Dublin Business School
Master’s Dissertation
“The Importance of Quality Management
in Discount Grocery Stores in Ireland”
Student name:
Egle Briedyte
Student ID:
1722674
Supervisor:
Dr. Lucia Walsh
2
DECLARATION OF OWNERSHIP
I, Egle Briedyte, declare that this dissertation is entirely my own personal work. The
methodology, definitions or any other statements quoted in the body of this work are
referenced applying Harvard Referencing requirements.
I also clarify that this dissertation or any part of it has not been submitted in any other
educational organization for another degree.
Signed: Egle Briedyte
Date: 20/08/2014
3
AKNOWLEDGMENT
I wish to thank various people for their contributions to this dissertation. I would like to
express my deep gratitude to Dr. Lucia Walsh, my research supervisor, for her patience,
great advice, professional guidance through the whole research process, motivation and
encouragement that I needed many times, assistance in keeping my thesis on schedule and
useful critiques of this research work. I would also like to extend my thanks to all my
colleagues and managers for kindly covering my shifts, giving me some extra time off, great
support during the two years of my study and valuable advice and ideas regarding the Aldi
case study.
Finally, I wish to thank my parents for their support and encouragement throughout my
study.
4
List of Tables
Table 1: Gender
59
Table 2: Age of respondents
60
Table 3: Occupations of Respondents
61
Table 4: Product features defined as quality indicators
62
Table 5: The most important aspect when choosing a grocery product
64
Table 6: The frequency of doing grocery shopping
65
Table 7: The great shopping experience
66
Table 8: Great customer service
67
Table 9: Frequency of Shopping in Aldi
68
Table 10: Rate of Satisfaction Level
69
Table 11: Aldi as Customer Focused Company
70
Table 12.1: Always the freshest bread, fruit & vegetables and other products
71
Table 12.2: Aldi products are always high quality
72
Table 12.3: The best deals on fruit & vegetable are in Aldi
73
Table 12.4: The quality of Aldi products exceed branded ones
74
Table 12.5: Cheap products – low quality
75
Table 13: Best Things about Aldi
76
Table 14: Recommendation of Aldi Products
77
5
Table 15: Old/Damaged/ Bad Quality Products in Aldi
78
Table 16: Returned Products
79
Table 17: Improvement in Aldi
80
Table 18: Aldi Customer Service Assessment
81
Table 19: Customers Contacted Aldi Customer Service Line
82
Table 20: Solved Problems
82
Table 21: Other Grocery Stores
83
Table 22: Best Aspects of Other Grocery Stores
84
6
List of Figures
Figure 1. Total Take Home Grocery – Ireland Consumer Spend
20
Figure 2. The eight quality management principles
21
Figure 3. Customer expectations
25
Figure 4. Never-ending improvement – the way to a competitive advantage
29
Figure 5. Universal process for managing quality
31
Figure 6. Aldi‟s Market Share
33
Figure 7: The research „onion‟
46
Figure 8. Types of Questionnaires
54
Figure 9: Gender of respondents
60
Figure 10: Age of Respondents
61
Figure 11: Occupations of Respondents
62
Figure 12: Product features defined as quality indicators
64
Figure 13: The most important aspect when choosing a grocery product
65
Figure 14: The frequency of doing grocery shopping
66
Figure 15: The great shopping experience
67
Figure 16: Great Customer Service
68
Figure 17: Frequency of Shopping in Aldi
69
Figure 18: Rate of Satisfaction Level
70
Figure 19: Aldi as Customer Focused Company
71
Figure 20.1: Always the freshest bread, fruit & vegetables and other products
72
Figure 20.2: Aldi products are always high quality
73
7
Figure 20.3: The best deals on fruit & vegetable are in Aldi
74
Figure 20.4: The quality of Aldi products exceed branded ones
75
Figure 20.5: Cheap products – low quality
76
Figure 21: Best Things about Aldi
77
Figure 22: Recommendation of Aldi Products
78
Figure 23: Old/Damaged/ Bad Quality Products in Aldi
79
Figure 24: Returned Products
80
Figure 25: Improvement in Aldi
81
Figure 26: Aldi Customer Service Assessment
82
Figure 27: Customers Contacted Aldi Customer Service Line
83
Figure 28: Solved Problems
84
Figure 29: Other Grocery Stores
85
Figure 30: Best Aspects of Other Grocery Stores
86
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Table of Content
DECLARATION OF OWNERSHIP
…………………………………………………………………………… 2
AKNOWLEDGMENT ……………………………………………………………………………………………… 3
List of Tables
………………………………………………………………………………………………………… 4
List of Figures ………………………………………………………………………………………………………. 6
ABSTRACT
…………………………………………………………………………………………………………… 10
1. INTRODUCTION
…………………………………………………………………………………………. 11
2. LITERATURE REVIEW
……………………………………………………………………………….. 14
2.1. Introduction ………………………………………………………………………………………………. 14
2.2. Concept of Quality …………………………………………………………………………………….. 14
2.3. Quality Management
………………………………………………………………………………….. 16
2.4. Retail from the point of discount store view ………………………………………………….. 17
2.5. The Importance of Quality Management in Discount stores ……………………………. 20
3. Total Quality Management …………………………………………………………………………….. 23
4. The History of Aldi ……………………………………………………………………………………….. 31
5. Aldi Quality Management
………………………………………………………………………………. 34
7. Aldi – Case Study of Quality Management …………………………………………………………. 36
7.1.
Aldi Approach of Total Quality Management …………………………………………….. 36
7.2. Quality in the store …………………………………………………………………………………….. 41
7.3. Suppliers
…………………………………………………………………………………………………… 42
7.4.
Conclusions
……………………………………………………………………………………………. 44
8.RESEARCH METHODOLOGY
………………………………………………………………………… 45
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8.1. Research Questions: …………………………………………………………………………………… 46
8.2. Research Philosophy ………………………………………………………………………………….. 47
8.3. Research Approach: Deductive
……………………………………………………………………. 48
8.4. Research Strategy: Survey Strategy ……………………………………………………………… 49
8.5. Research Choices: Mixed-Method ……………………………………………………………….. 50
8.6. Time Horizon: Cross-Sectional Study ………………………………………………………….. 51
8.7. Sample: Simple Random
…………………………………………………………………………….. 51
8.8. Data Collection
………………………………………………………………………………………….. 52
8.9.Ethics, Reliability and Validity …………………………………………………………………….. 57
9. RESEARCH ANALYSIS AND FINDINGS
……………………………………………………….. 59
9.1. Analysis: Questionnaires
…………………………………………………………………………….. 59
9.2. Findings: Quantitative Research ………………………………………………………………….. 86
9.3. Analysis: Observation Day …………………………………………………………………………. 87
9.4. Findings: Qualitative Research ……………………………………………………………………. 90
10.DISCUSSION ………………………………………………………………………………………………… 91
11.CONCLUSIONS
…………………………………………………………………………………………….. 97
12.RECOMMENDATIONS ……………………………………………………………………………….. 100
BIBLIOGRAPHY …………………………………………………………………………………………………. 102
APENDIX ……………………………………………………………………………………………………………. 106
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ABSTRACT
This dissertation is aimed to identify “The importance of quality management in discount
grocery stores in Ireland”. Particularly it is based on Germany discount retail chain case –
Aldi.
The dissertation starts with the overview of the retail especially discount grocery retail
industry in Ireland, its development and changes through the years. The research is
combined of both secondary and primary data. Using reliable reference and corresponding
literature, research explores the main aspects of quality, quality management, total quality
management and all applies to Aldi case.
Qualitative and quantitative data collection methods are used to collect the necessary and
research suited data. Via conducted questionnaires and observations days there are received
important data supporting secondary data review.
The research findings and conclusions clarify the main aspects regarding research questions
and hypotheses as well as identifying the correlation of quality management and success of
retail business.
The last part of this dissertation provides with some recommendations to improve the most
problem-orientated areas revealed by this research.
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1. INTRODUCTION
Retail industry brings a big contribution into the economy of any country. Retail plays a big
role in Irish markets as well: with large numbers of employed people – over 275000 –
making approximately 15% of the total jobs in Ireland and makes 10% (€16 billion) of
Ireland‟s GDP (Retail in Depth, no date). Unfortunately positive results of retail growth start
appearing just recently. The tough times during the financial crisis and recession changed
retail industry. It faced redundancies, many businesses closed down; there was a decrease in
sales and profits, fewer customers and their changed buying habits. Competition between
retailers has evolved to win a competitive advantage, and the loyalty of more customers,
increased productivity, and strengthened market position (Checkout, May 2014). During the
hard period for the economy, discount grocery stores managed to increase their business
performance. More customers switched to discount stores to save some money and get better
deals on their grocery allowances.
Heavy competition decreased product prices, but customers started looking for more than
that. Customers were in the hunt for both quality and good value. In the growing economy
particularly, customers become insensitive to prices and this does not play the main role in
choosing a product any more. It is unlikely the customer will buy a cheap grocery product
due to its low price alone. That is why it is very important to find the correct line binding
price and quality, as the quality in the eyes of the customer comes first.
Aldi – Germany‟s discount grocery chain – is the example of success during the toughest
time for the economy. The company increased its market share in Ireland, raised the number
of loyal customers, expanded the number of stores in the country, created lots of job
opportunities and involved local suppliers. It all sends a clear message to competitors of a
strong competitive advantage. Aldi positions itself as a discounter grocery store offering
company owned brands for lower prices but still of a high quality. Great deals and offers on
fruit and vegetables and other grocery products need to be managed through the aspect of
12
their quality. Based on the literature review above, there can be made an assumption that
quality management brings success to a business by controlling every part of the company
including people, products, performance, administration, etc.
The response is important to the raising customer expectations of grocery products, to
suppliers and to retailer himself. Buying habits evolved in order to reflect changing lifestyles
and living standards. A higher price was always related to a higher quality until the retail
business went to the wall during the economic crisis. Customers realized that quality does
not always cost a lot. Collected data revealed discount grocery retailers like Aldi proved that
high quality products can come at a reasonable price. This dissertation is trying to research
the quality management in the discount grocery stores.
In this dissertation the Aldi case will be examined and researched through the customer
survey and observation in order to provide comprehensive data supporting the quality
management aspect of the business.
The organization of the dissertation is divided into three main parts: literature review,
methodology and primary research data analysis and discussion. It also includes findings,
conclusions, recommendations, bibliography and appendices.
The whole dissertation is based on certain data collection in order to provide comprehensive
answers to research questions and hypotheses.
Research questions:
1.
What role does quality management play in retail particularly in the discount
grocery industry?
2.
Is Aldi a quality focused company in the eyes of customers?
3.
What is the main aspect that makes customers to return to Aldi?
13
Research hypotheses:
1. Quality is the key issue in discounter stores.
2. Customers value quality more than lower price.
3. Customers buy cheap goods even if they are bad quality.
4. The right suppliers are very important to maintain high quality standards in the
business.
5. Quality management has no influence on business success.
This research refers to quality management in general and particularity to Aldi including the
company‟s applied Total Quality Management approach. The primary data was collected via
a survey targeted only at Aldi customers.
Although the topic is wide and well researched in general, the quality management point of
view of the retailer and especially the discount retailer, is very limited. This dissertation will
be a big contribution towards filling the gap of discount retail quality management research
area for future studies.
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2. LITERATURE REVIEW
2.1. Introduction
In this chapter there will be highlighted the most important literature regarding the main
topic and narrowing it down to the most essential to support the research purpose. The
literature is relevant to the aims, research questions and hypothesis of the study.
2.2. Concept of Quality
A great profit can be achieved by making quality improvement in every part of business:
products, services, people, business processes and environment.
Bank (2000, p. 25) defines quality as “fully satisfying agreed customer requirements at the
lowest internal cost”. Most of the time quality means happy customers. But there is infinity
of customers and to satisfy each of them is very difficult. According to Bank (2000, pp. 23 –
24) “the measurements of quality will reflect each of the elements: specification,
conformance, reliability, cost (value) and delivery. Correspondingly to these elements there
are five questions to support each of it:
1. What can I expect when I buy your products?
2. Is it what I expected?
3. Does it continue to do what I expected?
4. How much do I have to pay?
5. When can I have it?
15
Nowadays word quality can be heard everywhere. Suppliers, manufactures, businessmen
emphasize quality as the main feature, guaranty of good and reliable purchase or service. But
the quality itself can vary accordingly to person. It can be illustrated by an example provided
by McGoldrick (1994, p. 115) stating that the quality to a supplier would be the ability
always to produce suitable and safe products for customers. Although the wholesalers would
define it differently.
Whereas in general quality is defined as “quality is a predictable degree of uniformity and
dependability, at low cost and suited to the market”. (Gitlow, A. and Oppenhsim, R. 1995, p.
3).
There are three main types of quality:
quality of design or redesign,
quality of conformance,
quality of performance.
In order the quality to be working positively and beneficial for the business, it must be
defined and acknowledged by customer‟s expectations. That is why important to determine
quality measures. In accordance with Saladis and Kezner (2009, p. 79) quality measures can
be “reliability, safety, availability, maintainability, performance, fitness for use, and social
acceptability (in some cases)”.
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2.3. Quality Management
Quality is very important in any sector of business. In concordance with Hoyle (2008, p. 10)
“Organizations are created to achieve a goal, mission or objective but they will only do so if
they satisfy the needs, requirements and expectations of their stakeholders. […] Their
customers, as one of the stakeholders, will be satisfied only if they provide products and
services that meet their needs, requirements and expectations.” Noted that:
“The customer is the only one who can decide whether the quality of the products and
services that is supplied is satisfactory and you will be conscious of this either by direct
feedback or by loss of sales, reduction in market share and, ultimately, loss of business.”
(Hoyle, 2008, p.6)
The success of the company depends on customers and customers rely on product and
service quality. In order to satisfy customer needs and expectations towards quality it is
important to know what quality is. ISO defines quality as “The totality of features and
characteristics of a product or service that bear on its ability to satisfy stated or implied
needs”. Expectations to quality vary in different types of businesses or for each customer.
But according to ISO 9000 Standards the typical product characteristics of quality remain the
same everywhere: accessibility, availability, appearance, adaptability, cleanliness,
consumption,
durability,
disposability,
emissivity,
flexibility,
functionality,
interchangeability, maintainability, odor, operability, portability, productivity, reliability,
reparability, safety, security, size, susceptibility, storability, strength, taste, testability,
traceability, toxicity, transportability, vulnerability, weight.
To meet quality expectations and requirements it needs to be properly managed and
improved. Quality management is the approach to successful implementation of standards
and requirements to achieve the best of it. But quality management is much more than just
that. According to ISO 9000 Standards definition of quality management is coordinated
activities to direct and control an organization with regard to quality.
17
Quality management breaks down into three main processes:
Quality planning
Quality assurance
Quality control
They all dependent on each other but at the same time operate individually.
There are important several aspects implementing Quality Management:
Customer satisfaction. Quality must meet customers‟ requirements in order fully
satisfy them.
Prevention. “Quality is planned into a project, not inspected in”. It is important to
note that it will always be more expensive to correct mistakes rather than prevent
them.
Management responsibility. The project team can improve quality standards, but it is
up to management to provide the same standards on day to day basis.
Kaizen Technology. This philosophy is about improving reduced costs and ensuring
consistency or project performance.
2.4. Retail from the point of discount store view
Retail is constantly growing and fast changing market. More and more new grocery stores
open doors everyday but even more of them close down. Especially tragic numbers were
shown over the recession. People needed and always will need to buy food and other
necessity goods. But here significant changes have occurred. Buying power has shrunk,
buying culture and customer behavior have changed and retail had to adjust to it. Some retail
18
companies (like Tesco, Supervalu, and Dunne‟s Store) had its hard time over the last five
years. But some were thriving. Discount stores like Aldi and Lidl were expanding their
market shares and raising numbers of customers. Discount stores have changed retail
business.
Discount store can be defined as the department store which offers products at lower cost
than the rest retail outlets (Berman, B. and Evans, J. R., 2009, p. 136)
Discount grocery stores also called box (limited-line) stores. “They focus on a small
selection of items, moderate hours of operation (compared with other supermarkets), few
services, and limited manufacture brands. They carry fewer than 2000 items, few
refrigerated perishables, and few sizes and brands per item. Items are displayed in cut cases.
Box stores rely on low-priced private-label brands. Their prices are 20 to 30 percent below
supermarkets.” (Berman, B. and Evans, J. R., 2009, p.136)
Discount stores have following characteristics:
Very low prices
Low gross margins
High degree of self-service
Low-cost fittings
No free services, such as delivery
Reliance on heavy advertising in nearly large population centers
Relative isolation of locations from conventional shopping areas with consequently
low rents predominantly in „edge-of-town‟ sites
(Cox, R. and Brittain, P. 2008, p. 16)
19
To be able to sell at a lower price supermarkets use several strategies:
evolve offering
develop logistic centers and distribution chains
customer focus
quality products
increase effectiveness of employees
cut on waste
maintain orders to reduce fresh product waste.
With the growing market shares and profit margins discounters improving quality wisely but
still keeping low cost. This is where the quality management plays a very important role
achieving goals and building success.
Berman and Evans (2009, p. 130) state that some other food stores have matched box-store
prices, many people are loyal to manufacturer brands, and box stores cannot fulfill one-stop
shopping needs. The newest market research is showing a huge increase in a market share.
According to research group Kantar Worldpanel Aldi‟s share of the market rose 21.9 percent
to 7.9 pc in the 12 weeks ending 30 March (Kantar Worldpanel, 2014). It all changed
customers‟ perception to discount stores and their shopping behavior. Customers coming
back to do their daily or every week shopping knowing that they will pay less for as good
quality products as in any other supermarket.
20
Figure 1. Total Take Home Grocery – Ireland Consumer Spend (Source: Deeney, 2013)
2.5. The Importance of Quality Management in Discount stores
Quality management plays an important role in any business especially retail. Quality
management is much more than just looking after a product or service quality. In fact quality
management works around eight quality management principles that integrate company as a
whole and seeking to make improvements:
21
Figure 2. The eight quality management principles. (Source: Hoyle, D., 2008, p. 25)
Quality management works in many areas and effects over all company‟s performance
positively. It is important for several reasons:
Product quality. This is the factor that makes customers want to come back. This
part of quality management in retail business could be called as one of the most
important. “Quality management is essential to create superior quality products
which not only meet but also exceed customer satisfaction. Quality management
tools ensure changes in the systems and processes which eventually result in
Factual approach
Customer focus
Continual improvement
Leadership
System approach
Mutually beneficial
supplier relationships
Involvement of people
Process approach
Quality Management
22
superior quality products and services. Quality management methods such as Total
Quality Management or Six Sigma have a common goal – to deliver a high quality
product.”(Management Study Guide, no date)
Customer satisfaction. It ensures if customers are satisfied by applying surveys
which can show the quality expectations, competitors‟ advantage, etc. Good product
quality, high customer service, various offers and deals lead to loyal and satisfied
customers who bring more new customers along with them. “Quality management
tools help an organization to design and create a product which the customer
actually wants and desires.”(Management Study Guide, no date)
Increased revenues. Quality management programs increase employee productivity,
attracts more customers, removes inefficient processes in the system, builds good
reputation and reduces waste. All these aspects positively affects sales and increase
profits.
Reduced waste and inventory. Quality management controls quality standards
including daily deliveries and relationship with suppliers. The right amount of
ordering high quality product from reliable supplier can reduce waste to a minimum
and ensure rising profit.
Team work. Quality management ensures close coordination between employees of
an organization. It inculcates a strong feeling of team work for the employees.
(Management Study Guide, no date)
23
The quality management implementation into a business brings long term benefits in return,
but at the same time it is time consuming and requires a dedicative work to achieve it all.
3. Total Quality Management
Aldi is being one of the biggest retail companies and particularly showing impressive
performance in Ireland and UK constantly seeking to improve its business, to achieve new
levels and setting high targets including customer satisfaction. The company practices Total
Quality Management.
Total – Encompasses the entire organization, supply chain, human resources, IT, processes,
and product development. Everyone is involved, practicing what is preached, and regular
communication of the purpose driven goal.
Quality – defined by the beholder and can take on many forms but in the case it is the
perception of the customer(s). The emphasis is on things being done right the first time.
Management – continuous management with cycle such as PDCA cycle, Plan, Do, Check,
Act also known as the Shewhart Cycle or Deming Cycle. (“Total Quality Management”, no
date)
Saladis and Kerzner (2009, p. 201) defines TQM as an organizational approach to quality
that starts at the top management level and includes all levels of employees. The focus is on
continuous improvement and everyone is responsible for quality.
24
Hakes (1991, p. 1) describes TQM as “a management technique designed to involve all parts
of the business in the pursuit of and commitment to the highest quality results.”
These both descriptions allows to make a clear assumption that TQM is a tool to achieve
more efficiency, productivity and increase quality by involving everyone in the company,
monitoring all business processes and continuous improvements.
Seven Principles of TQM:
1. meeting the needs and expectations of customers,
2. covering all parts of the organization,
3. including every person in the organization,
4. examining all the costs related to quality,
5. getting things “right first time”,
6. developing systems and procedures,
7. developing a continuous process of improvement.
(Slack et al. 2010, p. 45)
Some other authors like Charantimath P. M (2009, p. 6) add leadership principal on as well.
Meeting the needs and expectations of customers. TQM pays a big attention to customers
(external and internal), they always come first and their satisfaction is number one priority.
TQM sees importance to responding and meeting customer‟s requirements including basic
and specific ones that could be defined as company‟s competitive advantage. Customer-
driven quality also characterizes in reducing customer complains, immediately dealing with
them and turning negativity of complains into implementing requirements.
25
Figure 3. Customer expectations. (Source:. Charantimath P. M .2009, p. 228)
There is no doubt that high customer service is a success to any kind of business. Customers
are the ones that all the profit comes from. For the company to have a very well working
customer service is a big achievement. Charantimath P. M (2009, p. 228) claims the main
seven aspects that help to build a better customer service and retain customers are the
following:
1. Top management commitment to the concept of customer focus.
2. Know your customers and what they like and dislike about you.
3. Develop standards of quality service and performance.
4. Recruit, train and reward good staff.
5. Always stay in touch with the customers.
6. Work toward continuous improvement of customer service and retention.
7. Reward service accomplishments by your staff.
