Aldi

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Walmart's worry of Aldi:

Asset lock-in

Lower cost of capital

$444 billion in sales

$264 Billion ???

100,000 SKUs

444 Billion/100,00 SKUs = Sales of 4.4 million/SKU

7 Inventory turns/Year = 50 days (Feedback about supplier every 50 days)

Aldi's prices 15-20% cheaper than Walmart! ---How?

Option 1 : Walmart reduce prices until Aldi goes out of business

-Walmart cannot lower its prices as it will impact the topline and Wall Street will protest!!!

Aldi's Worry about Walmart:

High cost of capital

$7.3 Billion in US Sales

1400 SKUs

$73 Billion/1400 = sales of $52 million / SKU

52 Inventory turns/year = 1 week ; (feedback every week)

Aldi has lower capital requirements; lower risk ;

(Refer spreadsheet in folder exhibit for calculations) on how Aldi has lower price

Should Aldi enter into Organic foods?

No.....Aldi advantage has been the scale : Sales /SKU exceeds that of Walmart => leading to lower cost ; Higher Bargaining power ; Long-term contracts

In organic foods , the scaling does not exist due to lower volumes; so Alsi should not launch Organic foods

Aldi Special buys : why? to boost the footfalls into the store ;

How ? Old Models : Samsung Mobile ; Ralph Lauren; sell in a deal as long as stock last;

Generic Leadership strategy :

Walmart : Overall cost leadership

Aldi : Niche : Cost leadership;

plot the activity systems chart of Aldi : (Operation strategy) : Alignment (HR, Sourcing, Transportation, Location, Operations)

Walmart : Strategy : EDLP (Everyday low price) ; Value proposition : Only store you need to shop

Aldi : Strategy : Customer is not the King ; Value proposition : Not the only shop you buy (90% of buys)

Aldi Models:

Mapping of the competition

Generic strategy

Activity systems chart

Value proposition model :

Cost Analysis models:

Final:

Aldi is a Niche player (Low Cost) ; Being Niche Scaling is an issue; As long as Aldi is Niche, Walmart need not worry about Aldi;