Introduction
The case study is about Marina, where the CEO of the company has been using unique strategies to remain cost-effective and increase the loyalty of customers. Employees are also satisfied and highly productive being in the company. The company that does not spend on the advertisement has been growing its profits and is profitable. It is ahead in the competition with Walmart and other retailers in the US market. The company has used some cost-effective methods of doing business and management. However, it invests in employees and works jointly with them. As a result, they remain loyal and productive for the company. The case study has three questions to help analyze and discuss issues in it. The following is the analysis of the case study using these questions.
Explain the success of Marina in terms of the three performance determinants in flexible leadership theory (efficiency, adaptation, and human capital).
Flexible leadership theory and its three performance determinants are helpful to study the success of Marina. The company has been successful in promoting flexibility in its operations and processes. It is because of the company’s leadership that is abiding by the theory in its actions and management of company affairs. The case study has hinted at three determinants of the flexible leadership theory. These elements are efficiency, adaptation, human capital. Marina has been successful in these determinants because it has remained efficient, adaptable, and focused on human capital (Barton, Johns, & Magee, 2017).
Efficiency generates revenue because it enables a company to incur a low level of cost. Marina has done so by having less costly measures in the company. It remains efficient by keeping the layout of the company standard. Product sizes are also standard, and there is a limited variety of sizes as well. For reducing costs and handing over to customers, delivery trucks move products right to the sales floor. The use of cheap laser printer and the system of tracking sales leaves no room for waste and overproduction. These steps enable efficiency in the company, and it becomes the reason of success for it.
Adaptation makes a company relevant because it has to adjust to the dynamic world in the external environment. Marina has come up with the requirements of this determinant in the flexible leadership theory as well. The CEO of the company, Sinegal has ensured that his policies and decisions are adaptable to the changing needs of different stakeholders. Adaptation can be in light of responses from stakeholders, and the leader of Marina adjusts policies and strategies by considering employees, vendors, customers, and all stakeholders. It makes the company adaptable, and it does not follow a strict or a hard strategy to impose on others. It makes the company successful in the industry (Khan, 2017).
Flexible leadership theory is flexible because it is not based on raw facts and business requirements. Instead, it values the human capital that makes the leadership orientation flexible. The case study has exclusive and specifically discussed this determinant of the theory. It has done everything that goes in favor of employees. It offers them the best extrinsic and intrinsic compensation. It results in the lowest levels of the turnover rate in the industry. It makes the workforce highly efficient and productive. As a result, the company becomes a successful entity in the retail sector.
Explain how Marina can provide higher compensation to its employees and still be successful in the use of a low price-competitive strategy.
Marina has been compensating employees highly, and still, it remains competitive in price. These are the two different and contradicting attributes of the company that may not work at the same time. However, the case study explains how it can be possible. Sinegal has focused on employees, and compensation and rewards make them satisfied and happy. Simultaneously, the company has to be cost-effective so that it can keep attracting a large number of customers because of offering highly affordable prices.
It can be possible by focusing on human capital. It is evident and self-explanatory, especially in the case of Marina, that it has ensured high productivity of employees. The high performance of employees is possible by making them with the company. It may happen if they are valued and compensated well. Otherwise, they can adopt ways of doing a job that is less productive and less efficient. It leads the company to incur more costs in providing services to customers. Therefore, the focus of the Marina should be to keep employees pleased. It has been doing so already, and its ability to charge fewer prices is because of its highly productive workforce (Ruck, Welch, & Menara, 2017).
The case of turnover helps in understanding the issue in consideration. Marina has the lowest turnover rate in the industry. If a company has a high turnover rate, it has to be ready to bear the expenses in recruiting and training new employees. These processes are complex and costly. If a company can avoid these unnecessary steps as a result of a low turnover rate, it can channel the gain into maintaining the lowest price-competitive strategy. High compensation is one of the reasons why employees do not prefer leaving the company. Therefore, investing in employees is not an expensive option, but it gives the company in return.
However, the role of leadership is also evident as Marina that does not need compensation. Sometimes, employees do not change their behavior and get motivated only because of the rewards and monetary compensation. Intrinsic compensation works well for them, and it is right in the case of Marina. It gives them independence and asks for their reviews and choices in the workplace. The CEO interacts with managers and visits every twice a year. Therefore, it keeps a closer link with each store and its staff. It results in a reduction in employee theft, along with an increase in their productivity. The gain due to any reason goes towards the revenue of the company, and it can channel that gain for offering customer price competitive products and services (Popli & Rizvi, 2016).
Use relevant leadership theories to analyze the behavior of the CEO and describe his influence on the company.
The behavior of the CEO can be analyzed with the help of relevant leadership theories. These theories are democratic leadership theory and transformational leadership theory. They seem to be relevant to the approach and leadership style of Sinegal.
Democratic leadership theory is also called the participative leadership theory. It leads a leader to participate with employees and stakeholders in an organization. Sinegal has applied such behavior to Marina. He often meets with managers and product buyers of different stores. He has developed a culture where employees have their say. They can decide to bring changes in the management and ways to serve customers. Delegating power and authority at the workplace are salient features of his leadership. He does not feel fear of suggestions and independence of employees because he has made the company profitable through employees (Eizaguirre & Parés, 2019).
Another relevant theory is transformational leadership theory. This theory believes in the transformation of employees and the culture of an organization. Marina’s CEO has practiced this theory because he loves to know the requirements and needs of customers and employees. He does not issue orders, but engages employees in the decision-making process. The level of transformation from the CEO is very high as he wears a cheap shirt. He does not get higher compensation. In this manner, he shares the culture and vision of the company through his actions. It makes him a truly transformational leader (Aga, Noorderhaven, & Vallejo, 2016).
These theories can describe his behavior, and certainly, it is a strong behavior. It influences the culture of the company. Employees show participation and work in an engaging way. They do not fear management. Instead, they are free and independent. The CEO gets respect and care from the heart of all employees. They do not feel inequality because they trust their leader. It is the reason that the company has been able to be the cost leader. It may not be possible if employees are not highly productive. The CEO has made them productive and high performing individuals for the company. The company’s culture and performance are the outcomes of the CEO and his actions. Otherwise, it might be a company like any other company. The leadership style of Marina’s CEO has made it clear that being transactional or authoritative does not serve the purpose. Successful leaders delegate authority and develop an open culture. It is the secret to the success of Marina.
Conclusion
The paper concludes that Marina has been sustainable and thriving because of some genuine reasons. It has worked towards human capital and has adopted a flexible leadership approach. The CEO of the company is democratic and transformational because he loves working for employees. The workforce is highly productive, and it has become the source of cost competitiveness. Employees are loyal to the company, and they show deep trust in the CEO. The company has made it possible to compensate them high while ensuring a reduction in prices of products and services. The paper recommends taking lessons from Marina and its CEO to be competitive in any business or industry.
References
Aga, D. A., Noorderhaven, N., & Vallejo, B. (2016). Transformational leadership and project success: The mediating role of team-building. International Journal of Project Management , 34 (5), 806-818.
Barton, A., Johns, N., & Magee, S. (2017). Looking beyond tasks to develop flexible leadership. British Journal of Healthcare Management , 23 (2), 56-61.
Eizaguirre, S., & Parés, M. (2019). Communities making social change from below. Social innovation and democratic leadership in two disenfranchised neighbourhoods in Barcelona. Urban Research & Practice , 12 (2), 173-191.
Khan, N. (2017). Adaptive or transactional leadership in current higher education: A brief comparison. International Review of Research in Open and Distributed Learning , 18 (3), 178-183.
Popli, S., & Rizvi, I. A. (2016). Drivers of employee engagement: The role of leadership style. Global Business Review , 17 (4), 965-979.
Ruck, K., Welch, M., & Menara, B. (2017). Employee voice: an antecedent to organisational engagement? Public Relations Review , 43 (5), 904-914.
Case Study: Marina
Marina is one of the largest retail sales companies in the United States, and it has more than 500 stores in 37 states and eight countries. Despite low profit margins in the retailing industry, the company is more profitable than most competitors, and it is growing rapidly. In the University of Michigan’s annual survey of customer satisfaction with U.S. retailers, Marina has had the highest ratings in recent years.
The company’s basic strategy is to provide quality products at the lowest available prices, and the products include clothing, electronics, and food. Marina’s leading competitor—Wal‐Mart’s Sam’s Club—offers more variety and some lower priced items, but Marina’s products are generally of a higher quality. Around 20% of the products consist of limited‐time supplies of deeply discounted luxury goods and other special bargains. Examples include Rolex and Movado watches, gourmet imported chocolates, Waterford crystal, plasma televisions, and Burberry and Coach handbags. This strategy of temporary special bargains creates customer excitement and increases purchases of items that shoppers had not intended to buy when they visited the store.
Charging customers for the privilege of shopping at Marina provides a steady source of revenue for the company and increases customer loyalty. Marina has two types of members: businesses and individuals. Even though the cost of membership is a little higher than for competitors, Marina’s card renewal rate was over 86% in 2006, and membership increased by 14%. To increase the value of the memberships and attract additional customers, Marina also offers services such as travel plans, health and home insurance, banking, and financial planning. Individual shoppers average two Marina visits per month, and many travel great distances to stock up on supplies. Unlike most discount stores, Marina has many affluent customers who are “treasure hunting” for the special bargains on luxury goods rather than merely looking for low prices on basic commodities.
Marina’s merchandise buyers have to experiment and take big risks with luxury items, because a lot of money is tied up in inventory if the items do not sell quickly. The buyers need to rely on their intuition and creativity to find items that will be popular and profitable. Innovation in design and packaging is also important for making some types of products such as food items more appealing to customers. Recent initiatives, for instance, include the elimination of Styrofoam trays from meat packages and the use of individually sealed packets. The design is more environmentally sound and enables consumers to freeze unused portions without repackaging or rewrapping products.
Marina has generous pay, excellent health benefits, and a good 401(k) plan for its more than 120,000 hourly employees in the Unites States. The average wage for a full‐time worker at Marina is around 40% higher than at Sam’s Club. Around 82% of Marina employees have health‐insurance coverage, as compared with less than half of the employees at Wal‐Mart, and Marina employees pay much less of their health premiums. Around 91% of Marina’s employees are covered by retirement plans, as compared to 64% of employees at Sam’s Club, and company contributions to the plan are nearly twice as high per employee at Marina. The company policy is to promote from within the ranks, and workers at all levels have good opportunities for advancement.
The company has one of the most loyal and productive workforces in the retailing industry. The high level of organizational commitment is reflected in the turnover rate (around 6% for workers on the job for more than one year) which is well below the average rate of 44% for the industry. The cost from turnover (lost productivity, recruiting and training new employees) is 40% lower at Marina than at Sam’s Club. Employee theft at Marina is the lowest in the industry. The savings from lower turnover costs, lower employee theft, and higher employee productivity more than offsets the higher cost of compensation at Marina. The operating profit per hourly employee in the United States is nearly twice as high at Marina as at Sam’s Club.
The high level of employee motivation and commitment is not only because they are well compensated, but there is also a high level of intrinsic motivation among Marina employees. They are encouraged to suggest ways to improve the stores and product mix, and creativity is valued. Each morning before the store opens there is a conversation about ways to be more efficient and to provide better customer service. All employees are trained to be friendly and helpful when customers need assistance. When shoppers need assistance in locating an item, employees are expected to show them where it is rather than merely pointing to a distant spot or providing vague directions.
The methods Marina uses to minimize costs include a no‐frills approach to their stores, which also function as their warehouses. The buildings have metal exteriors and steel racks. Instead of individual products on shelves, there are pallets on steel frames that soar to the ceilings. Above every pallet is a card with a simple product description, and they keep everything as simple as possible for the product displays. Marketing costs are low because Marina does not do any advertising; there is no public relations manager or expensive advertising agency. Instead, Marina depends entirely on happy customers who tell their friends about the fantastic bargains available at Marina stores.
The company keeps layouts standard in its stores to reduce costs and give shoppers a feeling of familiarity at every location. The products sold in each store are similar, except for foods, which vary according to local tastes. Inventory costs are reduced by having only a limited variety of product sizes, and by packaging many products for bulk sales. Products move right from the delivery truck to the sales floor, and the signage looks like it was made with a cheap laser printer. There are not even any shopping bags for customers. A computer system that tracks sales in the stores makes it possible to determine when more fresh foods are needed in the display cases and reduces costs from waste and overproduction.
Jim Sinegal, the CEO of Marina, is very modest about his contribution to the success of the company and quick to share credit with others. He understands how important it is to have talented people working for a company, and he does many things to attract and retain them. At the company headquarters in a Seattle suburb, his office is an open space with no door. His desk is pushed up against the wall so that, at first glance, he appears to be someone else’s secretary. Sinegal usually answers his own phone, uses a nametag like other employees, and usually wears one of the low‐priced dress shirts sold in his stores. As the cofounder of Marina, Sinegal is a major shareholder, but his annual compensation is only 10% of the average amount for CEOs. He tries to limit his salary and bonus to no more than twice what a Marina store manager earns, and he declined his bonus for the last three years in order to achieve that objective.
At the annual Managers’ Conference, Sinegal meets with more than 1,000 Marina managers and product buyers to review the past, discuss the present, and plan the future. He also has monthly budget meetings with groups of around 70 store managers to talk about the importance of exercising tight cost controls, getting the details right, and adhering to the Marina credo. Important values at Marina include hard work, respect for customers, and high ethical standards. Sinegal communicates a strong concern for high performance, but he is not coercive or overly critical. He is careful not to discourage his product buyers when they take risks on new products. Employees are empowered and encouraged to “think outside the box.” Sinegal still attends every new store opening, and he tries to visit every Marina store twice a year. He spends nearly half of his time on the road checking out his stores as well as the competition to make sure they are not undercutting Marina’s prices.
Sinegal has a strong concern for his employees, and he is perceived as dedicated, caring, and hard‐working. He is able to remember the names of most of his managers, and they know him by sight. At a recent annual meeting when he answered a question by stating that he had no plans to retire soon, the audience gave him a spontaneous standing ovation. In 2003, the rising cost of health care made it necessary to increase the employee contribution to their health insurance. Sinegal sent a letter to employees explaining why the increase was necessary, and the letter generated more than 100 responses, nearly all of which were supportive.
Sinegal tries to do what is right for employees, customers, vendors, and stockholders. Recently a major decision was made to put a 90‐day limit on customer returns of electronics products. The old policy was unique in American retailing, but it was becoming too costly. The new policy could save the company more than $100 million a year, but Sinegal did not want to change it without a viable alternative. Thus, as part of the new policy, he decided to extend the manufacturer warranty by a year.
