Faculty of Economics and BusinessThe University of Sydney

Individual Assessment Cover Sheet(To be completed by students, signed, dated and attached to front of assessment)

Last name: TAO

First Name: Ye (Tom)

ID Number: 306257173

Email: Ytao6290@usyd.edu.au

Unit code: Work 6002 Unit name: Foundations of Strategic Management

Lecturer/Tutor’s name: Leanne Cutcher Lecture/Tutorial day/time: Monday 6:00-9:00

Full assessment title: Assignment B: Identify, evaluate and recommend no more than two key strategic

Initiatives our firm should pursue over the next 18 months Aldi Australia Word limit of assessment: 1500 Word count: _______________________________

Due date: 12 / May / 2008 Time & date submitted: ________ 12 / May / 2008

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…Ye Tao… …12…/...May.../…2008…Student Signature Date

Individual Assessment Cover Sheet Semester 2, 2006 (Revised 28/07/06)

TABLE OF CONTENT

1. Introduction

2. Strategy for sustaining growth

3. Short run strategy initiative

4. Long run strategy initiative

5. Conclusion

6. Reference

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1. INTRODUCTION

According to the analysis of report A of Aldi Australia, the growing popularity of private

label products can be viewed as both a threat and an opportunity fro Aldi. Further more

considering together with Aldi’s strength and weakness, it is widely believed that from both

tangible and Intangible resource point of view, Aldi should adopt new business strategy to

sustaining growth and maintain competitive advantage in not only Australia market but also

world widely. This report will address key business strategies that Aldi should adopt both in

long run and short run, namely merge, acquisition and brand empowerment. However giving

the capability of coordinating its resources and abilities to sustainability maintain the

advantage. These strategy are believed hard to implement and hard to execute. On the other

hand compare with Woolworth and Coles and other Australian grocers Aldi is a new entrant

who is still in its growth stage of business cycle, therefore all these strategy initiative are

made for purpose of sustaining growth.

2. STRATEGY FOR SUSTAINING GROWTH

There are many strategies to sustaining growth in broader view, however to address problem

in particular with Aldi and Aldi Australia, suggestions can be narrowed to: “Strengthen the

execution infrastructure by investing in 'safe bets’, Initiate a process to identify strategies

with a high probability for success, and Customer-Focused Growth Strategies(Liabotis,

Bill,2007) in another word, to invest means to purchase more lands for future development

and expansion, which is now in good favor of foreign groceries like Aldi . Given the fact that

Australia government is changing regulations and foreign investors would now allowed up to

five years to develop vacant land. (Jessica, SMH 2008) From Intangable point of view ,

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further develop of home brand is a aproprate startegy in short run.Mr. Baker argued that

"The strategy will be to continue with major investment in developing relevant and new

private label products to the market", "since the first generic brands focused on providing

low quality at low prices, which is no longer what consumers want." (IBIS World 2007)

Aldi as a pioneer on ‘home brand’ who should act fast on developing second generation of

high quality and low price ‘home brand’ for customer.

3. SHORT RUN STRATEGY INITIATIVE

According to IBIS World, Aldi’s private label products are becoming increasingly popular

with Australian households. It is widely believed that higher interest rates will affect

people in particular lower-income households, more and more people may begin shopping

at Aldi (IBIS world, 2008). However Aldi has a policy in Germany of not advertising, except

weekly newsletter of special prices called Aldi informiert.In Australia Aldi used two page

coloured advertising particularly in local suburban give-away newspapers. They have also

delivered the full colour leaflet used in store to householders' letterboxes in store localities.

( Aldi, Wikipedia ,2008) This report suggest that for short run Aldi Australia could adopt

startegy to promote brand names and service quality by developing second generation of

home brand and investing in commercial Advertising on Television and Radio. The key for

this strategy is to invest funds in intangible assets, however It will be very hard to implement,

and costly to execute.

Despite significant growth in recent years, supermarkets' "house brand" products have

failed to live up to expectations. IBISWorld General Manager (Australia), Mr. Jason Baker,

says that several years ago (2004), the supermarket industry predicted the house brand

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segment would contribute 30% of overall sales by this year. But it hasn't happened.

Shoppers haven't taken up the private label cause with quite the enthusiasm retailers

envisaged. (IBISWorld 2008) It is notable that in Australia brand loyalty and quality of

service still plays important role in the opinion of consumer. Therefore to spend on

Advertising is very necessary to stores like Audi although the business philosophy is

focusing on lower cost.

Consequently, adopting a differentiated strategy is necessary. Furthermore the benefit of

this strategy is switching Aldi from global strategy to transformational strategy which

integrate variety of Australia society, exploit experience-based cost economies of Australian

and transfer distinctive competencies within the company, building on the stage of

advertising ,

Second generation of ‘home brand’ will needed to back up the promotion, however by

promoting Aldi’s brand and service, it will not necessary influence cost , according to L.

Hamson: “The limited number of products enables Aldi to leverage its impressive buying

power and to control the Cost of its products by buying in large quantities. According to

Brands, Aldi has 30 to 100 times the Buying power of Wal-Mart.”(L. Hamson 2003). With

such strong buying power, developing second generation home brand is much easier in

contrast with other competitors. However implementing such strategy will consume huge

resource and time, and the coordinates of department are also need to make it happen, but it

is necessary and vital for Aldi to adopt such short term strategy on promoting brand quality

and develop second generation of home brand in order to switch to the ‘next gear’ of

competition in grocery industry.

4. LONG RUN STRATEGY INITIATIVE

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It is argued by German market researchers: they have found evidence that discounters are

nearing their peak and the rapid upward trend is weakening and possibly even grinding to a

halt. The renowned Swiss Gottlieb-Duttweiler-Institute even wants to have determined, that

consumers are desperately unhappy about rock-bottom prices. And if discounters aren’t

doing too good other vendors hope that brand products are going to win with consumers.

(Franz M. Schmid-Preissler, 2006) Currently, a climate of change is prevailing in the

German food trade. The market has been stirred up through mergers and takeovers. This

wave will come to Australia sooner or later. Therefore new strategies are necessary for long

term to address this problem. It is suggested that acquisition of more land and properties are

the next vital strategy for Aldi in order to expand and growth in Australia in long run.

Domestically speaking Woolworth and Coles have dominant market of groceries; however

with new government ruling of foreign company on land development, it is rare opportunity

to develop core competitive advantage, by taking this chance and investing heavily on real

estate. A consequent pursuit of this strategy accounts for creating Aldi’s own competitive

advantage which was claimed by Barney that such competitive advantage can only be

founded in rare, imitable and non-substitutable resource that already controlled by the firm.

(Barney, 1991; 117)

Internationally speaking, Aldi as market leader of discounters are facing new competitors.

“The takeover of controlling interest of the discounter Plus through Edeka marks the

beginning of the creation of the third largest low-cost supplier on the German market.

Tengelmann Group, which is still holding a minority interest of the discounter plus, is

merging in the discount segment with Edeka and its subsidiary Netto. With a network of

4,000 branches and a turnover of approximately € 11 billion, this is going to be the third-

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largest discounter after Aldi and Lidl.”(Brief Letter 22, 2007) in respond to that, More

takeovers and acquisition should be proceeding as a long run strategy, considering in

conjunction with Changing competitive landscape of retail sector of market, and the threat of

other retail giants like Wal-Mart, Aldi wouldn’t survive by staying on its original track,

further more by acquiring new shops and inject Aldi’s unique culture which can’t be easily

obtained are key for this strategy. Furthermore, considering the fact that geographic factor is

the main reason that other international competitors haven’t enter Australia market, however

from long term point of view, it is a matter of fact that they will get their step in Australia.

As a result adopting developing strategy as mentioned above will help Aldi to pre-reserve

locations that most suitable for retail shop of its supermarket. To summarize from long run

point of view Aldi need to adopt developing strategy such as acquisition of vacant land and

independent grocery shops in Australia and internationally.

5. CONCLUSION

In conclusion considering all the factors and summarizing all the data from internal and

external analysis Aldi shall adopt short term strategy of promoting brand names and service

quality as well as developing second generation of home brand with quality and low price

within the next 18 month, given Australian retail giants have already launch their campaign

of private brand product. On the other hand from long run point of view, more funds should

be invested in property and acquisition for the purpose to keep sustainable competitive

advantage as well as benefiting future growth. In contrast with other current strategies

and considering capabilities of coordinates these strategies are difficult to implement

and execute, however it is vital for Aldi to adopt it before it is too late.

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Reference

Aldi, Wikipedia http://en.wikipedia.org/wiki/Aldi last modified on 10 May 2008, at 22:20 (accessed 5May 2008)

ALDI Australia, http://aldi.com.au/ (accessed 1.5.2008).

Brief Letter 22 week 52 2007 Literature for business leaders published by SchmidPreissler International Strategy Consultants at the Lion’s House D-83703 Gmund am Tegernsee http://www.briefletter.com/BL2007/BL07_22_en-Sale-Sale-Sale-Supermarkets-Discounters-and-Aldi.htm (accessed 5 May 2008)

Data monitor “Food Retail in Australia” Industry Profile, May 2006 Reference Code: 0125-

2058

Food Magazine House brands: the future 26-Oct-2007http://www.foodmag.com.au/articles/House-brands-the-future_z133749.htm (accessed 3May 2008)

Franz M. Schmid-Preissler, BriefLetter 18 Week 41/2006 “Wal-Mart and Aldi, often a nightmare for suppliers, for consumers they are shops with decent goods at advantageous prices.” http://www.briefletter.de/html/BL06_18_en-Wal-Mart-Aldi-nightmare-suppliers-consumers.htm (accessed 4 May 2008)

IBIS world Press release RETAIL FORECAST FOR 2008, remember these names: Costco, TIVO, ALDI 2007/12/12 http://www.ibisworld.com.au/pressrelease/pressrelease.aspx?prid=110 (accessed 1 May 2008)

IBIS world Press release HAVE SHOPPERS SNUBBED HOUSE BRANDS 23/10/2007http://www.ibisworld.com.au/pressrelease/pressrelease.aspx?prid=102 (accessed 2 May 2008)

L. Hamson, ‘Inside Aldi’. The Grocer, 29 November, 2003, pp. 28–30.

Liabotis, Bill, 01-JUL-07 “Three strategies for achieving and sustaining growth”. Ivey Business Journal Online http://goliath.ecnext.com/coms2/gi_0199-7043681/Three-strategies-for-achieving-and.html#abstract (accessed 3 May 2008)

Jessica Irvine Economics Correspondent April 23, 2008 “labor’s deal to cut food pricies Sydney morning hearld , http://www.smh.com.au/articles/2008/04/22/1208742940194.html (accessed 3 May 2008)

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