08108170, 08108160, 08108117, 08108144, 0810189

Written analysis of case Mercadona

Executive Summary

Mercadona is a family owned Spanish Supermarket Company whose CEO is Juan Roig. In the

Spanish share of total food retail space represents a 13.1% and is located in 15 Autonomous

Communities with 1,338 supermarket stores.

This case presents the predicament of a company trying to do right by its customers and its

employees as the economic crisis of 2008. Fifteen years earlier, this Spanish supermarket

chain had adopted its own version of total quality management, called the Total Quality

Model, switching from the industry's traditional high-low pricing to "always low prices" and

continuous improvement. These changes called for a well-trained, empowered, and

enthusiastically engaged workforce dedicated to providing the best products and service to

their customers, who were always and seriously referred to as "the Bosses." The Total

Quality Model had been a success in terms of company growth and profitability, sustained

by the success of Mercadona's unusually high investment in employee training and

satisfaction. Nevertheless, when sales growth slowed down in 2008, CEO Juan Roig

concluded that Mercadona had let its customers down by not keeping prices low enough for

such hard times. Mercadona set about lowering its prices, reducing product variety, and

lowering its financial targets for 2009. Of the 9,200 SKUs in an average store, the company

decided to eliminate 1,000. But Roig still had to decide what to do about employee bonuses.

Since Mercadona did not meet its 2008 targets, the company policy was that no one--not

even top management--would get a bonus. But Roig knew that his employees worked hard

and well in 2008 and could not be held totally responsible for the downturn or for

management's failure to react quickly enough.

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08108170, 08108160, 08108117, 08108144, 0810189

Problems/issues

Sale Growth Decrease

The first problem they persist in the company is that the sales of the year 2008 is not as

expected and the growth rate of sales is decline average daily sales in 2008 is 1.06% which is

not satisfactory for a company which is having persistently double digit growth rate from

more than a decade

Determining who is responsible

They are having trouble while deciding who is responsible to the growth rate decline and

what should they do to it if they take employees as responsible then the employees bonus

as well as higher command bonus will cut but if they took only higher command responsible

of not taking the decision of stopping growth policies with the condition of the market then

the employee bonus will generated but the company have to bear the loss of 1.06 million

dollar

Which direction to take

The company is not sure in taking the direction of employ involvement and the total quality

management if they take employ involvement then they will employee a chance to get the

bonus and get their loyalty but in other case they may save their cost and may get little

bonus but in the whole they may not get the strategic advantage as whole

Reasons/Causes of the Issues

2008 crisis

The economic crises started in September 2007 GDP decline 0.9% and become 3.4% the

unemployment rate increase in the European Union by 12.8% which hurts the capacity of

individuals to spent and on that difficult time the president of Mercadona decided to change

the mission of the company to low cost rather than growth

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08108170, 08108160, 08108117, 08108144, 0810189

Tread offs

On the one hand the company is doing low cost strategy and on the other hand they are

making heavy investment in the training of their employees and they both are tread off of

each other and both can’t be exist together and both can be eliminated from the

environment

Solutions

Mixture of TQM or Employee Involvement

Perhaps the key issues, however, in determining the relative fit of TQM and employee

involvement are the type of work the organization does and the type of environment in

which it operates. There is a considerable amount of research which argues that the

TQM approach works particularly well in high volume production situations. Which

Mercadona dose in real scenario. The employee involvement approach, however, has often

been used in continuous, process production situations that are c a p i t a l intensive and

that require relatively complex coordination activities.

Every store is reliable

Every store must reliable of their own expenses and have their own profit measurement so

that they can give bonus on individual basis rather as a whole to the organization

Team building

They must encourage team building to get rid of low level hierarchy at work when they

implement employ involvement then they must need that to implement so that everybody

feel improved and at the same time under strict control

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Employee investment is critical

For Mercadona, investment in employees is part and parcel of process and product

improvement. In 2008, the chain invested four weeks of training time and €5,000 for each

new store employee. "In the United States," Ton points out, "the norm is only seven hours,

and the difference shows."

For example, Mercadona cross-trains employees so their productivity is not tied to store

traffic. Cleaners can work the cash registers during busy periods, and cashiers can shelve

products during downtime. Departmental specialists can assist customers during busy

periods and order merchandise and arrange their sections during slack hours.

The results? Customers receive better service. Employees have more predictable schedules,

one reason why turnover is a mere 3.8 percent. And Mercadona has a great bottom line.

Ton emphasizes the importance of scheduling and stability. Workers learn about their

schedules one month in advance and don't have to work different shifts from one day to the

next. Over 85 percent of Mercadona's store employees are full-timers, and they have fixed

salaries with a variable bonus.

"Stable hours and stable salaries make a world of difference to lower-wage retail

employees," she says. "In the United States, even full-time employees often do not know

when they will work and for how long in a given week. But offering stability isn't just a favor

to the workers—something that can be taken away if things get rough. It's part of what's

making the company profitable. Too often, retail managers keep their employees dangling

and switch their schedules around on short notice because they feel they have to be free to

match the labor supply with variable store traffic. What Mercadona shows is that all this

torture isn't necessary. You can offer employees stability and still run a very successful

supermarket chain."

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