Week 2 seminar aldi and lidl

3BM020 – week 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 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 forces In advance of next week, look up Bowman’s strategy clock and Porter’s Generic Strategies Become familiar with the concept of ‘differentiation’  ... 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... 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 20 15 Negative growth... “disastrous” and the pricing of key products, such as Jersey potatoes, was “ridiculous” (Ruddick, 20 14) The Yorkshireman questioned the competence of Mr Philips and his decision to expand into small