Whole Foods Market is a grocery retailer that has an emphasis mainly on organic as well as natural food products. The company was started in 1980 in Austin Texas and the headquarters have been there since. Over the years, the company has more than 456 stores that cut across the U.S.A., UK, and Canada (Clark, 2015). Most of the sales in the company are generated in the U.S.A. The recent stagnation in sales and the prospects of making more profits means that the company should develop new strategies to attain or maintain its competitive advantage not only in the USA but also in other markets (Whole Foods Market Analysis, 2016). It is evident that the company has not invested fully in those countries that it operates in and faces a lot of competition from other food chains in those markets. However, with the right strategies in place, the company stands a chance to attract more customers and in the process increase its market share. This paper looks at the strategic analysis of the company and provides recommendations on the strategies that the company can use in enhancing its competitive advantage not only in the USA but also abroad.
Current Performance
The company has seen a tremendous growth in sales from the year 2010 to 2017. In 2010, the company had net sales of about $9.006 billion, which increased to $16.03 dollars in 2017 across the globe (Whitten, 2017). However, much of the current performance of the company can be attributed to the US market. Moreover, WFM has seen the rate of growth reduce in the recent years thanks to the increased completion that the company has seen from its main competitors. In 2012, the company had a total revenue growth of 15.7%, which declined to 10.4% in 2013, 9.90% in 2014, and 8.40% in 2015 (Whole Food Market, 2015). The following table shows the performance of the company in 2014.
(Rooney, 2014)
The decline was bigger in 2016 when the revenue grew by 2.20% and 1.70% in 2017. In the same period, the rivals recorded higher growths that WFM around 11%. Companies such as Trader Joe’s, Sprouts Farmers Market, and Kroger have all seen better growths than WFM (Alotaibi, 2016). This is an indication that the company needs to rethink its strategy if it is to maintain its competitive advantage in the USA and maximize its growth and expansion in other countries.
(Whitten, 2017)
The graph shows that although the company has recorded an increase in net sales over the years, the increase has not been as pronounced as it was in 2012. The decline in growth of sales calls for the company to make a chance to its policies in regards to how it approaches its business and corporate level strategies (Whitten, 2017). This is essential as it allows WFM to maintain a competitive advantage in the USA and increase sales in other nations such as Canada and the UK. The recent acquisition by Amazon may provide the company with the much-needed experience in coming up with the right strategies that can lead to the success of the company on many fronts (Clark, 2015). The prospects are that the natural foods segment of the US and world markets will increase in the near future with double digits. The implication is that WFM should position itself ready to take advantage of the prospected market growth. This positioning can only be done with a change in strategy.
Strategy and Competitive Advantage
A business outlook of WFM shows that much of the growth the company has been recording comes from the newly opened stores. WFM has been recording decline from the same-store sales recorded a decline. The company’s results have been severely hurt by the competition from rival companies, which has led to the decline in the company’s stock price. This is an opportunity for the management to come up with new strategies to improve the business prospects. The best strategy that the company can implement can only be analyzed if the SWOT analysis of the company is understood. This enhances the understanding of the company’s internal and external business.
SWOT Analysis
Strengths
The company has for a long time been able to provide the highest quality standards in the market, which sets it apart from the rest of the competitors. It is for this reason that the company is able to maintain a loyal customer base (Whole Foods Market Analysis, 2016). The company’s standards have disregarded some of the practices used in manufacturing foods that are evident in other supermarkets (Whole Foods Market Analysis, 2016). The high quality of the products usually attracts customers who are ready to offer higher prices for the products offered by the company.
The other strength of the company is the favorable industry trends. It is evident that the organic food segment will increase with double digits in the near future. More people are becoming aware of the role that organic foods play not only to their health but also to the environment. This means that WFM natural and organic foods will continue selling well and attracting more customers. The growth strategy that has been used by the company has been successful (Whole Foods Market Analysis, 2016). For instance, the company has been able to open up stores in the UK, which has led to an increase in the sales of the company. The company also enjoys a strong image especially among the high earning customers Moreover, WFM is supported by industries such as fitness centers and health.
Weaknesses
The supply chain associated with the organic foods is usually underdeveloped and is, therefore, unable to meet the needs of the consumers. The other weakness is that some of the food products offered by the company are highly priced as compared to the competitors. This leads to the consumers having a perception that the products are not worth the cost. The company has found it hard to shake off the image of its products being high priced especially among the lower and medium income earners (Whole Foods Market Analysis, 2016). The international operation system of the company is weak as it has only a handful of stores in the UK and Canada, which means that the company is dependent on the American market. Much of the revenue collected by the company comes from the USA. WFM also lacks an online presence where it can promote its products.
Opportunities
One of the opportunities that the company has is the international expansion. As outlined in the weaknesses section, the company has a week international operation system, which means it has the opportunity to grow internationally. The company can expand its markets in the developed nations where the population is interested in natural and organic foods. WFM should expand in the UK and Canada by opening more stores in those regions with the aim of increasing its market share (Whole Foods Market Analysis, 2016). The other opportunity is the increased marketing and promotion of the products especially through online platforms such as social media sites. This would appeal to the millennial who are fond of using the online platforms to make decisions in regards to shopping. The other opportunity is the expansion internally by ensuring the stores cover a larger portion of America.
Threats
One of the major threats facing the company is the question of competition from other stores in the national and international scenes. These stores such as the Costco, Sprouts Farmers Market, Wal-Mart, and Kroger all offer the same products at a lower price as compared to WFM (Alotaibi, 2016). This means that the company should look for ways to shake the negative image painted by the price tag on its product. The company is also occasionally affected by negative publicity mainly based on the products and their weights. The company can also be negatively affected by the economic situation in the country and abroad especially if it affects the purchasing power of the customers (Whole Foods Market Analysis, 2016).
Recommended Strategy for Competitive Advantage
The company should use competitive pricing as its business level strategy. This strategy is important in promoting the competitive strategy. The company has a task of retaining or regaining its competitive advantage from the hands of the competitors who are offering the same products but at a lower price. Competitive pricing has the advantages to the company, as it will be able to offer the said products at a profitable price. The company is also able to remain in competition with those it competes with. Consequently, the strategy is advantageous in that it allows the company to offer consumers quality products at reasonable prices (Madsen & Walker, 2015). However, the strategy also has some disadvantages. One of the disadvantages is that the consumer of the products may be deterred if the prices charged by the company are too high. The company may also be at risk of having to deal with negative publicity in case customer advocates view the company as overcharging its customers. The other disadvantage of the competitive pricing strategy is that the price may not match the quality of the products offered by the company (Beske, Land, & Seuring, 2014). It is important to note that the company has been using a competitive pricing strategy before but has not been able to attain the necessary results. This calls for a more innovative approach to the strategy, which can be done with the aim of providing incentives for buying (Whole Foods Market Analysis, 2016). The company should make use of in-store incentives, especially in the already established stores. These incentives are meant to give the consumers more reasons to pay competitive prices in order to buy the products offered by the company.
Recommended Global Strategy
WFM goes through a lot of competition in the American market from rival companies such as Sprouts Farmers Market, Kroger, and Wal-Mart (Alotaibi, 2016). This has made it hard for the company to expand locally. The acquisition by Amazon came at an appropriate time, as the company is able to have the right expertise to implement a growth strategy in the global scene (Tyson & Walske, 2016). Amazon is one of the leading companies in the world with skilled employees who are able to develop effective strategies to enable the company to master the global markets (Tyson & Walske, 2016). The idea to invest in the global arena comes from the fact there is a growing interest among consumers in the global markets on organic and natural foods. Globalization has made it easier for people to have access to information on the role that food plays in the health, and the environment (Clark, 2015). Consumers are demanding better production processes from food companies, which act as an opportunity for WFM to fill the gap created by the growing interests of the consumers.
The recommended strategy at the corporate level should be global expansion and retail diversification. The two strategies help in implementing the selected growth strategy that the company has been using. The global expansion strategy is important as it gives the company more stores and exposure (Tyson & Walske, 2016). Retail diversification means that the company can become transitional and offer mobile services to its customers.
The company can experience many advantages if it implements a global strategy. Global expansion into developed and fast-growing economies provide a chance to have more stores, more profit, decreasing competition, and enhancing the brand image of the company as a provider of high-quality foods (Tyson & Walske, 2016). The company also benefits from the ability to educate both consumers and employees on a broader scale. Retail diversification is important due to the changing dynamics of the industry with more people going for online shopping of groceries and other foods.
The company should look at ways of developing its operations in Canada and the UK where it has not exhausted the market opportunities despite the company making profits from the ventures. The company should open more stores in major towns across the UK and not only London as is currently the case. This should proceed with expansion into other areas of Europe. The third phase of the global expansion strategy should focus on expanding into countries in Asia and South America. These include UAE, Saudi Arabia, Qatar, China, Japan, South Korea, and Brazil. These countries have one thing in common that their economies are expanding at a faster rate than the rest of the countries in the world.
Moreover, the global expansion strategy should be coupled with the acquisition of suppliers and competitors in those countries. Amazon provides a lot of expertise when it comes to mergers and acquisitions as the company has developed its customer base from acquiring its rivals. Acquiring its suppliers means that WFM can be able to control the production chain and ensure that all its practices remain ethical and within the requirements of the corporate social responsibility of the company. This will prevent any incidences of WFM dealing with negative publicity for unethical business practices.
Ethical concerns
WFM has many strides towards becoming socially responsible and an ethical corporate citizen. However, like many other companies, WFM cannot avoid issues related to ethics. The size of the company means that it has to assume the ethical risks (Dion, 2017). Of the ethical issues, that the company stands to face is the reaction towards competitors. Expansion to new markets may lead to the acquisition of local brands causing objections from local consumers due to the high cost of products offered by WFM (Bergleiter & Meisch, 2015). The company can deal with this issue by exercising caution when acquiring companies. However, this issue will be easily dealt with by the acquisition by Amazon as due to Amazon reducing the prices to make use of the economies of scale.
The other ethical concern that the company will have to deal with is the acquisitions of selling products that are not natural and organic (Dion, 2017). The global and local expansion means that the company will have to deal with an extensive supply chain where it will become impossible for the company to control all the operations of the suppliers (Lazarides & Goula, 2018). This straying from the corporate value has negative impacts on the company, as it would lose consumers in the highly competitive market. The company should look for ways to recommit to its value of healthy eating. Training suppliers and consumers on healthy eating using specialists can help in achieving this (Bergleiter & Meisch, 2015). Consequently, this ethical concern can also be averted by developing incentives for the employees to adopt healthier lifestyles. For example, the company can position itself as a leader in fighting obesity not only in America but also in other countries.
The other major issue that WFM will have to deal with is the question of unions. The company is against unions and employees forming or joining unions. This violation of the labor laws in the USA and other countries denies employees the right to form unions. In the past, WFM has been accused of using threats to prevent employees from forming unions (Lazarides & Goula, 2018). This may have legal or ethical implications that may end up being negative for the company. The only way to deal with this is by making sure that the company trains its human resource managers on how to respect the rights of employees and ensure compliance with the legal demands when it comes to labor.
Wages and working conditions is another area of concern when it comes to ethics. The expectation is that the company will provide employees with good wages that compare effectively with the rest of the companies (Lazarides & Goula, 2018). However, the desire to make more profit may lead to the company being accused of providing low wages and poor working conditions for the employees. This is something that the company can deal with by making sure that employees are well compensated according to the legal standards and the market values.
Conclusion
Whole Food Markets as a company has many potentials to develop especially after acquisition by Amazon. The experience of Amazon in the global expansion would be ideal for WFM when it comes to developing its global strategy. The company has seen tremendous growth over the years that have only been hampered by competition in the recent past. The only way to deal with competition is changing the strategy and focusing more on its growth and competitive strategies.
References
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Whitten, S. (2017, July 26). Whole Foods profit falls as same-store sales drop 1.9%. Retrieved from com/2017/07/26/whole-foods-market-third-quarter-earnings-2017.html”>https://www.cnbc.com/2017/07/26/whole-foods-market-third-quarter-earnings-2017.html
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