Nov 20, 2020 in Case Studies

Whole Foods Market
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Whole Foods Market

Whole Foods Market (WFM) is in the maturity stage of its product life cycle. Over time, the company has strived to maintain a competitive edge in the competitive industry. Its strategies have paid off of in terms of market share, profitability, and customer relations. Much of the driving forces within WFM can be assessed from Porters generic strategy perspective as discussed below.

 

Differentiation

The driving force behind the success of WFM has been acquired from the strength generated from differentiation. Central to differentiation is quality of products offered by WFM. This was captured in companys mission since its inception and has been actualized through daily operations. Quality of the products is affected in terms of nutritive contents, safety, ingredients, tastes, appearance, and freshness. Differentiation also depends on the breadth and depth of companys product selection. It offers around 20,000 non-food and food product types in its stores. It also offers different brands of products. For instance, it offers 50 brands of olive oil. WFM also differentiates itself from other retailers through excellent in-store shopping experience. This is done in terms of customer services offered, education, and stores environment (Harbin, 2010).

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Cost Leadership

With competition intensifying in food and drug industry, WFM has had to rethink its strategy. Most of its stores are located in the cities, where average income is high, though matching up with the costs of operation. To lower the cost, the company is extending into suburbs where renting costs, competition, and square footage are lower. The company has also been seeking to expand its market to benefit from cost advantages. This has been achieved through acquisitions and opening new stores. The growth realized has enabled the company to offer some discounts on sales.

Focus

WFM pursues focus strategy with regard to organic foods. It has, in the past, been the main retailer in the organic food market and has been able to earn high profits. The strategy has fit consumers' taste changes as a result of increased health consciousness of consumers in the past. It differentiates its organic products to provide a wide variety and high quality products, which mainly target urban market in the United States (Patton & Gruley, 2012).

Critical Inputs

Resources

To achieve differentiation through increased quality of products WFM sought to put things right after its inception. This was achieved by establishing a system of resources that would actualize companys mission of quality commitment. To address the disorganized organic product networks, WFM established a company in California closer to the farmers to ensure efficient produce distribution. Such close contact with farmers resulted in a mutual benefit whereby they could both learn from each other about organic produce that could be feasibly sold in the market. Such relationship with suppliers has helped WFC to lower its costs. Further, a network of facilities in the distribution process, such as shipping, storage, and packaging, was established to ensure that quality of products is maintained as organic products move to stores from farmers. The company has handled organic foods for a longer period than any other company. As such, it takes less time in learning curve to match changes in consumer tastes and other environmental changes that require quality adjustments and the use of a well established high quality system (Harbin, 2010).

To maintain quality differentiation, WFM has established a Quality Standard Team, whose work is to ensure that the products getting into stores meet quality standard requirements. The parameters of interest to the group include products nutrition, appearance, taste, and freshness. The team checks and compares the ingredients with those in the unacceptable ingredient list to decide whether to allow the product into its stores. As such, customers are assured that in WFM they will get the best products that are naturally preserved, least processed, and most flavorful.

To ensure extraordinary customer experience, the company seeks to recruit service-minded employees. In 2007, the company had over 53,000 employees, 47,000 of whom were full-time employees. Companys interest is in members, who are enthusiastic and possess in-depth knowledge to match market demand. WFMs employees extend their in-store services to interaction with customers as they shop or through charity events organized locally. Retail innovation has also been a great source of in-store shopping experience. WFM has educational counters in every store, which are referred to as Take Action Centre. These centers offer a lot of information about organic foods, sustainable agriculture, and pesticides among others (Harbin, 2010).

 
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To keep employees productive and motivated about what they do, WFM values their welfare. Around 95% of employees are employed full-time. To motivate them to provide outstanding service to a community, they are compensated for such activities. They also become members of work unions and benefit from an extensive healthcare system.

History

To be able to benefit from economies of scale, WFM has focused on expanding its market through a series of acquisitions and mergers with such companies as Bread of Life, Food For Thought, Select Fish, Fresh & Wild, and Wild Oats Markets and Wellspring Grocery among others. Complemented with professional team members, acquisitions and mergers have resulted in high profitability that has enabled the company to provide discounts for its employees. For instance, acquisition of Wild Oat helped increase sales as well as lower the costs (Patton & Gruley, 2012).

Competitors

Competition has immensely contributed to adoption of low-cost strategies. High profits from selling organic food faces competition from traditional grocers as well as supermarkets. It is important for a company to ensure efficiency in its operations to be able to offer competitive prices to customers. Therefore, more stores with smaller footage, around 33,000 sq ft are opened in suburb areas such as Colo, Frisco, Miss, and South Bend (Patton & Gruley, 2012).

Congruence between Strategies and Inputs

From the foregoing analysis, it is evident that differentiation is an overriding strategy, which mainly focuses on organic products in the market. To be able to initiate organizational change to improve performance, it is important to understand how congruent the inputs are with companys strategies (Falletta, 2005).

The congruence between historical traditional factors, such as acquisitions, mergers, and leasing and construction of new stores appear to be moderately congruent with organizational goal to ensure high quality and outstanding customer service. For instance, the company has in the past sought to increase store footage. Similarly, long term leasing of the stores is turning out challenging, especially in regions, which turn out to be dormant afterwards.

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On the other hand, there is a strong congruence between resources and niche differentiation. Close contact with consumers and organic farmers has helped the company maintain high quality of its products. Success has been achieved due to effective network of facilities forming the distribution system. Team members are competitively recruited and provided with an environment conducive to keep them excited on their job. Central to this is compensation, unionization, and health insurance cover. Quality Standard Team also ensures that the standards are not compromised. Excellent customer services through innovations like Take Action Centers has helped maintain loyalty of organic product customers.

Environmental factors such as suppliers, competitors, and consumers have weak congruence with the strategies of the firm to differentiate itself as well as its products, and also cost leadership. Organic product suppliers have had close working relationship with WFM, but there is a problem of overreliance. For instance, 31% of all purchases by WFM were made from United Natural Foods, Inc. (UNFI) in 2011. Though consumers find wide space more appealing, it has turned out to be costly, and therefore the company is seeking smaller stores in suburbs to serve the low-income segment that has been left out in the past. New players, such as Wal-Mart, are getting in the market of organic food products, hence posing competition in the focus strategy (Guenette, 2012).

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