Case Study- Whole Food strategy

Whole Foods

Whole foods is one of the largest food retails in central London at 80,000 square feet. It deals with organic food. The strength of any organic food company is its capability to deliver farm fresh items to the consumers on a daily basis.

The weakness of this particular business is that it is too dependent on natural processes, which are somewhat uncontrollable, and the outputs may vary. There is an increasing awareness and confidence about the integrity of preferring organic foods among the public which results in an ever-expanding market.

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Mass production from non-organic sources and existing competitors in the organic food segment are the main threats for the business. With respect to the strategy of Whole Foods the organization has used an array of strategies changing them every year to improve its brand value and increase its share in the marketplace. In the year 2005, Whole Foods increased the square footage of its stores and boosted the in-store advertising and point-of sale advertising of organic foods (Brand Autopsy 12).

The Strategic advantages that Whole Foods possesses are its brand image and the recognition it has got in the minds of the consumers in terms of the quality the value pricing offered (Study Mraketing, 29). In addition, the organization has an additional advantage over its competitors of having a strong distribution network. Apart from this, Whole Foods appeals itself to a superior level of social responsibility. The current strategy of Whole Foods is a focused differentiation strategy.

According to this kind of strategy, a firm tends to serve a specific market segment instead of catering for the entire market (ICFAI Center for Management Research 42). This segment may be a special group of customers, a specific geographic area, or a particular product or service line. The major advantage of having a focused differentiation strategy is of pricing their products at a higher price (Kotler, 122).

The growth strategy

The major part of the growth of Whole Foods can be attributed to the mergers and acquisitions that the company followed since the year 1986. Traditionally, the concentration of competitive players in any industry has been split through geography. However, because of many recent consolidations, the evolution of regional and national chains has started prevailing along with the decrease in the number of independent local grocery shops.

This trend may, in fact, help lessen some of the price competition in the industry, which was formerly driven by small, highly fragmented players. The same trend of consolidation may also eradicate any overcapacity in the industry as the years pass. In addition, the merger and acquisition activity also has allowed many firms to extend their fixed costs over an array of output, consequently creating increased operational efficiency.

Often, it is inexpensive for a firm to acquire an incumbent considering the location of their stores and access to consumers instead of raising the capital for completely new stores. The overall food industry can be portrayed as mature with reasonably fewer options for growth outside mergers and acquisitions.

Whole Foods has envisaged a combination of new stores and quite a few acquisitions. The sales of Whole Foods are consistent with the company’s growth strategy and the acquisition strategies. As already mentioned, the most significant strategy of Whole Foods is growth through acquisitions and through new store openings.

The acquisition strategy is reliant on finding appropriate locations and captivating the competition for such cites from the other players and local grocers. In addition, flourishing acquisitions are reliant on Whole Foods not paying a premium price for the same and carrying out a smooth amalgamation process. With this backdrop, the acquisition of ‘Fresh & Wild’ by Whole Foods is undeniably an obvious and smart choice.

Choice of Unique strategy of Duplication of competitors’ strategy

It is always recommended to adopt a unique strategy when making entry into new markets rather than duplicating the strategies of the competitors and using the same. The justification for stating so is the company’s sustenance; long-term growth can be hindered if duplicate strategies are used.

Instead, if a company prefers to devise and implement a unique strategy, it can offer a certain amount of value prepositions to the consumers and mark a great impression in the minds of the consumers, which will motivate the customers in opting for the product or brand more often.

With respect to Whole Foods, the company adopted a strategy of uniqueness in order to compete in an industry that has quite a few large and established players. The company adopted a strategy of offering completely natural, organic, fresh, and processed foods and various other healthy products with outstanding service at a premium price.

The target segments were educated, they were middle class people, and wealthy consumers who were fervent about food due to their healthy lifestyle. This was a niche segment of the market, which was not tapped by many.

Resources

The company has a well-developed, motivated, and trained workforce, an important aspect in its intangible resources. In order to cater for the individual growth and management needs of the employees, schemes such as training, employee recognition and the president’s award exist to reassure them that their efforts are acknowledged. Human resource management as a practice is highly valued. All employees are proud of the organizational culture as set out by the strategic mission and vision.

In addition, it has a substantial financial base, and this continued growing even in times of economic hardship. The company has built a good reputation through supply of food that is healthy. The result has been a consistent and satisfactory financial outcome, as was witnessed during the first quarter of 2011. The organizational culture emphasizes transparency, consistency, and communication as the key aspects in the development of strong relationships.

More than 80%of the employees belong to trade unions and stable relationships with these are upheld in an effort to ensure labor as an intangible resource maintained at its optimum at any given time. Diversity, inclusion, and cooperation ensure that everyone feels valued throughout any decision-making process.

Among the tangible resources is also the technology. The company always strives to develop the best approaches to work. It also devotes a considerable amount of income on research and development to facilitate improvements in all its facilities. The main issues arising in the strategic analysis may be categorized into two groups.

First is the extent to which Whole Food can be able to maintain the low cost advantage that it has had, and whether it will be able to maintain growth via its current strategy. In maintaining cost advantage, Whole Food may be criticized.

Challenges faced by Whole Foods in UK

The major challenge that is posed on Whole Foods in the UK market is that it may face difficulties in securing supplies of organic products on a day-to-day basis in UK. The organic supply chain is under great strain in catering for the increasing demand since there are inadequate certified farms, and the process of switching to achieve organic status is a long process that takes between two to three years (Organic Market.info, 2).

The major step against Whole Foods was made almost a year before opening its first store in the UK market and the same was made by Tesco, the leading supermarkets of UK.

As Whole Foods announced its plans to commence operation in UK by opening 70 large stores in as part of a major expansion spree into the UK market, the executives of Tesco quietly registered the trade name Whole foods under which a range of dried fruit, nuts, and pulses were introduced.

This restricts Whole Foods from importing its own-label supplies without altering the name on the packaging. This consequently had a serious impact on the profitability of the Whole Foods massively (Organic Market.info, 8).

There are also analyst opinions, according to which Whole Foods is believed to have underestimated the UK market, especially the natural and organic food segment. The core business of Whole Foods, which is nothing but the organic foods, is incidentally a category that is very common in the mainstream UK supermarkets.

Besides, these are offered at relatively less prices than Whole Foods. In order to succeed in the UK market, Whole Foods besides addressing the challenges posed by competitors also needs to address the perceived recession in the UK economy along with expenses that are a result of growth and acquisition.

Major Competitors of Whole Foods in UK

Whole Foods faces a threat from conservative supermarkets and mass merchandisers who travel to transmit organic products into their stores. However, it is uncertain as to whether increasing consumer awareness of organic products and the placement of these food products at conservative stores will eventually cannibalize the sales of natural food in large stores.

All these organizations and players compete with Whole Foods in more than one product categories. Besides, conventional and specialty supermarkets are intensifying their markets in a more aggressive manner by marketing a broad range of natural foods, eventually competing directly with Whole Foods in terms of product offerings, consumer base, and also store locations.

Whole Foods possesses a competitive advantage in terms of the size of its stores. Very few natural food stores have larger store space when compared to Whole Foods. Each store of Whole Foods possesses a customized design in order to match the particular site and building to display or exhibit particular products for the target customers in that particular area. Yet another strength that Whole Foods possesses in comparison to its competitors is the value added management and incentive scheme for its workforce.

This system suited well for team members to use in deciding crucial decisions, which generated sustainable shareholder value. Finally yet importantly, the passion for food and the exceptional standard of quality that Whole Foods maintains is the most significant differentiating factor. All these together help Whole Foods to handle the competition, differentiate itself, and thereby experience higher revenues.

Works Cited

Brand Autopsy. The Whinning Ways of Whole Foods Market. Brand Autopsy. Oct. 2005. 24 Dec. 201.

ICFAI Center for Management Research. Marketing Management. Hyderabad : ICFAI Center for Management Research, 2005. Print.

Kotler, Phillip. A Generic Concept of Marketing. Journal of Marketing, 1972. Vol: 36.(1).

Organic Market.info. Whole Foods is facing problems entering the British market. Organic Market.info. Sept. 2006. 24 Dec. 2011.

Study Mraketing. Brand Mangement. Study Marketing. Oct. 2005. 24 Dec. 201. .

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