Business Model of Migros Genossenschaftsbund - Research Paper Example

Migros Genossenschaftsbund Business Model Migros Genossenschafts-bund Business Model Business Model of Migros Migros Genossenschafts-bund (also commonly known as the Federation of Migro Cooperatives) is currently one of the biggest online retail chains in Switzerland with more than 80, 000 employees. According to the company’s official website, Migros Genossenschafts-bund currently consist of 10 local corporative that operate almost 800 super markets across Switzerland. With its headquarters in Zurich, Switzerland, Migros has spread its supermarket chains beyond Switzerland into Germany, France and the company exports its products to the UK, Austria and the US among other countries. This paper critically, analyzes the business model of Migros Genossenschaftsbund including the core operations, functions, strategies and future plans of the giant European retailer (Migros, 2014). Business models show plans that companies implement for purposes of revenue generation and realizing profits from their operations. Unlike most of the contemporary online retailers, Migros-Genossenschafts-Bund has a unique business model that focuses on developing a corporative with diverse business interests and areas. For example, although the company’s principal business is currently in the retail sector, the empire also comprises of a number of other retail formats not under its Migros supermarket brand such as insurance and banking operations, restaurants, printing and publishing, music as well as software retailing throughout Europe. According to Migros (2014), the major product portfolio of Migros include home appliances, groceries, sports equipment, cosmetics, furniture, apparels, hardware and other merchandise. Migros-Genossenschafts-Bund operates as a block and mortar retailing company just like Rosssman, that has incorporated online retailing in its business model. With online Migros shopping retails now available in Swtizerland, Migros-Genossenschafts-Bund operates within the financial service, industry or retail sectors inside Switzerland (Liebig 2009). It operates via six segments: Financial Services, Wholesaling & Industry, Travel, Commerce and Cooperative Retailing among others. Brick and mortar online retail type of business involves online retail companies that possess production facilities and actual buildings such as store in order to allow them maintain physical presence while at the same time enabling them to provide of face to face customer experiences (Funk, 2008). This is particularly in contrast to the online only models used by many online retailers such as Amazon which no not normally have any physical presence where shoppers can directly buy products. Generally, most of the contemporary brick and mortar retailers have increasingly moved into online business by merging their physical retails and e-commerce in order to stay competitive as well as to meet their customer expectations. One of the major advantages of this kind of business type is that it enables the retailers to meet more customers. For example, many consumers are currently searching for products and shopping online. As a result, e-commerce enabled stores are likely to be in a better position to keep up with their customer expectations. According to Funk (2008), merging physical retails with online shopping also has a significant potential to reach a relatively larger audience while at the same time offering an opportunity for the company to provide better customer services. With regard to how reaching it’s the company has enveloped a number of strategies to ensure it is able to effectively reach its customers. For example, aprt from its online retailing services in Switzeland, the business operates through twelve cooperative groups alongside 58 supermarkets situated all through Switzerland with other supermarkets in Austria and France. Other than the supermarkets, the company operates some retail formats like Micasa, Melectronics and Do It+. Another important aspect of the business model of Migros Genossenschafts-bund is product differentiation. This is particularly evidenced by the fact that the items offered by the supermarkets are distinguished by high dependence on the private-label goods. Besides, over 95% of the items in the business’ shelves come from the company’s own brands and it is the company itself that is involved in manufacturing a majority of the items. For example, although the company’s principal business is currently in the retail sector, the empire also comprises of a number of other retail formats not under its Migros supermarket brand such as insurance and banking operations, restaurants, printing and publishing, music as well as software retailing throughout Europe. On the other hand, the company has developed a unique supply chain. For example, apart from supply its stores with different products, the business supplies its own-label products to the smaller independent grocers. The company’s victory as a private label supplier has made it to further develop this activity. As per the start of 1997, the company already had supply contracts in countries like Holland, United Kingdom and Belgium. With regard to business spartnerships, Migros has constantly been on a mission to get newer growth opportunities. Protection of the leadership position within Switzerland partly contributed to the company’s transformation into a virtual market. What is more, the company got into a joint-venture deal Swiss online grocer LeShop- a project that kicked off in 2004 making Migros a real retailing institution within Switzerland. The current business model of Migros is particularly shaped by the fact the Swiss people have one of the highest standards of living in the world. With a quality conscious consumer base, the company has focused on developing a friendly staff and a broad range of products to improve its customer experience. For example, one of the company’s main strategies has been to create a feeling of social commitment by supporting cultural projects and providing a platform for the development of talent and ideas. It is widely acknowledged that the concept of business models is one issue that has triggered serious debates in academia and in practice with e-Marketing, e-Commerce and e-Business believed the main driving forces that have necessitated the need for re-evaluation of the traditional business models (Funk 2008). An issue of concern of the re-evaluation is the manner in which the emerging technologies transform the business model and consequently the strategy. It is worth noticing that a detailed analysis of the concept of business models asserts that there exist serious differences in views or understanding of business models and e-Business in general (Sommer 2012). This is likely to breed misunderstandings on the core issues or dimensions of the e-Business business models. There are a number of important lessons that can be learnt from the business model used by Migros Genossenschafts-bund. Throughout its history, the business model employed by Migros has always enabled the company to be a continuous innovator. For example, through the merging of physical stores with online retailing, Migros Genossenschafts-bund has been able to develop a cult like status by appealing to the young hip Swiss as well as the low income consumers in the country. In this regard, Migros particularly owns much of its business success to the growing community of devote consumers who have helped the company to expand into a diverse range of new markets. Lastly, in the near future, one of the most important indicators and differentiators of success in online retailers will be their ability to leverage the communities and consumers. Migros Genossenschafts-bund has continued to strengthen its online presence in order to ensure its future growth. This is particularly evidenced by the recent acquisition of 30% of Galaxus ownership (Migros, 2014). In summary, the Swiss online retailer operates a unique business model based on its novel ways of retailing and the sale of its branded products that takes advantage of its brand loyalty. Reflection on the Exercise Despite a few difficulties, the entire exercise of collecting and analyzing data on Migros Genossenschafts-bund online retailers and its business model was fairly exciting and interesting. One of the major tasks in the exercise involved accessing relevant databases, official company websites, annual reports and other relevant online sources to help determine the business strategy of Migross as well as its current operational and functional capabilities. However, despite the availability of numerous potential source of information on Migros Genossenschafts-bund, it was quite difficult getting information that only focuses on its online retail operations and not the company in general. This is particularly attributed to the fact that Migros is a brick and mortar online retailer and therefore, a significant potion of its operations do not fall under the focus of this research (Migros. (2014). Additionally, based on the collected and analyzed data on business models, it is evident that there exists a great variation in opinions regarding different perspectives of a business model. As a result some of the results of the literature review were conflicting and this posed a serious challenge throughout the research. Lastly, in trying to relate this to strategic analysis, nearly every theoretical component of the business models are covered in strategy formulation research yet it is these research findings that most business organizations rely on when deriving strategic analysis (Osterwalder & Pigneur 2013). Thus, there is likelihood that a business model that is not in compliance with the business structure might not offer a proper insight into the way to have the business potentials combined with opportunities within the market place. References Funk, T. (2008). Web 2.0 and beyond: Understanding the new online business models, trends, and technologies. Westport, Conn: Praeger Publishers. Liebig, B. (2009). Corporate Social Responsibility in der Schweiz: Wege strategischer Philanthropie. Bern: Haupt Verlag. Migros. (2014). Migros Genossenschaftsbund Official Company Website. Retrieved on May 01, 2014 from www.migros.ch Osterwalder, A., Pigneur, Y. (2013). Business model generation: A handbook for visionaries, game changers, and challengers. Hoboken, N.J: Wiley. Sommer, A. (2012). Managing green business model transformations. Berlin: Springer. Read More