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Aldi's Expansion Strategy
Aldi is expanding rapidly in the US by opening 600 new stores in the next 3 years. They have a strategic focus on small store sizes and private label products to keep costs low. Aldi has over 1500 US stores and $10 billion in annual sales. Their competitive advantages include highly efficient operations, limited product selection, and low prices.
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Aldi's Expansion Strategy
- 1. STRATEGIC MANAGEMENT April 25,2016 Austin Kilpatrick & Izmir Vodinaj Prof. Vasudevan Ramanujam 1 of 15
- 2. Current news: Expansion Theglobal village and how Aldi fits in it Aldi in the US: Industry Analysis Aldi’s competition in the US 2 of 15 Aldi’s Interior Analysis TODAY’S STORY
- 3. 3 3 of 15 THEEXPANSION STRATEGY Fresh & Easy By TESCO California, Nevada, Arizona Founded in 2007 Opened 200 stores in a year Bankruptcy in 2013 Target 133 locations in Canada Supply Chain Issues Over 2 billion in losses ALDI Rapid Growth Small store size 600 new stores (next 3 years)
- 4. 4 4 of 15 THEGLOBAL GROCERY MARKET 2014 Sales Revenue (Largest Grocery Retailers) ESTIMATED $2.5 – $4.5 Trillion 16% 4% 4% 3% 3% 2% 2% 67%$2000 B Others $55 B AEON $70 B Metro Group $80 B Aldi $93 B Tesco $108 B Kroger $118 B Carrefour $476 B Walmart (USA) Compare it to Automotive $9 Trillion
- 5. ALDI AROUND THEWORLD 5 5 of 15 GERMANY 1913 Expanding since 1962 14 countries Over 8500 stores $64 billion in sales Came in 1979 35 states Over 1500 stores $10 billion in sales Came in 2001 Over 400 stores $6.4 billion in sales 80% 13% 8% Europe US Australia
- 6. 6 ALDI IN THEUS: COMPETITION 6 of 15 24.5% 12.9% 7.6% 4.3% 3.9% 3.4% 2.4% 1.5% 0.0% 10.0% 20.0% 30.0% Walmart Kroger Costco Publix Albertsons H-E-B Whole Foods Aldi Market Share 2014 1500 399 363 2200 1115 481 2600 4500 StoresStrategy Low Price; Efficiency Organic Foods Customer Service/Local Mergers and Acquisitions Customer Loyalty/ Regional Membership Based Premium Private Label Low Price/One stop shop
- 7. 7 7 of 15 USMARKET CONDITION Political Food Subsidies Minimum wage changes Environmental Ethical Sourcing Waste Disposal Electricity/Green Initiatives Technological Online Sales Electronic Payments Legal Labeling Laws (Organic/ Natural) Compliance programs Socio-Cultural Eating Trends (Organic) Brand Names Consumer Loyalty Economic Resilient Industry Low skill labor Lower labor costs
- 8. 8 8 of 15 USINDUSTRY ATTRACTIVENESS Threat of Entry High start-up cost Low knowledge Growing Markets Power of Substitutes Prepared foods Higher Costs Bargaining Power of Suppliers Brand Names Integrated Supply Chains Bargaining Power of Buyers Price sensitive Lots of options Intensity of Rivalry Lots of Competition Brand Loyalty Geographic Location
- 9. 9 ALDI’S VALUE CHAIN 9of 15 Manufacturers Distribution StoreSales Local Suppliers National Suppliers International Suppliers Manufacturers Centralized Distribution Centers Almost 90% of products include Aldi labels Aldi stores all over the country Well trained and paid sales associates Supplier Relationships Social Media Local Coupons Website Marketing
- 10. 10 ALDI’S COMPETITIVE ADVANTAGE ValuableRare Hard to Imitate Advantage Organized to Capture Value 10 of 15 BRAND NAME EFFICIENCY LABELLING, EASY ACCESS LABOR UTILIZATION, DISTRIBUTION, BAGS, CARTS
- 11. 11 ALDI’S STRUCTURE Store Management Divisional Office SupportStaff District Manager District Manager District Manager Warehouse Employees Warehouse Supervisors Director of Administration Director of Purchasing Director of Operations Director of Real Estate Director of WH & Transportation Store Management Store Management Store Employees Store Employees Store Employees • FUNCTIONAL • MECHANISTIC 11 of 15 Vice President
- 12. ALDI’S STORE EXPERIENCE AVGUS Grocery Store 45,000 sq ft AVG US ALDI store 15,000 sq ft 12 of 15
- 13. ALDI’S SWOT ANALYSIS Efficiency (LABORUTILIZATION, DISTRIBUTION, BAGS, CARTS) Quick shopping experience Brand name Limited goods Customer service Quality perception Continue expansion Use of technology Customer relationships Being noticed by large players Changes in fuel prices Online shopping 13 of 15 Strengths Weaknesses Opportunities Threats
- 14. A FINAL WORDABOUT ALDI 14 of 15 Aldi strategy has proved to be successful in developed markets worldwide Aldi should pay close attention to consumer trends Aldi should monitor it rapid growth strategy
- 15. Questions? 15 of 15 STRATEGICMANAGEMENT April 25, 2016 Austin Kilpatrick & Izmir Vodinaj Prof. Vasudevan Ramanujam
- 16. 16 APPENDIX 1: ALDIUS DIVISIONS
- 17. 17 APPENDIX 2: PESTEL FactorPolitical Economic Socio-Cultural Technological Ecological Legal These trends are FAVORABLE to the industry Farm Subsidies, Low fuel costs Low fuel costs Health food and consumer consciousness Point of sale systems, inventory management Less Packaging Accepting WIC and Food stamps, These trends exert are of NEUTRAL impact on the industry Import Costs, Zoning laws Economic Fluctuations, Exchange rates Employees Storage, less packaging, Self- Checkout Seasonal Products Food Safety Standards, Health Regulations These trends are UNFAVOURABLE to the industry Selling regulations, licenses Market Saturation, Competition Wages paid Online sales High carbon emission, Low Fuel Costs Food Labeling, Organic/ GMO Labeling Overall impact of these trends Favorable Neutral Favorable Neutral Neutral Neutral Overall conclusions from the above PESTEL In general the grocery industry is favorable, because it is a very stable industry which tends to remain stable despite varying economic conditions, and technological advancements. The companies that are able to adapt to new trends, are able to be successful in a variety of locations, across demographics, and despite new laws or regulations.
- 18. 18 APPENDIX 3: FIVEFORCES Force -> Threat of Entry Bargaining Power of Suppliers Intensity of Rivalry Bargaining Power of Buyers Power of Substitutes These factors increase this force -> Limited specialized knowledge Name brand Products Lots of Competition Lots of competition Very price sensitive Lots of Restaurants These trends exert are of NEUTRAL impact on this force -> Number of stores will likely grow with increasing populations Integrated supply chains, Consumer Trends People tend to shop in small geographic area Brand Loyalty, Shopper Experience Consumer Trends/ Health Concerns These factors reduce this force -> Expensive to start Store Brand Products Brand Loyalty Location/ convenience of stores Lower Cost Overall strength of this force, LOW, MODERATE, HIGH Fairly Low Medium High Medium / High Medium/Low Overall conclusions from the above Five Forces analysis -> The Grocery industry is hard to enter because of the large number of competitors and the high startup costs of operating a large store. Aldi is in a decent position because it has a number of store brand products which gives them some power over suppliers. Competition in this industry is high, and buyers are price sensitive and generally willing to take the lowest cost alternative. It is fairly hard to substitute the grocery industry for anything other than restaurants, which tend to cost more and be less healthy. In general it is a hard industry to enter, but once established competitors can do very well.
- 19. 19 APPENDIX 4: MANAGEMENT JasonHart, Chief Executive officer, Aldi Inc.; He has been the Chief Executive Officer of ALDI Inc. since April 1, 2015. Mr. Hart served as the Co-President of ALDI Inc., until March 31, 2015. Charles E. Youngstrom, CO-president, Aldi Inc.; He is also known as Chuck, serves as Co- President of Aldi, Inc. David Behm, Co-president, Aldi Inc.; He serves as Co-president of Aldi, Inc. Scott Patton, Vice president; Scott Patton serves as Vice President of Batavia Division at ALDI Inc. Bob grammer, Vice president of Center Valley Division; Bob Grammer serves as Vice President of Center Valley Division at ALDI Inc.
- 20. 20 APPENDIX 5: VRIOANALYSIS Resource /Capability / Competence Valuable? Rare? Imitability Organized to capture competitive disadvantage, parity, or superiority? Tangible - Physical Stores YES NO Easy to Imitate YES Advantage Inventory YES NO Easy to Imitate Neutral Parity Store Brand Products YES YES Somewhat hard YES Advantage Transportation Fleet YES YES Easy to Imitate Neutral Parity Intangible – Brand name YES YES Hard to Imitate YES Advantage Low cost operations YES YES Hard to Imitate YES Advantage Customer Experience YES YES Hard to Imitate YES Advantage Staff usage YES YES Hard to Imitate YES Advantage Capabilities –Low Costs YES YES Hard to Imitate YES Advantage Environmental Policy YES YES Hard to Imitate YES Advantage Inventory Management YES YES Hard to Imitate YES Advantage The firm’s distinctive competence, if any Aldi is very good at providing low cost groceries, they have very lean operations and do not require a lot of employees which keeps cost down. Because of store size they have a limited selection, but offer the lowest costs on those items. Aldi is good at ensuring their stores run effectively, and they are hard to imitate because of their unique stocking and employment models. Their smaller store size also allows them to expand to areas that don’t have a ton of space, or where large store spaces are extremely costly.
- 21. 21 APPENDIX 6: MARKETINGCONTENT
- 22. 22 APPENDIX 7: SWOT StrengthsWeaknesses ● Low Cost Offerings ● Lean Operations – Low costs ● Good quality products ● Positive Supplier relationships ● Good environmental policy ● Innovative sales model ● Store Layouts ● Store Locations ● Variety of goods offered ● Customer service ● Size of stores, ability to stock ● Quality perception ● Consumer Familiarity ● Adaptability to technology ● Store aesthetics Opportunities Threats ● Expand US and Abroad markets ● Increase Brand Loyalty and awareness ● Expand into offering Organic and more fresh food options ● Expand urban presence ● Increase use of technology in stores to improve shopping experience ● Focus on customer relationships, and improve customer perception ● Develop employees aand cross train them to be effective at all in store positions ● Larger competitors offering lower prices ● Changes in fuel prices ● Changes in government food subsidies ● Changes in Import taxes ● Increasing abilities to shop online ● Consumers are very price sensitive ● Low Brand Loyalty
- 23. 23 APPENDIX 8: IndustryRatios
- 24. 24 APPENDIX 9: IndustryNumbers
- 25. 25 REFERENCES http://supermarketnews.com/aldi-usa-2015 http://www.mergentintellect.com/index.php/search/companyDetails/6940423 M, Paulo. "AldiMarketing." Slideshare, 10 Oct. 2014. Web. 27 Mar. 2016. Mergent Intellect. (n.d.). Retrieved February 23, 2016, from IBIS World US. Web. 27 Mar. 2016. www.aldi.com http://aldiuscareers.com/about-aldi/divisional-structure https://en.wikipedia.org/wiki/Costco http://supermarketnews.com/aldi Statista (Most of the data about industries and competition was taken from this database) IBISWORLD (Most of the data about industries and competition was taken from this database)
Editor's Notes
- #3 Aldi stands for Albrecht Discount
- #6 Germany - Largest Grocery Retailer United Kingdom - 5th Largest and growing Australia - 3rd Largest and growing United States - One of the Fastest Growing https://en.wikipedia.org/wiki/Aldi#cite_note-ALDI_Nord_about_us-8 http://supermarketnews.com/aldi
- #12 http://aldiuscareers.com/about-aldi/divisional-structure
- #17 Aldi’s divisions and distribution centers in the US