Whole Foods Market in 2008: Vision, Core Values, and Strategy
Running head: CASE STUDY ANALYSIS FOR WHOLE FOODS MARKET Case Study Analysis for Whole Foods Market Abstract This paper is an analysis of Whole Foods Market’s vision, core values, and business strategy. It lays out the type of strategy that Whole Foods Market utilizes, what parts of this strategy work and what parts could use improvement. This case study analysis concludes that Whole Foods Market has a very good business strategy, has a strong, clear vision, and lives by its core values. With only a few minor recommendations, Whole Foods Market can and should climb its way back to the top.
Case Study Analysis for Whole Foods Market Whole Foods Market captured around 11 percent of the total natural or organic sales from the total U. S. grocery store market in 2007 (Gamble, Strickland, and Thompson, 2010). That is quite a lot of market share for one grocery store chain. In order to be successful, a business entity must have a strategy, or “a series of competitive moves and business approaches that managers are employing to grow the business, attract and please customers, compete successfully, conduct operations, and achieve the targeted levels of organizational performance” (Gamble et al. 2010), p. 6). This case analysis will attempt to “dig in” to the strategy of Whole Foods Market and determine whether or not Whole Foods Market has attained a “sustainable competitive advantage” (Gamble et al. (2010), p. 7) with the strategic moves they have chosen. Chief Elements of Whole Foods Market’s Strategy There are a number of really good strategic moves that Whole Foods Market has put into place that has contributed to its success. Quality Standards and Customer Commitments
Whole Foods Market is in the business to “sell the highest quality foods we can find at the most competitive prices possible” (Gamble et al. (2010), p. C-13). Whole Foods Market makes it a priority to evaluate the food choices it makes and ensure that these foods rate highly in terms of nutrition, freshness, appearance, and taste, while maintaining a list of unacceptable ingredients for the foods they sell. They also guarantee their products 100 percent and strive to make the shopping experience of their customers a fun and enjoyable adventure (Gamble et al. 2010). Another strategic move geared towards a commitment to its customers is the size and scope of many Whole Foods Market stores. Over 100 of the stores opened since 2000 have averaged 48,000 square feet with 18 of these stores being over 60,000 square feet. It is also common in a Whole Foods Market store to see mini-restaurants, pastry chefs, oven ready items prepared by in house chefs, juice bars, fresh cut and exotic flowers, household items, and free wireless Internet access among many, many other extras for the customer (Gamble et al. 2010). Merchandising Whole Foods Market has put into place a customized store layout plan for its stores. Stores do not follow one specific layout, but are mixed and matched and tailored to fit the size and structure style of the building that is used. The layout for Whole Foods Market stores is designed to accentuate whatever product mix is successful in a specific area. The goal of Whole Foods Market is to create a fun, enjoyable atmosphere that comes in third place after home and the office.
Hand stacked produce, in store chefs, scratch bakeries, prepared food stations, whole body departments, salad bars, and sit down dining areas are just a few of the many features that Whole Foods Market has utilized to ensure an enjoyable shopping experience (Gamble et al. 2010). Whole Foods Market received high marks from merchandising experts and customers for its presentation focusing on bright colors, high quality of foods, high customer service, wide aisles and cleanliness.
Regional managers state that “we take the best ideas from each of our stores and try to incorporate them in all our other stores. We’re constantly making our stores better” (Gamble et al. 2010, p. C-15). Growth Strategy The growth strategy of Whole Foods Market is to focus on opening new stores in upscale areas and suburbs of major metropolitan areas and also to acquire existing stores. Whole Foods Market purchased the struggling Wild Oats Markets, their biggest competitors, in 2007. This acquisition brought on a hole new set of strategizing options because the Wild Oats Market stores were much smaller stores than what Whole Foods Market had currently been using (Gamble et al. 2010). It was also part of Whole Foods Market’s strategy to relocate smaller stores to larger sites with more visibility and parking. Early in 2008, Whole Foods Market had 89 stores averaging 51,500 square feet in different stages of development. 13 of these stores were over 65,000 square feet and 15 stores were in new geographic markets.
Altogether Whole Foods Market has stores in 36 states (Gamble et al. 2010). Wide Variety in its Product Line Up Whole Foods Market has a strategy of reaching many, many customers by giving them what they want. Due to different sizes of stores and different kinds of customers, product and brand selection does vary from store to store, however the large scale stores include around 30,000 natural, organic, and gourmet food and nonfood items.
Different items in the product line up of Whole Foods Market include: Fresh produce, meat and poultry, fresh seafood, a selection of daily baked goods, prepared foods, fine quality cheeses, olives, chocolates, and confections, a wide selection of dried fruits, nuts, and spices, beer and wines, coffees and teas, a body care and nutrition department, natural and organic pet foods, grocery and household products, a floral department, a 365 everyday value line and a 365 organic everyday value line and educational products with some stores having cooking classes and nutrition sessions (Gamble et al. 010). There are many products available to reach the needs of almost everyone. Whole Foods Market Strategy – Well Matched to Recent Developments and Conditions in the Natural and Organic Foods Segment of the Food Retailing Industry Whole Foods Market has put forth a great combination of strategies at a time when the organic food market experienced a rather large jump in growth. Organic food sales went from $13. 8 billion in 2005, to $17 billion in 2006. Adding the totals for natural foods brings this total up from $23 billion in 2005, to $28. 2 billion in 2006.
Natural and organic foods and beverages were projected to reach nearly $33 billion in 2008. In 1990, the Organic Food Production Act began a process of establishing national standards for organically grown products in the U. S. In 2002, the U. S. Department of Agriculture (USDA) established labeling standards for organic products (Gamble et al. 2010). These labeling standards helped consumers when they went to shop for truly organic foods. This standard, in turn, helped Whole Foods Market be able to capitalize on its selections or truly organic products that they offer.
John Mackey – Good Strategic Vision for Whole Foods? Is the Whole Foods Motto Just Window Dressing? Overall, John Mackey has a very strong, focused strategic vision for Whole Foods Markets. He has utilized the growth in the organic foods market and combined that with giving the customer the added extras to make their lives easier. Although Whole Foods Markets are technically sharing the same market with other grocery store chains, Mackey has set them apart by specializing in not only a specific type of food, but also a specific lifestyle that is becoming more appealing to many people.
The Whole Foods Market motto, “Whole Foods, Whole People, Whole Planet” is not just window dressing and nice words. The motto of Whole Foods Market is backed up by the actions of the organization. “Whole Foods” states clearly what the organization is, what it is about, and gives the customer a clear expectation of what to expect when they walk in the door. “Whole People” lets people know that Whole Foods Market works hard to touch the lives of the people that it comes in contact with, both customers and employees. Employees are treated fairly and top management has a cap that limits the amount of money they make.
Another emphasis on employees is that anyone in the company can look up the wage rates of other employees (Gamble et al. 2010). And finally, “Whole Planet” is a strong statement about the company’s intent to run its business in a manner that is consistent with what is good for all, including the environment. Whole Foods Markets Core Values – Do They Really Make A Difference? After reading the case study “Whole Foods Market in 2008: Vision, Core Values, and Strategy”, it is apparent that the core values in which Whole Foods Market operates within really do make a difference for this company.
Whole Food Market has a strong desire and interest in the lives of its customers. They want to change the way people think about food and their diet. Because of this they offer classes and sessions to educate the customer about their products. They train their employees well to make sure that both the employee and the customers have a good experience shopping. Whole Foods Market puts their money where their mouth is when it comes to employees, empowering them to be decision makers which enhance their work ethic and their personal lives (Gamble et al. 2010).
Whole Foods Market – How Well Are They Performing Financially? Whole Foods Market is in a good financial position having a steady climb in net income from 2003 through 2006, then experiencing a slight drop from $203,828 in 2006 to $182,740 in 2007 (Gamble et al. 2010). After crunching the numbers, it is apparent that Whole Foods Market is in a good financial position. 20032004200520062007 Gross profit margin Sales – COGS/Sales34. 24%34. 69%35. 07%34. 94%34. 84% Operating profit margin Sales – Operating income/Sales5. 31%5. 61%4. 88%5. 68%4. 51% Net profit margin Profits after taxes/Sales3. 4%3. 35%2. 9%3. 63%2. 77% *answers rounded20062007 Return on equity14. 5%12. 5% Return on assets10%5. 7% Current Ratio1. 22. 85 2007 was not a good year in comparison to 2003-2006, which is most likely contributable to the Wild Oats Markets acquisition. General and administrative expenses as well as store expenses in relation to sales were getting higher from 2003 to 2007 but not extremely so. On the downside, long term debt and capital lease obligations increased from $8,606,000 in 2006 to an alarming $736,087,000 in 2007, also due to the Wild Oats Market acquisition.
Whole Foods Market had a very strong performance record until 2007. It is clear that Whole Foods Market will need to regroup and restratagize in order to overcome the huge burden that the acquisition of Wild Oats Markets has caused (Gamble et al. 2010). Whole Foods Market’s Performance from a Strategic Perspective It appears that the Wild Oats Markets acquisition put a huge strain on Whole Foods Market and may have actually hampered its growth endeavors. Possibly this acquisition was a little too much a little too soon.
Until this acquisition, Whole Foods Market was on a great strategic path, but the acquisition combined with economic conditions weakening in 2008 has put a slight damper on the successful run of Whole Foods Market (Gamble et al. 2010). Whole Foods Market does, however, still have a lot going for it. They are still expanding even though the goal of 400 stores and sales of $12 billion was not reached. They do still have a sustainable competitive advantage in relation to their competitors mainly because they really are much different than their competitors in terms of what their goals are and the types of products and services they offer.
Operating in 36 states also gives Whole Foods Market an advantage over competitors such as Trader Joe’s and Fresh Market (Gamble et al. 2010). The Decision to Acquire Wild Oats Market; Right or Wrong? There is no exact right or wrong answer to the question of whether or not Whole Foods Market should have acquired Wild Oats Market. There are definitely both good and not so good aspects to the acquisition. For the negatives, the debt acquired along with Wild Oats Market was huge and unfortunately coincided with the economic downturn in 2008.
Whole Foods Market will have a long battle ahead to come out of all this extra debt (Gamble et al. 2010). Also, the Wild Oats Market stores were much smaller than the original Whole Foods Market stores which could actually change the dynamic of the Whole Foods Market stores as a whole. It will be hard for Whole Foods Market to continue to focus in one area of expertise that it is good at such as offering so many extras to its customers because of the smaller stores (Gamble et al. 2010).
On a positive note, taking out a major competitor leaves room for Whole Foods Market to focus on different types of competitors such as other grocery store chains that do not cater only to organic or natural food customers. Another good result of the acquisition is that the Whole Foods Market brand has expanded to more places making it better known because of the different locations of the Wild Oats Markets (Gamble et al. 2010). John Mackey – Internet Postings and Blogs Some bad publicity was bound to make its way to Whole Foods Market due to the Internet postings and Blog entries of CEO John Mackey.
However, everyone is entitled to their own opinion and John Mackey should be entitled to the same rights guaranteed everyone. It may not have been the smartest move on Mackey’s part, but aside from that, there was not anything truly unethical about the Internet postings and blog comments towards the FTC (Gamble et al. 2010). Recommendations The first recommendation that is necessary is for Whole Foods Market to make an extreme cut in its plans for expansion in the immediate future. They possibly need to wait out the economic downturn and focus on their current stores instead of expansion.
Whole Foods Market needs to make a serious commitment to reducing its debt and improving its cash flows. Whole Foods Market would be advised to fine tune its product offerings, trying to boost profits by focusing the most on what is known to be profitable and cutting back some of those items that may not be as profitable to the company. It would be wise for Whole Foods Market to make some of the suggested changes but not to change its overall strategy. It worked very well for Whole Foods Market in the past and is very likely to continue to work.
Mainly Whole Foods Markets needs to deal with the issue of too much debt and find ways to improve the aspects of the business that is working. The rapid growth due to the acquisition of Wild Oats Markets has caused a large bump in the road to Whole Foods Market’s path of healthy expansion causing it a few problems currently, however, it is a strong company with a high value system, a great business strategy and a companywide drive to make it back to the top. References Gamble, John E. , Strickland, A. J. , Thompson, Arthur A. , (2010). Crafting and Executing Strategy: The Quest for Competitive Advantage. New York, NY. McGraw Hill Irwin.