Annex 2 - The Diamond Supermarket

Written by Ph.D Ronald Rojas, professor at UNAD.

Today, given the turbulence of the market and the highly competitive
environment, organizations are forced to continually seek opportunities for
improvement and innovation that will make them more competitive in the global
village. In this sense, top management is increasingly aware of the importance of
integrated management, which takes into account external (macro and micro
environment) and internal (human talent, financial, market, logistics,
procurement, customer relations, among others) aspects.

The Entrepreneur:
Joaquín Pérez Rodríguez is a 65 year old dreamer who has made his own way,
defying from a very early age all the ups and downs that life has brought him. He
was born in the city of Tópaga (Boyacá) and was an only child; his parents, Eliécer
Pérez, and his mother Carlina Rodríguez, were humble farmers who worked from
sunrise to sunset to make ends meet. From an early age he accompanied his
parents to sell their products in the central market of the city of Sogamoso.
Although his parents did not have the opportunity to receive an education (not
even elementary school), they always instilled in Joaquín the importance of
studying to emerge in life and be a good person. At the age of 16 he was able to
finish high school in the public school of his town; however, due to lack of
economic resources he was unable to continue his university education.

One day, during the celebration of his town's festivities, he met an old friend of
his father's, who proposed him to work with him, distributing merchandise in an
old truck through several towns in the department of Boyacá. Joaquín decided to
accept the job to earn money to help his parents have a better life and to carve
out a better destiny for himself.

As time went by, he became a good businessman and, at the age of 21 and with
the savings of many years, he managed to open a small supermarket which he
called "The Diamond", in the municipality of Villa de Leyva (which he fell in love
with for its beautiful landscape and cobblestone streets).

The Family:
Joaquín married María (who graduated as a secretary from a technical
development center), and they had three children:

- Pedro (he is 29 years old and has a technical bachelor's degree).

- Ana (26 years old and is in her tenth semester of industrial engineering).

- Sofía (24 years old, in her eighth semester of agronomy, with an emphasis on
biotechnology).

Although the supermarket's profits have been considerable, Pérez family has a
very particular lifestyle: they regularly travel abroad on vacation for fifteen days
every December, each son has his own vehicle, and they even acquired a luxurious
farm (La Primorosa) 1 five years ago, which they visit every two weeks. Joaquín is
a collector of luxury watches and María is a fan of plastic surgery. (All this,
evidently obtained from the profits of the family business).

1
En dicha Finca también producen de forma artesanal los embutidos que comercializan principalmente
en el supermercado).
Organizational Structure:
Joaquín has a team of 10 employees:

- Maria Duque (his wife), is his right-hand woman in charge of assisting him as
secretary, cashier, accountant, and confidant.

- Pedro (his son), empirically manages the supply chain and interact with
customers and suppliers.

- Ana (his youngest daughter) works part-time as a supermarket cashier (her

father does not allow her to apply her knowledge, preferring her to be exclusively
concerned with money).

- Ofelia and Yasmín oversee the cleaning and security of the facilities.

- Oswaldo, Felipe, Rodrigo, and Juan Sebastián2 are constantly stocking the
shelves and unloading food from the warehouse.

Current situation of the Supermarket:

Although “The Diamond” is still the most recognized (in terms of quality/price
ratio) in Villa de Leyva and its surroundings, the entry of two chain supermarkets
in the municipality has caused a considerable decrease in its profit margins.
Taking into account this situation, a closer look also reveals considerable
operational inefficiencies and a cash flow deficit that can cause the dream and
work of a lifetime to collapse in the blink of an eye.

Five years ago and seeing the exponential trend in the growth of their sales, the
Pérez Duque family acquired a loan for 400 million pesos from a financial
institution to purchase a lot (very close to the warehouse located in the main
square of the municipality) for the construction of a new warehouse (which would
allow them to store a larger quantity of products). Although the warehouse is

2
Juan Sebastián es el novio de Ana y acaba de terminar sus estudios en administración y mercadeo.
modern, spacious, and comfortable, it is 60% oversized, does not have an
adequate physical layout, and, since it is located in the urban center of the
municipality, utility and tax costs are very high.

In addition, the supply chain is managed in a rudimentary manner, resulting in

excessive costs due to problems with suppliers and, on some occasions, loss of
perishable products due to logistical errors.

With respect to its suppliers, some of them have left to work with the two new
supermarkets, due to nonpayment of their invoices, resulting from problems in
the issuance of invoices and financial liquidity problems on the part of “The
Diamond”. Some of his suppliers do not have the backing of INVIMA to market
their products; however, they are old acquaintances of Don Joaquín and,
therefore, this is an aspect that is of no particular interest to Joaquín.

With respect to products, it is worth noting that the supermarket has

progressively incorporated some sausages (under its own brand) which enjoy
excellent prestige in the region. (In fact, in the last two Decembers they have been
marketed in four supermarkets in Tunja and three in Paipa).

Within the company, there are no function manuals, guidelines and/or policies,
no training, no formal contracts, no social security payments for employees, and
all decisions are made by Joaquín; no employee (or family member) is empowered
to make decisions of any kind.

Six months ago, Felipe had an accident at work (while unloading merchandise
from one of his suppliers) and fractured his ankle; Joaquín had to assume all the
costs of ambulance, medical exams, medicine, and subsequent therapies, because
his employees are not covered by an optimal medical service. However, the
salaries of all his employees (including his wife and children) are considerably
above market standards.

Communication with clients is done through a suggestion box that no one checks,
and when there is a problem with a client, it must be escalated directly to Don
Joaquín (who takes several weeks to deal with the problem).
Finally, it should be noted that Don Joaquín already shows some signs of
Alzheimer's, but his family has never traditionally questioned him about any
decision and have not been able to convince him to visit a doctor for treatment
of this pathology.

The Competence:
The two supermarket chains that entered two years ago to compete directly with
"The Diamond" have the following characteristics:

• Facilities: modern infrastructure, comfortable parking lots, food court (with

a couple of chain restaurants); a recreational space for children (painting
lectern and ball pool);
• Variety and quality of products: private labels (with more affordable
prices); a multitude of new and imported products;
• Marketing: promotions, CMR cards with accumulable points, online
customer service line, Whatsapp addresses, prize draws, among others).
• Technological Resources: modern software for administrative and
operational management with all stakeholders (shareholders, suppliers,
customers, employees, among others).
• Corporate Social Responsibility: as a CSR policy, they are undertaking some
projects, together with the municipal mayor's office, in order to mitigate
various social problems of the territory (such as the co-financing of an
elementary school in a village and the construction of a municipal library).

Trends & Environment:

A prestigious international hotel chain started the construction of a macro project
with capacity for 1,000 guests and is conducting a supplier certification study.
It is noteworthy that the municipality of Villa de Leyva has the first national
ranking in population growth (especially due to the arrival of foreigners and
wealthy people from Tunja and Bogota, who are looking for a beautiful, quiet area
with an excellent climate). These new inhabitants are sophisticated: they
preferably demand organic products of excellent quality, gluten-free, with
biodegradable packaging, produced under all environmental and CSR standards
(for example, that no children are employed in the planting or harvesting of
agricultural products, and that the working conditions of these farmers are
optimal and fair).

Universidad Pedagógica y Tecnológica de Colombia will open a new campus next

year, offering 20 professional careers and several Technology Centers on organic
food and beverages.

Finally, farmers in the region have just created a cooperative to market their
products throughout the Cundinamarca-Boyacá highlands.

Translated by: Karla Nathalia Triana Ortiz, professor at UNAD.