Recommendations For ALDI: Organizational Analysis And Management Restructuring

Overview of the company

Strategic Management plays a key role in the organization whereby the scanning of the external environment, as well as the internal environment of a business, is very important as it is assists in the identification of problems (Abushova, Burova and Suloeva 2016). These problems might be related to the internal management of the organization or to the presence of an external factor in an organization which might lead to issues for the organization. Strategic Management not only helps a firm to analyze these problems but also helps to figure out solutions for them so that the company can come on track.

Organizational behavior tends to play a key role in the given scenario whereby the employees are greatly affected by the change which the company aims to bring into the organization and hence, the study of both individual performance and the activity within an organization is crucial in order to determine the impact of such changes in this organization and how to manage them (Alkhafaji and Nelson 2013). The organizational behavior tends to study human behavior at work and topics like communication and performance.

Hence the primary aim of the report is to analyze the problems which are being faced by a company and recommend the changes which can be made in order to solve the stated problem. The report will be following a structured format whereby the brief overview of the company will be provided which will then be followed by the external and internal environmental analysis of the same (Barney 2014). Using this external and internal environmental analysis, certain problems faced by the organization will be figured out and solutions for the same shall also be provided. Moreover, the change in the organizational management structure before and after the change shall also be provided and certain relevant recommendations shall also be provided. The organization which has been chosen for the given assignment is the ALDI Stores in the United Kingdom.

ALDI is a German supermarket chain which covers more than 10000 stores in more than 20 countries. The company was found by brothers Theo and Karl Albrecht in the year 1946 after taking over the store from their mother. The organization is formerly known as a low cost and efficient supermarket retail which has various stores and is one of the most popular company’s functioning in the retail industry. In the United Kingdom, the company came into the establishment I the year 1990 and comprises of the 7 percent of the market share (Aldi.co.uk. 2018). There are around 726 ALDI stores in the UK each of them having the latest technology in place and has been performing considerably well. The stores sell goods at the cheapest price available and also tends to function on a system of faster checkout which will enable faster and efficient operations in the organization. This creates a competitive advantage for the firm over its competitors.

Importance of Environmental analysis in Strategic Management

For ALDI UK, the five major tools which shall be used which are PESTLE Analysis , Porters Five forces, Balanced Scorecard Analysis, McKinsey 7S and the SWOT Analysis (Bettis et al. 2014).

The PESTLE Analysis is a useful tool to analyze the external environment.

There exists high levels of conflict as well as political vulnerability which exists in the United Kingdom currently and pose a threat to the different firms which function in the respective countries. Although in different countries like China, Australia, and other companies, Aldi does not face much of a threat but in the United Kingdom, it might face problems as there exists uncertainty after the Brexit (Bolino et al. 2013). This will be mainly due to the regulation and legislative laws and relationships which exist due to the political relations which exist between the UK and Germany.

As the Brexit took place earlier this year, an after effect of this has been the rising prices in the United Kingdom. The pound has dropped considerably and this has impacted the operations of ALDI which has helped the company to grow the fastest in the last two years. The cost of imports has increased and this has impacted the functioning (Aldi-nord.de. 2018). The inflation rate in the grocery market has also increased considerably, shoppers have to pay extra for the goods which then makes them attracted to ALDI where they can avail to larger discounts.

Moreover, the grocery market in the United Kingdom has grown to an average of 3.8% and this indicates that the demands have been increasing and so are the sales of the firms.   As ALDI has followed the law and has increased its wage from £7.20 to £9.75, the employees will be attracted to the firm.

At present, Aldi one of the highest paying supermarket in the United Kingdom and there are more than 5000 employees working in the United Kingdom (Bratton and Gold 2017).  Additionally, the ALDI Company has come up with the Get Set to Eat Fresh Initiatives program which will further help the company to improve the operations of the firm.

With the advent of technological advancements, the Supermarkets are increasingly making use of the access to Technology and are utilizing it to aid their service propositions whereby consumers tend to have an access to self-service checkouts in the grocery provider store (Brewster 2017). The company has not yet adopted such a technology.

The role of Organizational behavior in managing change

ALDI tends to increase their stock sourcing from British producers and the different farmers which further tends to support the local producers and helps in ensuring the sustainability of the local areas in which they tend to function inefficiently. With regard to the conservation of the environment, the food norms need to be abided by regularly in the business environment.

The grocery industry in the United Kingdom has been greatly affected by the scandals which have taken place due to the content of food having been provided. This was very relevant with respect to the horse meat scandal. With time, even Aldi has found itself amidst legal disputes as it had misrepresented the sales of herbs (Brewster, Chung and Sparrow 2016). For this reason, the company needs to ensure that it abides by all legislative requirements in order to ensure success in the long run. 

The Porters Five forces tool can be described as an industry analysis tool which is generally used by the companies in order to understand the different forces which operate in the external environment or the industry environment. The forces have been examined as follows:

This threat of new entrants is comparatively quite low because, the majority of the supermarket stores in United Kingdom has been captured by the large retailers like the Tesco, Sainsbury`s, ASDA and Safeway (Wright, Paroutis and Blettner 2013).

The bargaining power of the different suppliers is comparatively quite low in the United Kingdom because the different suppliers fear losing their business to large supermarket. In addition to this, the different suppliers are also worried about selling the retailers getting their own manufacturing base.

The bargaining power of the customers has become considerably high because the number of options present for the customer has become considerably high. As the products being sold in the markets have become highly standardized, their choices change (Zott and Amit 2013). The giant retailer Tesco tends to offer various loyalty programs to the customers in order to retent them.

The threat of substitution in the given industry can be stated to be moderate in nature because the major substitutes for the supermarkets are smaller stores like convenience and express stores.

As the grocery market has grown in size, the retailer concentration along with the competition among existing players has increased considerably. This has led to accelerated development in the industry and innovated the way of business.

The balanced scorecard can be defined as a performance metric which can be used to improvise on the different internal functions of a business and thereby improving their outcomes for the future. It provides relevant feedback to the organization and then is used to formulize efficient strategies (Hill, Jones and Schilling 2014). The balanced scorecard segregates four different arenas in the business so that the analysis becomes comparatively easier and then, it uses these areas namely, learning and growth, business processes, customers as well as finance in order to attain the objectives as well as the goals resulting from these areas (Kalkan and Bozkurt 2013). Balanced scorecard is also used to implement strategy mapping and add value to an organization. The Balanced scorecard analysis of the ALDI Stores in the United Kingdom has been done as follows:

Tools for analysis: PESTLE, Porter’s Five Forces, Balanced Scorecard, McKinsey 7S, SWOT analysis

The financial perspective seeks to attain information from annual reports and other related statements. This helps in the formation of marketing strategies, management systems and internal operations. The balanced scorecard of Aldi on financial perspective is as follows:

Objectives	Measures	Target	Initiatives
Increasing the revenues with respect to assets	Revenue/Total assets %	Increasing the Revenue by 8% in the next year.	Make more use of assets to increase the revenues
Increase revenue with respect to the employees	Revenue/employees %	Increasing the measure by 5% in the next 6 months	Increasing the employee base through efficiency , training and technology
Increasing return on investments made	ROI	Increasing ROI by 2 % every year.	Reducing operating costs and achieve economies of scale by making bulk purchases.

As ALDI aims to use the cost leadership strategy, achieving these objectives will go a long way to help the firm.

The customer service perspective helps in gauging the customer satisfaction by making use of effective decisions like price and quality of the products available.

Objectives	Measures	Target	Initiatives
Increasing the average customer size of Walmart	Average customer size	Increasing the customer size by 5% every year	Providing better choices to the customers
Increasing the customer rating of ALDI	Improving customer ratings	Improving the customer rating by 10% in one year.	Practicing product variety and cost reduction
Reducing the number of complaints	The customer complaints received	Reducing the number of customer complaints received by 4% per annum	Improving the quality of the products in the stores.

This perspective seeks to understand the manner in which the products are manufactured and whether there are any gaps or delays and other bottleneck shortage as well as wastage. The scorecard for ALDI is as follows:

Objectives	Measures	Target	Initiatives
Reduction in the total expenses	Administrative expenses/ total revenue	Reducing the administrative expenses by 2% per annum.	Providing training to the employees to make them more efficient
Reducing delivery time	Average time taken	Reducing the time taken by 5% in the next three years	Making use of automatic packing and handling technology to reduce the time taken.
Reducing the waiting time of the customers at the counters.	Average waiting time	Reduction in the average waiting time by 15% in the coming year.	Bringing about a change in the layout of the store to ensure more counters can be kept.

The learning and growth perspectives of the organization helps in the investigation of the training as well as the knowledge perspectives.

Objectives	Measures	Target	Initiatives
To increase the training provided to the employees in order to improve them.	Average training hour per employee	Increasing training hours per employees by around 8% in the next three years.	Hiring trainers and managers which ensure good performance of the employees.
Reducing the employee turnover rate	Employee turnover rate	Reducing the employee turnover rate by 5% in the next three years.	Increasing employee engagement and employee participation
Increasing use of the employee engagement.	Empowerment Index	Increasing the index by 5%.	Providing decision making authority to the customers.

The McKinsey 7s model was developed by Tom Peters and Robert Waterman in the year 1980, which stated that there are seven important internal aspects which are required to be covered in order to ensure the success of the organization (Johnson 2016). It has several benefits associated to it like improving the performance of the organization, examining the impact of changes, aligning the departments and processes and determining the best strategy.

Fig.1. The McKinsey 7S Model

Source: (Carnall 2018).

• Strategy: The strategy of the organization helps to maintain a competitive advantage over competition. With respect to ALDI, it makes use of the cost leadership in order to compete in the external environment (Jarzabkowski and Kaplan 2015).
• Structure: This describes the manner in which the company is structured. The structure of ALDI comprises of various hierarchal structures.
• Systems: The systems describe the daily activities of the staff members who engage into the job (Grant 2016). The supermarket uses a wide number of daily systems to sustain its operations.
• Shared values: These are known as the superordinate goals and states that these bind the other six factors (Hubbard, Rice and Galvin 2014). ALDI functions on the shared value that, its main objective is providing adequate services to the different consumers.
• Style: The style looks after the management style. The leaders at ALDI follow a transformational style.
• Staff: This is concerned with the employees and their general capabilities. The staff at ALDI are given freedom and engaged in decision making.
• Skills: This looks out for the actual skills required and the competencies necessary for the employee to work for the company. These skills include hard work and sustenance.

The primary strength of the company is that its sales have been increasing considerably. In 2017, the sales rose by 20% ad this was the largest in comparison to the big four supermarkets as present in the United Kingdom (Harrison and John 2013).  These are Asda, Tesco, Morrison’s and Sainsbury`s.

Their market share has also been increased considerably and there are more than 1.1 million additional customers who have been visiting their stores (Carnall 2018).

Although the supermarket is a discount retailer, they are suffering from decreased profits due to the discounts being offered and the increase in the imports due to the weakening of the pound and thus, for this reason, they have had to increase the prices of the products which is hampering their cost leadership strategy (Moutinho and Vargas-Sanchez 2018).  Although the company has been growing considerably, it is still behind the four major supermarkets present in the United Kingdom which are Tesco, Sainsbury’s, Asda and Morrison’s.

Recently, the company has been labeled as the best company in terms of the quality being provided and therefore, for this reason, its products are fairly popular in nature (Chance 2013). Having stated this, the company can develop and expand these products lines in the given case scenario.

External and Internal Environmental analysis of ALDI

The major threats being faced by Aldi is the takeover of the market by the Amazon Company. Amazon now provides Whole Foods which tends to prove to be a successful domain for the UK Market (DuBrin 2013).

The company faces intense competition from Lidl and holds around 5% of its shares which is then expected to take over the positioning of the company

Hence, from the strategic analysis undertaken using the different Strategic Analysis tools of PESTLE, Porters Forces, Balanced Scorecard Analysis , McKinsey 7s and the SWOT analysis, the following issues and opportunities could be identified with the company:

The inefficient checkout procedures, act as one of the biggest problems which organizations face today. The inefficient system generally refers to the slow system of checkout done at the counters of the organization. According to Frankland et al. (2013), this can be considered to be one of the most important reasons, why the organization may face issues with respect to the turnover of the consumers.

Hence, this can be considered to be one of the biggest problems faced by the different stores at ALDI (Greenberg 2013). At the ALDI stores in the UK, the staff checkout procedure is one of the fastest but they have been often been faced by issues with respect to the damaging of items during the checkout procedure because of the speed.

The way in which an organization function is largely dependent on the kind of people who operate in the chosen organization. In the case of ALDI, UK the company needs to ensure that the organizational procedures are managed efficiently by the Managers (Hahn 2013). Due to the hierarchical structure of the organization, the company may find it very difficult to change the structure of the organization which may then assist the firm in maintaining a smaller chain of command (Hechanova and Cementina-Olpoc 2013).

For instance, if any customer comes up with a particular query then they will not be able to address to that query because the store supervisors and the managers do not have the answer for it (Jacobs, Chase and Lummus 2014).

Instead of opening more supermarkets, the company can cater to the demands of the different customers by ensuring that they open up express outlets. Currently, a large majority of the stores of Aldi are large supermarket stores which lead to increased costs for the firm and bigger maintenance.

It is for this reason, that it has been recommended that the company needs to ensure that this problem is solved (Kramar 2014). Hence, proper scanning of the environment is required in the given stage and the company needs to ensure that it saves cost. Furthermore, instead of seeing the other outlets which do not achieve much of a demand, the company can concentrate on the larger stores and improve their capabilities instead (Hubbard, Rice and Galvin 2014).

The Balanced Scorecard analysis of ALDI

From the analysis of the different problems as discussed in the previous section, it can be understood that there are quite a few numbers of issues which require the assistance of the administration and the CEO will be required to change these in order to make the situation better and in order to ensure that the organization is able to achieve a competitive advantage (Lasserre 2017). Hence, the problem is chosen or rather the opportunity which has been decided to be exploited is the problem related to the digitalization of the chosen stores using information solutions and inventory management techniques.

The checkout procedure which is majorly used in the different counters at a Grocery store can be described as a major point of issues for the company this is because the management of checkout counter is linked with various other problems like the follows:

The customers are directly in contact with the different employees who are present at the given counter. Hence, for this reason, it becomes increasingly important for the company to ensure that the checkout system is efficient.

The efficiency of the system is also portrayed by the organization’s efficiency of the checkout counter. When the checkout counter of the organization is very slow, the customers may give bad ratings to the company and may also switch over to the competitors (Stead and Stead 2013).

The checkout counter also needs to manage the cash paid by the people and during the peak season, this may become extremely difficult to carry out (Lengnick-Hall, Lengnick-Hall and Rigsbee 2013). This is because the cash which is difficult to collect and the correction of its authenticity also becomes a tiresome job.

As ALDI is a cheap priced products store, almost all the products sold in the organization tend to comprise of an offer and thus, for this reason, the checkout procedure becomes complicated.

Hence, due to these reasons, the entire staff oriented checkout counter has become a point of concern for the ALDI stores in the United Kingdom (Luthans, Luthans and Luthans 2015)..

Moreover, while inculcating checkouts using the new software of Retail Point of Sale (POS) System, the pricing system and other stocking information can be shared in a single database to ensure maintenance of paperless records and further managing the procedure (Martinsuo 2013).

With the advent of technology, the self-checkout mechanism has become quite popular and provides a mechanism for the different customers to process their own purchases from the retailer. This opportunity serves as an alternative to the cashier-staffed checkout (Merat and Bo 2013). The customers tend to carry out the purchases scanning themselves and applying payment for the items which have been purchased. Moreover, this facility is then supported by preparing various sales data, inventory data and other related information easily for the store managers. Various supermarket retailers in the United Kingdom have come up with the strategy of self-checkouts and the implementation (Miner 2015). Moreover, the store managers will be easily able the daily transactions.

Recommendations for Management restructuring

Moreover, changes to the entire database system using the POS System will be changed with respect to the stocking of goods, maintenance of records and other related aspects (Morschett, Schramm-Klein and Zentes 2015).

Hence, the implementation of these changes with respect to the self-checkout and POS System will bring about the following advantages to the system:

• Reduced Labor Costs

The labor cost of a cashier at the self-checkout system will be reduced. There is no need to replace the employee or to lay them off. Moreover, maintenance of systems cost using POS will also reduce considerably.

• Saving space

The self-checkout counter is comparatively smaller in size and hence, this can help in saving of space which may then be used to stock extra products (Team 2013).

• Faster

The self-checkout system minimizes human error and contact and hence, it is faster than the usual checkout. Moreover, the use of POS will then make the preparation of reports and other such inventory management procedures easier.

• Improves efficiency

Undoubtedly, the entire procedure of the self-checkout system helps in maintaining the efficiency of operations. In addition to this, the POS System shall bring about greater efficiency in the management of the stores.

The change has to be implemented in the different ALDI stores and hence, for this purpose a designated blueprint procedure needs to be followed. Given below are the certain plans which need to be undertaken in order to bring about the change:

1.  Planning the change- The first step of the chosen procedure involves determining the change which has to take place. As it has been decided that the self-checkout systems along with the POS Systems will be implemented, it is important for the management to decide upon the number of self-checkouts installed in each store (Pinder 2014).The choice of the different packages of the software’s available will also be required to be planned.

2. Discussion with the employees-The employees needs to be informed about the different changes which will take place in the chosen organization (Vogel  and Güttel 2013). As the implementation of the self-checkout system involves the change in a job of the cashiers employed, the need to be explained about the procedure and allocated to another department as per their expertise and competency.

3. Test Run in the major stores-The change cannot be implemented in all the stores at once and it is extremely important for the management to run a test change which will help in identifying whether the idea has been successful or not (Pugh 2016). This can be done in stores which experience footfall and thus will reduce the burden on the employees as well. However, it needs to be noted that during the test run period, the staff oriented counters need to be continued.

Before and After Organizational Charts

4. Training provided to the customers and employees-The customers need to be trained. This procedure can only be done during the test run period. In the given procedure, promotional activities need to be uncertain which will then advertise about the implementation of the new systems (Purce 2014).

In the given scenario, the employees shall be impacted deeply as it may lead to lower work pressure and losing out of jobs.  Hence, it is the duty of the management to bring considerable changes in the store organizational structure as well.

5. Measuring the success of the test run-After the test run has been conducted, the relevant changes need to be measured and their success needs to be organized effectively.

6. Implementation in 250 stores-If the test run has gone well, the organization would be required to implement the given procedure in around 250 stores in the country.

7. Measuring responses-The responses and the efficient functioning of the organization needs to be measured effectively after it has been launched in the initial 250 stores (Rothaermel 2015).

8. Correctional methods-There may be various technical glitches and operational shortcomings while the implementation of the given system takes place. For this reason, the correctional methods need to be undertaken so that the system can run smoothly.

9. Launching the self-checkout system and POS Systems in all stores-After the correctional methods have been undertaken, the checkout system needs to be launched in all the stores effectively.

10. Evaluation and control of the change-Once the changes have been made effectively they need to be evaluated continuously (Scarborough 2016). This means that the system needs to maintained and any error in the functioning of the system will be required to be handled well.

Activity	Months
M Jan	M Feb	M Mar	M April	M May	M June	M July
Planning
Discussion with the employees
Test run
Training provided to the employees
Measuring success
Implementation in selected stores
Measuring response
Correction
Launching in all stores
Change in organizational stricture
Evaluation and controlling of change

Time Line of Research

(Source: Created by the author)

From the given analysis, it could be seen that the main change which the organization will be undergoing is the change relating to the technological advancement of the stores. Technological change forms an essential aspect of the organization in order to remain competitive in the global world (Slack 2015). However, when technological advancements are incorporated in an organization, the manner in which the different stores were managed shall change considerably and now a centralized POS System will be used to manage the inventory of all stores at once.  For this reason, it has been recommended, that the organization may be required to reorganize the structure of the firm (Wagner III and Hollenbeck 2014).

Conclusion

This change in the structuring will then serve as an assurance to the employees that their position in the firm is secure and that all the new POS Systems can be easily adapted into the systems.

The organizational structure before the change followed a hierarchical structure as follows;

The organizational structure before the change (Hierarchy)

After

After the changes will be implemented, as stated earlier in order to ensure that the employees are able to take in the change and they are easily able to cope with it, the following flat structure shall be followed (Wheelen et al. 2017). This will assist in providing assurance to the employees and be able to remove any technological and hierarchical barriers so that they are easily able to make way through the following structure. Moreover, as witnessed earlier, the different ALDI Stores were managed separately, but now with the implementation of the POS Systems, the management of all the stores shall become unified in nature.

The organizational structure after the change (Flat)

The implementation of the given structure shall inculcate transparency in the organization and ensure that the technological advancement is adapted easily by all the employees and the changes can be monitored easily (Williamson et al. 2013).

The implementation of the changes which shall be made in the organization need to be made slowly and one section at a time. If the entire store is transformed under the POS System in one go it shall become considerably difficult for the people to manage the different employees to cope up with the system and it shall also become considerably difficult for the different customers to get used to the given system of development (Wood, Wrigley and Coe 2016). Hence, while implementing the change the manual checkout also needs to be made and it needs to be ensured that when the changed ones are successful, only then the manual checkout needs to be mitigated.

Conclusion

  Therefore, from the given analysis, it can be stated that organizational change is a crucial part of an organization. The organizational is faced by various external environmental factors and for this, the company will be required to ensure that certain changes to the manner in which the organization functions so as to ensure a competitive advantage. The given report was based on the ALDI stores in the UK. The report analyzed the external environment and presented various problems as well as the opportunities which were being faced by the organization. This helped in ensuring that all aspects of the company are taken into consideration. From the various problems being presented, the problem related to inefficiency of the stores due to lack of technology had been chosen and it was decided that Self-checkout along with POS System is implemented into the system. Recommendations to change the procedure have been provided. When a change takes place in the organization, the organizational structure also needs to undertake a change and for this reason, the before and after the organizational structure of the stores has also been provided.

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