Whole Foods Markets Strategic Analysis - Case Study Example

Whole Foods Market’s Strategic Analysis Whole Food Market has evolved into becoming one of the world’s largest retail chain in the organic and natural foods supermarkets. Their success is largely attributed to their comprehensive understanding of their products and continuous dedication to core values and quality standards. Its mission statement states, “Promote vitality and well-being for all individuals by offering the highest quality, least processed, most flavorful natural and naturally preserved foods available” (wholefoodsmarket.com, 2012). The company’s strategy and vision is to offer, “The most flavorful naturally preserved and flesh foods available”. Core Values Whole Foods Market tangible resources are categorized into the three dimensions: organizational resources, the financial resources, physical resources, and technological resources. Its core values include selling of the highest organic and natural products, satisfaction of the customers, support of the team member excellence and happiness, caring about the environment and our communities, and creation of wealth through growth and profits. Through the core values, the company has developed aids through core competencies, which give them a competitive advantage among its competitors. Strategic Goals Whole Food Market’s strategy goals is based on supply and demand and placement. The company is actively determined to meet supply and demand by investing a great amount of resources into political reform in regard to organic farming, carrying out R&D to provide high quality products & services, & engagement in outsourcing to ensure efficient production of its products and services (Harasta and Hoffman, 2007). On the side, placement acts as a guidance for setting strategic goals such as; development of the supportive nutritional, investment in the sales and financial research, etc. (wholefoodsmarket.com, n.d.: 2011) Critical Assessment In order to critically analyze the company, we look at the firm’s analysis in relation to the internal strengths and weaknesses. Financial Analysis Based on the financial reports from the fiscal years, 2005 to date, the profit margin for Whole Food Market has been generally decreasing (United Natural Foods, 2011; UNFI, 2011). The decrease has been largely attributed to the rising costs of goods and increased debts. In addition, compared to its competitors, Whole Foods Market has recorded low EPS and extremely low revenues (McLindon, et al., 2012). Assessment of Marketing According to Yahoo Financials, Whole Foods Market capitalization has increased. The marketing of Whole Foods Market is not that effective as compared to its competitors hence necessitating the need for R&D to help it maintain a steady and upward market capitalization, which is essential in gaining competitive advantage in the market (United States Securities and Exchange Commission, 2011; Meador, et al., 2012). Assessment of Finance The P/E is relatively higher as compared to the industry average due to the high pricing model of the Whole Foods Market’s products. However, if proper measures aren’t instituted, the company’s stock price is likely going to be affected negatively. Physical Resources Assessment The company is planning to expand its businesses to countries like China and South America. This signifies expansion of the physical resources thereby adding to already established resources, which averages approximately 30,000 sq. ft. Human Resources Assessment Whole Foods Market’s employees are knowledgeable, well-trained, and experienced especially in the grocery industry making it the best option for the customers. The company has in addition, reflected an increase in the bonus, payroll and other benefits. This shows that the company is increasing its human resource numbers. The company’s mission is without doubt an inspiration for the employees because it takes into consideration the views and beliefs of the employees (Fishman, 2008). SWOT Analysis Strengths Whole Food’s major strength is based on their high quality products as well as passion for food that has effectively led to 100% satisfaction of the customers. Some of the strengths include; the company offers broad range of products, which include meat and poultry, seafood, grocery and among others. This offers customers a variety of products to choose from that are stocked in their stores (EBSCOhost, 2008: 2011). Secondly, the company enjoys economies of scale because it carries its businesses globally hence making the cost of production low due to economies of scale (large scale production) e.g. the company has stores in Canada, London, Glasgow, etc. (Hitt, Ireland, Hoskisson, 2007). Further, Whole Foods Market has a competitive edge due to its provision of the fresh foods in the market. Fifthly, opening of the stores in London and Glasgow, which has helped it increase its market share consequently leading to an increase in sales thus enabling the company maintain a strong market position. Sixthly, the company has a strong image globally that makes it easy for the company penetrating to different markets in different geographical areas courtesy of the wide brand of products that the company offers to the consumers. Seventhly, the company enjoys a relatively strong backing from complementary industries such as health (health insurance industries and fitness centers). Ultimately, the company offers catering services, recipes and seasonal products as well as in store events such as free tours and classes for its customers. This have made the company remain relevant in the market because of the range of products it offers to customers. Other strengths include; High employee retention unlike its competitors Good customer services The labor wages are fair Staff that is not only skillful and experienced but also passionate about the products and services they offer to the customers Weaknesses Some of the weaknesses of the company include the following: underdeveloped supply chain that is unable to efficiently meet the American Food System needs. Secondly, the company prices its products highly as compared to its competitors thereby making them unaffordable to the customers. This has led to many customers viewing the company as a luxury destination. Thirdly, the international system of Whole Foods Market is weak. This is highlighted for instance due to low number of stores in Canada. Whole Foods does not have very active substantive stores in Canada and the United Kingdom. For instance, the company has seven and five stores respectively in Canada and United Kingdom (123HelpMe.com, 2014). In addition, the company does its advertisement of products by the use of the social networks, which its competitors have highly maximized on by developing efficient networks that are difficult to outperform. Unlike its competitors either the company’s digital marketing is not fully exploited or the company faces challenges of lack of the customer loyalty. Finally, the marketing of the organic foods are inherent with higher costs. Therefore, due to higher marketing costs e.g. advertisement costs the company realizes low profit margins. Opportunities Growing market through penetration and development. The company is planning to set up 33-34 stores in 2014. The company has plans to expand its market to South America and China. This will see the company increasing its profit margin relatively. The weak US Dollar, which has stimulated demand for the organic food products. Threats (The Hain Celestial Group, 2011). Threat of the substitute products- most of the products that Whole Foods sale are common grocery items, which are vulnerable to other substitute products from the competitors (agmrc.org, 2008). Economic downturns that is negatively impacting on the consumer spending habits, The foreign exchange rates are unfavorable leading to additional costs. Changes in government rules & regulations in the industry that cause an adverse effect on the purchasing powers of the consumers (Nickels, McHugh & McHugh, 2010). The economic conditions in the US signifies a threat. The American’s culture of saving, which in turn makes the foods expensive. Therefore, this makes the customers unwilling to buy the organic foods. Stiff competition in the industry from competitors such as HEB Central market, Wal-Mart, etc. (Lee and Linowes, 2009; Lytel, n.d.). Recommendations The company should increase the brand image, awareness, and loyalty through use of the various forms of the public relations and advertisements. This will boost the Whole Foods penetration in the market thereby increasing the market profits and shares. Additionally the company should implement approximately 95% of the available resources to increasing the brand image, awareness and loyalty and use the rest (5%) in determination of the store locations and sizes to ensure highest customer acquisition. The company should also regulate the rate of growth by opening up of less stores. The company should also consider eliminating leases, scaling back on the discretionary spending. Increased marketing, differentiation, and goodwill should also be on the fore front of the company’s plans. However, proper ways should be implemented to reduce upstream supply costs, and provision of the lower-cost products by undertaking private label. Implementation Short-term implementations- the company should consider holding radio stations promotions so that to promote the brand image among the local community. The company can also use billboards advertisements to make the products popular among the local community members. Long-term implementations- launching of the national advertising promotions. This can be done through sponsoring of the health related events. Assumptions The demand for the health and organic foods continuous to increase reflecting an improvement in the market profits and shares. Therefore, Whole Foods Market signifies a bright future. However, Whole Foods Market’s key risks lies in its devotion of too much resources to the advertisements and not concentrating on the company’s main operations. References 123HelpMe.com. (2014). 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