Assessment Whole Foods Market

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Assignment #2 Competitive Forces and SWOT Analysis Page | 0 Assessment#2– Competitive Forces and SWOT Analysis Gerry T. Hickman Strayer University – Charleston Campus Dr. Ron Steffel BUS599: Crafting & Executing Strategy: The Quest for Competitive Advantage Concepts and Cases April 22, 2010

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trends in organic food marketing

Transcript of Assessment Whole Foods Market

Page 1: Assessment Whole Foods Market

Assignment #2 Competitive Forces and SWOT Analysis P a g e | 0

Assessment#2– Competitive Forces and SWOT Analysis

Gerry T. Hickman

Strayer University – Charleston Campus

Dr. Ron Steffel

BUS599: Crafting & Executing Strategy:

The Quest for Competitive Advantage Concepts and Cases

April 22, 2010

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 1Background

According to the Whole Foods, Inc. Annual 10k Report (2009) Whole Foods Market is the world’s leading natural and

organic foods supermarket and America’s first national “Certified Organic” grocer. Our Company mission is to promote

the vitality and well-being of all individuals by supplying the highest quality, most wholesome foods available. Since the

purity of our food and the health of our bodies are directly related to the purity and health of our environment, our core

mission is devoted to the promotion of organically grown foods, food safety concerns, and the sustainability of our

entire ecosystem. We opened our first store in Austin, Texas in 1980 and completed our initial public offering in January

1992. As of September 27, 2009, we operated 284 stores: 273 stores in 38 U.S. states and the District of Columbia; six

stores in Canada; and five stores in the United Kingdom.

Our sales have grown rapidly through new store openings, acquisitions and comparable store sales growth, from

approximately $92 million in fiscal year 1991, to approximately $8.0 billion in fiscal year 2009, a compounded annual

growth rate of approximately 28%. We are a Fortune 500 company, ranking number 324 on the 2009 list. Our 284 stores

average approximately 37,000 square feet in size, approximately $29 million in annual sales, and are approximately nine

years old on average. We aspire to become an international brand synonymous with not just natural and organic foods,

but also with being the best food retailer in every community in which we are located. We believe our heavy emphasis

on perishables and locally grown products, along with our unparalleled customer service, is helping us reach that goal,

differentiating our stores from other supermarkets and enabling us to attract a broad base of loyal customers.

Discuss the trends in retailing of organic foods and the impact of these trends on Whole Foods Market.

There are several trends in the retailing of organic foods market that impacted them market itself and Whole

Foods. They are listed below as follows:

According to a leading trade publication for the industry, sales of natural products across all retail and

direct-to-consumer channels grew to approximately $68 billion in 2008, a 10% increase over the prior

year.

Congress passed the Organic foods production act in 1990.

USDA established official standards for organically grown products in the U.S. overhauling and regulating

43 state and other federal agencies for the labeling of organically grown products.

o Organic products that were processed had to be processed with 95% organic products.

o Products made with organic ingredients had to have at least 70% organic ingredients TO BE

WORDED ORGANIC, but could not display USDA certification.

o Other products with less than 70% ingredients COULD NOT WORD organic on package.

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 2 2003 all organic processors, exporters, importers, shippers and merchants had to document and verify

for that they were certified to grow, process or handle organic products carrying USDA’s Organic Seal.

31 % of Organic food sales were sold by mainstream supermarkets

24% through leading natural Food Stores (Whole Foods, Wild Oats and Trader Joe’s)

22% through independent small store chains

Was available for purchase at 75% of all retail grocery stores in the U.S. by 2008.

Among the top processors of Organic foods in the market are:

Kraft

General Mills

Groupe Damone (parent company for Dannon Yogurt)

Dean Foods

Kellogs

Heinz

Hain Celestial Group

Campbell Soup

Starbnucks

Coca Cola

Del monte

Hunt

Tyson Foods

According to Thompson (2009) in a study prepared by the USDA, said that in yr. 2000 more organic foods were sold

in conventional supermarkets than in over 14,500 natural food stores. By 2002, most supermarkets expanded their

selections of National and organic food products which ranged from:

- Wine - Cereal - Pasta - Cheese

- Yogurts - vinegars -Potato chips - Beef

- Chicken - Canned fruit - Canned Vegetables

Among the most popular items were fresh produce which included:

- Lettuces - Tomatoes - Carrots -Broccoli

- Califlower - Apples - Celery - Cucumbers

Meat, dairy and Bread were the fastest growing organic categories sold. Whole foods did their own survey of

consumer preferences and 75% of the participants responded that the Number one barrier to their purchase of organic

products was the high prices charged by most retailers. 46.1% said that they didn’t consume it because it wasn’t

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 3available to them where they lived and another 36.7% said that they were loyal to non organic foods. Among the

participants that purchased organic foods on a regular basis 75% said that they purchase mostly Fruits and vegetables;

32% purchased Dairy beverages; 22.2% purchased Bead & Baked goods; 24% purchased dairy items; 22.2% purchased

packaged goods (Soup or Pasta); 22.2% purchased meat; 22.1% Snack Foods; 16.6% purchased Frozen Foods 12.2

purchased Prepared or Ready to Eat Meals and 3.2 % purchased Baby Food.

Currently the market for organic products in this country is 20% and growing. Depite the fierce competition the

price or organic products has remained high due to rising consumer demand. Once a niche market, the several factors in

the market have forced Organic products to become one of the fastest growing segments of U.S. Foods sales. The

factors driving the increase in demand for organic products are listed below:

Healthy eating patterns

Consumer concerns over purity and having pesticides in their foods

Wellness and Health conscienceness

Soil and Water enthusiast growing beliefs that organic farming has positive environmental effects.

Although many large supermarkets chains stocked a wide selection of organic and natural food items, only two

chains in the U.S., Harris Teeter in the Southeast and Whole Foods Market had launched their own private label brands

Evaluate the competitive environment of the firm: Apply Porter’s model and analyze each factor

relative to the company.

Whole foods which ranked 24th in the market , had total revenues in 2006 were 5.6% only a fraction of some of its

largest competitors which included Walmart, Kroger, Costco which sales were $209.9, 66.1 and 59.0 respectfully and

held 9.4%, 7.8 and 4.3% of the total retail grocery sales in the market. But if ranked in the Natural and Organic Foods

market segment, Whole Foods is seen as the category leader for organic and natural foods because they offered the

largest selection of products in this category, as most of its competitors efforts were either futile or helpful to Whole

Foods, because they exposed customers to organic and natural foods. Whole Foods mission and objective was to

improve the health of the planet and help create new customers for Whole Foods by creating a gateway experience and

WF knew that as they grew at a modest pace that those same customers would likely become their customers when

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 4ever they moved in close proximity to those customers. Whole foods core growth strategy is to expand via combination

of opening its own new stores and acquiring small, owner managed chains that had capable personnel and were located

in desirable markets. Which had proven to be a difficult objective at first, since many of the owner operated retailers of

natural and organic foods were one store operations and larger store in the 5,000 to 20,000 square foot range was

impossible to find.

Whole Foods changed their strategy to a more measurable goal of driving growth by opening 10 to 15 larger stores

in major metropolitan areas which they planned to implement between 2002 to 2006 were proven to be much viable

strategy as indicated in exhibit 5 which shows that they grew from 135 stores to about 276 stores in 2008 including the

addition of Wild Oaks one their biggest competitors for $565 million and $135 million in debt and an additional $166

million in cash after selling 35 of the newly acquired stores. Whole Foods next biggest competitors in the natural and

organic foods segment of food retailing were fresh Market, Trader Joe’s, Sunflower Farmer’s Markets, Fresh & Easy

Neighborhood markets and Independent natural Health Food Grocers. Provided below is a chart outlining strenghths of

above competitors:

Fresh foods market may be a formidable opponent in the market earning over $350 million in 2007, but they are

still young and assuming that they lack the financial resources and retail merchandising skill to be a significant threat to

whole Foods right now but are currently seeking funding to go public soon . Fresh Markets size and geographical

locations are similar to Whole Foods customer Base near educated and affluent residents. Their product line and

offering are similar with Fresh Market having only a modestly innovative or creative layout differentiate themselves

natural food stores and traditional supermarkets with superlative service; attractive fresh produce display and “upscale

boutique” items such as pick & pack spices, gourmet coffees, appealing meats and seafood selections, chocolates, NY

cheese cake , H&H Bagels and other special condiments, wine beer and gift items—but had very high labor cost,

sometimes more than average supermarket because of the benefits package they received was fairly decent and part

time employees received benefits including medical, dental and life insurance directly after hire. Fresh market’s

customer service techniques need improvement in customer engagement, but could be improved through events for

customers such as cooking classes and sponsored fund raising events which they have annually for the children’s

Diabetes foundation; Fresh Foods stores are approximately 18,000 to 22,000 square feet and fit the profile Whole Foods

mentioned earlier for acquisition, partnership or out right purchase. Whole Foods needs to communicate with them to

see if they will be willing to collaborate and work in alliance for healthy and environmental causes.

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 5Exhibit A – competitive comparison chart

Company Sales 2008(billions)

stores Average store size(000/sqft

GeographicState/Intnl

Number ofEmployees000’s

product/service ranges Competitive DifferentiationStrategy *VAS

Whole Foods $6.5 284 45 – 60 36/2 54 Over 30,000 items items sold inkling 500 dailyFresh Produce seasonal,exotic Meat and poultry 150 Fresh Seafood items.Endless baked goodsPrepared foods;40, .Frozen foods, juices; Dried & fresh fruits and spices;1,200 Beers and wine brands; Coffees and tea; body care and nutrition, pet foods.Grocery and household products organic sheets and linen;A floral depart. Private labels/store brand items; Educational products; seminars on cooking and nutrition.

Public company since 1992Growth/ Market leadership strategyTeam leadershipRestaurantsCafesOwnership of Distribution centersOwnership of three seafood processing centersSupply chain management programImport supporting underdeveloped areas and countriesCommunity Health Well being

Fresh Markets .350 77 18 – 22 17 7 Meats, seafood, sandwiches, 300 fresh produce;40 coffees; a selection of dairy ; bulk products; cheeses;deli items;wine & beer; floral and gift items and bare line up of grocery items

Open air old World Europeon market design, old fashion sentiment

Independent Natural and Health Grocers

18/.005 14,000

1.1 -6 n/a Narro to mod erately broad Small open format

Fresh & Easy Neighborhood markets t

(.020) 200 10 Stock about 3,500 items

Sunflower Farmer’s market

n/a 14 25-27 Stock about 5,000 items Warehouse style palletized bulk shopping experience

Trader Joe’s n/a 315 Na 22 n/a Over 2,000 unique items in under their produt label

Treasure hunt 10-15 new, seasonal or one time buy items

Vitamin World General Nutrition

.001 7,500 Sells vitamins and supplements to Whole Food

Value Added strenghths

1. Source information from case s: Whole foods Market in 2008: Vision, Core Values and Strategy, pp. c-1-c-31; Thompson, A.A., Strickland, A.J., & Gamble,

J.E. (2010). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York: McGraw-

Hill-Irwin

The entering of Tesco subsidiary Fresh and Easy Neighborhood in organic grocery and retails market may

oversaturate market with just like me store presence hampering whole Foods profitability and slow down whole Foods

growth in the Organic and Natural Foods market. They have a large distribution center and could serve some of whole

Foods in their geographic region for future expansion needs. Whole Foods may need to create alliances with Tesco

health grocers to find out what their goals are in the market if they are similar and products are healthy and pure

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 6products they may be open to a merger to gain market share in US market. A large company like Tesco could aid Whole

Foods Internationally in achieving its humanitarian outreach. If no alliances or communications with company to reduce

can be formed with this company they could be a real headache in the market if they evolve and find a better way to

delight customers with their differentiated offering melding quality, low price and convenience.

Sunflower with their warehouse style bulking and discounting of large lots indicates that want to penetrate to the

heart of the organic and naturals market cutting off any major contenders such as whole Foods and deflating the hipe of

getting healthy foods without glitts and glomour through their state in mission saying they keep their overhead

low....just regular people looking for a great deal SunFlower’s mission statement : We will always offer the best-quality

food at the lowest prices in town. “Better-than-supermarket quality at better-than-supermarket prices” is our motto.~

We keep our overhead low. No fancy light fixtures or high rent. No corporate headquarters…just regular people, like

you, looking for the best deals we can find.~ We buy big. We source directly, we pay our vendors quickly and we buy

almost everything by the pallet or truckload. That buying power means big savings for you! Their tagline is one of

mockery & poking fun from Mark Gilliand, partner and former founder of Wild Oaks at Whole Foods’...High Prices by

giving reason to their low price versus that of Sunflower in saying : “Serious Food....Silly prices.” Is engaging whole

Foods head on with a limited selection of items from the Organic and natural market including minimally processed

items, cereals, seafood, nutrition bars, trail mixes, health drinks , produce, meats, salads, cheese, bread, coffee, nuts,

candy, nuts, soaps, shampoo, natural remedies and offer double AD days where they could get twice the items on

Wednesday. Whole Foods needs to intensify their efforts in supply chain management through acquisition and alliance

with major processors of organic foods to tie up distributors and control the supply available to vendors who are not

concerned with customer service and increase marketing of private store brands to increase customer loyalty in the

segment. Communication with individual health and organic grocers might prove effective to see if alliances cn be

established to keep this competitor from gaining to much ground in the organic market.

Whole Foods core values address differentiation as their core or primary competitive stengths and strategy

which accounted for much of their success in the organic and natural foods market. Some of the major areas where

they use differentiation are in their choice of products, location, customer intimacy/ store experience, and in their

employees. Whole Food sells the highest quality Natural and organic products available. They were able to differentiate

on their product line and brand selection because their stores were different sizes unlike a Walmart or Costco whom

stores averaged 132,000 to 141,000 and sell a wider selection of products, categories outside of the organics and

natural segment forming a natural barrier to entry. Whole foods located many of their stores located in upscale areas

near highly affluent or wealthy customers in urban metropolitan centers. Some stores were frequently found in

premier real estate sites or high traffic shopping locations. Some stores free standing; in shopping strips and others

located in mixed use project locations.

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 7Whole foods developed and used its own unique model to analyze potential markets and to target its customers

whom were mostly affluent and educated people whom were willing to pay a bit more for healthier food. Whole food

used a combination based on education levels, population density and income during a certain drive times at each store

location to project sites before a store was opened after passing certain financial hurdles. Whole Foods currently owns

over 274 stores in 36 states and abroad; and sources most of its organic and natural foods from individual or subsidized

farmers, and seafood fisheries with the exception of about 24% of its dry grocery and frozen food products fare

purchased from United National Foods, the company’s biggest food supplier; two wholly owned seafood subsidiaries

and Nine distribution centers; nine regional bake houses and five commissary kitchens supplied area stores with

prepared foods. A central roasting facility supplied stores with the company’s Alllegro brand of coffee and two produce

procurement centers which are in charge of procurement and distribution of all the produce Whole Foods sells. In order

to ensure the best quality in their products and future qualities of organic and natural foods whole Foods built unique

relationships and programs supporting farmer’s in disadvantaged or low income or wage areas or countries committing

to import over 50 % of its imported products from developing countries through its whole Trade program which

committed the company to paying small scale producers a price for their products that more than covered the

producer’s cost; so that they could invest in family’s and worker’s cost to educate themselves and have sufficient pay to

help support a better life.

Although many Whole food stores varied in size, their biggest was about 99,800 square feet with their average store

footprint ranging from 45,000 to 60,000 square feet, Catered to many different types of clientele. Their product lines

like Costco was limited and included only about 30,000 natural, organic, gourmet food products and nonfood items:

Fresh Produce – fruits and vegetables including seasonal, exotic and specialty products like cactus pears,

cippolini onions and japanese eggplant.

Meat and poultry – natural and organic meat house-made sausage, turkey and chicken products from animal

raised on wholesome grains, pasturelands and well water (without the use of hormones or steroids).

Fresh Seafood -- a selection of fresh fish; shrimp oyster; clams; mussels; homemade marinades; exotic items like

octopus, sushi and black tip shark. Most of their seafood came from two wholly owned subsidiaries Pigeon Cove

seafood processing facility located on the East coast in Massachusetts and Select fish processing facility on the

West coast which supplied only a portion of their seafood. As a part of their strategy to provide only the

freshest foods managers at individual stores were given discretionary authority to purchase from local organic

farmers and well managed seafood fisheries.

A large selection of baked goods—cakes, pies, breads and cookies and etc.

Prepared foods --- soups, canned and packaged

Fine quality cheeses up to 40 varieties

Frozen foods, juices, yogurts and dairy products, etc.

Wide variety of dried, fresh fruits and spices

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 8 Beers and wines, some with up to 1,200 varieties of domestic and foreign brands

Coffees and teas in store roasting, grinding stations; premium and exotic

A body care and nutrition department—organic, natural, homeopathic remedies without any animal testing

Natural and organic pet foods

Grocery and household products

A floral department with large variety sophisticated in and outdoor plants

A 365 Everyday value line and 365 organic everyday Value line of private label products that were less expensive

than other store brands.

Educational products—alternative health care and books related to cookery, healing, diets and lifestyles. Some

stores even feature seminars on cooking and nutrition.

Whole foods who depends largely on word of mouth and testimonial style or referral advertising; spends less 0.5 of

its revenues on Advertising. Corporate budgets which are largely decentralized and allocates most of their marketing

budgets toward regional programs and marketing efforts for individual store and national brand awareness.

Another element and important key to Whole Foods customer Intimacy strategy is its differentiated store layout

and designs and their skills in merchandising, which are quoted by Thompson (2009) as a prime factor in its success in

luring shoppers back time and again. It uses a differentiated style of merchandising that can be compared to an upscale

mix of Starbucks with Harris Teeter, with valet parking. In 2008, Whole Foods had over 274 store locations in 36 states

and are described below:

Its flagship store in Austin Texas, 78,000sq feet, considered a number one tourist attraction and destination,

features an intimate village style layout; six mini restaurants within the store; a raw food and juice bar; more

than 600 varieties of cheese and 40 varieties of olives; a selection of 1,800 wines; a candy Island with

handmade lollipops and popcorn balls; a hot nut bar with an in-house nut roaster; a world foods section; a

walk-in beer cooler with 800 selections; 14 pastry chefs making a variety of items; a natural home section with

organic cotton apparel and household linens; and extensive meat department with inj-house smoker and 50

oven ready items prepared by in-house chefs; and a theater like seafood department with more than 150 fresh

seafood items and on the spot shucking cooking, smoking, slicing and frying to order.

In their Columbus Circle store in Manhattan had a 248 seat café’ where shoppers could enjoy restaurant

quality prepared foods while relaxing in a comfortable community setting ; a jamba juice smoothie station that

served freshly blended to order fruit smoothies and juices; a full service Sushi Bar by Genjie Express complete

with stools where customers could sit and enjoy fresh cut Sushi wrapped in organic sea weed; a walk-in

greenhouse showcasing fresh cut and exotic flowers; a wine shop with over 700 varieties of wine from both

large and small vineyards and family estates; a chocolate enrobing station wher a customer could get anything

coated in chocolate.

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 9 In a two story Pasadena, California Store (one their largest stores west of Rocky Mountains) they featured a

wine and tapas lounge; a seafood and Italian trattoria; 1,200 selections of wine; fresh donuts made hourly; a

6,000 square foot produce department that featured more than 500 items daily; and free wireless internet.

Internationally, in a three store 99,800 square foot store in London had 55 in store chefs; 13 dining venues

including a tapas bar, champagne and oyster bar; a pub, and sushi and dim sum eatery) that accommodated

over 350 diners; a self service bulk foods center with 100 selections; and a 12 meter display of fresh seafood

selections ( many of selections were hook and line caught off the shores of the United Kingdom).

In creating the environment which many customers of Whole foods is used too, Whole foods wanted to create a

strong corporate culture that contributed toward an environment motivated employees to work in teams to carry out

their mission. So they use a team approach to store operations which in my opinion is the real the driving mechanism

for their total customer experience. Depending on the store size and traffic volume, Whole Foods employs any where

from 85 to 600 members, which are organized into as many as 13 teams, each with One team leader working with one

or two associate team leaders as well as with all departmental team leaders to operate the store as effectively and

profitably as possible . Each Team within a store is responsible for a different product category or different aspect of

store operations such as customer service, prepared foods, produce and customer checkout stations. Also another key

to Whole Foods use of this approach is their level of decentralization where these team leaders made decision on

merchandising and operating decisions but team leaders also screened candidates for jobs on their teams, but two

thirds of the team had to approve a new hire--- and that approval came only after a thirty day trial so every on the team

could get know if each candidate fit with the job and within the team.

Whole Foods empowers these teams to make decisions at the store level pertaining to merchandising,

departmental operations and efforts to please customers. Whole Foods uses this model based on their commitment

and belief that that their long term success depended upon having happy customers. They also believed that

empowering these tem leaders and employees they are further inspired and motivated and help to harness the

collective energy of the team to operate effectively and efficiently ---thus enabling them to manage their store better

than their rivals. In addition , to the empowerment to make decisions, many team members and employees felt good

about their jobs and had a greater sense of purpose and were motivated through their sense of contributing towards

the company’s vision of providing shoppers with better diets , eating habits and overall well being of society at large.

What also made this type of management approach effective was the compensation of each team leader and

member who were rewarded in a sense of shared fate. Team leaders received salary plus bonus based on the stores

economic value added (EVA) contribution; and were also eligible to receive stock options Leaders and members alike

received member selected benefits packages complete with health plan which the company paid 100% of the premium

and personal wellness accounts which members used to pay for higher deductibles or continue to roll over for future

expenses, paid time off, 20% discounts on all whole foods purchases, eye & dental care plans, life insurance and

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 10disability plans and emergency assistance plans. Team members were paid similarly to leader bonuses through a gain

sharing plan that linked each member of the teams by uniting the self interest of the team members with those of share

holders. The gainsharing plan which rewarded each member according to store’s operating profit ( Store sales less Cost

of goods sold less operating expenses) some distributions could add as much as 5 to 7 percent of their wages. Members

received a grant of stock options based on their performance, stock purchase plan through payroll and 401K plan.

Furthermore, employees were so happy with the way Whole Foods compensated them that turned away from all

unions, although there were several attempts to unionize members. The company was also was also picked for Fortune

100 Best companies to work for List over 11 times. One of 14 companies to make the list every year since its inception.

Fortune in scoring the survey, allowed two thirds of the weight were placed on 400 randomly selected employees of the

company and one third of the evaluation based on demographic makeup, pay, benefits and culture.

Discuss which environmental factor poses the most significant threat to Whole Food and what the company

can do to combat it.

In 2008, sales dropped below 10.91 percent with the newly acquired Wild Oaks whose sales only rose

about 0.8 percent versus 8.2 in 2007. Analyst say that this was because of the timing of the acquisition during

an economic downturn in the U.S. Other immediate threats to the company in 2008, stemming from the FTC

reopening its administrative challenge of the Whole Foods vs Wild Oaks which Whole Foods contested.

The entering of Tesco subsidiary Fresh and Easy Neighborhood in grocery and naturals market may

oversaturate market and slow down whole Foods growth in the Organic and Natural Foods market. Whole

Foods may need to create alliances with Individual health grocers offering assistance to ensure that there is a

strong market for healthy and pure products and these other smaller units won’t be gobbled up and dispursed

by tooming competition from discount giants trying to control retail groceries with unhealthy substitutes.,

Whole foods will need to spend more in advertising to create health awareness and educate consumers

on the consequences of eating environmentally unsafe foods. Maybe they can fund a reality show or a Healthy

Foods Show on Health or Cooking Channel promoting their brands,, missions and community and international

food Improvement advocacy.

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 11

Complete a SWOT analysis and identify significant opportunities and threats facing the organization.

Strengths

2007 Annual Report 10k form indicates that the company grew 7.1 percent in store revenues and achieved an

average of 34.8 Gross margin. Store contribution or sales per store minus cost of goods sold minus operating

expenses equaled an average of 8.9% per store.

Can sell stock on Nasdaq exchanges to raise capitol for growth and expansion efforts

Merchandising and Layout styles that is extremely difficult to duplicate

o Creates Disneyland style shopping experience.

o Restaurants and other Dining, Wine Tasting and Value added eating experiences.

o International Foods & Spices sections

o Raw, Kosher, dried, pick and pack Deli Bars

o Extensive baked goods and chocolating station

Over 30,000 varieties of Organic and Natural Food items

Ownership of nine distribution centers.

Ownership of Nine regional bake houses

Ownership of five regional commissaries.

Ownership of two produce procurement centers which facilitated procurement and distribution of all produce.

Ownership of three seafood processing plants in key geographic locations

Strong relationship with suppliers and and community

o Local producer loan program granting low interest loans of $1k to $100k to farmers and producers of

organic products that met their very strict standards.

o Paying a higher premium to local and international farmers and producers of quality products by their

standards.

o Who trade Program where they committed to have more than 50 percent of of its products imported

from developing nations that met their standards and qualifications. They feature label on over 400 of

their whole Foods products and donate !% of sales of these items to Whole Planet.

o Whole Planet a benevolent non profit organization charged with combating poverty and promoting self

sufficiency in third world countries that supplied Whole Foods with some of its products it sold.

o Donating 5% of after tax profits to educational and nonprofit organizations. Donated over $15 million in

2007.

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 12 Stewarded many Green Environmental in their stores and facilities through their Green Mission Task Force

including:

o Using paper bags made from 100% recycled paper and sold stlylish long lasting canvas bags made from

recycled plastic bottles.

o Converted vehicles in transportation fleets to biodiesel fuel

o Company purchased renewable energy credits for all their stores to offset 100% of all electricity used

o Created non profit Animal compassion Foundation in 2005 to help producers adobt and improve

practices for raising farm animals naturally and humanely.

Employee empowerment through Team Management and Employee Compensation & Retention Programs.

Weaknesses

Relationship with FTC over acquisition of Wild Oats

High Debt of $700 million

Underfunded advertising and marketing programs

Vitamins and Supplements purchased from outside supplier

No alliances or ties with any of

Opportunities

Expanding their customer base and creating Brand Loyalty through internet such as web based based stores and

health Information and environmental Blogs , and Social Networking through Facebook LinkedIn and Twitter..

Partnering with Largest Supplier of Organic and Natural foods in U.S.

Start a Organic and Natural Foods RSVP membership charging $10 and offering members 20 percent discounts

on all their purchases from whole Food or bulk discounts from fish, baked subsidies sending them a weekly,

monthly E-newsletter filled with coupons, information on health and wellness and news on Whole Planet

activities.

Form alliances with individual grocers offering growth assistance through partnering with them to achieve

economies of scale and better product offerings for their customers.

Expand market to where lower income families can become knowledge about healthy foods; form alliances with

local & State social services and Health agencies providing discounts for Food Stamp recipients and through

company health and wellness programs

Create own vitamin and supplements or create alliance with larger environmentally concerned giant to create

awareness health conscienceness.

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Assignment #2 Competitive Forces and SWOT Analysis P a g e | 13 Seek alliances with top food processors such as Kellogs, Green Giant, Pepsi Cola to create a natural Brand

Organic Beverage.

Market Seafood to other supermarkets i.e, Walmart, Costco in bulk and under Whole Foods Brand to expand

brand awareness. (Walmart sells Boston Market prepared meals).

Seek merger with Fresh Foods market to create sustained existence and economies of scale in the Organic and

Naturals market.

Seek alliances with Celebrity, Diet health and Well Being and other Green Peace organizations that champion

and endorse the Whole Foods mission to improve Food Quality around the world.

Threats

Oversaturation of the market or compettion with grocer giants i.e, Walmart under emphasis of selling organic

and natural foods over their everyday low prices. They have been in market longer and have more resources to

commit to marketing and etc.

Price war with larger competitors undermining quality of true organic and naturally grown animal , seafood

products by introducing or marketing technological/ genetically based substitutes into market that can be

purchased at fraction of price.

Economy economic conditions and employment rates lay-0ff and etc. Majority in market cannot afford to buy

Changes in the availability of quality natural and organic products could impact business

Future economic factors could cause impairment of goodwill

. The Company’s business could be severely impacted by a widespread regional, national or global health

epidemic.

Discuss how Whole Foods can use its strengths and opportunities to achieve a sustained competitive

advantage in the marketplace.

Whole Food has many programs which provide sustainability to their business efforts. Some the areas where

they have stewarded change and good practices are as follows:

o Agricultural programs supporting organic farmers, growers and the environment through their

commitment to sustainable agriculture.

Continue to delight, satisfy & surprise customer with hard to find organic and natural items

Merchandising and Layout styles that is extremely difficult to duplicate

Page 15: Assessment Whole Foods Market

Assignment #2 Competitive Forces and SWOT Analysis P a g e | 14o Creates inviting “Disneyland like” store shopping environments that are fun and reflect he communities

they serve.

o Restaurants and other Dining Venues, Wine Tasting and Value Added eating experiences

o International Foods & Spices sections

o Extensive prepared foods

o Self Serve Raw, Kosher, Dried, Pick/Pack & Deli Bars

o Extensive baked goods and chocolating station

Partnering with Largest Supplier of Organic and Natural foods in U.S.

Start a Organic and Natural Foods RSVP membership charging $10 and offering members 20 percent discounts

on all their purchases from whole Food or bulk discounts from fish, baked subsidies sending them a weekly,

monthly E-newsletter filled with coupons, information on health and wellness and news on Whole Planet

activities.

Form alliances with individual grocers offering growth assistance through partnering with them to achieve

economies of scale and sustainable product offerings for their customers.

Supporting fishing practices that ensure the ecological health of the Ocean and the abundance of Marine life.

Promoting and selling the products of well managed fisheries.

Partnering with groups who encourage responsible practices and provide the public with accurate

Market Seafood from well managed fisheries to other supermarkets i.e, Walmart, Costco in bulk and under

Whole Foods Brand to expand brand awareness. (Walmart sells Boston Market prepared meals).

Seek merger with Fresh Foods market to create sustained existence and economies of scale in the Organic and

Naturals market.

Seek alliances with celebrity, Diet health and well being and other Green Peace organizations that champion

and endorse the Whole Foods mission to improve Food Quality around the world.

Page 16: Assessment Whole Foods Market

Assignment #2 Competitive Forces and SWOT Analysis P a g e | 15Executive Summary

Whole foods has a good competitive position in the organic and naturals market, a compounded annual growth

rate of approximately 28%. From analysis of their case information, information in corporate within their annual 10k

report they are objectives are perfectly aligned and moving them in the direction they Aspire to become an

international brand synonymous with not just natural and organic foods, but also with being the best food retailer in

every community in which they are located and beyond . Though their heavy emphasis on perishables and locally grown

products, along with our unparalleled customer service, is helping us reach that goal, differentiating our stores from

other supermarkets and enabling us to attract a broad base of loyal customers they have also attracted some formidable

opponents in the market which may pose as barriers or helpful stepping stones toward reaching their goals. In addition

to competitive forces looming, Whole Foods is also faced with several threats dampening their profitability including

leftover perishable goods, high debt and leasehold agreements which is causing them a little difficulty, but nothing that

they could not abound from if they make a few changes in their business strategy which might prove to be effective in

helping them to stay ahead of the environment forces which are impeding them. Below I have listed several

recommendations that with careful alignment and timing along with normal plans might improve Whole Foods

profitability and serve as a barrier to impending competition that threatens to impede their position in the market.

Partnering with Largest Supplier of Organic and Natural foods in U.S to slow other competition and stop any

price competition by controlling the sources of organic and naturals this would allow whole food to reduce the

bargaining power of customers and other offering substitutes in the market..

Start an Organic and Natural Foods RSVP members organization charging $10 to $25 fund charitable

contributions. Offering members 20 percent discounts on all their purchases from whole Food or the ability to

bulk order at discounted rates on Seafood, Baked goods or catered meals for large events ( all prepared fresh

from bake houses, commissary’s) and placing them on a list to receive a weekly, monthly E-newsletter filled

with coupons, information on health and wellness and news on Whole Planet activities.

Form alliances with individual grocers offering growth assistance through partnering with them to achieve

economies of scale and sustainable product offerings for their customers.

Supporting fishing practices that ensure the ecological health of the Ocean and the abundance of Marine life.

Promoting and selling the products of well managed fisheries and Partnering with groups who encourage

responsible practices and provide the public with accurate information to help avoid any world shortage due to

plaques or other uncontrollable environmental outbreak.

Market Seafood from well managed fisheries to other supermarkets i.e, Walmart, Costco in bulk and under

Whole Foods Brand to expand brand awareness, converting competition to (Walmart sells Boston Market

prepared meals) cooperative selling , decreasing distribution cost and increasing profits in private and Whole

Brands of Healthy Food and organics.

Page 17: Assessment Whole Foods Market

Assignment #2 Competitive Forces and SWOT Analysis P a g e | 16 Seek merger, acquisition or purchase of Fresh Foods market to create sustained existence and economies of

scale in the Organic and Naturals market.

Seek alliances with celebrities, diet, health and well being organizations and other Green Peace organizations

that champion and endorse the Whole Foods mission fostering improvement of Food Quality around the world.

Encourage teams by offering additional incentive for cost or losses in perishables department through careful

age management for timely processing of goods in prepared goods, in pet products.

Expanding their customer base and creating Brand Loyalty through internet such as web based based stores and

webcast on health Information and environmental issues such as cooking, wine tasting, Healthy Food Blogs

promoting healthy eating habit , and Social Networking through Facebook LinkedIn and Twitter.

Expand customer loyalty by working with school dietians offering to setup healthy or organic and prepared food

stations to help reduce labor cost and foster healthy foods in local secondary and college and Universities.

Page 18: Assessment Whole Foods Market

Assignment #2 Competitive Forces and SWOT Analysis P a g e | 17 References:

1. Thompson, A.A., Strickland, A.J., & Gamble, J.E. (2010). Crafting and executing strategy: The quest for

competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York: McGraw-Hill-Irwin

2. Whole Foods Market, Inc. Annual Report on Form 10-K For the Fiscal Year Ended September 27, 2009 taken

from http://www.wholefoodsmarket.com/company/pdfs/2009_10k.pdf last opened April 25, 2010.

3. Porter’s Five Forces of Competitiveness Model taken from http://www.themanager.org/Models/p5f.htm last

opened April 25, 2010.

Page 19: Assessment Whole Foods Market

Competitive Rivalry, eg: • number and size of firms • industry size and trends • fixed v variable cost bases • product/service ranges • differentiation, strategy

New Market Entrants, eg:• entry ease/barriers • geographical • incumbents resistance change • new entrant strategy • routes to market

Product and Technology Development, eg:

• brand reputation• geographical coverage•product/service level quality• relationships with customers• bidding processes/capabilities

Supplier Power, eg:

• alternatives price/quality

• market distribution changes

• fashion and trends

• legislative effects

Assignment #2 Competitive Forces and SWOT Analysis P a g e | 18

Appendix

Porter's Five Forces model

provides suggested points under each main heading, by which you can develop a broad and sophisticated analysis of competitive position, as might be used when creating strategy, plans, or making investment decisions about a business or organization

.© alan chapman 2005, based on Michael Porter's Five Forces of Competitive Position Model. Not to be sold or published. More free online training resources are at www.businessballs.com. Alan Chapman accepts no liability

.

Buyer Power,eg:

•buyer choice •factors buyers size/number •cost/frequency •product/service importance volumes, J IT scheduling

Page 20: Assessment Whole Foods Market

Assignment #2 Competitive Forces and SWOT Analysis P a g e | 19

4.1          Reducing the Bargaining Power of Suppliers

4.2          Reducing the Bargaining Power of Customers

·          Partnering

·          Supply chain management

·          Supply chain training

·          Increase dependency

·          Build knowledge of supplier costs and methods

·          Take over a supplier

·          Partnering

·          Supply chain management

·          Increase loyalty

·          Increase incentives and value added

·          Move purchase decision away from price

·          Cut put powerful intermediaries (go directly to customer)

4.3          Reducing the Treat of New Entrants 4.4          Reducing the Threat of Substitutes

·          Increase minimum efficient scales of operations

·          Create a marketing / brand image (loyalty as a barrier)

·          Patents, protection of intellectual property

·          Alliances with linked products / services

·          Tie up with suppliers

·          Tie up with distributors

·          Retaliation tactics

·          Legal actions

·          Increase switching costs

·          Alliances

·          Customer surveys to learn about their preferences

·          Enter substitute market and influence from within

·          Accentuate differences (real or perceived)

4.5          Reducing the Competitive Rivalry between Existing Players

·          Avoid price competition

·          Differentiate your product

·          Buy out competition

·          Reduce industry over-capacity

·          Focus on different segments

·          Communicate with competitors