Migros Company Visit
Introduction number of corporations of all types have discovered that adopting so-called “green” or environmentally friendly and socially responsible business practices can pay large dividends in terms of more efficient operations and engendering consumer good will, but grocery retailers have largely been absent from this movement with a notable exception. The Swiss grocery retailer, Migros, has been in the vanguard of corporations that have focused on improving the quality of life for its partners and the customers it serves through such practices, which is a truly remarkable approach to doing business for grocery stores which traditionally have been compelled to compete using razor-thin profit margins in a highly competitive environment. While these business tactics have not always worked out the way the company envisioned or desired, to its credit, Migros continues to adhere to these socially responsible business practices today and expects them to help fuel its continued growth into new markets in the future. To determine what factors have played a role in the company’s growth to date, this paper provides an overview of the company’s history, some key facts and figures about Migros, its corporate strategy/philosophy and current and past issues that have affected the company. A summary of the research and lessons learned are provided in the conclusion.
Review and Discussion
History of the company.
Established in 1925 by Gottlieb Duttweiler, Migros has grown from its humble origins operating from a few Model T. trucks and 16 employees in Zurich to emerge as a major grocery retailer and employer in Switzerland today (About Migros, 2009). According to Migros’ corporate Web site, “With a starting capital of 100,000 francs, Gottlieb Duttweiler bought five Model T. Ford trucks and stocked them with six basic products (coffee, rice, sugar, pasta, coconut oil and soap) which he offered at up to 40% cheaper than his competitors” (About Migros, 2009, p. 1). Opening its first self-service store in 1948 (About Migros), Migros has diversified from these six basic products over the years and now offers its customers a one-stop shopping experience that rivals American-based Wal-Mart. According to Migros’ corporate Web site, “Whatever you think Migros is, you are right because Migros is as versatile as hardly another company in Switzerland: it’s shopping centers, publishing, travel, banking, industrial management, sponsor, culture and photographic processing, airline services, bakery good and even a lot more” (About Migros, 2009, p. 2).
Key figures and facts.
Today, Migros is the largest retailer in Switzerland as well as being one of the 500 largest companies in the entire world (About Migros, 2009). According to Reinhardt and his associates, “Primarily a retailer for foods and near-foods products, the cooperative Migros, with close to 600 retail outlets in Switzerland (but only four outside its domestic market), is facing stiffer competition, both from existing competitors (such as Coop) and new arrivals (such as hard discounters Lidi and Aldi)” (p. 37). The company employs almost 80,000 people and has annual revenues in excess of 20 billion francs (About Migros). Further, in 2007, Migros purchased a 70% share one of Switzerland’s other leading retailers, Denner, which specializes in the sale of alcohol and cigarettes (Swiss retail market consolidates, 2007). According to this report, “Both companies said the deal would secure the long-term future of the discount chain at a time of increased competitiveness since the arrival of foreign retailers in the Swiss market, such as Germany’s Aldi, and France’s Carrefour” (Swiss retail market consolidates, p. 3).
Strategy/philosophy.
One of the key strategic approaches being used by Migros is expanding its operations into European countries that until recently were either closed to such expansion or were deemed unsuitable for the company’s corporate philosophy. Things have changed today, though, and according to Sternquist and Kacker (1999), “Backed by long experience in international retailing, mature European retailers such as Migros would want to get more involved in the historic task of privatizing and rebuilding retailing activity in these countries. To many of them, it is a challenging opportunity and a great learning experience experimenting with hitherto successful concepts in an unfamiliar and often unpredictable environmental setting” (pp. 163-164). Likewise, Reinhardt et al. (2005) report, “In October 2005, Urs Riedener, head of marketing at Swiss retailer Migros, is contemplating the company’s competitive position. Riedener and Migros management have so far always had faith in Migros’ position in the marketplace, built around its governance structure (the customers were also the owners, creating a close link between the retailer and the market) and its emphasis on never selling harmful products” (p. 37). Indeed, the company’s emphasis on so-called “social clauses” (discussed further below) has been at the forefront of its corporate philosophy: “Socially, ecologically, and ethically produced products were key aspects of Migros’ product offering. Riedener knows that Migros benefited from a unique position — and he wants to make sure that Migros defends it from both new and old competitors” (Reinhardt et al., p. 37).
Current and past issues.
The company faces some profound challenges in its efforts to grow its business in the future but has continued its corporate philosophy of socially responsible corporate citizenship (Reinhardt, Dessain, & Sjoman, 2005). The company’s management has been examining ways to assist emerging economies in the countries where it competes or intends to expand to facilitate it future growth while helping improve the quality of life for the residents in these regions. In this regard, Sternquist and Kacker note that, “Many Eastern European countries today are in dire need of basic down-to-earth retailing know-how, not necessarily the sophistication offered by world class chains of specialty stores like IKEA and Benetton. Migros, for example, was involved in 1990 in a project that sought to improve the potato storage capabilities in Sosnogorsk in Russia. With simple measures and little investment, the coop played a significant role in this part of the world. It helped reduce the storage losses to the extent of 30%, something that benefited people immediately and directly” (p. 187). It is reasonable to suggest that these types of corporate initiatives will go a long way in establishing good will among current and potential future customers.
Not all of the company’s social improvement initiatives have experienced this level of success, though. As Brysk (2002) points out, “A prime example of a relatively successful ‘social clause’ experiment, begun in 1987, is between the Swiss supermarket chain Migros and Del Monte pineapple farms in the Philippines” (p. 108). The clause in question stipulated that, “The [Filipino] supplier hereby guarantees Migros that the production methods for the workers, in terms of social as well as economic conditions, are above average” (quoted in Brysk at p. 108). In support of this initiative, Migros maintained that “prices have to tell the truth and reflect the ecological and social costs incurred in production, otherwise someone else has to pay later, usually the innocent public through the insurance system, the public welfare system, and the international community” (quoted in Brysk at p. 108). As a direct consequence of this social clause initiative, though, the price of pineapples grown in the Philippines increased 15-20% beyond those being grown in Thailand, Malaysia, or South African and Thailand’s exports of pineapples increased 250% as a result (Brysk). This author adds that, “More significantly, Migros itself had to offer a second, discounted line of pineapples without the favorable ‘social label’ to cater to buyers who did not really care. Happily, Migros reported, shoppers continued to purchase the more expensive ‘labeled’ goods” (Brysk, p. 108).
Conclusion and Lessons Learned
The research showed that in its 85-year history, Migros has been transformed from its modest beginnings selling basic food and non-food products from the back of Model T. trucks to become the largest employer in Switzerland and one of the largest companies in the world. Retail managers of all types could learn much from this company and its focus on shortening the supply chain as much as possible to bring the products it offers to its customers as quickly and efficiently as possible. Likewise, other retailers could probably stand a healthy dose of the type of corporate citizenship that has fueled Migros’ growth over the years as well. It is unclear, though, whether such a socially responsible approach to doing business is viable in an increasingly competitive globalized marketplace for retailers competing in other countries, but it is clear that Migros has made it work to its advantage and it is reasonable to conclude that this company will maintain this course in the future.
References
About Migros. (2009). Migros. [Online]. Available: http://www.migros.ch/DE/.
Brysk, a. (2002). Globalization and human rights. Berkeley, CA: University of California Press.
Reinhardt, F.L., Dessain, V. & Sjoman, a. (2005, December 14). Migros case study. Harvard Business Publishing.
Sternquist, B. & Kacker, M. (1999). European retailing’s vanishing borders. Westport, CT: Quorum Books.
Swiss retail market consolidates. (2007, January 12). SwissInfo.ch. [Online]. Available: http://www.swissinfo.org/eng/front/detail/Swiss_retail_market_consolidates.html?siteSect=105&sid=7423697.
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