Unit <Number> <insert name of case> Case Study Analysis
Kaplan University
School of Business
MT460 Management Policy and Strategy
Author: <insert your name>
Professor: Dr. <professor’s name>
Date: <month> <date>, <year>
Whole Foods Market Case Study Analysis
Company Name: Whole Foods Market.
Topic of the Week:MT460: Management Policy and Strategy Unit 3.
Synopsis of the Situation
Whole Foods Market is a supermarket chain based in the U.S. and concentrates on providing consumers with foods that do not have artificial preservatives, sweeteners, sugars, and other artificial additions. Started by John Mackey as a single store, the business has grown to become one of largest natural food chain retailer (Pearce & Robinson, 2016). The company focuses being on not only a food retailer but also an advocate for healthier lifestyles. Over a span of 30 years, the company has provided customers with quality products at a premium price. In 2008, Whole Foods for the first time encountered negative sales due to the economic meltdown experienced (Pearce & Robinson, 2016). With time, the company has been able to regain its share of the market. Nonetheless, Whole Foods is still facing enormous challenges in the future.
When the company commenced operations as a small grocery store, it faced little or no competition. With time, other organic food stores have copied the company’s model, increasing the competitive rivalry in the industry. Although Whole Foods successfully merged with its strongest competitor, Wild Oats, stiff competition remains from conventional grocery stores that are changing their operational models to fit partly fir that of Whole Foods (Pearce & Robinson, 2016). Traditional supermarkets have realized the increased demand for natural foods. In order to fulfill their customers’ needs, the traditional supermarkets have introduced natural foods section within their existing stores in order to gain a share of the natural foods market. With these stores selling natural food products at a lower price, Whole Foods must rethink its strategy in order for it to remain relevant in the future.
Alternative Solutions
<Create at least three alternative solutions that are original and not from the case study itself.>
- Whole Foods should lower the cost of its natural products that are currently priced at a premium and instead focus on increasing sales. Whole Foods should lower the cost of its products while still maintaining their quality as well as the shopping experience it provides to customers.
- Whole Foods should consider expanding into overseas markets. Currently, Whole Foods concentrates its operations in the U.S. market, making it vulnerable to economic conditions affecting the U.S., and the intense competition within this market.
- Whole Foods should commence national advertising promotions to increase its sales. Currently, Whole Foods mainly relies on the word of mouth for sales promotions. Paid commercials on the mass media can help boost sales.
Selected Solution to the Problem
<Choose one of the Alternative Solutions that you created that will best fit and describe it.>
The best solution to the current problem the company is facing lies in competitive pricing. Whole Foods should consider lowering the cost of its products in order to increase its competitiveness relative to other competitors in the market. According to Pearce & Robinson (2016), consumers have little knowledge about natural foods, and thus end up confusing the numerous terms such as “organic foods” which are currently being used by traditional supermarkets such as Walmart. Consumers are unable to tell the difference between “organic”, “natural”, “hormone free”, and “free-range” foods. As such, consumers are likely purchase these products from other supermarkets and grocery stores without fully realizing what the terms mean.
It is easy for new entrants to enter the natural foods market segment. As witnessed in the past, traditional grocery stores such as Walmart, Stop ‘N Shop, and Shaw’s have easily penetrated the natural foods market previously dominated by Whole Foods and Wild Oats. Traditional supermarkets can easily enter the natural foods market by providing segments where they sell organic foods. Due to this reason, Whole Foods should consider reducing the price of its products since consumers might opt to buy organic products from other cheaper alternatives such as Walmart.
Implementation
<Discuss a plan in how you intend to implement the Selected Solution on behalf of the company featured in the case study.>
There is need for an elaborate plan to implement a price differentiation strategy at Whole Foods and for it to work effectively. First, Whole Foods should determine the relative prices of its competitors in the natural foods segment. The second plan of action is to review the profit margins on the current natural products sold by the company. If the profit margins are high enough, this indicates that the company can afford to reduce its prices on the current product it provides to consumers. Whole Foods should also conduct a research to establish the most important factors that consumers consider in deciding to purchase a food product. If consumers are more price sensitive, then there might be need for significant reductions in prices of products.
The actual implementation of the plan should involve pricing slightly higher above the competitors. High reduction in prices may give the view that the company is selling low quality products. As such, slight reductions in prices would help maintain the current image of the company as a home for quality products among the consumers. Whole Foods should reduce prices slightly but ensure that it maintains the same levels of customer experience. Additionally, the company should ensure that the employees receive the same level of benefits as before a price reduction.
Recommendations and Conclusion
<Discuss one of the alternative solutions not chosen and express why this would be a good choice as well and wrap up the analysis.>
Expanding into the overseas market may also be a good course for Whole Foods to take. The overseas market holds great potential for Whole Foods to invest and earn a return on its investments. The major benefit in expanding operations in overseas market would be the diversification of risks. According to Mandura (2006), international diversification eliminates local economy risks through ensuring that if the economic conditions in the local economy deteriorate, the company may still earn positive margins from investments in overseas markets. This may help the company eliminate the risk of total loss by depending on one economy.
Whole Foods is one of the largest grocery stores operating in the U.S. and concentrating in the sale of natural products. For long, Whole Foods has maintained dominance in the natural foods segment. In the recent years, competition from traditional supermarkets and grocery stores has significantly increased, putting Whole Foods’ model at risk of losing out to the competition. In order to overcome the competition, it is recommended that Whole Foods slightly reduce the price of its products relative to the competition. Lastly, expanding operations into the overseas market may help increase its customer base and avoid the impacts of local economy fluctuations.
References
Madura, J. (2006). International financial management. Mason (Ohio: Thomson/South- Western.
Pearce, J., Robinson, R. (2016-01-02). Strategic Management, 13th Edition. [VitalSource Bookshelf Online]. Retrieved from https://kaplan.vitalsource.com/#/books/0077807634/
Appendix
Figure 1. SWOT Analysis based upon the topic of the week for the company case.
Strengths
- Strong brand reputation.
- High quality products and standards.
- Motivated workforce.
Weaknesses
- Whole Foods depends mainly on the U.S. market for its products.
- The grocery store sells its products at premium prices.
- Whole Foods depends on a few suppliers.
Opportunities
- The company can engage in competitive pricing of its product to attract more customers.
- The company can expand operations globally.
- Increasing demand for natural foods in the U.S. due to increased consumer awareness.
Threats
- Threat of new entrants into the market who charge lower prices.
- Global warming may disrupt the supply chain since it relies on a few suppliers.
- The introduction of new product classifications such as “organic”, “hormone free”, “GMO”, and others may reduce the demand for its natural products.
