This case presents the predicament of a company trying to do right by its customers and its employees as the economic crisis of 2008 hits home. 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.
Swot Analysis of "Mercadona" written by Zeynep Ton, Simon Harrow includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mercadona Roig facing as an external strategic factors. Some of the topics covered in Mercadona case study are - Strategic Management Strategies, Human resource management and Technology & Operations.
Some of the macro environment factors that can be used to understand the Mercadona casestudy better are - – increasing transportation and logistics costs, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, increasing energy prices, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies,
talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Mercadona case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mercadona Roig, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mercadona Roig operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Mercadona can be done for the following purposes –
1. Strategic planning using facts provided in Mercadona case study
2. Improving business portfolio management of Mercadona Roig
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Mercadona Roig
Strengths Mercadona | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mercadona Roig in Mercadona Harvard Business Review case study are -
High switching costs
– The high switching costs that Mercadona Roig has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Mercadona Roig is one of the leading recruiters in the industry. Managers in the Mercadona are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Mercadona Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Cross disciplinary teams
– Horizontal connected teams at the Mercadona Roig are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Mercadona Roig has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mercadona Roig to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Mercadona Roig has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mercadona Roig has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Learning organization
- Mercadona Roig is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Mercadona Roig is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Mercadona Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Mercadona Roig in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Mercadona Roig
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Mercadona Roig does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Mercadona Roig is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Mercadona Roig digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Mercadona Roig has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Mercadona Roig is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Zeynep Ton, Simon Harrow can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Mercadona | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Mercadona are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Mercadona, it seems that the employees of Mercadona Roig don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Mercadona Roig is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Mercadona Roig needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Mercadona Roig to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Mercadona HBR case study mentions - Mercadona Roig takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Interest costs
– Compare to the competition, Mercadona Roig has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of Mercadona Roig products
– To increase the profitability and margins on the products, Mercadona Roig needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Zeynep Ton, Simon Harrow suggests that, Mercadona Roig is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Low market penetration in new markets
– Outside its home market of Mercadona Roig, firm in the HBR case study Mercadona needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Mercadona, in the dynamic environment Mercadona Roig has struggled to respond to the nimble upstart competition. Mercadona Roig has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Mercadona Roig has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
No frontier risks strategy
– After analyzing the HBR case study Mercadona, it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Mercadona Roig needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities Mercadona | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Mercadona are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Mercadona Roig can use these opportunities to build new business models that can help the communities that Mercadona Roig operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Using analytics as competitive advantage
– Mercadona Roig has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Mercadona - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Mercadona Roig to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Mercadona Roig to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Mercadona Roig can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Mercadona Roig can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Mercadona Roig can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Mercadona Roig can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Learning at scale
– Online learning technologies has now opened space for Mercadona Roig to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Mercadona Roig can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Mercadona, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Mercadona Roig can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Mercadona Roig can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Creating value in data economy
– The success of analytics program of Mercadona Roig has opened avenues for new revenue streams for the organization in the industry. This can help Mercadona Roig to build a more holistic ecosystem as suggested in the Mercadona case study. Mercadona Roig can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Mercadona Roig in the consumer business. Now Mercadona Roig can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Mercadona External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Mercadona are -
Stagnating economy with rate increase
– Mercadona Roig can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Mercadona Roig business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Mercadona Roig can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Mercadona .
Technology acceleration in Forth Industrial Revolution
– Mercadona Roig has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Mercadona Roig needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Regulatory challenges
– Mercadona Roig needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Mercadona, Mercadona Roig may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Mercadona Roig with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mercadona Roig in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Mercadona Roig can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Mercadona Roig needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Mercadona Roig
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Mercadona Roig.
Weighted SWOT Analysis of Mercadona Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Mercadona needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Mercadona is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Mercadona is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Mercadona is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Mercadona Roig needs to make to build a sustainable competitive advantage.
