Case Study on "Whole Foods Market 2007"

Case Study 10 pages (2797 words) Sources: 6

[EXCERPT] . . . .

Whole Foods

The demand for organic products has grown exponentially in recent years. As a result many companies that specialize in the sale of organic products have been forced to revamp their business strategies to meet the needs of an ever-growing demand. One such company is Whole Foods Market which has led the organic market industry as a respected suppler of organic products to consumers. The purpose of this discussion is analyze the case study, "Whole Foods 2007:will there be enough organic food to satisfy the growing demand?" The research will focus on the manner in which the company plans to address the problems posed by a scarcity in the supply of organic products.

Case Summary

John Mackey is an experienced executive in the grocery industry. After more than thirty years in the grocery industry Mackey decided to focus on a new approach to the grocery shopping experience (Harasta & Hoffman). Mackey decided that this new approach would involve the sale of organic product on a scale never experienced before. While many large grocery store chains had organic selection or organic sections available to customers, Mackney's idea involved the development of a grocery store that would contain products that were completely organic and natural, thus Whole Foods was born in1980. Since this time the company has expanded tremendously and the company's name has become synonymous with organic and natural products.

Currently the company is the largest natural food market in America. The company has 32,000 employees and owns 193 stores in Canada, the United Kingdom and the United States (Harasta & Hoffman). The locations for Whole Foods is dependent upon the demographics of the population and placed in areas where the population is receptive to and likely to purchase organic products (Harasta & Hoffman).

According to the case study "Whole Foods Market Remains uniquely missions driven: The company is highly selective about what they sell, dedicated to stringent quality standards, and committed to sustainable agriculture. They believe in a virtuous circle entwining the food chain, human beings and Mother Earth: each is reliant upon the others through a beautiful and delicate symbiosis (Harasta & Hoffman)."

In order to fulfill this mission the company offers only the best in organic and natural products for consumers. In addition the company aims to achieve 100% customer satisfaction. This missions is also accomplished through team work, which is a major aspect of the human resources strategy for the company. Whole Foods relies on team leaders to ensure that the day-to-day operations of the company runs smoothly.

Problem

Although Whole Foods has experienced a great deal of success in the years since its inception, there are aspects of the organic grocery industry that concern the company. For instance the demand for organic products in recent years has increased substantially. The United States Department of Agriculture explains that "Growing consumer demand for organic products has been manifested in the market in many ways. Acreage of certified organic farmland is increasing to meet growing consumer demand. According to the most recent USDA estimates, U.S. certified organic cropland doubled between

1992 and 1997, to 1.3 million acres. Preliminary estimates for 2001 suggest that certified organic acreage significantly increased between 1997 and 2001 (Dimitri & Greene)."

Although there has been growth in the organic farming industry, the number of farms that produce organic goods have not increased at the same rate. This means at some time in the future the demand for organic products will exceed the supply. In turn Whole Foods will have charge even more for the types of product in which it specializes. This is problematic as Whole Foods is already one of the more expensive organic market and some of the newer markets are offering organic products at much lower prices than Whole Foods. While the company still has an apparent competitive advantage because of the high quality of the products that it offers, it is concerned that this advantage will not be present in the future because there may not be enough organic products to sustain the company's growth.

Case Analysis

In the case of Whole foods the proper strategic management is vitally important to ensuring that the company will be successful well into the future. Strategic management is defined as the "Systematic analysis of the factors associated with customers and competitors (the external environment) and the organization itself (the internal environment) to provide the basis for rethinking the current management practices. Its objective is to achieve better alignment of corporate policies and strategic priorities ("Strategic Management")." The Strategic Management tactics utilized at whole Foods are apparent throughout every aspect of the company's operations. The firm clearly places a great deal of energy into choosing the types of products that it will offer and there is a great deal of emphasis placed on quality control and customer satisfaction.

Although the company has many strengths there are also some weaknesses. In addition there are some very real opportunities and threats that the company must take into consideration as an aspect of the strategic management process. The following section provides a SWOT Analysis for the case study.

SWOT Analysis

Strengths

The primary strength that Whole Foods has is associated with its early entry into the market. Whole Foods was created at a time in which the demand for organic products had just began. Because the company came into the market at a time that the demand for organic food had not yet reached its height, Whole Foods has been able to realize a great deal of profitability as a result of timing and placement in the market. In addition, the company's early introduction into the market has made its business operations the standard by which newer organic markets strive to emulate. Indeed the company's overall business strategy has become a benchmark in the industry.

Whole Foods has also embraced some conventional and unconventional forms of advertisement. As a conventional form of advertisement the company has used a word of mouth strategy to attract customers. The company has also relied upon inexpensive advertisements placed in health food magazines. The company is also able to gain a great deal of attention through its charitable activities. The manner in which the company advertises allowed it to spend only 0.5% of total sales for 2004 on advertising (Dimitri & Greene).

The quality of the products that the company offers is also a major strength. In fact the company's name has become synonymous with quality products. For instance, products sold at Whole Foods must meet the following quality standards:

Foods must be fresh, safe to eat and wholesome

Foods have to be free of additives and all preservatives

All product must promote healthy living

Promote organic growth of foods

Basically a great deal of Whole Foods past success can be attributed to the fact that the company has been able to differentiate itself from the competition through the quality of the products that it offers.

The quality of products that the company offers can be correlated with another one of the company's strengths which is brand name recognition. When people think of organic markets Whole Foods is the first that comes to mind. The company has established itself as the industry leader and worked hard to maintain brand name recognition since its inception in the 1980's

Finally, Corporate Responsibility is also a major strength of Whole foods. One of the company's primary concerns as it pertains to Corporate Responsibility is providing food for those who are without. According to the company's official website,

"Our team members are part of the local community and they are passionate about supporting the local causes that are important to our shoppers and neighbors. First off, it's a given that each store donates food to area food banks and shelters. We have food; they know how to get it to people who need it. Done. Then several

times a year, our stores hold community giving days (otherwise known as "5%

Days") where five percent of that day's net sales are donated to a local nonprofit or educational organization. The groups that benefit from these 5% Days are as varied as the communities themselves. Last but not least, team members are constantly volunteering their time and expertise to an assortment of local non-profits ("Community Giving")."

Corporate responsibility in this area and other areas assist allow the company to give back to the community that they serve.

Weaknesses

A major weakness of the company is that prices are not competitive. When Whole Foods was the only organic market, its price point was high but it didn't matter because there were no other alternatives. However, today the industry has changed and Whole Foods has failed, in some ways, to change with the industry. The strategic management of the company has taken the position that there will always be a certain segment of the population that is wealthy enough a health conscious enough to pay a premium price for organic foods. However, this theory may be unraveling and Whole Foods… READ MORE

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