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Whole Foods Market, the world’s largest retail chain of organic and natural foods supermarket was founded in the year 1980, from what was initially a local supermarket for health and natural food stuff and products. For nearly three decades now, since its inception, Whole Foods Market has proved to be a leader in the supply of natural and organic foods across the United States.
The company is widely recognized for its constant ability to supply food products that are free from preservatives and ingredients, and also for their stringent standards to sustain agricultural practices in the country.
The company’s unique mission in business is stipulated by its organizational motto, which bears the slogan, ‘Whole Foods, Whole People, Whole Planet.’ This paper provides an in-depth analysis of the trends applied by the company in retailing organic foods and its competitive power in the market as it is observed from the provided case.
The organic food sector has shown consistent growth in the past several years. Some of the key factors contributing to this abundant growth would include more consumers getting informed through education and conscious concerns of health that processed food products are likely to bring to humans.
These practices have further facilitated developments in the sector over the time as mainstream supermarkets continue to utilize the available opportunities to diversify their selection of organic and natural products. Some of the most common trends pertaining the retail of organic food products in the industry include the ups and downs within the farming sector, concerns of the environment, and concern of healthy lifestyles.
All these trends would have a significant impact in Whole Foods Market. Uncertain climatic patterns for instance, would negatively influence the supplies of the products in the market, leading to shortages in case of a bad season. More importantly unavoidable weather situations such as tornadoes and hurricanes can also occur anytime, contributing to loss of crops.
Regarding environmental concerns, consumers tend to believe that organic products come with positive effects towards the conservation of the environment. It is also understandable that people are now paying more attention than ever before, to what they ingest. In that case, the necessary steps are being applied in diverse settings to promote healthier lifestyle for individuals and families.
Whole Foods Market is making up and down attempts to establish major suppliers of organic supplies to cater for all chains and stores across the states. Food 2008 is a major player in the American food industry. Competition of the key players in the American food industry has increased rampantly in the past few years, owing to the heightening demand for organic and natural food products. Most Whole Food products target all categories of people in the society.
These products have continued to attract increasing consumer concerns from across the states owing to their unique market standards. It is easier to evaluate the competitive environment of the company using Michael Porter’s competitive forces that shape competition strategy. The five forces as observed by Porter include bargaining power of consumers, threat of new entrants in the market, suppliers bargaining power, competitive rivalry, and substitute products.
Bargaining Power of Consumers
The company is known for its commitment and involvement in charity missions among other community citizenship activities. More importantly, all these would happen as the firm continues to maintain its quality standards on all their products. In that case, the firm’s customers have less bargaining power since their demands and requirements are appropriately catered for and in the most charming manners.
However, owing to the increasing number of players in the food industry, buyers are likely to learn new ways in the long run, thus gaining added advantage on negotiating leverage. This way, consumers would tend to shift to other vendors on realization that they can always land on an equivalent product from the market.
Threat of New Entrants in the Market
As it would be observed, the initial concept of Whole Food Market was more innovative. However, current market trends are pushing the firm far from the scope of innovation and into mainstream.
According to USDA, the overall production of organic food products has been going up since the year 1990 in all regions, making organic food products the fastest advancing segment of agriculture. Rapid growth of market, coupled with minimal barriers to entry has attracted many participants in the industry, thus leading to stiff competition in the market.
Suppliers Bargaining Power
Just like any other firm, Whole Foods Market largely depends on a wide range of suppliers for its products. In most cases, some of these supplier groups have been active and powerful in determining the company’s competitive strategy in a number of ways. For instance, much attention is given to food processors in the country, which enjoy all the bargaining power. Only a very little percentage of farms are used for organic and natural food products.
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Whole Foods Market faces great rivalry presently, from the many competitors in the food industry. In normal circumstances, some of the common ways through which the firm is affected by rivalry include introductions of new products and services, improvement of services, advertising campaigns and price discounting among other implications.
The fact that competitors in the food industry are numerous and roughly equal in power is enough to increase the intensity of rivalry or competition in the market and this reduces the productivity levels of Whole Foods Market.
The company faces a high threat of substitutes from conventional food products that are processed artificially in the country. For example, many people in the U.S. would tend to see fast foods such as snacks and drinks as more convenient, compared to other food stuffs that are made at home.
Most of these fast foods are artificially processed and preserved, and they pose serious threats to the firm’s productivity. In most cases, these cheap preserved foodstuffs would tend to offer a significant price-performance trade-off to the natural and organic food products offered by the company. In such circumstances, it is easy for buyers to turn to conventional retailers, as there is no cost for doing so. In this regard, these substitutes have continued to limit the company’s profits and earnings in normal times.
Competition from major rivals in the industry remains the most significant threat to the firm. This also includes the stiff competition posed by conventional stores across the states. According to the United States Department of Agriculture (USDA), the year 2000 would see most conventional supermarkets in the country sell more organic food products, compared to the country’s natural food stores.
Even though a recognized leader in the supply of organic and natural food products, the company continues to suffer the cost of a high market competition from existing and new ventures in the market. In order to successfully combat this threat, the company should adopt an effective strategy that incorporates three significant tactics: Market, Product, and Operational.
In regard with marketing and product, things such as quality products, fair prices and effective ways of promotion would apply. On the other hand, operational strategy would incorporate the use of effective and exclusive store operations for improved outcomes.
Whole Foods SWOT Analysis
Huge variety items/products
Marketer of nationally known food products
Outstanding experience in the market
Low advertisement budget
Location of most stores in affluent regions
Lack of coupons in promotional offers
Effective advertisement and promotion to attract more customers
Introduction of rewards systems for consumers
Expansion of private label selection
Introduction of cost-effective ways that will favor customers
Bad or uncertain economy
Availability of local farmers
Conventional stores and supermarkets
regular changes in government regulations on natural and organic food products
It is possible for Whole Foods to achieve a sustained competitive advantage over its competitors in the market simply by making effective use of these strengths and opportunities. For example, the company deals with a variety of products that are nationally accepted as foods, and this could be a certain way of attracting and retaining huge numbers of consumers in the market. More importantly, the company has great business potential considering their large stores located allover the country.
These facilities can be utilized in a number of useful ways, apart from only acting as selling stores. Holding exhibitions and educational forums regarding the products on sale to potential consumers are some of the useful ways of utilizing the stores. Effective promotional strategies would help in publicizing the company’s products whereby the introduction of a reward would play a significant role in the attraction and retention of consumers in the company’s products.