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Transcript of Whole Food
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CASE STUDY & ANALYSIS: Whole Foods Market in 2010: Vision, Core Values and Strategy
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Group MembersAhona Azad Choyti (59)
Ayasha Sultana (62)
Shamroze Nurul Abedin
(68)
Rakshanda Zihan (72)
Raka Tabassum (76)
Anas M.A. Sami (78)
Md. Shabit Shafiullah (80)
Wasiur Rahman (96)
Ashhab Zaman Rafid (97)
Farhan Khaled (109)
Md. Mehedi Hasan (112)
Nabil Ahmed Khan (114)
BBA 19 B-5
Institute of Business Administration, University of Dhaka
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INTRODUCTION
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Company Overview• Whole Foods Market, Inc. (Whole Foods
Market), incorporated on August 15, 1980, is a retailer of natural and organic foods.
• The Company operates in one segment: natural and organic foods supermarkets.
• It is a leader in this segment with 8 billion USD sales in 2009
• It operates 289 stores in the United States, Canada, and the United Kingdom by 2010
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Core Values• Selling the highest quality natural and
organic products available• Satisfying and delighting our customers • Team member happiness & excellence • Creating wealth through Profits &
Growth• Caring about our communities & our
environment • Creating on going win-win partnerships
with our suppliers• Promoting the health of our
stakeholders through healthy eating education
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Vision
To set the standard for excellence in food retailing
Mission
“Whole Foods, Whole People, Whole Planet”
Mission & Vision
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Core Competencies• Of the resources and capabilities of
Whole Foods, its core competency lies in its dominance of the organic market
• With close to 289 stores, and the ability to target its locations towards smarter, more health conscious consumers.
• The company is better managed and employed to provide the information an organically inclined customer would need as compared to traditional stores carrying only some organic products.
• Critical factors for Whole Foods' success include its reputation, trust, and friendship among its customers and suppliers,
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INDUSTRY ANALYSIS : EXTERNAL
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Industry Overview
$4.9 billion
sales in 2008
20% Annual
Growth Rate $52 billion
global sales
13%
increase every year
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Industry Overview
9% growth of
the organic Industry
4.1Acres in
2005 17,600 certified farmers
35% more
profitable
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Porters Five Forces
Bargaining
Power of
Suppliers
Low to Medium
• Sourcing from local small producers
• Strict quality parameters
• MNCs are gradually buying up the small producers
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Porters Five Forces
Bargaining
Power of
Buyers
Medium to High
• Market demand rapidly increasing
• Many sellers but most of the buying happens at recognized chains
• Buyers do not have any switching cost
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Porters Five Forces
Rivalry HIGH
• Independent Supermarkets
• Merchandisers Super Centers
• Wholesale Clubs
• Fast food chains
• Natural food stores
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Porters Five Forces
Threat of
Substitutes
Medium to Low
• Non Organic Products
• Patronizing local farmer markets
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Porters Five Forces
Threat of New Entrant
s
LOW
• High cost low margin nature of the industry
• Big Economies of Scale
• Largest 50 companies responsible for 70 percent of revenue
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Opportunities and Threats
O
Opportunities
• Nation wide appeal • Niche market• Niche product• Small number of competitors • Increasing awareness of organic
product• Potential market segments • Leading organic producer • Retail innovation and capitalism • Growth in private label product
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Opportunities and Threats
Threats
• Peoples ignorance about organic product
• High profit provokes new entrant
• Competitors• Substitute product • Government takeover• Labeling and other regulations• High bargaining power of
suppliers of natural and organic foods
• Weak economic result
T
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COMPANY ANALYSIS : INTERNAL
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Strength & Weakness
S
Strength
• Pioneers in natural food supermarket• Sustainable growth over the years• Successful win-win acquisition contracts• Clearly defined motto• Well classified niche market focused
strategies• Wide Range of Products• Smooth Distribution Channels
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Strength & Weakness
Weakness
• High Priced Items
• Acquired Debt as a result of acquisition
• Increased store expenses
W
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Financial Conditions
$ (‘000) 2009 2008 2007 2006
Sales 8,031,620 7,953,912 6,591,773 5,607,376
Gross Profit 2,754,310 2,706,705 2,296,603 1,959,642
Net Income 146,804 114,524 182,740 203,628
Basic EPS 0.85 0.82 1.30 1.46
Net Worth $ 3,783,388
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Financial Conditions
2009 2008 2007 20060
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
Sales Gross Profit
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Financial Conditions
2009 2008 2007 20060
50,000
100,000
150,000
200,000
250,000
Net Income
Net Income
2009 2008 2007 20060
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
EPS
EPS
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BCG MATRIX
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• Product Development
• Market Penetration
• Market Integration
• Product Development
• Divestiture• Market
Integration• Market
Penetration
• Diversification• Product
Development• Divestiture• Retrenchment
• Divestiture• Retrenchment• Liquidation
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Market Analysis
Organic; 4%
Non-Organic; 96%
US Grocery Market Size by Sales, 2011
Organic Non-Organic
• Despite only 4%, sales are increasing
• Organic industry summed to a sale of $31.5 billion, resulting in a growth of 9.5%
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Market Analysis
Whole Foods Market Map
• Present widely in USA
• Presence in certain states of Canada and UK
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Customer Analysis
Higher the earning, lower the unemployment rate
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Customer Analysis
According to Great Gatsby Curve, USA is especially unequal and has low mobility
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CURRENT STRATEGIC POSITION
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• Value-added pricing strategy
• Delighting customers with service they cannot get anywhere else
• “A narrow market niche where buyers needs and preferences are distinctively different”
• “Features and attributes tailored to the tastes and requirements of niche members”
General Strategy
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• Expansion and Acquisition e.g. Purchased the struggling Wild Oats Markets, their biggest competitors
• Creating Barriers for entry• Expansion into new and existing
areas. Opening new stores in upscale areas and suburbs of major metropolitan areas and also to acquire existing stores
• Expanding into International market• Relocating smaller stores to larger
sites with more visibility and parking.
Operations Strategy
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• Stock repurchase of up to 200 million USD over 4 years
• Very strong cash flows from operations prior to wild oats acquisition making new stores possible without any substantial long term debts
Financing Strategy
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• Advertising o Word of Moutho TVCo Print, online, billboard, in-store
ads
• Websiteo E-newsletter o Cooking tips, company blogs,
store locatoro Facebook/Twitter Page
Promotional Strategy
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• Product and brand selection does vary from store to store
• Large scale stores include around 30,000 natural, organic, and gourmet food and nonfood items
Product Line Variety
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EVALUATION OF CURRENT STRATEGY
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FIT TEST
• Growth strategy complements industry’s exponential growth
• Caters to the ‘go green’ and ‘healthy eating’ trends
• Motto of Whole Foods backed up by actionso Whole Foods – best quality natural
produceo Whole People – customer and
employee satisfactiono Whole Planet – community
development
How Sound is the Strategy?
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COMPETITIVE ADVANTAGE TEST
• Number 1 player in the natural and organic foods market
• Specializes in providing a different “lifestyle” and making it appealing
o Customers are in for a healthy experience – groceries along with restaurants, educational classes, juice bars, etc.
o Giving customers what they want – varied product line and merchandising options
o Employee empowerment – transparency and decision making
How Sound is the Strategy?
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PERFORMANCE TEST
• Delivering on each promiseo Selling highest quality food at
competitive prices o Touching the lives of customers and
employeeso Team member happiness o Helping the environmento Profitable return on investment
How Sound is the Strategy?
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How Sound is the Strategy?
FIT TESTCOMPETITIVE ADVANTAGE
TEST
PERFORMANCE TEST
“Well Matched, Winning
Strategy”
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Key Strategic Question
How can Whole Foods Market remain successful by
• increasing their customer base – attracting nonorganic buyers?
• drawing away customers from competitors?
• increasing purchase volume and frequency?
Strategic Problems
• Economic downturn in the US
• Increasing competition – saturation of conventional, lower priced grocery chains
• Rising demand for high quality low priced foods
• Scarce supply of naturally grown food
• Uncertainty about the future of organic market
New Strategic Issues
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ALTERNATIVES & EVALUATION
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CONS
• Increased advertising cost
• Increased employee involvement in marketing and promotional activities- tying up human resources
PROS
• Increase in market size.
• Increased brand awareness.
• Improved public relation leading to customer acceptance and employee attraction.
Emphasize on Marketing Strategies
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CONS
• Reduction of growth
• Possible reduction in store size
PROS
• Efficient Use of Buying Power
• Possible deflation of prices
• Increasing customer base
Increasing Profit & Cutting Costs
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CONS
• Reduced profit due to reinvestment of internal cash flows
• Market analysis may prove to be costly
• Inventory will be limited.
PROS
• Steady growth maintained
• Economically suitable for smaller places
• Allows expansion without increasing long term debt
Building on smaller store strategy
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CONS
• Increased complexity of management
• More employees required
• Production will be seasonal
• Increased storage and inventory cost
PROS
• Absence of middle man
• Lower cost products
• Creation of employment opportunities
Vertical Integration of Supply Chain
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THANK YOU