Segmentation, Target Market and Positioning of Whole Foods Market - Assignment Example

?Whole Foods Market: UK 0 Executive Summary Whole Foods Market, Inc. is a U.S. based supermarket chain that markets fresh organic food. The companyis pretty successful in its home market but its UK operations are not generating the desired results. The present paper chalks out a marketing plan for Whole Foods Market in UK. At the outset, an environmental scanning of the various macroeconomic forces has been carried out using the PESTEL framework. The SWOT analysis enumerates how the company can use its strengths to avail of the opportunities and ward off threats. The paper also details the segmentation, targeting and positioning (STP) strategy and lists the various financial, societal and marketing objectives for the company. An attempt has been made to project the likely inflows of the company under three different scenarios; pessimistic, optimistic, and realistic. Finally the paper refers to the controls Whole Foods needs to be put in place to achieve success in UK. 2.0 Situation Analysis Whole Foods Market, Inc. (hereafter referred as Whole Foods) is a foods supermarket chain based in Austin, Texas. The company’s net sales have consistently increased over the last few years. The company generated net sales of $11.7 billion in 2012, up from $ 8 billion in 2008. During the same period the chain’s operating income spiked from $236 million to $744 million. Whole Foods also managed to keep its identical store sales growth at 8.4 percent in 2011 and 2012 (Whole Foods Market, 2013). Whole Foods continued to grow its operations at a decent pace in 2012. It opened 25 new stores and forayed into eight new markets. On a cumulative basis, the food chain expanded its square footage by 8 percent to 12.7 million. While the overall financial results look healthy, Whole Foods is encountering some problem in its UK operations and has incurred losses in that country. Whole Foods is however confident of reversing its fortunes in UK despite the tough trading conditions. As of now, Whole Foods has seven stores in UK. It intends to open few more in the near future (Best, 2012). 2.1 PESTEL Analysis The PESTEL analysis of UK suggests that the overall business environment in UK is favorable for Whole Foods. At this juncture, the political stability in the country is an issue. However, this concern is mitigated as the government is pro-business. The UK economy is not in the best of shapes; however this too appears to be a passing phase. The healthful food options of Whole Foods appeal to all social classes. The company’s products may also help reduce the incidence of obesity in the country. In general, the technological and environmental forces represent an opportunity for Whole Foods since the company is in a position to embrace new technology and strengthen its sustainability programs. A detail of the various macroeconomic forces and their impact on Whole Foods is given in Appendix 1. 2.2 SWOT Analysis Opportunities Threats Strengths The company deals in organic food which is more healthful than inorganic food. The growing awareness about the health benefit means that the demand for the products of Whole Foods Market will not decline. One of the biggest strengths of Whole Foods Market is its compensation structure. The company pays its employees really well. This strength will enable the company attract the talented workforce in U.K. Organic food is more expensive than inorganic food. Whole Foods Market can still convince the customers to buy the products of the company given its highest commitment to quality, sustainability and welfare of the community. Food-consciousness is not high in UK. Whole Foods Market can bank on its rich experience and replicate its successful U.S. model in UK as well. Whole Foods has a reputation of delivering high-quality, nutritious food. Thus it will be able to create demand for its products in UK where consumer awareness is lacking. Weaknesses The high price of the products tends to put off many consumers. Whole Foods however strives to work efficiently and maintain the freshness of the food thus giving good value to the customer. Thus high prices will not come in the way of demand. The company introduces its own store-brand lines from time to time in order to compete with high priced organic brand names. The UK operations are running into losses. However the operating margins of Whole Foods as a whole are far higher than the industry average. This sound financial health will act as a buffer for its UK operations and ward off any potential financial threat. 3.0 Segmentation, Target Market and Positioning 3.1 Segmentation Whole Foods Market will not be able to cater to the needs of all the consumers. It will therefore have to divide the market into different segments which can be done on the basis of demographic factors, economic factors, geographic factors or psychographic factors. Whole Foods stores will be opened at different locations in UK which will cater to the locals as well as people living in the vicinity. To that extent, the market is automatically segmented geographically. The products of Whole Foods are such that they can appeal to all demographic profiles irrespective of gender. Demographic segmentation makes sense to the extent that the adult and older population of the country will be more receptive towards Whole Foods products. Since the products of the company are relatively expensive, the middle-class and upper sections of the society will be able to afford them. So segmenting the market on the basis of economic factors, say income, is justified. It is also important to understand that in the ultimate analysis, the lifestyle and attitude of the consumers will play a pivotal role in generating demand (Howell, 2005). Thus psychographic segmentation becomes really important. The UK market can be segmented using the VLAS framework which uses the resources of the consumer and their primary motivation as the two dimensions to arrive at eight distinct consumer profiles (Dunne, 2006). Such segmentation reveals the lifestyle and attitude of consumers and is therefore appropriate for Whole Foods to adopt. 3.2 Target Market The target market of Whole Foods would be the financially sound and educated people of the country who are conscious about their health. It will be easy for Whole Foods to apprise educated people about the benefits of organic food. Since health related problems generally occur in old age, Whole Foods will make special effort to target the elderly in the country. Close to 29 percent of the population in the country is more than 55 years of age. This segment of the society will immediately adopt Whole Foods products. 41 percent of the population is aged between 25 and 54. Again, this represents a lucrative target market for Whole Foods (CIA, 2013). 3.3 Positioning Whole Foods started its operations as a niche high-end player. While it continues to sell organic food, the food chain has incorporated ‘freshness’ in its core value proposition (Alster, 2012). It is thus positioned as a food chain that offers fresh organic food for the health conscious people. In fact, in its home market, the company claims to be ‘America’s Healthiest Grocery Store’ (Whole Foods Market, 2013). 4.0 Objectives 4.1 Financial Objectives Whole Foods stint in UK has not been financially successful. One of the reasons is the huge costs that the company has incurred because of its 80,000 sq ft flagship Kensington store. The average size of the Whole Foods Market store in the United States is 40,000 sq ft. The company will change tack in UK now. Whole Foods will open smaller sized stores in the country. Opening small stores will reduce the initial capital expenditure and the recurring costs will also be low. The financial objective of the company is to cut costs by $2 million during the year 2014 so that it is able to generate profits. 4.2 Marketing Objectives The company will support its UK stores with a gamut of marketing activities. The company will go in for print and electronic advertising to create awareness of the health benefits of consuming fresh, organic food. The marketing objective for 2014 will be to make 50 percent of the UK population aware about organic food. In the subsequent year, Whole Foods will attempt that two-third of the population in UK is aware about organic foods. Thereafter the focus of advertising would shift to creating a brand preference for Whole Foods. 4.3 Societal Objectives Whole Foods is committed to giving back to the communities in which it does business ( Food Weekly, 2010). It will contribute 5 percent of its total net profits from UK operations for the welfare of the society. The company will give fresh organic food to food banks and shelters so that it reaches the needy people. Last, but not the least, the employees in UK will replicate the deeds of their U.S. counterparts and would volunteer their time and expertise to assist the local non-profit organisations in achieving their objectives. 5.0 Location Strategy Location plays a key role in retail business (Brynjolfsson & Rahman, 2013). Whole Foods will lay emphasis on the location of its stores in UK. The process of deciding the locations will include quantitative criteria in addition to the astute judgment of the management (Food and Beverage Close-Up, 2012). As a strategy, the company will open stores at locations that have a population of more than 3, 00,000 people in a fifteen minute drive time. The stores will be located in high traffic areas so that the footfall increases automatically. Adequate parking space would be provided at the stores in order to increase customer convenience. The small store strategy will help the company open stores across U.K. and thereby penetrate further in the country. The customers will get access to products of Whole Foods Market at numerous outlets. Higher visibility of the brand will be an added advantage for the company. 6.0 Marketing programs Whole Foods will generously give free samples of its products during the first half of next year. These free samples will induce consumer trials. Repeat purchases are bound to happen given the quality of the company’s products. The company will also sponsor a few health camps. Health Foods will organise a ‘Run for Fun and Good Health’ in January, 2014. This event will create hype and awareness about the brand. Media coverage of the event will provide the much needed publicity. Whole Foods realizes the power of social media. The company will remain active on social networking sites like Facebook and the micro blogging site Tweeter (Pyrah, 2013). Whole Foods will share new product launches and new recipes on these forums. The interactive media will also be used to solicit customer feedback and suggestions. All in all, the online social media will be effectively used to create a buzz about the brand and generate positive word-of-mouth (WOM) publicity. 7.0 Financial Plans Whole Foods will try and keep its capital outlay as low as possible. A summary of the food chains projected costs, revenue and anticipated profits is depicted below. The financial projections have been made on three possible scenarios depending on varying degrees of consumer demand. Financial Projections for 2014 ($) Outflows   Inflows Rent of Outlets 1,00,000   Scenario 1 (Pessimistic) Scenario 2 (Realistic) Scenario 3 (Optimistic) Salary of Staff 60,000       Administration Expenses 40000       Advertising/Sales Promotion 50000       Events/Sponsorships 30000       Total 2,80,000 2,50,000 2,85,000 3,50,000 The financial projections suggest that Whole Foods will break even in the first year of operations if everything goes as planned. The food chain will incur losses only in a pessimistic scenario where demand remains sluggish. If the demand beats expectations, Whole Foods will pocket a profit of $70,000 in 2014. 8.0 Metrics & Implementation controls The most important aspects that need to be taken care of at this juncture are the finalisation of locations where the Whole Foods outlets will be opened and ensuring advertising effectiveness. The outlet locations have to be in line with the targeting and positioning strategy of the company. At the same time, Whole Foods has to ensure that it does not opt for very expensive properties. The second aspect is the advertising effectiveness as a lot depends on the making the UK population aware about the Whole Foods’ product portfolio. Appendix 1 (PESTEL Analysis) Factors What is happening? (Current world) Impart on the company It is opportunities or threats? p a) Political instability due to persistent recessionary forces and Euro-zone crisis. b) In general, government is pro-industry and encourages foreign investment/companies (Julier, 2009). a) Adverse: Political stability can be detrimental to all businesses. b) Favorable: Easy for Whole Foods to get regulatory clearances. a) Threat b) Opportunity e a) High fiscal deficit, low interest rates, rising tax burden and lower personal disposable incomes a) Adverse: People will reduce spending on discretionary and expensive items. a) Threat s a) Social classes fall on a continuum ranging from elite class to deprived class (Cook, 2007). b) Social environment encouraging obesity. a) Favorable: Barring the deprived class, all other sections of the society are potential targets. b) Favorable: Whole Foods’ products are healthful and have the potency to reduce the incidence of obesity. a) No major impact / More or less an opportunity b) Opportunity t a) UK is open to technological advancements a) Favorable: Whole Foods can adopt state-of-the-art technology; encourage business partners to do the same. a) opportunity e a) Lot of pressure on companies to adopt ‘green measures’ a) Favorable: Whole Foods is already doing a lot on this front (Food Business Week, 2010). The company will be seen a responsible corporate citizen that takes care of all stakeholders including the environment. a) Opportunity l a) Robust regulatory framework in place. a) Whole Foods is an ethical company and follows the law of the land (Whole Foods Market, 2013). a) No major impact / More or less an opportunity References Alster, N. (2012). Upscale Grocery Store Chain Adapts To Price-Conscious Era Whole Foods Market Inc. Austin, Texas, Los Angeles. Best, D. (2012). Dean's Blog : Despite losses, Whole Foods sees potential in UK, Bromsgrove. Brynjolfsson, E., Hu, Y.J. & Rahman, M.S. (2013). "Competing in the Age of Omnichannel Retailing", MIT Sloan Management Review,vol. 54, no. 4, pp. 23-29. "Business News; Whole Foods Market(R) Shoppers Donate More Than $1.4 Million for Salad Bars in Schools", 2010, Food Weekly News, pp. 91. Cook, B. (2007). 'Mobility is low in class divided UK', Haymarket Business Publications Ltd, London. Dunne, D. (2006). "That's segmentation, not sales", Marketing, vol. 111, no. 34, pp. 16. Howell, D. (2005). "Whole Foods' Market Lifestyle to open this month", DSN Retailing Today, vol. 44, no. 19, pp. 3-3,36. Julier, G. (2009) "Design and Political Economy in the UK", Knowledge, Technology, & Policy, vol. 22, no. 4, pp. 217-225. Pyrah, A. (2013). "Interview - Soumit Roy of Whole Foods Market", Managing Intellectual Property . Sussan, A.P. & Kooros, S.K. (2006). "Business Strategies for Political and Economic Operations: The Case of United States, China, and the United Kingdom", Competition Forum, vol. 4, no. 1, pp. 55-65. Whole Foods Market (2013). [Online]. Available from: http://www.wholefoodsmarket.com/ [Accessed: 10 November, 2013]. "Whole Foods Market Opens Doors in Cheltenham, UK", 2012, Food and Beverage Close - Up . "Whole Foods Market; Whole Foods Market Partners With Cork Re Harvest to Recycle Wine Corks, Help Save Mediterranean Cork Forests", 2010, Food Business Week,  pp. 37. Read More