Whole Foods market analysis and operations

Whole Foods

New Service Proposal 2012

Company Overview

The Concept

Statement of Mission and Vision

Mission Statement

Vision Statement

New Service Proposal

External and Internal Business Environment Analysis

The Business Environment Overview

Five Forces Model Analysis

Environment Discussion

Risk Analysis

Action Plan

Financial Projections

Company Overview

Whole Foods' business model is founded on the notion that food should be nutritious, healthy, and contain as few artificial ingredients as practicably possible. The company started out with nineteen people who had an idealistic approach to the way food should be grown and circulated (Whole Foods). From these modest beginnings, Whole Foods has grown to a company that employs over fifty thousand people and operates in three international markets. Whole Foods Market went public on January 23, 1992 and much of its growth has been hinged on acquisitions of various organic food brands and related goods.

Figure 1 - Whole Foods Origination (Whole Foods)

The organization represents something of a paradox to many analysts. On one hand they a strong dedication to corporate social responsibility. Whole Foods announced the introduction to their "Whole Trade Guarantee" in 2007 that tackles such issues as fair trade with developing countries and better wages and working conditions for workers (Allen). However, on the other hand, they have been reported to be less than friendly to their own employees and a frequently recognized with a strong union aversion. Dismantling the union in their industries has been listed among the organizations top priorities (Smith). Despite whatever contradiction lie in Whole Foods progressive image, the fact of the matter is that the company is the leading retail force in the organic and natural food industry. This proposal will outline a new service that can further add value to the Whole Foods customer base.

The Concept

Our idea is to create a new concept in Whole Foods market, by adding a new way to serve the customer. As opposed to simply buying raw meat ingredients, it is recommended that a service be established in which the customer can choose any kind of meat at the poultry from the store and then a chef can cook it in right in front of them if they wait or they may also chose to continue shopping. The customer could either choose sides and drink as well, after that they can eat in the luxury place which has been re-modeled for them in the second floor in the market. Cooking healthy organic food right in front of the costumer could generate a great deal of excitement for the customers. Customers could use this opportunity to witness how Whole Foods products should be prepared for best results or also use the service to sample new products.

To further develop this proposal, the goal or objective was to look at a number of other organizations both small and large that might be offering a number of similar products and food based items such as the ones that we intended to promote. As per the earlier assignments, the key objective of the Whole Foods Market Grill is to be able to offer a number of custom tailored food items that are both organic but also fresh at the same time and that itself ensures that there is the inherent notion of providing the best value added products to the end clients that come to shop here. There are a number of other food eateries that seems to offer something very similar as that is entirely consistent within their mission and vision statements. A survey of the market was taken and a new mission and vision statement for Whole Foods was developed.

Statement of Mission and Vision

After having taken an in depth look at all of these mission statements and business strategies of a number of our competitors, the following is our initial Mission and Vision statements:

Mission Statement

"Our mission is to offer organic, high quality and the freshest of all grilled foods for price conscious customers at a location that is very convenient but also inviting with an end commitment of being the best grilled chain in the industry."

Vision Statement

"Our vision is to be the "premier grilled market within the communities that we operate in and strive to become the leading place for having grilled lunches or dinners."

For the purposes of this given assignment, the task was to come up with as much information about the competitive landscape as feasibly possible for our selected and intended project on "Whole Foods Market Grill." Several lines of investigations were conducted including an industry overview analysis, a Porter's Five Forces analysis, as well as a SWOT analysis. Understand the market nuances of the market served as the foundation that allowed us to properly critic the project proposal.

New Service Proposal

The idea that was chosen is to develop a section at Whole Foods that customers can come in to the store pick any kind of meat and take it to a certain section of the store and have a chef cook it for them. The cost of this service will be $5 plus the cost of the meat that is selected. The customer is also given a choice as to whether or not they want to actually learn to cook the meats. This is expected to bring in revenues for the stores because not only are more people that aren't sure how to cook meat going to buy more meat but it will also bring in more shoppers that are more than likely to buy other products in the store and increase revenue that way as well.

External and Internal Business Environment Analysis

The Business Environment Overview

There are two primary social drivers that have subsidized a great deal of the success that Whole Foods has experienced throughout the years. The first is that in general consumers are becoming more health conscious as well as becoming increasingly concerned about what kind of processes and artificial additives go into the foods that they eat. These consumer segments are conscious of such considerations and are prone to appreciate the product lineup that Whole Foods offers and are generally also willing to pay a premium over lower cost alternatives. However, this can be a mixed blessing since at the same time there are many social drivers that also prevent people from shopping at Whole Foods such as time and money constraints.

Many of the political drivers that affect Whole Foods and the industry in general can be summarized by vast amounts of uncertainty that are driven by a highly polarized political environment. So far in its history, Whole Foods has not had to deal with excessive regulations or consumer protection measures other than some certifications and regulations involving organic marketing (USDA). However, if this industry becomes the subject of increasing regulations the freedom that the organization has had could change quickly. Even though increased regulations would be a hindrance for Whole Foods product line up, since the products are mostly organic this could actually become a competitive advantage if food regulation were accelerated in the future because it could create even more havoc for some of the competition.

The economic drivers that shape Whole Foods competitive landscape and consumer base are also subject to large amounts of uncertainty as well. The global recession has reduced the amount of disposable income that various consumer segments possess (Bawden). Since Whole Foods products are relatively more expensive than the products that are produced by mass production, a drop in disposable income can cause the organization tremendous financial harm because of the incentive to purchase substitute products. However, with the customer loyalty to the organization sustained at a high level coupled with the high margins the organic products receive, it is likely that Whole Foods will be able to sustain any shocks to disposable income. Furthermore, even when the business is operating at a low profit margin is still has an incredibly high turnover rate when compared to other players in the same industry.

Figure 2 - Low Margins - High Turnover (Maranjian)

Whole Foods has a refined enterprise resource management system which it uses to manage its inventory and its supply chain. Despite the level of technological sophistication that Whole Foods employs, many mainstream competitors have much more efficient systems. Wal-Mart for example has built a distribution network that Whole Foods would have virtually no possibility of competing with directly. However, in the organic foods niche, this level of technology could act as a barrier to entry for smaller firms. Another challenge for the organization is that their products often have shorter shelf lives than traditional grocers because of the lack of preservatives which can add a level of complexity to managing inventories (Maranjian).

Five Forces Model Analysis

Threat of New Entrants

There are a number of new entrants that are entering the marketplace and could pose a threat to established industry firms who also wish to prepare food for customers.

Some of these new relatively new entrants include those that operate as small cafes, dining restaurants, fast food restaurants offering grilled items, and some supermarkets that are also beginning to offer grilled items in their delis.

Many of these might have a cost advantage due to the locations that they operate in or their retail size which makes square footage more cost effective.

Barriers to entry also is inclusive of them having a more timely and reliable access to various distribution channels and networks (such as supermarkets having their own delivery services).

Bargaining power of Suppliers

The timely availability as well as reliability of suppliers with whom one works with downstream in the supply chain is an important consideration. Since Whole Foods has acquired many of the organic organizations downstream, they have a great deal more control of their supply chain than most firms.

The importance of being able to switch over to a different supplier in case one relies on very few or "concentrated" suppliers. In Whole Foods case, the fact that they own many of their suppliers would make it virtually impossible to redesign the supply chain if needed making them dependent on their supplier's performance.

The types of prices that suppliers are able to offer or leverage is considerably low for Whole Food's suppliers since profits would ultimately end up in the same set of books no matter which organization claimed the profits.

The scope and network spread of the suppliers in the industry is rather narrow in the supply chain opportunities since the organic foods market is still developing.

The cost of being able to move from one supplier to another one would be high for Whole Foods since it has a great deal of ownership invested in its current supply chain.

Bargaining Power of Buyers (Customers)

The income distribution of the selected buyer market; with the goal of having customers with middle to high incomes and greater amounts of disposable income.

Levels of similar products and food choices available to such buyers are generally fairly limited in the markets in which Whole Foods choses. It operates with a rather unique product niche that few have been able to effectively imitate.

The perceived quality of our food items to buyers vs. those afforded by other rival competitors is generally high in the Whole Foods markets. They have unique control over their supply chain as well as high turnover so they can guarantee quality and freshness of their products.

The perceived level of importance of our product to the end buyer (whether they prefer organic or non-organic but reduced priced grilled items) is high among certain consumer demographics that place a relatively high value on quality food.

The actual concentration of our targeted buyer market will vary from market to market however since Whole Foods chooses its markets selectively, the markets which they operate in often contain heavy concentrations of buyers in the target market.

Threat of Substitute Products

The pricing of similar or substitute products is rather low in the organic market however if consumers shop outside of the organic market then the threat of substitutes can be great. This would depend on the customers' loyalty towards organic products.

The concentration of such substitute products within our coverage market will also be mixed based on customer loyalty. For example, there are probably many places that can grill foods that might serve as a substitute to the Whole Foods proposal. However, few can do this with the same quality ingredients as Whole Foods.

The perceived quality of such substitute products vs. Whole Foods will generally be low except for in a few rather rare cases such as where farmers markets may be present.

The cost of moving from one substitute product to another one by the end buyer will undoubtedly be fairly high since the product niche is fairly unique in most markets.

The volume of substitute products being sold will be high if all food substitutes are considered and low if only organic products are considered effective substitutes by the market.

Rivalry among Competing Firms

The scale and spread of competing firms will undoubtedly grow into the future as more and more firms try to imitate Whole Foods success.

Price-based competition with our competitive firms will remain low in the short and mid-term; however in the long-term the market could be flooded with new entrants.

Level of product differentiation by those competitors will be low until at least a long-term timeframe is considered and may also vary somewhat in individual markets.

Advertising and marketing efforts by rival firms in attracting clients to their side will be most likely low in most areas.

The concentration of such competitors in the market place & their profit levels will also most likely be low in most areas.

SWOT Analysis

Strengths

Convenience

Customer Service

Location "Your service style is new to the area"

Pricing "Your prices are cheaper than your competitors"

A branded image.

Different variety of food.

Almost the palace fully equipped.

Topline products "organic food and wine"

Weaknesses

Value compared to quality

Time/cost

Employee training

Limited expansion "new and not established"

Competition

Limited funds available.

Offer a product, which is already available on the market.

More of everyday neighborhood restaurant.

Reputation as 1st time in this business.

Opportunities

Industry or life style trends.

Neighborhood friendly restaurant.

New housing development is being built nearby.

Attractive & flexible employment.

Positive environmental commitments.

Threats

Change of Supermarket concept.

Technology involve in the food market.

A high street brand is moving into the area.

Operating costs are set to increase soon.

Effects on core activities "Either one effect the other, people who come to the restaurant or the one who's come to the Market"

Another restaurant has started offering similar products to your own, at a lower price and you are unable to match this.

Environment Discussion

After having completed this five forces model, the SWOT analysis, and the general environmental analysis what was identified was that it is equally important to have the right types of suppliers and quality ingredients as it is with being able to cater to our end clients and provide a unique and convenient experience that adds value to them and the Whole Foods brand in general. That itself is based on the fact that if we aren't able to get our food items on time and in a consistent manner, then it would be that hard for us to be able to turn around and offer such grilled items on a consistent manner. In addition to that, this exercise also informed about the importance of being able to differentiate our food items on the notion of "quality" as well as "pricing" strategies. Preparing food is a bold move considering the operations current business model. Although this proposal has a great deal of potential, it also carries a significant amount of risk.