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ORGANIZATIONAL AGONY AND ECSTASY

"Throughout their life, companies go through different cycles and challenges, which, if not addressed with the appropriate strategies, can lead organizations to a drop in sales, profits, a cash flow crisis and “potentially bankrupt”

FROM CRISIS TO BUSINESS GROWTH

"If we understand that the crisis is the generous niche in which a better tomorrow is prepared, the gloom that precedes the sunrise, and we know how to remain firm, accepting the challenge and hoping against all hope, then we will have the opportunity to mature and give a leap into a richer horizon in human and organizational life. Overcoming the crisis is not achieved through activism and external excitement, but through serious reflection and meditation, where forces come together for a decision and a liberating purification" Leonardo Boff

JUAN CARLOS ERDOZAIN EXECUTIVE DIRECTOR OMNIVERSE -eaBC

Throughout my professional career, I have witnessed how some companies fell into a cash flow crisis, which led them to an extreme situation of insolvency.

As a Strategic Business Consultant, when one takes clients with cash flow crises, one knows perfectly well that it is highly probable that one will not be financially rewarded by their client, however, sometimes the main gratification is seeing the client healthy, safe and on the way to profitable stability.


What to do in situations when the company faces an emergency due to a drop in its profits and cash flow?

For those general directors who have a focus more on the internal part of the company than on the external and who, in addition, are not very skilled in marketing strategies, the Bibeault Model gives us a series of guidelines to get out of the emergency to stabilize the company and lead it to growth.

 

THE RECOVERY MODEL TOWARDS BIBEAULT PROFITABILITY

This Recovery Model towards Profitability (developed by Bibeault) proposes the following procedure:

• Adapt marketing strategies to the needs of companies with financial problems.

• Select a marketing strategy that is consistent with the organization's recovery stage.

• Evaluation of product lines and marketing tactics during the delivery process.

• Strengthen the arguments for eliminating unprofitable segments from the product portfolio.

 

PROCEDURE

  1. Determine which of the five stages of recovery best suits the organization.

  2. Use the strategic decision table to identify marketing strategies that are consistent with the organization's current recovery stage.

  3. Review existing product lines and marketing programs to see where they deviate from the model prescriptions and make necessary changes.


As an application of this Recovery Model, let's see below a case of a Mexican company called precisely “COMERCIAL MEXICANA”

How did he almost go bankrupt and recover?

RELEVANT FACTS


1930 Without a doubt, the “Comercial Mexicana” case is a story of passion, courage and “reinvention”; Its history dates back to 1930 when Mr. Antonino González Abascal and his sons Antonino, Carlos, Jaime and Guillermo González Nova founded their first fabric store in Mexico City. It was a store specializing in rigging, jargon and fabrics.

The Comercial Mexicana was located on the corner of Venustiano Carranza and Pasaje Yucatán, in the Center. This was the first store in the chain, founded in 1930.

1962: They begin their expansion in the city, opening the “Insurgentes” branch; with the image of the pelican that would distinguish it.

With the opening of the San José Insurgentes store in 1962, the history of Comercial Mexicana began. In this innovative self-service store, perishables and general merchandise were combined within the same sales floor; Its success generated the opening of 20 more units under the same idea in the 70s. By 1964, the branches in Asturias, Pilares and La Villa were already operating.


1969: They inaugurate the first branch outside of Mexico City, in Irapuato, Guanajuato.

 

1981: Following a strategy of horizontal integration to the right (acquisitions) , and expanding its presence in the market, it acquired the chain “Supermercados, SA” (known as Sumesa). With this, it added to the opening of 51 stores under the Comercial Mexicana concept.

 

1982: As part of its “Business Diversification” strategy , it acquired California Restaurants in order to compete on this front with the then “Aurrerá” that had the “Vips” store format.

 

1988: The first store opens in Monterrey, in the Plaza Fiesta San Agustín shopping center.



1989: Following a segmentation strategy , the Bodega Comercial Mexicana business format was created, a more accessible store model for the low purchasing power segment, emulating the Aurrera wineries.


 



1991: Following a horizontal integration strategy on the right (strategic alliances), an Alliance is carried out with Costco Wholesale, through a joint venture type business model. They open 2 more stores in Monterrey: Plaza La Silla and La Leona.

A public offering of Comerci shares was made on the Mexican Stock Exchange.

By 1996, these shares began to be offered on the New York Stock Exchange in the USA.


1992: They open the first Price Club in Mexico located in Ciudad Satélite in the State of Mexico.

 

1993: Following the US trend of opening “Supercenters”, as Walmart had already done, it creates the MEGA Comercial Mexicana format, a broader store model, which, over the years, and after the study carried out by Walmart in the USA, where “independent retailers” had grown (in surface area, measured in square feet) faster than Walmart, concludes in the “Category Management” concept:

Management by categories guides Walmart to close the famous Supercenters. This concept involves reducing the offer of brands by category, thus facilitating the customer's purchase decision making and reducing the size of the stores.


Example of Category Management:


1996: Comercial Mexicana and Auchan joined forces ( joint venture ) to open the first Auchan hypermarket in Mexico, located in Tlatelolco, CDMX. The 3 stores in Monterrey close, failing to establish themselves in the public's taste.

 

1997: Acquires the 5 Super K-Mart Center stores, located in the State of Mexico, Cuernavaca and Puebla; These stores were a failed act of strategic alliance between Liverpool and K-Mart.

 

2002 : Comercial Mexicana rethought its commercial strategy, focusing on differentiation. This new approach resulted in the launch of what has been its advertising mantra: Are you going to Super or La Comer?, as well as the opening in 2006 of a revolutionary concept that has been strongly accepted: City Market. Following this same philosophy, it introduced its supermarket concept in 2009, under the name Fresko.

 

2003: Comercial Mexicana, in its expansion process, acquires the 5 stores of the French chain Auchan México (2 in Mexico City, 2 in the State of Mexico, and one in Puebla, once the sale is completed, its presence in the country will be concluded; these stores were a failed act of strategic alliance between Comercial Mexicana and Auchan.

 

2006: Until this year, Grupo Comercial Mexicana had more than 170 stores including Mega, Tienda, Bodega, Sumesa and 3 distribution centers. In addition, the City Market format, the chain's premium format, is created.

 

2008: Through its subsidiary California Restaurant chain, it purchases the craft brewery chain Beer Factory and its 3 branches Santa Fe, Cuicuilco and Mundo E, becoming part of California.

He suffered the consequences of betting on the purchase of dollar futures. Speculation brought it to the brink of bankruptcy, but a restructuring program focused on reducing debt and selling assets helped the company move forward.

 

2016: Eight years after that bitter experience, Comercial Mexicana sold 143 stores to Soriana and changed its name to La Comer. This new company only kept the formats that are aimed at a population with greater purchasing power: La Comer, City Market, Fresko and Sumesa.

 

2015 : Decided to divest from its California Restaurants, Beer Factory and some Comercial Mexicana stores.

 

2016: With the agreement to sell stores to Soriana, Controladora Comercial Mexicana becomes a subsidiary of Tiendas Soriana; However, it will only retain 143 of the 155 stores purchased. The unification and merger process will be staggered, starting with the joint operation of campaigns, such as that of Julio Regalado. Controladora CM has most of the branches of the original company (148 branches), which operate in the Tienda Comercial Mexicana, Bodega Comercial, Mega Comercial and AlPrecio formats. Soriana will have the right to use the original name and logo of "Comercial Mexicana" for two years, so the stores that use this distinctive are those managed by the company based in Torreón. After this time, they must be renamed to one of the formats used by the chain or create a new format, if it does not have an equivalent. Temporarily, its headquarters of operations continue to be in Mexico City, next to La Comer.

 

2019: They return to Monterrey after 23 years, this time with the City Market format located in San Pedro Garza García, Nuevo León.

 

2021: The return to Monterrey, to the medium-high segment, is planned after 25 years of absence, with Fresko, in the Esfera Fashion Center shopping center.

 

2022: It opens its second branch in Las Animas Puebla and in Escala Morelia in Morelia Michoacán.

La Comer is a commercial company with 84 units: 37 La Comer stores, 13 City Market, 21 Fresko and 13 Sumesa.

 

DIAGNOSIS: THE MEXICAN COMMERCIAL ALMOST BANKRUPT FOR BETTING ON THE PURCHASE OF DOLLAR FUTURES
🔘 Whose responsibility was this decision to bet on dollar futures? The CEO, the finance director... the family?
🔘 How institutionalized was this family business? Did it have corporate governance foundations? Did it have advisors to determine whether investing in futures was prudent?
🔘 Why did the company forget its "Core Business" seeking speculative profitability instead of focusing on the self-service sector where they were very good?
The answer, only the owners of Comercial Mexicana know, what we know is that they did an extraordinary rescue work worthy of praise.

HOW TO RETURN TO A BUSINESS RECOVERY MODEL?

This “La Comer” experience makes us think about the “Bibeault Recovery Life Cycle”.

Donald Bibeault applied the fundamentals of Strategic Planning and his experiences in several companies with problems, to create a matrix of recommended marketing strategies for each stage of an organization that is in the process of recovery.

This matrix is very useful for prioritizing and identifying unnecessary or counterproductive marketing expenses.

 

Marketing can play an important role in turning a company around to profitability, so it is necessary to develop effective and appropriate marketing strategies.

 

It must be taken into account that the marketing strategies to apply are very different if the company is in the process of recovery or if it is in a normal situation.

For CEOs without extensive marketing experience, this method provides a useful framework for venturing into the nuts and bolts of marketing strategies.

 

STEPS TO FOLLOW

1 Identify the recovery stage where the organization is currently based on Bibeault's five-stage recovery lifecycle model below. The following table describes the characteristics of each stage to help identify which one applies:

For example:

Stage 01: Management change, when the company enters this stage, it recognizes for the first time that there is a serious problem. (Note: although companies usually incorporate a new director or manager, this stage does not always imply a change in management).

 

Stage 02: Evaluation, the organization moves to this stage, resolves it and continues to take emergency measures (stage 03), stabilization (stage 04) and, if the change is successful, return to growth (stage 05) .

 

2 Develop a marketing plan based on the strategy indicated for the current stage of your company. The following table identifies strategies for making market share, price, promotion, and product line decisions:

3 Modify current marketing programs to reflect the indicated decision strategies. When a company gets into trouble, abnormal, sometimes extreme, measures are needed to get back on track.

Traditional pricing and promotion approaches are often inappropriate during the turnaround process, and product lines typically need to be trimmed.

 

The Bibeault model helps company management identify necessary changes in marketing strategy and strengthens the determination to make marketing contribute to the recovery effort.

One of the most controversial issues when companies are in the emergency stage is what to do with traditional lines of business that no longer provide a positive contribution. Often a company has defined itself as serving a particular segment for so long that management and the board of directors have trouble seeing it any other way. But in general, experience indicates that a company cannot try to save its losers during the emergency stage.



Recapitulating and taking into account Bibeault's tool, what the Comercial Mexicana experienced that successfully emerged from its crisis, let us not forget the wise words expressed by Leonardo Boff at the beginning of this reading:

"If we understand that the crisis is the generous niche in which a better tomorrow is prepared, the gloom that precedes the sunrise, and we know how to remain firm, accepting the challenge and hoping against all hope, then we will have the opportunity to mature and give a leap into a richer horizon in human and organizational life. Overcoming the crisis is not achieved through activism and external excitement, but through serious reflection and meditation, where forces come together for a decision and. a liberating purification"

 

REFERENCES:

📤Donald B. Bibeault. Corporate change: How managers turn losers into winners.

 


“Competitive Intelligence is for organizations to understand their market, make safe strategic decisions and increase their profitability, through a competitive analysis that allows them to predict challenges, risks and opportunities”

 

 

 

 

 

 






 


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