Article Analysis Essay on Market Basket: Pioneers of Employee Benefits and Good Pay

Introduction

The main lesson to carry from the article about Market Basket supermarket is that other supermarkets can provide their employees with good pay and benefits. The supermarket was founded back in the year 1917, as a small store by Demoulas grandfather, which later expanded into a grocery store, as a result of his children intervening. The family started fighting over management and ownership of the store down the line. Demoulas family was known for lack of communication, and hence, the conflict began hurting the family members which finally resulted in affecting the company and its operations altogether (Ton, Kochan, & Reavis, 2015). The main brothers involved in the conflict were Arthur T. and Arthur S., where the latter was unhappy with the way the grocery store business was run by the former at the time. Arthur S. cared all about the profits generated by the grocery business while Arthur T. was both customer, profit, and employee-oriented. However, following the firing of Arthur T., concerns were raised among the employees who feared of losing their jobs, the personal relationship that they had created with the CEO, and lowered wages. Due to this loyalty, the employees stood with Arthur T., until his reinstatement.

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Article Analysis

The uniqueness of customers, distinctive financial performances and creative employees, are the three features that make Market Basket unique and profitable as compared to other organizations in their line of business. Market Basket is characterized by both an environment for shopping that is not complicated and absence of loyalty cards and the lines for self-check-out. They are known for their lower prices and average, and in particular being between 22% cheaper than Shaw's, Walmart, as well as 10-21% cheaper than Stop & Shop. Rather than customizing its prices, Market Basket chooses to focus heavily on demographics. For example, before setting up a new store, store director and buyer will study the region of interest for what people consume and their respective ethnic backgrounds, and if there is anything unique such as a certain type of bread, Market Basket will find a way to start carrying it to appeal to customers. Market Basket takes customer service very seriously, and they go above and beyond for their customers. Market Basket says they stock their shelves during the day and not at night because which is essential as it enables consumers to receive help easily in shopping. The organization also established "the 10-foot rule that any customer within 10 feet of an employee should be acknowledged with a greeting or a smile" (Ton et al., 2015, p. 7). In addition to this, Market Basket has a fantastic customer service and service culture.

The supermarket is well renown for paying their employees incredibly well, with both the part and full-time cashiers remunerated at $8/hr., and $12/hr., respectively. The cashiers in part-time also receive 0.25 increment every half a year till they reach $12/hr., payable to the full-time cashiers at the supermarket (Ton et al., 2015, p. 7). Market Basket gives its employees bonuses throughout the year that are based on how long employees have been with the company, to help recognize their hard work. There is an enormous focus on making sure that everyone in the company works hard, and works together, to make sure the chemistry is right. Market Basket from the beginning has been on an upward path. From 1971-1974, Market Basket experienced intense growth of stores which rose from fourteen to fifty-one (Ton et al., 2015, p. 3). By 2014, in just a countable three states, the supermarket had collected revenue amounting to almost five billion in its seventy-one stores. As of 2012, the operating margin of Market Basket was 7.2 %, a percentage higher than that of Stop & Shop and Whole Foods. Rather than financial growth through debt, Market Basket uses profits to expand its territorial borders of business.

Prior to when Arthur T. was in control of the supermarket, he exercised the business model that was responsible for the success of operations of the organization. The model was made up of four parts: its debt lack, its low people, low-cost structure, and its low prices. They kept their people and customers happy. They were able to offer such low prices thanks to their suppliers and had a great company culture. Supplier wise, Market Basket turned to local vendors. They work with vendors for a long time, allowing personal relationships to develop.

Moreover, Market Basket is friendly and adopts a helpful culture and speed, which are the main features that can be attributed to its success. When Market Basket opens up in a neighborhood, they are not just opening a store; they are creating a culture, a business and helping the area. The model of business applied by the company under study was volume-driven. A typical supermarket might be in possession of 15,746 transactions per week per store, but Market Basket was in possession of 29,600 transactions in one week, per store, and overall possess over two million consumer transaction every week (Ton et al., 2015). They have lower costs than most supermarkets, but they make up for it by how many transactions they have. By operating with no debt and financing with profit, the company can be very productive.

There was fervent tension created in the employees, suppliers, and customers of the supermarket, following the firing of Arthur T. The latter had done so much not only for the employees but saved customer money, and local vendors dependent on the business of Market Basket, and they were worried to lose everything. The Directors responsible for the supermarket understood the impact of firing Arthur T., and so they wrote to the board of the company to explain on the serious repercussions the organization would have faced in Arthur T. absence. Thousands supported Arthur T. and stood outside the building with a sign saying "Save Market Basket" (Ton et al., 2015, p. 14). The board had initially fired all the complete trusted employees of the organization along with Arthur T., which made many employees insecure about their jobs, hence protesting in large numbers for a whopping six weeks to bring Arthur T. back in front of the headquarters. Employees had one simple request which was the reinstatement of their mentor Arthur T. back and reinstated his CEO position. Employees did not trust the new CEO and feared that without Arthur T., and together with the customers, they feared of lowered benefits and salaries as well as high prices for the company products respectively. The protest gained attention and supporters. Politicians expressed concerns and soon it was all over the newspapers and television stations. The intensity of the protests was felt by the company when the sales dropped with more than ninety percent, only two weeks into the protest (Ton et al., 2015, p. 17). Following the intense protests in the aim of reinstating Arthur T., half of the company was sold to Arthur T. for 16 billion, which was initially owned by Arthur. S.

Collective action worked for Market Basket because of how loyal the people were to Arthur T. Under Arthur T. leadership; Market Basket grew and succeeded as a company, so people were likely afraid about what would happen if he was gone. Employees stayed with Market Basket for a very long time, so losing Arthur T., who is a great source of stability for Market Basket, could have proved disastrous for them. Another reason that collection action worked can be attributed to the public. Companies have an obligation to all those that have a stake in them, such as their customers, communities they are based in, and employees.

Conclusion

Market Basket business model I believe, is sustainable, but it may have to change its business model. They are now in a lot of debt, 1.6 billion, and it will take some time to get out of that debt, but because they can no longer use the profit to finance growth since they use the profit they gain to pay off the debts, it may become difficult. Market Basket will have to work hard to lower costs as much as they can so they pay off as much debt each year, and hopefully with time they can get back to how they were. The trouble, in my opinion, will come with finding the right balance between continuing to expand, which will in the long run increase profit, and paying off their debts. They got some great publicity, and they should take advantage of that, but so are other groceries store chains and supermarkets. Some customers, vendors, and suppliers stopped going to Market Basket all together because of the damage and publicity. Other challenges I think they will have as times passes is the aging of Arthur T. He will not be around forever, so he has to find a successor. He is the type of CEO all companies should have. I believe when we invest in human capital, our employee's performances increase and it makes our business successful.

Reference

Ton, Z., Kochan, T., & Reavis, C. (2015). "We Are Market Basket." MITS Loan Management, 28.