Whole Food Market in 2010 - Generic Strategy - Assignment Example

Whole Food Market Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 13th August, 2012. Introduction Whole food market is a company that is based in Texas and it mainly majors on the offering its customers with natural and organic products (History of Whole Foods Company 2005). The company is rated as been one of the most socially responsible companies in the US (Company Spotlight: Whole Foods Market, Inc. 2004). This paper aims at analyzing whole food market case. This will be done in three steps. The first section will offer a detailed analysis of the whole food market external environment, the second section will offer a detailed analysis of the resources and competitive position of the organization while the their section will identify the generic strategy that the organization uses to gain a competitive advantage and the last section will be a proposal of the strategies that the organization can adopt for the period 2012 to 2017 and a discussion of how the strategies will assists the company in ensuring that they have a sustainable source of competitive advantage for the period. Opportunities, Factors driving change and prospects for attractive profits The organic and natural food industry is very huge and it continues to grow significantly annually. This is mainly because the demand for whole foods has improved in the past couple of years due to the increasing awareness about the benefits of organic foods. According to industrial estimates, the sales of whole foods exceeded $28.6 billion in 2010 (OTA 2011). In 2010, the sales of whole foods rose by 7.7% and it is expected to continue rising (Gertsberg 2011). Thus, firms in the industry are in a good position to benefit from increase in demand. Moreover, there is an increase in recent trends that support increased demand for whole food products. In 2010 for example, there was a significant reduction in restaurant eating as well as increased awareness of eating healthy foods. According to Cochran (2011, pp.15), the opinion that meals prepared at home are healthier than restaurant prepared foods is a view supported by 92% of grocery shoppers. In spite of the recent economic recession, industry reports indicate that the sale of perishable foods has been increasing (Cochran 2011, pp.35). This increase in sales has also been partly caused by the growing percentage of the population in formal employment with less time to cook. These recent positive trends in the whole foods market could lead to increased sales which will also force footfall. In addition to increasing demand, the company stands to benefit from the increasing popularity of private labels. The sales of private label brands in the U.S food industry increased from 15.2 % in 2006 to 17.4% in 2010 (OTA 2011). Competitive forces, market position of rivals and strategic moves of rivals The various kinds of competitive forces that the industry’s members are facing include internal rivalry, ease of entry into the industry, substitutes/complements as well as the bargaining power of suppliers and customers. The threat of new entrance into the industry is high (3). This is because established firms including regular stores and supermarkets can join the industry with relative ease. Furthermore, supermarkets and regular stores can offer their products at a lower price and thus the organic food industry can struggle to get customers. According to Datamonitor (2010), organic foods retail stores contributed 37% of the total sales in the industry, supermarkets contributed 28%, multilevel marketers contributed 16%, super naturals 10% and the others [for example practitioners and mail orders] contributed 8%. Thus organic food retail stores are strongly positioned. However, rivals, for example supermarkets, plan to lower prices so as to ‘steal’ customers from organic food retail stores. On the other hand, the threat of substitutes is minimal, due to the fact that organic foods do not have substitutes. Because of this reason, internal rivalry is intense. The other force is the bargaining power of consumers. Consumers of whole foods do not go for the organic foods with the lowest price, but rather, they go for quality. Collectively, consumers can influence a retail store not to sell a particular product. Also, the bargaining power of suppliers in this industry is high due to the fact that there are no substitutes for organic foods (Data monitor 2011). Resources and competitive position In analyzing the competitive position of the organization we will take a look at the SWOT analysis, the current marketing strategy and value chain analysis. Current marketing strategy applied by whole food market There are varies marketing strategies that are applied by organization in the aim of attracting more customers. The customers can purchase not only the food products from the stores but they can also buy various body care products. The target market care not only for what they consume but also on the products they apply to their bodies and the company offers a healthy choice for the customers. The company also offers the best of products which are derived from the natural environment and the organization also seems to be environmental friendly. Though they charge a higher cost on their products they offer the best in terms of quality. The stores are also evenly distributed. The organization also applies a number of promotional strategies such as sampling, personal selling and advertising (Clegg, Kornberger & Pitsis 2008, p. 44). SWOT Analysis The table below shows the SWOT analysis of whole food market in 2010 (Fine 2009, p. 67). Strengths High level of experience Customized and large stores A wide variety for the customer to choose from Wide recognition Weaknesses Their promotional offers don’t have coupon Low advertising budget Only available in affluent locations High prices for their products Threats Convectional supermarkets Poor economy Independent retail stores Opportunities Reward programs Advertise more Buy more of the local products Expand globally Value chain analysis of whole food market in 2010 Below is the value chain analysis of whole food market in 2010. Primary activities Partnering with vendors Operates and owns downstream suppliers Offer lower interest loans New store inventory Managing and distributing inventory Jit delivery Store operations Duplication Customization Marketing and sales Full service Rich sensory experience Supporting activities Human resource Motivational and respectful work environment Elaborate team environment General administration prime store locations leverage culture and reputation excellent relationship with stakeholders groups The company is ranked as the first among its competitors since it has a wide customer base and they also have a diverse range of commodities to sell to their customers (Porter 1980, p. 66). In overall the company has a net competitive advantage since it has the first mover advantage. There exist a number of strategic issues that merit managerial attention in the organization. One of the strategic issues is the competitors, the company has been in the industry for long and they had not received steef competition as it is case currently. There have been numerous competition from other organic food manufactures who have joined the industry and even the green grocers are at times even offering lower cost for their products and a considerable number of customers are now moving away and buying the cheap products been offered by the competitors. Whole food market in 2010 Generic strategy There are a number of generic strategies that are applied by different organization in different sectors of the economy. The most common generic strategies that are applied include: cost leadership strategy, differentiation strategy, focused differentiation and the focused low price strategy (Porter 1996, p. 34). The generic strategy that is applied by whole food market in 2010 is the focus differentiation strategy. This strategy seems to be similar to the differentiation strategy but it majors on a particular niche market. The organizations that tend to use this kind of strategy offer certain products to a certain market and then tend to differentiate then with aspects such as great services, high quality as well as better designs. The associate working at whole food market is more than willing to offer support to the customer as compared to the average stores operating in the current business world. The strategy is also demonstrated in that there have a variety of products for the customer and thus the customers tend to have a wide variety to choose from. For example in relation to olive oils, whole food market offers around fifty different brands, thus with the wide selection list the customer is able to choose the preferred brand and also the customer can be able to compare the prices. Thus ion the end the customer will be satisfied since he will be able to choose a product he fills that he cab be able to affords it and at the same time his most preferred brand. The strategy is also demonstrated in that they are differentiated from their competitor in the area of their commonly prepared foods. Whole food market has a wide selection for dinner, desert as well as lunch. It also depends on the customer whether he wants to take them in or they want them as take away. Proposed future strategy that can be adopted by whole food market Based on the current strategies which are in place in the organization, whole food market is likely to face a number of challenges in the coming future and they are therefore supposed to devise some strategies that will assist the company in overcoming the challenges (Thompson, Strickland & Stappenbech 1994, p. 77). The new strategies will also assist the organization in ensuring that it has a competitive advantage over its competitors in the market. Therefore the organization will have to put in place an investment strategy so as to continue its successful placement of the company’s stores in the market place. In order to deal with the growing demand of organic food by the customers as well as the supply demand from the buyers who are entering the inorganic market place, the company have no option but to invest a considerable amount of their energy into the political changes of the current government policies that are in place in relation to the amount of organic farming that needs to be done. The organization can also opt to conduct research and develop some of the stable organic products that they use by themselves. Through research and development there will be a substantial reduction in cost and this will be tinkled down up to the prices of their final products. Another favorable option is the outsourcing the production of the products. Through outsourcing the company will not incur any costs that are associated with the production of the products. The other corporate strategy is related to the placement of their stores. Placement means the locations of the company’s stores. It has been noted that most whole food market aims at selling its product to the above average earners this is evident since a considerable number of their store are located in areas the dwellers have at least college degree. By this their target customers are likely to be aware of the benefits of organic foods and they are also aware and supportive of nutritional, environmental as well as the health issues. With the current number of subsidiaries and stores, whole food market is almost reaching its full potential with the strategy that is in currently in place in the organization. So as to continue growing and to survive in the industry while at the same time targeting the ultimate all natural consumer, whole food market will need to invest a considerable amount of their money in sales research and by doing so they will be aiming at coming up with a number of additional possibilities for their current target customers while at the same time trying to come up with other correlated factors related to their target customers thus the strategy to be implemented should not be based solely on the income and education levels. With the development of a new target group the customer base will ultimately increase, thus the organization will have a competitive advantage in the coming years. Whole food market can also place their stores in other areas so as for the customers to have easier access to their products. Another strategy that the firm can implement is in relation to company’s brand name. In the aim of promoting the company’s brand name globally, whole food market will have to continue with the promotion through advertising by using their image as the best organic food company and natural living this will be supported by the continuous use of a “healthy” logo that seems to promote green living all over globe. The organization will also have to implement a strategy that will be aimed at brand positioning itself in the market place. This will be achieved by a number of ways such as the notion that whole foods are likely to promote higher standards of their products as opposed to the prices charged on their products. The marketer will have to demonstrate to the customers the possible benefits associated with the consumption of their products, thus creating higher level of confidence among the customers and thus they will feel comfortable when paying for the high cost that is been charged on the products. Thus the organization needs to make numerous and exciting advertisement, this may be through the local media and use of social sites; this will ensure that they advertise to a wider audience. Another strategy that the organization needs to implement is to re-focus their marketing efforts on the core values such as environmental friendly food products, health conscious food products, sustainable community development and delightful service (Tarnowski 2003, p. 77). By refocusing their marketing efforts of the above core values the organization will tend to have a competitive advantage over their competitors in the market and they will attract more customers and hence higher sales levels which will ultimately lead to higher profits. The consumers are over time becoming more sensitive on the products that they buy and they are not likely to purchase their products from companies that are not environmental friendly thus by the adoption of the core value as a guiding principle for the organization operations the company will tend to have a great advantage over the others. Also most of the consumers are becoming more sensitive on the types of product that they consume. The producing products which have no other health implications the company will be able to use this as a source of competitive advantage over the other companies operating in the same industry. services offered to the customers also play an important role and it assist a company on gaining a competitive advantage, whole food market 2010 ought to ensure that their customers are offered with the level of services at all times, this will ensure that the customers purchases products form them the next time they are in need and may at times act as advocates for the company. Thus the organization will benefit from the returning customers and the new customers. The organization should also advocate for a sustainable community at all times. When all these aspects are coupled together the organization will have a competitive advantage over the others and it will also have a competitive advantage in the coming years (Porter 1985, p. 55). Another strategy that the organization can adopt is to use the social sites as a marketing tool. Currently whole foods market uses a very comprehensive website that has details of the company, their store locations, any upcoming news relating to the organization, their recipes, health as well as nutrition (Brandt 2003, p. 30). The company also has some blog sites that assist a lot in marketing the organizations products and through them they are able to know when there are certain issues relating to their products through the customers comments and the like (Fishman 2004, p. 56). They ought to make sure that a platform is implemented so as to enable customers to order almost all their products online and they can be delivered to the customer’s desired destination. The internet has over time became an effective tool in marketing in that customers can order for products and pay for them online , the company need to keep up with the upcoming technology this will means that the organization will have a competitive advantage over its competitors who are not using the internet as a marketing tool. Conclusion Based on the discussion whole food market uses focus differentiation as their current generic strategy and it seems to be working well. The organization needs to implement the recommended strategies so as to achieve a competitive advantage between the years 2012 to 2014. References Gertsberg, D, 2011, U.S Organic Industry Grew to Nearly $29 Billion in 2010, accessed 9th August 2012, http://www.gmo-journal.com/index.php/2011/04/26/us-organic-industry-grew-to-nearly-29-billion-in-2010/ OTA, 2011, Industry Statistics and Projected Growth, accessed 9th August 2012, http://www.ota.com/organic/mt/business.html Cochran, T., 2011, Emerging Issues in the U.S. Organic Food Industry, Nova Science Publishers Datamonitor, 2010, Organic Food: Global Industry Guide 2010, accessed 9th August 2012, http://www.datamonitor.com/store/Product/organic_food_global_industry_guide_2010?productid=C9A72F75-510A-4CC7-AA28-9DE6FE209E1A Brandt, L 2003, ‘Flavoring Organics’, Prepared Foods, vol. 172, issue 4, pp. 28-32. ‘Company Spotlight: Whole Foods Market, Inc.’, 2004, Data monitor, . Fishman, C 2004, ‘The Anarchist’s Cook Book’, Fast Company, issue 84, p. 70. Tarnowski, J 2003, ‘Doing what comes naturally’, Convenience Store News, vol. 39, issue 13, pp. 174-181. 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