ALDI in Australia

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Tom Osegowitsch, Lecturer at the Department of Management and Marketing, University of Melbourne, Australia, talks about the development of his case, ALDI in Australia, co-authored with Markus Goelz.

Why ALDI?

We tend to use ‘outlier’ companies in our teaching. This is somewhat ironic as in our research we often steer clear of them, regarding them as deleterious. However, in our teaching we love them, because outliers are often the most innovative organisations, characterised by extraordinary performance in the form of outstanding success or spectacular failure. Using such extreme cases in our teaching is often justified on pedagogical grounds. These organisations are also inherently more interesting, thus engaging students in the classroom.

ALDI is a classic example of an outlier, which is what initially roused my interest. The company is an innovator in that it almost single-handedly created the hard discount segment; originally in Germany and subsequently in many of the countries it entered. This is certainly true for the Australian grocery market. While price-sensitive consumers have always existed, and a number of Australian supermarket retailers were, nominally, discounters, the segment only took off following ALDI’s entry in 2001. Through its unique offering (combining low prices with sound product quality) the company dramatically expanded the hard-discount segment.

ALDI is also an intriguing organisation, chiefly on account of its single-mindedness. The company is a little eccentric, but then most highly successful operators have a pathological edge. By all accounts, working with the late Steve Jobs must have been one of the most inspiring experiences; but his obsessiveness also drove people to despair. Intel’s legendary former CEO Andy Grove openly embraced the notion that ‘Only the paranoid survive’. ALDI’s founders’ evangelical zeal for keeping costs down and operations simple is in the same category. Remarkably, the organisation preserved this obsession despite the retirement and death, respectively, of Karl and Theo Albrecht, and it has successfully transplanted it to operations in foreign markets.

Beyond that there are a number of very specific pedagogical reasons that led me to adopt ALDI in my teaching. Firstly, all too often students see cost leaders as boring compared to their more glamourous differentiation cousins. Yet ALDI is far from boring. Students are often divided by the ALDI story but never bored. Most importantly this cost leader is also a significant (process) innovator in its own right, which students appreciate after becoming familiar with the ‘ALDI Way’.

Field research versus published sources

Alt text When my co-author Markus Goelz and I started the project we fully intended to work with ALDI Australia but the company ultimately chose not to be involved. The decision was not entirely unexpected - ALDI is notoriously economical in its disclosure and its engagement with journalists and researchers. At that point we had to make a judgement call whether to proceed or not. Following extensive research we decided there was sufficient information in the public domain and proceeded to write the case based entirely on public sources.

One of the key principles of writing a teaching case is to put the reader in the shoes of the protagonist. This helps students to develop empathy with the central character and to fully appreciate the situation he/she is facing. When writing a case from published sources this objective is achieved through the extensive use of direct quotations and a carefully constructed narrative (with some creative licence). We were hampered in this regard given that the current MD of ALDI Australia, Tom Daunt, had only been in the job for a relatively short period of time and there was scarce commentary attributable to him. We remedied the situation by drawing heavily on statements by Daunt’s predecessor, Michael Kloeters. He had launched ALDI in Australia and had led the company for a decade. Kloeters had groomed his successor and continues to be involved with the Australian operation in a supervisory capacity, all of which allowed us to present ALDI under Daunt’s leadership as a continuation of the Kloeters’s era.

Teaching objectives

The case (in its abridged and full-length version) is best suited at a relatively early stage of a strategic management course. It provides a good basis for discussing Porter’s generic strategy framework and for presenting strategy as an integrated set of choices and a holistic task. The case allows the instructor to get across two principal issues: (1) a close look at a company reveals the limitations of the generic strategy framework and (2) a coherent strategy requires alignment (or ‘fit’) of strategic choices across all of the company’s activities.

Abridged and full-length versions

There is a neat dividing line between the two versions of the case. The abridged version is focused almost entirely on the details of the company’s strategy. The single most important insight crystallised through case analysis is the concept of alignment (or ‘fit’). At the end of the case discussion students understand ALDI’s strategy as a carefully calibrated system of coherent choices. The abridged version yields up to one hour of case discussion.

Alt textThe full-length case, which occupies up to two hours of discussion, adds to that the external picture. It provides portraits of ALDI’s competitors as well as the regulatory context and thus allows for a much more informed discussion of the risks and opportunities associated with ALDI’s distinctive strategy.

Teaching note

The comprehensive teaching notes contain plenty of suggestions of how to accomplish the principal teaching objectives and also canvass additional issues that may be taken up during case discussion. They contain a number of suggestions for readings that can be paired with the cases and also a number of supplementary materials (figures, graphs etc.) designed to prompt / support discussion of specific issues. The cases themselves contain extensive references for those wanting to consult the original sources.

Case details

Click on the case title to view further details and, where available, an educator preview copy.

ALDI in Australia
Tom Osegowitsch and Markus Goelz
The University of Melbourne
Ref 312-002-1
Also available:
Teaching note
Ref 312-002-8
ALDI in Australia (Abridged version)
Ref 312-003-1
Teaching note
Ref 312-003-8

About the authors

Tom Osegowitsch is a Lecturer in Management at the Department of Management and Marketing, University of Melbourne, Australia. e ot@unimelb.edu.au

Markus Goelz is a PhD student at the Department of Management and Marketing, University of Melbourne, Australia. e markusg@unimelb.edu.au

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