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Whole Foods

MGMT Case Presentation
by

Julia Freeman

on 1 November 2012

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Transcript of Whole Foods

Company Background The Beginning
1980
Austin TX
John Mackey + Two other grocers
Supermarket Concept Whole Foods Vision To become an international brand synonymous with carrying the highest quality natural and organic foods available and being the best food retailer in every community in which Whole Foods stores are located. Values 1. Selling the highest quality natural and organic products available
2. Satisfying and delighting our customers
3.Team member happiness and excellence
4. Creating wealth through profits & growth
5. Caring about our communities & our environment
6.Creating ongoing win-win partnerships with our suppliers
7. Promoting the health of our stakeholders through healthy eating education Goals Offer the highest quality, least processed, most flavorful naturally preserved and fresh foods available.
Making shopping at Whole Foods interesting and enjoyable
Sell foods that met strict standards and that were of high quality in terms of nutrition, freshness, appearance and taste. Objectives Have 400 stores by the end of the fiscal year of 2010

Sales of $12 Billion by the end of the fiscal year 2010

Overtaking key competitors on product quality and customer service

Having a wider product line than rivals Strategies Growth
Store Location
Economic Downtime
Merchandising
Customer Service Value Proposition Providing high-quality, natural and organic food to more and more customers in more communities that will gradually transform the diets of individuals to help them live longer, healthier and more pleasurable lives. Whole Foods Business Model Whole Foods operates 278 retail stores in 38 U.S states, 6 stores in Canada, and 5 in Great Britain.
Distribution points throughout nation feed the retail stores
Suppliers are scrutinized for organic and sustainable practices.
Value-based pricing strategy allows for increase revenue. Pricing Product Line Carry the highest-quality natural and organic foods available including earth-friendly home goods
Costs involved in growing, distributing and marketing organic products is considerable more expensive than typical grocers 20-50 thousand items
Fresh produce including exotics
Meat and poultry--natural and meats, house-made sausages
Fresh seafoods--either wild caught or farm raised with sustainable methods Financial Performance Whole Foods Market has been profitable every year except 2000.
Although revenues increased from 5.6 billion in 2006 to 8 billion in 2009 they did take a hit in profitability throughout the last recession.
Acquired Wild Oats through accumulating long term debt and issuing preferred stock.
Instituted cost containment measures in 2009 to increase cash flow and put company in good position. Strategic Performance Gained considerable market share through the acquisition of Wild Oats.

Subsidized local farms to gain suppliers.

Instituted value pricing initiatives and cost containment measures to put the firm in a good position

Holds the highest quality natural
and organic foods Management Characteristics Background
Philosophy
Salary and Wages
EGALITARIANISM Qualifications of TMT CEO John Mackey-Believes Whole Foods can become an international brand synonymous for carrying highest quality natural and organic foods
1980 Decided natural foods Market was ready for a grocery store
Responsible for 278 stores in US and district of Columbia, 6 in Canada, 5 in Great Britain
Believes in Decentralized Structure and lives by company values.
Go-Getter "with a cowboy way of doing things." Top Executives Aware of Decentralized Structure
Continuously trying to better the company
Give credit to where credit is due, at any level
Compensation and benefits to be fair
Empower employees
Believes employee motivation comes from strategic vision Corporate Culture
and Values "Team Members" and just as important as managers
Core values do not change
"stress our 'value' along with our values"
Teams and individuals are empowered
"Walking the talk"
Family-like SWOT analysis Strengths Organic market leader
A 'wellness' or health conscience trend
Private Label
Finest quality
Well trained staff
Strong supplier collaboration
Real Estate
Team environment Weaknesses Prices are high
Luxury shopping
Marketing
Large perishable inventory
High inventory costs Opportunities Expand private brand
Store expansion
Develop a 'Rewards Program'
New marketing techniques Threats Customers shifting to low priced supermarkets
Increased competition
Government regulation
Weak economy Core
Competencies Value-based pricing
Social Responsibility
Employee Empowerment Distinctive
Competencies Customer Service
Product Line Strategy
Merchandising Strategy Capabilities Highly adaptive business model
Leveraging supplier relationships
Outstanding customer service The Natural and Organic Food Industry Economic Features Industry Market Share in the U.S: $30-35 billion
Growth: 10% from 2007-2008 and up 37% from 2004-2007 GROWTH Social Forces
Economic Conditions Regulatory Factors FDA
FTC Driving Forces Health conscious
Environment concerns
Concern for food purity Key Success Factors Product attributes and service characteristics
Resources and competitive capabilities
Shortcomings Industry Trends 2010 Organic food was available in nearly every food category
Available in 80% of U.S retail stores
70% of overall organic sales in 2009 were through mainstream supermarkets/grocery stores and leading organic and natural food supermarket chains
20% of organic sales were through small, independent chains
Niche market, transformed into the fastest growing segment of U.S food Five Force Analysis Buyers: Moderate
Entry: Weak
Substitutes: Weak
Rivalry: Strong
Suppliers: Strong Problem 1: Competition from cheaper firms Causes:
It is an industry segment that is growing
Less competition within the industry
Whole Foods strategy is value based
Impacts:
Losing market share to cheaper firms, substitutes, imitators, and cost based buyers Alternative A: Expand premium goods offering to further differentiate Pros:
Increased customer valuations of products
Better economic conditions will result in more customers able to spend
Cons:
Customers perceived value per cost decreases
This will take considerable research and time to implement Alternative B: Offer a delivery service Pros:
Increase responsiveness to customer
New revenues from additional customers
Match offerings of other firms
Cons:
Initial capital investment is large
Less foot traffic in the stores for discovery purchases Alternative C: Emphasize highest quality and variety through marketing campaign Pros:
Increase brand awareness
Differentiates brand
Cons:
Costs associated with advertising
No know-how in advertising Problem 2: Weaker performance during recession Causes:
Whole Foods market is value based
As economic conditions worsen Whole Foods products become more price elastic
Impacts:
Weaker financial performance
Stagnant growth and expansion
Higher customer turnover Alternative A: Further educate about benefits of healthy food Pros:
Attract new customers
Cons:
Potential alienation of unhealthy customers
Customers might use competitors Alternative B: Bulk strategy to increase spending per customer per visit Pros:
Increase items per shopping cart
Increase amount of items sold
Cons:
Cuts into profit margins
Increases inventory costs
Decreases appeal of display
Lose farmer market appeal Alternative C: Create contingency plan to deal with recessions Pros:
Cuts costs associated with expansion
Saves money to use in better times
Cons:
Halts growth
Competitors might take advantage
New competitors might enter market Problem 3: Government Monopoly Regulations Causes:
They control a consider amount of market share in the organic and health food industry niche
There are very few competitors in this niche
Whole Foods has an aggressive expansion policy
Impacts:
Limited growth and expansion potential
More capital investments required for expansion
Company image and goodwill is tarnished Alternative A: Expand into more foreign markets Pros:
Aligns with current expansion strategy
Already has experience with this
Avoids litigation with government
Cons:
Growth strategy is more expensive
International risks Alternative B: Hire Lobbyists Pros:
Effective in changing government policy
Continuance of its current policy
Cons:
Expensive
Tarnished reputation Alternative C: Expansion of and selling Whole Foods own brand "365 everyday value" Pros:
New Sources of Revenue
Increased brand awareness
Cons:
May eat into store sales
Competitors might purchase Recommendations
Alternative A: Expand into foreign markets Implementation
Major Steps:

1. Analyze foreign markets to find the most profitable
2. Do SWOT analysis of each country
3. Select a country
4. Acquire healthy grocer in foreign market
5. Update grocer to Whole Foods standards Recommendation
Alternative C: Create contingency plan to deal with recessions Implementation
Major Steps:

1. Cut Expansion
2. Saving Capital
3. Improving Customer Service
4. Introducing coupons to keep up customer store traffic Recommendation
Alternative A: Expand premium goods offering to further differentiate Implementation
Major Steps:

1.Analyze premium goods of Whole Foods, Competitors, Industry, and goods not offered
2.Find suppliers that will provide premium products at competitive prices
3.Establish distribution chains
4.Set up pricing strategy as well as display strategy Expansion
1991: 10 Stores, Sales $92.5 Million
1991: NASDAQ
2009: Sales $18 Billion Natural Foods: minimally , largely or completely free of artificial ingredients, preservatives and other non naturally occurring chemicals and near to their whole, natural state as possible

Organic Foods: Foods grown and processed without the use of pesticides, antibiotics, hormones, synthetic chemicals, artificial fertilizers, preservatives, dyes or additives, or genetic engineering Whole Foods Consultants: Marcus Fukushima, Veronica Arroyo, Christopher Brown, Julia Freeman, Nathaniel Chu, Karissa Merriman Agenda Company Background – Nathaniel
Vision & Mission – Karissa
Goals, Objectives, Strategies – Julia
Business Model – Chris
Company Performance – Marcus
Management Characteristics – Veronica
SWOT Analysis – Julia
Core and Distinctive Competencies – Karissa
Industry & Competitor Analysis – Veronica, Julia
Analysis and Solutions – Nate, Chris, Marcus
Full transcript