Competitive Forces and SWOT Analysis 1 Running head: Competitive Forces and SWOT Analysis

Assignment #2 Competitive Forces and SWOT Analysis

Strategic Management January21, 2012

Competitive Forces and SWOT Analysis 1 Competitive Forces and SWOT Analysis Discuss the trends in retailing of organic foods and the impacts of these trends on Whole Foods Market are: According to the organic consumer association, sales in organic foods in the United States hit 17 billion in 2006, up 22 % from 13.8 billion in 2005. In 1990, Congress passed the Organic foods production act, establishing the national standards for organically grown products in the United States. In 2002, the Department of Agriculture (USDA) officially established the labeling standards for organic products, both the patchwork of inconsistent state regulations for what could be labeled as organic and the different rules of some 43 agencies for certifying organic products (Thompson. 2009). The USDA regulations established four categories of food with organic ingredients, with varying levels of organic purity: 100 percent organic products, such products were usually whole food such as fresh fruits and vegetables grown by organic method meaning that the products had been grown without the use of synthetic pesticides; organic products which are processed these had to have at least 95 percent organically certified ingredients; made with organic ingredients such products had to have at least 70 percent organic ingredients, and all other products with organic ingredients these products with less than 70 percent organic ingredients and could not use the word organic in front of the package (Thompson. 2009). Evaluate the competitive environment of the firm: Apply Porters model and analyze each factor relative to the company. Whole foods which ranked 24th in the market , had total revenues in 2006 were 5.6% only a fraction of some of its largest competitors which included Wal-Mart, Kroger, Costco

Competitive Forces and SWOT Analysis 1 which sales were $209.9, 66.1 and 59.0 respectfully and held 9.4%, 7.8 and 4.3% of the total retail grocery sales in the market. But if ranked in the Natural and Organic Foods market segment, Whole Foods is seen as the category leader for organic and natural foods because they offered the largest selection of products in this category, as most of its competitors efforts were either futile or helpful to Whole Foods, because they exposed customers to organic and natural foods. Whole Foods mission and objective was to improve the health of the planet and help create new customers for Whole Foods by creating a gateway experience and WF knew that as they grew at a modest pace that those same customers would likely become their customers whenever they moved in close proximity to those customers. Whole foods core growth strategy is to expand via combination of opening its own new stores and acquiring small, owner managed chains that had capable personnel and were located in desirable markets. Which had proven to be a difficult objective at first, since many of the owner operated retailers of natural and organic foods were one store operations and larger store in the 5,000 to 20,000 square foot range was impossible to find. Whole Foods changed their strategy to a more measurable goal of driving growth by opening 10 to 15 larger stores in major metropolitan areas which they planned to implement between 2002 to 2006 were proven to be much viable strategy as indicated in exhibit 5 which shows that they grew from 135 stores to about 276 stores in 2008 including the addition of Wild Oaks one their biggest competitors for $565 million and $135 million in debt and an additional $166 million in cash after selling 35 of the newly acquired stores. Whole Foods next biggest competitors in the natural and organic foods segment of food retailing were fresh Market, Trader Joes, Sunflower Farmers Markets, Fresh & Easy Neighborhood markets and Independent natural Health Food Grocers.

Competitive Forces and SWOT Analysis 1 Discuss which environmental factor poses the most significant threat to Whole Foods and what the company can do to combat it. Organic products are defined by the USDA as being products grown and produced under strict regulation promoting a system of biodiversity and with low residue, minimizing pollution in the air, water and soil. Various factors influence organic food products, and these include labeling and certification guidelines, governmental policy and costs (Thompson. 2009). The USDA Economic Research Service (ERS) published the report on the development of organic policy. It states that in 2002, the USDA established guidelines for organic products to address concerns about products identifying themselves as organic. Two USDA funded programs help alleviate the cost burden of certification on farmers and producers seeking organic certification. The 2008 Food, Conservation, and Energy Act continued those programs and focused funding on helping farmers transition to organic farming. Other government agencies have also established working groups to support organic agriculture and other sustainable farming practices. Despite federal assistance, the cost of organic farming and production seems higher than that of conventional farming (Thompson. 2009). Complete a SWOT analysis and identify significant opportunities and threats facing the organization. Strength 2007 Annual Report 10k form indicates that the company grew 7.1 percent in store revenues and achieved an average of 34.8 Gross margins. Merchandising and Layout styles that is extremely difficult to duplicate

Competitive Forces and SWOT Analysis 1 Creates Disneyland style shopping experience Restaurants and other Dining, Wine Tasting and Value added eating experiences. International Foods & Spices sections Raw, Kosher, dried, pick and pack Deli Bars Over 30,000 varieties of Organic and Natural Food items Ownership of two produce procurement centers which facilitated procurement and distribution of all produce. Strong relationship with suppliers and community Local producer loan program granting low interest loans of $1k to $100k to farmers, and producers of organic products that met their very strict standards. Paying a higher premium to local and international farmers and producers of quality products by their standards. Who trade Program where they committed to have more than 50 percent of its products imported from developing nations that met their standards, and qualifications. Whole Planet a benevolent non-profit organization charged with combating poverty and promoting self-sufficiency in third world countries that supplied Whole Foods with some of its products it sold. Stewarded many Green Environmental in their stores and facilities through their Green Mission Task Force including:

Competitive Forces and SWOT Analysis 1 Using paper bags made from 100% recycled paper and sold stylish long lasting canvas bags made from recycled plastic bottles. Employee empowerment through, team management and employee compensation, and retention Programs. Weaknesses Relationship with FTC over acquisition of Wild Oats High Debt of $700 million Underfunded advertising and marketing programs Vitamins and Supplements purchased from outside supplier Opportunities Expanding their customer base and creating Brand Loyalty through internet such as web based stores and health Information and environmental Blogs, and Social Networking through Facebook, LinkedIn and Twitter Partnering with Largest Supplier of Organic and Natural foods in U.S Start an Organic and Natural Foods RSVP membership charging $10 and offering members 20 percent discounts on all their purchases from whole Food or bulk discounts from fish, baked subsidies sending them a weekly, monthly E-newsletter filled with coupons, information on health and wellness and news on Whole Planet activities.

Competitive Forces and SWOT Analysis 1 Form alliances with individual grocers offering growth assistance through partnering with them to achieve economies of scale and better product offerings for their customers. Expand market to where lower income families can become knowledge about healthy foods; form alliances with local & State social services and Health agencies providing discounts for Food Stamp recipients and through company health and wellness programs Create own vitamin and supplements or create alliance with larger environmentally concerned giant to create awareness health consciousness. Seek alliances with top food processors such as Kelloggs, Green Giant, and Pepsi Cola to create a natural Brand Organic Beverage. Market Seafood to other supermarkets i.e, Wal-Mart, Costco in bulk and under Whole Foods Brand to expand brand awareness. (Wal-Mart sells Boston Market prepared meals). Seek merger with Fresh Foods market to create sustained existence and economies of scale in the Organic and Naturals market. Seek alliances with Celebrity, Diet health and Well Being and other Green Peace organizations that champion and endorse the Whole Foods mission to improve Food Quality around the world. Threats Oversaturation of the market or competition with grocer giants i.e, Walmart under emphasis of selling organic and natural foods over their everyday low prices. They have been in market longer and have more resources to commit to marketing and etc.

Competitive Forces and SWOT Analysis 1 Price war with larger competitors undermining quality of true organic and naturally grown animal , seafood products by introducing or marketing technological/ genetically based substitutes into market that can be purchased at fraction of price. Economy conditions, and employment rates lay-0ff Changes in the availability of quality natural and organic products could impact business Future economic factors could cause impairment of goodwill The Companys business could be severely impacted by a widespread regional, national or global health epidemic. Discuss how Whole Foods can use its strengths and opportunities to achieve a sustained competitive advantage in the marketplace. Whole Food has many programs which provide sustainability to their business efforts. Some the areas where they have stewarded change and good practices are as follows: Agricultural programs supporting organic farmers, growers and the environment through their commitment to sustainable agriculture. Continue to delight, satisfy and surprise customer with hard to find organic and natural items Merchandising and Layout styles that is extremely difficult to duplicate Creates inviting Disneyland like store shopping environments that are fun and reflect he communities they serve. Restaurants and other Dining Venues, Wine Tasting and Value Added eating experiences

Competitive Forces and SWOT Analysis 1 International Foods & Spices sections Extensive prepared foods Self-Serve Raw, Kosher, Dried, Pick/Pack & Deli Bars Partnering with Largest Supplier of Organic and Natural foods in U.S. Start Organic and Natural Foods RSVP membership charging $10 and offering members 20 percent discounts on all their purchases from whole Food or bulk discounts from fish, baked subsidies sending them a weekly, monthly E-newsletter filled with coupons, information on health and wellness and news on Whole Planet activities. Form alliances with individual grocers offering growth assistance through partnering with them to achieve economies of scale and sustainable product offerings for their customers. Promoting and selling the products of well managed fisheries. Partnering with groups who encourage responsible practices and provide the public with accurate Market Seafood from well managed fisheries to other supermarkets i.e, Wal-Mart, Costco in bulk and under Whole Foods Brand to expand brand awareness. (Wal-Mart sells Boston Market prepared meals). Seek merger with Fresh Foods market to create sustained existence and economies of scale in the Organic and Naturals market.

Competitive Forces and SWOT Analysis 1 References: Thompson, A. Strickland, A.J., & Gamble, J.E. (2012). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York: McGraw-Hill-Irwin Whole Foods Market, Inc. Annual Report on Form 10-K for the Fiscal Year Ended September 27, 2009 retrieved from http://www.wholefoodsmarket.com/company/pdfs/2009_10k.pdf on January 18, 2012 Porters Five Forces of Competitiveness Model retrieved from http://www.themanager.org/Models/p5f.htm on January 18, 2012