Whole Foods Strategic Review: Environmental and Institutional Analysis

Overview of the Strategic Review Framework

This organizational diagnosis of Whole Foods, Inc. involved both environmental and institutional analyses. The environmental analysis covered the categories of political, economic, social, technological, geographical, community relations, and informal sector network, seeking to discern opportunities and threats. The institutional analysis covered organizational role and profile; membership; programs and services; resources and capabilities; management systems; and external links, seeking to discern strengths and weaknesses. Together, the combined environmental and institutional analyses and their charted results illuminate the Company's nature and interactions to support more fluid integration of Whole Foods, Inc. into ABC Company.

Environmental Analysis

Analyzing the external forces affecting Whole Foods to identify the options open to the Company, one can see significant opportunities and threats.

Whole Foods Market, LP is a U.S.-based supermarket specializing in natural and organic foods, with more than 300 stores in the United States, Canada, and the United Kingdom (Whole Foods Market, IP.LP, 2014). Founded in 1980, its corporate headquarters are in Austin, TX, and the majority of its income is derived from U.S. sales (Hill, 2013). Whole Foods' customer base is largely liberal, though its CEO, John Mackey, is a very vocal, conservative libertarian (O'Callaghan, 2009). The 2014 mid-term U.S. elections, which gave Republican majorities in both Houses of Congress, are deemed very favorable to business and to corporate interests in particular. For example, Republican tax reform was expected to close corporate tax loopholes while lowering corporate tax rates overall (Merrill, 2014).

Whole Foods is a non-union employer, choosing to provide good benefits and a sense of community to workers rather than engage with the possibility of unionization; consequently, it has faced external union opposition to its business model (Shaywitz, 2013). In addition, the Corporation was sued by the California Attorney General in 2008 for knowingly illegally selling carcinogenic products (Baldas, 2008) and again in 2014 for deliberately overcharging California consumers (Li, 2014). The 2008 suit appeared to remain pending at the time of this review; however, Whole Foods agreed to pay an $800,000 settlement in the case involving overcharging Californians.

Whole Foods' position as a primarily U.S.-based corporation in the retail grocery industry means that it must pay a higher corporate tax rate — sometimes as high as 35% — than, for example, technology industry corporations (Berman, 2013). However, as noted above, Republican tax reform was expected to close corporate tax loopholes while lowering overall corporate tax rates (Merrill, 2014), which is favorable to Whole Foods. In addition, the stock market continued to rise and was predicted to keep rising at the time of this analysis, a condition favorable to U.S. businesses such as the publicly traded Whole Foods (Merrill, 2014).

Whole Foods' customer base is liberal (O'Callaghan, 2009) and has reacted strongly to statements by CEO Mackey on multiple occasions — boycotting the store in 2009 in reaction to his characterization of Obamacare as "socialist," and reacting again against his 2014 claim that Obamacare was "fascist" (Kavoussi, 2013), as well as his pro-corporate tax haven assertions (Berman, 2013). Simultaneously, Republican majorities in both Congressional Houses following the 2014 mid-term elections boded well for corporate interests (Merrill, 2014).

Technology has advanced to the point at which Whole Foods' 300+ stores in the U.S., Canada, and the United Kingdom are able to obtain and sell fresh organic foods (Cuenllas, 2013); however, technology had not yet reached the point at which the retail food chain could successfully sell fresh organic foods online. The Company attempted to do so several years prior to this review but failed in that effort (Shaywitz, 2013).

Whole Foods is the largest retailer of fresh organic foods, operating more than 300 stores across the U.S., Canada, and the United Kingdom (Whole Foods Market, IP.LP, 2014); however, the Company does not maintain a worldwide presence.

Whole Foods' largely liberal customer base has at times been alienated and driven to boycotts of the Corporation, primarily due to its CEO's conservative and outspoken views regarding corporate taxes, the Affordable Care Act, and capitalism (Shaywitz, 2013). At the same time, the Corporation has earned a well-deserved reputation as one of the most socially and environmentally conscious corporations in America (Whole Foods Market, IP.LP, 2014).

There is a strong informal sector network surrounding Whole Foods, including an active web presence and social media engagement (Whole Foods Market, IP.LP, 2014), local communities benefiting from food donations, and contributions of 5% of Whole Foods' net profits to local nonprofit or educational organizations. The Company also maintains a dedication to good nutrition and to overcoming poverty in the global community (Whole Foods Market, IP.LP, 2014). Simultaneously, the informal sector network is weakened among the Corporation's liberal customer base due to the CEO's conservative, vocal opinions about capitalism, the Affordable Care Act, and corporate taxes (Kavoussi, 2013).

Environmental Analysis Summary Table

The table below summarizes the key opportunities and threats identified across each environmental category.

Political: Opportunities — Pro-business Congress. Threats — Antagonized liberal customer base; union opposition; lawsuits for knowingly illegally selling carcinogenic products and for overcharging California consumers.

Economic: Opportunities — Pro-business economy with a steadily rising stock market; pro-business Congress expected to lower corporate tax rates. Threats — Retail grocery industry pays very high corporate taxes, often as high as 35%; paid $800,000 settlement for overcharging California consumers.

Social: Opportunities — Republican majorities in both Congressional Houses indicate some public approval of the CEO's conservative stance. Threats — Alienation of the liberal customer base by the CEO's vocal, conservative assertions.

Technological: Opportunities — Capabilities for obtaining and marketing fresh organic produce across 300+ stores in the U.S., Canada, and the UK. Threats — Inability to successfully sell fresh organic produce online, particularly in light of a prior failed attempt.

Geographical: Opportunities — Largest retail chain of fresh organic produce, with 300+ locations in the U.S., Canada, and the UK. Threats — No global presence at this juncture.

Community Relations: Opportunities — Strong reputation for community involvement and environmental consciousness, as well as contributions to local and global communities. Threats — Antagonism of the liberal customer base by the CEO's vocal, conservative opinions.

Informal Sector Network: Opportunities — Strong informal sector presence through well-known social consciousness, environmental consciousness, contributions to local and global communities, and a robust web presence maintained by the Corporation and through social media. Threats — Antagonism of the liberal customer base by the CEO's vocal, conservative opinions.