Case: “We Are Market Basket”

I. Case Background
Arthur T. had worked for the company for over 40 years and had been CEO since 2008, when
fired resulted into a broad coalition of high-level executives, middle managers, front-line clerks,
warehouse workers, and truck drivers would band together in protest without any legal
protections for their actions.

Market Basket handled by Mike kept prices low and stores clean. He was also generous with his
employees, starting a profit-sharing plan in 1963, which, by 1991, was estimated to hold $79
million for the 1,826 employees. After Mike died in 2003. Mike’s son, Arthur T. became
president and CEO and carried on the company’s business model.

For Arthur T. there are three “vital pieces” for Market Basket, The People (Employees), low-
price and low-cost structure, especially that the company has no debt. By 2014 Market Basket
was the fasters-growing retailer in eastern Massachusetts. Market Basket had a lean management
structure. Two hundred employees at headquarters supported the store network.

On average, prices were lower than competitors. Market Basket also emphasized uniform pricing
rather than having higher prices in locations where there was higher willingness to pay, while
also constantly working to improve the customer experience, Especially In 2004, the company
put increased emphasis on customer service emphasizing more respectful and friendlier service.
This campaign created a service culture.

Shareholders had opposed Arthur T.’s management practices, accusing him of taking advantage
and spending too much of the shareholders’ money. On June 23, 2014, the board fired Arthur T.
and named Felicia Thornton, former CFO of Albertsons, and James F. Gooch, former president
of Radio Shack, as interim co-CEOs. At the same time, the board fired two other senior
executives, the Vice President of Operations, and Vice President Joseph Rockwell by email.
Over the following 24 hours, Executive Vice President, and Operations Director, quit along with
others with decades of experience. Three and a half weeks after Arthur T. was fired, the majority
of Market Basket’s 200 front office workers, 300 warehouse associates and 65 truck drivers
walked out on their jobs and spent the next six weeks picketing in front of headquarters

On August 27, the Market Basket board of directors and shareholders reached an agreement for
Arthur T. and his family to purchase 50.5% of the company for $1.6 billion from Arthur S.’s side
of the family. As part of the agreement, Arthur T. was reinstated with his management team to
run the company with full operational authority during the transition period, and the two CEOs
would stay on in a monitoring capacity and report to the board during this time. The problem
now is the debt the company had taken on to buy out Arthur S.’s side of the family.
 II. Statement of the Problem
Could Market Basket keep growing, while offering low prices to customers and high wages and
retirement benefits. While also recuperating the $1.6 Billion dollar debt incurred to buy out Arthur
S’s side of the family.

III. Assumptions
If reinstating Arthur T. with his management team to run the company. Getting the business back
up and running at full capacity took only weeks. Vendors and customers alike flocked back to the
chain they had fought for. In fact, Market Basket experienced a bump in sales volume as curious
shoppers went to Market Basket.

IV. Areas of Consideration

a. Human Resource and Development

- By 2014 Market Basket had 25,000 non-unionized employees, 71 stores in
Massachusetts, New Hampshire, and Maine. All employees have been treated well
via bonuses give higher wages. The amount of bonus is determined based on the
longevity rather than performance. This gives every employee the equal benefits
based on how long they are working in the company. The company also worked to
have internal successors in place for important position. This means that Market
Basket trains their employees into a much higher position, which results in
employees staying from the company.
b. Operations
- The business model was driven by volume with a 2.1 million customer transactions a
week. It also helped that most of the stores were in low-income communities where
real estate was cheap. Market Basket also created jobs in these low-income
communities. Two hundred employees also supported the store network with 22
category buyers.
c. Finance
- With the $1.6 Billion Debt Market Basket has a disadvantage, however we need to
consider that in Arthur T’s management there were 22 categories of buyers, which
accounted for 50% of revenue. By 2014 Market Basket was the fasters-growing
retailer in eastern Massachusetts. Even though the price is low and with a low-cost
structure.
 d. Marketing
- When the walkout occurred the employees of Market Basket received a lot of
support from customers. It even gained the attention of the United Food and
Commercial Workers International Union. One loyal customer began a fundraising
to purchase ads in local papers. We can consider that the walkout itself created its
own marketing, and brand recognition from the community.
e. IT / R & D Business Development etc.
- Market Basket did not use any form of technology. This is evident before Arthur T.
was fired, the company does not have any website. However, the lean management
structure is used to support the store network and keep the stores stocked with
products from different suppliers, keeping the stores functioning.

V. Framework (e.g. SWOT, Porter’s etc.)

Strength Weaknesses
 Products has a lower price compared to
 Loyal Employees and Customers. competitors.
 Low-Cost Structure  Market Basket rising up from the debt and the
 Good relationship with suppliers loss of sale
 Location is in low income communities.
 Great customer service

Opportunities Threat
 Market Basket is situated in low-income
communities.  Market Basket incurred a $1.6 billion debt to
 Internally hired employees for higher buy Arthur S’s side of the family.
positions.  The turmoil between the shareholders.
 Products are based on the most bought items
in the location.

VI. Alternative Courses of Action (at least 4)

 Continue to operate like before Arthur T’s firing without any change
 Advantages: With the previous performance and sales we can safely assume
that the company will survive and will have an increase in sales
 Disadvantages: Revenue will be lower than the previous year since the
company is going to pay off the debt.
  Operate in a similar process but increase the price by a little.
 Advantages: by increasing the price by a few percentages we can increase
the profit made per sale.
 Disadvantages: Customers might have a bad impression towards price
hikes.

 Look for more cheaper suppliers.

 Advantages: By replacing the current stores and suppliers with similar items
but cheaper we can cut costs
 Disadvantages: The overall quality of products might be reduced and
customer satisfaction might be drastically lowered

 Close a few store locations not operating well

 Advantages: We can cut cost by a larger margin.
 Disadvantages: By doing this we are removing jobs and leaving
communities, which will have a bad impression on the
consumers. We will also not be getting revenue from closed
locations.

VII. Action Plans

 In this particular statement of the problem the main concern is if Market Basket can offer
to give higher salary and benefit, with low-cost products. While having a debt of $1.6
Billion. How can Market Basket pay the debt without reducing the salary and benefits of
the employees while maintain their image from consumers.

For this the alternative course of action will be used is Operate in a similar process but
increase the price by a little
 Activity Responsible Person/s, or Timeline
Department/s, Team/s, etc
Continue with basic operations. All employees Normal shift

Train employees internally to All higher position, Especially Store 2-3 months of shadowing
replace the important positions Buyers
by shadowing

Increase the price of products by Finance Department 1 Year

a small percentage, making sure
that it is an unnoticeable change.

Start experimenting with loyalty Finance and Sales Department 1 Year

cards and discounts.

VIII. Recommendation

 Since Arthur T’s return the sales lost during the protest while difficult was recovered in
only weeks, and showing a bump in sales. It is safe to assume that the Marketing, and
sale of Market Basket is steadily growing. This is why it is recommended to increase the
price by a small percentage, making sure that the change will not be noticed. With 2.1
million transaction for week and a revenue of $4.6 billion by 2014. It is also
recommended to resume normal operations without any larger changes. In time the debt
will be paid off, and Market basket remove all debts again.

IX. Conclusion
 Market Basket is a model business, with its 3 vital pieces the people, the low
cost, and that they have no debt. Market Basket is like well oiled machine,
by taking care of its employees, making sure to create a culture of loyalty by
giving internal opportunities and giving high pay and benefits. We can
assume that the employees are happy and have a sense of establishing the
 business. Market Basket also has loyal consumers, when the protest arose
even the consumers stood up to fight for Market Basket.

More companies should copy Market basket’s strategy because it is clear

that it worked for them, even though they incurred a debt, with how Market
Basket is operating and generating sales and revenue. The debt will be paid
off in a year or two.

NOTE:

FYI
All groups (1-4) need to submit word (.doc) the printed copy of their report
following the case analysis standard format.

Only the assigned reporting and critiquing group will be required to submit the
hard copy of their presentation (.ppt)
Soft copies will be emailed at:
[email protected]
file name: DAY_TIME_SEC_GROUP_CASE TITLE (ALL CAPS)
e.g. SAT 9-12NN SEC 1 GROUP4 WE ARE MARKET BASKET

Case presentation:
20 minutes will be allotted for the reporting group to present. (No time
extension. please be mindful of the time)

10 minutes- for the critiquing group and the rest of the class to ask questions /
clarification