REV: APRIL 20, 2010
ZEYNEP TON SIMON HARROW
The best inheritance you can give to future entrepreneurs is that of values. — Juan Roig, president and CEO, Mercadona1 Juan Roig took a sip of his café solo and greeted the sunny Valencia morning with a rueful smile. 2008 would be over in two weeks and Mercadona, the company he presided over, had to face the external crisisaffecting the world’s economy by first acknowledging an internal crisis for which Mercadona was solely responsible. Sales and profits for this chain of over 1,200 supermarkets, one of Spain’s most important companies, had been experiencing rapid growth since 1995. Even the national transport strike in June 2008 hadn’t slowed that growth, but had proven harbinger of worse to come. But in Septemberof that year, a year into the global economic crisis, consumer spending dropped off sharply. The number of customer transactions per store, a measure Mercadona tracked closely, had not shown promising growth in 2008. (See Exhibit 1.) After much thought, Juan Roig had come to the conclusion that Mercadona had become so focused on growth that it had lost its grip on its goal of anticipating andmeeting its customers’ needs. It should not have been a surprise that customers would become very price-conscious during a recession. Mercadona had to realign its strategy with its Total Quality Model and put the customer back at the center of the company’s decisions, taking only those steps that provided customer value. Roig told his Board of Directors and the company’s integrated suppliers: “We haveto start pinching pennies. In times of plenty, we fell asleep.” For one thing, it was time to tighten up the product assortment, something else that Roig felt had also gotten out of control. He was confident he could solve Mercadona’s problems; the constant drive to improve was rooted in the Mercadona culture. More difficult was the question of the employees’ annual bonus. It was clear thatMercadona would not reach its company-level targets for 2008. According to the company policy, then, no one— not even the president himself—would receive a bonus. Yet, Roig knew the employees had worked hard this year and could hardly be held responsible for a worldwide economic crisis or for their top management’s slowness to react and failure to stick to its customer-oriented principles.____________________________________________________________
Professor Zeynep Ton and Simon Harrow, Research Assistant of the HBS Europe Research Center, prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective orineffective management. Copyright © 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of HarvardBusiness School.
When I finished my studies, I had only one dream: to create a company whose objective was not only to generate profits, but also to take care of customers and employees and to demonstrate that if you give opportunities and training to people, you get real leaders. — Juan Roig2 Mercadona was a Spanish family-owned supermarket company, foundedby Juan Roig’s parents in 1977. In 1981, along with his brother Fernando and sisters Trinidad and Amparo, he bought Mercadona from his parents. At that time, when he started running the company, they had eight stores with some 300 m2 of retail space each. It was not until 1990 that he, along with his wife, Hortensia Herrero, took over control of the company. Roig was an avid reader and had...