Please respond to the following: Assess your satisfaction with Aldi and make recommendations about how the company could modify its business-level strategy to both increase your overall level of satisfaction and to attract new customers. Provide specific examples to support your response.

Analyze the five business-level strategies discussed in Chapter 4 to determine which strategy most likely applies to Aldi. Determine how a shopper's experience might change if it switched to one of the other four strategies (your choice). Explain your rationale.

Background Information:

Five Business-level Strategies:

1. Cost Leadership Strategy

This strategy is for organizations that want to compete for a broad customer base based on price.

A misconception about this strategy is that returns are lower. That is not the case. To maintain above-average returns and provide the lowest price, the organization must focus on internal efficiencies continually.

Common mechanisms to drive down costs include:

• Establishing rigid cost controls.
• Building state-of-the-art facilities to produce at scale at a low cost.

To be effective, this strategy requires your product or service to be standardized.

Defensive Properties

Cost leadership can help defend your business against Porter's 5 forces:

• Rivalry: Cost leadership means you can still make a profit even after your competitors have competed away their profit.
• Suppliers: Cost leaders can absorb bigger cost increases before those costs need to be passed on.
• Buyers: In a competitive market, powerful customers can force you to sell products at a lower and lower price. However, this can force your competitors to exit the market. If this happens, then your customers lose their buying power, and you end up in a monopoly position.
• New entrants: By operating at scale and with a continuous focus on cost reduction, you form a barrier to new entrants.
• Substitutes: By selling at the lowest cost you can build loyal customers.

2. Differentiation Strategy

This strategy is for firms that want a broad customer base based on their uniqueness. Typically, firms with this strategy will focus on building unique features to win in the marketplace. They also usually charge a higher price to their customers, to offset the cost of being unique.

Common mechanisms to differentiate include:

• Superior quality.
• Customer service.
• Design.
• Uniqueness.

Defensive Properties

Differentiation can help defend your business against Porter's 5 forces:

• Rivalry: Brand loyalty and uniqueness can prevent competitors from taking your market share.
• Suppliers: Your higher price means you are better able to absorb cost increases.
• Buyers: Powerful buyers have limited scope to force price reductions because they can't get what you offer elsewhere.
• New entrants: Brand loyalty and uniqueness stops customers from switching to new entrants.
• Substitutes: Brand loyalty and uniqueness prevents customers from switching to alternatives.

3. Focused Cost Leadership Strategy

These organizations compete on price but also stand out because they focus on serving a niche market.

Common mechanisms to adopt a focused cost leadership strategy include:

• Focusing on serving a small group of customers.
• By understanding the needs of your smaller target market, you can uniquely cut costs to serve the needs of that market.

Defensive Properties

Focused cost leadership can help defend your business against Porter's five forces in the same way that broad cost leadership can.

4. Focused Differentiation Strategy

This strategy is very similar to that of a differentiation strategy except that it is focused on a very narrow segment of the market. These firms compete by offering unique features to a small market segment.

Common mechanisms to focus include:

• Select a profitable narrow subset of the market.
• Focus on areas where competition is weakest.
• Focus on a segment where product substitution is difficult.

Defensive Properties

Businesses using a focused differentiation strategy can defend themselves against Porter's 5 Forces in the same way as businesses using a broad differentiation strategy.

5. Integrated Cost Leadership/Differentiation Strategy

This strategy involves producing low-cost products with differentiated features. This strategy is about simultaneously focusing on two drivers of competitive advantage: cost and differentiation. This type of strategy is often called a hybrid strategy.

To understand the appeal of a hybrid strategy, realize that a mid-priced product that distinguishes itself in some way can be more appealing to customers than a cheap generic product.

This can be a high-risk strategy because you must invest in both reducing costs (through automation, etc.) and also invest in differentiating your product.