Whole Foods 2
Transcript of Whole Foods 2
Kelley ParriginKat Keivens
Bo GhassemiKathy Flores
Miranda NiederleSheridan SandsJessica NelsonSeda McCarthy
Whole Foods Market
• Customers are considered the #1 stakeholder
• Takes a longer view of financial health rather than the quarterly model
• Helped develop standards for organic foods and more humane treatment of animals
• Fortune’s 100 Best Companies to Work For: #22
Whole Foods Vision
• Our vision of a sustainable future means our children will be living in a world that values human creativity, diversity, and personal choice.
Mission
• Whole Foods — We search for the highest quality, least processed, most flavorful and natural foods possible .…
• Whole People — Our people are our company. They are passionate about healthy food and a healthy planet….
• Whole Planet — We are committed to helping take care of the world around us….
Values
• Selling the highest quality natural and organic products available
• Satisfying and delighting our customers
• Supporting team member happiness and excellence
• Creating wealth through profits & growth
• Creating ongoing win-win partnerships with our suppliers
• Caring about our communities & our environment
The General Environment
• Demographic
• Economic
• Political/Legal
• Socio/Cultural
• Technological
• Global
The General Environment
Demographics -
• Only one demographic governs WFI:
• Each store is located in a neighborhood where 40% have a college degree.
• This ensures being in an area where people know about nutrition.
The General Environment
Economic – • WFMI has grown
with the rising trend of health and fitness consciousness.
• It depends on this trend to continue and to grow.
The General Environment
Political/Legal –
• In the U.S, Japan, and the European Union “Organic” standards are certified by legislation.
• In other countries laws or standards may not exist.
The General Environment
Socio/Cultural –
• Representative on the National Organic Standards Board
• Health conscious
• Consumer awareness-health education
• Sustainable agriculture
The General Environment
Technological –
• Business Processes– Website– Paperless ordering system
• Green Mission– Power monitors– Wind power– Solar and Biomass
The General Environment
Global –
• More than 270 stores in North America and the United Kingdom
• Increase in global trade– Opportunity to expand into new markets– Food standards are not uniform
• Emergence of China as superpower
Industry Environment Analysis
Whole FoodsWhole Foods
Threat of New Entrants
• Other organic supermarkets or competitors
• Effects on Whole Foods market
Bargaining Power of Suppliers
• The greater bargaining power of Whole Foods Market could also squeeze existing suppliers who will have fewer market options
• Supplier challenges– Number of suppliers
• Supplier loyalty– Different manufacturers
Bargaining Power of Buyers
• Buyer dominance– Wal-Mart
• Grocery market insensitivity to economic conditions – For example, Wal-Mart vs. Whole Foods
Threat of Substitutes
Rivalry Among Firms
Internet Grocers
Local Farmers’ Markets
Restaurants and Fast Food Chains
Wholesale clubsConvenience
stores
Supermarkets
Mass Merchandisers and
Super Centers
Whole Foods
Internal Capability Analysis
Strengths
• Quality food
• Customer “experience”
• Store and corporate culture
• Image and branding
• Loyal customer base
• Great store locations for target market.
Weaknesses
• Prices are high- “Whole Paycheck”
• Lacking on international operations
• Narrow target market
• Marketing relies on- “word-of-mouth”
Opportunities
• Expand private label brand– Possibly work with large chains for generic distribution
• Expand food selection
• Expand its investment in marketing about the benefits of eating healthy and organic
Threats
• Economy- downturn leads to less disposable income and less luxury
• Market intrusions and competition
• Lax regulations on organic foods
Internal Capability Analysis
Value Chain Analysis
Primary Activities • Partnering with vendors
– Owns and operates downstream suppliers
– Low interest loans – New store inventory
Value Chain Analysis
Primary Activities• Purchasing goods
– Stringent quality standards*
– Regional and national suppliers
– Local suppliers
• Managing and distributing inventory– JIT delivery
Value Chain Analysis
Primary Activities• Store operations
– Duplication– Customization*
• Marketing and sales– Full service – Rich sensory
experience*
Value Chain Analysis
Support Activities• Human resources
– Motivational and respectful work environment
– Elaborate team environment
Value Chain Analysis
Support Activities• General administration
– Prime store locations– Leveraged
culture/reputation– Excellent relationships
with stakeholder groups
Resources and Capabilities
Tangible Resources• Financial
– Capacity to raise equity
• Physical– Stores– Distribution centers– Support facilities
Resources and Capabilities
Tangible Resources• Organizational
– Strategic planning process
– Innovative evaluation and control systems*
Resources and Capabilities
Intangible Resources• Human capital
– Strong bench strength
– Widespread involvement & knowledge transfer
– Trust and commitment
• Innovation– Strong innovation capacity*
• Reputation– Brand name
– #1 natural food chain
Resources and Capabilities
Organizational Capabilities• Highly adaptive business
model• Leveraging supplier
relationships• Outstanding customer
service• Ability to hire, motivate
and retain human capital
Sustainable Competitive Advantage?
• Challenging because….– Exit barriers are low– Market is being infiltrated by lower priced, more
readily available stores– People looking for one stop shop– Direct competitors are making it even harder for
Whole Foods to differentiate themselves
Stakeholder Agenda
Business Strategy
• Expansion– Whole Foods is expanding internationally– Expects to have a sizeable market position in Europe
20 years from now– Hopes to become a global company
• Roping in customers– Captive banners– Giving customers a sense of “virtue”
Business Strategy
• Information sharing– Collects and distributes sensitive information to
everyone.
• Community giving– Donate food and money to fight poverty worldwide
Organizational Strategy
• Caps on executive compensation– No exec. makes more than 14x the employee
average
• Teams– Whole Foods is committed to self managing teams
which do their own hiring and scheduling– To be hired, individual must be voted on by 2/3 of
their team during “trial” period
Ethical Issues
• Treatment of Animals– Existing standards for humane animal treatment can
always be improved– Thrives to help animals flourish and do it in a way that
is cheap enough for customers to buy
• 14 page code of conduct– Addresses expected and desired employee behavior
Financial Analysis
• NASDAQ since 1992• Retail Grocery Business segment• Ranked 26th according to revenue• 2008 Sales just under $8B• Acquisitions $700M loan
Financial Analysis
Financial Analysis
Ratio Measures 2008 2007 2006 Kroger Safeway Industry
Net Profit MarginNet profit / Revenues
Profitability1.4% 2.8% 3.6% 1.71% 2.16% 3.65%
Return on Equity (ROE)Net Income / Total Equity
Profitability7.75% 12.56% 14.76% 24.40% 13.29 17%
Current RatioCurrent Assets/Current Liab.
Liquidity.93 .85 1.22 .94 .88 1.15
Total Debt/ Equity ratio Debt/EquityFunding .62 .52 .01 1.56 .81 N/A
Interest Coverage Debt Mgnt 6.49 70.69 9,969.03 5.05 5.17 N/A
Financial Analysis
Less than 1 1-3 3-5 More than 5 Total Year Years Years Years Long term debt obligations $ 897,698 $ — $ — $ 897,698 $ — Estimated interest on long term debt obligations
126,956 40,591 64,010 22,355 — Capital lease obligations (including interest)
41,125 2,089 4,179 4,179 30,678 Operating lease obligations(1) 6,017,763 261,467 627,483 641,428 4,487,385 Total $ 7,083,542 $ 304,147 $ 695,672 $ 1,565,660 $ 4,518,063
The following table shows payments due by period on contractual obligations as of September 28, 2008 (in thousands):
Due before Sept 28, 2009
Due After 9/2009 and Before 9/ 2011
Due 9/2011 and 9/2013
Due After 9/2013
Net income $ 114,524 $ 182,740 $ 203,828
2008 2007 2006
Glimmers of Hope
• Rise in same store sales
• Customer attrition over
• Beat profit expectations
• Shares have soared
• Attacking their
inefficiencies