Figure 1 shows the Porter Five Forces Model graphically, drawn from the original mention of this model by Dr. Micheal Porter of Harvard University. Each of these areas is now discussed in bullet form in the following series of sections.
Assessing Whole Foods Industry Competitors (Rivalry)
Whole Foods faces significant competition both at the local level in served U.S. markets and globally from Carrefour, Tesco and Wal-Mart. In addition the mergers and acquisitions of competitors are leading to regional competitors gaining critical mass, with Wegman's and Winn Dixie being two examples. As a result of these factors the rating for this factor is high.
Pressure from Substitute Products
Whole Foods is facing moderate competition from health food stores, traditional supermarkets, and supercenters. The pressure from substitute products is therefore considered medium.
Bargaining Power of Buyers
Buyers have more options with every new health food store, launch of new providers of healthy-based foods and health-related products. Competitors are concentrating on price, convenience, evangelism of healthy foods and healthy living and lifestyle changes many consumers globally are looking for (Stuart, 68, 69). As a result, this factor is rated as high.
Bargaining Power of Suppliers
As the demand for organic foods is one of the highest growth areas of grocery stores and food retailing, the entire supply chain of organic products often has more demand for their products than they have products to fulfill all potential orders (Ebenkamp, 14). From local growers, independent and family farmers, food brokers and Co-ops, the supply chain for natural foods is still vastly underdeveloped. This translates into a high rating for this specific factor.
Strategy Discussion & Recommendations
From this analysis it is evident at Whole Foods excels at launching new stores, and needs to continue this approach to growth, in conjunction with acquisitions of companies that selectively fit with their business model. Using the internal metric of growing at 10-15% (Ebenkamp, 14) which is achievable given the company's existing organizational processes, systems and structure, the company needs to align their strategies to accomplish this level of growth in 2009 and 2010.
Second, Whole Foods needs to create coordinate campaigns that provide rapid access to new geographic markets and also focus on their unique value proposition to attract new consumers as well. As While Foods excels at partnerships, they need to consider regionalized promotions to build their brands in new geographic markets. Third, the company's global brand equity needs to also be augmented more with psychographically-based analysis of key audiences that are oriented more towards healthy lifestyles. Fourth, Whole Foods needs to also concentrate on how to gain greater international sales in the UK and Canada by acquiring health food retailers in these nations to alleviate any cultural differences between the company and the specific country they are intent on selling into. Finally, Whole Foods need to concentrate on making their entire supply chain more efficient so sales productivity per employee can be driven up over time, in addition to overall company performance.
Whole Foods has a very unique market position today that can be augmented and strengthened if the company concentrates on extending its unique value proposition through better internal efficiency and through a more aggressive approach to global expansion. On this latter point, the use of merger & acquisition strategies needs to be considered as the company has shown an innate strength at this area of processes. Minimizing the risks of global expansion is critical for the long-term growth of the company, in conjunction with the growth of U.S.-based markets through lifestyle marketing. The continual orientation and endorsements of healthy foods in the U.S. media is acting as a form of business development for the chain today. To fully take advantage of this dynamic, Whole Foods must work to coordinate and control their supply chain more effectively, to keep global mass merchandisers Carrefour, Tesco and Wal-mart from dominating this retail market.