Aldi: The European Hard Discounter's Strategy in Australia
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Case Code: BSTR296 Case Length: 15 Pages Period: 2001-2008 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.300 Organization: Aldi Industry: Retail Countries: Australia Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
"You can't go into an environment where successful people have been operating for 30, 40, 50 years and expect to do it successfully in a very short time. We are a different formula. We will be successful as well but that takes some time. Eventually we'll get our stores... because we are very long-term players."
- Michael Kloeters, Managing Director, Aldi Australia, in 2000.
"Our unique business model has helped us become one of Australia's fastest growing retailers, which is certainly an exciting place to be."
- Stefan Kopp, Managing Director, Aldi New South Wales stores, in 2008.
Introduction
In August 2008, The Australian Competition and Consumer Commission(ACCC) released a report on the competitiveness of retail prices for standard groceries. About Germany-based hard discounter, Aldi Group (Aldi), which operated 172 stores in Australia, the report said: "Aldi has been a vigorous price competitor since its entry into Australia and has the incentive and ability to engage in sustained price competition. This has had a dynamic impact on the grocery sector and brought about competitive responses from Coles and Woolworths on many products."
According to the report, Aldi's presence had had a positive impact in the neighborhood where it operated, "Aldi creates a strong competitive dynamic on the products it stocks and puts pressure on Coles and Woolworths to offer many of their private label products at prices not seen before Aldi's entry." Aldi, one of the largest retailers in Germany, entered Australia in 2001. Its stated goal was "to provide our customers with the products they buy regularly and ensure that those products are of the highest possible quality at guaranteed low prices."
Aldi was among the oldest retailers in Germany, and was considered to be one of the pioneers of the hard discounter concept - a format characterized by a high turnover on a narrow range of grocery items in a small space (Refer to Exhibit I for features of a Hard Discounter). Aldi with its 'no-frills' style of retailing maintained low prices through its low cost business model that eliminated all unnecessary expenses and passed on the savings to the customers. One of the biggest advantages of maintaining a simple operational set-up was that Aldi was able to keep its wage bill low by employing the minimum number of people. The company's motto was 'Top quality at incredibly low prices - guaranteed'. Aldi used the same business model along with a bit of localization in Australia and this helped it become popular with a section of the consumers and also to expand rapidly in Australia...
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