1. How does the Mountain Equipment Co-op use value chain analysis to increase both membership and revenue?

2. What is the Co-op generic strategy? Describe it.

3. How does MEC measure its performance? What are two criteria it uses to evaluate how well it is doing?

Source. Getty/Taxi Outside of Canada, few people have ever heard of the Mountain Equipment Co-op (MEC), but it is one of the most successful small businesses in the world. The company currently holds 65 percent of the Canadian market for outdoor equipment, far outdistancing all other competitive MNEs and retail brands in the country. In fact, MEC is so efficient that its products are priced lower than those of any North American competitor. MEC was founded in 1969 when a group of six outdoor enthusiasts decided to get together and purchase expen- sive outdoor equipment. In August 1971 the organization was officially registered as a co-op and began operating under a member-elected board of directors that assumed responsibility for setting overall policy and overseeing management of all operations. Today MEC has 2.8 million heavily on customer word-of-mouth and the mail-order members, operates stores in 14 cities across Canada, an network to help promote its products. international mail-order clientele and online shopping, and MEC also places a great deal of importance on the qual- a worldwide network of suppliers. For a one-time $5 fee, ity of goods. Its buyers and designers look not only for a members are able to enjoy a wide variety of benefits low price from suppliers, but also for products that provide from an organization that focuses heavily on four primary both functionality and durability. In addition, the co-op objectives: keeping costs down, offering affordable goods, offers a lifetime guarantee on most of its products, regard- providing high-quality merchandise, and maintaining high less of whether it manufactured them, had them provided ethical standards. by an outsourcer, or purchased them from a large brand Regarding the first of these, MEC takes a number of name company. steps to control costs and offer affordable products. One Co-op members are also assured that the company is to use the clout of its large membership as a basis for adheres to the highest ethical practices. MEC is an inno- extracting the best possible prices from suppliers, thus vator in a number of areas ranging from human rights to being able to offer low-cost products. Another is to keep the environment. Its stores are designed with the utmost the number of staff to a minimum. Some of the ways it does attention to the environment, using as much natural light this is through the use of self-service in all stores and the as possible, high-efficiency HVAC (heating, ventilation, and promotion of its international mail-order business, which air-conditioning). low-consumption water fixtures, and can be handled by a small number of personnel. In addition, recyclable materials. As an example, its Ottawa store uses the co-op minimizes overall marketing expenses by relying only half the energy of a conventional building. In addition, as a member of the 1 percent for the Planet, the co-op gives are currently in the range of CAD$250 million and the com- 1 percent of gross sales each year to environmental and pany is continuing to expand operations across Canada. conservation groups. At the same time, its retail employees MEC was able to flourish as a result of the huge margins are among the best paid in the country and its buyers and enjoyed by its competitors. This allowed the co-op both to inspectors are charged with ensuring that all factory reduce prices and to maintain higher levels of environ- workers in foreign countries receive a reasonable living mental and labor practices than its competitors. Over the wage and work under safe conditions. next few years, however, as competition grows and large MEC has undertaken many business initiatives to better outdoor retailers exert the same kind of pressure on serve its members, to secure long term financial sustain suppliers that allowed it to sell at lower prices, MEC will ability and to promote its care about environment. For have to switch its strategy to remain competitive. It has some example, in 1997, MEC introduced its popular and free of advantages. For one, it has no shareholders and reinvests charge online gear swap where members can recycle used most of its surplus into the company. MEC still has to exploit outdoor gear. to the fullest its community and environmental contributions. Some suppliers, such as Sierra Designs, Salomon, Arc In the spirit of keeping advertising costs low, many members, Tyrex, North Face, and Patagonia, see MEC as a threat not to mention potential members, have never heard of and have refused to sell to it. In many cases, however, this MEC's social policies or its charitable contributions. strategy has proven to be counterproductive, resulting Websites: www.mec.ca; www.sierra-designs.com; www.salomonsports. in MEC designing and manufacturing these products and com; www.thenorthface.com; www.patagonia.com then successfully competing with the traditional brands Sources: www.mec.ca; "Mountain Equipment Co-Op Live with Socially that were unwilling to sell to it. In addition, the co-op's Responsible Retail," PR Newswire. May 22, 2001; "One of the Greenest increased involvement in manufacturing has enabled it to Commercial Buildings in the World." Sustainable Sport Sourceline, July 2000: "Mountain Equipment Co-op to Stage Outdoors Skills Challenge in monitor its suppliers' operations more closely. Celebration of its 2,000,000th Member," Canada News Wire, June 16, 2004; Over the past couple of decades, MEC's strategy has Martin Mittelstaedt, "Mountain Equipment pulls water bottles oft shelves, been more emergent than calculated. Yet it has proven to globeandmail.com, December 7, 2007 be a successful business venture that has brought together a large group of dedicated environmentalists and other 1 How does the Mountain Equipment Co-op use value customers who need products for outdoor activities. In the chain analysis to increase both its membership and process, the co-op has created a "style" and "brand" pres its revenues? ence that appeals to outdoor enthusiasts. In fact, MEC's 2 What is the co-op's generic strategy? Describe it. outdoor gear has become so popular that even urbanites, 3 How does MEC measure its performance? What are highly unlikely to go trekking or camping in the outdoors, two criteria it uses to evaluate how well it is doing? are now becoming members. As a result, annual revenues