Jacqueline Garcia

Whole Foods Market

MGMT 4325.850

Jacqueline Garcia

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Step 1 Vision, Mission, Objectives

1a) Vision

Their aspiration is to become an international brand synonymous eith not just natural and organic goods,
but also to be the best food retailer in every community in which they locate. “Whole Foods, Whole
People, Whole Planet” emphasizes the companies vision as more than just a food retailer.

1b) Mission

Whole Foods Market’s mission is “to promote the vitality and well-being of all individuals by supplying
the highest quality, most wholesome foods available.”

1c) Objectives

To be the best food retailer in every community in which they are located and to provide good customer
service and premium quality foods.

1d) Strategies

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Step 2: Identify the organization’s external opportunities and threats.

2a) Economical Forces

 Unemployment Trend/ level of disposable income

 Typical growth rates of 20% to 30% for organic food sales in the US eased in the 2 nd ½ of
2008 as middle and upper income families felt the effects of layoffs and declining
portfolios.

 Stock market trend

 After peaking at almost $80 in Jan 2006 its stock has continued a downward slide from
then. In 2009 it fluctuated between $9 to $19.

 Inflation rate & value of $1

 In contrast since food companies have been increasing prices to offset the rising
commodity prices & currency related effects, the price gap between regular food products
& organic products has narrowed.

 Price fluctuations

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  This narrowing of prices could make organic products more appealing to a greater
number of customers.

2b) Social forces, demographic forces, and environmental forces

 Attitude toward product quality:

 Every department that handles organic food is certified

 Location of retailing

 Some of their newer stores were also built in lower income area bringing them into direct
competition with more established and lower cost competitors

 Government regulation

 USDA’s National Organic Program declared individual certification.

 Social programs

 Heavily involved.

 Attitude toward customer service

 Knowledgeable staff

2c) Political, governmental and legal forces

 Antitrust legislation

 FTC involvement with acquisition of Wild Oats

 Level of defense expenditures

 $19 million in settlement issues

2d) Technological forces

 Internet

 Corporate website averages 50000 hits a day.

 Marketing

 Word of mouth

2e) Competitive forces

 General grocers
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  Walmart – number 1 grocer seller, over $100 billion in 2008, in 2009 announced plans to
completely overhaul its oldest and biggest store brand in the entire country

 Kroger - $76 billion in sales, 2500 stores, number 1 pure grocer in sales, expanding its
marketplace store concept

 Safeway - $44 billion in sales, 1750 stores

 Organic

 Trader Joe’s – (2008) 300 stores, 25 states and growing, stores concentrated in California,
usually priced lower, offer similar product mix on the cheap

 Wegmans – open air market concept, $4.8 billion in sales (2008), 30 th on list of 25 top
supermarkets, 70 + stores, stores concentrated in New York and surroundings, rated in
top tier of fortunes annual, list of top 100 best companies to work for

Step 3 Construct a Competitive Profile Matrix.

Competitive Profi le Matrix

Whole Foods Market Trader Joes Walmart

Weighted Weighted Weighted

Critical Success Factors Weight Rating Score Rating Score Rating Score
1 location of facilities 0.34 4 1.36 4 1.36 4 1.36
2 brand awareness 0.33 4 1.32 1 0.33 4 1.32
3 price competitiveness 0.33 3 0.99 3 0.99 2 0.66
Total 1 3.67 2.68 3.34

Whole Foods Market’s weighted score is 3.67 and it shows they are doing better than their

competition in the industry. Whole Foods is doing better because they do a good job positioning their

locations and penetrating new markets thus taking out competitors as well. For example: global

expansion, acquiring Wild Oats and repositioning and building in lower income areas. In doing this it

helps them stay in direct competition with their rivalries.

Step 4 Construct an External Factor Evaluation matrix

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 EFE Marix for Cinema Complex

Key External factors

Weighted
Opportunities Weight Rating Score
inflation rate & value of the $1: cost of food rising and
1 currency related eff ects >>> narrow price gap 0.03 2 0.06
2 price fl uctuations: make organic food more appealing 0.07 2 0.14
3 atti tude toward product quality: all dept's certified 0.08 3 0.24
location of retailing: lower income areas, direct
4 competitiion lower cost competitors 0.05 3 0.15
5 social programs: heavily involved 0.06 3 0.18
6 atti tude toward cs: knowledgeable staff 0.09 3 0.27
7 internet: corporate website averages 50000 hits a day 0.08 1 0.08

Key External factors

Weighted
Threats Weight Rating Score
1 stock market trend: downward slide since 2006 0.07 1 0.07
unemployment trend/ level of disposable income: growth
rates of 20 - 30% in sales declined due to layoff s and
2 portfolios 0.09 2 0.18
gov't regulation: USDA's Natioinal Organic Program
3 declared individual cert 0.04 4 0.16
Antitrust legislation: FTC involvement w/ acquisition of
4 wildoats 0.05 2 0.1
level of defense expenditures: $19 million in settlement
5 issues 0.11 2 0.22
6 marketing:dependent on word of mouth 0.05 1 0.05
general grocer competitor increasing their off erings of
7 organic food 0.07 3 0.21
8 organic grocers off ering similar product mix cheaper 0.06 3 0.18
Total 1 2.29

Whole Foods Market’s weighted score is 2.29 which is below avg. Whole Foods threats have exceeded

opportunities. Having a knowledgeable staff increases their customer service image compared to the

competitors keeping their existing customer base and potentially drawing more in. Although the Their

number one threat is the amount of money they had to spend in litigation. Major improvements can be

made through creative advertising on their already established website which is drawing in more than

50000 hits a day.

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 Step 5 Porter’s Five Forces

BARRIERS TO ENTRY/ EXIT COMPETITIVE RIVALRY

 Barriers to entry are low  In the organic industry

making competition high but
Whole Foods counter attacks
well to deter new organic
entrants by lowering prices,
emphasizing value and offering
greater discounts.
(excluding regular grocers)
rivalry is increasing.
barriers to  In the industry consumer brand
barriers to
entry/
entry/ exit
exit switching is increasing as there
is an increase of similar product
offerings with general grocers.

supplier
supplier competive buyer
buyer
power
power rivalry power
power

Supplier Power Buyer Power

 Bargaining power of suppliers threat

threat of
of
substitution
 Buyer power in this
substitution
is increasing this environment environment is high making
making competition increase competition go up. Their
as more grocers are offering differentiation advantage has
organic products. narrowed due to the
competitions encroachment on
that niche. It is also very easy
for buyers to switch their

THREAT OF SUBSTITUTION

 Whole foods suffers from close competition w/ producers of substitute (non-organic and
organic) products putting a ceiling on prices that can be charged, as store brand and generics
recognition is at an all time high.

Analysis

After applying Porter’s five forces to the Whole Foods industry I feel that the firm is suffering as a
result of these environmental conditions because markets with low entry barriers have lots of players
Step 6 RBV Perspective
and thus low profit margins. The lower the barriers the more likely the market is to become a perfect
competition at this point Whole Foods is in a monopolistic competition.
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 A. Whole Foods Market has gained leadership in the organic industry by penetrating the

market through acquisitions and buying out competitors and reestablishing stores. They

have also created a good customer service base by educating their staff in the products

they sell and the staffs willingness to help. They have a tremendous workforce of 50000

team members on the roster. The innovation of their own organic brand name food is

also favorable in the market as 64% of shoppers said they often or always buy a store

brand rather than a national one. These internal factors are responsible for creating a

niche retailer.

B. Whole Foods Market has a list of distinctive competencies which sets them way apart

from their rivalries. To include: knowledgeable staff and willingness to help which

creates that good customer service base, their specialty item selection allowing them the

ability to skim the market, location strategy, selection of prepared foods, and penetration

into the global market. The combination of having a vast selection of specialty items thus

allowing them to skim the market the way that they do is the number one thing that they

do particularly well bringing revenue from the market before substitute products appear.

This in turn gives them the control to set those premium prices and quality items they are

well known for but also to lower the price drastically to capture the low end buyers and

thwart the copy cat competitors.

Step 7 IFE

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 Key internal factors
Weighted
Strengths Weight Rating Score
strong expense control leads to 10% increase in income
(2008) 0.04 3 0.12
Worlds leading natural & organic foods super
market:depth and breadth of item selection/ market
skimming 0.11 4 0.44
good rep and image:"100 best companies to work for" in
Fortune since 1996 rated 16 out of 100 (2009) 0.08 4 0.32
perishable product sales accounted for app 67% of total
retail sales 0.09 4 0.36
reduce capital expenditures 0.05 3 0.15
prepared meals accounted for 20% of total sales 0.03 3 0.09
only spend 0.5% of total sales on advertising & marketing
compared to industry 0.02 2 0.04
growing brand name 0.09 4 0.36
Key internal factors
Weighted
Weaknesses Weight Rating Score
Distribution eff ectiveness 0.09 1 0.09
cutti ng planned store openings 0.07 2 0.14
successor 0.04 1 0.04
unsaturated markets: majority of sores located in lower
half of the US 0.07 2 0.14
cost of products 0.03 3 0.09
negative attention to CEO & Whole Foods hurting image &
business 0.11 2 0.22
multiple strategy issues to grow and succeed 0.08 2 0.16
0 0 0
Total 1 2.4

Whole Foods Markets weighted score is 2.4 which is just below the average. In this matrix the

internal strengths far outweigh the weaknesses. Being that they do hold the title of the “worlds

leading natural and organic foods” and the depth and breadth of the item selection that they have

I feel they can eventually make a good turn around for the future. Launching and growing their

new store brand can bring in an added increase to perishable. In the middle of a recession Mr.

Mackey might want to think about diminishing the negative attention drawn to Whole Foods to

protect the image that has been portrayed until now.

Step 8 Financial Ratios

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Ratio (2008) Whole Foods Evaluation
Marke t Strength or
Weakne ss
Liquidity Ratios
Current 0.93
Quick
Leverage Ratios
Debt to total assets 55.5
Debt to equity 1.2
Long-term debt to equity 0.61
Times-interest-earned ratio
Activ ity Ratios
Fixed Assets Turnover
Total Assets Turnover
Inventory Turnover 24
Profitability Ratios
Gross profit margin 34.00%
Operating profit margin
Net profit margin 3.00%
Return on assets
Return on equity
Price-earnings ratio
EPS 0.82
Growth Ratios
Sales Growth % (3-year)
Net Income Growth % (3-year)
Earnings per share Growth % (3-year)

Dividends per share Growth % (3-

year)

Step 9 SWOT ANALYSIS

Stre ngths – S We akne ss e s – W

•organic market leader,
knowledgeable staff , •distribution effectiveness,
community cutting store openings, mult
involvement, item strategy issues to grow and
selection succeed

Opportunitie s – O SO Strate gie s WO Strate gie s

•Private label, global use website as in a more creative res tratigize iss ues to continue penetrating
expansion, narrowing marketing manner, market,
price gaps, website

Thre ats – T ST Strate gie s WT Strate gie s

weak economy s pending down, continue preaching good cus tomer improve on dis tribution effectivenes s as a
government regulations , s ervice to retain established means to beat increas ing competiton
increas ing competion clientel

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