Management and Business Model Essay
Q: Description of the business model of Aldi by using the business model canvas
Usually the first thing coming on our minds when the word model is mentioned are models of real objects in engineering, architecture and etc. But the point with the business model is to gain understanding of the “big picture“. The business model canvas designed by Dr. Alexander Osterwalder provides you with this knowledge and also with visualizing the same. Aldi functions on an every-day basis.
There you would find products you consume every day. Their suppliers (key suppliers) sell items under Aldi`s labels which favors their negotiating position for purchasing the stocks by lower price. Regarding key suppliers and key partners, as I am implementing the business model of Aldi in UK, their partners there are the British farmers when it comes to meat, and all of those suppliers have to pass a high quality testing.
In fact, all of the Aldi`s suppliers have to pass this high quality standards, otherwise they lose them as a company. So starting by this they show their commitment to their customers and begin with the value proposition. Initiating the value “chain“ of the canvas, I would start by defining the one. The
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Aldi makes the job done. There aren`t any fancy shelves where the customer can lose him/herself. Everything is simple arranged and by this not only the company increases the usability and accessibility to the products but also saves the consumer’s time. According to me this represents an extra created value with big importance for the consumers. For the segment of customer relationship and customer segments per se, I would combine them together because the answer of several question like:
* For whom we create value?
* Who are our most important customers?
* What type of relationship does each of our customers segments expect us to establish and maintain?
* How are the integrated with the rest of the business model?
The answer is the mass market. For all consumers. Although at the beginning this retail business was categorized as a low-budget families, and sort of shame for the middle and upper class, today (better to say after the recession) Aldi`s customers are everyone. They want cheap and good quality products-the retail company gives them that. There is mutual interest which is highly fulfilled followed by high revenues.
The generic items and their label on it is a way of cost reduction. Another one is the “coin-system“ for the shopping trolleys which you receive back when you are returning it. By this an expenses for extra staff`s salaries are saved. Another connection with the cost savings is that as one of the distribution channels for Aldi is organized by the retailer itself. It`s more cheaper and quicker, and of course increases the revenues. Seems they don`t have any need of intermediaries because they sell their own products. Aldi falls under the category of firms which are capital intensive (financial resources). They need a big capacity (store capacity); parking lot and also warehouses. Read about components of staffing
Aldi has their own warehouses from where the stock is distributed to the stores. The item`s choice is limited to 2-3 selection options. Concerning the key resources, human resources are something in which Aldi invests a lot. The entity wants the employees to know the business model in which they participate; the business strategy and on that way they would know how to sell the product. I would finish with the key activates as one of the canvas`s compositions. Focusing on low price products with high quality and having the cost leadership as a competitive advantage are the key drivers for Aldi`s success.