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IndividualAssignment
Module Name: Marketing Management
Program: MBA Stage 1
Submission Deadline: August 29th 2014

Introduction
This report is focused on analysis of business activity of ALDI, a low price grocery
leader, with more than 5,000 stores worldwide
...

Pursuing alternatives for continuous improvement of its operations, research has been conducted
in four given areas being relevance of lean production in retail business, analysis of ALDI’s
segmentation strategy and employed logistics scheme, as well as recommendations on
continuous improvement management approaches
...
With time,
application of this approach has been transformed and integrated to various industries
...
According to Wahab, Mukhtar and Sulaiman (2013), the
term “lean manufacturing” or “lean production” refers to production process with lowered
consumption of resources, being material, time and labor
...
This principle has been always prioritized by various
businesses, leaving however the question of lean production principles individual interpretation
and proper implementation at question
...
These measure has been maintained in a row with limited working hours, despite
competitors going 24/7, to keep low production costs and deliver saved value to customers in a
form of discounted products (Emsell, 2011)
...
It has been claimed by certain researchers that
minimization of production and operation waste is directly linked with enhancing customer value
for the products (Dennis, 2002)
...
Nevertheless, both of the listed waste reduction outcomes are
quiet favorable for ALDI, as it is operating in highly competitive business field, where both
excellent customer service and ability to lower the costs despite the scale of business are crucial
...
At this pre-requisite, lean management is expected to become a fruitful business tool
...


Currently, ALDI is already building its activity based on lean production principles
...
careers
...
ie)
...
This approach lies into lean thinking, cutting labor
and production costs
...
They have also created a Lean Improvement Pyramid, suggesting a step-by-step
lean approach implementation of the abovementioned principles
...
Lean Improvement Pyramid

Important concepts of successful lean thinking, directing lean production to managerial
perspective, are linked in sequence, as proposed by Piercy and Morgan (1997):
1
...
Identifying major sources of values and eliminating associated waste;
3
...
Ensuring responsiveness of the entire supply chain;
5
...


As ALDI faces multi-leveled daily operations, providing fresh food and household
products to a huge audience of customers worldwide, it is vital to maintain the positive balance
between pursuit of values and minimization of costs
...
His main idea is that this technique will allow smoother operation conduct
...
He finally draws lower pricing strategy and the importance of
exception of unnecessary stocks as two key success dimensions of retail business, which are
underpinned by lean production
...
It is thought to reduce waste in the operational supply
chain to timely deliver the necessary product to the customer to his best convenience
...
As Gerhard and Hahn (2005) report, company has managed to increase its turnover by
15,7% within the period of 2001-2002, by intensive pricing strategy during consumer price shoot
up stage at Euro currency introduction
...
Specifically, those customers have spent £20
billion per year in those stores
...

In their book on retail management, Berman and Evans (2007) point out environmental
uncertainty, arising at times in retail business due to constantly growing competition and shifting
customer preferences
...
Yet, its strategic goal is to stand out from the crowd and maintain attractiveness
striving for the same target audience as of its numerous competitors
...

However significant lean production techniques may appear to retail management, it is
just another operational element of the company, aiming to maintain long-term prosperity
...


Nevertheless, in modern retail business, this process should not be overseen, as its absence or
failure to establish may ruin company’s efforts in areas of staff learning, innovation
implementation and HR policies design (Ries, 2011)
...
Motorola has officially patented the term Six Sigma (See Figure 1 below)
...
Setting Six Sigma as an efficiency benchmark, process must allow for not more than
3
...


Figure 1
...
The focus is made on critical evaluation of both
outsourcing and in-house logistics alternatives, in terms of associated risks and opportunities
...
Additionally, Ballou (2003) contributed that logistics’ vital function is to create
added value for customers, production company and the suppliers
...
The author claims that products have reduced value if not delivered at the
right time in the right place for targeted customers
...

Suggested definitions also point out primary objectives to be fulfilled by resourceful
logistics
...
Moreover,
Hartmann, Fischer and Nyhuis (2009) elaborate that proper deployment; processing time and
schedule reliability are vital for diligent logistics management
...
Literature review proposes the following motivation
factors for logistics outsourcing:


Facilitate and speed up business process management: outsourcing enables the
company to manage its resource allocation effectively;



Elasticity and risk management: when enterprises outsource, they avoid bearing
operational and investment risks, enhancing flexibility and adaptability of its
activities;



Investment opportunities: external logistics exploitation allows the company to
redirect its capital towards core additional business development investment, by
turning its logistics budget into variable costs;



Reduced operating expenses: cost lowering and operating cost limitation are the
primary reasons for third party logistics employment
...


The figure below demonstrates supply chain in consideration of logistics as one of its
compulsory elements
...
Supply Chain Scheme

Source: Ladd (2012)

External logistics providers enable achievement of economies of scale, drawing
company’s resources into continuous adaptation and improvement of business requirements
(Goldberg,1990)
...
Further on, Laarhoven, Berglund and Peters (2000) and Langley, van
Dort, Ang and Sykes (2005) haveunderlined operational transparency in outsourced logistics
costs as an additional benefit for the customer company
...
Benefits of Logistics Outsourcing(Salanta, Ilies and Muresan, 2012)

In contrast,Sink and Langley (1997) argue that lack of control is one of the main
problems with external logistics
...
Therefore, companies are advised to outsource, only if cost benefits prevail over
arising transaction costs (Williamson, 1996)
...
Laarhoven (2000)underpins
also the comparative benefit of confidential data protection in case of in-house logistics, which
becomes an important issue in today’s highly competitive retail market
...
Another danger overcome by in-bound logistics
approach by ALDI, in this context, is the loss of competitive knowledge of diligent logistics
management suitable for company’s individual business mechanism
...

In ALDI’s 2012 report on business activity in Australia, it is stated that company
exploitation of own vehicle fleet is one of its main competitive advantages, contributing to
overall efficiency
...
At the same time, ALDI is highly responsive to control over delivery time
management
...
ALDIsuccessfully manages with logistics challenge
applying incorporated purchase systemand timely day-to-day deliveries to all stores (ALDI
Australia, 2012)
...
Additional
motivation behind ALDI preference towards ownership of logistics fleet is creation of additional
employment opportunities for local population in employment vulnerable areas of operations
...

Final recommendation for the ALDI’s management is to conduct its operations and plan
its service approaches based on the GAP Model
...
This model provides an insight into provider-consumer

cooperation
...
GAP
model makes account of the external and internal contributory factors
...
Nevertheless, GAP model’
distinctive feature is that it goes far beyond outlining the contributory factors
...
GAP model lists the driving variables for each of those factors and makes a
notation of possible dangers and possibility of a threat for company’s operations
...


Question 3
Market segmentation as defined by Kotler,Adam,Brown and Armstrong (2006) is
division of market into distinctive groups of customers on the basis of their needs, expectations,
lifestyles and behavior, as they might require different products and marketing mixes
...

Moreover, Kotler (1984) has highlighted four pre-requisites that successful market
segment definition should meet:


Measurability



Accessibility



Substantiality, and



Actionability
...

Another important task to be completed during market segmentation is product or service
value communication, via social media and other informational channels
...

Dibb and Simkin (1997) makes it clear that market segmentation puts customer first,
enabling market researchers obtain a vivid data on customer satisfaction which serves as a great
competitive advantage
...
ALDI provides goods for a wide audience, people of
various backgrounds, generations and income levels
...
Undoubtedly, this factor tends to evolve
high responsiveness of the majority of potential buyers in the market internationally
...
In 2014,
ALDI has been rewarded with The Grocer of the Year Award (www
...
ie)
...

Justification behind this choice is that however common and uniformed ALDI’s customer base
may seem, the company can never avoid the behavioral factors, due to their changeability and
vulnerability to shifts, considering not only personal issues but also great influence of mass
media on modern consumers
...
Therefore, behavioral aspect of ALDI’s market segmentation will be discussed in
more detail
...
Some behavioral aspects are:
 Benefits Sought
 Usage Rate
 Brand Loyalty
 User Status
 Readiness to buy
 Occasions
According to the promotions information on ALDI’s website (www
...
ie), ALDI’s has
been undertaking certain promotional strategies such as “Like Brands” and “Swap and Save”, to
attain loyal customers and constantly deliver the value message of lower pricing
...
Consumer Insight issue (2007)
devoted to ALDI also notes its conservative expansion strategy and company’s commitment to
simple principles of delivering loyal brands within limited product ranges
...

Calabash education software article of 2005 also confirms that the final goal of every
marketer is to efficiently lead customers to exercise positive behavior towards their products
...
As in case of ALDI,
they first carefully study current sales trends and identify most demanded products
...
With time and gained expertise,
ALDI has managed to predict customer behavior in new areas of operation
...

Back in 1964, Yenkelovichhas pointed out that traditional demographic factors such as
age, income, gender and education are no longer reliable and feasible benchmarks for adequate
market segmentations
...

Finally, segmentation is an important strategic process, as it serves as a foundation for
further targeting and positioning
...


ALDI’s positioning philosophy lies on a simplified image of an inexpensive simply
designed and low-priced store next door
...
By focusing on sales of most liked and preferred product
brands, ALDI aims for long-term customer loyalty, underpinning its commitment to positive
conservatism in expected product range and availability
...

Question 4
However experienced ALDI in winning and attaining its customer loyalty, it is important
to employ techniques for continuous improvement of the company’s performance
...


Continuous improvement is a strategic pathway, which requires accumulation of
necessary skills and competencies
...
Secondly, those processes aim to enhance company’s performance
in multiple operational spheres
...


But pointing out that continual improvement is a cyclical process; authors have
developed a staged diagram applicable to any business
...
Continuous Improvement Cycle

However, Conyers and Ewy (2004) draw up certain challenges linked with proper
continuous improvement implementation, which are important for ALDI to consider
...
It is crucial for ALDI to realize, that decision on
which processes to initiate and which changes to pursue is highly individual matter for each
organization
...
Continuous improvement incurs additional costs, which is another reason for
management’s consideration
...
He believes that while Lean evolves active staff participation, it uplifts productivity and
saves time and resources due to waste reduction
...

United application of both methods can boost the company internal potential and bring up
additional competitive advantages (See also Appendix 3)
...
Buyer behavior and its affect on company’s profitability have been discussed
in the previous chapter of this research paper
...
But the issue will be approached from both
perspectives: the customer wants and needs and ALDI’s responsibilities and steps to be
undertaken
...

ALDI’s staff at all organizational levels need to have a clear vision on where the
company is currently and where it is trying to get
...
ALDI’s HR policies
need to include strong and vivid intrinsic rewards for employee’s contribution appreciation
...
Moreover, as continual development includes changes and shifts, management
should be skillful for provision of adequate supervision, coaching, consulting and
communication with the staff members
...

The diagram below is another illustration of the complexity and inclusiveness of continuous
enhancement procedures, designed by earlier functioning UK Government Department of Trade
and Industry
...
Continuous Improvement Framework

Source: Department of Trade and Industry (2005)

Contributing to ALDI’s management education on continuous improvement, Romaniello,
Rennaand Cinque (2011) advice on MAAR system approach, standing for Monitor, Analysis,

Action and Review
...
The system
may allow ALDI to:


Develop an intensive and flexible system;



Supervise real-time performance;



Define adverse process contributors;



Measure performance of individual contributors;



Pull the entire system of continuous improvementapplying previously attained
data
...

Getting back to the issue of customer service improvement, it is important to remember
that understanding and forecasting customer needs is a basis for superior service delivery
...
impression relationship (Lewis
and Booms, 1983)
...
Whereas

consistency mainly concerns after-service impression, other four elements are derived from the
service process
...
The desired
level is what they expect to experience, while the adequate level is a set standard of what service
is acceptable for the buyer (Cadotte, Woodruff, and Jenkins, 1987)
...

Considering tough competition in the market of ALDI’s operations, promotional
campaigns, image creation and communicated mission of alternative suppliers may create
exceeding expectations, driving customers away from ALDI
...
Independently on the
prices that customers are ready to pay, they always expect the best service
...
Customers want to be heard, paid attention to and are
ready to reward the service supplier with loyalty in return
...


Conclusion
The conducted research study has been projected as a set of proposed guidelines and
recommendations for the management of ALDI
...
Existing field theories and findings have been input as a
discussion foundation, which led to definite and personalized suggestions for further perfection
and development of ALDI’s business
...
Mainly, sources cited in this
academic report include published books for the four of the outlined questions as well as
academic research works and articles based on in-depth studies in the given spheres
...
Full list of references authors and publications will be presented
at the end of the paper
...
The process of researching this topic has evolved

associated dimensions of the term, such as lean management and lean thinking
...
Lean production has brought up crucial issues of waste
reduction, efficient resource management and profit maximization as a result
...

The next point concerned the fact of ALDI owning and exploiting its own fleet of
transportation for supply and delivery management
...
The study
has demonstrated financial and strategic reasoning behind both of the options, but yet, managed
to justify ALDI’s perspective
...
It is also
important to note that company owned logistics secures ALDI from related information
confusion, process break downs and confidential data leakage
...
ALDI’s conservative policy of a simple family brand store
suggested its open-modeled segmentation approach
...

ALDI is offering what is called value for money products, the well-balanced combination of
price and quality, which attracts majority of buyers in the retail market
...
This variable has been outlined as the most unstable due to the influence of media,
competitors and buyer perceptions and attitudes
...
This part of the research
appeared to be most challenging due to the great variety of existing techniques and proposals
...
Discussion has covered different aspects of lean, six sigma and system approach
...
After literature review on the topic, recommendations have been
made more definite towards continuous improvement and development of ALDI’s customer
service quality
...
Many of the issues covered have been

discovered from unexpected points of view, demonstrating unlimited dimensions of previously
subjectively perceived issues
...
Previously
possessed knowledge on the subject appeared to be rather limited and undervalued
...
Considering the enormous scale of ALDI’s business, research aim was to
address most vulnerable, most undermined issues, in order to make most practical and up-to-date
recommendations
...
It is sometimes believed that the process represents more use and efficiency than
the result
...
It has certainly contributed to overall expertise
and knowledge growth, has drawn clear correlations between theory and practice and
encouraged desire for further investigation of issues covered
...
Wahab, A
...
, and Silaiman, R
...
A Conceptual Model of Lean
Manufacturing Dimensions
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Singapore, Malaysia
...
sciencedirect
...
Emsell, P
...
Aldi – The No Frills Retailer
...
University of Huddersfield
...
hud
...
uk/12404/
Accessed on: August 18th 2014
3
...
(2002)
...
Productivity Press
...
Monden, Y
...
Toyota Production System: An Integrated Approach to Just-in-time
...

5
...
(2007)
...
The
McKinsey Quarterly
...
Working for ALDI
...
[ALDI corporate website]
Available at: http://www
...
aldirecruitment
...
asp
Accessed on: August 20th 2014
7
...
, Fryer, A
...
, Bojczuk, K
...
, and Cox, J
...
The Role
of Lean Thinking in Increasing Resource Efficiency in the UK Food and Drink Supply
Chain
...

8
...
, and Morgan, N
...
The Impact of Lean Thinking and the Lean Enterprise
on Marketing: Threat or Synergy? Journal of Marketing Management
...
Lukic, R
...
Lean, Outsourcing and Kaizen in Retail
...

10
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, and Holweg, M
...
Lean Distribution: Concepts, Contributions,
Conflicts
...

11
...
, and Hahn, B
...
Wal-Mart and Aldi: Two Retail Giants in
Germany
...

12
...
(2014)
...
[Online]
Available
at:
http://businesscasestudies
...
uk/aldi/competitive-advantage-throughefficiency/lean-production
...
Berman, B
...
(2010)
...
Prentice
Hall
...
Ries, J
...
The Lean Start Up: How Constant Innovation Creates Radically
Successful Businesses
...
, St
...


15
...
, Murrow, R
...
, (2007)
...
Air
Academy Press
...
Ladd, B
...
Supply Chain Management and Lean Six Sigma in a Retail
Environment
...

17
...
(2006)
...
[Online]
Available at: http://www
...
com/resources/glossary03
...
Ballou, R
...
Supply Chain Management
...

19
...
, and Billington, C
...
Managing Supply Chains: Pitfalls and
Opportunities
...

20
...
, and Sparks, L
...
Logistics and Retail Management: Emerging Issues and
Challenges in the Retail Supply Chain
...

21
...
, Fischer, A
...
(2009)
...
World Congress on
Engineering and Computer Science 2009
...
San Francisco,
USA
...
Tagliapietra, S
...
, Li, N
...
(1999)
...
Business Logistics
...

23
...
(1990)
...
Transportation &
Distribution
...
Damme, D
...
, andAmstel, M
...
(1996)
...

TheInternationalJournalofLogisticsManagement
...
Laarhoven, P
...
and Peters, M
...
Third-Party Logistics in Europe Five Years Later
...

26
...
, van Dort, E
...
, and Sykes, S
...
Third-PartyLogistics - Results
and Findings of the 10th Anual Study
...

27
...
, Ilies, L
...
(2012)
...
Babes-Bolyai University
...
Sink, H
...
(1997)
...
Journal of Business Logistics
...
Razzaque, M
...
(1998)
...
International Journal of Physical Distribution & Logistics Management
...
Williamson, O
...
Economics and Organization: A Primer
...


31
...
(1997)
...
A Case Study
...
ALDI Australia
...
(2012)
...
aldisuppliers
...
au/PDF/ALDI-Corporate-Brochure
...
Submission to the Competition Policy Review
...
(2014)
...
gov
...
pdf
Accessed on: August 20th 2014
34
...
, and Bitner, M
...
Services Marketing
...

35
...
, Adam, S
...
, and Armstrong, G
...
Principles of Marketing
...

36
...
(1984)
...
Prentice
Hall
...
Kotler, P
...
(2012)
...
Prentice Hall
...
Dibb, S
...
(1997)
...
Journal
of Business and Industrial Marketing
...
Tynan, C
...
(1987)
...
Journal of Marketing
Management
...
ALDI Corporate Website
...
aldi
...
Goyat, S
...
The Basis of Market Segmentation: a Critical Review of Literature
...

42
...
An Overview of Aldi and Lidl in Europe
...

Consumer Insight
...

43
...
A Primer for Introductory Marketing Market Segmentation & Consumer Behavior
...
Calabash Education Software
...
Yankelovich, D
...
New Criteria for Market Segmentation
...

45
...
(2010)
...
Andrew Whalley and Ventus Publishing Aps
...
Tidd, J
...
, and Pavitt, K
...
Continuous Improvement: Specific
Techniques
...
[Online]
Available at: www
...
com/college/tidd
Accessed on: August 20th 2014
47
...
, and Ewy, R
...
Charting Your Course: Lesson Learning During the
JourneyToward Performance Excellence
...


48
...
(2003)
...
Environmental Quality Management
...
Blazey, M
...
Insights to Performance Excellence in Education 2007: An Inside
Look at the 2007 Baldrige Award Criteria
...

50
...
(2006)
...

51
...
(2005)
...

[Online]
Available at: http://www
...
com/tqm/dti1
...
Romaniello, V
...
, and Cinque, V
...
A Continuous Improvement and
Monitoring Performance System: Monitor - Analysis - Action - Review (MAAR) Charts
...

53
...
, and Booms, B
...
The Marketing Aspects of Service Quality
...

54
...
, Berry, L
...
(1988)
...
Journal of Marketing
...
Cadotte, E
...
, and Jenkins, R
...
Expectations and Norms in Models of
Consumer Satisfaction
...

56
...
(2004)
...
Prentice Hall
...
GAP Model

Appendix 2
...
Comparison of Lean, Six Sigma and Systems Approach

Source: Pojasek (2003)

Appendix 4

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