Aldi being a hard discounter pursues the cost-leadership strategy. The primary focus of strategy development is towards pricing of their products which has made Aldi a popular grocery store. Aldi website states that they focus on their own brand which constitutes 95% of the products in store so as to remain independent. This allows Aldi set their own prices and introduce new products. While traditional supermarkets have in store 25,000-30,000 products Aldi Stores around 700 of the most commonly purchased items. Fewer products would allow Aldi to control the quality of the products which prevents products with lower shelf-life from being wasted.
As the manager stated that the key to Aldi’s business strategy is minimizing costs at all levels in the value chain. This is accomplished by the following ways:
- Aldi sets up stores in lower middle class suburbs. Once they attract customers it expands its business by opening new stores in the surrounding area. This is cost efficient since the cost of land is minimized by utilizing the aggressive site acquisition strategy. Also, the size of Aldi stores is small which allows it to be managed efficiently in terms of size of the warehouses.
- Aldi is open during the prime shopping hours i.e. 9am to 7pm from Monday-Saturday and 10am to 6pm on Sundays. This implies that Aldi is open for 19 hours less/week compared to the other supermarkets in the surroundings. This is beneficial as it cuts down the labour costs which would allow Aldi to utilize this amount towards the betterment of the stores.
- Staffing is kept minimal with just 5 employees including cashiers compared to the other supermarkets. This would lead to further cutting down on the labour costs.
- Shopping bags are not provided in Aldi stores and shopping bags should be purchased by customers which cost between 3p to 79p/bag. This leads to encouraging customers to bring their own shopping bags and an added purchase at Aldi.
- Unnecessary costs such as advertising is not undertaken by Aldi and promotion of their products is through catalogs, local press advertising and web updates. Even the minimum advertising includes mainly about ‘surprise buys’ which change weekly and are held until stocks last. This way Aldi makes sure that costs to maintain a marketing department is excluded and inclusion of ‘surprise buys’ is a strategy to ensure that stocks get cleared quickly, attract more customers by providing value services. Advertising of its premium product range would attract more customers who are willing to try which adds to allowing Aldi to grow as a leading retailer store which is their long term goal.
- Aldi aims at the upmarket customers or more generally the ABC1 class who like to benefit from the main theme of Aldi being a hard discounter. Since the prices of the products are kept low services such as coupons, sales, membership cards are excluded. Membership card facilities are provided by those organisations as a means to maintain customer relationship. Customers would return to benefit from Aldi’s product due to their low prices and good quality further enhancing the customer relationship.
Aldi following a quality discount model, it retains its position by powering ahead of their competitors in the UK grocery store business. Thus, strategy is important to ensure that stability of Aldi or in fact any organisation to the changing environment.
Missions and objectives of Aldi
The mission statement of any enterprise must be clear and represent its purpose of existence. It must stand for the ethical positions of an enterprise, image portrayed to the public and more importantly products and services provided by the enterprise (businessplans.org).
Aldi stands up to its Mission Statement “Spend a little, Live a lot “. This is a ‘one liner’ but supported by a set of values. The main mission of Aldi when it started was to provide low quality goods to the poor who could not afford to shop elsewhere and this is maintained even today.
Aldi has set some long term goals of expanding its business and being a leading company in the grocery business.
Aldi’s concept is “honest to goodness savings” and it aims at
- Streamlining operations by eliminating non-essential features of the goods to reduce costs.
- Adhering to stringent quality standards, so that Aldi products must match or even exceed the quality and the taste of the other leading national brands.
- Quality, taste and satisfaction are a double guarantee at Aldi. If the customer is not satisfied there is a provision for replacement of the products.
- Simplicity, consistency and responsibility are the three core values which are followed by the employees as they are the part of an expanding discount retailer.
- Binding framework consisting of employees, partners and suppliers strive hard as a single team to cope with the customer’s demands (aldi.us).
Aldi is also trying to provide employments all over the world. In return to the staff’s commitment, hard work, dedication and responsibilities, the enterprise aims at providing more salary and also job security. It also aims to have flexible working hours for employees for a perfect work and life balance.
3.2 Organisational structure
Organisational structure is defined as “the formal system of task and reporting relationships that controls, co-ordinates and motivates employees so that they work together to achieve organisational goals.” (Buchanan and Huczynski, 2004, p. 461). In general, large organisational structure is depicted in the form of a pyramid.
Figure : Organisational Structure (source: )
Drucker (1989, p.223) explains the importance of structure as “good organization structure do not by itself produce good performance. But poor organization structure makes good performance impossible, no matter how good the individual managers may be, to improve organization structure …… will therefore always improve performance.”
Hence, one can say that the structure plays an important role in achieving organisational success. The personality of every individual taking up a position in the organization structure also makes a lot of difference. Therefore good structure can be developed keeping in mind the human element.
Structure can be classified into four basic types. Robbins and Coulter (2001, p. 267) defines simple structure as “an organisational design with low departmentalization, wide span of control, centralized authority and little formalization.” Functional structure groups people with similar skills and similar job description. On the other hand, Divisional structure groups together people depending on the area of work (product, geography, customer or process). For example people working in a particular location would be considered a group under geographic divisional structure. Finally, the Matrix structure utilizes the benefits of the above two types to from groups based on projects. The group members in this type would generally belong to at least two formal groups. (Schermerhorn, 2001).
LearnManagement2.com (2010) defines the term Span of control as “the term used to describe the number of employees that each manager is responsible for.” It can also be noticed (as depicted in the following diagram) that having a broader span of control results in a flat structure and a narrow span of control leads to the formation of a tall organization structure.
Figure: Flat and Tall Organisational structures. (source: )
In the above figure organisation A represents tall-structure and organisation B represents flat structure.
Robbins and Coulter, (2001, p. 260) defines Chain of Command as“The continuous line of authority that extends from upper organisational levels to the lowest levels and clarifies who reports to whom.” Authority, responsibility and unity of command together ensure the effective functioning of the chain of command. The right to command sub-ordinates and expect the work to be done is known as authority. In the same way the obligation to perform any assigned tasks is called responsibility. When every member of the organisation takes orders and reports to only one person, it is known as unity of command. These keywords and their definitions have been adopted from Robbins and Coulter (2001).
Structure of Aldi
Figure :Aldi’s organisation Structure(Source: )
Aldi follows a divisional structure based on geography, without being too departmentalized. The divisional managers are completely responsible for handling the services/products provided by the store and running the store as if it were his/her own business. This also indicates that Aldi follows a decentralized structure where-in lower level managers are skilled and capable of making decisions all by themselves. As a part of decentralization which happened when Aldi was split into Aldi Nord and Aldi Sud in 1961, an autonomous corporation was formed for every sixty to eighty stores in the locality. This lead to the formation of a large number of autonomous corporations, which competed with each other in a healthy fashion to help the growth of the organisation. In a geographically dispersed organisation like Aldi this has proved to be a good decision considering the growth and success of Aldi ever since its formation. Due to the small size of the corporations there will be less bureaucracy and almost all issues can be handled at ground-level quickly using the knowledge of the local market.
Decentralised structure of Aldi allows regional managers to involve in decision making and also helps effective implementation of the company’s strategies. These views of a decentralised structure have been adapted from Robbins and Coulter (2001).
Aldi’s structure is a flat one when defined in terms of span of control. The Managers have a wide span of control, thus leading to a flat structure rather than a hierarchical one. Aldi does not have separate planning, human resources, public relations or marketing departments. Managers have clear specifications for goals, responsibilities and authority. It is the manager’s job to delegate these to the sub-ordinates in an efficient and clear manner. Random checks and evaluation of performance and results is done to maintain the culture and exercise authority.
The chain of command at any Aldi store is depicted in the following figure :
Figure: Chain of command at an Aldi store
From the above figure it is quite evident that the chain of command at any Aldi store follows unity of command. It is the job of the manager to delegate the sub-ordinates in accordance with organisational policies and rules.
3.3 Analysis of Organisational Culture
The culture of an organization depends on how a company delegates, its aim and ethics, traditions, policies in its employees to adhere to all management levels. It is defined as “The collection of traditions, values, policies, beliefs and attitudes that constitutes a pervasive context for everything we do and think in an organization” (Mullins, 2005). As culture is a sub-part of organization development, it all divides of how to work for a better perspective for the ‘betterment’ of the entire organization which wants to achieve success.
The primary motive of culture is to assimilate and control the entire organization with its different levels of management i.e. top, middle and ground/lower. Understanding the culture existing in an organization depends on what values and ethics are observed and followed by the employees. The underlying culture existing in an organization can be clearly demonstrated in the words of Buchanan and Huczynski (2004, p.643) as “the collection of relatively uniform and enduring values, beliefs, customs, traditions and practices that are shared by an organization’s members learned by new recruits, and transmitted from one generation of employees to the next.”
The traditions followed by the entire workforce definitely unify a bonding between the employees and to focus on more productivity, which the overall potential increases and ultimately results in maximum output. It also depends on how the ethics are delegated to the employees and those employees who will adhere to the following ethics will definitely become an asset to the organization. The employee’s individual preferences and choices may affect the whole ‘system’. But due to the liking created by the company, the employer will always be an asset to the organization as long as he or she delivers his or her part during working hours at the work station.
Pennington (2003) has defined the term corporate culture as “the integrated patterns of human behaviour that describe how we do things around here.” It is an effect on people’s mind and ‘psyche’ and basically winning their trust and building loyalty among the customers. To retain a customer, it needs a lot of convincing and capturing the interest of the end user. The corporate culture is more about handling the employer-employee relationship. The corporate are goal oriented and the main motive is profit. The approach towards customer retention is mainly important to build a customer base. The supermarket chain such as ‘Aldi’ wherein a customer, who believes and trusts the organization (retail) industry and is buying FMCG (Fast Moving Consumer Goods), the possibility of getting a lot of customers from this sector is high. It can shape and develop an employee and by providing guidelines and adequate training after his/her behavioural modification can help in improving customer retention.
The need for culture in every field is very much inter-disciplinary and is needed to be implied in every organization to ensure smooth functioning of the entire organization structure. The need for array of managers in the organization to uphold and maintain order in the entire workforce is a very big responsibility. The performance appraisal from time to time keeps the good performers motivated and gives them incentives according to their achieved targets.
Aldi, being a German company which has existed for around sixty two years has a reputed and trusted name all over the world. It is a world renowned brand and is entrusted by thousands of customers who rush to its door steps. The brand Aldi finds its inspiration from German roots. The entire belief and promoting the company to cut down costs, and avoid costs, it is cost effective. It delivers high quality luxury products at comparatively low prices available in the market. The strategy is to capture the consumer ‘psyche’ to afford the goods/services and continue its preparation to improve or maintain its quality. The stock of Aldi does name branded products on their shelves. They only rely on the quality control of their products. The price is often heavily discounted. To render products and services to the customer extensively, they have proved efficiency by relying on local suppliers and produce. Quality is never compromised on any basis.
Aldi is expanding and taking over new ventures and crossing boundaries. Its efficiency levels have fetched fame and many awards. By delegation of roles to be played by every employee and decentralization help in creating new possibilities and stay ahead in the rat race. The everlasting effects created by them strive for customer satisfaction helps the retail chain to develop, offer and create new products for the demand available in the market. The company on the whole is a very big commitment, towards satisfying the customer and taking care of his need/want and given special offers and discounted pricing helps the store. The absolute power of selling is all about the buying power of customer so it is all integrated and processed into a complete commodity.
3.4. Critical evaluation of Management & Leadership practices
Management is defined as “the process of working with and through others to achieve organisational objectives in a changing environment” (Krietner 2001, p 5). Main purpose of management is to bring people under single roof for getting things done by them. Management is basically a combination of arts and science. It is an art because it is a personal activity and it is a science because it based on vast accumulation of knowledge which is an aid to manager in performing a job.
Management mainly focuses on how to manage people, technology and money. Managers handle these to know their strength and weakness. Managers are responsible for decision making whether it is a long term or a short term decision. Managers take the initiative of executing the decisions with the help of top level management. Since manager do not work alone and the outcome does not depend on the individual performance, manager has different roles to play and they can be divided into three groups they are information roles, decision making and interpersonal roles (Mintzberg 1973).
The top management role is decision making. Even though the decisions are made at all the levels of organisation senior officials make crucial decisions. The consequences of their decisions may increase the productivity, increase the market share and sometime decisions might have the opposite consequences also.
Traditional approach to management is mainly concerned with the improvement of the management. These approaches were made to increase the productivity from individuals. The major contribution to this approach was from F.W Taylor (1856-1917). He is called the “father of scientific management” (L.J. Mullins 2005, p 69). Taylor believed that each individual has his own style of working just as there is a best machine for a particular job. Another approach was from Henry Fayol (1916). This theory mainly concentrated on managers. Since he was a manger he attempted to translate his experiences into practical ones. By doing this he believed that it would provide guidelines for a successful management. Fayol divided manager’s jobs into five different functions they are planning, organising, command, coordination and control.
Conflict or crisis in management is the one which covers all aspects of human life. If an organisation has to function smoothly it has to ensure that conflict or the dispute is settled quickly. If the conflict persists for a longer period it may lead to more misunderstanding and it has all the possibilities to hamper the progress of the organisation.
Aldi is one of the leading supermarket in U.K maintaining a good reputation and it has been one of the top retailer since it was found. This is all because of their management style that they have been following since decades. In Aldi they follow a traditional approach that is they are always with positive attitude and always give their best. They even strive hard to succeed the goals of the organisation. By doing this they feel that they can compete with other retailers in U.K. And regarding the decision making, manager has the power of controlling the store.
A set of rules and regulations are framed which has to be followed by the subordinates for the smooth functioning of the organisation. The staffs are made aware of the jobs which have to be performed on that particular day and also guide them how to perform these jobs efficiently. And they are also well aware of the time taken to perform a particular work and they do it as per schedule. Customer satisfaction is the main area where every organisation concentrates on. Employees know the customer requirements, if the customers are not satisfied with the service provided and are irritated, employees try to be as polite as possible to them and help them in solving their problem. If the employees are finding it difficult to handle the customer or to convince them they get help from the manager. Aldi employees are trained in such a way that if there is a conflict or any dispute in the organisation they try to solve it by themselves and if the misunderstanding still persists manager takes the initiative to sort out the issues between the employees.
Management is getting things done through other people in order to achieve the set organisational goals, whereas leadership is concerned more with attention to communicating, along with motivation and involvement of people. Leadership emphasises on interpersonal behaviour. However management and leadership are inextricably linked (Mullins, 2005)
Now we will consider the definition of leadership, traits to be an effective leader, leadership style in Aldi and then the general issues in leadership.
We can define leadership as “ the moral and intellectual ability to visualize and work for what is best for the company and its employees”(Lord Sieff). Thus leadership is the process of influencing and inspiring people to work hard to accomplish important tasks and achieve goals. Leadership is important as it is the leaders in the organization who make things happen, it is also important to keep people motivated and reduce employee dissatisfaction (Mullins,2005), leadership is the key to large-scale improvement.
Effective leadership lies in the way the manager uses his power to influence the behaviour of others, effective leadership must have cognitive, interpersonal and political skills, management skills and expertise (Yukl,2006). Leaders must also be able to envision, organize, socially integrate, and externally span to ensure that his team is effective and efficient in achieving goals, maintaining team cohesion, and keeping the decisions compatible with the organization’s needs. Leadership must be able share this complex monitoring with his employees/teams in order to track information on trends and developments (Yukl, 2006). Leadership should be able to also develop strategic plans to address the organization’s requirements by considering long-term objectives, the organization’s strengths and weaknesses, core competencies, current and new strategies, and outcomes of these strategies (Yukl, 2006).
The manager of Aldi plays various roles, one such interpersonal role that he plays is as a team leader in the store. As a leader the manager will and continue to his maximum ability to foster the best out of his group and encourage each individual to have a voice and an opinion. The manager who also plays the role of a leader builds commitment and enthusiasm needed for people to apply their talent fully to accomplish plans. Learning about the employee’s families, individual goals, likes, dislikes and pretty much everything in between about the employees personally will help gain trust and respect which is the main essence to sustain leadership.
Traits that are associated with leadership are drive, desire to lead, honesty and integrity, self-confidence, intelligence, job relevant knowledge(Robbins, 2002). The manager of Aldi possesses a few traits such as being honest with his subordinates, being competent, forward looking, inspiring and being credible (Stewart, 1963), these traits have made him an effective leader. A few personal traits that were evident in the manager were motivation to do a good job, the drive to achieve the targets and flexibility has had an additional effect to his successful leadership (Trait-spotting)(Ralph Stogdill,1974).
Leadership style is the recurring pattern of behaviour exhibited by a leader (Robbins,2002). Generally at the management level Autocratic style of leadership would be followed whereas at the managerial level Democratic/Participative style of leadership is followed. In Aldi Democratic style (Likerts leadership systems) of leadership is followed. This is because the manager has high concern for both people and tasks. Democratic leadership contributes to both quantity and quality of work for long periods of time. The manager shares the decision with the work group, encourages employees to be a part of decision making, supports the work effort of all, this inculcates trust within the employees and they respond with co-operation, team spirit and high morale leading to high subordinate satisfaction level,(this relates to the relaxed leadership followed by the manager of Aldi).
A Democratic manager keeps his employees informed about everything that affects their work and in this style of leadership the manager also requires to be a coach who has the final say but taking into account the peers opinion (www.essortment.com)
“When and under what circumstances a particular leadership style is preferred is the basic essence of contingency approach” (Schermerhorn,2001). We can relate Democratic style with the Path-Goal model by Robert House (Schermerhorn,2001) of the contingency approach. According to this model the leader assists his subordinates in achieving their goals and directs them, in order to ensure that their goals are compatible with the objectives of the organization(Robbins,2002).
Transformational leadership style “induces the employees to transcend their own self interest for the sake of the organization or team, as well as activating their higher order needs”(Yukl,2006).This type of leadership is quite evident in Aldi since the manager strives towards mentoring the employees to be more efficient, developing positive attitude and working hard to embrace success. These qualities also define the personality of Aldi. In Aldi the nominal interaction between the manager and the subordinates is done on a daily basis through phone calls and weekly personal visits to emphasize the four leadership behaviors. The artifacts and norms of the employees are achievement-oriented through regular performance reviews, discussion of matters and constant communication of goals. According to Leithwood(1990) the effect of transformational leadership is “uniformly positive”, this style is best suited to continually increase the morale and motivation of employees(Kevin,2006).
Aldi does not rely on the extensive use of power but sometimes power is essential for executive success (Schermerhorn,2001). Aldi manager uses reward power (Schermerhorn,2001), some of the incentives provided for good performer are more pay for employees who perform well and opportunities for promotion.
Common issues evident in leadership are in the use of power to influence work actions and other decisions, in building credibility and trust(which can be done by practicing openness, being fair, speaking out, speaking the truth, keeping promises), in empowering employees, gender differences in leadership, embarrassing individuals in public, altruistic motivation and difference in opinion(Robbins2002,). In Aldi, since the size of the staff is kept minimal there are no conflicts or issues experienced regarding leadership.
Leadership thus is a relationship through which one person influences the behaviour and actions of other people.
Appendix
B-SWOT Analysis
Strength:
- They rely on their home brands (95% of its products are home branded).
- Minimal staff, so it is easy to exert influence and improvise their ability.
- Record share of the UK grocery market at 29%.
- Since company follows low price strategy the valued capital can be utilized for the betterment of organization.
- Since Aldi perceives cost-leadership strategies, it can exert its reputation through hard discounting.
Weaknesses:
- Paying for shopping bags gets customers fruited.
- Less number of working tills.
- Threats from core competitors such as M&S and Lidl are established in the same surrounding.
- Unlike other supermarkets, Aldi focuses only on grocery business.
Opportunities:
- Concentrate on other services other than grocery, provision.
- A direct feedback from customer about the home branch would foster towards a better economy
- Taking over a new region, a definite number of customers are target marketed.
- To increase customer base, the store need to be run 24/7 so as to cope with the demand of the customers.
Threats:
- The awareness created by the competitors Ex.Tesco,Lidl are varying by the hour.
- The system followed by other stores, running 24/7, a lot of working customers are getting benefitted by this.
- The availability of the product or service is very important so the store has to have a complete product line.
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QUESTIONNAIRE
To the manager:
- The motto “buy a little, live a lot” defines values and beliefs. Elaborate on this?
Ans: People do not have to spend a lot to get quality and luxury products.
- What motivates you personally to be a manager of a retail organization? How do you describe your style of leadership?
Ans: Motivated by doing a good job, hitting targets, relaxed leadership to gain trust and respect from employees.
- What roles do you play as a manager in the store?
Ans: Team leader, finance, ordering as if it were my own business.
- What is your attitude towards the selling process? What do you recommend?
Ans: Customer satisfaction is the key. Availability, quality, freshness.
- How do you tap and mentor the artifacts and norms of the organization members towards organization goals?
Ans: Performance reviews, discussing matters, constant communication of goals.
- How does the chain of command work in your store?
Ans: Manager – Assistant- Deputy – Store assistant.
- What is the traditional management practice you follow?
Ans: Positive attitude, strive for success with targets.
- How do you plan a change in the store?
Ans: List and plan to ensure smooth change.
- How is your management style different from others?
Ans: Others may be very corporate.
- How do you define your style of leadership?
Ans: Democratic
- What long term goals have you set for Aldi?
Ans: To build the store to high level sales.
- Do you face any issues in leadership? If yes please elaborate.
Ans: No
- How often are the subordinates delegated in Aldi? Is there any room for consideration while forming strategies for Aldi?
Ans: All done by head office. No consideration by ground level.
- How do you interact with your subordinates, peers and superiors?
Ans: Weekly visits, daily telephone calls.
- How do you define the personality of your organization?
Ans: Efficient, cost saving and hard working.
- What are the set of shared beliefs and values that have developed in your organization over the span of 10 years?
Ans: Creating a brand discounter, we do not stock branded products; we rely on the quality of our products. Price is discounted. By being efficient in every area, running stores on low staff levels, thus making us a worldwide leading supermarket.
To the employees: (other than managers)
- What is the incentive based programs which are provided for a good performer (employee)?
Ans: More pay for employees of store which perform well (productivity bonus), opportunities for promotions and pay rises.
- What steps are taken when there is a conflict of ideas between a good performer and a bad performer?
Ans: If there was any sort of dispute, the manager would probably talk to those involved to resolve the problem as he saw fit.
- What training do the staffs undergo for handling a crisis situation?
Ans: All staff made aware of all emergency procedures. Location of fire extinguishers and alarm made clear. How to use the extinguishers and the different types, list of first aid in office, fire drills and emergency bells system for thefts, not to put yourself in any danger; handbook with emergency drill is available.
- In case of a faulty product, is there a replacement given or what procedure is used to satisfy the need of the customer?
Ans: Either a replacement or a refund is given provided that the customer has a receipt and returns the product within 30 days.
- We know that you’re the top leading retailer in the market and how do you cope up with the competitors?
Ans: Aim to provide top quality products at the best prices with the best services in order to compete with other shops.
- What is the main objective of satisfying the consumers need as an employee of Aldi chain of stores? How do you accommodate a customer?
Ans: Happy customers come back and spend more money. Be helpful and polite to the customers.
- What is delegation of authority to the subordinates from the manager to help the smooth functioning of the entire store?
Ans: At the start of the shift the staffs are all made aware of the jobs they need to do and how to do these jobs efficiently. We are aware of how long each job should take and therefore we can manage our time effectively.
- Being in the retail business, how do you cope with irate customers?
Ans: Be as polite and helpful as possible. Do what you can to help and if you cannot deal with the problem, get help from someone higher up.
- What are your customer loyalty programs? How do they benefit the customers?
Ans: No specific customer loyalty programs.