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MARKET BASKET

Market Basket

Vanessa Lopez

South Texas College

ORGL-4631-V05-Capstone I

Dr. Patricia Blanco

October 21, 2020

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MARKET BASKET

Difference between Market Basket and its competitors. 

Market basket differs from a lot of its competitors for various reasons. First, the business

has adopted a strategy that to offer products at reduced prices. The business has adopted the

economy of scale where it makes profit by selling the products low prices targeting a large

volume of customers. "You can go to the Stop & Shop and pay $3.99 for a package of Oreos.

They might sell 100 of them. We sell them for $1.50, but we'll sell 10,000. We're going to win in

volume. We always win in volume" (Ton et al, 2015). Second, the business owns and operates its

warehouses. This helps the business to be organized by stocking the warehouses just like the

stock in the stores. To facilitate the delivery, the company has its truck drivers who deliver the

stock apart from a few items that are sourced directly from the vendors. Third, the market basket

operates with no debt and finance its growth with profit. The business set up stores that fit in the

specific geographic area which comes with customer loyalty. “Supermarkets can benefit from

economies of scale because they can buy food in bulk and get lower average costs. If you had a

delivery of just 100 cartons of milk the average cost is quite high. The marginal cost of

delivering 10,000 cartons is quite low” (Pettinger, 2019)

The market basket has for long been involved in relationship conflict. The family-owned

business has been tussling over ownership as the children of one of the stakeholders (George)

claimed that their uncle (mike) was buying them off. The conflict took a legal turn and the court

ruled in the favor of George children and ordered Mike to give them 50.5 ownership of the

company. The dyadic conflict between Arthur S (George son) and Mike arose after Mike took

over the running of the business after his brother’s death. Initially, Mike would resume the

responsibility of taking care of his brother's family, “attended George's children's sporting

events, took them on lavish vacations, paid for their educations, and took care of their housing
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and business expenses. They began to joke that while some families received alimony, they

received “Uncle Mony” (Ton et al, 2015). However, he was mischievously buying Mike's share

from the business from the initial 50% to 8%. This increased his stake in the business from 50%

to 92%. George's family realized what Mike was up to leading to the dyadic conflict. This move

created the potential opposition after the realization that uncle Mony was after his interest while

pretending to help his brother's family. Personalization of the conflict takes shape as Arthur sues

Mike for his family's rightful share in the business. This makes his intentions clear that the

relationship conflict has taken a legal turn as Arthur seeks to regain his family rightful share in

the business. The conflict is now visible with the fate of the business unknown as the speculation

of the relationship conflict hurting the chain's ability to grow. The outcome of the dyadic conflict

held that Mike had to reinstate his brother shares in the family and also pay $206 million. 

Why the Market Basket business model is successful. 

Market business model success can be attributed to several factors on how the business

manages its employees, relate with the suppliers, culture, and speed of decision making and

shareholder responsibilities. The business offers the best prices, lower than all its competitors.

The strategic resource group points out that, “a family of five would spend $1,500 less per year

at Market Basket than it would have spent at a competitor” (Ton et al, 2015). Also, the company

customizes its product selection depending on demographics. The customer experience is further

enhanced by restocking the shelf’s when the stores are open providing the customers with

someone to offer assistance. The success of Market Basket is also attributed to its employee

management. The business offers bonuses to both the part-time and full-time employees based

on the duration that the employee has worked for the business rather than their performance. The

business sources from the local vendors with the supply for horticultural products coming from
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farms in New England. The business has maintained a long supplier relationship with some of

the vendors that have supplied to the business for more than 20 years. Lastly, the business

model's success can be attributed to the business's ability to act rapidly. The business has

maintained its culture taking care of its consumers to ensure that they come back again. 

There exist relationship conflict between the shareholders. One of the shareholder Arthur

T had misused his position by, “spending too much of the shareholders' money on capital costs

and entering into improper business deals with companies owned by his wife and brothers-in-

law” (Ton et al, 2015). The intergroup conflict was enhanced by the Arthur T refusal to have the

shareholder oversight the business dealings and also the conflict of interest associated and self-

dealing. The conflict has developed over time and the shareholders losing confidence with

Arthur T.'s management style. His behavior in handling the profit-sharing plan that led to the

minority shareholders seeking to sell their stake in the business. The outcome of the conflict saw

a superior court judge granting the minority shareholder to sell their stake despite the adverse

effect that this action could have on the business. 

Reaction to the firing of Arthur T. from employees, customers, and vendors. 

The firing of Arthur T. caused a lot of reactions from the employees, customers, and

vendors. The employees under the management of Arthur T. got several bonuses a year. This

bonus “was determined by Arthur T. and was based on longevity rather than on performance.”

Further, most of the part-time employees were promoted to a full-time position as the business

mostly promoted from within. This relationship between Arthur T. and the employees caused the

reaction after his firing. Under the management of Arthur T., the business had maintained a good

personal relationship with its suppliers. Market basket made a reputation of taking care of the

suppliers which explain reactions from the suppliers. The business assisted its suppliers
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especially when their salespeople failed to meet the set sales quota by giving them extra display

in the store. Lastly, the reaction from the customers emanated from the business offering lower

prices than its competitors. The customer was comfortable with Arthur T.'s leadership as they

were able to spend less compared to other stores.

The firing of Arthur T. was caused by process conflict on how he handled the business.

He took advantage of the lack of oversight and support by the majority shareholders to conduct

business with his family amounting to conflict of interest. The intergroup conflict led to his

subsequent firing after he proceeded to reduce the product prices by 4%. The decision to fire him

was in the time after he took a business risk that was set to cost the company $170 million. His

behavior stamped his fate as the shareholders had previously suspended his authority from the

previous damage he had done to the business. The outcome of this conflict was the firing of

Arthur T. from his position as the president of Market Basket. 

Employees' collective Action. 

The collective action came from Market Basket management at the headquarter failure to

attend to the employee's request to reinstate Arthur T. The employees opted for collective action

to make their voices heard. Collective actions are successful for the employees to struggle to

have their voices heard (Boner, 2018). The collective action by the Market Basket employees

was initialized by the employees walking out from their jobs to have their voices heard. The

management response to fire the managers triggered the employees to increase the intensity of

the collective action. The good relationship between Arthur T and the employees enhanced the

collective action with the employees most employees losing their jobs. The management failure

to heed to the employee's call and instead issuing ultimatums to get back to work or least get

fired did not ease the situation. 

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The relationship conflict existed between Market Basket management and its employees.

The intergroup conflict between the two groups escalated as none of the group was willing to

soften their stand. The opposition arose when the board decided to go ahead and fire Arthur T.

who had established a good working relationship with the employees. The employees opted to

demonstrate to have their voice reach the business management. The perception of conflict is

realized as the employees and the management makes their stand on the matter clear. The

employees then settle to demonstrate after their conflict is not solved by the other group. The

behavior of the employee group involves boycotting work and supporting the drivers who had

been laid off. The outcome for the relationship conflict was customers turning to competitors, the

laying off of part-time workers with the management threatening to fire the full-time employees.

The employees maintain their stand refusing to comply with the ultimatums unless the

management reinstated Arthur T. with all the decision-making rights. 

The sustainability of the new Market Basket Structure. 

Market basket's new business model is not sustainable going with its new structure. The

new structure involved buying out the majority shareholder with a move that saw the business

take a $1 billion mortgage loan. Going by the Market basket's strategy of offering low-priced

goods, high wages, and generous retirement benefits it will be hard to run sustainable operations.

The protest came with a $1.6 billion debt which questions how the business will pay the debt if it

continues its operation the same way it had been doing while running a debt-free. The

sustainability of the business depends on the creativity of both Arthur T. and the employees to

run the new structure. It is important to be creative and “always be looking for ways to improve

your business and make it stand out from the competition. Recognize that you do not have

everything and be open to new ideas and different approaches to your business” (Seabury, 2020).
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Cutting down the cost will one way or another affect the employee’s salary or their benefit for

the sustainability of the business. 

The process conflict between Market Baskets and its debtors is most likely to affect the

employees and the sustainability of the business. The intragroup conflict driven by the business's

new structure will either cause conflict between the business and its employees or the business

and the debtors. The potential opposition will arise from the employees protesting against the

business cutting down their salary. Also, the customers may object to the move by the business

to increase costs to pay for the mortgage. The personalization of the conflict comes in when it

dawns on the business that it is difficult to fund the mortgage with the current labor cost. The

firm will seek the option of reducing the wages and the retirement benefits to sustain the new

structure. The decision made is either to reduce wages and the retirement benefit or lay-off part

of its part-time employees. The conflict between the management and the employees will erupt

as they oppose the move to reduce their wages and benefits. The outcome of this conflict will

cause dysfunctional performance by the employees objecting to the firm decision. Considering

the nature of the conflict, the business will have no other option but to reduce the number of

employees and cutting down on wages. The demotivated employees will be dysfunctional as they

now realize that the company debt may affect their future in Market Basket.    
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References

Bonner, C. (2018, June 26). Strategies for Successful Collective Actions: A step-by-step guide |

WIEGO. Retrieved from https://www.wiego.org/blog/strategies-successful-collective-

actions-step-step-guide

Pettinger, T. (2019, March 6). Economies of scale examples - Economics Help. Retrieved

from https://www.economicshelp.org/blog/326/concepts/economies-of-scale-

examples/#:~:text=Bulk%20Buying

%20%E2%80%93%20Supermarkets,10%2C000%20cartons%20is%20quite%20low 

Seabury, C. (2020, June 11). 9 Tips for Growing a Successful Business. Retrieved

from https://www.investopedia.com/articles/pf/08/make-money-in-business.asp 

Ton, Z., Kochan, T. A., & Reavis, C. (2015, March 23). We Are Market Basket | LearningEdge

at MIT Sloan. Retrieved from https://mitsloan.mit.edu/LearningEdge/operations-

management/wearemarketbasket/Pages/We-Are-Market-Basket.aspx