Operation Management

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Case study
The grocery discounter, ALDI, operates stores in 18 countries. ALDI’S strategy resolves around providing good -quality groceries for low prices. Quality is important to ALDI, which guarantees products sold with no-question-asked money –back guarantee. ALDI achieves its low –cost strategy by using a variety of methods. ALDI buy large quantities of items from vetted suppliers capable of delivering good-quality products, taking advantages of quantity discounts and economies of scale. The stores are typically small and are standardized with respect to appearance and layout, allowing for small differences between countries where they operate. The store sells around 700 products and there is only one or 2 brands of an item of which 95% is store brand items. ALDI chooses inexpensive locations for its stores which is usually outside towns or on side streets to minimize overheads. ALDI’S products are displayed on pallets rather than on shelving. Employees are cross-trained to be able to operate checkout as well as restock items by replacing pallets. Customers need to pay for bags or bring their own. Customers pay a coin deposit for carts and as soon as they bring it back they will get their deposit back. ALDI stores typically operate with a 13% overhead of labour. Question 1

How does ALDI’s strategy lead to a competitive advantage? How does the company achieve this strategy? Question 2
Does ADLI’s low-cost strategy imply that the company offers low quality? Why is quality important, regardless of competitive strategy?
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