Aldi is expanding rapidly in the US by opening 600 new stores in the next 3 years. They have a strategic focus on small store sizes and private label products to keep costs low. Aldi has over 1500 US stores and $10 billion in annual sales. Their competitive advantages include highly efficient operations, limited product selection, and low prices.

1. STRATEGIC MANAGEMENT
April 25, 2016
Austin Kilpatrick & Izmir Vodinaj
Prof. Vasudevan Ramanujam
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2. Current news: Expansion
The global village and how Aldi fits in it
Aldi in the US: Industry Analysis
Aldi’s competition in the US
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Aldi’s Interior Analysis
TODAY’S STORY

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THE EXPANSION STRATEGY
Fresh & Easy
By TESCO
California, Nevada, Arizona
Founded in 2007
Opened 200 stores in a year
Bankruptcy in 2013
Target
133 locations in Canada
Supply Chain Issues
Over 2 billion in losses
ALDI
Rapid Growth
Small store size
600 new stores (next 3
years)

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THE GLOBAL GROCERY MARKET
2014 Sales Revenue (Largest Grocery Retailers)
ESTIMATED $2.5 – $4.5 Trillion
16%
4%
4%
3%
3%
2%
2%
67%$2000 B Others
$55 B AEON
$70 B Metro Group
$80 B Aldi
$93 B Tesco
$108 B Kroger
$118 B Carrefour
$476 B Walmart (USA)
Compare it to Automotive $9 Trillion

5. ALDI AROUND THE WORLD
5
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GERMANY 1913
Expanding since 1962
14 countries
Over 8500 stores
$64 billion in sales
Came in 1979
35 states
Over 1500 stores
$10 billion in sales
Came in 2001
Over 400 stores
$6.4 billion in sales
80% 13% 8%
Europe US Australia

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ALDI IN THE US: COMPETITION
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24.5%
12.9%
7.6%
4.3%
3.9%
3.4%
2.4%
1.5%
0.0% 10.0% 20.0% 30.0%
Walmart
Kroger
Costco
Publix
Albertsons
H-E-B
Whole Foods
Aldi
Market Share 2014
1500
399
363
2200
1115
481
2600
4500
StoresStrategy
Low Price; Efficiency
Organic Foods
Customer Service/Local
Mergers and Acquisitions
Customer Loyalty/ Regional
Membership Based
Premium Private Label
Low Price/One stop shop

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US MARKET CONDITION
Political
Food Subsidies
Minimum wage changes
Environmental
Ethical Sourcing
Waste Disposal
Electricity/Green Initiatives
Technological
Online Sales
Electronic Payments
Legal
Labeling Laws (Organic/
Natural)
Compliance programs
Socio-Cultural
Eating Trends (Organic)
Brand Names
Consumer Loyalty
Economic
Resilient Industry
Low skill labor
Lower labor costs

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US INDUSTRY ATTRACTIVENESS
Threat of
Entry
High start-up cost
Low knowledge
Growing Markets
Power of
Substitutes
Prepared foods
Higher Costs
Bargaining Power of
Suppliers
Brand Names
Integrated Supply Chains
Bargaining Power of
Buyers
Price sensitive
Lots of options
Intensity of
Rivalry
Lots of Competition
Brand Loyalty
Geographic Location

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ALDI’S VALUE CHAIN
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Manufacturers
Distribution
StoreSales
Local
Suppliers
National
Suppliers
International
Suppliers
Manufacturers
Centralized
Distribution
Centers
Almost 90% of
products include
Aldi labels
Aldi stores all
over the
country
Well trained
and paid sales
associates
Supplier
Relationships
Social Media
Local Coupons
Website
Marketing

10. 10
ALDI’S COMPETITIVE ADVANTAGE
Valuable Rare
Hard to
Imitate
Advantage
Organized to Capture Value
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BRAND NAME
EFFICIENCY
LABELLING, EASY ACCESS
LABOR UTILIZATION, DISTRIBUTION,
BAGS, CARTS

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ALDI’S STRUCTURE
Store
Management
Divisional Office
Support Staff
District
Manager
District
Manager
District
Manager
Warehouse
Employees
Warehouse
Supervisors
Director of
Administration
Director of
Purchasing
Director of
Operations
Director of
Real Estate
Director of WH
&
Transportation
Store
Management
Store
Management
Store
Employees
Store
Employees
Store
Employees
• FUNCTIONAL
• MECHANISTIC
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Vice President

12. ALDI’S STORE EXPERIENCE
AVG US Grocery Store 45,000 sq ft
AVG US ALDI store 15,000 sq ft
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13. ALDI’S SWOT ANALYSIS
Efficiency
(LABOR UTILIZATION, DISTRIBUTION,
BAGS, CARTS)
Quick shopping experience
Brand name
Limited goods
Customer service
Quality perception
Continue expansion
Use of technology
Customer relationships
Being noticed by large players
Changes in fuel prices
Online shopping
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Strengths Weaknesses
Opportunities Threats

14. A FINAL WORD ABOUT ALDI
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Aldi strategy has proved to be successful in developed
markets worldwide
Aldi should pay close attention to consumer trends
Aldi should monitor it rapid growth strategy

15. Questions?
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STRATEGIC MANAGEMENT
April 25, 2016
Austin Kilpatrick & Izmir Vodinaj
Prof. Vasudevan Ramanujam

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APPENDIX 1: ALDI US DIVISIONS

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APPENDIX 2: PESTEL
Factor Political Economic Socio-Cultural Technological Ecological Legal
These trends are
FAVORABLE to the
industry
Farm Subsidies,
Low fuel costs
Low fuel costs Health food and
consumer
consciousness
Point of sale
systems, inventory
management
Less Packaging Accepting WIC
and Food
stamps,
These trends
exert are of
NEUTRAL impact
on the industry
Import Costs,
Zoning laws
Economic
Fluctuations,
Exchange rates
Employees Storage, less
packaging, Self-
Checkout
Seasonal
Products
Food Safety
Standards,
Health
Regulations
These trends are
UNFAVOURABLE
to the industry
Selling
regulations,
licenses
Market
Saturation,
Competition
Wages paid Online sales High carbon
emission,
Low Fuel Costs
Food Labeling,
Organic/ GMO
Labeling
Overall impact
of these trends
Favorable Neutral Favorable Neutral Neutral Neutral
Overall
conclusions
from the above
PESTEL
In general the grocery industry is favorable, because it is a very stable industry which tends to remain stable
despite varying economic conditions, and technological advancements. The companies that are able to adapt to
new trends, are able to be successful in a variety of locations, across demographics, and despite new laws or
regulations.

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APPENDIX 3: FIVE FORCES
Force -> Threat of Entry Bargaining
Power of
Suppliers
Intensity of
Rivalry
Bargaining Power of
Buyers
Power of Substitutes
These factors increase
this force ->
Limited specialized
knowledge
Name brand Products Lots of Competition Lots of competition
Very price sensitive
Lots of Restaurants
These trends exert are
of NEUTRAL impact on
this force ->
Number of stores will
likely grow with
increasing
populations
Integrated supply
chains, Consumer
Trends
People tend to shop in
small geographic area
Brand Loyalty,
Shopper Experience
Consumer Trends/ Health
Concerns
These factors reduce
this force ->
Expensive to start Store Brand Products Brand Loyalty Location/ convenience of
stores
Lower Cost
Overall strength of this
force,
LOW, MODERATE, HIGH
Fairly Low Medium High Medium / High Medium/Low
Overall conclusions
from the above Five
Forces analysis ->
The Grocery industry is hard to enter because of the large number of competitors and the high startup costs of operating a
large store. Aldi is in a decent position because it has a number of store brand products which gives them some power over
suppliers. Competition in this industry is high, and buyers are price sensitive and generally willing to take the lowest cost
alternative. It is fairly hard to substitute the grocery industry for anything other than restaurants, which tend to cost more and
be less healthy. In general it is a hard industry to enter, but once established competitors can do very well.

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APPENDIX 4: MANAGEMENT
Jason Hart, Chief Executive officer, Aldi Inc.; He has been the Chief Executive Officer of ALDI Inc.
since April 1, 2015. Mr. Hart served as the Co-President of ALDI Inc., until March 31, 2015.
Charles E. Youngstrom, CO-president, Aldi Inc.; He is also known as Chuck, serves as Co- President
of Aldi, Inc.
David Behm, Co-president, Aldi Inc.; He serves as Co-president of Aldi, Inc.
Scott Patton, Vice president; Scott Patton serves as Vice President of Batavia Division at ALDI Inc.
Bob grammer, Vice president of Center Valley Division; Bob Grammer serves as Vice President of
Center Valley Division at ALDI Inc.

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APPENDIX 5: VRIO ANALYSIS
Resource /Capability
/ Competence
Valuable? Rare? Imitability Organized
to capture
competitive disadvantage,
parity, or superiority?
Tangible -
Physical Stores YES NO Easy to Imitate YES Advantage
Inventory YES NO Easy to Imitate Neutral Parity
Store Brand Products YES YES Somewhat hard YES Advantage
Transportation Fleet YES YES Easy to Imitate Neutral Parity
Intangible –
Brand name YES YES Hard to Imitate YES Advantage
Low cost operations YES YES Hard to Imitate YES Advantage
Customer Experience YES YES Hard to Imitate YES Advantage
Staff usage YES YES Hard to Imitate YES Advantage
Capabilities –Low Costs YES YES Hard to Imitate YES Advantage
Environmental Policy YES YES Hard to Imitate YES Advantage
Inventory Management YES YES Hard to Imitate YES Advantage
The firm’s distinctive
competence, if any
Aldi is very good at providing low cost groceries, they have very lean operations and do not require a lot of employees which keeps cost
down. Because of store size they have a limited selection, but offer the lowest costs on those items. Aldi is good at ensuring their stores run
effectively, and they are hard to imitate because of their unique stocking and employment models. Their smaller store size also allows them
to expand to areas that don’t have a ton of space, or where large store spaces are extremely costly.

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APPENDIX 6: MARKETING CONTENT

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APPENDIX 7: SWOT
Strengths Weaknesses
● Low Cost Offerings
● Lean Operations – Low costs
● Good quality products
● Positive Supplier relationships
● Good environmental policy
● Innovative sales model
● Store Layouts
● Store Locations
● Variety of goods offered
● Customer service
● Size of stores, ability to stock
● Quality perception
● Consumer Familiarity
● Adaptability to technology
● Store aesthetics
Opportunities Threats
● Expand US and Abroad markets
● Increase Brand Loyalty and awareness
● Expand into offering Organic and more fresh food options
● Expand urban presence
● Increase use of technology in stores to improve shopping experience
● Focus on customer relationships, and improve customer perception
● Develop employees aand cross train them to be effective at all in store positions
● Larger competitors offering lower prices
● Changes in fuel prices
● Changes in government food subsidies
● Changes in Import taxes
● Increasing abilities to shop online
● Consumers are very price sensitive
● Low Brand Loyalty

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APPENDIX 8: Industry Ratios

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APPENDIX 9: Industry Numbers

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REFERENCES
http://supermarketnews.com/aldi-usa-2015
http://www.mergentintellect.com/index.php/search/companyDetails/6940423
M, Paulo. "Aldi Marketing." Slideshare, 10 Oct. 2014. Web. 27 Mar. 2016.
Mergent Intellect. (n.d.). Retrieved February 23, 2016, from
IBIS World US. Web. 27 Mar. 2016.
www.aldi.com
http://aldiuscareers.com/about-aldi/divisional-structure
https://en.wikipedia.org/wiki/Costco
http://supermarketnews.com/aldi
Statista (Most of the data about industries and competition was taken from this database)
IBISWORLD (Most of the data about industries and competition was taken from this database)