Strategic Business Management, Section 1

Quiz # 4
Notes:
This is an open-book exam but consultation with anyone is prohibited.
Plagiarism is subject to penalty as per university policy.
Please fill in your name and Roll No. in the spaces provided below.
Please Save As this document as Word file, indicate your Roll No. in the file name where
indicated, and submit it on LMS within due time. Submission through any other
media/channel will not be accepted.
Response in any format other than Word document will not be accepted.
Question:
In the light of the information provided in the attached MiniCase, please give your response to
the following question(s) in the space provided below:
Why did Whole Foods lose its competitive advantage? Why did its turnaround initiatives
also fail?

Student Name:
Roll No.:
RESPONSE:
Whole Foods started off with a unique and novel proposition for their business which was selling
organic and freshly packed products at their stores. This was their competitive edge because at
that time this was not present in the market. But an important aspect of competitive advantage is
that it needs to be “sustainable” and for competitive advantage to be sustainable it needs to
satisfy various dimensions. Among these dimensions we can see that a competitive advantage
needs to be unique, novel and must have a factor that it could not be imitated by others for it to
be sustained for a long period of time and for it to reap benefits for the business. Moving further
to their strategy implementation they had to opt for either differentiation or cost effectiveness
but keeping in view their proposition Whole Foods was not even able to provide their products at
an effective cost. Their budget estimates and incurred costs severely ruin their profit margins.
What could have been done was that instead of opting for a low-cost initiative they must have
charged “premium” on the exclusive service that was being offered by them to their customers.
By opting for this strategy they were stuck in the middle. Another blunder that the company
made was when it denied the charges that were claimed on them owing them mainly to
negligence of the staff. Instead of taking a defensive approach the leader should have opted for
a more apologetic way of conveying how they actually “cared” for their consumers and would
go to any lengths to prevent any further mishaps from happening. This would have improved the
company’s perception and driven the “brand value”. Economies of scales is an important thing
to consider here. This is because they had their products processed at a higher turnover and this
could have been more effective of the company had devised ways to make it more economical
for all the transportation and acquiring their products.
When other competitors came into the market imitating what Whole Foods was doing in the first
place instead of being completely blinded by their strategy framework, they should have
realized the sensitivity of situation and opted for other ways of improving the situation. Their
turnaround failed because all the competitors copied them and were able to do them the same at a
much lower cost. Not only this but their promise of providing more healthy options also failed
when they accidently “mislabeled” their items and overcharged for them. The last blow was
when the local suppliers had “specialized” in their domain whereas Whole Foods was offering
something that was more general instead of specialized organic food. This was complete
opposite of what Whole Foods had initially offered to their customers thus further reducing the
brand value further. Thus, all in all a competitive advantage needs to be sustainable and should
not blind the management of the changes in the market that impact the business.