Jacqueline Garcia

Whole Foods Market

MGMT 4325.850

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Step 1 Vision, Mission, Objectives

1a) Vision

Their aspiration is to become an international brand synonymous eith not just natural and organic goods, but also to be the best food retailer in every community in which they locate. “Whole Foods, Whole People, Whole Planet” emphasizes the companies vision as more than just a food retailer.

1b) Mission

Whole Foods Market’s mission is “to promote the vitality and well-being of all individuals by supplying the highest quality, most wholesome foods available.”

1c) Objectives

To be the best food retailer in every community in which they are located and to provide good customer service and premium quality foods.

1d) Strategies

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Step 2: Identify the organization’s external opportunities and threats.

2a) Economical Forces

Unemployment Trend/ level of disposable income

Typical growth rates of 20% to 30% for organic food sales in the US eased in the 2nd ½ of 2008 as middle and upper income families felt the effects of layoffs and declining portfolios.

Stock market trend

After peaking at almost $80 in Jan 2006 its stock has continued a downward slide from then. In 2009 it fluctuated between $9 to $19.

Inflation rate & value of $1

In contrast since food companies have been increasing prices to offset the rising commodity prices & currency related effects, the price gap between regular food products & organic products has narrowed.

Price fluctuations

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This narrowing of prices could make organic products more appealing to a greater number of customers.

2b) Social forces, demographic forces, and environmental forces

Attitude toward product quality:

Every department that handles organic food is certified

Location of retailing

Some of their newer stores were also built in lower income area bringing them into direct competition with more established and lower cost competitors

Government regulation

USDA’s National Organic Program declared individual certification.

Social programs

Heavily involved.

Attitude toward customer service

Knowledgeable staff

2c) Political, governmental and legal forces

Antitrust legislation

FTC involvement with acquisition of Wild Oats

Level of defense expenditures

$19 million in settlement issues

2d) Technological forces

Internet

Corporate website averages 50000 hits a day.

Marketing

Word of mouth

2e) Competitive forces

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General grocers

Walmart – number 1 grocer seller, over $100 billion in 2008, in 2009 announced plans to completely overhaul its oldest and biggest store brand in the entire country

Kroger - $76 billion in sales, 2500 stores, number 1 pure grocer in sales, expanding its marketplace store concept

Safeway - $44 billion in sales, 1750 stores

Organic

Trader Joe’s – (2008) 300 stores, 25 states and growing, stores concentrated in California, usually priced lower, offer similar product mix on the cheap

Wegmans – open air market concept, $4.8 billion in sales (2008), 30th on list of 25 top supermarkets, 70 + stores, stores concentrated in New York and surroundings, rated in top tier of fortunes annual, list of top 100 best companies to work for

Step 3 Construct a Competitive Profile Matrix.

Whole Foods Market’s weighted score is 3.67 and it shows they are doing better than their

competition in the industry. Whole Foods is doing better because they do a good job positioning their

locations and penetrating new markets thus taking out competitors as well. For example: global

expansion, acquiring Wild Oats and repositioning and building in lower income areas. In doing this it

helps them stay in direct competition with their rivalries.

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Step 4 Construct an External Factor Evaluation matrix

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Whole Foods Market’s weighted score is 2.29 which is below avg. Whole Foods threats have exceeded

opportunities. Having a knowledgeable staff increases their customer service image compared to the

competitors keeping their existing customer base and potentially drawing more in. Although the Their

number one threat is the amount of money they had to spend in litigation. Major improvements can be

made through creative advertising on their already established website which is drawing in more than

50000 hits a day.

COMPETITIVE RIVALRY

In the organic industry (excluding regular grocers) rivalry is increasing.

In the industry consumer brand switching is increasing as there is an increase of similar product offerings with general grocers.

BARRIERS TO ENTRY/ EXIT

Barriers to entry are low making competition high but Whole Foods counter attacks well to deter new organic entrants by lowering prices, emphasizing value and offering greater discounts.

Buyer Power

Buyer power in this environment is high making competition go up. Their differentiation advantage has narrowed due to the competitions encroachment on that niche. It is also very easy for buyers to switch their

Supplier Power

Bargaining power of suppliers is increasing this environment making competition increase as more grocers are offering organic products.

THREAT OF SUBSTITUTION

Whole foods suffers from close competition w/ producers of substitute (non-organic and organic) products putting a ceiling on prices that can be charged, as store brand and generics recognition is at an all time high.

Analysis

After applying Porter’s five forces to the Whole Foods industry I feel that the firm is suffering as a result of these environmental conditions because markets with low entry barriers have lots of players and thus low profit margins. The lower the barriers the more likely the market is to become a perfect competition at this point Whole Foods is in a monopolistic competition.

competive rivalry

barriers to entry/ exit

buyer power

threat of substitution

supplier power

Step 6 RBV Perspective

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Step 5 Porter’s Five Forces

A. Whole Foods Market has gained leadership in the organic industry by penetrating the

market through acquisitions and buying out competitors and reestablishing stores. They

have also created a good customer service base by educating their staff in the products

they sell and the staffs willingness to help. They have a tremendous workforce of 50000

team members on the roster. The innovation of their own organic brand name food is

also favorable in the market as 64% of shoppers said they often or always buy a store

brand rather than a national one. These internal factors are responsible for creating a

niche retailer.

B. Whole Foods Market has a list of distinctive competencies which sets them way apart

from their rivalries. To include: knowledgeable staff and willingness to help which

creates that good customer service base, their specialty item selection allowing them the

ability to skim the market, location strategy, selection of prepared foods, and penetration

into the global market. The combination of having a vast selection of specialty items thus

allowing them to skim the market the way that they do is the number one thing that they

do particularly well bringing revenue from the market before substitute products appear.

This in turn gives them the control to set those premium prices and quality items they are

well known for but also to lower the price drastically to capture the low end buyers and

thwart the copy cat competitors.

Step 7 IFE

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Whole Foods Markets weighted score is 2.4 which is just below the average. In this matrix the

internal strengths far outweigh the weaknesses. Being that they do hold the title of the “worlds

leading natural and organic foods” and the depth and breadth of the item selection that they have

I feel they can eventually make a good turn around for the future. Launching and growing their

new store brand can bring in an added increase to perishable. In the middle of a recession Mr.

Mackey might want to think about diminishing the negative attention drawn to Whole Foods to

protect the image that has been portrayed until now.

Step 8 Financial Ratios

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Step 9 SWOT ANALYSIS

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