The case study suggest that Aldi is pressuring a cost leadership strategy, which is true as they have a limited product range and therefore can by the products in bulk. This creates a large buyers power, which the case study eluded to saying that Aldi has 30 to 100 times more buyer power than Walmart.
However, Aldi has also created a differential shopping experience as a side product of their cost leadership strategy. Consumers go to Aldi for the experience of Aldi shopping. The smaller stores, and the limited product range makes shopping for the consumer less difficult.
This differential shopping experience may explain why the store has fewer opening hours than it main competitors. They suggest it has smaller hours to save labour costs, however smaller hours is not necessary a good thing. It may not be a good thing because for every hour Aldi is closed, it is not generating revenue. This lost revenue may be greater than the labour costs of opening longer. The only argument that may counter not being open for longer is that Aldi is created such a differential shopping experience that its customers want to go to Aldi over other stores, so will alter than plans so they can shop at Aldi.
Aldi has got a philosophy of trying to offer “top quality at incredibly low prices.” They are doing this by cutting unnecessary operation and fixed costs down as far as possible, for example food is brought in on crates and not packed onto shelves. This saves cost of staff on not packing shelves. Aldi does many other cost saving procedures to ensure it is offering low prices. It is installed into their culture with staff being trained to have a strong focus on economic efficiency, which is accompanied by a passion for details.
Aldi has limited advertising costs and has no human resources, planning and other central functions to keep costs lean.
The article suggests that the most important decentralization was when Aldi was divided by the two brothers into Aldi North and Aldi South. It suggests that it allowed both brothers to pursue their own strategic ideas rather than trying to compromise. It suggests that the decentralization allowed the brothers to exchange experience i.e. that one operation could try a new strategy while the other waited to see how well it worked. However, I would say that the reason while they could experiment and exchange information so well was that they both had similar strategies in running the two divisions. If the divisions had extremely different strategies say one had a product range of 450 products and the other had a product range of 5000 products, the exchange of experience would be less worthwhile as one experiment might work well for one division by not the other.
Aldi is within a very competitive market within a Australia, with many large players. Currently it has advantages in differentiated shopping experience and cost leadership on many products. If Aldi remains successful in Australia, in the medium term there is a real threat of other competitors trying to copy their strategy or new players entering the market. The best strategy for Aldi is to gain as much market share as possible, especially in the market of customers who prefer the shopping experience Aldi offers. Once Aldi has got a large chuck of this market it will most likely have more economies of scales for any new entrants or competitors who try and copy Aldi’s strategy.