Strategic Analysis of Whole Food Market - Essay Example

Memorandum Art Espance Strategic analysis of Whole Food market Current Situation Whole Food Market, started in 1980 in Austin, Texas, is one of the largest retailers of organic food. With 18 more stores opened till September 2011, they now boast of 311 retail outlets across US, UK and Canada and plan to open nearly 50 more stores by 2013 (ar, 2011). The stores are located in 38,000 square foot in size which conform to the locality and community that they serve and which have observed 5% year on year growth. The company’s stock was boosted by nearly 38% which has seen 17% growth in EBITDA to $835 million and 20 year compounded annual growth rate of nearly 26% (ar, 2011). 1.1 Vision and mission Company’s vision is to become a global brand for best quality natural and organic food and best food retailer of organic food in every community that it serves. The mission statements of the company are designed to meet the food requirements of the people by providing them with healthy and nutritious food so that they can lead a healthier life and live longer. The core values of the company focus on sustainable business practice and ensure complete customer satisfaction through quality food that is organically produced. They also empower people with knowledge and information that promote their general well-being. The core values are aligned to their strategic vision and mission that fundamentally cater to the interests of all its stakeholders including workforce, customers and supply chain. 1.2 Current strategy The current strategy is designed to encourage people to adopt healthy lifestyle through food that is organically produced. It ensures customer satisfaction by facilitating high quality of naturally and organically produced wide variety of food products. The Whole Food stores are strategically designed to meet the needs of its customers. They have cafeteria facility which ensured that customers could also taste and test the quality food that they would be buying. The brochures and information about food products and sustainable business practice empower customers with information which they use in their buying experience. 1.2.1 Goals and objectives The organizational culture greatly helps to achieve its broader goals and objectives of meeting the changing demands of its various stakeholders including customer satisfaction. The company promotes more than 2600 SKU with its 365 Everyday Value, primary in-house brand (ar, 2011). The company’s goals are focused opening around 24 to 27 new stores and improving its sales growth to around 15%. Its major objective is to promote sustainable business practices. To achieve it, WEM emphasizes diversity in workplace and creates barrier free and encouraging environment to meet the needs of diverse community. The team leaders within the stores are empowered to make independent decisions that ensures improved performance outcome. The broader goals and objectives of WFM are achieved through measures like employees’ welfare schemes, environmental concerns, health and well-being and charitable works in the area of education, training and development of entrepreneurial skills etc. Its suppliers of food products from low waged countries were supported financially to ensure quality produce which also helped them to raise their living standard. It has introduced innovative processes to promote sustainable business practices within its in-house staff and business partners (ar, 2011). It has encouraged greater interaction with various focus groups and fostered alliances for proactive participation of the public and workforce in its drive for environmental conservations and community welfare. 1.2.2 Major strength The double digit growth rate, exemplary customer service and broad range of quality product lines are its major strengths. With approximately $11.7 billion revenue in 2011, the strong cash flow and stock position greatly favor the company in achieving its goals and objectives (yahoo, 2013). The growth plans of companies are primarily through opening of new stores and acquisition of smaller stores which have also been into the same business. The company’s philosophy of ‘Whole Food, Whole People, Whole Planet’ give huge understanding about its principles which value its customers and various other stakeholders. Most importantly, its emphasis on sustainable business practice ensures that environment conservation and preservation remain the top priority at all levels of its operations. 1.2.3 Major weaknesses that need to be addressed The major threat comes from the volatility of the global and domestic markets which could adversely impact consumer spending and availability of credit, interest rates, fuel cost etc. It is important because growth relies on opening of new identical stores at prime locations across the globe. Moreover, the deteriorating financial conditions could divert clientele to competitors with low priced products. 2. Competitive analysis 2.1 Major competitors 2.1.1 Product/ service lines Its major competitors in the industry are: Trader’s Joe and Wal-Mart. TJ has more than 375 stores with similar product lines (traderjoes, 2013). They have smaller stores but have committed customer based because of low price and highly customer friendly ambience, giving unique shopping experience. Nearly 80% of its products are private labelled which are marketed as quality brands. Wal-Mart, on the other hand has wide range of similar products with its private labels also (Wal-mart, 2013). It is able to keep low prices for its private label through innovative logistics and supply chain management. Other stores like Safeway, Kroger Co. and local supermarket chains etc. also pose stiff competition for WFM. 2.1.2 Competitive strategy Assessing competitive strategy through Porter’s five forces reveal that there is huge competitive rivalry as market has large numbers of competitors due to increasing demand of organic food. It is for this reason that the threat of new entrant is low. Also because very small percentage of only about 1% of farmland is used for organic farming, suppliers have strong bargaining powers. Within a highly competitive market, the threat of substitute is high. 2.1.3 Major strengths and weaknesses The major strength of competitors is local suppliers’ options which may prompt customers to switch their loyalties. The major weaknesses are that apart from Wal-Mart, the competitors have relatively smaller stores which mainly rely on their private labels for sale at competitive prices. Moreover, they also lack comfortable cashflow and strong global presence to compete on broad product range. 2.2 Opportunities or possibilities that might become available from competitors The large number of competitors, both small and large can be easily threatened if the company continues to expand through new stores with large shopping areas. With its own private labels, the company can easily compete on prices and attract customers from its rivals by providing them with highly satisfactory and fun-filled shopping experience. 2.3 Threats or possible future changes or challenges from competitors The major challenges from competitors are mainly through competitive pricing which it needs to address. 3. General environmental analysis The company’s sustainable business practices that highlight a culture of transparency, accountability and social responsibility have been major contributor to its global and domestic success. Scholars have emphasized that strategic planning is critical ingredient of a firm’s business strategy as it facilitates development of strategic processes for its future (Bateman and Snell, 2009). Whole Food ensures that it adopts proactive measures of competitive advantage and constantly evolves flexibility in its approach to suit the changing needs of the times. The company has $754.8 million in cashflow and shareholders’ income increased by whopping 42.5% from last year to $342.6 million. While total sale has increased by 12.1%, the identical store sale has seen 8.4% growth from previous years (ar, 2011). The company has also created new heights in healthcare awareness by introducing Wellness Clubs which empowers members to make lifestyle choices for long healthy life. The stores also promote healthy eating education and whole deal guide that are designed to provide customers with tips to enhance their shopping experience and lower their spending. The company only spends about .4% of its revenue on marketing but extensively supports market related activities that foster bonds with the community through local farmers’ markets, taste fairs, classes, tours and product samplings. 3.1 Opportunities The increasing demand for organic food has provided WFM with huge opportunities for expanding globally through acquisition and building new identical stores. Contract business relationships contribute to higher efficiency and organizational growth (Kay, 1995). WFM has achieved its enviable growth through acquisition and takeovers. Moreover, it already has leadership position which can be further exploited through innovative measures like social media and educational programs at local and regional levels. 3.2 Threats The major threats could come from volatile market and new government regulations which could adversely impact consumption behaviour and consumer spending. 4. Recommendations Intense competition necessitates new measures that can justify its relatively higher price strategy. It can do so through sustainable business practice and buy directly from the farmers of underdeveloped and developing countries that would local economy and help in improving their living standard. It should use emerging new social media to promote its goods and services. It would help it exploit new opportunities and gain leverage in the market. In highly competitive business environment, while the acquisition and forging new alliances with local stores and supermarket chains are recommendable, the company must also try to restructure its stores to suit the local taste and thereby create more committed customer base. Lastly the company has strong and high quality private label products in wide variety. WFM must expand its private labels through tie-ups with local stores and supermarkets. (words: 1553) Reference Bateman and Snell. (2009) Management: Leading and Collaborating in a Competitive World, 8th edition, NY: McGraw hill. Kay John. (1995) Foundation of corporate Success, London: Oxford University Press. Whole Food Market, Annual Report 2011, Retrieved from: http://www.wholefoodsmarket.com/company-info/investor-relations/annual-reports Yahoo Finance. (24 January 2013) Whole Food Market, Retrieved from: http://finance.yahoo.com/q/co?s=WFM+Competitors Read More