Week 2 seminar aldi and lidl

3BM020 – week 2 seminar

Strategic concepts



Week 1: What business are you in?
Where you shop in Britain has always been one of the great social signifiers: e.g.

Upper-middle class: Waitrose
Middle class: Marks and Spencer
Lower-middle class: Morrisons
Big four retailers - Tesco, Asda, Sainsbury's and Morrisons - facing a game-changing
threat as German competitors Aldi and Lidl cut into their market share with no-frills
shopping that is marking a generational shift in retail patterns.


Consider the language of strategy

Facing

a game-changing threat as German competitors Aldi and

Lidl cut into their market share with no-frills shopping that is
marking a generational shift in retail patterns.


Levels of growth: Jun – Sept 2015
Negative growth

Tesco: - 1.4%

Morrisons: - 1.4%
Low growth

Sainsbury’s: 0.9%
Asda: - 2.9%
Spectacular growth

Aldi: 17.3%
Lidl: 16%


Reasons? Thoughts?


Morrisons: lessons for the strategist
In an extraordinary intervention at the company’s annual
meeting, Sir Ken said the performance of Morrisons was
“disastrous” and the pricing of key products, such as Jersey
potatoes, was “ridiculous”. (Ruddick, 2014)

The Yorkshireman questioned the competence of Mr Philips and his decision to
expand into small convenience stores, given the sharp decline in sales in
Morrisons’ main supermarkets. “What makes you capable of running a
convenience store when you can’t even run the core business? I see no sign at
all that you’re capable.”


Morrisons: lessons for the strategist
Morrisons: has become a lesson in what to avoid in grocery retailing.

•

Its thrust for online sales, where the slice of the profits pie is smaller, undermined the profitability at its stores.

•

Its foray into convenience stores did not fit its more traditional format and that austerity and deflation provided
the profit-losing backdrop to all of this.

Is it ‘stuck in the middle’ – what does this mean?


Lidl: lessons for the strategist
Rather than offering a wide range of choice to trolley-stacking weekly shoppers, the discounting
German chains are aimed at the little-but-often shoppers.
Their range might be limited but the quality is often comparable.
By ruthlessly culling brands that don't sell, producing copycat versions of high street lines, and
even offering expensive fare in the form of lobster tail and Belgian chocolates, they are reaching a wide
audience.
For the big four, the recent gains of Aldi and Lidl have been like the arrival of a new predator.
Not just down to austerity….
"Lidl and Aldi are not successful because they are cheap, they are successful because they are
cheap but still offer consistent quality.
"The quality is about 10% lower than the classical brands but the prices are 30% lower which then
means that the customer gets more value per pound spent."


What are the key issues?

How do these relate to strategic concepts?

Competition, continued growth, new frontiers?
The move puts it into the
heartland of supermarkets
such as Waitrose, Tesco
and Sainsbury's.

"This is part of an ongoing strategy, with Lidl putting in more premium ranges, more
fresh bakery products, more brands, to make it more like a mainstream supermarket."
Last week its stores introduced 60 new lines to its "Wine Cellar" concept, all from
France, including less well-known wines such as Arbois, and a white Châteauneuf-duPape.

Mr Gray said that Lidl's strategy was a
gamble because its model was based on
low-cost out-of-town sites and moving into
central London could be far less profitable.


Does this sound like Lidl?
What are the issues?
What is Lidl hoping to achieve?
What are the pitfalls?
What are the strategic issues?


Applying strategic concepts
Competitive advantage
Turbulent environments
Resources and competences

Porter’s 5 forces

In advance of next week, look up Bowman’s strategy clock and Porter’s Generic
Strategies. Become familiar with the concept of ‘differentiation’.