Aldi Brand Harvard Case Solution & Analysis

Aldi Brand Case Study Solution

Comparative Analysis:

Although the competition in the Australian market after the arrival of the Aldi brand created the war to the bottom due to its non-competitive pricing strategy that cannot be adopted easily by its competitors. But the threat of new entrance in the grocery market is high due to an increase in the Australian population and demand that would continue to increase in the future. Along with it, the Australian government encourages new businesses and innovations in the country by providing tax relaxation and other subsidiaries and incentives, which is a huge threat leading to an increase in the competition.

However, Aldi has the power of economies of scale, which creates difficulties for small businesses in the economy for playing the major roles in the grocery market, but large scale companies might create the biggest barriers for Aldi to operate smoothly in the Australian economy. Moreover, due to the low switching cost; the customers have high bargaining power because the relative demand and availability of substitutes for grocery products are quite higher. So, there are more chances to have a shift in the customer’s loyalty by  providing the inferior quality products in cheap prices in order to satisfy or even delight them to be retained.

Furthermore, its pricing strategy is creating more value for Aldi Brand in consumers’ minds,which is a positive sign for the company to expand more in the future. In addition to this, its pricing strategy might be imitative in the industry because it is creating a temporary competitive advantage over its competitors, but the efficiency in the sales force and channel management help the company to reduce the overall logistics and distribution costs,  which ultimately provides more ways to reduce prices. In short, it is a complementary element with its pricing strategy, which helps the company to sustain its competitive edge over its competitors.

On the other hand, Wool worths and Coles were initially focused on national brands but now have changed their strategic initiatives after the changing consumer perceptions for the private label brands. The two players are trying to enter the market through complete efforts and might lead to a reduction in the market share of Aldi in the future. Along with these two players in the market; Amazon’s strategic initiative is to create stores with no checkouts and payment via mobile app method to provide convenient experience to its customers at its stores. (officials, annual report of coles, 2018).

Resource Based View & the Growth Strategy Success:

The strategic plan of Aldi is to target the discount market segment (a niche market), which is one of the key strategies of the company towards the success of the organization. The strategy of the Aldi is to provide the low cost products to its discount seeking customers by using the economies of scale production method, because  consumers seek a seller who provides them the low priced and inferior quality products which helps them to reduce their daily expenses and save more for their future.

The main focus of the company is towards the growth of its core business (grocery stores) rather than expanding its business through unrelated diversification. The more focus towards the core business expansion helps the company to meet its quality standards at low prices by purchasing goods in bulk quantities. Its growth strategies to expand its grocery business globally includes the cost leadership strategy along with the competitive pricing strategy by offering the private label brands to the discount market segment in order to create value for the customers as well as to increase their satisfaction level.

Aldi strictly follows its quality control standards with a high quality product packaging because the consumers’ perception about the private label brand is the inferior quality products at lower prices than the national one. Aldi has played an important part in changing the consumers’ perception about the private label products.

By using the cost leadership and competitive pricing strategy; the market share of Aldi Brand in the Australian supermarket industry has increased by 6.6 % from 2007 to 2017 (are shown in Exhibit 1) as compared to its competitors, such as Woolworth Groups, Coles Group, IGA and others that have increased their market shares by – 3.6 %, – 1.2 %, 1 % and – 2.8 % respectively.

Conclusion:

Most of the competitors in grocery market in Australia provide the high quality and lower priced products but currently Aldi has possessed the competitive position as the market leader by using the cost leadership strategy along with the competitive pricing strategy by offering the private label brands to the discount market segment in order to create value for the customers as well as to increase their satisfaction level. Through this, Aldi Brand has achieved the 6.6 % growth in the market share as compared to the negative increase of its competitors’ market shares.

 

Exhibit 1: Market Share of Australian Supermarket

Company20072017% Change
Woolworth Groups40.9 %37.3 %-3.6 %
Coles Group33.7 %32.5 %-1.2 %
Aldi5.5 %12.1 %6.6 %
IGA8.7 %9.7 %1 %
Others11.2 %8.4 %-2.8 %

 

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