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1. ALDI: Impressively High Quality at Impossibly Low Prices, Every Day.

Aldi is a globally recognized German discount supermarket brand, known for its efficient no-frills retail model and everyday-low-price (EDLP) strategy. The company operates as two legally separate entities—Aldi Nord and Aldi Süd—but is commonly perceived as one global brand. As of 2025, Aldi operates over 13,200 stores worldwide across approximately 18–20 countries. In 2023, the combined sales of Aldi Nord and Aldi Süd reached €112 billion, reflecting strong ongoing growth.  Aldi’s no-frills stores focus on a limited assortment—typically around 1,400 core SKUs—mostly own brands, which helps maintain low prices and high turnover per item. The limited range also allows smaller store footprints and leaner operations versus traditional supermarkets carrying about 40.000 items. Aldi’s model emphasizes simplicity, operational efficiency, and cost savings passed on to customers through EDLP pricing. More than 90% of the products Aldi sells are private-label brands, reinforcing its value proposition of quality at low cost. The company’s operational model prioritizes cost control and efficiency without sacrificing quality. For example, Aldi historically omitted individual price tags (even before barcoding technologies), streamlined product selection, and optimized checkout processes to reduce labor and overhead costs. Unlike many competitors, Aldi does not rely on high-low promotional pricing; rather, it consistently offers EDLP to build customer trust and simplify operations. In Germany, Aldi consistently ranks among the most trusted retail brands.

a) Explain ALDI’s pricing strategy in your own words. What do they mean by the term “price”?
b) How is ALDI distinguishing itself from other “value-oriented” grocery stores like Lidl? How does it deliver value to consumers?

2. Louis Vuitton Price Increase
One way to maintain exclusivity for a brand is to raise its price. That’s what luxury fashion and leather goods maker Louis Vuitton did. The company did not want the brand to become overexposed and too common, so it raised prices 10 percent and is slowing its expansion in China. The Louis Vuitton brand is the largest contributor to the company’s $13.3 billion revenue from its fashion and leather division, accounting for $8 billion of those sales. It might seem counterintuitive to want to encourage fewer customers to purchase a company’s products, but when price increases, so does the product’s contribution margin, making each sale more profitable. Thus, sales can drop and the company can still maintain the same profitability as before the price hike.
a) If the company’s original contribution margin was 40 percent, calculate the new contribution margin if price is increased 10 percent. (Simplfy calculation by setting price equal to $1.00)
b) Determine by how much sales can drop and let the company still maintain the total contribution it had when the contribution margin was 40 percent.