Competitive Advantage Through Vertical Leadership: A Case Study Of Aldi - An Essay.

Value Chain of Aldi

Question:

Discuss About The Competitive Advantage Vertical Leadership?

Aldi offers daily products, dairy food, vegetable and alcoholic products.  There are many clothing items also that are sold by the company.  The store has a simple layout and offers many products at low price.  The vision of the company is – "The individuals should have the opportunity to purchase the routine groceries of good quality at a low price".  The Mission of the company is – "To offer high quality of products at low prices ".

The focus will be on the activities that will help to generate value. Also, the report will consider many concepts that will be related to Aldi ability to offer value to its customers and also to improve the existing activities (Gielens, K., 2018). In the first phase of the report the discussion will be made on the value chain of Aldi.  In the next phase of the report corporate and business strategies will be discussed.  In the last phase of the report, recommendations are given to enhance the overall outcome.

The value chain is related to a chain of operations that the organization takes into consideration so that products that effective product can be offered in the market. There are two parts in Value chain. First is concerned to the primary activities and second is related to the secondary activities. The first portion of primary activities takes into consideration the subparts like inbound logistics, operational, outbound logistics, marketing and sales (Mudambi and Puck, 2016).

The second part is related to secondary activities that are firm infrastructure, human resource management, technological development, and procurement.  The activities that are secondary are also known as support activities.  This part emphasizes on many parts by considering Aldi. Value chain helps the managers to evaluate the activities that are conducted in the organization.

Aldi takes into consideration cost leadership strategy. It is seen that to create value by reducing cost can improve the quality of products in both primary and secondary activities (van Rompay, Deterink, and Fenko, 2016).

• Inbound logistics: By considering the inbound logistics of Aldi it is seen that the company purchase a bulk of materials to manufacture its own products with its brand name. It saves cost and also helps to give a competitive advantage to the organization over other competitors. Also in this, the company considers centralized warehousing that protects the products in a proper manner (Cahill, 2017).
• Operations: It evaluates the lifecycle of products and services. The company has its own brand name and they offer good services to their customers. By offering good products and services the customers are induced to purchase it again and again.  It is also seen that the product cycle of the company is in the growth stage as it is more popular in the market if the comparison is made with other competitors in the retail sector (Grundy, 2017).
• Outbound logistics: It is related to the production of products and services that can be availed by the buyers.  It is evaluated that the company has its own outbound logistics. The company has its own personal transport system so that the products can be reached easily to its customers (Steenkamp, 2017).
• Service: The Company offers services like easy availability of all the products so that the satisfaction level of the customers can be enhanced. When effective services are given to its customers in a proper way and on time then it can be easy to enhance the overall satisfaction level of the customers (Zhang, Zhou and Xu, 2015).
• Marketing and sales: It is related to the products that are available for the products by considering marketing and sales.  The marketing and sales strategy of the company is to save money in every possible way.  The company has turned the market by considering the other competitors like to follow the marketing strategy of reducing the cost and to enhance the saving pattern of the customers (Berman, 2015).

• Human resource management: Human resource plays a great role in conducting the routine activities of the company. Without efficient employees, it is not possible for the employees to accomplish goals and objectives. Aldi recruits efficient employees so that the satisfaction level of the customers can be enhanced (Voigt, Buliga and Michl, 2017).
• Technology development: It takes into consideration the information off the management and also the knowledge of the organization. Aldi uses latest technologies like latest billing machines so that proper services can be provided to the customers (Jakubovskis, 2017).
• Firm infrastructure: It is related to the support sections like quality, planning and senior management.  The company tries to manage all the information of the organization in a strict way.  It is seen that the company give less information to the public.  It emphasizes on maintaining the quality of the product and also considers top management so that proper decisions can be taken (Crawford et al., 2017).
• Procurement: It is related to the activities that are conducted by the human resource management of the organization. The human resource management gives assistance to its customers by doing billing on time (Gassmann, Frankenberger and Csik, 2016).

By considering the competitive implications from resources there are resources and capabilities that are known as a strategic requirement. The strategic strength is the major competencies possessed by the company and it has a sustainable competitive advantage that can help to enhance the profitability and market share (Mitroulis and Kitsios, 2015). The strategic requirement is to offer good quality products at fewer prices and also the size of the store should be good so that the activities can be conducted smoothly. The resources and capabilities lead to below average returns underperformance implications. The strategic weakness can be opening hours and product differentiation (Kew and Stredwick, 2017).

The competition level in the grocery industry is very high.  Coles and Woolworth are holding a large market share of 80 percent. There are also many global and local retailers in the Australian market who offer similar types of products and services.

In the recent scenario, the Customers in Australia do not have any substitutes for products that they buy from grocery stores. The customers are dependent on these products only. The threat of substitute products is high as it is seen that customers are moving away from packages of products and also towards local products that encourage the specialty at particular stores.  The switching cost can be low if the customers are not satisfied with the product they are switching (Grant, 2016).

Corporate and Business Strategies of Aldi

There are some products like biscuits that have many suppliers where the supermarkets can easily source their products. The bargaining power of supplier is low. As there are more online businesses like Ozsale, the suppliers are achieving more avenues so that products can be distributed. The bargaining power is low as there are many suppliers who offer same services and provide products at low price. Backward integration of large retailers like Aldi has less bargaining power of suppliers (Mortimer, 2016).

It is seen that customer's preference and attitude have changed the industry.  Consumers have more expectation and demand from retailers. Buyers can easily switch from one retailer to another just because of the close similarities of products given to many retailers.  The decisions of the consumers are made by considering the prices of the products.  The expectation level of the customers is more from retailers as it is seen that the customers purchase the products that are attractive and unique. Woolworths and Coles have more than 80 percent market and Aldi has only 12 percent market that creates difficult to achieve large market share (Ododo, Mulholland and Turner, 2015).

Aldi has many competitors like Tesco, Asda, plus and Dia. It is seen that new entry has to face the level of competition with an existing supermarket. It is seen that threat of new entrants is high as grocery industry can be easily copied by the other competitors. Also, there are many concerns if legal requirements are taken into consideration when entering the Australian market. It is important for the company to be prepared as there is a rise in the new entrants to the market (De Haas, Herold, and Schaefer, 2017).

The company adopts a product that is feasible and helps to offer a variety of products to the customers.  It is best for both customer and the company. It is seen that the company also have effective promotional strategies that help to inform the customers about the products and services offered to its customers.

Aldi emphasizes on attaining the overall goals and objectives by taking into consideration specified target audience. Aldi can also open the store in the center of the city so that the customers can easily purchase the products. It is seen that if there is differentiation in the strategies of the company then large market share can be grabbed easily (D. Banker et al.,  2014).

The company emphasizes on market development so that the activities can be conducted in a proper manner. It is seen that it is important for the company to enhance its operations in many countries. The company is in 18 countries and should focus on enhancing the market share by considering strategies like promotion (Caritte, Acha, and Shah, 2015).

 The company should emphasize on product development by taking into consideration unique services so that development can take place in a proper manner. It is seen that if a company want to develop a product then it is important to focus on unique services that can be offered to the company (Solberg, 2017). Aldi can easily try to improve the interior of stores to attract more customers towards the products and services offered by the company. It is seen that the company can bring new changes so that overall objective can be achieved (Chatterjee, 2017).

Recommendations for Enhancing Overall Outcomes

 In this step, the company should focus on acquiring the competitors so that profitability can be enhanced. If the company offer unique products at low cost then it can be easy for the company to acquire a large market share in an effective manner.

In this factor, it is important to be the own supplier so that the distribution of products can be done effectively. The company has a good distribution channel that helps to enhance the overall profitability in a proper manner.  The company should be the own supplier by taking into consideration acquisition. It is seen that Aldi has its own outbound logistics. The company has its own personal transport system so that the products can be reached easily to its customers (Turban et al., 2018).

The business outcome can be enhanced if the company emphasizes on improving the services and offering effective services. It is seen that for Aldi the company should adopt assortment strategy so that product that is offered by the company can be differentiated. It also helps to achieve overall profits so that the company can achieve success in long-term.

Aldi should also emphasize on the new strategies of moving into other regions by taking into consideration store roll out programs as it will assist to enhance the overall profits and help the company to compete in the competitive environment.

It is also essential for the company to offer good quality at low price.  It can be known as a sustainable competitive advantage for the organization over its competitors. It is seen that to use the technology is not the core value of Aldi but it is important to use the technology by considering proper strategies so that the products and services that are used can be more competitive and unique.

Aldi is known as one of the top stores in the grocery sector so it is important that the company should look towards giving advertisements and publicity so that more consumers can be attracted and existing clients can achieve the advantage of low price by considering good quality.

It is also important for the company to encourage repeat purchases by simplifying the process and also by ensuring that level of stock can be maintained by considering distribution channel.

Market expansion strategy is also one of the strategies that can help to achieve large market share.  It helps to expand into the new segments so that large and new consumer group can be captured. Product line expansion strategy is achieved by the company by taking into consideration special buyers program so that the products that range from electronics to clothes can be sold with daily grocery items at a low market price.

Digital marketing is also the strategy that plays a great role in the recent environment. So it is important for the company to emphasize on the increase in the online consumerism.  To evaluate and understand the activities Aldi should consider online activities so that RACE model can be considered. For Aldi, the digital marketing strategy is based on the email marketing.  The company does not conduct online sites to sell products and services. It is important for the company to focus on digital marketing so that large audience can be grabbed effectively.

Competition in the Grocery Industry

Aldi should also consider frontal attack strategy in the market so that the segments that are not unaddressed can be considered.  The market challenger is important to give a challenge to the established organization as a sustainable competitive advantage. The company maintained a competitive advantage by considering highly efficient activities that facilitate cost leadership strategy. This strategy can be communicated by considering television advertisements where the information compares the product that is of low price (Watkins, 2015). 

Conclusion

By analyzing the report it is concluded that the company has a good position in the grocery store industry by giving high-quality products at low price. In this report value chain of Aldi is discussed in which the primary and secondary activities are taken into consideration. It is important for the company to emphasize on the activities as it will help to enhance the overall profitability. In the next phase of the report, business level strategy is discussed in which porter five force model is explained. In the last phase, corporate level strategy is discussed in which it is important for the company to implement the strategies that can help to compete in the competitive environment. In the last phase, recommendations are given so that business outcomes can be improved. It is important for the company to consider digital marketing as it helps the company to enhance the market share.

References

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