Although relatively well established within the grocery store market space, Whole Foods faces a key set of challenges that are perhaps most effectively illustrated in terms of an analysis and review f the Five Forces approach. Accordingly, the following paper will provide an overview of these Five Forces as they relate to Whole Foods and the extant threats that this particular grocer faces within the current and immediate future. Begun in 1980, Whole Foods currently has market share within both the United Kingdom and the United States; with over 360 stores total.
Threat of New Entry:
Whereas it might not be immediately apparent that Whole Foods faces an existential threat for new market entry into the Organic Food sector of the grocery store market, the extreme completion that is exhibited throughout other areas of the industry highlights the fact that there is both a desire and
…show more content…
ability of other grocers to focus their efforts towards penetrating a new market and gaining the revenues associated with such an action. Further, as this market becomes more lucrative as more and more consumers are increasingly health conscious, the degree of optimism that Whole Foods can exhibit based upon its continued unchallenged dominance within this sector is something that should be quite limited. Supplier Power: Essentially, this is a relatively low threat as a direct result of the fact that Whole Foods relies, to such a great degree, on local producers. However, supplier power is somewhat evident in terms of more exotic foods that must be imported from larger collectives and cannot be grown/raised locally. Regardless of this, as compared to other grocers, supplier power as it relates to the outlook and potential threats for the future strategy of Whole Foods are a relatively low concern that this analyst does not see as of vital immediate importance. Buyer Power: Buying power is not a significant force in the grocery sector. By means of extension, this is not an issue that Whole Foods must engage on a regular basis. However, it is also important to note that buying power within the target demographic of Whole Foods is slightly more nunaced as compared to buying power elsewhere within the realm of grocery chains or brands. This is the result of the fact that Whole Foods average consumer is more socially and environmentally conscious; thus, if Whole Foods faces a scandal that targets either of these competitive advantages, their success within the market could be squandered as buyer power could amass against them. Competitive Rivalry: In terms of competitive rivalry, this is a factor that Whole Foods should rank as one of their primary threats.
Due to the saturated and cut-throat nature of the grocery business within the United States, the level and extent to which any mis-step could potentially create a crisis for the firm is extremely high. With this in mind, any strategy that would be put forward must be thoroughly vetted as a means of ensuring that competitive rivalry is accounted for; and the behavior of other grocers is expected based upon the strategic move that Whole Foods might make.
Threat of Substitution:
In keeping with the information presented above, the threat of substitution is very high as well. Although other analysts have not seen this to be a relevant concern, the manner by which high competition and the threat of new entry exists within the grocery business demands that the strategist consider this as an existential threat. As long as the organic and whole food market is lucrative to producers and grocers, this will remain the highest threat the Whole Foods must face..
Strategy
Recommendation: Based upon the aforementioned discussion, the greatest threats come from substitution and the continual threat of existing competitors attempting to target Whole Food’s market share. Based upon these determinants, the best approach to the existing market would be for th firm to diversify and target markets outside its realm of specialty. The underlying reason behind such an aggressive strategy is rooted in the understanding that Whole Foods is already saturated in terms of its market representation within the organic and natural food grocery market. Further growth and development within this market, as well as the potential for loss of profitability and new substitutions by other vendors, are both relevant concerns that would demand the firm behind looking at expansions into new markets that it can effectively leverage its core strengths and operational best practices as a means of engaging. Although no path of expansion is guaranteed, it is the estimation of this researcher that further development that targets smaller stores operating within existing markets that focus on cost competition alongside fresh and healthful alternatives would be an expansion direction that could yield successful levels of growth in the coming years. To a large extent, Whole Foods has already experienced a degree of success in terms of such expansion efforts; especially with respect to their offerings in larger cities such as NY or Los Angeles.
They anticipate competition between supermarket chains will be fierce this year as food prices continue to stay low. The Canadian grocers have been grappling with declining food prices, especially for meat, and Loblaw’s said “The notion of a shift into a steady inflationary environment is going to be offset by what we see as a continued level of competitive intensity”
Associated Wholesale Grocers (AWG) came into being more than eight decades ago when several independent retailers decided that the power of a cooperative far outweighed the influence of any one individual retail grocer. AWG provides distributor services to independent grocers in over 30 states with nine distribution centers throughout the South and Southeast regions of the country. In addition to their wholesale foods department, AWG offers a myriad of services from new store design, construction, marketing, product placement and “world class” logistical consultation (cite 11). AWG faces many of the same logistical challenges that other similar wholesalers face to include rising fuel costs, inclement weather, stringent timelines and an ever evolving need for stringent quality. One method to exploit a business’s positive and negative attributes is through the use of a Strength-Weakness-Opportunity-Threat analysis, or SWOT analysis (Cite 11). If used correctly, the analysis results can give insight into potential market areas of expansion and expose vulnerabilities to senior leadership so that they can be mitigated. AWG looks at its Supply Chain Management (SCM) as an integral part of its core business offering multiple services such as logistics to new co-op members. The team members of AWG are positioning themselves for sustainable success, now and in the future.
“Attention Whole Foods Shoppers” is an essay written by Robert Paarlberg for the May/June 2010 edition of Foreign Policy magazine. Foreign Policy was originally founded in 1970 with the intention of providing views on American foreign policy during the Vietnam war and does more or less of the same today. Paarlberg’s purpose in this essay is to convince an educated western audience that the Green Revolution was not a failure and improved life everywhere it took place, organic food having advantages over non-organic food is a myth, and the solution to food disparity is investing into agriculture modernization. With logos as the main mode of appeal, Paarlberg’s organization effectively sets up his points throughout the essay with consistently
The food market business is usually a difficult one, but online retailer Amazon's proceeding to purchase high-end chain Whole Foods changed the landscape. The new corporation is currently reducing prices, as well as Amazon is managing to reduce costs by taking its online expertise
My organization, Trader Joe’s, is not an international business. Their stores are all located in the United States; therefore, I chose Whole Foods, who is a main competitor of Trader Joe’s for this assignment.
The framework that will compare Publix Super Markets and its competitors is the Five Forces Model of Competition. The five aspects that will be discussed are the threat of new entrants into the market, the bargaining power of suppliers and buyers, threat of substitute products and rivalry among competing firms. Striving for the optimal position in each of these categories has given Publix Super Markets the reputation it has pride towards earning. It is important to every compa...
Oliver’s opened its second store in April of 2000 in Santa Rosa, CA fashioning it after Woodlands Market, another Organic Health food store. Unfortunately, in the early 2000’s with the increase of discount superstores, club stores, dollar stores and drugstores, there was a decline in the traditional retailers’ market share from 82.3 percent down to 69.2 percent. Increases in giant retailers will be one of Oliver’s biggest competitive pressur...
Gaar, B. (2013, December 21). Whole Foods chain is growing, but facing increasing competition. The Columbus Dispatch. Retrieved February 25, 2014, from http://www.dispatch.com/content/stories/business/2013/12/21/healthy-but----.html
..., John E., Strickland, A.J. Thompson, Arthur “Whole Foods Market In 2006: Mission, Core Values, and Strategy”, Crafting & Executing Strategy 15th Ed., McGraw-Hill Irwin, 2007
The purpose of this memo is to show the affects of how Albertson’s is trying to implement many strategies in order to try, and compete with its powerhouse competitor Wal-Mart. This memo will contain information on steps Albertson’s is taking to gain back some of the market share that Wal-Mart has swallowed up. It will also describe Albertson’s planned innovations that will be what determines their success. Lastly it will discuss how through IT as well as a successful implementation of satisfying consumers demands, will possibly allow them to compete with the ever so powerful Wal-Mart.
The rivalry aspect of Porter’s Five Forces that influence’s the grocery industry finds that there is a high degree of competition for consumer’s business among the dominate retailers as well as those companies trying to take any share of the market they can get. The large retailers engage in intense competition among each other as well as other stores that are competing for sales. Price wars drive down the profit margins for individual items and new and improved store design to bring in customers increases fixed cost. Improved distribution lines affect distribution and storage cost is competitive adjustments that the major retailers use to stave off the increasing competition. The last area of rivalry that the major companies use is the relationships they have with their suppliers to sign exclusive deals or lower cost than those prices paid by competing firms. As more retailers such as Wal-Mart and Target add groceries to their sales floor the competition increases as well as the stores that offer individual grocery items in their stores such as Dollar General, Walgreens and CVS. The grocery rival...
For Oliver’s Market among the five Competitive forces, pressures associated with the threat of new entrants into the market are the strongest one. Because Wal-Mart and Target had announced plans to develop regional supercenters in the Sonoma county region. They are strong candidates for entering the market, because they possess the res...
To most consumers Whole Foods is known as a chain grocery store specializing in organic and natural foods. Some may go as far as say the name is synonymous with quality. This comparison is the result of Whole Foods’ marketing their brand successfully to consumers demanding their specialized foods. As with any organization, Whole Foods may consider evaluating their strategic objectives and decide if necessary course corrections are needed to reach their objectives and goals. Through a fundamental and technical analysis, I will discuss Whole Foods’ mission, vision, and goals, their competitive environment, and some factors within their strength, weakness, opportunity, and threat analysis. With such data and information I will recommend, if needed, and strategic changes in order to sustain a competitive advantage.
Challenges in Today's U.S. Supermarket Industry. 2014. Challenges in Today's U.S. Supermarket Industry. [ONLINE] Available at:http://msdn.microsoft.com/en-us/library/aa479076.aspx. [Accessed 31 March 2014].
The trend towards healthier and organic foods is an opportunity that Wal-Mart can take advantage of. A recent survey shows that there has been a positive trend towards lower fat diets in the past decade. This data means that the general public is willing to improve their health and diet – a wide customer base Wal-Mart cannot ignore. Government and private sectors even made efforts towards guiding Americans to more healthful diets, through nutrition education and information efforts.