Strategic Review of Whole Foods Market

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In the modern world, large-scale corporations often provide the bulk of consumers’ products and services both in the developed world and, increasingly, in the developing world. Given this fact, it becomes important to investigate the nature of the businesses that provide for the most basic of human needs. Among those needs, of course, is the need for sustenance, but particularly in the developed world, it seems that it is no longer enough for food to be filling or to taste good; more and more, the demand for “good for you” food seems to be on the rise. To fill this need, multiple companies catering to the crowd that prefers organic produce and natural groceries have established themselves. Of these, perhaps the widest-spread and most well-known name is Whole Foods Market. Because of this company’s economic and financial clout, it is a worthy endeavor to determine whether Whole Foods Market provides customers and investors with good value while also staying in integrity with its mission, vision, and core values. In addition, Whole Foods Market’s relationship to its own strengths and weaknesses, as well as to its competitors and other outside threats or opportunities is a vital topic for examination. Overall, upon exploring these facets of Whole Foods Market in greater detail, it is readily apparent that Whole Foods Market is essentially a strong company facing only relatively minor detriments to the assured nature of its ongoing existence.

Mission, Vision, and Values

Whole Foods Market’s mission, vision, and values paint a picture of a company that cares and tries to be the opposite of the stereotype of the evil corporate enterprise. In fact, it seems it is hard to analyze Whole Foods Market without mentioning its mission, as some researchers have found: “Whole Food’s stated mission statement was to ‘promote vitality and well-being for all individuals by offering the highest quality, least processed, most flavorful natural and naturally preserved foods available’” (Meador, Britton, Phillips, & Howery, 2008, para. 1). This is a mission statement that seems focused on appealing to investors with a conscientious mindset. In addition, other aspects of Whole Foods Market’s vision appeal to emotion. There are eight “core values” around which Whole Foods Market revolves: to sell organic products of the highest quality, to “satisfy, delight and nourish” customers, to “support team member excellence and happiness,” to “create wealth through profits and growth,” to serve its communities, to “advance environmental stewardship,” to create “win-win partnerships” with suppliers, and to “promote the health of [their] stakeholders through healthy eating education” (Whole Foods Market [WFM], 2014b, para 1-8). It is interesting to note how many of the core values not directly related to natural goods or the environment speak to happiness, directly or indirectly, for all involved with Whole Foods Market. As shall be seen later during a discussion of Whole Foods Market’s competitors, this is not the case for all grocery store chains. First, however, a deeper investigation into Whole Foods Market must take place, starting with its current strategic goals.

Current Strategic Goals

Whole Foods Market’s current strategy and strategic position in the industry seem to be largely based upon scaling-up rather than down. This is an interesting shift from their earlier focus on giving more of a “mom-and-pop” feel to the stores. As one researcher put it, the current strategy of Whole Foods Market in recent years “ . . . has been to open its own large stores . . . The driving concept behind their merchandising strategy was to create an ‘inviting and interactive store atmosphere that turned shopping for food into a fun, pleasurable experience’” (Meador et al., 2008, para. 2). It is interesting that Whole Foods Market does not see making stores larger as being at odds with making shopping pleasurable. Indeed, it is hard to know whether the various unique features of Whole Foods Market can truly make up for the well-known general consumer distaste for shopping in huge, warehouse-like grocery stores. If Whole Foods Market can expand into larger stores without destroying the ambiance that draws customers to it, this would be a source of great confidence for its investors.

Investor Relations

Whole Foods Market seems to have a strong relationship with its investors in which it conveys a sense of caring about their satisfaction with the company. For example, as stated in Whole Foods Market’s own work on defining its relationship to investors, this focus becomes quite clear: “Our ‘bottom line’ ultimately depends on our ability to satisfy all of our stakeholders. Our goal is to balance the needs and desires of our customers, team members, shareholders, suppliers, communities and the environment while creating value for all” (WFM, 2014a, p. 1). This is a way of thinking that is quite in line with the company’s stated values. However, there are still questions raised by critical thinking regarding whether there is any truth to Whole Foods Market’s supposed caring nature. Fortunately, financial data does back up the company’s promise to investors: “[We] ended the year with a healthy reserve of $1.4 billion in cash and investments. Our outstanding performance was reflected in our stock price, which increased 20% for the fiscal year, outpacing the S&P 500 for the fifth consecutive year” (WFM, 2014a, p. 3). This statement should help bolster the solidity of investor relations, given its basis in hard financial data that can be confirmed. Overall, Whole Foods Market’s relationship with its investors seems strong, but further analysis is still in order.

Strengths and Weaknesses

Strengths and weaknesses, the two elements of a SWOT analysis relating to the internal environment, are useful concepts when investigating Whole Foods Market. As it turns out, Whole Foods Market’s strengths are related to the fact that it is well-positioned in a growing market. One team of researchers put it thus: “In 2005 sales were 1.3 million and rose to 1.7 million in 2007 showing for an increase in sales over the three year time period.” (Meador et al., 2008, para. 4). This is definitely a good sign and points to one of Whole Food Market’s strengths—namely, its continuing growth. A review of recent trends in the company’s stock confirms this gradual but unrelenting climb upward (Reuters, 2014b). Surely the stock market, though fickle, can serve as an adequate reflection of another of Whole Food Market’s strengths, which is that investors have had confidence in the past and continue to display confidence going forward into the future. However, the positive signs associated with Whole Foods Market are not without their counterparts on the negative side.

Whole Foods Market’s weaknesses include the troubles it faces with the rising costs of goods sold, which leads to internal problems with finances. This issue has been described thus: “[T]he profit margins from year 2005 have been decreasing each year. The costs of goods sold are on the rise over the past three years and debt over the past three years has risen dramatically to all time highs” (Meador et al., 2008, para. 3). Clearly, this is a concern if Whole Foods Market cannot internally find methods to cope with this factor. So far, it appears this will be a difficult hurdle for the current leadership and the existing strategies to tackle, which suggests weakness in Whole Foods Market’s adaptability and dynamic capabilities to react to change. However, there are also opportunities to be had in terms of the environment in which Whole Foods Market is currently operating.

Competitive/External Environment (Opportunities and Threats)

The remote environment in which Whole Foods Market exists is complex, consisting of the technological, ecological, social, and political factors affecting the company, yet the operating environment should be the focus for forming strategic plans for growth, as it is the aspect which the company has control over. Of the relationship between operating environment and logistics, Stank and Daugherty (1997) have said, “Firms are moving away from single transaction business arrangements and forming cooperative relationships with third party . . . [A] random sample of manufacturing executives identifies operating conditions in the manufacturers’ operating and strategic environment” (p. 53). Third-party cooperative arrangements are indeed vital to maintaining an optimal operating environment, and, as shall be seen shortly, Whole Foods Market has even entered into such partnerships with other, possibly competing grocery chains. However, the remote environment is still important, and part of that remote environment is the increasing social trend of focusing on more ecologically friendly products. This is a trend that many have picked up upon: “Without question, the organic food industry is experiencing hasty consolidation but it still faces immense competition in these upcoming years from supermarkets who are falling into the organic trend” (Tainted Ink, 2010, para. 8). Thus, Whole Foods Market can expect that not only will new organic grocery chains arise in the coming years but also that existing companies may make a lateral move into this area. In some ways, it may be easier to join such competitors rather than beat them, so to speak.

As mentioned above, Whole Foods Market’s focus on happiness in its core values is not shared by all major grocery retail chains. For example, Safeway’s mission statement revolves instead around loyalty from all those who interact with the company (www.safeway.com). For a sustainable business model, loyalty might be far easier to capitalize on than happiness, so this is one way in which a potential competitor could serve as a threat to Whole Foods Market. However, interestingly, Safeway and Whole Foods have also had dealings together in which they functioned as partners rather than competitors, turning a threat into an opportunity: “In February 2014, Whole Foods Market Inc acquired leases from Safeway Inc for seven locations formerly operated as Dominick's stores” (Reuters, 2014a, para. 1). Perhaps this shows that Safeway and Whole Foods Market are different enough in their focus—the former on the full range of groceries, the latter specifically on organic and natural groceries such as grass-fed beef—that some of the threat is neutralized. However, there are other companies that have strategies more similar to Whole Foods Market’s approach, and these may be greater threats.

Two other competitors with which Whole Foods Market will have to contend in the upcoming years are Sprouts Farmers Market and Natural Grocers, which is an offshoot of Vitamin Cottage. It is well known that the former offers very similar best-selling services and products as whole foods, albeit with a stronger focus on produce and a reduced emphasis on packaged natural foods. According to Fleisher and Bensoussan (2003), the fact that the two companies have different specialties does slightly reduce the threat to Whole Foods Market from this competitor. As for Natural Grocers, this company appears to be less widespread than either Sprouts Farmers Market or Whole Foods Market. In spite of the fact that it is owned by Vitamin Cottage, it seems that the products and services upon which it focuses are fairly similar to those of Whole Foods Market (www.naturalgrocers.com). Yet Natural Grocers is a less commonly heard name in discussions of natural grocery stores, and so Whole Foods Market should not consider this chain too large of a threat. This suggestion is not the only recommendation for the company, however.

Recommendations

Many recommendations suggest themselves where Whole Foods Market is concerned. As has already been mentioned, Whole Foods Market is well-established enough that it can afford not to pay terribly much heed to the competitors who seek to threaten its dominant position in the natural foods industry. In addition, Whole Foods Market would do well to continue along its current path in most regards. With the substantial evidence provided concerning Whole Foods Market’s situation according to a SWOT analysis, one cannot help but notice that the business is relatively secure with respect to threats and weaknesses. However, there are still some areas in which Whole Foods Market could improve.

On the flip side, as has already been suggested based on previous evidence given, Whole Foods Market may be suffering from the kind of inflexibility in mindset that so often sets in once a business is large enough. To counteract this possibility, the company should ensure that there is a constant mixture of new people coming into leadership positions from outside the company. This helps prevent a group from falling into a rut in which everything is assumed to be predetermined because those in charge have done things the same way for a long time. That concern is valid for any organization, but it is particularly relevant as a company begins to find itself in a dominant position in the market. Whole Foods Market is in just such a position now, and if it continues to become entrenched in doing things the same way it has always done them, its future could be dire indeed. Simply because one does not yet have substantial threats in the form of competitors does not mean that no threats exist. Ultimately, it is a strategy of cautious self-awareness that will best serve Whole Foods Market in the coming years as the organic grocery market continues to evolve.

Conclusion

Whole Foods Market, like other businesses adapting to a growing and changing market, must not take its security and dominance for granted. Though there are many respects in which the company seems extremely strong, from its firm embodiment of its mission, vision, and values system to its relationship with its investors and ability to consistently grow year after year, the possibility of other natural or organic grocery chains stepping in is a constant concern. Though an even bigger concern may be the possibility of internal stagnation, in the end, constant vigilance will help prevent this. If Whole Foods Market can stay true to its values as it expands, it can look forward to enjoying a profitable existence for years to come.

References

Fleisher, C. S., & Bensoussan, B. E. (2003). Strategic and competitive analysis: Methods and techniques for analyzing business competition. Upper Saddle River, NJ: Prentice Hall.

Meador, D., Britton, M., Phillips, P., & Howery, A. (2008). Case analysis: Whole Foods Market. Retrieved from http://pnphillip.asp.radford.edu/whole%20Foods%20Case.pdf

Reuters. (2014a). Whole Foods Market Company Inc (WFM.O) company profile. Retrieved from http://www.reuters.com/finance/stocks/companyProfile?symbol=WFM.O

Reuters. (2014b). Whole Foods Market Company Inc (WFM.O) quote. Retrieved from http://www.reuters.com/finance/stocks/overview?symbol=WFM.O

Stank, T. P., & Daugherty, P. J. (1997). The impact of operating environment on the formation of cooperative logistics relationships. Transportation Research Part E: Logistics and Transportation Review, 33(1), 53-65.

Tainted Ink. (2010). Business analysis: Whole Foods Market. Retrieved from http://tainted-ink.net/archives/102

Whole Foods Market. (2014a). 2013 annual report. Retrieved from http://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/WFM-2013-Annual-Stakeholders-Report.pdf

Whole Foods Market. (2014b). Core values. Retrieved from http://www.wholefoodsmarket.com/mission-values/core-values