OXXO, a convenience store chain in Mexico, faced a strategic challenge when its rival doubled in size overnight. OXXO's CEO focused on improving the company's culture and operations instead of opening more stores. They implemented management systems to gain economies of scale. The podcast discusses strategy, operational strategy, organizational culture, and growth in multi-unit organizations.
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Quick takeaways
Rather than focusing on rapid expansion, OXXO CEO Eduardo Padilla prioritized improving culture and operations to address a strategic challenge.
OXXO's success was attributed to implementing management systems across its locations, resulting in economies of scale and the ability to identify new market niches.
Deep dives
Oxo's Strategic Challenge and Growth
Oxo, a convenience store chain in Mexico, faced a strategic challenge when its chief rival, Extra, doubled in size and threatened to displace Oxo as the dominant player in the market. The CEO of Oxo, Eduardo Padilla, had to decide whether to accelerate growth or focus on consolidating the company's culture and systems. Oxo's success was attributed to its implementation of management systems across its locations, which allowed for economies of scale, greater accountability for store managers, and the ability to identify new market niches.
The Origins and Growth of Convenience Stores
The convenience store industry emerged from the need to provide basic necessities beyond just ice. Southland Ice Company, later known as 7-Eleven, pioneered the concept in the US and it has now become a global industry generating billions in revenue. Convenience stores have evolved to offer a wide range of products and services, with competition centered on attracting and retaining customers. Oxo and its competitor, Extra, entered the market to distribute their parent companies' products, and while brand loyalty exists, Oxo differentiated itself through its focus on service and being present where customers needed it.
Implementation of Management Systems and Culture at Oxo
Oxo initially operated with a decentralized model, with individual store managers having significant autonomy and responsibility for their stores' success. When Eduardo Palija became CEO, he recognized the need to connect different regions and stores, strengthen the company's culture, and leverage resources and knowledge across the organization. Oxo implemented a structured empowerment system, which balanced control and flexibility. This system held store managers accountable for results while allowing them to personalize their store operations to best serve their customers. Palija also created rituals, rituals, and encouraged open dialogue and feedback between employees at all levels.
The Success of Oxo's Systems Approach
Oxo's systems approach, which emphasized a checklist of qualitative results and allowed store managers to customize their store layouts and product assortments, contributed to the company's success. The systems were cascaded from the regional level to store managers, who received regular feedback and guidance from store advisors. Oxo embraced employee input and continuously improved the systems based on feedback. The company's systems helped achieve economies of scale, strategic consistency, employee engagement, and improved customer experiences. Oxo's success story demonstrates how a service-focused organization can balance standardization with flexibility.
OXXO was the dominant convenience store chain in Mexico—until its chief rival doubled in size almost overnight.
In this episode, Harvard Business School professor Tatiana Sandino explains how OXXO CEO Eduardo Padilla responded to this strategic challenge. Instead of opening more stores as quickly as possible, he focused on improving the company’s culture and operations. The company implemented management systems across its locations and then used those systems to gain new economies of scale.
HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.