Customer Marketing Assignment: Aldi Supermarkets


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This is an assignment produced by a student at the University of East Anglia National Skills Academy, Norfolk, UK. It focuses on the discount supermarket retailer, Aldi, and looks at ways in which the supermarket could increase their market share by a range of innovative marketing tools and strategies Aldi could adopt as part of their long-term customer-related marketing strategy. Complete with SWOT Analysis and reference list.

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Customer Marketing Assignment: Aldi Supermarkets

  1. 1. Aldi Supermarkets Marketing Report 1
  2. 2. Contents Contents and Appendix 2 Executive Summary 3 Audit and explanation of the business and its current customer related marketing strategy. 5 The Four P’s 5 Identifying and recommending new marketing objectives 8 Corporate and Social Responsibility Initiatives 9 Recommending new marketing objectives 10 The Marketing of Halal in the United Kingdom 11 Recommending new marketing objectives 12 Company Rebranding Initiative 12 Recommending new marketing objectives 13 Conclusion 14 SWOT Analysis 16 References 21 Insert 1.0: Marketing and Selling Models 28 Insert 1.1: Needle. D Model 29 Insert 1.2: New Organisational Structure 30 Insert 1.3: Porters Five Forces Model (1980) 31 Insert 1.4: Porters Generic Forces Model 32 Insert 1.5: Ansoff’s Matrix 33 Insert 1.6: Twelve-Month Marketing Plan: Gantt Chart 34 Notes to the Examiner:  All additional information is stored in the Appendix  The word count excludes the following: I. All references and bibliographies II. All references to diagrams and tables. III. All content within tables IV. Labels and titles of tables and diagrams V. The Learning Outcomes as Titles VI. The Contents Page VII. All content on page 2, 3 & 4  All Harvard referencing in this assignment is from the formatting illustrated in the Anglia Ruskin University document.  I would like all ‘Inserts’, which have been placed within the main assignment to be included in the marking scheme if possible. 2
  3. 3. Executive Summary The UK grocery industry is so large, with the demand of food retail goods being so sensitive to cross-price elasticity that retailers are constantly striving to explore new and innovative methods to which they can achieve differential advantage over their discounter retail competitors. (Mitchell & Kiral, 1998) This report will provide recommendations on how Aldi can achieve this by diversifying into new markets as well as retaining loyalty with their existing customer base. Scope: In recent months the retailer is looking to enhance its image and perception by developing a stronger focus on quality of its products, as well as its additional in-store services. (Aldi, 2009) Furthermore, Aldi has expansion plans in opening new stores in higher, more upmarket locations and to expand its product ranges to attract a higher-earning clientele (Aldi, 2009). This innovation is supported by Harvey, (2000, pp. 17) who suggests that, being in a society housing a wide spectrum of income levels, retailers can bring together high- income and low-income market segments and therefore, can integrate separate ‘segments of consumer demand’ and forming an internal niche market, whom they can both target with higher (or branded) and lower priced items (or own-branded items). This report will analyse their current position within the market in relation to their competitors, and to conduct a twelve-month marketing plan in order to achieve new marketing objectives. This will revolve around attracting a new, higher-earning clientele segment, and therefore, achieving growth to their market share. Aldi supermarkets are a private company and so the main driver will be financial gain. However, in order to achieve this, the report will look at the discount market sector in the UK as a whole, and look at the physiographic aspects of Aldi’s current customer base, their competition and conduct a SWOT analysis in order to derive the retailers core competencies and to look at new opportunities for ways in which to exploit these competences and looking at how Aldi could turn weakness and threats into opportunities and strengths. Furthermore, the report will also focus on potential asset-lead and market-lead strategies in order to build upon and to communicate their core competencies through innovative marketing techniques, and, in turn, to achieve higher customer loyalty. There are two dimensions to the discount retailer market, and these are hard and soft discount retailing, where the latter’s characteristics focus on the breath and choice of product, which is categorized as less than 1,000 SKU’s, its positions in 3
  4. 4. terms of cost are lower than the soft retailers, and exclusive private labels exceed 90% of the retailer product portfolio (Colla, 1997; Colla and Dupuis, 1997). Limitations: there are some limitations at the time of writing this assignment, where is was proven difficult to obtain primary sources of data from the company itself as Aldi were very reluctant to disclose their future marketing strategies Findings:. The supermarket holds the strongest position financially in the grocery discount sector, retailing both food and on-food products. Their business model allows them to be able to sell their products to up to 30% cheaper than the major UK retailers (Tesco, Morrisons, Asda & Sainsburys), through economies of scale (Sloman, 2008), targeting to a clearly defined market segment who have a larger concern about price, than the quality of the product itself. The retailer has a key advantage over their competitors in terms of being able achieve international presence through standardised purchasing of as little as one line per item, which isn’t tailored to geographical location. (Colla, 2003). Moreover, Aldi have also diversified into the holiday sector with the aim of providing ‘cash- strapped’ shoppers with weekend city breaks to European destinations for a fraction of their competitor’s ‘high-street’ prices. They have been able to sell this service at significantly lower prices through the use of the same business model they use when purchasing their core product: purchasing large ‘quantities’ of holiday service provisions, thus again, achieving economies of scale, and passing their savings onto their customers (Aldi, 2009). Own labelled products have a higher profit margin compared to branded items, as they have the costs of national advertising added into the wholesale price (Colla, 2003). Their travel agent is the With this limited assortment, second largest agency in Switzerland (BBC News, Aldi, they can achieve substantial globalisation and higher 2009). Aldi are a limited line grocery discounter housing reductions in international purchasing costs as well approximately 1,000 lines which are tightly controlled, and the good majority of them being own-branded (Wood & Pierson, 2006). However, a study carried out by Strategic Retailing Associates (1990), found that 64% of a survey sample said that customers shopped elsewhere for branded items ‘which were apparently missed by most customers’. Bellizzi 4
  5. 5. et al (1981) Cunningham et al (1982) and Hawes et al (1982) state that ‘Several studies have found that consumers perceive national brands to be superior to store brands and to generic grocery items on attributes, such as overall quality, taste, aroma, and reliability’, However, Store brands do provide a platform for retailers to allow them to improve margins (Ailawadi, 2001). This is certainly a strength or Aldi who can attain cost leadership status (‘Cost Leadership’ Segment: Porters Generic Forces: Insert 1.4) An audit and explanation of the business and its current customer related marketing strategy. Audit and explanation of the Business The Company Aldi is a well known supermarket discounter brand, is the 9th largest grocery retailer in Europe by sales volume and currently holds 1% of the UK market share (TNS Global, 2009). This has been achieved by their simple business model: reducing company operational expenditure: this means purchasing only one line per item from the supplier, thus limiting choice for the consumer however, their transportation costs are kept to a minimum by delivering their stock straight from the warehouse to the store being merchandised on the pallets they arrived in. With this limited assortment, they can achieve substantial globalisation and higher reductions in international purchasing costs (Colla, 2003). Also, their basic store architectural and interior designs involve using inexpensive signage and employing a ‘no frills’ design (Aldi, 2009). They stock mostly non-branded ranges which are seen as the key differentiator between competitors (Burt & Sparkes, 2003). The Current customer related Marketing Strategy Aldi are focused to targeting a specific audience where customers are more concerned about the price of the product than the quality product itself. They have achieved this by developing an understanding that customers will chose carefully before they decide to purchase a product or use a service (Dibb, 2001). Product 5
  6. 6. The product ranges Aldi mainly specialise in are their own-branded labels, which are cheaper than branded label because Aldi control their costs and production process. Aldi also stock non-food items such as toilets, scuba diving equipment and musical instruments.  The Core Product: this is the perceived core benefit or service. The core product in this case is to be able to make use of a service which sells convenience goods (Dibb, 2001)  The Actual Product: concerns the additional features of that product or service, such as durability, branding, packaging and design (Dibb, 201)  Augmented Product: these concern aspects of the product such as customer service, warranty, delivery and credit. In the case of Aldi, warranty may only apply to non-food items, where as with customer service, customer care extend to their food items as well (Dibb, 2001). Price The process of distribution reflects the retailers pricing strategy used for being able to sell their products at a lower price, and this comes back to their business model. The retailer, using its high bargaining power over their suppliers, can buy large quantities of stock to service all their stores across the country. This then leads to Aldi achieving economies of scale and potential Cost Leadership status (See Porters Generic Forces: Insert 1.4). Another aid to the retailer keeping prices low their purchasing of one item per line, limiting the amount of choice for the customer. Aldi say that their prices are up to 30% lower and use a combination of pricing strategies such as market penetrating pricing, physiological pricing and promotional pricing. Place The ‘place’ component of the marketing mix concerns the physical location as well as distribution channels, communication channels and opening hours. Aldi has a physical presence in communities around the UK as well as Europe in the form of their stores as physical buildings. However, the retailer also has an online presence in the form of a 6
  7. 7. marketing channel, where customers can find their nearest store, find recopies, and obtain information on products, services and contact details. Packaging Aldi use their own packaging, as the bulk of their products are packed exclusively for the retailer. The packaging used at Aldi is similar to the packaging used on branded items (Wood & Person, 2006). Own packaged products accounts for 70% of their portfolio and is seen as a key component for retail differentiation (Hogarth-Scott & Rice: 1994) People Operational staff performs the tasks as well as sell the product. This is why employee selection, training and development are crucial aspects to give the perception that customers are in the hands of professionals who are friendly, helpful and efficient. The people act as evidence of a service being present; as the service itself is intangible (it isn’t a physical object) and play the crucial role of being the ’face’ of the business and have the power to build up a relationship with that customer or break it down. However, it isn’t just the people at the customer-interface end; there are a range of parties all of whom work towards the one aim of providing a shopping experience, and balancing this with keeping their costs down and at the same time achieving financial gain. Supermarkets have the simple task of buying things and selling them. And it is the retailers job to ensure that quality and safety are maintained in all food products and ensuring that their customers are satisfied with their purchases. This will happen through market research and may stem from innovative new products or revamping old ones to stimulate demand (Sloman, 2008). It is the process in between the buying and the selling, which is where the bulk of the people are situated such as buyers, distributers, packers, manufacturers and merchandisers. Moreover, once the product has been purchased, there are also after sales services in the form of customer service operators, which again are evidence of a service, present (Dibb 2001). Physical evidence/ambience This concerns the environment: the layout, decor and lighting, with the ambience, or feel of the store are very much a part of the product offer (Dibb, 2008). Aldi employs a ‘no frills’ 7
  8. 8. concept with regards to the interior designing of all their stores. As part of their strategy to keep their operational costs down, this is extended to their signage they use for product location and for advertising (Aldi, 2009). Process The main focus is to deliver products to customers at lower prices, which is achieved through their business model of purchasing higher volumes of product with no manufactures brand name nor intellectual property physically present on any packaging. Moreover, these producers do not pay for the communications or the marketing of their products and are able to reduce their manufacturing overheads. They can operate on margins which are lower than those of branded manufactures due to their intensive unitisation of production equipment. This is offset by their higher investment turnover both with the manufacturer and Aldi, which keeps both their profitability satisfactory (Colla, 2003). Furthermore, with the balance of power tilted towards the retailer, they determine their product ranges and are able to quickly and cheaply switch suppliers based on the criterion set by Aldi (Sloman, 2008: Colla, 2003). Through vertical integration they can eliminate additional costs associated with dealing with external suppliers and producers and also erect barriers to entry for competitors (Sloman, 2008) (See Porters Five Forced Model: Insert 1.3). Logistics has become a key element in ensuring food quality both within fresh and chilled product ranges (Harvey, 2000). Another customer-focused operation is their stores only being open during peak trading hours, therefore, costs saved are saved. Each region consists of up to 55 stores and a warehouse which aids fresh distribution of their products (Aldi, 2009). Identifying and recommending new marketing objectives. Summary Harvey (2000) suggests that competition is not to be judged in terms of price and cost but by the ability for a firm’s capacity to innovate over time, thus leading to higher, long-term gains in quality, price and convenience. 8
  9. 9. Corporate and Social Responsibility Initiative Jones and Comfort (2006) state that healthy eating has The bus ness case for CSR is seen to focus on a wide range of potential assumed an increasing importance on the political agenda benefits. These include improved financial performance, reduced within the UK; the Government sees the food industry as operating costs, long-term sustainability for companies and their employees, having a corporate and social responsibility to promote Increased staff commitment and involvement, long term return on healthy eating. Organisations in general play an investments, enhancedhas assumed an ....healthy eating capacity to innovate, increasing importance on the good relations with increasingly important role in the lives of society, government and communities, better risk andpolitical agenda within the UK crisis management, (Mullins, 2007). Lambin (1997) proposed that ‘In recent enhanced brand value and reputation and the development of closer links with customers and greater years, there has been increased pressure on many awareness of their needs. Commercially and academically companies to acknowledge their responsibility to society, these last two claimed benefits are clearly rooted in marketing and there and act in a way which benefits society overall’ The is a growing, but still relatively undeveloped literature on the links Department of Health (2004) states that the food industry between marketing and CSR. (Jones and Comfort, 2005) has a major impact on what people eat and that 9 out of ten people buy their food at a supermarket versus independent shops. What constitutes as ‘healthy eating’ are based on personal beliefs, cultures, aspirations and advances in healthy eating ‘practices’ which are constantly evolving with advances in scientific research (Jones & Comfort: 2006). Although many Britons are attempting to switch to healthier lifestyles and therefore, change their buying habits, there is also a strong counterbalance in the upward surge in convenience foods. (Key Note Ltd: 2007). Corporate and Social Responsibility, according to Mullins (2007) is: ‘The comprehensive approach organisations take to meet or exceed the expectations of stakeholders beyond such measures as revenue, profit and legal obligations. It covers community, investment, human rights and employee relations, environmental practices and ethical conduct’ (Mullins, 2007) It has been argued by experts that many neighbourhoods have poor access to shops who sell quality and ‘wholesome’ foods at competitive prices (Jones & Comfort, 2006). Riches (1997) states that there is evidence to suggest that low income families find it difficult to maintain a 9
  10. 10. Riches (1997) states that there is evidence to suggest that low income balanced diet, partly due to the lack of money to purchase families find it difficult to maintain a balanced diet party due to the lack of healthy foods. The Department of Health (2005) states that money to purchase healthy foods.... obesity is becoming increasingly the norm amongst children, who consume too much saturated fats and sugar’s and too few portions of fruit and vegetables. Another factor that has been sought as a political trend is that both manufacturer and retailer introducing less salt and sugar in their food products whilst others have taken further steps to highlight the healthy qualities of their brands (Key Note Ltd, 2007 pp. 56). Retailers who have launched aims of improving health via healthy eating initiatives have earned the reputation in the past, from stakeholder parties, as being socially responsible (Piacentini, MacFadyen & Eadie, 2000, pp. 462). Therefore, the key is corporate communications in marketing: this is highlighted by the numerous examples of companies who have sound socially responsible practices; however, they do not have that reputation they should have. It appears that some companies are not communicating enough to the public about their CSR Strategies (Wilkinson and Balmer, 1996). Further reading supports this with studies carried out by Waddock and Graves (1997), who revealed that social performance, leads to financial performance, however, it was Balabanis et al (1998) who suggested that disclosure of such CSR activities was key to the social performance-financial performance correlation. According to Ansoffs Matrix, this is an existing market with existing products which have been revamped to enhance health standards, therefore, is a low risk strategy (See Ansoff’s Matrix (Insert 1.5)). The marketing and Product Stewardship selling process to stakeholders can also be seen in Understanding, controlling, and the Marketing and Selling Models (Insert 1.0) from communicating a product’s environmental, health, and safety related effects throughout Dibb (2001). its life cycle, from production (or extraction) to final disposal or reuse (BizEd, 2009) Recommending new marketing objectives Aldi forms a strategic alliance with the Department of Health, (which can be identified as a stakeholder) both acting in the interests of the community’s health, well-being and balanced lifestyles by promoting foods and beverages which are linked to healthy eating (‘Differentiation’ Segment: Porters Generic Forces: Insert 1.4). This would be extremely time consuming 10
  11. 11. and costly to imitate for competitors to achieve (See Porters Five Forces: Insert 1.3) As the retailer is working closely with the Department of Health, Aldi can change their marketing strategies as new scientific advances are made through research and development. Aldi will need to work with their suppliers, producers and manufactures in producing nutritious foods which provide a better quality of life to all their customers and not just to the customers who can afford to purchase such foods. The retailer will continue to use own-labelled goods as these provide a better margin in their pricing, compared to branded items, which include the cost of national advertising (Kent, 2003). Methods in which to communicate this marketing imitative to their customers are through in-store advertising, through company annual reports, extensive television advertising, incorporating the new branding scheme, and full page adverts in national newspapers, all advertising medias of which have been used extensively in the past. In order for the CSR strategy to remain relevant and effective, the retailer needs to constantly engage with their stakeholders and managing conflicts of interest. Firms who focus on moral and social issues can adopt a ‘first mover’ advantage by prompt response to stakeholder concerns (Schlegelmilch, 1998; Pratley, 1995; Laczniak and Murphy, 1993). The Marketing and Retailing of Halal Meat (HM) in the UK There has been a rapid growth in the UK in shops and business catering to the Muslim community (who can be identified as another stakeholder) by offering products and services which are produced, or to be used/consumed according to the Muslim faith (for instance, HSBC PLC retail banking offers an Anamah/Shariah Current Account, aimed at providing financial services to meet the needs of the Muslim Community) (HSBC Plc, 2009). The increasing Muslim population across Europe and the UK and has encouraged many businesses, and certainly retailers, to invest in this growing market (Ahmed, 2008) (‘Focus’ Segment: Porters Generic Forces: Insert 1.4). The Muslim population in the UK is 5% but consumes 20% of the meat sourced in the UK (UK Government Statistics, 2006: Scottish Executive, 2006: NISRA, 2006, BBC, 2005). Jackson (2001) states that farmers are also being urged to diversity into the HM market. However, the Muslim Council has warned that 90% of meat labelled as Halal 11
  12. 12. has been sold illegally, with the animal not being slaughtered to the Muslim Faith and is the third largest illegal trade in the UK (Pointing & Tienaz, 2004). This violates beliefs, abuses trust, is a serious concern to public important contribution health and exerts cruelty to animals (Ahmed, 2008). Therefore, to store image are elements systems which provide tractability to confirm the authenticity of such as decorative features, colours displays stimulations meat sold in Aldi, from source to store, will need to be of senses such as smells... implemented at the customer inter-face level. The National Halal Foods Group are the main regulators for Halal based products and currently operates 10 Halal butchery outlets in Asda and two outlets in Tesco (Gale Cengage Learning, 2009) Recommending new marketing objectives Again, Aldi forms a strategic alliance with the National Halal Foods Group and the Muslim Councils in order to provide certification to the core product and to regulate and integrate ‘traceability to source’ practices of all products through product stewardship methods. This means that Aldi will be able to develop trust and loyalty between the Muslim communities. Stores can either house a separate Halal butcher in-store where fresh cuts of meat can be prepared: in this instance extensive training will need to be carried out with qualified Halal butchers, or Aldi could sell pre-pack portions of Halal meat in store. This will depend on where each store in located in relation to Muslims communities and so sufficient demand can be fulfilled. This can be seen as a high risk strategy according to Ansoff’s matrix because it is a new market to Aldi, promoting new products (See Ansoff’s Matrix (Insert 1.5)) Company Rebranding Initiative A positive and successful brand is defined as a name or symbol, or a combination of the two. It identifies a product or service of an organisation as having a sustainable differential advantage (Schmidtt, 1999a) At present, all Aldi stores employ a ‘no frills’ design in terms of their signage, interior design and in-store advertising with little in-store branding (BBC News, Aldi. 2009). However, today, customers are increasingly aiming to seek an experience which goes beyond the product variety and pricing strategies, there are further attributes which create a store image and important contributions are elements such as decorative features, colours displays stimulations of senses such as smells 12
  13. 13. (Bitner, 1990: Sivadas & Baker-Prewitt, 2000). Babin & Darden (1996) state that, by habit, the shopper’s perception on quality of the products can be linked to the atmosphere (patronage) of the store itself (Darley & Jen-Su, 1993: Jacoby & Mazursky, 1985: Arnold et al. 1983: Craig et al, 1984: Koelemeijer and Oppewal, 1999; Louviere & Gaeth, 1987). Further reading suggests that, according to Lingquist (1974), Marks (1976) and James et al (1976), store image construction and features have made its way into retail and marketing literature for over three decades. The key element Aldi must address is to tackle their current perception of the public that the retailer is downmarket (Verdict, 2009). Morrisons Supermarkets have achieved this on a large scale in rebranding the company through ‘refreshening’ their brand and revamping store interior design to give their customers a modern shopping experience through their Optimisation Plan. Furthermore all of their staff were fitted with new uniforms which carried their new brand, alongside their new own- labelled packaging and in-store signage (Morrisons Supermarkets, 2009). Recommending new marketing objectives Rebranding the company will provide a ‘fresh and invigorating’ feel to the business. Rebranding their stores with a new logo and signage will give their customers a new shopping experience. Because Aldi is a multi-national retailer, in-store food signage is of a simple design consisting of the new logo and an illustration of the food item which the sign is designating within the store. Not only will this ‘imprint’ the new logo into customer’s minds, but it will also eliminate the issue of multi-language signage having to be produced over different countries. Providing a detailed marketing plan for the business to undertake, for the next 12 months, to achieve the set customer related objectives. (See Insert 1.6) 13
  14. 14. Conclusion Incorporating all the CSR imitative, illustrated in this report, the retailer will form a mission statement to further develop trust and loyalty from their customers and to be advertised in all company literature (i.e. annual reports) in-store advertising, television advertising and on all own-labelled packaging. It will illustrate the following: ‘Whilst enjoying a quality, a mouth-watering and delicious product with a tailored in-store service to match, Aldi Supermarkets aims to work closely with the Department of Health and the British Nutrition Foundation (BNF) to become the leading providers of quality and wholesome foods to you, your families, and for all our communities, every day, at prices everyone will love, throughout the year!’ Comparing all these factors to the four major retailers in the UK we can see there is a large contrast between the values and cultures between the two sectors. Firstly, whilst Aldi stock around 1,000 product lines in their stores, the majority of retailers (which have a combined market share of over 75%) have over 30,000 product lines. This gives the customer a wider choice when choosing a product, however, leading to their products being more expensive. They also focus heavily on store design and layout and have fresh food counters, providing their own in-store fishmongers, bakery, butchery and delicatessens, with their adverting budgets and strategies being on a much larger scale with a wider range of advertising media and an emphasis on all their staff being trained in fish, butchery and other trades. This is a result of these retailers investing heavily in training and development of all their staff, thus leading to higher investment costs. This is because retailers aim to enhance the overall product for their shoppers by selecting and investing in their employees to enhance job performance: they may have to perform certain tasks (i.e. preparing a food item to a customer’s request) as well as selling the product. Supermarkets have also, in recent years, diversified from grocery retailers and have gone further by expanding their product portfolio to sell intangible products and services. (I.e. Tesco’s now sell insurance, store credit, and launching their mobile phone network). Morrison’s also have pharmacies in some of their stores and most stores across the sector 14
  15. 15. have cafes too. However, a comparison that Aldi has with the four major retailers are that most of ‘majors’ have a value and own branded range alongside the branded ranges they stock, again offering the customer more choice, with their focus on product quality but helping their customers save money whilst doing so. They have adopted the Aldi marketing strategy where customers can pick up an own-branded (Morrison’s Value range) food item and saving money, but not compromising on the quality and health standards that product gives. 15
  16. 16. The SWOT Analysis Insert 1.7 Strengths Aldi is the leader in the discount grocery market sector and continues to hold this position today. This could be turned into an opportunity for exploit their market position and to build upon this advantage through innovative marketing and long-term strategies in order to position themselves for growth. During the recession the discounter has seen a surge of sales as people are switching retailer to take advantage of the better prices Aldi has t offer relative to the major retailers on the UK. Another core competency they have is being able to keep their retail prices low through a business model widely used in other discount supermarkets, through purchasing bulk and passing the savings onto those customers. These innovations have not only been introduced at the point of sales, which are easier to imitate by competitors, but through vertical integration, which is harder for competitor to imitate due to the barrier to entry being erected (Colla, 2003) and in with purchasing: this is tailored more closely to product line than to the size of the retailer itself (Colla, 2003). Another strength they have built upon was their diversification into the holiday market whereby Aldi now offers holidays as weekend breaks to certain destinations around Europe and has become the second largest travel agency in Switzerland. The hard discount retailer has had an enormous amount of experience in trading in territories outside its home country (Hogarth-Scott & Rice: 1994, pp 20), with help from own-label brand management and buyer-supplier relationship management and purchasing power as an asset-lead, core competence factor (Colla, 2003) and their business model consists of large purchasing of non-diversified and specialised product ranges. This is a leading characteristic if the hard discount retailer and this leads to Aldi being able to retail their own-branded portfolio at up to 30% less than the supermarket and hypermarket prices. With this limited assortment, they can achieve substantial globalisation and higher reductions 16
  17. 17. in international purchasing costs. Aldi is the leading discount retailer in terms of market share in Germany, its home country, but also the retailer has achieve aggressive internalisation with an equal amount of market share with their rate of expansion being higher in terms of number of stores within those penetrated countries than then penetration into new countries. This strength has been built upon, stemming from the fact that hard discounters are at a higher risk of penetrating into new countries due to their standardised and limited product range which isn’t tailored to local and cultural differences. Colla (2003) also goes on to say that the countries in which Aldi have penetrated present opportunities for higher purchasing power. UK supermarkets operate in a market which focuses on price choice, quality and convenience, which is a contrast to the discount retailers. However, because it could be argues that the superstore and the discount retailer (Aldi) are not in direct competition with one another, because of the diverse target markets they cater to, competition is only restricted to other discount retailers whose market shares will be similar (Harvey, 2000) Weaknesses The retailers opening hours and operational periods are somewhat different to those of their major rivals. The discount retailer does not open on Sundays or Bank Holidays and this could be an opportunity to look into. During these holidays people in certain industries are not likely to be working these days, therefore, they will with be at home, or visiting friends and relatives and so may visit a supermarket (preferably their nearest one) to either carry out their weekly shop or to go and purchase items such as presents and food or beverage gifts whilst travelling to visit friends of relatives. Colla (1997) states that ‘they are present in most countries, and with a larger proportion of their market share, and their rate of international expansion over the past few years has been higher in terms of number of stores than penetration into new countries’ This goes hand-in- hand with Colla (1997), further stating that ‘countries that are culturally different and geographically distant from Germany and where the risks for new players are higher - such 17
  18. 18. as South American and Asian countries - it is the discount retailers in the third group, benefiting from the experience of an already established strong international group, who remains favoured’ What Colla, 1997, is saying is that if Aldi want to expand into international territories further away from their home country, this could be detrimental to the business as their product range isn’t fluid to local buying habits. Aldi exclusively stock their own-branded items, which stemmed from their experience on brand-label management, but this has deterred customers from shopping at Aldi saying that prefer purchasing branded and well-known items they ‘know and love’. Opportunities With the ever-increasing Muslim population in the UK, many businesses are finding it financially beneficial to cater for this segment by provision of products and services. A large area which is being investigated is the marketing of Halal, a Muslim meat, in the UK. There are some controversies between parties between buying Halal from a national chain supermarket and saying loyal to their local butchers with the majority of the Muslin community saying that they would prefer to say at their local butcher because of the personal service they receive, as well as the provision of coffee and newspapers’ whilst waiting for their meat and provisions to be prepared. Aldi could incorporate at ‘Morrison’s approach’ and create a ‘Market Street’ approach whereby Muslim butchers could be produced in their stores in high Muslim populated communities, as well as trained Muslim butchers and implementing systems whereby both butcher and customer can track the source of the meat back to the slaughterhouse in order to confirm its authenticity through Product Stewardship means, as part of their Corporate and Social Responsibility initiatives. However, because the demographic population of the Muslim population varies by location, the most cost effective practice of implementing this strategy would be to only carry this out in stores which are situations in high Muslin populations and goes against the business model of high purchasing volumes and may not be able t achieve economies of scale and therefore being able to charge lower price if sufficient demand cannot be fulfilled. This will need further investigation. 18
  19. 19. A large political factor which has been the major influence of many retailer marketing strategies is the trend on the nation becomes more and more health conscious over the years. This could be due to more media coverage on diet and health issues as well as a Sky dedication a section to dieting and ‘looking good’. This, coupled with the governments intervention of tackling obesity in the UK (23% of people in the UK are classed as obese), could open a door of opportunity of incorporating a pledge of helping their customers stay healthy and life balanced lifestyles by communication the benefits of eating healthily with adapting the food in which they offer to recommended daily allowances on each item of food. Many major retailers have started doing this. Morrison’s have launched an ‘Eat Smart;’ range, whereby all food within this range have a reduce sale content. In addition, customer are becoming more concerned about what is in their foods in terms of nutrients and minerals, and so many retailer have launched simple labelling systems on all their packaging to tell customers what exactly is in their food. According to statistics, people on lower incomes find it difficult to purchase foods which sustain balanced lifestyles because of the higher prices of these foods that those which have fewer health benefits. The key here is for Aldi to help their customers save money and having access to health foods such as fresh fruit and vegetables. Because of the surging demand for healthier food over the years Aldi could benefit significantly from thus niche market by providing foods to improve the health of their customers as well as further aiding them to eat healthily through education and Corporate and Social Responsibility initiatives. Redeveloping their brand in terms of their logo would be a good way to re-establish itself in the market and to overcome that perception that Aldi is a ‘down-market’ supermarket. A brand is a way to communicate to its customers regarding what the organisation is all about and it is used to create an identity unique to the organisation relative to its competitors. Furthermore, a brand a create a perceptions in the mind of the customer as well as associations with that brand name in order to establish a more superior loyalty base. A new logo with green-shaded colours and its simple design could be perceived as the green for selling fresh, healthy, produce in a modern and professional shopping environment. For branded products Aldi could incorporate a brand strategy whereby the company name could be combined with the individual brand name: their product have their own branded names, 19
  20. 20. but also with the company logo alongside those brand names on the packaging of all their products as well as the blanket family name approach where Aldi just simple puts its corporate identity on all their products regardless whether they are branded or own labelled products. The reputation of the brand can be enhanced by selling the same brand and/or product if it different outlets and not just limited to lower purchasing costs (Colla, 2003) Threats Competition will always be a threat to any business. Especially where the grocery sector is grown so large over the years and has saturated almost every part of the country that retailer are finding it more and more difficult to differentiate themselves away from their competitors. In addition, because customers are comparing prices of the ‘shopping baskets’ with other retailers cross-price elasticity has become the forefront of price-setting. Further threats could be random shocks and events that may occur that could affect the crop or cattle yields, grocery inflation and commodity shortages, which will raise the price and therefore will raise the retail prices. This will especially be the case if the Pound in the foreign exchange market was falling in value and therefore would make imported goods cheaper to buy relative to domestically produce goods. Regarding the retailer moving into the holiday market, there will be a fell in the demand for domestic holidays in the Euro zone because of the weak pound in 2009, which may mean that people will be looking outside of Europe for their holiday. This could be turned into an opportunity in that, if Aldi do find that there is a large demand for holidays outside or Europe, the retailer could transfer all their efforts in promoting and selling holiday outside of Europe as a competitive strategy. Furthermore, international sourcing of food items could weaken profits if the British exchange rate falls against rates overseas. Aldi has little expertise in fresh produce is to its less diverse range. Fresh produce is predominately exploited by retailers belonging to groups with low foreign diversification and those who have highly diversified groups abroad. The threat here is that Aldi could lose out 20
  21. 21. on an independent market to their competitors. This especially would be the case if the retailer wishes to expand its market segmentation to include target markets with higher incomes. According to Harvey (2000) there is immense competition between branded manufacturers and non-branded manufacturers (own-labelled), stating that manufacturers of branded product have companied that the threat posed by own-label producers has dampened down their investment and innovation and have struggled to produce under the UK own-label or they risk losing shelf space to own-label manufacturers. Around 70% of the products Aldi sells are own-labelled products, therefore they could become the focus of public and trade cutinisation (Hogarth-Scott & Rice; 1994). References: please note that all referencing was carried out to the formatting in the Anglia Ruskin University ‘Library Guide to the Harvard Style of Referencing’ Available at: Jones. P & Comfort.D .,2006. Healthy Eating and the UK’s major food retailers: a case study into corporate and social responsibility. British Food Journal, [Online]. 108 (10). Available at: http:// [Accessed 26 November 2009] Key Note., 2007. Market Assessment 2007. Supermarket own Labels, [Online] (Issue Number and Date Unknown). Available at: [Accessed 24 November 2009] BBC News, 2008. Pinch helps discount supermarkets. BBC News, [Online] 20 November. Available at: [Accessed 22 September 2009] 21
  22. 22. Ahmed, A., 2008.British Food Journal. The Marketing of Halal Meat in the United Kingdom; Supermarkets versus Local Shops, [Online]., 110 (7), pp. 655-670. Available at: http://www.emraldinsight/com/0007-070X.htm/ [Accessed: 16 September 2009] Sandra Hogarth-Scott & Steven P. Rice., 1994. The International Journal of Retail and Distribution Management. The New Food Discounters: Are they a Threat to the Major Multiples?, [Online]., 22 (1), pp. 20-28. Available at: [Accessed 16 September 2009] Harvey, M., 2008. Supply Chain Management: An International Journal. Innovation and Competition in UK Supermarkets, [Online]., 5 (1), pp 15-21. Availbale at: [Accessed 16 September 2009] Wilkinson. A, and Balmer, J.M.T., 1996. Corporate and Generic identities: lessons from the co-operative bank. International Journal of Bank Marketing, 14 (4), pp. 22-35. Waddock, S. and Graves, S., 1997. The corporate social performance-financial performance link. Strategic Management Journal, 18 (4), pp. 303-19. Balabanis, G, Phillips, H.C. and Lyall, J., 1998. Corporate social responsibility and economic performance in the top British companies: are they linked? European Business Review, 98 (1), pp. 25-44. Schelgelmilch, D., 1998. Marketing Ethics. An international Perspective, Thopmson International Press, London. Laczniak, G.R. and Murphy, P.E., 1993. Ethical marketing decisions- the higher road, Allyn & Bacon, Boston, MA 22
  23. 23. Lambin, J.J., 1997. Strategic Marketing Management, [Online]., 28 (11), pp. 459-469 Available at: [Accessed 18 December 2009] Findlay, A. & Sparks, L., 2008. International Journal of Retail and Distribution Management. Switched: store switching behaviours, [Online]., 35 (5), pp. 375-386. Available at: http://www [Accessed 18 December 2009] Pointing, J and Tienaz, Y., 2004. Halal meat and food crime in the UK. Proceedings of International Halal Food Seminar, Islamic University of Malaysia, [Online] Available at:[ Accessed 30 April 2006] Arnold, D.A., Capella, L.M. and Smith, G.D., 1983. Strategic Retail Marketing Babin, B.J. and Darden, W.R., 1996. Good and Bad Shopping Vibes: spending and patronage satisfaction. Journal of Business Research, 35 (3), pp. 201-206. Craig, S., Ghosh, A., and McLafferty, S., 1984. Models of Retail Location Process: a review. Journal of Retailing, 60 (1), pp. 5-36. Darley, W.K. and Jen-Su, L., 1993. Store Choice for pre-owned behaviour. Journal of Business Research, 27 (1), pp. 17-31. Jacoby, J., and Mazursky, D., 1985. The impact of linking brand and retailer images on perceptions of quality, in Jaboby, J and Mazursky, D. (Eds). Perceived Quality: How Consumers Views New Stores and Merchandise, D.C. Heath and Company, Lexington, MA, pp. 155-159. 23
  24. 24. James, D.L., Durand, R.M. and Dreves, R.A., 1976. The use of multi-attributes model in a store image study. Journal of Retailing, 52, pp. 32-32. Koelemeijer, K and Oppewal, H., 1999. Assessing the effects of assortment and ambience: a choice experimental approach. Journal of Retailing, 75 (3), pp. 319-45. Lindquist, J.D., 1974. Meaning of image Q survey of empirical and hypothetical evidence. Journal of Retailing, 50 (4), pp. 29-38. Marks, R.B., 1976. Operationalising the concept of store image. Journal of Retailing, 52, pp. 25-48. Colle, E and Dupuis., 1997. Le defi mondial do bas prix. Publiunion, Paris. Burt, S and Sparks, L., 1994. Structural Change in Grocery Retailing: a discount reorientation. International Review of Retail Distribution and Consumer Research, 4 (2), pp. 195-217 Burt, S and Sparks, L.,1995. Understanding the arrival of limited line discount stores in Britain. European Management Journal, 31 (1), pp. 110-19. Mullins, L.,2007. Management and Organisational Behaviour. 8th ed. Harlow: Pearson Education Ltd. Colla, E., 2003. International Journal of Retail and Distribution Management. International expansion and strategies of discount grocery retailers: the winning models, [Online], 31 (1), pp 55-66. Available at [Accessed 16 September 2009] Aldi, 2009. Welcome to Aldi.[Online] Available at: [Accessed 02 December 2009] 24
  25. 25. HSBC Plc, 2009. Amanah Bank Account. [Online] Available at: bank-account;jsessionid=0000dyU90dTNy9lPgP1Z0hdeOgw:14f64qmvd [Accessed 17 December 2009] Muslim Council of Britain, 2002. Halal Meat. Muslim Council of Britain [Online], 17 December 2009. Available at [Accessed 18 January 2005] UK Government Statistics, 2006. Religious populations. UK Government Statistics [Online] 17 December 2009. Available at [Accessed 30 April 2006] BBC Online, 2006. Farmers urged to go Halal. BBC Online. [Online] 12 December 2009 Available at [Accessed 16 January 2005] Jackson, M.,2001. Demand for Halal. [Online] 12 December 2009. Available at [Accessed: 18 January 2005] Wood. L & Pierson. B., 2006. International Journal of Retail and Distribution Management. The brand description of Sainsbury and Aldi: price and quality positioning, [Online], 34 (12), pp 904-917. Available at: [Accessed 16 September 2009] 25
  26. 26. V.W Mitchell & R.H. Kiral., 1998. British Food Journal, Primary and Secondary store-loyal customer perceptions of grocery retailers, [Online], 100 (7), pp. 312-319. Available at: [Accessed 17 November 2009] Teodoridis. P & Chatzipanagiotou. K., 2009. Store image attribute and customer satisfaction across different customers profiles within the supermarket sector. European Journal of Marketing, [Online], 43 (5/6). Available at [Accessed 18 November 2009] Kent, T., 2003. 2D3D: Management and design perspectives in retail branding. International Journal of Retail & Distribution Management, [Online]. 31 (3), pp. 131-142. Available at: [Accessed 16 December 2009] Schmitt, B.H., 1999. Experimental Marketing: a new framework for design and communications. Design Management Journal, 10 (2), pp. 10-16 Riches, G., 1997. Hunger, food security and welfare policies: issues and debates in First World societies. Proceedings of Nutritional Societies, 56 (1), pp. 63-74 Louviere, J.J. & Gaeth GJ., 1987. Decomposing the determinants of retail facility choice using the method of hierarchal information integration: a supermarket illustration. Journal of Retailing, 63, pp. 25-48. Wm Morrison’s Supermarkets Plc, 2009, Annual and Financial Statements 2009. [Online] Available at [Accessed 16th September 2009] 26
  27. 27. Piacentini. M, MacFadyen. L & Eadie. D., 2000. International Journal of Retail & Distribution Management. Corporate and Social Responsibility on food retailing, [Online]. 28 (11), pp. 459-469. Available at: [Accessed 18 December 2009] Dibb, S. Simkin, L., 2001. The Marketing Casebook: Cases and Concepts. 2nd ed. London: Thompson Sloman, J., 2008. Economics and Business Environment. 2nd ed. Harlow: Pearson Education Limited) 27
  28. 28. (Insert 1.0) Marketing and Selling Models Dibb, S. Simkin, L., 2001. The Marketing Casebook: Cases and Concepts. 2nd ed. London: Thompson Production Selling Consumption Profits throught volume sales Selling Consulting with Stakeholders relating to all new marketing initiatives L Feedback Profits throgu Customer need Integrated Market Customer satisfied evaluaiton Effort Satisfaction customers Feedback Feedback Marketing 28
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  31. 31. Porters Five Forces Model (Porter, 1980) (Insert 1.3) Tuesday, December 22, 2009 Rivalry Among existing Firms Morrison's offer a unique shopping experience to Potential threat of new entrants their customers, who focus solely on their fresh food Through backward vertical integration of their supply credentials, compared to their competitors who try to chain, Aldi gain full control over the quality of the promote their non-food credentials (i.e. Tesco's who food which they offer in their stores, not only this but promote their insurance and financial products). they can potentially limit the number of new entrants This way they are differentiating away from not only to the market, weather they are suppliers, one competitor, but from the good majority of both distributors or retailers, and prospering. However, large and small retailers in the market and have Ocado, an online grocer in partnership with achieved a large sustainable core competence, Waitrose has now launched a fresh food preparation which is costly for competitors to imitate. However, service where customers can order items such as during the recession customers are switching to meat and fish cut to specification. This means that cheaper supermarkets such as Aldi and Lidl, who this grocer can now compete with retailers like have seen sales surge during the recession and by Morrison's, who also place heavy emphasis on their promoting their competence of their prices are up to in store preparation.(Sloman, J., 2008. Economics and 30% cheaper than the major retailers. Business Environment. 2nd ed. Harlow: Pearson (BBC News, 2008. Pinch helps discount supermarkets. Education Limited & The Grocer.,2009. Ocado prepares BBC News, [internet] 20 November. cuts at depot to replicate store counter service, [Online] Available at: [Accessed 14 Nov. Available at: 22 September 2009] & Sloman, J., 2008. Economics and [Accessed 14 November 2009] Business Environment. 2nd ed. Harlow: Pearson Education Limited)) The Bargaining Power of Buyers (Retailers). The major retailers are the biggest source of The Bargaining Power of Suppliers revenue for suppliers, who have few other channels Branded suppliers have some power over their of distribution for their product. Furthermore, with customers as they have more leeway over which the growing concentration in the retail market and retailers to they wish to supply to. However, Sloman, J., 2008. Economics and Business Environment. 2nd ed. with the growing tendency to source national and suppliers of retail-branded products, which are the Harlow: Pearson Education Limited internationally has grown the supply base thanks to key differentiators of the competition associated technological and infrastructure improvements in the what that retailer, need to have that supplier-retailer macro-environment. This means that the major communication to ensure retailer specifications are The Threat of Substitute Products retailers have large amounts of power over their met. This puts more power on the retailer, and they These days, customers are shopping around in order to find the best price for a product , suppliers because if there is some dissatisfaction of use that power to keep a tight grip on prices which Sainsbury have called this the ‘Savvy Shopper’. The major retailers stock around 30,000 lines the current supplier which the retailer is using, they may result in the suppliers loosing out. However, both being branded and own labelled products and the discount retailers stock around 1,000 can relatively quickly and cheaply switch to another suppliers must remain competitive if there a large lines which are mainly only own labelled goods (BBC News: Aldi, 2009). Studies have shows supplier because of this ever-growing supplier base. amount of suppliers on the market and a key that consumers ‘miss’ the branded products which the major superstores sell as they are The suppliers are in competition with each other. advantage to the suppliers are that their large perceived as better quality products, reliable and trustworthy. This could be a reason why However, Aldi ensures that they establish both customers can easily and cheaply switch to a some people would choose to shop at a competitors store who would sell national branded working practices and contractual agreements which particular supplier if they are seen favourable to item, over shopping at Aldi, who sell exclusively own-branded items are both fair to the supplier and to the retailer as another one. However, manufacturers are Sloman, J., 2008. Economics and Business Environment. 2nd ed. Harlow: Pearson Education Limited) well. (Sloman, J., 2008. Economics and Business competing for shelf space at the retail end with the Environment. 2nd ed. Harlow: Pearson Education own branded labels, however with retailer being Limited ) & able to imitate branded products, this can dampen Key Note.,2007. Market Assessment 2007. Supermarket down product innovation and development at the own Labels, [Online] supplier end. (Clarke, I, Bennison, D, Guy,C., 1994. The (Issue Number and Date Unknown). Dynamics of UK Grocery Retailing at the Local Scale, Available at: [Online]. 22 (6), pp 11-20. Available at: http:// [Accessed 24 November 2009] [Accessed 16 September 2009] & Sloman, J., 2008. Economics and Business Environment. 2nd ed. Harlow: Pearson Education Limited) Page 1 31
  32. 32. Porters Generic Strategies (Insert 1.4) Tuesday, December 22, 2009 Store brands do Aldi forms a strategic alliance provide a platform with the Department of Health, for retailers to allow (which can be identified as a them to improve stakeholder) both acting in the margins (Ailawadi, interests of the community’s 2001). This is health, well-being and balanced certainly a strength or lifestyles by promoting foods and Aldi who can attain beverages which are linked to Cost cost leadership status Differentiation healthy eating Leadership Stuck in the Middle A positive and successful brand is defined as a name or symbol, or a combination of the two. It identifies a product or service of an organisation as having a sustainable differential advantage (Schmidtt, 1999a) Focus The increasing Muslim population across Europe and the UK and has encouraged many Dibb, S. Simkin, L., 2001. The Marketing businesses, and Casebook: Cases and Concepts. 2nd ed. certainly retailers, to London: Thompson invest in this growing market Page 1 32
  33. 33. Ansoff’s Matrix (Insert 1.5) Corporate and Social Responsibility ‘Healthy Eating’ Initiative The Marketing of Halal Meat in the United Kingdom 33
  34. 34. Aldi Supermarkets: Twelve Month Marketing Plan Gantt Chart (Insert 1.6) Tuesday, December 22, 2009 2010 ID Task Name Start Finish Duration Departments Responsible Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1 Stakeholder identification (Phase A) 04/01/2010 26/02/2010 8w CSR Direcor Training, recruiting and organisational 2 01/01/2010 31/12/2010 52.2w Managing Director, Training Consultants restructuring process 3 Stakeholder Engagement 01/04/2010 30/04/2010 4.4w CSR Director Corporate and Social Responsibility 4 Initiative (Healthy Eating) (Phase 23/02/2010 23/04/2010 8.8w CSR Director One) Partnership with Department of Health 5 25/02/2010 26/03/2010 4.4w CSR Director (Healthy Eating) (Phase One) Partnership with National Halal Food 6 01/04/2010 30/04/2010 4.4w CSR Director Group (Phase Two) Rebranding Corporate Symbol 7 01/01/2010 30/12/2010 52w Marketing Director (Phase Two) 8 Store Rebranding (South Sector) 01/01/2010 22/04/2010 16w Chief regional and reigional directors 9 Store Rebranding (Middle Sector) 04/03/2010 23/06/2010 16w Chief regional and reigional directors 10 Store Rebranding (North Sector) 21/05/2010 09/09/2010 16w Chief regional and reigional directors 11 Store Rebranding (Scotland) 04/08/2010 23/11/2010 16w Chief regional and reigional directors 12 Store Rebranding (Wales) 10/09/2010 30/12/2010 16w Chief regional and reigional directors Staff and Management Training/ 13 01/01/2010 31/12/2010 52.2w HR Directors and Store HR Workshops (Phase Three) 14 Advertising Phase One 01/01/2010 22/04/2010 16w Marketing Director 15 Advertising Phase Two 26/04/2010 13/08/2010 16w Marketing Director 16 Advertising Phase Three 07/06/2010 13/10/2010 18.6w Marketing Director 17 Advertising Phase A 20/09/2010 16/09/2011 52w Marketing Director 18 19 Page 0 34