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 commodity prices, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion,
digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, 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 -
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.
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.
Training and development
– Mercadona Roig has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Mercadona Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Mercadona Roig in the sector have low bargaining power. Mercadona has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Mercadona Roig to manage not only supply disruptions but also source products at highly competitive prices.
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.
Diverse revenue streams
– Mercadona Roig is present in almost all the verticals within the industry. This has provided firm in Mercadona case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
Sustainable margins compare to other players in Technology & Operations industry
– Mercadona firm has clearly differentiated products in the market place. This has enabled Mercadona Roig to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Mercadona Roig to invest into research and development (R&D) and innovation.
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.
Highly skilled collaborators
– Mercadona Roig has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Mercadona HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Mercadona Roig supply chain. Even after few cautionary changes mentioned in the HBR case study - Mercadona, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Mercadona Roig vulnerable to further global disruptions in South East Asia.
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.
Products dominated business model
– Even though Mercadona Roig has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Mercadona should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Mercadona Roig has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 decision making process
– As mentioned earlier in the report, Mercadona Roig has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Mercadona Roig even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Mercadona, is just above the industry average. Mercadona Roig needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
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 -
Low interest rates
– Even though inflation is raising its head in most developed economies, Mercadona Roig can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
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.
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.
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.
Loyalty marketing
– Mercadona Roig has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Mercadona Roig in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Mercadona Roig is facing challenges because of the dominance of functional experts in the organization. Mercadona case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Mercadona Roig to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Mercadona Roig to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Mercadona Roig can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Mercadona suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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 -
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.
High dependence on third party suppliers
– Mercadona Roig high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
Consumer confidence and its impact on Mercadona Roig demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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 .
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 .
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.
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.
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.
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Mercadona Roig in the Technology & Operations sector and impact the bottomline of the organization.
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.