The Theory of Comparative Destruction

Discuss about the Cost Leadership Strategy of ALDI.

ALDI is one of the common supermarket brands of Germany. It has around 10000 stores in 18 countries and has an estimated turnover of about 50 billion pounds (ALDI UK | Homepage 2017). The company has entered the market of United Kingdom in the year 1990, which had provided the organization to attain maximum expansion capabilities. The company has been successful in handling various strategical implementation s thereby upgrading their framework in accordance to the current digital economy.

The advancement of technology in today’s world, has subjected the organizations to raise their productivity in a cost effective method. By implementing such effective advancements, the subjected companies are able to produce and expand their sales much more than before. It not only affects the productivity of the firm, yet, it also deals with the promotional activities that attract the customers towards it, thereby, generating revenue.

In the year 1950, Joseph Schumpeter had coined a new concept in the world of economics termed as “comparative destruction” (Schumpeter, 2013). He had derived this concept based on the work of Karl Marx. According to this theory, the industrial mutation of an organization based on new production techniques, new markets, new products, innovative measures, etc., helps in keeping the capitalist economy in motion. The term comparative destruction focuses on destroying the old measures of production, in order to implement the new one. It is quite an important concept in the field of economics as it helps in sustaining the development of the firm along with initiating cost effective measures (Hall, 2013).

Currently digital economy prevails in the society, which is dependent upon the technological advancements and implementations. ALDI, being one of the top most supermarkets in the field, has adapted the concept of digital economy with flexibility. They have extended their tries with VeriFone that would help in supplying special equipment to the company (Payment Solutions & POS Solutions : Official Verifone US Site. 2017). This would make the payment acceptance through mobile wallet. With the implementation of such an application in the economy, ALDI would be able to generate large amount of sales to its customers. There would be hassle free payment for the products that are bought by the consumers from their stores. It would lead to a smoother and hassle free implementation of payments. By doing so ALDI would raise the efficiency of their stores in managing the customers moreover, it would even attain a cost leadership method by reducing their labour costs. As the payment would be done by the consumers itself with the help of their smart phones, ALDI would not require extra employees in their stores for the payment section (Guillaume Blanchet, Legendre & He, 2015). Hence, this application of the technology would be convenient for both the consumers and the organization.

It could be seen from the above case study, how ALDI being an old company has been able to change their business process pattern along with the change in the economy. It has adapted the technological advancements of the digital economy thereby improving their cost conditions and raising the frequency of sales. It has been able to bring convenience and profit generation aspect in their firm by applying the theory of comparative destruction.

Reference

Hall, J. R. (Ed.). (2013). Civil society: Theory, history, comparison. John Wiley & Sons.

Schumpeter, J. A. (2013). Capitalism, socialism and democracy. Routledge.

Guillaume Blanchet, F., Legendre, P., & He, F. (2015). A new cost?effective approach to survey ecological communities. Oikos.

Payment Solutions & POS Solutions : Official Verifone US Site. (2017). Verifone.com. Retrieved 6 February 2017, from https://www.verifone.com/

ALDI UK | Homepage. (2017). Aldi.co.uk. Retrieved 6 February 2017, from https://www.aldi.co.uk/