Example Of Whole Food Market SWOT Analysis Research Paper
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Whole Food Market is an American-based food supermarket chain that mostly specializes in the sale of organic foods. The food market was founded in 1980 in Austin Texas by four local businessmen, John Mackey, Craig Weller and Renee Lawson, who observed that the natural foods industry was ready for the supermarket format (Johnstone 309). The company currently generates more than $15 billion in annual sales two-thirds of which are from perishable products. The market began its expansion out of Austin to Dallas and then to New Orleans following the ultimate purchase of Whole Food Company. The company expansion was fuelled by the rapid growth and acquisition of other natural food chains. The food chains included; Bread and Circus of Massachusetts, Wellspring Grocery of North Carolina and Mrs. Gooch Natural Foods markets of Los Angeles. Whole Food Market began its third decade of operation by acquiring Food for Thought chain in Northern California and additional Harry Farmers Market store in Atlanta (Sahota 19).
The ultimate Whole Food Company began its operation in New Orleans in 1974, and the main mission was to be the best grocery store that featured a good wholesome food (Johnstone 315). Their sales were mainly USDA-certified organic foods and other products that are environment-friendly and ecologically responsible. The company aimed to draw away from the establishment of health foods stores that were only filled with potions and pills. In the early days, the company’s sale doubled each year and by b1978 the company was doing more than $2 million per year. This success was majorly fueled by a group of committed staff who were all drafted as the stockholders in the company. In addition, the company grew to become the largest outside customer of Texas Health Distributors and acquired Esplanade Store in New Orleans which eventually became the sixth Whole Food Market.
Whole food Market has currently encountered particular problems in its mode of operation. Since is hitting the peak in October, the sales of organic and natural foods shares have fallen by more than 40%.This has largely been a period when the stock market has been strong. Furthermore, shoppers have been paving the way over the regular produce cost and the successful strategy in getting them to do so have attracted many competitors from other rival organic chains like Costco and Wal-Mart (Johnstone 318). This aspect has resulted into organic produce price premium crashing further down.
Apart from trimming costs to help keep the company margins up, the firm has had to recall certain products that were suspected of being contaminated. This has further made it harder to acquire the competitive edge and air of superiority over its current competitors. In addition, the whole food market has found itself as a victim of an increasingly competitive organic and natural environment (Sahota 19). This has resulted in customers looking for alternative at their mainstream markets and local neighborhood markets that have begun the expansion of their own natural and organic selections (Johnstone 230). The company has further undergone a big scrutiny after it failed to come clean on the applicator of toxic chemicals and GMO in its products. Much of the company’s privately labeled frozen vegetables and fruits do come from China where organics are not regulated. This aspect means that the government does not carry out its checks to make sure the farms are using the organic methods as stated. Thus, much of the dangerous food from Whole Food Market finds its way into the market for human consumption.
Best -of company breeds established in an attractive segment of the industry
The demand for organic food in the market is increasing at a faster rate than in the broader food industry. This aspect is ultimately mature by most measure. The organic segment of the industry has been increased by 8%-12% a year that is compared to the slight increase of 1%-2% in the traditional food sector (Wells 18). This aspect has enabled the Whole Food markets to expand aggressively since going public. In addition, the company has grown its tops and bottom lines at double digit figures over the past few decades. This has been an achievement not matched by any of its top competitors including KR Company that is the largest store in the country. Despite the pricing pressure and the downshift in comps, the relative strength can persist into the future. The company boasts of a wonderful record of excellent and consistent executions through its competent Chief Executive Officers (Wells 150).
The company wields a strong free cash flow
Whole Food Markets generates a lot of cash in terms of sales of products. Most importantly the company often looks to return a good portion of the liquidity to the shareholders. The return is evenly split between stock paybacks and dividends(Sahota 19). The strategy makes much sense for the investment, and cash balance presently garners modest returns. The repurchase is thus expected to be accretive enough to share the net in the coming years.
Whole Food Market Inc boasts of a strong image and mostly appeals to the hip, affluent and younger target market.
Other strengths include the ability of the company to remain the marquee brand in organics. The status was elevated after the acquisition of Wild Oats thereby leaving its major competitors as only traditional groceries that devote most of their shelves to organic items (Johnstone 318). In addition, the company has a good presence in the United States and the ability to provide a diverse range of food products.
One of the major weaknesses of whole food market is that, despite its value based food pricing and competitive nature; there is still a perception by the consumer that their healthier food products are costlier than competitor’s products. The aspect of market saturation at the same time forces the whole food to enter smaller markets with smaller stores. There is a further lack of product promotions through social networking (Hill 46). The US government recently subsidized by providing more financial support to the corn industry rather than the organic farmers. This move has made companies to no longer use the organic ingredients in their products. In terms of technological advancement, Whole Food Market does not provide consumer online services unlike its major competitors in the market(Hill 48).
Tighter Cost controls
Despite the planned price cuts being apt to weigh in margins, Whole Foods should be in a position to offset the pressure through streamlining of the company’s overhead structure. Since the company has been exceptionally executing from capital and cost allocation in the last recession, they have the ability to produce more of its scale advantages (Hill 51). They can further boost efficiencies in key economic areas such as labor, distribution and procurement. Therefore the plan to consolidate all the point-of –sale systems will increase more profits and aids in improving the overall customer experience. Furthermore, the company stands a better chance to be provided with value added services such consultation services and in-store health clinic (Hill 51)). Finally, there is opportunity to acquire and utilize the privately labeled growth.
Oversea market exposure
Despite maintaining a small cluster of store chains in the USA, Whole Food Market is still very far from operating internationally. But with the attempt to leverage the upscale brand continentally about to materialize, the situation may probably change over time. Expansions abroad have the likelihood of adding new chapters to Whole Food Market growth story.
Cost effective strategy
During the period of economic downturn, the whole food market can effectively adopt the cost effective strategy for its regular customers through a free reward card offer. Provision of discount on next purchases and buying one get one free offer from the store (Hill 46).
The company can build its brand identity in a manner will attract every consumer that is in need of organic foods. Whole Food Market should always come to the mind every consumer who wants to purchase organic products.
Rivals such as Mass merchants, conventional supermarkets, and local pop grocers have in the recent past increased the stocking of organic and natural food products. This move has been made mostly to jumpstart their top lines in a fairly mature industry (Hill 52). This has forced Whole Foods Market to reduce their prices in future. The move is likely to squeeze the company’s gross profits and margins.
There has been hampering of same-store sales in certain territories in the UK where the company operates two or more units in proximity (Hill 50). In the near future, this could be a problem in case Whole Food Market Company tries to expand the domestic unit base from 3000 to 1000 and beyond.
USA economic state
The economic state in the USA is a ready threat to Whole Food Markets due to the approach of Americans to save money. This aspect, therefore, may make consumers unwilling to buy organic food products when food becomes expensive (Hill 52). The changes in UK government regulations are another threat faced by the company. The regulations on organic food can ultimately have an adverse effect on the consumer purchasing power.
In terms of business concept, Whole Food Market has a unique selling proposition and strategy that gives whole food market the advantage over its competitors. This is due to their differentiation strategies. The company’s associates are far much knowledgeable and well trained than those in the average grocery store (Johnstone 222). The depth and breadth of the company’s item selection are explicit. Since the year 2002, Whole Food strategy has always been to open its large stores in different locations within the UK. This was to create an inviting and interactive store that had the ability to turn food shopping into fun and pleasurable experience(Well 100) Furthermore, the company uses a point of sale system to record and scan product sales unlike many of its competitors. Finally, the whole food company has recently updated its ordering procedure with the introduction of handheld inventory instrument that orders products automatically when they run out. This aspect shows that the company has embraced technological change, unlike its competitors.
Hill, Terry, and Roy Westbrook. "SWOT analysis: it's time for a product recall." Long range planning 30.1 (1997): 46-52.
Johnston, Josée, and Michelle Szabo. "Reflexivity and the Whole Foods Market consumer: the lived experience of shopping for change." Agriculture and Human Values 28.3 (2011): 303-319.
Johnston, Josée. "The citizen-consumer hybrid: ideological tensions and the case of Whole Foods Market." Theory and Society 37.3 (2008): 229-270.
Sahota, Amarjit. "3 Overview of the Global Market for Organic Food & Drink." The world of organic agriculture (2006): 19.
Wells, John R., and Travis Haglock. "Whole Foods Market, Inc." Harvard Business School Case (2005): 9-705.
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