Since the opening of Aldi in Australia in 2001, it has been expanding rapidly. Aldi operates its activities in divisions known as Aldi South and Aldi North. Aldi North includes management of operations in Denmark, Belgium, North Germany, Spain, Netherlands, and Luxemburg. All activities of Aldi North are managed by Essen. Aldi South includes management of operations in Australia, Austria, Britain, Switzerland, United States, South Germany, and Ireland. Aldi, a Germany Owned company, has over 5000 stores across Australia and European countries (George & Wilson, 2004, p.80).
Aldi has large resources. The capital base for Aldi is large. Many institutions are willing to lend credit to Aldi for the proven successes of their strategies and their large-scale size. The core values of Aldi are ability to offer quality excellent products with value that is outstanding. Value is created by offering quality products at low prices. The Mangers, customers, and employees of Aldi are well aware of the company’s missions and visions. The success of Aldi can be attributed to its strategy of cost management (Hamson, 2003, p. 29). Its cost management strategy involves selling the most used products and products that are necessities in nature for less. Aldi offers a smaller range of items of about 700 products compared to other supermarkets with a range of 15000-30000 products. Despite the sale of smaller range of products, Aldi is still a leading supermarket in the world (George & Wilson, 2004, p.80).The smaller range of products enables Aldi to buy many goods in large quantities which is cost-effective. The limited range of products enables Aldi to have control over their customers’ needs.
Aldi cuts down its cost by ensuring that there are no extra activities. Aldi has ensured that there is no checking of cash, fancy displays, and customer saving cards, bagging clerks. Aldi has a small number of employees who are paid nineteen dollars hourly compared to supermarkets that pay fifteen dollars per hour. Aldi does not employ professionals as professionals come at a price. Employees are trained to be flexible such that they can work in all departments in the store. This reduces its operating costs therefore reducing prices of its products. Aldi has a low stock maintenance to reduce storage costs. Another strategy for Aldi is adding value to supply chain. Whenever a supplier has lowered prices on their supplies, the same is reflected in prices of the products presented to the customer. Aldi reduces the rent costs by occupying small stores compared to the modern supermarkets with escalators. Aldi has introduced its own range of products that they sell at a reasonably low cost. The reduction in prices has seen Aldi commanding a customer base of more than five million customers (Seth& Randall, 2001, p.153)
According to Walker (2003, p.42), the challenge that Aldi is facing is the low-cost strategy. Customers tend to match prices with quality. Aldi’s products are cheaper than other stores but the quality of their products is questionable. The approach of Aldi of quality goods for lower prices is economically inefficient. Economic factors are gradually changing with the increase in production costs due to economic depression of 2008.Many suppliers have to sell their products to Aldi at a lower price that is economically inefficient for them. Aldi also faces stiff competition from entrants in the grocery industry who come with modern and better strategies to attract customers. Wool mart, a major competitor of Aldi, is designing strategies to be the leading supermarket.
Lidl grocery based in European store is literary taking over activities of Aldi. Lidl is imitating Aldi style of conducting business. If Lidl enters the Australia, market will be a big problem for Aldi. Small grocery faces a lot of completion from big grocers such as Aldi.Small grocer’s major weakness in pricing. The small grocers pricing model is outmoded as well as their distribution models (Hitt et al, 2008, p.51).Small grocers should modify their distribution chain in order to reduce costs and attract more customers.
Small grocers in Australia have fewer market shares as the big groceries have taken up much of the market share. According to National Association of Retail Grocers of Australia (2009), big groceries have a market share of eighty-five percent compared to those of small grocers of fifteen percent. The worst-hit of the small grocers is Queensland grocers and Master Grocers. The major weaknesses for the small grocers include lack of sufficient funds to expand, poor management skills, lack of skills and knowledge and specialization of labor. According to Borsdow (2007, p.68), Many small groceries have internal processes that are insufficient. The small grocers also have a market target that is too narrow. Small groceries also face the challenge of acquisition by large groceries.
Small grocers should seek finance from the government institutions that are ready to give them finances. The small grocers should engage in money management classes to learn business management. Small grocers should be flexible to the changing needs of the world. They should encourage division of labor. The small grocers should employ flexible employees who can do any type of job that may arise. Small grocers should develop a code of conduct to deal with employees who do not follow the goals and objectives of the stores. Those who violate the practices and values of the stores should be properly dealt with. This will ensure that internal processes are efficient and transparent. According to Borsdow (2007, p.68), the small groceries can take advantage of the emerging international groceries in Australia. This way they will combine their strategies with those of international groceries. They will also be protected from big groceries.
The small groceries should also seek to grow their market share by building on key competencies such as convenience, reliability, and accessibility.
Common strategies used in Australia include strategic competitiveness and strategic management. According to Nolan (1996, p.328), the Australian direct marketing strategy is a way of that is essential to the economic growth and sustainability of developments in Australia. Both Coles and Aldi use direct selling where they locate their stores near customers. Barrar and Gervais (2006, p.322) say that outsourcing globally is a way of reducing costs while accessing expertise in a particular field. This is a common practice in Austria especially in manufacturing industries. They outsource materials and labor from other countries to reduce production costs. Industrial innovation is a common strategy among the Australian industries. Many old-fashioned industries are reforming their organizational structures to accommodate change. Australian industries are adopting internationalism. Internationalism is the ability to change the industry dynamics to concur with other world industries through innovation and restructuring (Dick & Merret, 2007, p.394).
Another common strategy is aligning the industry’s competitive ability with the modern information technology. Information technology has improved business activities through efficient production processes. Distribution processes have been made easier and less costly by use of software to track the delivery process. Common use of information technology is through use computers to carry out transactions. This is done through e-marketing, emailing, and use of computer software to keep track of expenses and revenue generated. The Australian government has come in place to regulate the use of information technology in the Australian industries (Maude, 2004, p. 14).Research methodology has become a goal for each industry in Australia. Research data is used to implement marketing strategies, design resource allocation strategies, define governance policies, and determine the economic growth and development.
References
Barrar, P & Gervais, R., 2006. Global outsourcing strategies: An international reference on effective outsourcing relationship. Vermont: Gower Publishing Limited, Pp. 322-324.
Borsdow, J., 2006. Case Study Springbok. Norderstedt: Druck and Bindung, Pp. 68-70.
Dick, H& Merrett, D., 2007. The internationalization strategies of small-country firms: The Australian experience of globalization. Cheltenham: Edward Elgar Publishing, Pp. 392-394.
George, M & Wilson, A., 2004. Conquering complexity in your business: Conquering complexity in your business: How Wal-Mart, Toyota, and other top companies are breaking through the ceiling and growth. New York: McGraw–Hill publications, Pp.79-80.
Hamson, L., 2003. The grocer: Inside Aldi, Pp. 29 -30.
Hitt, M.et al., 2008. Strategic management: Competitiveness and globalization Concepts & cases. Ohio: Cengage Learning Inc, pp 57-68.
Maude, A., 2004. Regional Development Processes and Policies in Australia. Bristol: The policy Press University of Pristol, Pp.13-36.
Nolan, J., 1996. Australia business: The portable encyclopedia for doing business with Australia. California: World Trade Press, Pp.328-330.
Seth, A & Randall., 2001. The grocers: The rise and rise of the supermarket chains. London: Kogan Page Limited, Pp. 153-154.
Walker, J., 2003. Business Review weekly: Inside Aldi, PP.41-44.