Whole Foods the Demand for Case Study
Excerpt from Case Study :
Given the growing demand for organic foods Whole Foods is in a unique position to contribute to consumer awareness that promotes a better understanding of organically grown foods. This opportunity is important because many consumers do not understand the health and economic benefits of purchasing and consuming organically grown foods. This may lead to a greater desire for people to grow organically produced food. Such production is needed because of the growing demand for organic products.
Whole Foods also has the opportunity to make organic products more accessible and affordable for everyone. The company has already established itself as an industry leader. In doing this it has also maintained high quality standards. With this understood the strategic management that the company chooses should embrace the idea of providing high quality products at reduced prices. This would serve the purpose of reinventing the store while also making the community healthier.
The shortage of organic food in the future is a major threat to Whole Foods. The company is built on the premise of offering consumers premium organic products. However the popularity of organic food has resulted in a decreased supply. There simply are not enough organic farms and producers to keep up with the demand. This issue is compounded by the fact that Whole Foods is no longer the only grocery chain that specializes in organic products. With this understood Whole Foods is competing with other companies to have access to the organic supply of products. The case study explains that "The market for organic foods grew from $2.9 billion in 2001 to $5.3 billion in 2004 an 80.5% increase in the three-year period. In addition the scarcity of the organic food supply is such a threat that some organic markets have begun to look outside the United States for their supply of organic products.
Although Whole Foods remains the largest such grocery of its type, there is an increase in competition in recent years. For instance Wal-Mart now carries a significant amount of organic foods. This is a very real threat to Whole Foods because of the large market share that Wal-Mart already holds and the number of stores that Wal-Mart has around the country and throughout the world. Additionally stores such as Trader Joes, which also sells products that are strictly organic, has a much lower price point.
Another threat is economic conditions. Although the company is selective in the types of locations that stores are place, growing economic woes can serve as an impediment to the company's bottom line. The company only places stores in neighborhoods where 40% of the residents have college degrees. The reasoning behind such placement is that people with college degrees are more health conscious and make more money on average than do non-degreed people. However, the problem wit this reasoning during difficult economic time is that many of these individuals are losing their jobs and no longer have the income to support the purchase of products that Whole Foods offers.
One of the actions that Whole Foods can take is the lowering of prices. This can be done by developing a product line that is geared toward shoppers who want to eat healthy but have limited budgets. The company must overcome the attitude of only catering to middle and upper income individuals because during difficult economic times these individuals will not be able to afford Whole Foods and they will turn to alternatives. The offering of organic foods at a lower cost would serve the purpose of broadening the company's customer base and therefore allow the company to remain competitive well into the future.
Another approach in addressing the scarcity of organic foods is for Whole Foods to embrace vertical integration. Vertical integration is defined as the degree to which a firm owns its upstream suppliers and downstream buyers (Clinton et
al., 2008)." Embracing this particular strategy will allow Whole foods to become self sufficient through the creation of organic farms that are owned by the company.
Whole Foods may also choose to go outside of the United States for its products. The company has to remain competitive and if the competition has access to products that are cheaper and more plentiful outside the United States, Whole Foods will not be able to compete. The scarcity of organic products may make this strategy absolutely necessary to make the company viable in the future. Utilizing this strategy the company
In the case of Whole Foods it appears that vertical integration may be the best solution for the company's problem of scarcity. Vertical integration will allow the company to produce its own organic products. This strategy would also allow the company to have even better quality control because the company will be able to manage the process from beginning to end (Panchack, 2003). That is from the time products are planted until they reach the point of sell. This could prove to make Whole Foods strength of differentiation even more pronounced. According to Clinton et al. (2008) vertical integration "can have a significant impact on a business unit's position in its industry with respect to costs, differentiation, and other strategic issues, the vertical scope of the firm is an important consideration in corporate strategy. Vertical integration potentially offers many different advantages." The advantages are as follows
1. Decreases costs associated with transportation when common ownership leads to closer geographic proximity (Clinton et al., 2008) .
2. Enhances that coordination of the supply chain (Clinton et al., 2008).
3. Allows the company a greater opportunity to differentiate because it increases ownership over inputs (Clinton et al., 2008).
4. Secures both upstream and downstream profit margins (Clinton et al., 2008).
5. Allows the company to obtain access to downstream distribution channels that would be inaccessible if not for vertical integration (Clinton et al., 2008).
This solution was chosen because it seems to be the most practical as it pertains to addressing the problems associated with scarcity of organic products as a result an increase in demand and the limited amount of organic farmers. Vertical integration also seems to be the most compatible with the mission statement and overall culture of the company. That is the company emphasizes the importance of growing and consuming organic products and the impact of non-organic growth on the environment. By implementing a strategy that permits the company to grow organic products the overall mission of the company is more completely fulfilled. In addition this strategy will allow for tighter quality control which has been essential to the success of Whole Foods in the past.
The purpose of this discussion was analyze the case study, "Whole Foods 2007:will there be enough organic food to satisfy the growing demand?" The research focused on the manner in which the company plans to address the problems posed by a scarcity in the supply of organic products. The conclusions drawn suggests that Whole Foods should employ a strategy of vertical integration to address the problem of scarcity. Such a strategy is warranted because it will allow the company to continue to differentiate, to present quality product to consumers and to holistically meet the goals established by the company's mission statement.
Clinton, S.R., Manna, D., Marco, G. (2008) A Case Series Of Today's Vertical Integration. Journal of Business Case Studies 4(7), 47-52.
Community Giving. Retrieved from: http://www.wholefoodsmarket.com/company/giving.php
Dimitri C., Greene, C. Recent Growth Patterns in the U.S. Organic Foods Market
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Harasta, P., Hoffman A.N. Whole Foods Market 2007: Will There Be Enough Organic Food to Satisfy the Growing Demand? Pearce, J., Robinson, R. (eds)
Strategic management formulation implementation and control 11th edition
Panchak, P. (2003) The Virtues of…
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