In 1985, the business writer and management consultant Michael Porter developed a method of analysing the marketing strategies of firms. He distinguished between a low-cost strategy, where the focus is on providing similar benefits to competitors, but doing so at a lower price, and a differentiated strategy, where a firm seeks to charge a higher price by providing more benefits than competitors.
In the current economic climate, Aldi and Lidl are much-cited examples of businesses pursuing a low-cost strategy. These supermarkets are able to keep costs low by having a basic store layout and inexpensive signage. They also only stock one product line in each category, e.g. baked beans, tomato sauce. So, for example, at a typical store, Aldi will stock roughly 1,000 lines whereas the major supermarkets will stock about 30,000 lines. Stocking fewer lines means Aldi can buy products in larger volumes and can negotiate bulk-buying discounts.
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