Whole Foods, is a natural and organic food retailer, which was started its operations in 1980, in Austin, Texas. It is now the largest natural and organic foods retailer in the world, and has stores in the United Kingdom and throughout North America. The company has been involved with a lot of mergers and acquisitions since it started its operations. In fact, much of the company’s growth has been achieved through the acquisitions and mergers.
The company developed this strategy in order to expand its market, since the companies they have partnered with, are spread in many parts of the world. Initially, the company was called SafeWay, and it was founded by John Mackey and Rene Lawson Hardy. After running for about 2 years, SaferWay merged with Clarksville Natural Grocery, which resulted to the establishment of the Whole Foods Market in 1980.
Since then, the company has been extensively employing this strategy, and it has formed mergers with companies such as Wild Oats© Markets, Fresh & Wild, Select Fish, Harry’s Farmers Market, Food for Thought, Nature’s Heartland, WholePeople.com, Allegro Coffee, Merchant of Vino, Amrion, Bread of Life, Fresh Fields, Mrs. Gooch’s, Bread & Circus, and Wellspring Grocery. This paper will focus on the market, industry and the marketing strategies employed by Whole Foods.
Discussion
This retail company operates in the food industry. This is an industry which mostly depends on agriculture. In other words, agriculture is the key source of products in the industry which Whole Foods operates in; hence changes in climatic conditions directly affect the industry.
The type of market structure in this industry is a rapid growth structure. This is because the use of organic food products is on the increase in the modern world, as people are increasingly being affected by foods that contain chemicals. Due to this, many people want natural foods and this is why the market for the industry in which this firm operates in, is experiencing rapid growth (Kotler & Keller, 2009).
The change agents in this industry include societal/demographic trends and technological trends. When demographic trends change, the food industry is affected because changes in perception and way of life are directly related to food consumption. Technological changes also affect the food industry because they affect production, quality and distribution of food products, hence directly affecting the food industry market.
Threat of new competition
There are many firms selling organic food products such as Wal-Mart, Trader Joe’s and Safeway among others. Therefore, Whole Foods faces a threat of new competition as these competitors are constantly employing modern technology to outdo each other in the foods market. Due to the increasing demand for natural and organic foods, the foods market is growing rapidly and this may facilitate entry of more new firms into the industry, which will further increase the competition for Whole Foods (Joshi, 2005).
Threat of substitute products or services
There are many substitute products for Tartar sauce and Tropical fruit blend among others. The natural environment offers some substitutes to these products and so, an increase in these substitutes will definitely affect the market of Whole Foods. Changes in demographic trends may also offer more substitutes to the products sold by Whole Foods, hence affecting the firm’s market (Mercer, 1996).
Bargaining power of customers (buyers)
Many companies appreciate the bargaining power of customers by reducing prices to favor the customers. Different customers from different geographic locations have varying bargaining powers, and this affects the profits of the companies. Change in social trends; affect the bargaining power of customers for the organic food products sold by Whole Foods and other organic food retailers (Paliwoda & Ryans, 2008).
Bargaining power of suppliers
Changes in technology may affect the bargaining power of suppliers in this industry. If some suppliers of raw materials advance in technology more than others, many firms in the industry will start working with the advanced suppliers.
This increase in demand with limited supply, will increase the supplier’s bargaining power, hence leading to an increase in the prices of the raw materials. This will in turn lead to an increase in the final products by the firm, which will subsequently affect the market structure, situation and competitiveness in the industry (Hill & Jones, 2009).
Intensity of competitive rivalry
Changes in technology affect the intensity of competitive rivalry. If a company in the food industry employs advanced technology in marketing its products, it increases competition in the food industry, as more firms in the industry will be trying to counter this advancement. If the intensity of competitive rivalry increases, prices reduce and quality improves. This in turn makes the market more segmented (Ahlstrom & Bruton, 2009).
The firm employs a differentiation strategy in marketing its products. This is because it tries to make each product unique, which differentiates it from products of other retailers such as Wal-Mart. Changes in technology affect product differentiation in that; advanced technologies are used to make products more differentiated and unique, which in turn helps in marketing the products (Henry, 2008).
Demographic changes also affect product differentiation, in that people from different areas and cultural backgrounds; have their own tastes and preferences, and firms try to differentiate products based on the target market. Differentiation of Whole Foods products is mostly focused on ingredients and appearance, which is a good differentiation strategy, because these are the things which customers for food products consider first.
With this strategy, it can survive in any new environment because universally, customers for food products first consider the ingredients and the appearance/branding. Since the competitors of Whole Foods such as Wal-Mart are large, the company tries to lower the prices of its products, so as to effectively survive in the highly competitive environment (Burgers, 2008).
References
Ahlstrom, D., & Bruton, G. D. (2009). International management: strategy and culture in the emerging world. London: Cengage Learning.
Burgers, W. (2008). Marketing revealed. London: Palgrave Macmillan.
Henry, A. (2008). Understanding strategic management. Oxford: Oxford University Press.
Hill, C., & Jones, G. (2009). Strategic management theory: an integrated approach. London: Cengage Learning.
Joshi, R. M. (2005). International marketing. Oxford: Oxford University Press.
Kotler, P., & Keller, K. (2009). A framework for marketing management. New Jersey: Pearson Prentice.
Mercer, D. (1996). Marketing. New York: Wiley-Blackwell.
Paliwoda, S. J., & Ryans, J. K. (2008). Back to first principles. International Marketing, 25.