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Whole Foods Case.pptx
- 2. Vision/Mission Statements Vision: “Whole Foods, Whole People, Whole Planet” Mission: “Our purpose is to nourish people and the planet. We're a purpose-driven company that aims to set the standards of excellence for food retailers. Quality is a state of mind at Whole Foods Market.”
- 3. INTRODUCTION: • Whole Foods Market Inc. is the world’s leading natural and organic foods supermarket. • United States' first certified organic grocer • September 20, 1980 • Austin, Texas
- 4. INTRODUCTION: • Founders: John Mackey Renee Lawson Hardy Craig Weller Mark Skiles
- 5. INTRODUCTION: Main growth strategy: MERGERS AND ACQUISITION Houston Dallas New Orleans California United Kingdom
- 6. INTRODUCTION: Main growth strategy: MERGERS AND ACQUISITION
- 7. EXTERNAL ASSESSMENT PESTEL ANALYSIS • Political: Proper labeling of organic and GMO-free products, free trade agreements, Whole Trade Guarantee • Economic: Economic recession, rising unemployment rate • Social: Healthy lifestyles trend, rising cultural diversity of its target consumers, rising wealth gap • Technological: More automation technologies, patenting of genetically modified organisms (GMOs) • Environmental: Global warming, waste disposal, pollution • Legal: environmental protection laws, inadequate employee laws in developing nations, antitrust laws.
- 8. EXTERNAL ASSESSMENT EXTERNAL FACTOR EVALUATION (EFE) MATRIX External Strategic Factors Weight Rating Weighted score Opportunities Growth through acquisition .20 3 .80 A vast varieties of item selection .20 3 0.6 Distribution of retail store in such place where competitor’s store is unavailable .15 4 0.6 Threats Local grocers increasing organic food options .15 3 0.45 High price of product .15 2 0.3 Economy troubles: customers switching to lower cost products .15 1 0.15 Total 1.0 2.9
- 9. EXTERNAL ASSESSMENT CPM (Competitive Profile Matrix) Critical Success Factor Weight Whole Foods Market Kroger Walmart Rating Score Rating Score Rating Score Brand Recognition 0.20 4 0.80 4 0.80 4 0.80 Product Quality 0.13 4 0.52 4 0.52 3 0.39 Management 0.10 2 0.20 4 0.40 4 0.40 Price Competitiveness 0.15 2 0.30 3 0.45 4 0.6 Financial Position 0.15 2 0.30 3 0.45 3 0.45 Customer Loyalty 0.15 3 0.45 4 0.60 4 0.60 Global Expansion 0.12 2 0.24 2 0.24 3 0.36 Total 1.0 2.81 3.46 3.6
- 10. EXTERNAL ASSESSMENT Porter’s Five Forces Model
- 11. INTERNAL ASSESSMENT Corporate Governance Board of Directors John Mackey as a cofounder and CEO Dr. Ronald Chwang (Chairman and President, iD Ventures America, LLC) George C. McNamee Dr. Jacques S. Gansler (Director, Center for Public Policy and Private Enterprise, University of Maryland) General Paul J. Kern (U.S. Army, Retired) (Senior counselor, The Cohen Group) Deborah G. Ellinger (President, Ellinger Enterprises)
- 12. INTERNAL ASSESSMENT Corporate Governance Top Management John Mackey: cofounder and CEO John J. Leahy: Chief Financial Officer Jeffrey A. Beck: Chief Operating Officer Glen Weinstein: Senior Vice President and General Counsel Dr. Tom Wagner: Chief Technology Officer Alison Dean: Senior Vice President of Corporate Finance and Principal Accounting Officer
- 13. INTERNAL ASSESSMENT Corporate Resources VRIO ANALYSIS Resources Is it valuable? Is it rare? Is it imitable? Is it substitutable ? Strong local presence (Marketing) Yes No No No Strong expense control (Financial) Yes Yes No Yes High quality product (Operations) Yes Yes Yes Yes Employee satisfaction (HR) Yes Yes No No 280 stores totaling 10.3 million square feet (Logistics) Yes Yes No No Social Responsibility Yes Yes No No Strong leadership Yes Yes No No
- 14. INTERNAL ASSESSMENT Corporate Resources The world’s leading natural and organic foods supermarket. Has a very strong local presence not only among customers but also the national media Enjoys lofty profits in a very price-competitive industry Despite the declining sales, it was able to exhibit strong expense control which resulted to 10% increase in income in the first half of 2009 Remained committed to organic certifications to a wide variety of products such as produce, meat, cheese, and salad bars despite stricter federal requirements
- 15. INTERNAL ASSESSMENT Corporate Resources The world’s leading natural and organic foods supermarket. Has a very strong local presence not only among customers but also the national media Enjoys lofty profits in a very price-competitive industry Despite the declining sales, it was able to exhibit strong expense control which resulted to 10% increase in income in the first half of 2009 Remained committed to organic certifications to a wide variety of products such as produce, meat, cheese, and salad bars despite stricter federal requirements
- 16. INTERNAL ASSESSMENT Corporate Resources It was able to expand its stores while maintaining costs at low level and not raising prices Continually earned accolades such as 2009 Socially Responsible Retailer Award and Top 25 Green Power Partners Participated in community involvement by donating at least 5% of its net profits yearly to charitable causes
- 17. INTERNAL ASSESSMENT Internal Factor Evaluation (IFE) Matrix Key Internal Factors Weight Rating Weighted Score Strengths Brand Recognition Good Quality Huge Selection/Variety Positive Employee Environment Large, customized stores No. 16 on Fortune’s World’s Most Admired Companies list 0.12 0.15 0.10 0.08 0.10 0.05 4 4 4 3 4 3 0.48 0.60 0.40 0.24 0.40 0.15 Weaknesses Concentrated just on US market Relative slow growth Limited number of suppliers Advertising budget is very low 0.15 0.05 0.10 0.10 1 2 1 2 0.15 0.10 0.10 0.20 Total 1.00 2.82
- 18. SWOT ANALYSIS STRENGTHS Market leader in the industry High quality products Strong brand equity - the Whole Food’s brand is known worldwide for its organic products Strong public image because it has a sense of Corporate Social and Environmental Responsibility Has wide reach of customers due to numerous stores in the US, UK, and Canada Strong expense control Motivated employees due to above average salary, good benefits of employees WEAKNESSES Premium price Limited operations overseas Limited supplier Diseconomies of scale Inability to reach targeted revenue and flat sales year by year Struggle to maintain pricey image and higher margins CEO’s opinion has caused public drama which hurt the company’s image and business.
- 19. SWOT ANALYSIS OPPORTUNITIES Increasing trend of healthy living Lower income customer base Capitalize on Whole Trade Guarantee Local and international expansion and take advantage of free trade agreements implement more automation technologies to increase business efficiency provide improved online services through consumers’ mobile devices THREATS Increased competition from existing supermarkets that are re-branding in order to compete with them Recession: the rising unemployment rate in the US may lead to deeper retrenchment shopping pattern for consumers Low spend per trip due to high prices. Individuals buy the specialty item and not the essentials Changes in government regulations on organic food would impact consumer spending even further In low income areas, consumers are avoiding any products that might be considered lavish or more than a necessity
- 20. STATEMENT OF THE PROBLEM As much as Whole Foods Market Inc.’s historical growth was achieved through mergers and acquisition, how can it maintain its market leader position despite high threat of rivalry within existing competitors and future threat of new entrants in the organic food industry?
- 21. ALTERNATIVE COURSES OF ACTION Grand Strategy Matrix
- 22. ALTERNATIVE COURSES OF ACTION Grand Strategy Matrix
- 23. ALTERNATIVE COURSES OF ACTION Grand Strategy Matrix
- 24. ALTERNATIVE COURSES OF ACTION Alternative 1: Market Penetration Focuses on selling existing products into existing markets to gain higher market share Offering better prices than rival’s price may result to luring out customers. Increase its market share in the existing market X organic products are expensive to produce and trying to produce enough while lowering production cost and price at the same time may not be possible
- 25. ALTERNATIVE COURSES OF ACTION Alternative 2: Market Development Targets audiences they have not yet reached or are not yet currently serving Can explore new markets like expanding internationally such as in Europe, Canada, and UK X typically requires capital investment as it builds new stores X becoming successful internationally may take time
- 26. ALTERNATIVE COURSES OF ACTION Alternative 3: Product Development Creating or introducing new product in the market to create new business Remain relevant with its customer base Creating innovative product may drive a higher value proposition to customers X risk of failure of developing successful product X shelling out money, time, and effort which may not payoff
- 27. CONCLUSION Employ a primary intensive growth strategy to maintain its strong market share and revenues Phase 1: Market Penetration— To strengthen its market share and ensure a strong customer loyalty Phase 2: Market Development— Enter the international market for further growth
- 28. RECOMMENDATION Phase 1: Market Penetration Strategy a. Intensify its marketing campaign-“We Believe in Real Food” b. Strengthen customer loyalty base- incentives and initiatives through customer feedback, Loyalty Point Cards c. Go online- revamp its website and partner with e-commerce websites like Amazon d. Consider offering promotional coupons- offer affordability through discounts
- 29. RECOMMENDATION Phase 2: Market Development Strategy a. Enter overseas market- Asia, Europe, Australia b. Create stronger supply chain operations overseas- enhance foreign relationships and add value to store operations c. Franchise in International Markets- but keep management and operations in order to ensure quality products and services
- 30. Thank you.
Editor's Notes
- Founders: John Mackey and Renee Lawson Hardyowners of Safer Way Natural Foods, and Craig Weller and Mark Skiles, owners of Clarksville Natural Grocery
- Its initial strategy was to expand to various states such as Houston, Dallas, New Orleans, and one store in California where it acquired other natural food chains throughout its three-decade history. In 2004, Whole Foods entered the United Kingdom by acquiring an existing chain of natural food stores
- e in 2007, it had its biggest acquisition where it acquired Wild Oats Market, their largest, closest competitor.
- The EFE total score is 2.9 which is above the average score of 2.5. This indicates that the company is responding in an excellent way to current possibilities and risks in its industry. In other terms, the company's techniques successfully take advantage of current opportunities and reduce the negative effects of exterior risks.
- The Competitive Profile Matrix reveals that Whole foods is only partially positioned against its competitors. Shoppers spent only few dollars at Whole Foods while shopper spent more dollars in nearest competitor because whole foods prices are high. They have to provide high quality on low cost and fresh foods in order to maintain its profitability.
- threat comes from rivalry among existing competitors because competition in the grocery industry is high. The natural and organic food is growing, hence, it has attracted a stiff competition since mainstream US food retailers now has ensured a prominent shelf space for organic foods. In fact, research showed that the marketing boom has pushed retail sales of organic foods up to $21.1 billion in 2008 from $3.6 billion in 1997 (Dimitri & Oberholtzer, 2009). In addition, with the rising demand for organic products, Whole Foods Market must watch out for future threat of new entrants since big local and international retailers/groceries known for low prices may easily enter the market which may weaken Whole Foods’ market share.
- The world’s leading natural and organic foods supermarket. Has a very strong local presence not only among customers but also the national media as proven by Google and its corporate website which averages more than 50,000 visitors a day. However, due to CEO John Mackey’s comment on Obama’s health care policy, many customers and unions were outraged which threatened the company as they call for boycott in retaliation to his strong opposition.
- The world’s leading natural and organic foods supermarket. Has a very strong local presence not only among customers but also the national media as proven by Google and its corporate website which averages more than 50,000 visitors a day. However, due to CEO John Mackey’s comment on Obama’s health care policy, many customers and unions were outraged which threatened the company as they call for boycott in retaliation to his strong opposition.
- The company IFE score is 2.82 which is above the average score 2.5. It indicates that the company is internally very strong, if the company use its strength effectively it will minimize the weaknesses of the company.
- The Grand Strategy Matrix was used for Whole Foods Market Inc. in choosing alternative strategies to attain its objective. The Grand Strategy Matrix determines those alternative strategies by taking into consideration, a company’s industry growth and competitive position. Since Whole Foods Market Inc. has a strong competitive position in a rapidly growing market, it falls under Quadrant I.
- Since Whole Foods Market Inc. has a strong competitive position in a rapidly growing market, it falls under Quadrant I.
- This strategy focuses on selling existing products into existing markets to gain higher market share. It is an attempt by a company that is already in the market with an off-the-shelf product to get more sales from other market participants. Offering better prices than rival’s price may result to luring out their customers. By increasing volume of sales by intense and aggressive marketing campaigns, it can increase its market share in the existing market. On a side note, organic products are expensive to produce and trying to produce enough while lowering production cost and price at the same time may not be possible. Thus, in choosing this alternative, whole foods must also consider adjusting its costing and pricing so as not to hurt its profit margin.
- This is a growth strategy put in place by companies or organizations to introduce their product or solution to target audiences they have not yet reached or are not yet currently serving. For Whole Food Market, since it is mostly concentrated in the United States (264 out of 305 stores), it can explore new markets like expanding internationally such as in Europe, Canada, and UK. However, this typically requires capital investment as it builds new stores and becoming successful internationally may take time.
- This is strategy involves creating or introducing new product in the market to create new business. By pursuing this strategy, Whole Foods and its brand can remain relevant with its customer base. Advantages of this strategy include creating innovative product that may drive a higher value proposition to customers. Disadvantages include not only the risk of failure of developing successful product which will be embraced by customers but also shelling out money, time, and effort which may not payoff.
- With the increasing demand for organic and natural products, Whole Foods Market was able to thrive and maintain its leading position in the industry by rapid acquisitions of other natural food chains throughout its three-decade history Whole Foods is faced with high threat of rivalry among existing competitors like Walmart whereas threat of new entrants cannot be set aside because aside from Whole Food’s struggles in keeping up its high profit margin, massive local and international retailers/groceries known for low prices may easily enter the market which may weaken Whole Foods’ market share.
- LIMITED OVERSEAS OPERATION Enter overseas market such as Asia, Europe and Australia. Organic and healthy life style trend is global and need to be responded; Create stronger supply chain operations overseas that will enhance foreign relationships and add value to store operations similarly to the US strategy; Franchise in international Markets while keeping management and operations to ensure quality of products and services.