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ALDI: Low-Cost Strategy Assignment Essay

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Updated: Jun 11th, 2021

ALDI

ALDI is able to provide customers with the most cost-efficient choices because of the company’s reliance on exclusive brands. However, this approach to following the low-cost strategy is associated with some risks and crises for this retail chain. The problem that ALDI often faces is the necessity of realizing recalls of products because of quality or packaging issues, among others. Despite the set standards for the quality of produced goods, ALDI follows the cost-saving strategy to guarantee that their products will be offered at the lowest prices in the market.

In 2016, Combos Cheddar Cheese Snacks, Sundae Shoppe Dipped Sundae Cones, and Deluxe Whole Cashews were recalled because of the potential presence of peanuts not mentioned on the package. In 2017, food items were recalled because of inappropriate packaging and the undeclared presence of milk in some products (ALDI). The reasons for recalling products in 2018 included mislabeling, the presence of allergens in some items, and the presence of Salmonella in rolls and E. coli in meat.

ALDI’s mission

Mission and Vision

ALDI’s mission statement is “From our Test Kitchen, and Twice as Nice Guarantee to award-winning products and fresh produce, ALDI does things differently to bring you amazing products at low prices” (ALDI). The company’s vision is to apply the cost-effective approach in order to help customers save their resources and do their smart shopping while choosing ALDI’s exclusive brands. Furthermore, the company guarantees the quality of its products to address customers’ needs and expectations.

Financial Perspective

The first financial objective for ALDI is to reduce costs that are associated with supply chain relationships. The second objective is to increase ALDI’s market share in the grocery market in such regions as the United Kingdom, Australia, and the United States. These objectives can be seen as oriented toward reducing costs without affecting the quality of products and services as well as toward increasing revenues.

The measure for the first set objective is the percentage by which the costs related to the company’s supply chain relationships will reduce in 2019. In addition, the measure for the second objective is the percentage by which the market share of ALDI in the UK, Australian, and US retail grocery markets will increase by the end of 2019. The other measure related to the second objective is revenue growth. These measures are effective to demonstrate whether the objective has been achieved.

Targets for each described measure should also be discussed in detail. For the first objective, the target measured in percentage is the reduction in the company’s supply chain costs by 5% by the end of 2019. For the second objective, one of the targets is the increase in the market share by 2% in the 2019 fiscal year in comparison to the 2018 fiscal year. The other target is the associated revenue growth by 2.5% for the period of February-November 2019.

Initiatives that can be applied in order to achieve the first set objective are to revise the currently used supply chain system, improve logistics, and find new suppliers of cheaper products of high quality. Additionally, initiatives associated with the second objective include the further development of the “Like Brands, Only Cheaper” marketing campaign in the United Kingdom, the United States, and Australia (ALDI). It is also necessary to open 50 stores in the US, 22 stores in the UK, and 20 stores in Australia in 2019.

Business Process Perspective

The key objective in this area is to improve the asset utilization and the use of energy and water resources with a focus on ALDI’s facilities and storehouses. The company realizes the principles of sustainability in its activities. As a result, this general objective is associated with completing tasks to decrease the negative impact of activities in the company’s facilities and stores on the environment.

The associated measures include the turnover of material assets and the amount of used energy and water resources. In spite of the fact that the asset turnover is a financial ratio, it is helpful to demonstrate how effectively ALDI uses its assets in order to generate more sales (Crandall et al. 149). The amount of used energy and water resources is important to be monitored in percent for determining changes in the company’s sustainability strategy and outcomes.

The first target associated with the set objective is related to increasing the asset turnover ratio to 1.7 by the end of 2019 to guarantee the efficient use of available assets to receive higher revenues. The second target is to decrease the number of used resources by 10% in European, US, UK, and Australian facilities. These targets can be achieved with the help of certain changes in business processes and operations.

The initiatives to realize within a short period of time include investing in innovative equipment for stores and warehouses and changing the strategy on lighting and refrigeration systems. The outdated equipment should be changed with the most efficient equipment in facilities and storehouses where it is required with the focus on using recycling technologies. More facilities should be equipped with solar panels, LED lighting, and innovative refrigeration compressors.

Learning and Growth Perspective

In order to guarantee that customers receive only high-quality products and services, it is necessary to improve the quality of employees’ work and the services they provide. It is important to note that this objective also includes such a component as the improvement in employees’ productivity (Crandall et al. 95). From this perspective, this objective needs to be addressed because it is directly correlated with customer satisfaction.

The first measure to consider is the level of employees’ productivity that should be measured in the rate of completed tasks set for a certain period of time. The second measure to use is the post-service rating provided by customers. This rating will be presented in scores to assess the work of individual employees, as well as the work of the personnel in a selected store.

The first target to achieve is to guarantee 92% completion of all scheduled tasks by employees in ALDI by the end of 2019. The second target is to receive the average post-service rating for all ALDI’s stores that equals 90 points (Crandall et al. 158). These achieved targets will demonstrate the improvements in the quality of offered products and services through the development of employees’ skills.

It is possible to propose several initiatives that are effective to achieve the described objectives and targets. The first initiative is the integration of a new management system for coordinating the work of employees. The second step is the implementation of additional professional training for the staff to improve their skills and competencies. Much attention should be paid to developing employees’ skills through training programs and supervisors’ feedback.

Customer Perspective

The main objective in this area is to expand the range of ALDI’s exclusive products that are regarded as special ones (organic, dietary, gluten-free, and other items) to increase customer satisfaction. Inasmuch as ALDI is focused on offering mostly exclusive products, customers can feel the lack of special food items associated with their lifestyle and habits. This need should be addressed to increase customer loyalty and satisfaction with services.

To assess the completion of this objective, it is necessary to refer to such a measure as the number of new lines of products and brands to be launched in 2019 to address customers’ expectations. This measure allows for determining whether the goal has been addressed as it was planned (Crandall et al. 158). In addition, the measure can be easily calculated and monitored by managers.

The target related to the proposed measure is nine new products to be launched and offered to customers in 2019. This number should include exclusive brands and original names that will be proposed as absolutely new products for ALDI or within the existing lines. The focus on nine names is selected because it is necessary to guarantee that ALDI will be able to complete this challenging task.

The associated initiatives and strategies are related to the development of new exclusive brands and products, as well as the expansion of the range of goods within existing lines. Thus, it is important to expand the assortment of live-free products and Never Any! meat products, as well as Simply Nature items popular among customers (ALDI). New products and brands will be oriented toward customers interested in vegetarianism, food without lactose, food with a decreased number of calories, organic products, and food without saturated fats.

Works Cited

ALDI: Shop Differently. ALDI Inc., 2019. Web.

Crandall, William Rick, et al. Crisis Management: Leading in the New Strategy Landscape 2nd ed. SAGE Publications, 2014.

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