Aldi started out in 1948 when two German brothers Karl and Theo Albrecht took over from their mother’s Essen grocery store where they began selling basic items at low prices. The economy in Europe was bad then and only few customers had money to spend but there were very few essential products available. These two bothers had the plans to expand the limited range of products they had once there was an improvement in the economy. As the economy of Germany recovered the Albrecht’s realized that they could maintain lower prices compared to their competitors if only they limited their own product selection down to the basics. They chose to focus on low prices and efficient operations and by 1958 the Albrecht’s owned and operated 300 outlets all over Germany and had revenues exceeding 100 million Deutsche marks.
Aldi Growth and Expansion
Aldi ended up expanding their operations internationally. It was in the late 1960’s when Aldi stores expanded to Austria and by mid-1970 these stores were in operation in Denmark, Belgium and even the Netherlands. Aldi made a huge impact in these first foreign forays and during early 1990’s Aldi held a 5% market share in Netherlands and realized an estimated $1 billion from sales in 260 stores in Belgium by 1992. By 2000, Aldi was a leader among German grocers with 40% of the market share and even inspired its rival Lidl that was owned by Germany Schwarz Unternhmens Treuhand that ended up copying the aspects of Aldi’s operating model. Having captured almost 90% of the shoppers in Germany, Aldi turned to other markets in order for it to grow further (Lane, 2014).
Aldi’s entry into the United Kingdom had to overcome numerous challenges that it had not expected. First of all the U.K consumers had a strong brand loyalty. This brand loyalty among these consumers made Aldi make some changes in its strategy which included a reduction of heavy reliance on private label goods and it began stocking some international brands. Secondly there were a lot of competitors within the local discount chain such as Kwik save. The CEO of kwik save pledged to ensure they match up the prices that Aldi was offering and also buy 100 of the existing retail stores in order to limit any expansion by Aldi. Aldi responded in 1991 with an agreement whereby they opened outlets at the existing gateway footmark sites with the hope that their low prices would appeal to new customers to gateway that offered better selection as compared to Aldi.
Within the first five years of Aldi in the U.K it opened 100 stores and it preserved to open new stores at a compound average rate of between 36% between 1990 and 1999. Aldi opened its first store within the United States in rural Midwest in 1976. Aldi operated about 150 stores in states of Indiana, Illinois, Missouri, and Kansas. Its estimated sales in the U.S by 1989 reached the half a billion dollar range. This led to an increase in the pace of Aldi’s U.S expansion with new stores being added both in the Midwest as well as the East coast ((Lane, 2014).
Aldi Internal SWOT Analysis
There are several strengths of Aldi that has enabled it to maintain a competitive advantage. Right from when it was founded Aldi has focused on low prices. In fact it is termed as the world’s lowest cost grocery retailer. Aldi’s prices are termed as delightfully as well as breathtakingly low. Aldi offers powerful price points for all its products in their stores. Their products are generally affordable as compared to those sold by their competitors.
Secondly Aldi has Simplicity and cost efficiency when it comes to their operations. This makes it possible for them to maintain low operating costs which trickle down to their customers through affordable prices on their products. Aldi relies on Private label sourcing whereby they operate by a model of ubiquity of private label brands within their stores. They exercise rigorous quality control over these private label items with a daily sampling and lab tests and at the same time comparing with items that are well branded.
Aldi also ahs a strong presence not only in Germany but also all over the world. Aldi boasts of having captured about 90% of the German shoppers. Aldi has about 2500 all over Germany 250o and over 8000 stores in Europe and other countries. Aldi has a strong organizational culture based on cultural rules and values that reflect on the organization’s philosophy. It is well known that the purpose of the organization is to avoid any unnecessary costs and the managers of the company as well as the staff are all cost conscious ; they attach the importance of each of the economic benefits because the organization has a policy of not wasting. A simple rule in the organization is that employees turnoff lights when they can get enough sunlight from outside. This means that the concept of saving costs extends to all areas of Aldi stores which include developing new technologies such as warehouse management or transportation (Corious research,2000).
One of the weaknesses of Aldi is that it is relatively small as compared to its competitors. Their stores are generally small as compared to their competitors and hence they are unable to stock many products for their customers. Aldi stores are generally located in nondescript areas that are well trafficked but with limited parking. In the stores instead of shelving and aisle end caps their products are displayed on the floors of stores in their cardboard shipping boxes which are stacked atop pallets.
Aldi stores have a limited assortment of products that leads to a limited appeal to customers. There is no variety among their products for the customers to choose from. This discourages many customers who have their specific brands of choice from visiting the Aldi stores because they know they will not get their products from there.
Some of the opportunities that exist for Aldi it are their potential to expand their markets. Aldi can expand into growing economies such as Asia and Africa.
Aldi also ahs the potential of Increase market penetration by entering into new markets. Recently, Adi has been able to successfully enter new markets like Houston and expanded its presence in markets that are competitive such as New York and Florida.
In Aldi they believe that great quality is affordable and hence the company is eager to ensure that they continue to improve quality. This is through their continued lab tests on their products just to make sure that their products are up to standard and of good quality.
Aldi also has the potential to hold tight to low cost positioning which can be achieved through their maintaining low operational (Euromonitor, 2014).
A threat to Aldi is the fact that other limited assortment companies that understand the business and can operate better are emerging. Aldi cannot cater for customers who are looking for established brands that they know and like. The private label brands offered by Aldi can easily be tossed away by the established brands.
Evaluation of the SWOT Analysis. Having looked at the Strengths Weaknesses, Opportunities and Threats of Aldi we can come to various conclusions. Generally Aldi is in an overall strong competitive position due to the strengths and opportunities that the company has. Aldi boast of numerous strengths that have enabled it to establish a competitive advantage against its competitors. Looking at these strengths we are able to see that they are what have enabled the company to reach the level it is at currently not only in Germany but also in the rest of the world. Aldi can turn the weaknesses to strengths through various ways first they can start building relatively larger stores like those of their competitors. They can also increase the assortment of [products so that their customers can get everything they want at Aldi.
Secondly Aldi has numerous opportunities that they can explore to make the company increase its presence all over the world.
However the weakness that Aldi has can be a factor that can lead to the company going down. These weaknesses are things that Aldi can improve on such as increasing the sizes of the stores and also increasing the variety of brands that are found in their stores. The threats that Aldi faces can lead to the company’s failure. The company should strive to make sure that these threats do not get to the better of the organization and hence lead to its failure. Aldi can turn their threats into opportunities such as through incorporating established brands into their stores. This can be done especially in new markets where people have brand preference.
- Lane, D. (2014). Aldi: The Dark Horse Discounter.
- Corious research.(2000). Aldi in Australia: what will be the impact. Retrieved September 4, 2014 from www.coriolisearch.com/pdfs/coriolis_…
- MBASkool. (2014). ALDI. Retrieved September 4, 2014 from https://www.mbaskool.com/brandguide/lifestyle-and -retail/2014-aldi.html
- Research and markets. (2013). Aldi, Inc.-Strategic SWOT Analysis Review.
- Retrieved September 4, 2014 from www.researchandmarkets.com/…/aldi_inc…
- Euromonitor.(2014). Aldi group in retailing. Retrieved September 4, 2014 from www.euromonitor.com/aldi…in…/report