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Aldi

ICMR Case Collection

Icfai Centre for Management Research

Aldi: A Cheap Retail Giant's Distinctive

Organization Practices

BSTR252

This case was written by Shirisha Regani and under the course of S i9000. S. George, Icfai Centre for Managing Research (ICMR). It was compiled from released sources, and is intended to be used as a basis for discussion in the classroom rather than to illustrate both effective or perhaps ineffective controlling of a management situation.

For use by students of Icfai Adaptable Learning programs.

Not to always be reproduced or distributed in any form or perhaps by any means

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BSTR/252

Aldi: A Low-Cost Retail Giant's Distinctive

Business Practices

" There are individuals that say there is absolutely no room to compete with Wal-Mart on selling price, but Aldi has figured out a way to undertake it. ”

– Russ Jones, Vice President in Cap Gemini Ernst & Young, you in 2002. 2 " We undoubtedly recognize Aldi as being a difficult competitor. ” – Expenses Wertz, a spokesman pertaining to Wal-Mart, in 2004. 3

" All of us run our businesses incredibly efficiently and reflect that in the value. There is no these kinds of thing as being a free company bag or a free devotion point. The cost is always passed on to the customer. ” – Tony adamowicz Baines, Brain of Buying to get Aldi in britain, in 2006. 4

THE LAND OF THE HARD DISCOUNTER

In This summer 2006, Wal-Mart Stores Inc. (Wal-Mart)5, the biggest and most effective retailer in the world, announced that it could close down its price tag operations in Germany and exit the market. At the time of the exit, Wal-Mart operated eighty five stores in Germany. The company announced that it will sell the operations to German full major Local area AG6. The financial details of the agreement were not disclosed, but Wal-Mart reportedly reserved a $918 million pre-tax loss within the venture. six Other than the South Korean market (from which Wal-Mart exited in May 2006)8, Australia was the only other foreign market when the company experienced faced significant problems. Wal-Mart had entered Germany in 1998, but had found the going challenging from the beginning. The main reason just for this was the clout enjoyed by simply hard discounters9 like the Aldi Group (Aldi) and Lidl & Schwarz Stiftung & Co (Lidl) in the country. Wal-Mart, known worldwide for its low prices, acquired 1

a couple of

3

5

5

6th

7

8

9

A major international retail agency based in Rome.

John Karolefski, " Aldi, ” Brandchannel, July 10, 2002.

" The Next Wal-Mart, ” BusinessWeek, April 26, 2004.

Jean Midgley, " The Bargain Hunters, ” Times On the net, October thirty-one, 2005 Wal-Mart based in america, operated discount stores, blend discount and grocery stores, and Supercenters in most of the major markets around the world. In the financial year ended January 2006, Wal-Mart had sales of $315 billion dollars and applied more than 1 ) 8 , 000, 000 people. The corporation operated more than 6000 shops around the world. Metro was the biggest retailer in Germany. In the fiscal yr ended December 2005, the company had income of $65. 9 billion dollars. The company controlled around a couple of, 100 wholesale stores, grocery stores, hypermarkets, shops, and Press Markt and Saturn gadgets stores all over the world (although much more than two-thirds of its operations were in Germany). (www.hoovers.com)

" Wal-Mart F3Q07 (Qtr End 10/31/06) Earnings Call Transcript, ” http://retail.seekingalpha.com, November 14, 2006.

Wal-Mart leaving South Korea, selling the 16 shops to a local retailer, the Shinsegae Group, for $882 million. Hard discount shops are those that sell goods at rates that are also lower than these in traditional discount retailers like...

References: 2 . Steve Karolefski, " Aldi, ” Brandchannel, This summer 10, 2002.

3. Ruth Elkins, " Thrifty German born Shoppers Urged To Stop Ordering No-Name Goods, ” The

Independent upon Sunday, Aug 24, 2003.

5. Jack Ewing, " Test Traveling by air Tomorrow's Grocery stores, ” BusinessWeek, April 26, 2004.

6. " The Next Wal-Mart, ” BusinessWeek, The spring 26, 2005.

7. Larry Armstrong, " Trader Joe's: The Trendy American Cousin, ” BusinessWeek, April 21,

2004.

almost 8. " Lidl Set to Surpass Aldi in European Levels, ” www.foodanddrinkeurope.com, July twenty two,

2004.

being unfaithful. Chris Harris, Bryan Savage, " Europe's Top Stores, ” Beef Processing Global, September

twenty-three, 2004.

10. Manfred Lange zeit, " The important thing Drivers of Globalization and International Advertising, ”

Yearbook of Marketing and Consumer Exploration, 2004.

11. David Bosshart, Jose Luis Nueno, Daniel Staib, " The Age of Low-cost, ” www.gdi.ch, 2004.

12. Paul O 'Keeffe, " Surprising Customers Proves a surprise Tactic, ” www.bbc.co.uk, Apr 11,

june 2006.

13. " European Low cost Initiative, ” Nestle Investor Seminar 2005, www.nestle.com, 06 8,

2006.

14. Robert Duff, " Hard Discounters Raising the Retail Club In The european countries, ” DSN Retailing Today,

June twenty seven, 2005.

15. André Pantzer, " Aldi and Lidl Stir In the Retail Business, ” Credit rating Suisse EMagazine, July

twenty-five, 2005.

17. " A language like german Food Discounter Aldi Opens in Switzerland, ” Business Deutsche Welle,

October 28, 2005.

18. Carol Midgley, " The Great buy Hunters, ” Times On-line, October 23, 2005

19

Business Content Online, January 22, 2006.

Times, July 28, 06\.

22. Allan Hall, Jeff Bawden, Debbie Butler, " Wal-Mart Brings out of Germany for Cost of

$1bn, ” Times Online, www.timesonline.co.uk, July 30, 2006.

twenty-three. Maria Sheahan, Thomas Mulier, " Wal-Mart Joins Rivals in Retreating from German

Retail Market, ” www.bloomberg.com, September 28, 2006.

25. " Best Value Supermarket: Aldi, ” www.associatedcontent.com, March 9, 06\.

26. " Wal-Mart F3Q07 Earnings Call up Transcript, ” http://retail.seekingalpha.com, Nov

14, 2006.

27. Marc Sachon, Test Mitchell, " Aldi: A Supermarket Which has a Reason to signify, ” IESE

Insight, 06\

28. " Richest Germans: Germany's Grocery store Giants, " www.dw-world.de (Accessed January

16, 2006)

29. Marc Sachon, Jordan Mitchell, " Aldi: A Supermarket With a Explanation to Celebrate, ” IESE

Information, 2006

35. http://www.forbes.com/lists/2006/10/3VFF.html (Accessed on January 16, 2006).

31. " Retail Sector: Time to Take Action, ” www.hk24.de/servicemarken/ueber_uns/hamburger_

wirtschaft/englische_artikel/englisch_12. jsp (Accessed upon January 23, 2007)

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