Aldi and Growth: Suggested Answer for Edexcel UA 3.1-3.2 Q1(a)
Below is a suggested for Q1(a) of our Edexcel A Level Business Unit Assessment 3.1-3.2 (Business objectives and strategy/ Business growth).
Growth is where a business increases in size and can be organic (growing from within) or inorganic (e.g. through a merger or takeover).
One problem that Aldi might experience from growth is that they may suffer from diseconomies of scale.
Aldi’s market share is growing and last year their UK sales grew by 37% to around £7bn. To capitalise on this growth, Aldi are opening a further 80 new stores in the UK this year and are looking to increase their number of stores from 600 to 1,000 by 2022, an increase of 66.67%.
This rapid increase in store numbers could make it difficult for Aldi to co-ordinate the business and communication within the stores may suffer, especially as Aldi will be recruiting an extra 5,000 employees. Spans of control within the stores may increase and store managers may struggle to communicate effectively with store staff and stock assistants. This could lead to staff not being properly supervised resulting in store staff working less efficiently, for example, not putting stock out quick enough or longer queues at the tills. As result of working less efficiently, unit costs could rise putting pressure on profit margins and making it difficult for Aldi to maintain their reputation for low prices.