Strategic Management Case Analysis (Whole Foods Market)

Submitted to: Sir Ahsan Durrani Submitted by Wasif Qureshi Danish Qa i Danial Mohammad Sharif

Q!" #hat are the chief elements of the strategy that Whole Foods Market is $ursuing% &se strategy diamond to e'$lain this $art! After going through the case one can easily get an idea about the business strategy of Whole Foods Market which basically a growth and expansion strategy. Following is the explanation of the Whole Foods Market Strategy with respect to the business strategy diamond. Arenas for Whole Foods Market Whole Foods Market is operating globally with 27 stores in !SA" #anada and !nited $ingdom and panned to ha%e &'' stores globally. (t is highly in%ol%ed in %alue creation acti%ities to increase the %alue of its products to ha%e more and more loyal customers which play an important role in achie%ing its ob)ecti%es. (t is offering * different product lines to cater the di%ersified needs of different target markets. +hese product lines include Fruits , -egetables" Meat , .oultry" Fresh Seafood" daily baked goods" cheeses" chocolates" /eer , Wines" #offees , +eas" /ody care" natural , organic pet foods" 0rocery , household products etc. As per the information" WFMs has all together nine regional distribution centers +hey ha%e segmented their customers on the basis of geographic locations

(ehicles Whole Food Market is focusing on internal de%elopment efforts related to ac1uisition of external parties. WFM takes responsibility of its actions and tries to correct its mistakes on its own. Most of the business expansion achie%ed %ia combination of opening its own new stores in different locations and ac1uiring small owner2managed chains that were located in the desired markets. +he ma)or ac1uisition occurred in the history of WFM is the ac1uirement of Wild 3ats Market which led it to enter into new geographic locations and new customers. +his thing is also in the practice of WFM that they relocate a few of its smaller stores to larger and %isible locations to increase the prominence of the stores.

Differentiators WFMs differentiating itself on following basis Customi ation: +he layout of the stores of WFMs was designed according to the geographic locations instead of ha%ing a standardi4ed layout and they had the specific product mix as per the demand of the target market they operated )roduct *eliability: WFMs is pro%iding 1uality and reliable food products to its customers. +he food offered by WFMs is fresh" full of nutrition" good in taste and meeting the 1uality standards with *''5 guaranteed satisfaction. Whole food market has its own 1uality standards team which ensures that there are no unacceptable ingredients included and the food is at its purest state. Styling: WFMs belie%ed in creating an interacti%e store ambience that makes the food purchasing more pleasant. Most of the stores include din2in areas" comment board and also customer information centers with the name of Action #enters where customers can get the information on topics related to organics" sustainable agriculture" the en%ironment and other related issues. +hey belie%e that their stores are the places where people can gather and interact along with food shopping and eating. Some store also pro%ide with the %alet parking and home deli%ery. +mage: +he focus of WFMs is to form a positi%e image in the minds of its customers and ensuring them that they are using best practices to create a brand name and make them feel good that they are the customers of Whole Food Markets. Staging +he se1uence and pace of the strategic mo%es of WFM are %ery fre1uent specially after increasing the awareness of natural and organic food among the customers WFM decided to response on fre1uent basis and opening new store and ac1uiring other small stores are the e%idences which show that how well it is performing to enhance its staging.

,conomic -ogic 3btaining the returns is the ultimate ob)ecti%e of any firm" to make sure that it is attaining the ade1uate returns Whole Foods Market is charging premium prices for its products offered. /ecause the nature of the products is organic and pure so it )ustifies the pricing of the products set by the WFM. Although WFM prices are a little high but still it is charging relati%ely competiti%e prices in the market.

Q!. +s Whole Foods/ strategy #ell matched to recent de0elo$ments and conditions in the natural and organic foods segment of the food retailing industry% (f we look at the change oriented strategy of Whole foods market then the answer is yes because Whole foods market tied its le%el best to cater the rising needs of the consumers. As it is noticed that the consumers were becoming more health conscious and preferring natural foods o%er artificially processed and fla%ored products so Whole Foods market capture this need by making the organic foods a%ailable on a large number of places so that customers can easily get it. +his case also highlighted the fact that the sales of organic foods in the !nited States hit 6*7 billion in 2'' as stated by 3rganic #onsumer Association" which shows that the consumers7 interest towards the organic foods was increasing day by day" and Whole foods market took the ad%antage of this changing preferences and promoted organic foods at e%ery le%el. Whole foods market7s well designed and managed stores with fully aware staff" its business and merchandising strategy" its interest and will towards promoting the organic foods among the consumers" and its growth strategy highlighted that its position was well matched with that of the industry.

Q!1 Do you think 2ohn Mackey has a good strategic 0ision for Whole Foods% Why or #hy not% What do you like3dislike about the com$any/s 4Whole Foods5 Whole )eo$le5 Whole )lanet6 motto% Do the motto and the $rinci$les underlying the motto (case ,'hibit ") really matter at this com$any or are they 7ust nice #ords and #indo# dressing% ,'$lain! (n our point of %iew Mr. 8ohn Mackey7s %ision was %ery much clear and at its best. +he way Mr. Mackey de%eloped a worthy and effecti%e strategy and brought efficiency in the operations of pro%iding organic foods to the consumers. 9is strategic %ision for Whole Foods Market helped it to create a place the market as well as in consumers7 minds. +he %ision was not only pro%iding the organic foods but also making sure that the consumers are aware of what actually meant by organic food. +heir %ision shows that they are also making a part for the betterment of the society and hence completing its social responsibility by promoting the offering of no preser%ati%es foods and encouraging formers to grow the pesticides free corps. As for as company7s motto :Whole Food" Whole .eople" Whole .lanet; is concerned in our %iew point it is not )ust a bunch of nice words but this show the strong notion of the Whole Foods towards its consumers and the society. +he actions" acti%ities" business strategy" store operations" its contribution to the society are the facts which supports its motto that they are actually doing what they are claiming. 9ere we want to break down the motto and explain it separately with respect to its %alues< Whole Food: /y this Whole Foods Market means that the organic food on its purest state and it is a truth that they are highly in%ol%ed in promoting and selling organic food and this thing can be supported by the facts that most of their product lines are based upon the *''5 organic foods like fresh seafood" fresh fruits and %egetables" natural and organic meats" organic coffees and so on. +hey ha%e also mentioned in their core %alues that they pro%ide natural and organic food to bring 1uality in consumers7 li%es.

Whole )eo$le: Whole Foods take a special care of its customers as well as employees. +heir claim of Whole .eople is supported by its core %alue that they satisfy their customers more than their expectation so that they are delighted and to do this they ha%e empowered team members of e%ery stores to whate%er they can do exceeds customer expectations. +aking care of its employees is also an important factor for Whole Foods they belie%e in employee empowerment" self2moti%ated work force and self2directed teams. +hey also share their growth by in%ol%ing employees in different =mployee Stock 3wnership .lans >=S3.s" they reward their employees by gain sharing. Whole )lanet: As Mr. Mackey shared its belief that my desire is to promote Well2being of e%ery one on earth and earth itself this statement shows that how much importance the gi%e to the planet and how encouraged they are towards the welfare of the society. Whole Foods Market consider itself as an participant in the community and gi%e ?5 of its profit to the community and not for profit organi4ations. +his part motto is also supported by this fact that Whole Foods Market won a 0reen .ower .artnership award from the !.S =n%ironmental protection agency for consecuti%e two years 2'' and 2''7. +his shows that society and institutions also accept the participation made by Whole Foods Market.

Q!8 Do WFM/s core 0alues as $resented in case ,'hibit 1 really matter% 9a0e they contributed to the com$any/s success% Why or #hy not%

+he application of the core %alues can be seen in e%ery aspect of Whole Foods Market. Whether it7s a de%elopment of strategy" taking care of customers" empowering and in%ol%ing employees" taking care of social responsibility we can see that these %alues area taking WFMs to the height of success. For instance if we take its employee empowerment %alue than we will find that the customers satisfaction was merely because of this %alue because the gi%e free hand to the employee to make the customer delight and this %alue lead to wining the customers heart. And other %alue was to work for the community welfare and this %alue led WFMs to achie%e en%ironmental awards. 3ne of their %alues is to increase the %alue of retail experiment and their merchandising and business strategies ha%e successfully achie%ed it by gi%ing a pleasant atmosphere in the stores during purchase. +heir sales staff also guide customer in a nice way and make them feel the most important by gi%ing them special attention.

Q!: 9o# #ell is Whole Foods Market $erforming from a ;nancial $ers$ecti0e% Financial performance of Whole Foods Markets was %ery good since 2'' " but decrease in 2''7 in term of profitability instead of growth in re%enue in 2''7. @et income of company increase from 6AB"A*? thousand or 6AB.A Million in 2''C towards 62'C.B Million in 2'' " but fallen down in 2''7 to 6*B2.2 Million. +he growth rate in @et income from 2''C to 2'' was 2 .?5 and it is decrease in 2''7 by rate of A. 5 which impact the total growth rate to * .A5 in growth rate from 2''C to 2''7. +he De%enue growth rate from 2''C to 2'' was *A.?5 as well as increase in 2''7 with the rate of 2*.25. (t shows that whole food is growing in term of re%enue but decrease in net income. +here are some ratios of Whole foodsE .<<= 0ross .rofit Margin C&.B5 .<<> C&.A5 .<<: C?.* 5 .<<8 C&.7 5 .<<1 C&.25

3perating .rofit Margin @et .rofit Margin Deturn on total Asset Deturn on =1uity =arnings per Share #urrent Datio

&.?5 2.B5 ?. A5 *2.?C 5 6*.C '.B?

?.75 C. 5 A.AB5 *&.?2 5 6*.& *.22

?5 2.A5

?. 5 C.&5

?.25 C.*5

6*.'?

6*.'

6'.B&

Q!> 9o# #ell is Whole Foods Market $erforming from a strategic $ers$ecti0e% +s the strategy #orking% Does the com$any ha0e a #inning strategy% (f we look at the strategic perspecti%e of WFM than we can easily say that at strategic le%el the company is following a growth and expansion strategy and most of expanding occurred through hori4ontal integration which is the ac1uisition of its competitors and by expanding the number of its own stores. +he only mishap happened to WFMs was a recession that is faced in 2''B and became a barrier in achie%ing the strategic ob)ecti%e of ha%ing &'' stores. Although WFMs faced some recession and hurdles in its way but still we think that the strategy of the 8ohan Mackey is working and helping the WFMs to en)oy a competiti%e edge o%er its competitors like Fresh Market" +raders 8oe7s" Sunflowers Markets etc. the ac1uisition of its ma)or competitor Wild 3ats also shows that the company is performing so well that it is in the position to not only beat its competitors but also ac1uire them. Following are some factors which gi%e WFMs a competiti%e edge o%er its competitors< Attracti%e and friendly en%ironment and the supporti%e staff at WFMs stores @umber of geographic areas co%ered by WFMs is also larger than that of its competitors Si4e of the stores and a%ailability of a large number of product lines

Q!= Do you a$$ro0e of the decision to ac?uire Wild @ats Market% What $ros and cons do you see% +o some extent ac1uisition of Wild 3ats was a good decision with respect to the growth strategy of Whole Foods Market because it helped WFMs to ha%e an increase in the number of stores and to explore new geographic location which ob%iously allowed WFMs to ser%e more customers. (n our point of %iew there are some pros and cons that are related to the decision of ac1uiring Wild 3ats.

)ros +his decision wiped out a ma)or competitor of WFMs and now it can focus on other competitors and their strategic mo%es (t helped WFMs to enter into new geographic location where Wild 3ats was operating and it helped to increase the number of stores of WFMs After ac1uisition of a ma)or competitor of the cadre of WFM ri%als now WFM is able to focus on the larger supermarkets because in the present situation it has ac1uired it7s the biggest competitor. Cons Since ac1uiring Wild 3ats was a ma)or decision so after ac1uiring it WFM will now focus to impro%e the stores and the 1uality of the products which will di%ert its attention from its growth strategy and it might not be able to focus on its own stores. Ac1uisition of Wild 3ats was a capital and costly decision and it can affect the financial position of the WFM. +his ac1uisition is also against the strategy of WFM to ha%e larger stores because Wild 3at7s stores are relati%ely smaller.

QA< Were 2ohn Mackey/s +nternet $ostings unethical5 or in any #ay ina$$ro$riate% What actions5 if any5 do you disa$$ro0e of% What actions5 if any5 should the com$any/s board of directors take #ith regard to his +nternet $osting and blogs% 8ohn Mackey7s posting on internet before the ac1uisition of wild oats markets is %ery unethical because it was his personal %iews and he should keep control on his emotions rather than to make it fun" stakeholders may be influence negati%ely from this act of )ohn Mackey" board of directors should force )ohn Mackey to apologi4e publicly to F+# on this issue as he did" or they can demand resignation from him. QB: What recommendations #ould you make to 2ohn Mackey regarding the actions that Whole Foods/ management needs to take to get through the recession that began in earnest in .<<A% Should the com$any se0erely cut back on o$ening so many ne# stores% Should the com$any 0igorously contest the reo$ening of the FCC/s challenge to the Wild @ats ac?uisition% Are any other strategy changes needed% As economic conditions are not good for business therefore they should delay the expansion plan of opening of new stores +hey should reduce the capital expenditures for example they do not need to make new furniture or shel%es in wild oats markets" otherwise it will incurred in huge expenses. @ew price promotions must be start to attract new customers , ad%ertisement policies needs to be re%ised and implemented in a new passion and style" they should make belie%e on customers that they are buying the foods at cheap prices and in context of in%entory management" priority should be gi%en to those items which has more demands in the town rather than to store the luxury items. For a certain period they should not gi%e the di%idend because they should focus on payback of loans.