Whole Foods Essay Example

ambiance where shopping for nutrient was a merriment and enjoyable experience. Analysis of the Industry

The Grocery industry. which includes conventional supermarkets. supercenter. limited-assortment and natural epicure supermarkets. netted about $ 563 billion in gross revenues in 2010. a 1 % addition from 2009. Since the organic and natural nutrients sections account for about $ 65 billion dollars yearly of the $ 563 billion dollar pie. up 7 % from 2009. this was a really of import factor for Whole Foods ( Meador & A ; Britton ) . Harmonizing to the statistics. the natural and organic nutrients industry is represented by a broad scope of consumer goods and continues to turn with popularity each twelvemonth. Natural and organic nutrients are those consumer goods prepared without any unreal ingredients. doing them whole and natural. The USDA sets the criterions for the term “natural” to purely intend meat and domestic fowl along with the ordinance of the term “organic” under the “Organic Foods Production Act” ( The Natural Industry. 2012 ) .

In the early 1990s. Natural and Organic nutrient shops were usually thought as little. non good lit. non good organized and unpopular. Organic nutrients were considered inferior. undependable. and much more expensive ; an unrealistic option for the mundane consumer ( Marquis. Besharov. & A ; Thompson ) . This was a large factor for Whole Foods and played a large function in their shop layout and design in the old ages to follow. Even today. Whole Foods carefully maps out shop location while planing each person shop to suit the peculiar location and reflect the environing community. Mackey sought to take the commonplace perceptual experience

of food market shopping and transform it into a good experience. “ Shoping for food markets is like a job. its like making the wash or taking out the refuse. Whole Foods strives to do shopping prosecuting. merriment and attractive” ( Marquis. Besharov. & A ; Thompson ) .

This metabolism of nutrient shopping from a job to an energetic experience has become one the most of import facets of Whole Food’s mundane scheme. Upon come ining a Whole Foods Market shop. one instantly feels the ambiance. with well-trained squad members. and an inspirational merchandise mix which focuses on healthy feeding and quality over measure. With its alone shop design. Whole Foods strives to make an environment for people to garner. interact and larn about different nutrient.

Environmental Regulation

During its 90’s. because organic merchandises saw a crisp addition in demand. the organic market faced challenges affecting tough ordinances. The first was the environmental factors in which the merchandises were categorized. Before the 1990’s. there were no official demands for organic nutrients. and therefore no confidence that “organic” intend the same thing from province to province or shop to hive away. The word “organic” could be printed onto the merchandise without it intending anything. Thus. “The Organic Foods Production Act” of 1990 changed the manner in which we would see the same incorporate organic and natural merchandises from topographic point to topographic point. This Act regulated the agricultural merchandise. botanical pesticides and many other factors. including the manner the merchandises were handled and distributed ( Organic Foods Production Act of 1990. 2005 ) . These criterions changed the ways and patterns for many husbandmans who grew organic nutrients.

All individuals involved in the procedure were required to be certified by the U. S. Department of Agriculture ( USDA ) . These governmental criterions overhauled the full organic market by puting heavy loads on manufacturers and Sellerss in the turning and merchandising of organic and natural nutrients ( Marquis. Besharov. & A ; Thompson ) .

Buying and Distribution

As the market steadily increased. distribution so became a ambitious factor. Organic and natural nutrients. which were grown without chemicals and pesticides. by and large had a shorter shelf-life and were known to botch or decompose if they did non acquire from the manufacturer to the consumer in a comparatively short period of clip. It was difficult for husbandmans and manufacturers to cover with big retail ironss like Whole Foods ; so alternatively. the husbandmans sold to big distributers. Whole Foods. in bend. needed to cover with these big regional distributers. who pretended to non cover with the little farm entities practising natural and organic agriculture. Even so. by making the bulk of their buying at the regional and national degree. Whole Foods was able to negociate big volume price reductions and salvage money. As of 2011. Whole Foods individual largest 3rd party provider is United Natural Foods ( UNF ) . which accounts for a astonishing approximative 31 % of their entire purchases ( Whole Foods Market. 2011 ) . Meanwhile. at micro degree. Whole Foods still continues to buy locally from the little organic agriculturists. This is an indispensable constituent to Whole Food’s kernel. which creates the inspirational merchandise mix. doing the shops unique to their specific location.

Expansion and Acquisitions

Whole Foods began spread outing right

from the beginning. From its low generation in its first shop in Austin. TX. It would finally distribute throughout Texas and the South and. finally. to the West seashore in California. While spread outing “in house. ” throughout the 1990’s. Whole Foods started geting other natural nutrient ironss. Other entities acquired were Wellspring Grocery. Break & A ; Circus. and Mrs. Gooch’s Natural Foods. In order to better its distribution place. in 2008. Whole Foods opened its first ain distribution centre in Braselton. Georgia thereby leting Whole Foods to farther minimize costs and maximise net income. In the late 2000’s. the organic nutrients giant. Whole Foods. began deteriorating. and its stock monetary values began plumping. Even after the company lowered its monetary values while still keeping its trademarked high quality criterions. many thought Whole Foods was on its manner out.

In visible radiation of its looming diminution. Whole Foods initiated its largest acquisition in 2007. At the clip. Whole Foods biggest challenger. Wild Oats. had held a strong presence in the market where Whole Foods was less established. so Whole Foods made a measure to get it. However. this acquisition would non come without many challenges. The first barrier came in the signifier of The Federal Trade Commission ( FTC ) . which stepped in and opposed the acquisition trying to halt an organic supermarket monopoly. Initially. the FTC was unsuccessful and the amalgamation occurred. but subsequently the FTC once more intervened and Whole Foods was required to do certain grants. which included divesting of certain trade names and shops.

Competitive Analysis

In order to understand the range of the state of affairs. it is really of import

to see the competitory environment environing Whole Foods. or as our book clarifies. the “industry environment” ( Dess. Lumpkin. Eisner. & A ; McNamara. 2012 ) . The competitory environment consists of many different factors that are peculiarly relevant to the firm’s scheme. These can include existing rivals. possible rivals. clients and providers. The industry of nutrient retailing is vastly competitory and complex. During the old ages of its development. Whole Food’s competition has been progressively turning across the state in the signifiers of either local. regional. national and international conventional. or forte shops. Local husbandmans markets. smaller forte shops. and rank nines had been go oning to seek to vie with Whole Food’s laterality. Harmonizing to the instance survey. throughout much of its growing period. Whole Foods chief rival has been Trader Joe’s. which had the doctrine “less is more. ” Trader Joe’s took a radically different attack to Whole Foods.

With shops averaging less than 10. 000 square pess and merely transporting about 2. 500 different merchandises. they sought to maintain their monetary values competitory. ever ready to purchase or sell. Whole Foods. in bend. responded with a merchandise distinction. which allowed them to make strong trade name and client trueness and a barrier to come in the market ( Dess. Lumpkin. Eisner. & A ; McNamara. 2012 ) . In the old ages following the instance survey. the nation’s largest food market retail merchant. Wal-Mart. announced it would be duplicating its organic merchandise offerings. puting it a direct rival of Whole Foods. Critics and nutrient advocators applauded the development of Wal-Mart’s attempts of this enlargement. thereby increasing the sum of organically farmed land

and the measure of organic nutrient available to the populace. However. others were non so optimistic.

Some viewed the retail giant’s entryway into the organic grocer sector as bad. because it would be another rival for Whole Foods to jostle cubituss with ( Warner. 2006 ) . Since Wal-Mart’s addition of organic merchandises. Whole Foods has continued to stress the quality of its merchandises and its monetary values. With such a new and powerful rival. Whole Foods may necessitate to shift its shops to prolong a competitory market. Other rivals such as Safeway. Kroger. Hannaford and Super Target have besides secured organic enfranchisement from the USDA ( Marquis. Besharov. & A ; Thompson ) .

SWOT Analysis

Although an analysis of Whole Foods’ Strengths. Weaknesses. Opportunities and Threats ( SWOT ) is non the best manner to analyse its concern scheme and do future recommendations. it can be a utile get downing point.

Strengths

Possibly Whole Food’s most evident strength is at that place experience. cognition and expertness in the market of organic and natural nutrients. As mentioned earlier. Whole Foods seamsters and customizes each shop to its single geographical location. It strives to hold the best and largest choice and assortment of merchandises with over 30. 000 different points to take from. It is unusual to see natural and organic nutrient shops larger than 20. 000 square pess ; nevertheless. by runing in such big installations of 50. 000 square pess. Whole Foods has a crisp competitory border to smaller shops. Another major strength that Whole Foods possesses is there sense of “team” and how they incorporate and foster “team edifice. ”

Whole Foods encourages friendly competition within their shops

while endeavoring to achieve success in each of its different sections. Compensation is no secret within Whole Foods as employees are compensated for their difficult work and attempt. Another strength that Whole Foods possesses is their changeless growing into new and different channels. Whole Foods owns and operates several distribution centres in which it has complete control. Such control helps extinguish monetary value wars while helping in dialogue with its major 3rd party distributers. such as UNF.

Failings

One of the biggest failings Whole Foods succumbs to is their pricing scheme. Whole Foods emphasizes quality ; nevertheless. their monetary values are sometimes 75 % higher than the rivals. Another failing is their shop locations. Whole Foods merely operates in big metropolitan countries. where other big rivals ( e. g. Wal-Mart ) are normally found. therefore possible net income is divided amongst the many viing organic shops.

Opportunities

One of the most of import chances is increasing the attraction of natural and organic nutrients. Though organic and natural nutrients are non new to the market. over the past decennary or so. the demand for these merchandises has skyrocketed. Therefore. to the uninformed individual. Whole Foods has the rich chance to make out in this undiscovered market and gaining control the consumer. Another chance for Whole Foods is spread outing into new geographic locations. Whole Foods already operates in big metro countries but could spread out into markets it has yet to come in.

Menaces

One of the biggest menaces a company like Whole Foods must be cognizant of is the large box shops. These shops are normally national concatenation shops such as Wal-Mart and Super Target. which normally have much better buying

and bargaining power. therefore puting forte shops like Whole Foods at hazard. Therefore. it is perfectly imperative that Whole Foods make an experience for those clients. which sets them apart from their competition. Another menace at the local degree is conventional supermarkets. Whether they are locally owned or concatenation shop supermarkets. these will ever show some kind of menace. Although they may non transport the same choice and assortment as Whole Foods. little supermarkets will hold some imitation merchandise with which they will try to vie.

Because of the demand over the past five old ages. conventional supermarkets have transitioned from their mainstream merchandises and now carry many more organic and natural nutrients. The rational behind this displacement is a countrywide addition in nutritionary instruction. the consciousness of fleshiness and the aging population ( Thrill. 2013 ) . A 3rd and really of import menace to see is the big addition in the figure of local husbandmans who offer their natural and organic merchandises in even smaller markets at a much lower cost. These husbandmans offer their merchandises for sale at local farmer’s markets at local countries or in parking tonss in forepart of large retail concatenation shops.

Market Analysis

By looking at Exhibit 1 we are able to compare some cardinal fiscal prosodies of the food market industry. specifically Kroger ( KR ) . Safeway ( SWY ) and Whole Foods ( WFM ) . Looking at gross it is no secret that Kroger ( $ 94 billion ) and Safeway ( $ 44 billion ) far surpass Whole Foods ( $ 12 billion ) . Although this is an indicant that Kroger and Safeway represent larger

pieces of the overall food market market. it may be misdirecting if we do non go on to the bottom line. Whole Foods is a natural and organic nutrients supermarket. which typically carries higher borders than normal food market ironss. Whole Foods presently holds a 36 % border compared to Kroger at 21 % and Safeway at 28 % . While better borders are surely the end of any company ; so is maintaining runing costs low as this is what finally leads to profitableness.

By looking at the operating net income we note Whole Foods does a great occupation in comparing to the market as they are able to keep & gt ; 6 % operating net income which totals $ 465 million during the past twelvemonth. From the dollar perspective both Kroger and Safeway have larger bottom line dollars but the Operating Income rate as a per centum of gross is less than half the rate of Whole Foods. Considering Whole Foods recent success in deriving valuable market portion. if they can keep their Operating Income ( OI ) rate changeless and go on to turn. it may non be long before they surpass the competition. From the investor position WFM besides boasts a larger net incomes per portion ( EPS ) at $ 2. 52 and market capitalisation $ 17 billion which indicate that it is presently more profitable and of a larger value in the market.

Future Challenges

Whole Foods must alter with the times. They need to go on to offer high quality natural and organic nutrients at a competitory monetary value. They need to spread out to smaller markets in add-on to

big markets that they presently serve. In making so. they need to be witting of the great cost in runing big scale retail constitutions and should see smaller brick and howitzer constitutions which could be operated more expeditiously with less work force. The larger markets seem to be more concentrated with constitutions which sell natural and organic merchandises ; hence. the mid-sized and smaller markets are the countries. which Whole Foods must infiltrated in order to prolong future growing.

Whole Foods should besides go on to spouse with the agriculturists of natural and organic nutrients and license husbandmans to put up little retail bases in their parking tonss. This may look to take some concern off from them. nevertheless. a modest fee could be charged. By making so. leting this local commercialism would at the same time give the populace the perceptual experience that Whole Foods is marketing the “home grown” type merchandises. Whole Foods may besides see offering natural and organic nutrient catering services in the countries that they serve. This would give them another avenue to market their merchandises and could be accomplished without a big extra outgo of capital or work force.

Decision

Whole Foods has parlayed itself into the largest individual retail merchant of natural and organic merchandises in the state ; nevertheless. as other large-scale retail merchants are besides come ining the competitory sphere. it needs to alter its scheme and focal point in order to go on to be profitable. Merely by reenforcing the buy-low. sell-high theoretical account of concern while offering other services than those traditionally offered by “grocery” shops. and by farther attending this yet undiscovered sector of nutrient –

merely so can Whole Foods continue its longstanding growing and fulfill its stockholders. Through the decennaries. Whole Foods has been able to accommodate to the altering market environment as a corporate giant. With these alterations and its community enriching love of organic merchandises. Whole Foods can guarantee its hereafter.

Plants Cited

Dess. G. . Lumpkin. T. . Eisner. A. . & A ; McNamara. G. ( 2012 ) . Strategic Management: Creating Competitive Advantages ( 6th Edition ed. ) . McGraw-Hill
Irwin. Marquis. C. . Besharov. M. . & A ; Thompson. B. Whole Foods: Balancing Social Mission and Growth. Harvard Business School. Meador. D. . & A ; Britton. M. Case-Analysis-WFM.

Organic Foods Production Act of 1990 ( November 10. 2005 ) .
The Natural Industry. ( 2012 ) . Natural and Organic Food Industry. Retrieved from Natural Industry Jobs: naturalindustryjobs. com/natural-organic-foods. asp Thrill. C. ( 2013. January 17 ) . National Grocers: Huge Runway for Growth In A Surging Industry. Seeking Alpha. Warner. M. ( 2006. May 12 ) . Wal-Mart Eyes Organic Foods.

Whole Foods Market. ( 2011 ) . FORM 10-K. Washington D. C. : United States Securities and Exchange Commission.