Whole Foods Market Case Analysis

Whole Foods Market has received recognition as recent as January 27th 2011 when CNBC aired Supermarkets Inc: Inside a 500 Billion Money Machine. “Whole Foods is arguably the most influential, and by some measures, the most successful supermarket chain in the world. The specialty gourmet store has grown into a Fortune-300 company offering specialty foods and locally grown organic produce. ” CNBC goes on to state that even “Established brands like Safeway, Giant Eagle and Kroger are cultural icons as familiar as our own street names, but they are under constant attack from brilliant upstarts like Whole Foods…1” From the general supermarket industry Whole Foods Market breaks down into even a smaller specific industry which is the natural and organic foods industry.

This industry focused on proving customers with natural foods which is defined as “foods that are minimally processed, largely or complexly free of artificial ingredients, preservatives and other non natural occurring ingredients; and near to their whole, natural state as possible. 7. ” Also “organic foods were a special subset of the natural foods category; to be labeled as organic, foods had to be grown and processed without the use of pesticides, antibiotics, hormones, synthetic chemicals, artificial fertilizers, preservatives, dyes or additives or generic engenerring. ”

Also from the text book CEO John Mackey believes Whole Foods Market has been highly selective for finding the highest quality, least processed, most favorable and naturally preserved foods available. Whole Foods Market is an industry leader in natural and organic food retailing. The five forces model of competition, in written form, is provided as a key analytical tool to better understand the overall attractiveness of the industry.

Rivalry among competing sellers is certainly strong and is expected to become stronger as more grocery retailers compete for loyal customers who desire the healthiest foods. The threat of substitute’s products is very high from other grocery retailers. For example, Publix has branded its own natural/organics products line named Green Wise and even a few stores that have a majority of its products natural/ organic. The restaurant industry should be considered but it is a very low threat because there are very few restaurants that are only dedicated to natural/organic products.

The threat of new entrants entering the industry is fairly low. This is simply because grocery retailers have already got into the market to insure they would get their share. The bargaining power of suppliers is a medium level threat to the industry because industry members are competing for products to put on their shelves from the same suppliers. The bargaining power of buyers is definitely low because conventional retailers set the price consumers must pay to obtain the goods they want.

Because of these threat levels the overall attractiveness of the industry high. Consumers are becoming more conscious of the foods they are eating and will continue buying natural and organic foods. There have been many main events and performance indicators that have occurred with Whole Foods Market recently, as stated in the Epilogue to January 2009 “ Whole Foods Market planned on opening 15 stores , have annual sales of about 8. 3 billion, have capital expenditures of $400 to $450 million, and incur annual interest costs of $35 to $40 million. ”

The main elements of Whole Foods Market strategy are providing customers with the highest quality natural/organic products. Whole Foods Market has a strong growth strategy because they have 66 store in the stages of development and have future plan of acquiring more stores to expand their company further down the road. This growth strategy has helped them achieve their financial goals. Whole Foods Market can be assessed by using a simple SWOT analysis. This assessment will begin by examining the internal strengths and weaknesses.

Internal strengths Whole Foods Market has two narrow markets that it serves, organic differentiation is the key-stone of whole foods mission, this means Whole Foods Market uses a focus differentiation strategy, highest quality brand reputation, dedication to the social ethics of organics, industry best customer service strong supply chain, and developing a private label of organics. Whole Foods Market has had experience in the natural/organic retailing industry since 1980. For the past 30+ years they have built over 300 large customized stores in North America and also in the United Kingdom.

Whole Foods Market is known to provide the highest quality of products. Weaknesses of Whole Foods Market include the high prices for their products; this is a direct result of the company’s focus on their availability of the finest products. The majority of Whole Foods Market inventory consists of perishable items. This can sometimes pose problems because, produce, milk, eggs have a short shelf life, Produce especially needs constant maintenance to be graded as well as pulling the damaged or bruised produce off the sales floor.

Working as a roduce clerk for several years I know the importance decreasing the cost of throw away products. It hurts the company’s sales especially when you are dealing with pricy high quality natural and organic foods. Another weakness the Whole Foods Market faces is the high costs associated with expanding into different locations. The third part of SWOT is external opportunities that WFM faces in the industry. Over the past couple of decades more consumers have been becoming more health conscious and eating right. WFM can take advantage of this new outlook on the health food industry by acquiring new customers.

Also, Whole Foods Market should spend more money on advertising to attract these health conscious customers. The final part of the SWOT analysis is the external threats that Whole Foods Market has to face. One of these threats is the increasing competition of already established grocery retailers. It’s very easy for these competitors to add natural and organic foods into their inventory. Another threat to Whole Foods Market is that their growth relies on building new stores and acquisitions of existing favorable buildings.

If Whole Foods Market does not succeed in acquiring these store then the dominating grocery retailers will take more market share and slow the company’s growth. Evaluating Whole Foods Market using (S. W. O. T. ) analysis internally and externally helps you to develop an overall assessment of the company’s current competitive situation. Whole Foods Market is in good standings with the competition they seem to have a business model that is working for them and may need to emphasis a bit more on advertising and attracting more health conscious people with pamphlets at gyms.

The Internally the company looks great with not to much to worry about but externally they must act now before the Wal-Mart starts taking their profits as well as other grocery retailers. One of the Key Success Factors (KSFs) of Whole Foods Markets is that it has a strong brand name because the company is well known reputation and far superior up against its main competitors. When a consumer shops at Whole Foods Market they know they will be getting the best quality possible. Another thing that gives them a competitive advantage, is the strong network of suppliers.

This KSF has been a focus of Whole Foods Market to purchase their products grown locally to their stores. Information from wholefoodsmarket. com shows that each store has their own definition of “local” but the consumer just need to check with their particular store to find out where their quality goods are coming from. Another KSF is the access to locations rich in the target market. Whole Food Market has strived to establish stores in most metropolitan areas attracting more people. The Final KSF has been the company’s effective marketing communication.

There are many Key Success factors (KSF) when stacking Whole Foods Market up to the competition. It seeks out the finest natural and organic foods available, maintains the strictest quality standards in the industry, has an unshakeable commitment to sustainable agriculture, and the excitement and fun they bring to shopping for groceries, Whole Foods Market is permanently committed to buying from local farmers whose produce meet quality standards, particularly those who farm organically and are themselves dedicated to environmentally friendly, sustainable agriculture.

Whole Foods Market is greatly increasing their efforts in this regard by further empowering their individual store and regional buyers to seek out locally grown produce. From Investor relations Whole Foods Market states “Our success reaches far beyond the company by contributing to a higher quality of life. By offering the highest quality food available, we are helping to transform the diet of America, helping people live longer, healthier, more pleasurable lives while responding positively to the challenge of environmental sustainability. ”

In Conclusion, Whole Foods Market is the leader in this niche market of natural/organic foods industry and is facing strong competition from the big superstores such as Wal-Mart, Costco and many other grocery retail chains. The company is in a position to change people lives forever and future generations as well. As many companies are doing now is finding their consumers and keeping those customers for life. Not just what they just spend at the register each time but what they may spend over each person’s life p and if you are eating healthier you will definitely live longer in return spending more money with Whole Foods Market.

Works Cited

http://www.wholefoodsmarket.com/products/locally-grown/

http://www.wholefoodsmarket.com/values/green-mission.php