Corporate strategy case - Essay Example

Introduction: It is the need of today’s highly competitive market that the organizations should come up with effective and efficient strategy. Not only this but organizations should also evaluate and modify on the basis of the changing market trends. This in turn will facilitate the organizations in the process of improving overall profits and performance. Increasing competition and globalization has resulted in making it difficult for the organizations to survive in the industry. The well thought and executed strategy can help the organizations to come up with competitive advantage over other competitors in the market (Hitt, Ireland, and Hoskisson, 2007). Whole Foods has been able to create this competitive advantage in the market with the help of efficient and effective corporate strategy. In this case analysis an attempt has been made to evaluate and analyze the corporate strategy of Whole Foods in reference to the changing needs and demands of the market and consumers. Chief Elements of the Strategy: In order to come up with an effective and efficient strategy it is important for the organization to understand the market needs and demands and shape the important elements of the strategy accordingly (Freeman, 2010). From the very start Whole Foods has been working to provide the customers with healthy and hygienic food. Being the world’s largest retail chain of natural and organic foods industry, Whole Food has always focused on improving the health and well being of the people and the planet. The company is committed to provide its customers with highest quality and nutritious food to help the people live a healthy and happy life. The company promises to provide food in its purest form without the use of artificial sweeteners and additives that reduces the quality of the product (Harbin and Humphrey, 2010). The company aims to sell highest quality products exceeding the expectations of the customers at competitive prices. For this reason the management of Whole Food believes in constant innovations and tries new ideas that would help the customer and the company to understand each other and the vision “Whole Food, Whole People and Whole Planet”. The company wants be regarded as the best organic food retailer in every place it serves (Meador, Britton, Phillips, and Howery, n.d). Whole Foods takes failures as an opportunity to learn from their mistakes and is responsible for their own actions and to continuously improve at providing the customers with natural and organic products. The strategy that the company has been pursuing is of rapid expansion and growth. The growth strategy has been focused on acquiring stores that existed and to open new stores. For the company, acquisition has been the best strategy that has allowed the company to access desirable locations and market with low cost. Another strategy that the company has implemented is to open new stores in niche market that would allow them meet the needs of the consumers who are health and hygiene conscious. By targeting such customers, the company has been able to charge premium pricing. It can be said that the main strategy of Whole Foods has been differentiation (Lee and Linowes, 2009). The company has devised strategies with the aim that customers see the company stores as “third place” where they could learn and enjoy the experience at the stores. The management of Whole Foods always focused to create a positive perception regarding the company as the company meets the customers’ requirement beyond their expectations. By such perception it would have to spend less on advertisement, as the management of the company expects that the customers would share their good experiences with others at the store (Meador, Britton, Phillips, and Howery, n.d). Hence the main elements of the strategy of Whole Foods are: 1. High quality and hygienic products 2. Customer satisfaction 3. Rapid expansion 4. Acquisitions 5. Differentiation Strategies to Cope With Recent Development and Conditions in the Natural and Organic Food Segment With the development and changing conditions in the natural and organic food segment of food industry, the company has shown great improvement over years. The strategy of the Whole Food is well matched to serve the needs of the customers with healthier and highest quality product in the market. To meet the trend of healthy lifestyle, the company has a wide variety of products available that are demanded by the customers (Harbin and Humphrey, 2010). To meet the demands of the product internationally, the company has established many stores in different markets. These stores are equipped with nearly 26,000 food and non-food items. By ensuring the quality and maximum freshness of the product, the company can charge premium pricing as the customers are willing to pay for healthy and hygienic products. The company sells the entire commodity in the stores under private label and is able to charge premium and super-premium for these products. To cope with the changes in the organic food segment, company did not kept standard design for its store. Instead, each store’s design is set to meet the particular area. By doing so, the company does not have to change the design again and again. The merchandises are set in a unique way that attracts the customer’s attention immediately (Harbin and Humphrey, 2010). For being recognized in the market, the company is still opening new stores to provide the customers with quality product according to their requirements. The company is setting goals to reach 1,000 stores in US; the company currently has 300 stores in US. This is to attract high income customers that are trying to live a healthy lifestyle (Harbin and Humphrey, 2010). Recent Development and Conditions in the US Economy The US economic conditions are posing serious challenges for different businesses and organizations. Same is true for Whole Foods. In order to cope with the recent development and conditions in the US economy, the company has focused on creating clear competitive advantage over other competitors and providing differentiation to the customers. For this reason the company has decided to open 1,000 stores different areas targeting the niche market segment. The company currently operates only 300 stores in the US and the management is of the view that these are not enough to meet the demands and needs of the customers. Keeping the changing trend of lifestyle in mind, the company has always innovated with the stores in terms of size. The companys store are now going to between 25,000 and 50,000 square feet making the companys store able to meet the changing demands of the customers. These stores are to be located in most of the urban areas to meet the niche market demands of healthy and hygienic demand (Harbin and Humphrey, 2010). However, owing to the changing economic situation of the country it is not feasible to work on rapid expansion within the same country. The management of Whole Foods should consider on strategically expanding to other international markets. The current strategy of rapid expansion and increasing presence in the same region will result in cannibalizing the performance and profits of the existing outlets and stores. Competitive Advantage over Trader Joe’s and Other Competitors: Whole Foods is the pioneer in the organic and natural food industry, thus enjoying the benefits of being market leader. The company is one of the earliest in this food segment, giving it a strong brand name over its competitors (Harbin and Humphrey, 2010). The company has a variety of 26,000 unique items making it difficult to be compared with any other rival in the market; even the chief rival like Trader Joe’s does not have such immense variety. Whole Foods has always been known for its highest quality of hygienic food; the only reason because of which the customers have always paid premium prices for the product. Being the leader of the market, the company has an advantage in the market to set prices according to its need. The company pays great attention to the customers making them feel welcome and to enhance their interaction with the customers, for this reason there is always one employee available to help the customer. The company is also an active participant when it comes to sustainable future and has always played a vital role for the planet. Performance of the Company from Strategic Perspective By the result of 2010 of the company, it can be analyzed that it operates almost 299 stores with average size of 38,000 square feet. The company’s store sales growth has increased from the preceding 3 years making the company to earn greater revenues. The company is at the top with growth of 6.0% in the year 2010. The company has also high gross margin, operating margin and net profit margin as compared to the other competitors (Whole Foods, 2010). The company has not only achieved the goals in terms of revenues but also in terms of rapid expansion and differentiation. The company has always met the requirements of the customer and focuses on "WE" attitude rather than "I" attitude. The company considers the customers to be their most valuable asset and to satisfy their requirements of healthy and hygienic lifestyle is companys priority. The company has always exceeded the customers expectation in shopping experience; this is to make the customer loyal. The company does not focus much on advertisement budget as according to them their customers are enough for publicity and advertisement. The company has also acquired smaller competitor like Wild Oats (Koenig, 2007), which shows the company’s success and its determination to acquire smaller rivals to provide the company with opportunities to prosper in the market and to provide the market with different locations. Hence, it can be said that the company has been able to succeed on the basis of the differentiation, rapid expansion, and acquisition strategy. Recommendations: In order overcome increasing challenges and competition in the industry, the management of Whole Foods should work on further enhancing and modifying the overall corporate strategy. Some of the recommendations for the company are as follow: The company should focus more on PR and marketing activities in order to attract more customers. Whole Foods can start advertisement and should allocate resources and budget for advertisement. The company is currently not focusing much on the marketing and relies heavily on word-of-mouth; instead of relying too much on such technique the company should focus on mass media. The company should heavily advertise regarding the product range available at the company’s store. The company should use mass media to convey the company’s message regarding the healthier lifestyle and should also use internet sources to post recipes making it easier for the customers. In order to respond to growing economic and pricing challenges the company should work on reducing the overall cost. This in turn will provide the management of Whole Foods with the opportunity to play more with the pricing of the products. The company should also expand in foreign market. Emphasizing too much in local market could provide an opportunity to other competitors to capture international markets before Whole Foods. The company has already 300 stores in the local market and enhancing the store would lead to cannibalization. The market has great potential for growth and high revenues which has attracted many new companies to enter this market. The company should increase the variety of products and should also innovate from time to time to keep its reputation of high quality products. The company should also focus on synergy with other companies; this will not only reduce the risk but will also help the company to reduce cost. This strategic initiative will also help the company to increase the investment and number of stores in the market. The company should expand by buying profitable store rather than that store that could become burden on the company. The company should diversify the product range to reduce the threats of substitute products. The company is already facing too much competition directly from Trader Joe’s and others. The company can expand their private label at low prices to be affordable by the customers. This expansion can help the company to earn greater revenues and to attract diverse consumers in the market. Convenient stores can be potential threat to the company that provides the same organic and natural food at lower prices as compared to the company. For this reason, the management of the company should focus on more direct advertising and promotional tactics to encourage customers to shop at company’s store rather than shopping at convenient store. The company is already focusing on after-sale services. Whole Foods should keep focusing on such customer services along with free coupons to attract customers to shop more at the company’s store. Conclusion: Whole Foods is operating successfully in local and international markets. The company should work on further improving its corporate and management level strategies in order to maintain the competitive advantage over other competitors and improve the overall performance. This is important to capture more market share and increase the profitability of the organization. References Freeman, R. (2010). Strategic Management: A Stakeholder Approach. New York: Cambridge University Press Harbin, J., and Humphrey, P. (2010). Whole Foods Market, Inc. Journal of Case Research in Business and Economics. 2, 95-111. Retrieved November 4, 2012, from http://www.aabri.com/manuscripts/09288.pdf Hitt, M, Ireland, R., and Hoskisson, R. (2007).   Strategic management: Competitiveness and globalization: Concepts (8th Ed.). New York: Thomson/South-Western. Koenig, D. (2007, August 28). Whole Foods closes Wild Oats deal. Usatoday. Lee, A., and Linowes, R. (2009). Whole Foods Market: A Strategic Analysis. Retrieved November 5, 2012, from http://aladinrc.wrlc.org/bitstream/handle/1961/7826/Lee,%20Adrienne,%202009S.pdf;jsessionid=A959F0CF1A6D19BE985092576FC1A7FD?sequence=1 Meador, D., Britton, M., Phillips, P., and Howery, A. (n.d). Case Analysis – Whole Foods Market. Retrieved November 5, 2012, from http://pnphillip.asp.radford.edu/whole%20Foods%20Case.pdf Whole Foods (2010). Whole Foods 2012 Annual Report. Retrieved November 5, 2012, from http://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/ar10.pdf Read More