Whole Foods Market - Essay Example

Management Topic: Whole Foods Market. Contents Management Topic: Whole Foods Market Contents Introduction 2 Competitive Environment Analysis 2 Porter’s Five Forces Model 2 Bargaining Power of Buyers 3 Bargaining Power of Suppliers 3 Threat of New Entrants 3 Threat of Substitutes 3 Competition among Existing Players 3 SWOT Analysis 4 Strengths 4 Weakness 5 Opportunities 5 Threats 5 Sustainable Competitive Strategies 5 References 7 Introduction The organic food industry is one of the lucrative industry segments. Data from sources state the market size of the organic food industry at 55 billion US dollars as of 2009that represents a buoyant growth of about 207 percent as of 2000. The US and Germany constitute the top markets for this industry segment. Some of the other industry trends include emergence of private label brands, as well as a growing demand in the developing economies. The report also shows the market to grow by about 4.2 percent in the present year. It also shows large scale consolidation and foray of major brands into this segment (Sahota, 2010, p.1-11). USA the major market for Whole Foods is the most growing market for the industry with trade values in the industry segment being pegged at 28.6 billion US dollars in 2010 representing a growth of almost 11.8 percent annually. The growth trends of the organic foods also outperformed the sales growth in the entire food category segment reflecting a major shift in consumption patterns of individuals with a shift towards the organic food category (Organic Trade Association, 2011, p.1). These aspects are highly encouraging for a market player like Whole foods whose core product offering happens to be organic foods. Competitive Environment Analysis Porter’s Five Forces Model The competitive environment of any organization can be analyzed using the framework of the five force model proposed by Michael Porter. The five forces and their effect on Whole Foods are stated below: Bargaining Power of Buyers Considering the fact that a large number of retailers including supermarket chains are stocking organic food items, customers are flooded with choices, however with very few specialized organic food stores the bargaining power of consumers is medium. Bargaining Power of Suppliers Suppliers for organic foods normally include farmers, and other small and marginal players that are present in considerable numbers, moreover with specialized training for farming being provided by corporate the bargaining power of suppliers is considerably low. Threat of New Entrants It is quite difficult for a new player to establish in the market considering the cost of operations and access to suppliers, however exiting supermarket chains can pose a threat if they chose to make a foray in this sector, hence the bargaining power of new entrants is medium. Threat of Substitutes Substitutes for organic food include food items that are being preserved or created artificially. In spite of the awareness among consumers with regards to the benefits of organic food, synthetic food items still have an edge over the aspect of lower cost. This makes the threat of substitutes high for the industry. Competition among Existing Players The competition among the players are extremely high with major supermarkets like Wal-Mart and Kroger selling organic food items, although the number of specialized organic food stores is quite less and they are not present in a big way that makes the threat of this force high. The most significant threat to Whole Foods emerges from this competitive force. This is primarily because of the fact that some of the competitors especially the supermarkets are making a foray in this segment. These companies like Wal-Mart have a huge reach and better penetration and scale of operations that commands a high customer footfall. Along with this the growth of private label brands also poses threats that clearly indicates that competition among existing players is the most significant threat. This apart macroeconomic factors like disposable income and economic growth can also pose a threat especially in the backdrop of economic fluctuations. Considering the fact that prices of organic foods are in a higher range this aspect can also pose the most serious threat to the organization. SWOT Analysis SWOT is an acronym for analyzing the Strengths, Weakness, Opportunities and threats faced by an organization. The SWOT analysis for Whole Foods is stated below: Strengths The biggest strength of Whole Foods lies in its product offering, that is highly natural and with minimal or no use of inorganic chemicals. An efficient financial resource management along with proper management of suppliers including assistance to them in farming also constitutes some of the potential strong points of the organization. In addition to this the company also has a global presence. Some other areas of strength include focus on customer, efficient Human Resource practices, efficient work culture, catering to the needs of society and above all a service mix that tends to ensure the maximum value to the consumers. Weakness Some of the potential areas of weakness include the aspect of handling perishables and the high cost of spoilage of items in the event of product being left unsold. Moreover the high cost of products may deter some customers to other competitors considering the fact that synthetic food items are available at cheaper prices that may lead to customer switching to these products. Opportunities Opportunities for the company exist in the form of growing consciousness of individuals regarding the use of organic food items. In addition to penetration of existing market scope also exists for the company in developing markets like India and China that have considerable potential. Threats Whole Foods faces threats from other competitors like Wal-Mart and other supermarkets that have started selling organic food items. In addition to this high cost of storage and certain issues pertaining to legal aspects pose threats to the organization’s business prospects. Sustainable Competitive Strategies In order to maintain a competitive edge in the market Whole foods can use its exiting brand image and expertise to penetrate the lucrative markets like USA and other European markets that are the best markets for the company. This apart the company can also make inroads into developing markets like India and China to capture the growing demand in those markets. In addition to this efficient management of supply chain and use of technology in supply chain management such as real time information sharing can help the firm cut down on inventory costs and pass on this benefit to the customers and make an edge over its competitors. Finally the company must also develop an online channel for sales that would help he firm gain a considerable market share and generate long term sustainable competitive edge in the market. References Organic Trade Association. (2011). U.S. Organic Industry Overview. Retrieved November 2, 2011 from http://www.ota.com/pics/documents/2011OrganicIndustrySurvey.pdf. Sahota, A. (2010). Global Organic Food & Drink Market. Retrieved November 2, 2011 from http://www.fibl.org/fileadmin/documents/en/news/2011/sahota-2011-biofach-market.pdf. Read More