a detailed study to analyze the business strategy of whole foods market inc

A Detailed Study to Analyze the Business Strategy of Whole Foods Market Inc 1

A Detailed Study to Analyze the Business Strategy of Whole Foods Market Inc

Charm Rammandala

California Intercontinental University


Abstract

The purpose of this study is to understand the business philosophy behind the Whole Foods

Market Inc which is the largest natural and organic foods supermarket in USA. The study will

look in to the business strategy of the company along with firm specific resources and

capabilities. Further, study will evaluate the future challenges and opportunities for the company.


A Detailed Study to Analyze the Business Strategy of Whole Foods Market Inc

Whole Foods Supermarket Inc is the biggest supermarket in USA which sells natural and

organic products. It’s the first and the only supermarket which is nationally accredited as

‘certified organic grocer’. Company has 462 stores in North America and United Kingdom.

Founding philosophy behind the Whole Foods is to seek out the finest natural and organic food

products available, ensure the highest quality and have an unshakable commitment to sustainable

agriculture. It generated US$13.1 billion in revenue last year with net income of half a billion

dollars. 97% of the revenue generated in USA making them fully depended on the USA

operation for the company’s financial performance (Diederich 2014)

Whole Foods business strategy

Being true to the company philosophy, Whole foods business strategy revolves around the

core concept of organic and natural food supplier to the nation. Company had ensured to make

all stores throughout the country to have the green certification as an accredited organic grocer.

Whole Foods mission is to set the standards of excellence in food retailing. This is a very

powerful mission statement and it helps to attract and retain a loyal base of customers (Seth

2016)

Whole Foods strongly believes that its emphasis on highest quality standards set it apart

from the rest of the supermarkets. Also, company bans many ingredients such as certain foods

colorings’, flavors, sweeteners, hydrogenated fats and meat prepared from animals raised with

antibiotics. This strategy to ban certain ingredients which are commonly found in other

supermarkets help to create an identity for the company and create a niche market in the crowded

market place (Diederich 2014).


There are 3144 food supermarkets in USA with 37459 stores. It is therefore very important

to have a differentiation strategy to stay relevant and overcome the competition. Emphasizing on

the core massage of sustainably produced organic and natural food retailer is the driving force of

the company. It gives a sense of purpose to the customer to shop in Whole Foods and higher

prices justified by the extra effort company putting to source the best and quality products

(Grimes 2015)

Firm specific resources of Whole Foods Supermarket Inc

Resourced based view discuss the firm specific resources. Every company has its core

competencies built over time and this knowledge enable firm to stay ahead of the competition

and create a market advantage. Combination of physical, organizational and human capitals of

the firm create the firm specific resources (Peng 2012)

When thinking about organic and quality foods, Whole Foods supermarkets is the first name

comes to mind in virtually every customer in the country. Over the last 35 years, they have

managed to create an identity for the company as the premier destination for the organic and

natural foods. This is as a result of firm’s internal knowledge on how to source the best food

products from the farmers. It is vital to understand food growing and cultivating methods, how to

fertilize and what pesticides to use and which ones to avoid (Diederich 2014)

Similarly, knowledge on food processing techniques and storage is very important to keep

the goods fresh and healthy. Having the processes and facilities to avoid cross contamination and

spoilage is a vital knowledge. By training the team members on the job specific knowledge is

extremely important and once trained they become an integral part of the company. being able to

explain the customer’s concerns and inquiries from the healthy food point of view is a very


important to create a better customer experience and loyalty. This is even more important when

considering customers expected to pay higher prices for similar products in other supermarkets.

Whole Foods has managed to create a firm specific knowledge over the years in terms of

knowledge on supply chain and organic food processes. Company invested in stores which gives

best access to target customers enabling company to be visible in key locations. Building a team

of employees who are knowledgeable on organic and natural foods and how to source and sell

them to customers is a key resource of the company (Grimes 2015)

While acknowledging customer perception on organic foods declining why Whole Foods

still emphasizing the same business model

Over the last two decades, there was a movement among the general public to eat healthy and

heightened awareness about the origin of the food they eat. This trend has largely shaped the

Whole Foods Supermarket we see today. Company was able to charge above average prices for

its products as customers were willing to bear the additional cost knowing it would make them

feel good about their choices (Seth 2016)

It is noted that Organic food sales has been increasing steadily over the last decade in USA.

Chart 1 demonstrate that total value of organic products in 2015 was US$43.3 billion which is an

increase of US$4.2 billion from previous year. The average increase of overall food market is

about 3.3% per annum while the growth of organic food is in double digits averaging 10.2% per

annum (Grimes 2015).


Chart 1 (Organic Trade Association)

While the overall consumer demand increasing for the organic and natural food market,

traditionally strong players in the segment such as Whole Foods not seeing the same rate of

growth on its sales. This is predominately due to the stiff competition faced by the company.

There is an intense pressure from the rival supermarkets as they too tapping in to the products

offered by the company (Seth 2016)

Walmart, Costco and Sprout farmers market are few of the new entrance to the organic and

natural food market. While new to the organic food industry, these supermarkets are not new to

the grocery and food industry. All the infrastructure and necessary resources are available for

them to make a quick transition and more importantly offer the products significantly cheaper

than Whole Foods (Grimes 2015)

Savvy shoppers who are interested in organic and natural food products and seeing the

options available for them in other supermarkets are opting to cheaper options. Shopping

experience might not be as great as Whole Foods but savings are a strong motivation factor for

them to shop at alternative supermarkets (Seth 2016).


Summery

Over the last 30 years Whole Foods have maintained an image of leading retailer of organic

and natural food for the nation. The demand for the organic and natural food products increased

in double digits due to the health-conscious customers. Over the last few years’ traditional

retailers have noticed the trend and started their own version of organic and natural foods. This is

causing a problem to Whole Foods as their growth is dramatically reduced due to customers

opting to cheaper options provided by competitors.


Reference

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Bazerman, H (2012). Judgement in managerial decision making. New York, Pearson

Diederich, M (2014). Whole Foods Market Business Strategy Analysis, Pearson, NY

Grimes, R. (2015). Supermarket Business. New York, McMillan

Kourdi, J (2015) Business Strategy. A guild to effective decision making. Irwin, McGraw-Hill

Seth, A. (2016). Supermarket Wars. Global Strategies for Global Retailers San Francisco,

Pearson

Peng, M. (2012). Global Strategy. New York, South-Western