Whole foods market case 2009
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Whole Foods is the leading natural and organic supermarket, founded in 1978. It has grown to 264 stores in the US, 6 in Canada, and 5 in the UK, with $6.6 billion in annual revenues and 50,000 employees. While Whole Foods has strong brand recognition and product quality, its growth has been relatively slow and it faces threats from competitors expanding into organic products. The document analyzes Whole Foods' internal strengths and weaknesses as well as external opportunities and threats, and recommends the strategic plan of expanding into new markets through market development to address its weakness of being concentrated in the US market and pursue opportunities for growth.
Whole foods market case 2009
- 1. By M Amir Mujtaba
- 2. Introduction Whole foods is the world leading natural and organic supermarket. It offers variety of products. John Mackey open Saferway store in 1978, Merged with Clarksville Natural Grocery in 1980 as a result World Foods is formed.
- 3. Cont… Having 264 stores in US, 6 in Canada and 5 stores in UK A third of its existing square footage derived from acquisition World foods have 50,000 employees with $ 6.6 Billion of revenues Head Quarter is in Austin, Texas, Current CEO is John Mackey
- 4. Internal and External Analysis
- 5. SWOT Analysis Strengths Brand Recognition Good Quality Huge selection/variety Positive Employee Environment Large, customized stores No. 16 on Fortune’s World’s Most Admired Companies list Weaknesses Concentrated just on US market Relative Slow Growth Limited number of suppliers Advertising Budget is very low Opportunities Expansion Consumer Health Benefits through media Emphasis on organic farming Threats Supermarkets introducing organic products Increasing inflation Low spend per trip due to higher prices
- 6. Internal Factor Analysis (IFE) Key Internal factors Weight Rating Weighted Score Strengths •Brand Recognition •Good Quality •Huge selection/variety •Positive Employee Environment •Large, customized stores •No. 16 on Fortune’s World’s Most Admired Companies list 0.12 0.15 0.10 0.08 0.10 4 4 4 3 4 0.48 0.60 0.40 0.24 0.40 0.05 3 0.15 •Concentrated just on US market •Relative Slow Growth •Limited number of suppliers •Advertising is Budget very low 0.15 0.05 0.10 0.10 1 2 1 2 0.15 0.10 0.10 0.20 Total 1.00 Weaknesses 2.82
- 7. Interpretation (IFE) Matrix The company IFE score is 2.82 which is above the average score 2.5. It indicates that the company is internally very strong, if the company use its strength effectively it will minimize the weaknesses of the company.
- 8. External Factor Evaluation (EFE) Key External factors Weight Rating Weighted Score Opportunity •Expansion •Consumer Health Benefits through media •Emphasis on organic farming 0.25 0.20 0.15 4 2 3 1.0 0.40 0.45 •Supermarkets introducing organic products •Increasing inflation •Low spend per trip due to higher prices 0.15 0.15 0.10 4 3 2 0.60 0.45 0.20 Total 1.00 Threat 3.10
- 9. Interpretation (EFE) Matrix The EFE total score is 3.10 which is above the average score of 2.5, indicate that the company is replying in an excellent way to current possibilities and risks in its industry. In other terms, the company's techniques successfully take advantage of current opportunities and reduce the negative effects of exterior risks.
- 11. CPM Critical success factor weight Whole Foods Market Trader Joe's Rating Score Rating Score Brand Recognition 0.20 4 0.80 4 0.80 Product Quality 0.13 4 0.52 4 0.52 Management 0.10 2 0.20 4 0.40 Price Competitiveness 0.15 2 0.30 3 0.45 Financial Position 0.15 2 0.30 3 0.45 Customer Loyalty 0.15 3 0.45 4 0.60 Global Expansion 0.12 2 0.24 2 0.24 Total 1.0 2.81 3.46
- 12. Interpretation (CPM) The Competitive Factor Evaluation Matrix reveals that Whole foods is only partially positioned against its competitor Trader Joe’s. Shoppers spent only few dollars at Whole Foods while shopper spent more dollars in nearest competitor because whole foods prices are high. They have to provide high quality on low cost and fresh foods in order to maintain its profitability.
- 13. Problems
- 14. Minor Problems Expand into smaller area where population have low income Focus on niche market Less number of Suppliers as compare to competitors, results low growth Advertising Budget is very low
- 15. Major Problem Decision Making Whole foods management is acquiring small competitors and building new stores, through which their business is only expanding in US, Management is not taking decision to expand their business in UK and Canada.
- 17. Strengths - S TOWS MATRIX 1. 2. 3. 4. 5. 6. Opportunities – O 1. Expansion 2. Emphasis on organic farming 3. Consumer Health Benefits through media Threats – T Supermarkets introducing organic products 2. Increasing inflation 3. Low spend per trip due to higher prices Brand Recognition Good Quality Huge selection/variety Positive Employee Environment Large customized stores No. 16 on Fortune’s World’s Most Admired Companies list Weakness – W 1. Concentrated in US 2. Relative Slow Growth 3. Limited number of suppliers 4. Advertising Budget is very low SO – strategies WO – strategies (S1,O1) (S2.O3) (W2,O1) (W3,O2) ST – strategies WT – strategies (S1,S5,T1) (W1,T1) (W3,T3) 1.
- 18. Interpretation (S1,O1): Whole foods have to expand their market. Its an opportunity for them because their brand is highly recognized if they enter into another market it will be beneficial( Market development) (W2,O1): Whole foods have the opportunity to enter into another market by doing this they can overcome their weakness (Market Development) (S1,S5,T1): Whole foods have recognized products and large number of stores in US they have to advertise their products in different ways to attract their customers. They should announce shopping incentives. Threat will be overcome by doing this. (Market penetration) (W1,T1): Whole foods can overcome its weakness and threat by expanding its Market from US to other Markets.( Market Development)
- 19. Internal Strategic Position External Strategic position Financial Strengths (FS) Environmental Stability (ES) Return on Investment leverage Liquidity Earning per share Total Average +3 +2 +2 +3 +10 +2.5 Price range of Competing products Competitive pressure Price elasticity of demand Total Average Competitive Advantage (CA) Market Share Product Quality Customer Loyalty Control over suppliers Total Average -3 -4 -3 -10 -3.3 Industry Strength (IS) -3 -2 -2 -4 -11 -2.75 Growth Potential Profit Potential Financial Stability Productivity, capacity utilization +3 +3 +2 +4 Total Average +12 +3
- 20. FS +7 Conservative Aggressive +6 +5 X-axis =CA + IS +4 = -2.75+(3) +3 = 0.25 +2 +1 +1 CA +2 +3 +5 +6 +7 IS -7 -6 -5 -4 -3 -2 -1 -1 Y-axis = FS + ES -2 = 2.5+(-3.3) -3 =-0.8 -4 -5 Defensive Competitive -6 -7 ES
- 21. Interpretation According to the space matrix score HP falls in the “Competitive Quadrant” . Strategies they can apply are They can focus on Market development because they are facing very tough competition in US market and they are having only few stores in the foreign markets They can also use Market penetration and use some different advertisement methods to attract customers.
- 23. IFE Total Weighted Score 2.82 EFE TOTAL WEIGHTED SCORE 3.1 4.0 Strong 3.0 – 4.0 3.0 Average 2.0 – 2.99 2.0 Weak 1.0 – 1.99 i ii iii iv v vi vii viii ix High 3.0 – 4.0 3.0 Medium 2.0 – 2.99 2.0 Low 1.0 – 1.99 1.0
- 24. Interpretation Whole foods falls in first region of IE matrix and there main focus will be on “GROW AND BUILD” and strategies which whole foods has to focus on are Market development Market penetration
- 26. Market Penetration Strengths Weight Market Development AS Key Internal Factors AS TAS TAS Brand Recognition .12 2 .24 4 .48 Good Quality .15 2 .30 3 .45 Huge selection/variety .10 2 .20 3 .30 Positive Employee Environment .08 - Large, customized stores .10 4 .40 2 .20 No. 16 on Fortune’s World’s Most Admired Companies list .05 2 .10 2 .10 Concentrated just on US market .15 3 .45 4 .60 Slow Growth .10 1 .10 3 .30 Limited number of suppliers .15 2 .30 1 .15 - Weaknesses Total weight 1.00 -
- 27. Market Penetration Key External Factors Opportunities weight AS Market Development TAS AS TAS Expansion .25 1 .25 4 1.0 Consumer Health Benefits through media .20 3 .60 1 .20 Emphasis on organic farming, .15 2 .30 3 .45 Super markets introducing organic products .15 3 .75 4 .60 Increasing inflation .15 1 .15 2 .30 Low spend per trip due to higher prices .10 3 .30 1 .10 Threats Total weight Total Attractive Score 1.00 4.44 5.23
- 28. Recommended Strategy and Plan of action Market Development Whole foods is competing in very unstable industry and their business is almost situated in one industry, if they face tough competition in that market so they will have no other market to rise their profits • They have to expand their business e in the UK and Canada as well as in other markets, which will help Whole foods to focus on stable market and also take the 1st mover advantage from competitors