whole foods market case 2009

Whole Foods Markets

By M Amir Mujtaba

IntroductionWhole 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.

Cont…Having 264 stores in US, 6 in Canada and 5

stores in UKA third of its existing square footage derived

from acquisitionWorld foods have 50,000 employees with $

6.6 Billion of revenuesHead Quarter is in Austin, Texas, Current

CEO is John Mackey

Internal and External Analysis

SWOT AnalysisStrengths Brand Recognition Good Quality Huge selection/variety Positive Employee Environment Large, customized stores No. 16 on Fortune’s World’s

Most Admired Companies list

WeaknessesConcentrated 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

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

0.120.150.100.080.10

0.05

44434

3

0.480.600.400.240.40

0.15

Weaknesses

•Concentrated just on US market•Relative Slow Growth•Limited number of suppliers•Advertising is Budget very low

0.150.050.100.10

1212

0.150.100.100.20

Total 1.00 2.82

Internal Factor Analysis (IFE)

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.

Key External factors Weight Rating Weighted Score

Opportunity

•Expansion•Consumer Health Benefits through media•Emphasis on organic farming

0.250.200.15

423

1.00.400.45

Threat

•Supermarkets introducing organic products•Increasing inflation•Low spend per trip due to higher prices

0.150.150.10

432

0.600.450.20

Total 1.00 3.10

External Factor Evaluation (EFE)

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.

CPM(COMPETITIVE PROFILE

MATRIX)

CPMCritical 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

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.

Problems

Minor ProblemsExpand into smaller area where population have low income

Focus on niche marketLess number of Suppliers as compare to competitors, results low growth

Advertising Budget is very low

Major ProblemDecision 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.

Alternative Strategies

TOWSMATRIX

Strengths - S

1. Brand Recognition2. Good Quality3. Huge selection/variety 4. Positive Employee

Environment5. Large customized stores6. No. 16 on Fortune’s

World’s Most Admired Companies list

Weakness – W

1. Concentrated in US2. Relative Slow Growth3. Limited number of

suppliers4. Advertising Budget is

very low

Opportunities – O1. Expansion2. Emphasis on organic

farming3. Consumer Health

Benefits through media

SO – strategies

(S1,O1)(S2.O3)

WO – strategies

(W2,O1)(W3,O2)

Threats – T1. Supermarkets

introducing organic products

2. Increasing inflation3. Low spend per trip

due to higher prices

ST – strategies

(S1,S5,T1)

WT – strategies

(W1,T1)(W3,T3)

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)

Internal Strategic Position External Strategic positionFinancial Strengths (FS) Environmental Stability (ES)

Return on InvestmentleverageLiquidityEarning per share

TotalAverage

+3+2+2 +3

+10+2.5

Price range of Competing productsCompetitive pressurePrice elasticity of demand

TotalAverage

-3-4-3

-10-3.3

Competitive Advantage (CA) Industry Strength (IS)Market ShareProduct QualityCustomer LoyaltyControl over suppliers

TotalAverage

-3-2-2-4

-11-2.75

Growth PotentialProfit PotentialFinancial StabilityProductivity, capacity utilization

TotalAverage

+3+3+2+4

+12+3

-7 -6 -5 -4 -3 -2 -1

+1 +2 +3 +5 +6 +7

+7+6+5+4+3+2+1

-1-2-3-4-5-6-7

AggressiveConservativ

e

CompetitiveDefensive

ISCA

X-axis =CA + IS = -2.75+(3) = 0.25

Y-axis = FS + ES = 2.5+(-3.3) =-0.8

FS

ES

InterpretationAccording to the space matrix score HP falls in the

“Competitive Quadrant” . Strategies they can apply areThey 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.

IE (INTERNAL-EXTERNAL

MATRIX)

i

ii iii

iv v vi

vii viii ix

Strong 3.0 – 4.0 Average 2.0 – 2.99 Weak 1.0 – 1.992.03.04.0

IFE Total Weighted Score 2.82

1.0

2.0

3.0

Low

1.0 – 1.99

Medium2.0 – 2.99

High

3.0 – 4.0

EFE

TOTA

L WEI

GHTE

D SC

ORE

3.1

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 developmentMarket penetration

QSPM(QUANTITATIVE

STRATEGIC PLANNING MATRIX)

Key Internal Factors Market Penetration

Market Development

Strengths Weight AS TAS AS TAS

Brand Recognition .12 2 .24 4 .48

Good Quality .15 2 .30 3 .45Huge selection/variety .10 2 .20 3 .30Positive Employee Environment .08 - -Large, customized stores .10 4 .40 2 .20No. 16 on Fortune’s World’s Most Admired Companies list

.05 2 .10 2 .10

Weaknesses

Concentrated just on US market .15 3 .45 4 .60Slow Growth .10 1 .10 3 .30Limited number of suppliers .15 2 .30 1 .15

- -Total weight 1.00

Key External Factors Market Penetration

Market Development

Opportunities weight AS TAS AS TAS

Expansion .25 1 .25 4 1.0Consumer Health Benefits through media

.20 3 .60 1 .20

Emphasis on organic farming, .15 2 .30 3 .45 Threats

Super markets introducing organic products

.15 3 .75 4 .60

Increasing inflation .15 1 .15 2 .30Low spend per trip due to higher prices

.10 3 .30 1 .10

Total weight 1.00

Total Attractive Score 4.44 5.23

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