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Whole Foods Market

Essay by   •  January 5, 2011  •  Case Study  •  1,586 Words (7 Pages)  •  3,672 Views

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Introduction

By 2005, Whole Foods Market had evolved into the "world's largest retail chain of natural and organic foods supermarkets." Their rapid growth and success is primarily due to being highly selective about what they sell, as well as being dedicated quality standards and core values. Whole Food's stated mission statement was to "promote vitality and well-being for all individuals by offering the highest quality, least processed, most flavorful natural and naturally preserved foods available."

At the same time, Whole foods market was experiencing scarce resources in the organic produces and prime locations for their next business expansion. In this case study, firstly, it will analyze external and internal environments, competitor and five forces of this industry. Then, it will move on to the analyses of capabilities and core competencies of Whole Foods Market. Lastly, it will provide recommended strategies for Whole Foods Market to achieve its target: to reach US$10 billion in revenue with 300-plus stores by 2010 without sacrificing quality ad its current reputation.

External Analysis

Political/Legal

In October 2002, the US Department of Agriculture defined the standards of 'certificated organic' food, which gave the Whole Foods Market a legal opportunity to start its new business. At that time, Whole Foods Market was an early entrant into the organic food market and it has used its early mover advantage to solidify its position and continue its steady growth. (Opportunity)

Admittedly, potential threat exists as well. For instance, if new laws require the reformulation of certain products to meet tougher standards, the supply of these products may be constrained. Any significant disruption in the supply of quality natural and organic products could have a material impact on its overall sales and cost of goods. (Threat)

Socio-cultural

Firstly, Whole Foods Market commit to sustainable agriculture. They believe in a virtuous circle entwining the food chain, human beings and Mother Earth. Furthermore, the company defines its philosophy as following: Whole Foods Market's vision of a sustainable future means business will harness human and material resources without devaluating the integrity of the individual or the planet's ecosystem. The opinions above are strengths, and can help Whole Foods Market building its social and business reputation. (Strength)

Then, with a growing percentage of women working outside of the home, the traditional role of home-cooked meals, prepared from scratch, has waned. So sales of ready-to-eat meals have grown significantly, and the consumer awareness of the need for the one stop shopping experience has increased as well. This provides an opportunity for Whole Foods Market to develop a new increasing point to its sales. (Opportunity)

Demographic

 European expansion provides enormous potential growth because of the large population, and WF holds a more sophisticated organic-foods market. (Opportunity and strength)

 WF targets locations where 40 per cent or more of the residents have a college degree, as they are more likely to be aware and supportive of nutritional issues. (Weakness)

 The aging of the baby boomer generation will expand the senior demographic over the next decade as their children grow up and leave the nest. (Opportunity)

 Urban singles are another group with extra disposable income due to their lack of dependants. (Opportunity)

Economic

 Overall, research estimates that the main direction of the economy of United States might rise for at least the next couple of years. (Opportunity)

Global

 European expansion provides enormous potential growth because of the large population.

 It seems that global brands are well known and inspirational for people with above average disposable incomes. (Opportunity)

Competitor Analysis

At the time of Whole Foods' inception, there was almost no competition. But today, the organic foods industry is growing and Whole Foods finds itself competing hard to maintain its elite presence. Other successful natural food grocery chains today include Trader Joe's Co and Wild Oats Market.

Trader Joe's Co

 By expanding its presence and product offerings while maintaining high quality at low prices

 It owns 215 stores, primarily on the west and east coasts of the United States.

 It offers upscale grocery fare such as health foods, prepared meals, organic produce and nutritional supplements.

 Its stores have no service department and average just less than 1000 square meters in store size.

 It has enjoyed sales of US$2.5 million in 2003, a 13.6 per cent increase from 2002.

Wild Oats Market

 Its founders had no experience in the natural foods market, relying heavily on their employees to learn the industry.

 Its product offerings range from organic foods to traditional grocery merchandise.

 It is traded under the ticker symbol of OATS and is the third largest natural foods supermarket chain in the United States in terms of sale.

Additional competition

 From grocery stores, which incorporate natural foods sections in their conventional stores

Industry Analysis

Natural and organic foods are available in more than seven in 10 retail food stores (72 percent), according to shoppers surveyed in FMI's U.S. Grocery Shopper Trends, 2006. USDA's Economic Research Service (ERS) reports that organic products are available in nearly 20,000 natural foods stores. The mainstreaming of organic food has drawn major manufacturers into the market. A typical grocery store or supermarket remains the most common outlet. (Barney & Hesterly 2006)

New Entrants

Entrants are already there. Their intensity of their pursuit of the natural/organic market

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