The Business Book

(Joyce) #1


Lidl’s supermarkets are basic, with
a limited range of products, some of
which are displayed on warehouse
pallets. However, the products
themselves can be of a high quality.

See also: Your workers are your customers 132–37 ■ Porter’s generic strategies
178–83 ■ Lean production 290–93 ■ Applying and testing ideas 310–11


immediately passed on to his
customers by way of lower prices,
which helped to boost sales.
Successful companies are able
to attract customers by supplying
high-quality goods and services at
prices the buyer is willing to pay.
Companies such as Dollar Tree in
the US or Poundland in the UK base
their business model on offering
their customers as much as
possible for $1 or £1—for example,
in June 2013 Poundland launched
the world’s cheapest bra, which
retailed at £1. Offering more for
less can be an effective business
strategy, provided that the price
covers costs. Low prices that offer
excellent value for money attract
customers away from rivals.

More for less
Budget supermarket chains, such
as Lidl and Aldi in Europe, have
used this strategy to great effect.
These businesses have been able
to grow their market share at the
expense of larger supermarket
chains. Since the financial crisis,

inflation has regularly outstripped
pay raises, and households have
responded by seeking out retailers
that offer them more for less.
The secret to Lidl and Aldi’s
success is not solely due to their
low prices. They also offer high-
quality products. For example, in
2012, Lidl launched its own
designer aftershave called G.Bellini
X-Bolt for $6.35 (£3.99). In blind tests
the fragrance beat famous brand
names, such as Dior Homme, D&G
The One, and Hugo Boss Bottled,
which cost up to ten times more.
The stores focus on offering
good value stock rather than an
attractive shopping experience.
They offer products on pallets
direct from the warehouse, and do
not spend time or money displaying
their goods attractively. They also
do not stock popular brands that
shoppers will find elsewhere; most
stock comes from less well-known
suppliers that the stores can obtain
at competitive prices.
The challenge for entrepreneurs
is to offer outstanding value for
money, while also keeping costs
low enough to trade profitably. ■


The car manufacturer Hyundai
is the fourth-largest in the
world and the third-largest
chaebol (conglomerate) in
South Korea. Its success is a
direct result of its policy of
offering customers a good deal
at a competitive price.
One way Hyundai has
grown its market share
is by offering the longest
warranties in the auto
industry. Long warranties
are an obvious selling point,
because if a new car breaks
down during the warranty
period the buyer can return
it to the manufacturer, who
will repair it free of charge.
Hyundai’s warranties
guarantee the engine for ten
years, cover the bodywork
for seven years, and offer
free roadside assistance in
the event of a breakdown
for five years. Despite these
long warranties, Hyundai still
charges relatively low prices
for its vehicles.
Hyundai cars are also
well equipped. Features such
as Bluetooth connectivity,
heated side-view mirrors, air
conditioning, and LED running
lights are all standard.
Hyundai competes by offering
its customers as much as
possible for the price charged.

I don’t understand why
anyone would hold something
up and proudly say, ‘I paid
more for this than I needed to.’
Paul Foley
Managing director Aldi UK (1958 –)
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