ALDI: A German Retailing Icon

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Dr Marc Sachon, Professor of Production, Technology and Operations Management, IESE Business School, University of Navarra, Barcelona, Spain, on ALDI: A German Retailing Icon.

Why ALDI?

I wanted a case about an exceptional company; a hidden example of European best practice to rank alongside anything North America could offer. In Europe, we often don't know much about outstanding companies, due to language barriers. ALDI is even more difficult, as the company doesn't publish consolidated results. As a German, ALDI was as familiar to me as K-Mart or Walmart to an American. The company is exceptional, tying together different operations concepts with little use of high-tech and IT (compare with Walmart's satellite network!). The results are impressive: ALDI is the biggest retailer of PCs in Germany (and possibly Europe), sells more than 20% of wine consumed in Germany and has a 30% market share for coffee. This yields a 4% profit margin compared with an industry average of 1%. By now Walmart has left Germany - partly due to ALDI and Lidl. Students often do not fully comprehend the far-reaching implications of strategy. I wanted to translate ALDI's strategy into 'doing' and show how logistics, product portfolio, inventory and supply chain management etc can produce a winning strategy, based on efficient operations. I knew ALDI was operationally effective, but I was surprised how many of the concepts attributed to US or other businesses (cross-docking, total quality, core competencies etc) were present at ALDI, though it never highlighted them.

How did you research the case?

I started to collect articles and anything else I could find on the company and sampling products (ALDI's white chocolate is addictive). I also read the book by Dieter Brandes who worked for ALDI until the early 1990s. I then decided to involve my MBA students in the research. I opted to replace their midterm exam with project work on ALDI. Following three pages of instructions, the students formed eight teams. They visited stores, checked layouts, materials handling, product portfolio, pricing structure and tried to interview staff (next to impossible due to company policy). Some really caught the 'ALDI bug', spending all night outside a Spanish outlet to check where the truck came from (Germany) and interview the driver. All this material was refined and passed, with the English translation of the Brandes book, to a case writer, Jordan Mitchell, to work up a first draft. I, then, was fortunate to spend two hours with Theo Albrecht, one of ALDI's founders; a polite and unassuming man, working in a 1960s office, while being in the Forbes Top 20. His comments proved invaluable in correcting the case draft and I will always be thankful for this meeting.

Teaching the case

I like to test teach a new case and then write the teaching note, integrating lessons from my classroom experience. I like to challenge MBA students, to stimulate their thinking and to generate discussion. I have ground rules in class - no laptops open, no mobile phones and nobody leaves. Students know that the last person to enter will be asked to open the proceedings. Everyone is usually early! This philosophy is 'firm but fair', with the teacher being a resource for students, recording their discussion, teaching tools and concepts and summarising the major learning points, but with key questions to interject if necessary. I do hope that colleagues will find ALDI a most enriching case teaching experience. 

Case details

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ALDI: A German Retailing Icon

Marc Sachon and Jordan Mitchell
IESE Business School
Ref P-1071-E
Also available:
Teaching note

Ref PT-0047-E

About the author

Dr Marc Sachon is Professor of Production, Technology and Operations Management at IESE Business School, University of Navarra, Barcelona, Spain.
e msachon@iese.edu

Related links

ALDI: A Supermarket With a Reason to Celebrate
by Marc Sachon and Jordan Mitchell
IESE INSIGHT

ALDI website

 

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