Good About The Company Report Example

Type of paper: Report

Topic: Company, Business, Food, Market, Customers, Products, Health, Sales

Pages: 9

Words: 2475

Published: 2020/10/22

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Business

Business Analysis- Whole Foods Market

Headquartered in Austin, Texas, Whole Foods Market is the certified organic grocer and retails natural and organic foods serving three markets, namely, US, UK and Canada. The company was founded in the year 1978 and went public in 1992, At present, the company has network of 399 stores and generates annual sales of $14 Billion.
The company operates with the mission to promote the viability and well-being of all the individuals through supply of high quality foods in the form of organic foods.

Porter’s Five Forces

-Competition/ Rivalry
The company faces competition from local, regional, national and even international supermarkets chains, specialties chains, online retailers, et cetera. While few years back, the company was a sole leading organic produce retailer, now rivals like Krogers and Wal-Mart with their entry into organic retailing are posing maximum rivalry to the company.
-Bargaining power of suppliers
The supply for the company is arranged through a variety of suppliers which are the farm producers themselves, both at regional and national levels. However, although the supply is arranged from variety of suppliers that allows the company to negotiate better volume discounts, but United Natural Foods, Inc. (“UNFI”) is the largest third-party supplier, accounting for approximately 32% of total purchases in fiscal year 2014. Due to this concentration of purchases from a single third-party supplier, the company is exposed to high operating risk and the supplier is in a position to bargain at a substantial level., pg 6
-Bargaining power of consumers
Over the years, many factors have turned in favor of the company that allows them to have a legitimate control over the prices of their products. Some of them are stated below:

Growing awareness of the consumers relating to purity and safety of the food rather than the price

The younger generation that values health, sustainable and organic trade
A better educated and increasing segment of the wealthier populace whose median age is increasing.
, pg 1
Thus, the company deals with set of consumers who are largely insensitive of prices and more about organic and healthy origin of the food. Thus, the bargaining power of the buyers is low.
-Threat of new entrants
Whole Foods Market can potentially face threat of new entrants in the market. Even the company states this threat in their 10K statement were they declare that some of its competitors are expanding aggressively to earn their market share in offering natural products. Thus, there is a high threat of new entrants to gate-crush the industry and this may negatively affect the operating results through loss of sales, reduction in margin from competitive price changes, and/or greater operating costs such as marketing.
Important to note, organic market is registered a growth of 11.5% to $35.1 Billion and the growth rate is expected to increase further in the near future. Hence, not only big organizations such as Kroger and Wal-Mart will try to enter aggressively into natural and organic food market, but small one such as Trade Joe are also making great impact in the market.

Thus, we believe that growing market and sustainable profit margins may lure more companies to enter this industry or segment.

-Threat of Substitutes
As said before, the company has a specialized set of consumers who believe in healthy living and healthy eating. In addition, with growing awareness of the consumers relating to benefits of organic foods, we don’t believe that the company is likely to face threat from substitutes such as junk food or non-organic food as the loyal customers will be loyal to their organic consumption.
However, since price of the substitutes do matter, the company in order to increase its sale and grow the organic consumption has launched ‘’365 Everyday Value’’ program that serves more than 500 organic products at more affordable price. , pg 3

Thus, we believe that the company will face little threat from substitutes.

PESTEL Analysis
The concept is widely used by the organization and by the third parties to have a bird eye view of the environment under which the company operates. Since it covers multi-dimensional aspects of the organization, it helps them to keep a track of the factors that directly influences their operations. Below discussed is the PESTEL analysis of Whole Foods Market:
-Political
Although the company operates in capitalistic political system only but it needs to adhere to various regulations associated with production and sale of organic food items. All products labeled as organic and sold within a retail store or used within the production of foods labeled as organic must be verified by an accredited certifying agency. In addition, the company also has to adhere to organic equivalency agreement between US, Canada and European Union. pg 1
In the United States, all the matters relating to organic sale and production are covered under US Department of Agriculture’s Organic Rule that was embedded into federal law in 2002. Thus, in order to sell any organic product in their store, Whole Foods Market has to comply with the regulations of USDA. For Instance, during 2011, when the company launched their body care products they had to comply with the regulations of U.S. Department of Agriculture (USDA) standards for sale as being organic.
-Economic
With 96.7% of the total sales sourced from United States market and that too when the product is highly priced than its substitutes (non-organic foods), the company is highly dependent upon on the macro-performance of the US economy. Amid the carnage of financial crisis of 2008, the consumer spending reached record low with thousands of individuals losing their jobs. However, over the half-decade, the US economy is back on the path of growth and is witnessing low unemployment along with increase in the income of households.
Such factors are highly optimistic for the company as increased consumer spending will lead to higher consumer spending and eventually, higher sales figures for the company.
-Social
This is one factor that is majorly in favor of the company. As discussed before also, there has been significant shift in in food preference of the consumers. On a primarily basis, the younger generation and the wealthy populace is largely educated about the importance of organic food and healthy eating. In addition, a major section of consumer is now aware of healthy lifestyle and how its supports in long-term wellness. pg 1
Also, the consumers now welcome those organization that have a concern for the environment and infusing healthy lifestyle in their customers.
Whole Food Market, through its various programs fulfills all such requirements and is expected to achieve a large consumer base in the coming future because of growing health consciousness.
-Technology
With company serving naturally grown products, the role of technology is limited to packaging only. However, the company is also entering into digital space by integrating with Apple Pay. In addition, the company continues to evolve the customer experience online, adding new features, products and merchandising to their eStore. pg 8
-Environment
The company whose base-foundation is linked with environment only, cannot neglect the same while operating its business. As for Whole Foods Market, the company is intensely involved in ensuring that it follows sustainable environment practices and be an environmental steward. Since 2004, the company have purchased over 4.3 billion kilowatt hours of wind-based renewable energy, earning seven Environmental Protection Agency (“EPA”) Green Power awards. During 2008, use of plastic grocery bags were discontinued at all the checkouts. In addition, 17 stores are using rooftop solar system, four stores are using fuel cells and one with combined heat and power (CHP) system. The concern for the environment extends towards a commitment to reduce energy consumption by 25% per square foot till the end of 2015., pg 9
-Legal
Just like any other organization, the company is also required to adhere to various legal regulations. As already discussed, being an organic product retailer, the company needs to adhere to laws framed by US Department of Agriculture for organic products. In addition, the threat of possible litigations with the employees, consumers, et cetera is always present., pg 13

SWOT Analysis

Strength:
Best-in-Breed Company in the industry:
Whole Foods Market is the world’s largest company involved in the retailing of organic and natural products to the consumers. In addition, the growing health awareness and inclination towards organic food is promising for the company. It is noteworthy to comment that natural/organic segment has been growing rapidly allowing the company to expand aggressively. On the other hand, rivals like Kroger and Wal-Mart are sort of new entrants in the organic food retailing and it will take them good amount of time to earn recognition in this segment.

Luxurious Store ambience

The company with 399 organic stores in US, Canada and UK that spreads to 15162000 square foot offers a large luxurious ambience and a great shopping experience to its customers while they are engaged in purchase of healthy and organic products., pg 5

Adherence to Corporate Social Responsibility

As already discussed in one of the previous sections, the consumer today welcomes the organization that not only offers them great products at best prices but also take care of the environment and society around them. As for Whole Foods Market, the company involves itself into high standards of environmental and social aspects. Some of the appreciable activities by the company in this regard include:
Use of renewable energy sources in the stores which includes, solar system cells, fuel cells and roof top combined power heating system, etc.

Employing roof top farms and using green-building innovations.

No use of plastic grocery bags in its stores
Establishment of Whole Cities Foundation- It is the newest arm of the Whole Foods Market family and works as independent non-profit organization and dedicates itself to individuals and community health through collaborative partnerships, education and broader access to nutritious food in underserved communities.
Establishment of Whole Kids Foundation- Another non-profit foundation of the company that works for betterment of national intake of the children by supporting schools and educating families. The foundation also provides grants to the schools for establishing salad bars and for offering national education to teachers and other staff. , pg 9

Weakness:

Premium Pricing
Although the company has launched affordable range of organic products through ‘’365 Everyday Value’’ program but still a large consumer base are high income group people. Historically, this position serves well for the company as it allows the margins to outpace that of the industrial average. However, the luxury orientation can prove detrimental to the company by rending it to possible budget changes during economic downturns. In addition, at the time of poor economic performance, it is the luxury items that are ruled out from the consumer’s list.

Thus, premium pricing and large exposure to macro-economic factors leaves the company prone to negative results.

Opportunities
Offshore expansion:
Although the company has its stores in Canada and UK in addition to US, but with 96.7% of the total sales generated from US alone, it cannot said to have a complete international exposure. Thus, with growing health awareness among the consumers globally and great potential for the organic market to expand further, the company can add new chapters to the company’s new unique strategy., pg 1

Traffic Booster:

The company in their SEC-10K statement has declared that till now it has been spending minimal resources in media and marketing advertisement. During 2014, the total expenditure made by the company on advertisement accounted for only 0.4% of the total sales., pg 8
However, in order to reach the wide scale of consumers, it should take up the marketing and advertising activities more seriously and should educate the audience towards the growing need of better food quality, public health and environmental sustainability.

Focus on cost cuttings:

With growing rivalry in the industry, the company should focus on cost cutting by reviewing its overhead structure.
Threats:
Aggressive Rivals:
Although the company still dominates the organic market, but the growing rivalry is a great source of threat to the ace position of the company in the industry. The major threat is being posed by Kroger, leading retailer in the United States that is competing hard with the company for the market share.

Moreover, optimistic predictions relating to the growth of the organic market is luring new entrants to enter the industry.

Declining Comparable Store Sales Growth
The decline in comparable store sales growth is another possible threat to the company. Important to note, since 2012, the company has been experiencing negative growth in comparable same store sales growth percentage. During 2013, the comparable store sales growth declined from 9% to 7% followed by another 3% decline in 2014., pg 5
In addition, many of its stores sales have been disrupted as a result of cannibalization. In Boston, two stores are in close proximity and are thus hampering sales of each other. This could be a big issue for the company when it is targeting higher growth in the recent time. Thus, while the opportunities will extend as the industry prospects seems optimistic, however, to ensure comparable store sales growth, we should expect the store area to slow down a little for the coming years now.

Works Cited

"SEC 10K Filing- Whole Foods Market." n.d. Whole Food Market. 31 January 2015 <http://www.sec.gov/Archives/edgar/data/865436/000086543614000161/wfm10k2014.htm#s56db89faadd441089a400d7114f983e5>.
Sparshot, Jeffry. "Hiring Booms, but Soft Wages Linger." 9 January 2015. Wall Street Journal. 31 January 2015 <http://www.wsj.com/articles/u-s-adds-252-000-jobs-unemployment-falls-to-5-6-1420810489>.
Tahiri, Adem. "Why Whole Foods Market Stock Has Crashed 34% in 2014." n.d. 31 January 2014 <http://www.fool.com/investing/general/2014/10/03/why-whole-foods-market-stock-has-crashed-34-in-201.aspx>.
"What is PESTLE Analysis? ." n.d. 31 January 2015 <http://pestleanalysis.com/what-is-pestle-analysis/>.

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