Whole Foods Case Study How

Whole Foods Case Study

How would you describe the merchandising and operational decisions made by Whole Foods Market in terms of the rational, bounded rationality, and garbage can models of decision-making?

Given the current public upsurge of interest in where food comes from and how food is prepared, Whole Food's merchandising and operational decisions can be explained by the rational model of decision-making. Increased publicity surrounding food-born ailments like mad cow disease, e.coli poisoning, antibiotics in cow feed, and high levels of added sweeteners make Whole Food's extensive organic and locally grown lines of food a comfort to worried consumers and a viable alternative to traditional supermarkets. "Catering to the growing interest in organic and gourmet foods," Whole Foods merchandise offers customers peace of mind at a price, but customers appear willing to pay higher prices for such goods (Brady, 2005).

More and more customers are willing to pay high prices for food in general, given the corresponding success of stores like Starbucks that likewise cater to what might be called mass affluence, or the willingness of middle-class consumers to pay more for certain premium foodstuffs like coffee. Even the presence of the Food Network on television indicates a heightened interest new and innovative ways to put food on the family dinner table. However, an advocate of theories of bounded rationality might caution that Whole Foods' founders in the 1970s could not have predicted all of these 21st century food marketing trends. Rather, the company designed a unique and effective approach to management through early regionalization and niche marketing of its foodstuffs. It has been able to make pricy produce profitable, despite its nickname "whole paycheck" because of a semi-orchestrated convergence between product, pricing, and consumer trends (Brady, 2005). Its limits on high executive salaries allowed the company to become profitable quickly and coincided as well with the heightened public and shareholder distaste for paying CEOs high salaries and pricy perks. Today, Whole Foods is actually more profitable than traditional supermarkets, with gross margins of 35% over the past year, vs. 24% for Kroger Co. And 29% for Safeway Inc., according to market research firm Capital IQ (Brady, 2005). It carved out a niche quite expertly, and at this time and place in history, there was demand for that niche. Also, these merchandise and leadership decisions is not simply rational, they also correspond to the company's overall ethos. Of course, a garbage can model would place even more emphasis on the accidental coherence between the ideological agenda of people who have promoted greener, cleaner living, some recent food scares, and the heightened concern about nutrition in light of the nation's obesity crisis. Finally, there seems to be something unique about the atmosphere at Whole Foods -- other chains like Trader Joe's are doing what Whole Foods is doing, and doing it for less, but only Whole Foods inspires such devotion: "I'm addicted to the onion focaccia bread!" (Brady, 2005)

Question

What role does participation play in the decision-making process at Whole Foods Market?

One of the reasons that Whole Foods Market may be so effective is that it makes such effective use of self-directed merchandising teams that have a direct role in how individual stores are run and what types of inventory the stores carry. True, the company has a highly cohesive ethic, regarding the environmentally friendly and ethically produced nature of its products. However, one problem that a supermarket chain will inevitably run across is that different areas of the nation have different tastes. This is why allowing self-governance is so important on a store-by-store basis for this chain. A Whole Foods in New York City might have more convenience vegan food, for busy apartment dwellers, while a Whole Foods located in a suburb might have more bulk items, for consumers who shop less frequently, prepare more goods at home, and have larger families. Different employee teams, of which there are eleven subdivisions in each store, are also able to devote their attention to regional trends regarding specific goods. There is also intense communication with customers about what they want and a willingness to think out of the box. Thus Whole Foods Market, although not a democracy, attempts to draw upon the most effective features of participatory democracy to make good decisions.

Question

How does Whole Foods Market incorporate ethical considerations into its decision-making?