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Aldi was a hard discounter based in Germany which sells a variety of private-label groceries and household items in several stores. It was the world's 8th largest retailer. In 2013, Aldi initiated moving fast with its US expansion. While it has more than a thousand stores in various states, Aldi was still not popular in the US. It is said to be the same reason why Walmart did not make it in Germany. Since the US is Walmart's home market, could Aldi make it through the competition with Walmart in the US?
Eric Van Den Steen; David Lane
Harvard Business Review (714474-PDF-ENG)
February 07, 2014
Case questions answered:
Case study questions answered in the first solution:
- Please identify the strategic issues and problems to be solved, describe the necessary analyses and conclusions, and present recommendations and implications. Do whatever analysis is needed to solve the problem you have identified.
Case study questions answered in the second solution:
- What are the key business problems Aldi is facing competing in the USA?
- Who are the key stakeholders in these problems?
- What is Aldi’s business-level strategy and what are the activities that support this strategy?
- How well is the company performing, particularly in terms of efficiency and profitability?
- Does Aldi have a source of competitive advantage relative to Walmart?
- Identify three solutions Aldi can use to address the business problems it faces, with the pros and cons of each solution.
- Which solution do you recommend, and why?
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Aldi: The Dark Horse Discounter Case Answers
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EXECUTIVE SUMMARY – ALDI
An international brand with a rich history, Aldi is known for its low prices and no-frills grocery shopping experience. While Aldi has seen substantial success in European markets, they seem to have trouble integrating into the U.S. and understanding the ideologies of the American consumer. Aldi has developed a presence in the U.S., spreading over 32 states and 1200 stores. Despite this, they are still virtually unknown. Looking forward, Aldi wants to expand their organic food offerings and expand their presence in the U.S.
Some of the most notable threats in the grocery industry are Walmart and Target, incredibly large brands with immense customer loyalty that can leverage their size to negotiate low prices with suppliers. With trends in the U.S. constantly evolving, niche grocery stores focused on organic and health foods and wholesale stores are prominent competitors. A holistic analysis of the macro environment in the U.S. is necessary to understand trends and American consumer behavior. Discount retail is a very competitive industry to navigate, with revenues of the top ten retailers totaling over $1 trillion.
Aldi has unique, inimitable resources that can aid them in their mission, such as their unique staffing levels, low-cost structure, and private label products. With this advantage, Aldi needs to implement the right global expansion strategy to succeed in the U.S. Thus, creating the core question of what specific measures must Aldi take to differentiate itself in the market?
It is recommended that Aldi emphasize their customer retention efforts with a customer loyalty program, increase its presence in urban markets and adopt innovative technology such as self-checkout. These three strategic insights will help guide Aldi through a successful expansion in the United States.
Aldi has maintained a strong sense of industry leaders regarding discount grocers, attributing their success to their reputation as a frugal, consistent grocery shopping experience. The firm has stayed committed to its value of operational excellence, with an average number of 10 employees per store and its emphasis on private label products, which makes up approximately 95% of their product offerings.
Many international brands struggle with being cognizant of the local culture, often choosing the wrong global expansion strategy and ending with failure. We have seen this with Walmart and their entry into Germany. Exhibit A outlines the market conditions of the U.S., highlighting different trends and regulations that directly affect Aldi’s operations. It is crucial to assess all trends to be proactive in identifying opportunities and threats. Failing to take into account any of these factors can be detrimental to Aldi’s expansion. This analysis shows that the grocery industry in the U.S. is relatively stable, and with groceries being a necessity, the industry will still thrive through economic boom and bust cycles. The firms that can adapt to trends quickly are the ones that succeed. One prevalent trend is that of online ordering and self-checkout, feeding into the sensation of instant gratification that is common in the American consumer.
The scope of Aldi’s expansion efforts is incredibly ambitious, aiming to open 650 new stores by 2018. While they are trying to replicate initiates that have been successful overseas, such as their successful expansion into Australia with over 270 stores, Aldi needs to tailor their expansion efforts to the U.S.’ unique business environment. What specific measures can Aldi take to differentiate itself in the market?
Exhibit B addresses various parameters of the competitive structure Grocery industry and how they affect Aldi. There is a high barrier to entry due to the tremendous number of competitors and the high start-up costs associated with building an effective distribution network and establishing a brick-and-mortar store. With various big players already in the space, it is…
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