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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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 Tread offs 2

08108170, 08108160, 08108117, 08108144, 0810189 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 cant 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

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

08108170, 08108160, 08108117, 08108144, 0810189 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 workerssomething 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."