Mercadona: In-depth Business and Strategic Analysis

This report provides a comprehensive analysis of Mercadona, a prominent Spanish supermarket chain, examining its business operations, competitive advantages, and strategic positioning. The report begins with an introduction to Mercadona, its founders, mission, and vision, highlighting its focus on customer satisfaction and its role as a market leader. It then delves into a PESTEL analysis, assessing the political, economic, socio-cultural, technological, ecological, and legal environments in which Mercadona operates. A SWOT analysis is presented, outlining the company's strengths, weaknesses, opportunities, and threats. The report also applies Porter's Five Forces model to analyze the competitive landscape, including the threat of substitutes, new entrants, competitive rivalry, supplier power, and buyer power. Furthermore, the value chain is examined, breaking down Mercadona's primary and support activities to identify sources of competitive advantage. The analysis covers inbound logistics, operations, outbound logistics, marketing and sales, service, firm infrastructure, and human resource management, providing a detailed overview of Mercadona's strategic approach and operational excellence.

Introduction:
Mercadona is regarded as a family-run business that specializes in product distribution and has
roots in the Valencian Community. Francisco Roig Ballester and his wife Trinidad Alfonso
Mocholi are the founders of this business, which was established in 1977. Mercadona was
originally thought of as a butcher store, but over time it developed into the biggest supermarket
network in Spain that it is today. Throughout Spain, it operates about 1700 supermarkets.
Currently, company also has four own brands, including Hacendado, Bosque verde, Deliplus,
and Compy. Due to all of this, it has surpassed other significant, globally successful businesses
to take the top spot among food shops in Spain.
The company's Total Quality model, which emphasizes complete stakeholder satisfaction, has
been the fundamental factor in its success. It should be mentioned that the customer is its
primary focus because the company views the client as its "boss" and directs all its efforts
toward the client.
Mission:
The goal of Mercadona is to meet the demands of all its constituents, with a particular emphasis
on customers, but also on employees, suppliers, society, and capital. All of this is done with
the goal of attaining maximum profitability through its own brand's differentiation in quality
and pricing.
Mercadona's vision:
As well as developing customer loyalty by becoming their preferred supermarket and a
competitive business in every way, Mercadona's objective is to become the top supermarket in
Spain. From having a distinctive company identity to completely differentiating itself from its
rivals. With the best quality, most comprehensive service, and the quickest turnaround times
feasible, Mercadona strives to become a pricing leader.
Competitive advantage:
Affordable rates, superior, individualized customer service, items for celiacs, and favourable
working circumstances are Mercadona's competitive advantages.
Because it is built on all the small competitive advantages they have and because the business
has been able to continue growing over the long term, it is sustainable. Both customers and
employees are content. Although expensive, staff training is predicated on efficiency (full

tracks negotiation and productivity of employees). The effectiveness reflects the long-term
worth of the business.
PESTEL analysis:
 Political environment:
Since Spain has been a democracy since 1977, the political climate is regarded as stable because
there are no indications that this regime will alter. Due to the COVID-19-related health issue
that is affecting both our nation and the rest of the world, we currently find ourselves in a very
challenging situation. With the current crisis, there is a significant 16% unemployment rate.
Despite this, Mercadona has continued to employ a policy of confidence in its employees and
permanent contracts for all of them. In this way, it exudes a strong sense of security during
these uncertain and uneasy times.
 Economic environment:
The most important economic factor to highlight is the economic crisis that began in 2008 in
Spain and in part of Europe. This fact has had great consequences for all sectors. If we focus
on the food sector, we see that there has been a significant rise in prices, also due to the rise in
VAT or a considerable increase in the unemployment rate, which has caused consumers to need
to obtain higher-quality products. or equal quality at a lower price.
 Socio-cultural environment:
In Spain, the birth rate has decreased along with the death rate in recent years, leading to a rise
in the number of elderly people and a decrease in the number of children. Even though this is
an isolated incident and the trend toward longer life expectancy and a lower birth rate will
continue, studies do not yet allow us to calculate the impact that this pandemic has had and is
having on society. It is true that the number of elderly people has significantly decreased as a
result of the current pandemic.
 Technological environment:
In this instance, Mercadona has modernized its technology by adding an online purchasing
option, making it among the most cutting-edge in the grocery industry. This makes Mercadona
one of the top businesses in Spain, together with the fact that it consistently invests in the
creation of new policies and initiatives.
 Ecological environment:

Based on its cattle and agricultural industries, Spain is regarded as one of the most resource-
efficient nations. Due to the extensive amount of daylight, it receives throughout all its regions,
it is also one of the nations in Europe that uses solar energy the most. Mercadona is particularly
concerned about the environment, and this is evident in its campaigns. In all its locations, the
company has signs encouraging recycling and uses recyclable bags to encourage sustainability.
 Legal environment:
Spain has many work regulations as well as environmental laws.
SWOT analysis:
STRENGTHS OPPORTUNITIES
 White brands of superior quality and wide market
acceptance. (Hacendado, Bosque verde...).
 Many stores in most autonomous communities.
 Lower pricing than those at other supermarkets.
 Has a stable customer base and is a well-known brand
without the need for advertising.
 Customers with a limited range of motion may be drawn
to home delivery.
 Benefits of loyalty for holders of Mercadona cards.
 The top national products are available.
 Human resources, treating employees well
 Expansion of online commerce.
 Due to the country's economic difficulties
and its low-price policy, the potential for
gaining new customers.
 Growth potential into new markets
WEAKNESSES THREATS
 Lack of brand choice could turn off discerning buyers.
 No service for substantial customers. (Hotels and
eateries)
 Only sells items relating to the home or food.
 Absence of a global presence
 The country's weak economy and high
unemployment rate discourage
investment in the shopping cart.
 Suppliers' ability to influence prices.
 Negotiating power on the part of the
consumer
As a result, it is clear from this SWOT analysis that Mercadona has several issues that need to
be resolved or countered if it is to maintain its current level of growth and increase its lead over
its primary rivals.

5 Forces of Porters:
Threat of substitute products: Since 2013, the brand has been narrowed for the first time
between manufacturer brands and distribution brands. Its white marks can be seen as a danger
to the brand products of the same manufacturers. The distribution's brand sales are still aided
by this disparity, though. Since the food industry deals with so many diverse items, businesses
in the industry can easily identify alternatives. White marks on some of its rivals' items could
tempt customers from Mercadona to switch to their lower-priced alternatives.
Threat of new competitors: Given how fiercely competitive the industry is, threats are always
present. Mercadona continues to be the market leader in Spain despite the global economic
crisis thanks to its robust growth and entire quality management methodology. Due to the high
entry hurdles, it is challenging for potential new businesses to compete with established, major
ones in the industry.
The competence on the market: The top rivals of Mercadona are Carrefour, Eroski, Alcampo,
and Dia. Mercadona is the industry leader in its field, although there are many rivals. Only one
of them, Carrefour, could compete with Mercadona.
The bargaining power of suppliers: Since it can select from many suppliers and has
"intersuppliers" who exclusively produce for Mercadona, this power is limited (white brands).
The bargaining power of customers: This influence is quite strong since consumers continue
to find ways to make purchases in the market at lower prices because they are so sensitive to
price adjustment rules. Mercadona has a very distinct offering (the first to market food for
coeliacs), communicates with customers clearly, and promotes "ALWAYS LOW PRICES" as
its motto.
Value chain:
Michael Porter created the value chain, a management tool that enables an internal analysis of
a firm by breaking down each of its primary value-generating operations, from the procurement
of raw materials through the delivery of the finished product or service that is useful to the
market (Porter, 1985).
The primary and supporting activities for the Mercadona case will then be created in order to
ascertain which ones enable the business to gain a long-term competitive advantage.

PRIMARY ACTIVITIES: entail the physical production of the product, its sale and transfer
to the customer, as well as post-sale support, and are broken down into the following five
generic categories:
Inbound Logistics: Mercadona has spent a lot of money automating warehouses to save staff
time and effort and boost production. It is divided into four clearly defined divisions: a building
for the dry parts, another for the cold areas, a third for the containers, and a fourth for the
services. Mercadona has reduced the time from 45 minutes to 12 minutes by organizing the
pallet. As everything becomes more automated, fewer workers are required, which lowers the
likelihood of workplace accidents. However, this also means a loss in the workforce.
It may be argued that because of its approach of organizing purchases to reduce storage and
delivery delays, it has a competitive edge in this area. Additionally, it purchases from dockside
providers to cut down on wasteful expenses.
Operations: Because of its relationships with its suppliers, the business can alter its production
procedures in order to reduce costs, such as by doing away with cardboard boxes and fruit
trays, for example. Additionally, the new Efficient Store format features considerably larger
and more open spaces so that shoppers can buy things more easily without having to navigate
numerous aisles. There is a line to get through because many of its stores still have numerous,
small aisles. However, having storefronts in a city has a distinct advantage because it adds
value to the product by fostering intimate ties with customers.
Outbound Logistics: In this instance, the business based its strategy on product rotation
because it has removed duplicate products from its shelves and, despite managing to lose some
margin, it reduces the cost of the customer's shopping basket. The items also have a quality
component because of control and storage management. Like this, Mercadona employs
specialists who visit each of its stores to examine operational enhancements.
Marketing & Sales: In this area, it might be argued that Mercadona does not spend much on
advertising because it defends its no-advertising stance with the help of customer loyalty,
which spreads word of its existence and reputation through word-of-mouth, meaning that new
potential customers learn about it through friends and family. Thus, since no advertising is
required, the cost of the products can be reduced.
Service: As was described throughout the work, Mercadona continuously strives for customer
pleasure, and all its tactics are based on them. As a result, what interests it most is their feedback

in order to enhance the products. Because of this, it includes a customer service department
where users may voice any concerns or suggestions. As a result, it has a competitive edge in
this industry because it cares about customer happiness, solicits feedback, and considers client
suggestions to enhance business practices and maintain its position as a market leader.
SUPPORT ACTIVITIES:
They are the ones who provide the purchased inputs, technology, human resources, and diverse
firm operations in order to support the primary activities and each other. They fall into 4
categories and hence indirectly add value.
Firm Infrastructure: By maintaining a positive relationship with its suppliers, Mercadona
gains a competitive edge. Additionally, the items go through ongoing quality checks and are
planned to depend on consumer needs. As a result, most of the company's funding comes from
its own resources because, as a supermarket, customers must pay now of purchase.
Human Resources Management: Because Mercadona spends annually in the training of its
staff members and practically all its employees have long-term employment contracts, the
company has a competitive advantage. It also provides all of them incomes that are higher than
the standard for the industry. Since they are off on Sundays and holidays, the employees work
modest hours. The same goes for women, who make up more than half of the workforce and
have access to an extra month of maternity leave in the event of pregnancy. Like Mercadona,
which includes day-care facilities and adapts shifts to workers' needs, Mercadona is dedicated
to family reconciliation.
Technology development: spends annually in R&D processes for new items, and thanks to the
Data Processing Centre, which enables it to know in real time the state of all fresh products in
all its stores, it has a technological competitive advantage.
But at Mercadona, innovation isn't just created at the product level; it's also created through
concepts, technology, and processes. At all times, the company bets on the constant
introduction of advancements that enable processes that don't add value to the product to be
eliminated. product.
Procurement: whenever the season and proximity let it, we try to find domestic suppliers that
can supply us with high-quality, fresh products. Additionally, she is committed to creating a
sustainable food chain, which means working with the primary sector (farmers, fishermen, and

gandoras) on a national level, even if she is now considering the possibility of importing some
raw materials.
The fact that Mercadona purchases the chickens before they are born, which enables it to
negotiate the terms since if an epidemic happens, it must bear the costs, might be used as an
illustration of supply.
In conclusion, 4 activities that give Mercadona a sustainable competitive advantage may be
emphasized after studying each activity that makes up the value chain. These activities are as
follows: Procurement, internal logistics, post-sale support, and technological development.
VRIO analysis:
The VRIO analysis will be transferred to the case of Mercadona, to find out if it has any
competitive advantage over its competitors. In this way, a resource is considered valuable when
it has the capacity to take advantage of market opportunities or minimize threats; it has to be
scarce and difficult to imitate, that is to say, the acquisition of that resource would entail a very
high cost for the competitors, or it would take them a long time to imitate it. Finally, it is about
the company being structurally prepared to exploit resources that were previously classified as
valuable, rare and difficult to imitate. Therefore, different Mercadona resources will be
analysed, although later I will focus on one to study it in depth.
Resource or
capability
Valuable Rare Inimitable Organisation Competitive
advantage
Brand and
Reputation
Yes Yes Yes Yes Yes
Distribution
network
Yes Yes Yes, but it’s
difficult
Yes Yes
Food
products
Yes No Yes Yes No
Financial
resources
Yes Yes Yes, but it’s
difficult
Yes Yes
The distribution network, which produces a competitive advantage for the business by meeting
all needs, would be a VRIO resource, as can be seen in the Table. It is valuable since it enables
you to contact an increasing number of clients thanks to its 16 logistical blocks, which

guarantees more income because the products are easily accessible and arrive at the
establishments fast. It is also a limited resource because doing so would require a significant
expenditure of time and money, meaning that only a small number of rivals would succeed in
outdoing Mercadona's logistical network. This may be related to imitability, meaning that while
it is possible, doing so would require a significant commitment of financial resources, to which
only a few numbers of people would have access given Mercadona's high income. Finally, the
business is extremely well-organized because it can quickly get to all the locations thanks to
the various logistical strategies it employs. Additionally, it has been able to automate a
significant portion of its logistics centres, allowing it to be incredibly effective and productive.
In the same way, the private label would also be a VRIO resource since it is valuable for the
company due to the great customer loyalty and working with suppliers that provide the products
only to the company. Likewise, it is scarce since the competitors have not managed to have a
white label of such quality as Mercadona's and at such competitive prices, however, it could
be imitable, although it would mean investing a lot of capital and for that they would need to
increase their prices by a large percentage. sales and they would only achieve it by taking
market share away from Mercadona, which would be quite difficult. They should also invest a
lot of time to find suppliers that will only work with them and provide them with better quality
products at more profitable costs. Regarding the last requirement, the company is very well
organized since it has efficient workers who, together with the technology that it has in the
production processes, manages to be a very productive company. They should spend a lot of
time looking for suppliers who will only do business with them and offer them higher-quality
goods at more advantageous prices. About the final criteria, the business is extremely well-
organized thanks to its productive employees and the technologies it uses in its manufacturing
procedures.
Business Model Canvas

Conclusion:
One of Spain's most successful companies is Mercadona. It is the market leader, and even
during the years of the crisis, its sales have risen year after year.