper has examined the competitive position of ALDI, internal and external environments, and its business-level strategies. As noted in the paper, ALDI must reconsider its strategies and consider the above recommendations to gain and maintain a competitive edge over competitors in the long run.
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