Aldi and Walmart: On a Collision Course?

In 2021, the US grocery industry had been undergoing several changes. The competitive landscape had changed significantly since the first decade of the twenty-first century. Walmart Inc. (Walmart) had emerged as the dominant retailer in all markets leading to bankruptcies and mergers with erstwhile market leaders. However, mistakes made by Walmart in that same period allowed ALDI SÜD Dienstleistungs-SE & Co. (Aldi) to make its presence felt with Walmart’s customers. Aldi was gaining its advantage through rapid expansion, with an increasingly broader assortment of products meant to attract upscale customers. Walmart initially tried to respond by opening small-format stores. Walmart had to decide whether this was the right approach to use to fight Aldi, or whether it was even a worthwhile fight. On the other hand, Aldi needed to be careful with how fast and far it should deviate from the core business model that had been instrumental in its success. Finally, the grocery business model had a growing online component that became more prominent during the COVID-19 pandemic. Therefore, Aldi and Walmart also had essential decisions to incorporate these online aspects into their respective business models.

This case is suitable for a capstone strategy course or an advanced elective in competitive strategy at the undergraduate and graduate levels. The case should lead to an interesting discussion regarding whether Aldi was likely to be a legitimate threat to Walmart’s dominance of the grocery industry in 2021. Analysis of this case will highlight how competitive advantage can shift in an industry through proactive investment by some companies or the mistakes made by industry leaders. After working through the case and assignment questions, students will be able to<ul><li>discuss whether Aldi is likely to be a legitimate threat to Walmart’s dominance of the grocery industry in 2021;</li><li> understand the capabilities that Walmart had developed that had allowed it to become the dominant grocer;</li><li> understand whether Aldi’s ascendancy in the latter part of the first decade of the 2000s was due to mistakes made by Walmart or to strategic moves made by Aldi; and</li><li>analyze how Walmart and Aldi were positioned in respect to each other by highlighting how competitive advantage can shift in an industry through proactive investment and errors made.</li></ul>

• business models
• e-commerce
• competitive advantage
• industry dominance
• proactive investment
• strategy
• expansion
• COVID-19
• pandemic