Whole Foods Market inc. has various strengths that continuously stamp its authority as a market leader in retail of natural and organic food items. It also has weaknesses that have made it susceptible to competition and comparative disadvantage in the global market. The company, nevertheless, has taken to its stride to capitalize on its strengths and mitigate on its weaknesses in order to retain its competitive edge in the global market.
The company has several strengths that explain why it has enjoyed the position of market leader for years in the food industry. The first strength is noted to be broad product offering or in other words product diversity. The company over the years has managed to avail to the market a variety of natural and organic products. This diversity has made the company an ideal place to shop in especially by organic and natural food consumers. The product selection in this organization’s stores is mainly grocery, seafood, meat and poultry, bakery, coffee and tea, prepared foods and catering, specialty (wines beer and cheese), nutritional supplements, vitamins, body care and educational products such as books, floral, pet products and household products (Habin & Humphrey, 2012, p. 7). This variety is essentially, what draws in more shoppers and helps the organization tap into new potential markets. It also incorporates quality its products a fact that is greatly supported by its mission as a company in availing minimally processed food products.
The next strength lies in the company’s right sizing of stores. This presents a competitive edge over other firms in the food industry where each Whole Food stores have customized layouts that fit particular site and building to show off particular products for their target customers in that area. It is rare to find any natural foods stores that have larger than 20,000 square foot. The organization, further, employs tact in the format choice depending on different locations. Each Whole Foods store is unique in its design, because each store is designed to reflect the local community in which it is located. This is accomplished by integrating the outward appearance of each store into the community and by giving the inside of each store a colorful local flare using locally made art and design (Stonehouse, 2007, pg 261).The large-format stores are strategically positioned in dense urban areas. The decision to scale back the average size of its new stores is a prudent factor that has propelled Whole Foods Market Inc. productivity. It has had positive impact on the chain efficiency and return metrics.
The third strength that Whole Foods Stores posses is focused growth strategy. This has been made possible by the strategic team that plays an advisory role to the top brass of the corporation. The growth strategy focuses on primarily expansion through new store openings in existing and new trade areas. This strategy has further seen the corporation open branches in international markets. The best practices of each location are incorporated back into the Whole Foods Market chain. The lessons learned at one location are internalized by all branches enabling the chain to maximize on effectiveness and efficiency when serving their clientele base.
Good customer service is the next strength that has continuously made the corporation a choice of many. The employees are trained to view the customer as king. This has been enabled by the organizational culture that defines operations in Whole Foods Market environment. The corporation values integrity and ethics that govern relations with all its stakeholders chiefly its customers. The customer service is, further, boosted by the fact that the company remunerates its employees well through an economic value added management system and incentive system (West, 2006, p.441).
It also has a strong brand image that gives it is a far more competitive edge than the other market players do. The company offers its own line of products called 365 Everyday Value. This line of products is specially created to meet all of the standards in place at Whole Foods, as well as to provide a great value the customers Additionally, Whole Foods has created the 365 Organic Everyday Value Line which gives customers the opportunities to purchase certain organic products without having to pay the typical organic food price tag. These value brands help to set Whole Foods apart in the expanding organic foods while not requiring their whole paycheck to do so. Total sales of these products made up approximately 11 5 of retail sales for both fiscal years 2011 and 2010.
Whole Foods Market also has several weaknesses as a corporation. The first weakness lies in the fact that it charges exorbitant prices on its products. The corporation sources its high quality products in a relatively costly manner, which makes them, extend the cost incurred to their end-customers. The costs of growing and marketing organic products are about 25-75% more than conventionally grown items. This has made the corporation’s stores to be perceived as a luxury or elitist shopping destination by many. It is generally dubbed as “whole paycheck’ store due to the fact that some of their foods are highly priced than common groceries in America.
The second weakness lies in the fact that the firm has weak international operations. The company has just six stores in Canada and five stores in Canada. Even though the corporation plans to open up new chain of stores in the Diaspora market, specifically UK and Canada, its operations are not enough to help it capitalize on the economies of scale that are experienced through purchasing and distribution. This eventually affects the product prices. This is in comparison with their competition that has a leaner supply structure hence lower operational costs.
The third weakness that Whole Foods Market corporation experiences is increasing operational expenses specifically rental expenses. The organization has several obligations under certain capital leases. These leases include rental equipment and facilities. These leases have continuously increased the operational costs margin. In the year 2010, 2009 and 2008 averaged at approximately $303.5 million, $281.9 million and $257.5 million respectively. These expenses have negatively affected Whole Food Market’s profitability. The company also through expansion faces challenges due to increase in magnitude and complexity (Habin & Humphrey, 2012, p. 9).
The company, further, faces a high valuation. It carries a price to earnings ratio that surpasses the average set by S&P at 500. The ratio currently a stand at 3631.The valuation is steep for any company even though it may be linked to its growth as a corporation. The company also faces the problem of undersupply of organic food (Habin & Humphrey,2012, p. 9). The organic food farmers are growing in a rather slow rate that cannot meet the current needs of the American clientele base.
What are opportunities and threats facing whole foods?
In the strategic analysis of Whole Foods Market Inc. opportunities and threats are identified. These factors are crucial in the proper planning of the corporations operations, management of resources and making of investment decisions. The opportunities are market and operational advantages that the company can tap into while threats are factors that may easily affect the company’s operations and profitability.
There a various opportunities that the Whole Foods Market can exploit in order to improve its profitability and scale of operations. The first opportunity is the increasing demand for organic products. More people are increasingly becoming aware of the benefits of natural and organic foods. The demand has increased three fold since the year 2000 reaching a $25 billion margin by the year 2010. In 2010, organic sales stood at 5% while the overall food industry grew at a rate of 2%.
The next opportunity that the corporation can tap into is trends that support rise in demand of food products. There are two trends that are likely to increase demand of natural and organic products. Many people are embracing healthy eating and eating at home habits. The economic downturn has influenced a lot of people’s perception of home-prepared foods. They view home-prepared foods as much healthier a perception held by 92% of American grocery shoppers. Whole Foods has recorded a steady growth mainly due to this view held by customers on healthy food. A population that is composed of individuals that lack ample time to cook as well as variety of meals provided at their stores. It is forecasted that as the economy grows the number of individuals with greater discretionary spending income will be the factors behind World Food Market growth in years to come (Lee & Linowes, 2009, p.12).
The next opportunity established through the SWOT analysis of this company is the rise of popularity of private labels that will have a positive impact on margins. Many American private label products are experiencing a strong growth in sales. In the year 2010 alone, private label products accounted for almost 20% of the dollar share and more than 20% of the unit share in stores in the US. The consumer market is gravitating away from expensive brands towards private brands. This shows a decline in brand loyalty. Whole Food Market’s store brands have approximately 2,200 SKUs led by private labels, 365 organic brands and 365 Everyday Value.11 % of the corporations retail sales in the two consecutive financial years,2009 and 2010, was established to be total private label sales(Habin & Humphrey,2012, p. 12).
The company also enjoys opportunities through enhancement of their brand loyalty through community service. Its corporate social responsibility should be more aggressive in initiating communal projects that will have a long-lasting impact on residents and consequently boosting the Whole Foods Market brand image amongst the masses and potential clientele. The next opportunity arises in the acquisition of other established firms in the food industry such. It bought one of its largest competitor Wild Oats, which has shown to be profitable. Through acquisitions, the company can tap into new markets previously a domain of the acquired company. The company also ought to tap into rewards program in order to boost its customer loyalty. This can be carried out effectively through use of Kroger cards.
Whole Foods Market should capitalize on more advertising that is effective. This will offer a brilliant opportunity to break into new market horizons. The company should commit more resources to product promotion in order to get more buyers into their chain stores (Stonehouse, 2007, pg 265). These market costs can easily catered for by the economies of scale that the company enjoys. It can hire the services of an efficient Public Relations firm to tailor make an effective campaign that will impact positively on the profitability of the company.
Whole Foods Market faces a horde of threats that can have a negative impact on its profitability and standing as a market leader. The first main threat that this company faces is intense competition from other industry players. It is prudent to note that food retailing is intensively competitive. The company competes with many competitors on local, international, regional, conventional and specialty fronts. Most of these lines of stores carry similar products that translate to loss of sales and profits, which are highly dependent on the quality and price of products and customer loyalty (Petusvesky, 2002, p.24).
Stringent regulations impose additional threats on Whole Foods Market as a company. It is notable that the company operates in the natural and organic food market, which are subject to strict regulations in relation to health, food labeling and sanitation. There several agencies that are tasked with the role of imposing these regulations. These departments include the Federal Trade Commission (FTC), Food Drug Administration (FDA), the Consumer Product Safety Commission (CPSC), the Environmental Protection Agency (EPA) and the United States Department of Agriculture (USDA). These agencies set and enforce standards that ought to govern the manufacturing, processing, packaging, formulation, labeling and advertising products. Failure of compliance results to penalties and repossession of marketing and sales licenses (Habin & Humphrey, 2012, p. 7). These regulations further bring about additional compliance costs that may affect negatively the company margins.
Other threats that characterize the Whole Foods Market Inc. business environment is changes in the economic environment. The company has to endure the most of the negative elements of the economy performance. Economic downturns such as inflation have a great impact on the company’s clientele base leading to reduced spending power, which consequently leads to reduced margins.
What are strategic factors facing whole foods?
The company faces strategic factors that affect their corporate, medium-term and long-term plans as a company. These strategic factors inform the managerial decisions to be undertaken by the company’s human resource (Wilkison, 2003, p.148). These factors are namely competition, marketing, pricing, substitute products, customer loyalty, expansion plans, and emerging trends. All these factors are core to any strategy employed at Whole Foods Market Inc.
Competition is a critical strategic issue that faces Whole Foods Market. Over the years, the company has faced the threat of existing and new competitors. This has influenced much of its operational functions. The competition has of late affected negatively the company’s profit margins. Many firms have joined the natural and organic food specialty translating to loss of sales and profits for Whole Foods Market.
Marketing is the next strategic factor that faces this company as it seeks to boost its clientele base. The company has to commit substantial amount of funds in order to enhance its product promotion initiatives. The company has to establish the best message to associate its products with in order to catch the attention of many potential customers as possible. Currently its selling message is inclined to the company’s philosophy of selling minimally processed high quality food products. Whole Foods Market holds a strong position in the market and by increasing awareness and demand for organic foods; they will inevitably increase their market share and profits (Habin & Humphrey, 2012, p. 16).
Pricing stands out as a factor that has overall strategic impact on the profitability and competitive edge of the company in the food industry. The company has to ensure that its pricing is friendly to its customer base. The pricing procedure should also factor in the competition and economic conditions in order to ensure a win-win situation for both the company and customers.
Substitute products have presented a strategic quagmire to the company’s investment and operational plans. The presence of substitute products in the market implies that Whole Food Market primary consumers can easily divert their resources to other product lines that meet their needs. It is prudent to understand that substitute products can have great impact on the profit margins of a firm in a business environment. To counter this, the firm ought to diversify its product and incorporate efficient product promotion techniques.
Customer loyalty is another strategic factor that Whole Food Inc. faces. The company strives to ensure that it retains its old clients and incorporates more into its ardent clientele base. Customer loyalty is crucial in that it safeguards the company’s returns and catapults the business into investing more. The loyalty can be heightened through increased efforts in boosting brand recognition through corporate social responsibility platforms and communal activities (Njuguna, 2009, p.41).
Expansion plans are equally strategic to any company that seeks to boost its returns and occupy the market leader position. Whole Foods Market understands the criticalness of this factor if the number acquisitions in the last decades are anything to go by. The acquisition of the Wild Oats, a strong brand has enabled the company venture into new market segments consequently increasing its profit margins. The company, however, has to consider the viability of some of the expansion decisions. It might end up spreading itself thin in the market making it very vulnerable to market threats.
The Whole Foods Market Inc. leadership comprehends the fact that the company operates in a dynamic environment. There are emerging trends in all business dimensions such as management, technology, marketing et cetera. The company should be keen to tap into innovations and business models that will ensure it will retain its position as a market leader.
Does Whole Foods have any core competencies?
Whole Food Market inc. has three main core competencies, which are namely ability to make acquisitions, corporate transparency, and product differentiation. These areas of specialized expertise are a result of harmonizing complex elements of technology and work activity. These factors have been pivotal in ensuring that the Whole Foods Market Inc. remains a force to reckon in the food industry.
Ability to make acquisitions is deemed as a core competence in that the company has managed to integrate new firms into their chain of stores and outlets. The latest notable acquisition that the company managed to carry out successfully is the Wild Oats merger. Wild Oats was one of the largest firms within the American food industry. It is estimated that the merger brought together over 74 stores and a great pool of human resource. The merger has also led to combination of the best of the two firms in order to capitalize on the synergy and core competencies. The success in these acquisitions lies in the financial stability of the Whole Foods Market Inc. It also lies in the strategic brains behind the well-analyzed acquisition of firms both big and small, incorporating and synchronizing them with Whole Foods Markets mission and objectives. In 2005, the Whole Foods Market acquired Fresh and Wild an organic food store based in the United Kingdom. This acquisition helped this firm tap into the emerging organic and natural food market globally.
Corporate transparency as a core competency has set Whole Foods Market Inc. apart from other firms in the food industry. The transparency and integrity factors are captured in the company’s mission. The company endeavors to employ fully ethical practices in its relation with customers and other stakeholders. In May 2003, the company went a notch higher in its accreditation procedures by being certified by an independent third party certification organization. In July 2009, California Certified Organic Growers (CCOF), one of the oldest and largest USDA-accredited third-party organic certifiers. This certification verifies the handling of organic goods according to stringent national guidelines, from receipt through repacking to final sale to customers. This voluntary certification goes on to show how the company has integrated transparency in its operations.
Product differentiation is the third and one of the major competencies of Whole Foods Market Inc. The success of this firm is founded in comparison to large typical grocery competitors. By focusing on unique products such as specialty foods and a prepared foods section, the company has provided consumers with a differentiated shopping experience. A shopping experience that is full of high quality and healthier products. Whole Food Market has managed to tap into a market segment that is health conscious and appreciative of natural and organic products (Lee & Linowes, 2009, p.17). Many of the customers are willing to spend more in Whole Food Market stores with the assurance that they are buying the best healthy products for themselves and their families. This rise in demand for these products has been brought about by the rise in awareness on diseases and healthy eating. The company values this competency and has collaborated with communities, charities and farmers in ensuring the natural and organic products are produced and are popularized effectively.
Does the whole foods have a distinctive competency?
Whole Foods Market has a distinctive competency that has enabled it to survive in the cutthroat competition that the food industry has become of late. The company, in these recent times has had to grapple with competition from existing and new entrant firms in the food industry. This has pushed Whole Foods Market in. to invest in a distinct competency that gives it a comparative advantage over all its competitors. Product differentiation is the most distinctive competency that is possessed by this firm.
The company has invested in the availing a wide array of products to consumers. This is in utter comparison to large typical grocery firms. The chains of stores under this organization incorporate uniqueness in that they provide specialty and prepared foods to its customer base. The shopping experience is differentiated with the customers acquiring virtually all types of food products under one roof. This experience is further made memorable by the presence of quality and healthy products that have passed under stringent standards courtesy of USDA (Lee & Linowes, 2009, p.13). These standards help in the differentiation process of Whole Foods from its competitors by providing customers with quick and easy way to ensure that their food is of the highest quality. Many of the customers are willing to spend more due to the assurance that they are indeed purchasing healthy and products of high quality for their kin and own consumption.
This competency has, further, been made possible by the health awareness campaigns that have been on the rise in the media and in the society in general encouraging people to adopt healthy eating habits and living. This has led the company to invest in this distinct competency by engaging with all stakeholders t all levels to ensure that it meets the needs of its clientele while ensuring product diversity and differentiation reigns.
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