The primary purpose of the essay will be to address the pertinent issues in the Whole Foods Market. Additionally, the article will analyze the strategies used by the company to foster growth, existing challenges, and the recommendations that will enhance positive future development.
Pertinent issues in whole foods market
Increased demand for organic foods
The United States is experiencing a rise in the demand for organic foods. Healthy eating is becoming a norm especially among the adults and the aging population. The United States has recorded an increase in the number of people with obesity and other cardiovascular ailments. The positive attitudes and perceptions towards the organic foods have played a significant role in fostering the growth and development of the Whole Foods Market. The statistics from the Whole Foods Market show that the sales have been increasing since 2009. In 2009, the Whole Foods Market had sales of $8,032 million, compared to $12,917 million in 2013. As people become increasingly aware of the benefits of organic foods to their health, it is expected that the demand will continue rising.
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High cost of production and sale
Another pertinent issue worth addressing is the high cost of the organic foods in the U.S markets, compared to the non-organic products. The high cost of the organic foods has been attributed to the relatively higher cost of production. Despite the high cost of the organic foods, there has been a rise in the demand of foods as demonstrated in Diagram 1. Since 2000 to 2007, the demand for organic products has increased significantly because of the reasons cited above. However, a closer look at 2008 demonstrates that the demand for the products reduced drastically. The fall in sales is mainly attributed to the global economic crisis of 2007/2008. With the cost of production being high, most of the farmers could not afford growing foods due to the low market demands and increasing costs of seeds and other inputs. The sharp fall in sales was also caused by a decrease in disposable income among the U.S population. During the economic crisis, millions of Americans lost jobs, with the unemployment rate hitting almost 10%. The purchasing power was adversely affected, hence the reduction in the consumption of the organic products. The statistics are a demonstration that the survival and profitability of the Whole Food Market are dependent on the prevailing economic situations. While people want to eat healthy meals, their purchasing decisions are largely determined by the economic conditions.
Figure 1: Table showing average weekly sales Whole Foods Market from 2000-2008 (amount in dollars)
Increase in number of stores
Since 1991, the Whole Foods Market has witnessed a growth in the number of stores, particularly in the U.S, Canada, and the U.K markets. In 1991, there were ten stores in the U.S markets. The increase in demand for food products increased the demand to about 117 stores in 2000. Further expansion of the business so the number of stores reach 276 in 2007. In 2008, however, the number of stores reduced by one to 275. The main reason for the reduction could have been the global economic depression. In 2008, the company was downsizing, since the demand for food was reduced significantly. In 2009, the market began recovering, and the company increased the stores to 284. As of 2014, the company had 379 stores in the U.S market. The company has been able to gain a competitive edge in the market as a result of the rise in the number of stores. The Whole Foods Market is able to reach more customers by situating more stores at the strategic location.
Effective leadership
Effective leadership is another pertinent issue has been attributed to the growth and development of the Whole Foods Market. The management plays a significant role in fostering a good relationship between the business and customers. A personal interaction strategy has been used to attract and retain customers. Every customer is treated fairly, explaining why the average weekly sales have been increased as demonstrated in figure 1 above. According to the theory of customer relations management, one of the main strategies of attracting customers is through effective communication and quality products. The Leadership at Whole Foods Market ensures that the foods supplied by the company are of high quality and grown under the recommended conditions.
The Whole Foods Market has enhanced connectivity with its target market by embracing the social media. According to statistics by the Pew Research Center (2015), more than 65% of the adult Americans are using the social media. It is also imperative to note that the adults are the most conscious about their health, hence more likely to demand quality food. Therefore, the social media has enabled the company to increase its market base. The management has also used the social media as an avenue for continuous interaction with potential customers, and responding to various questions.
The management also seeks to promote corporate social responsibility. At specific times of the year, the company will ensure that about 5% of the daily sales are donated towards the improvement of the environment. The United States, like most of the countries in the world, is facing unprecedented economic degradation due to industrialization and urbanization. The environmental conservation is vital to reduce effects of global warming, which have affected agricultural production. The company’s corporate social responsibility has also been propagated through sponsoring the poor, but bright students within the society. Corporate social responsibility is a strategy that also plays a vital role in fostering a good relationship between the community and the business. As the company adds value to the community, there is a likely growth in market size.
Fostering employee motivation and job satisfaction is yet another strategy the food company has used to promote the growth and development. One of the core values in Whole Foods Market has been to create a favorable working condition for the employees. The company has been able to abide by the employment laws that stipulate the number of hours that employees should work, the minimum wages, and protection of workers against harm. Employees are given an opportunity to participate in decision-making within the company. The enhanced communication between the employees and employers has played a significant role in improving job satisfaction. As a result, the Whole Foods Market is able to overcome the challenge of employee turnover. The employee turnover causes significant economic challenges in an organization when it occurs. The company has to meet the cost of recruitment and also training of new employees to ensure that they have all the require skills. This explains why the employees are treated justly to prevent high turnover rates.
Growth Strategies Analysis
The financial statistics shows that the company has had positive growth. Apart from strong demand for organic production, the effective leadership, and good decision making has played a significant role in fostering growth. Figure 2 and Graph 2 below demonstrate the growth of income in the Whole Foods Market from 2009 to 2013. In 2009, the company’s net income was about $ 147 million compared to $246 million in 2010. In 2013, the income increased to $551 million, showing positive growth in the company. As a public company, the growth in profits is imperative in assuring enhancing the shareholder value. Also, the company is well positioned for future expansion within the U.S and at the international market.
Figure 2: Net income growth from 2009-2013
Graph 2: Income growth from 2007-2013
The Whole Foods Market’s growth has been attributed to a number of growth strategies employed by the company. The strategies include the following:
Market expansion strategies
As aforementioned, as of 2014, the company had 379 stores from 10 in 1991. The growth in the number of stores has increased because of the construction of new premises and also the acquisition of the existing businesses. The acquisition strategy is one of the most effective in fostering market expansion. The major food companies acquired by the Whole Foods Company include the Harry’s Market and the Wild Oats. The two markets were acquired in 2001 and 2007 respectively. The main reason for the acquisition of the two companies was because they also controlled a significant market share. One of the main advantages of acquisition is the ability to minimize the market competition. Secondly, the acquisition allows a company to settle fast in the new market since the acquired market has an existing customer base and employees who are familiar with the market. Additionally, acquisition lowers the cost of operation. The company does not need to spend millions of dollars in advertisement since the acquired market is already known. These factors explain why acquisition an effective strategy for multinational that are expanding in the international market.
The Whole Foods Market has also ensured that it continues to promote its organizational culture to the new markets. Good customer relationship, effective communication, employee motivation, quality goods and services, and corporate social responsibility are some of the major corporate strategies the Whole Foods Market has used to attract and retain customers. As indicated before, the highlighted corporate strategies have contributed immensely to the growth and development of the company. However, there is still the economic challenge issue that the company is yet to address. In the case of another financial meltdown, the company may experience one of the most adverse effects due to the fall in sales.
Educating the consumers
Education on nutrition is another strategy that the company has used to increase its market size. The dissemination of health information is facilitated by nutritional experts. The Whole Foods Market has also used health information on its advertisements and online communication to ensure that its target customers are informed. The customer’s decision making is partly determined by information. Customers need to know why they should pay the high cost of organic foods when there is an alternative to inorganic products. In other words, companies must assure customers that they are going to get value for their money. The nutritional education explains the general increase in demand for healthy foods in the United States, Canada, and U.K where the Whole Foods Market are mostly found.
Challenges facing the whole food market
Despite the success of the Whole Foods Market, there are some challenges, which if left unaddressed will have a major effect on the company. These challenges include the following:
Stiff competition
The company faces stiff competition from large companies and multinationals, such as the Fresh Market, Trader Joe’s, and Walmart. It is estimated that Trader Joe’s has more than 400 stores in 31 States in the U.S. On the other hand, Fresh Market operates 150. Additionally, Walmart is also large multinational with almost 5,000 stores throughout the United States. If all these competitors are combined, it is apparent that they are a real threat to the profitability that the Whole Foods market continues to enjoy. One of the major threats is Trader Joe’s product line has more than 9,000 items, including the plant and animal products. This means that customers can get all the goods they want under the same roof. Additionally, the cost of goods at the competitor companies is lower compared to that in the Whole Foods Market. Customers who are sensitive to prices will be attracted to such companies since they are able to save more. Also, during the economic depression, such competitors will have a competitive edge.
Economic challenges
The economic depression affects most businesses, not just the Whole Foods Market. As shown before, the 2007/08 economic crisis led to a decrease in sales and profits. The economy is increasingly becoming unstable, especially with the fall in Asian markets, particularly China. The future negative economic challenges will cause a significant fall in sales and profits. The existing stiff competition will also have an adverse effect in the case of economic turmoil.
Conclusion and Recommendations
The Whole Foods Market has witnessed tremendous growth and development in the U.S market. The positive growth has been attributed to the existing demand for the healthy food products. The demand for organic foods has been rising, due to the sensitivity of the people about their health. It is expected that the market demand for organic foods will skyrocket in future as more and more people become conscious about what they eat. Whole Foods Market’s growth has also been largely caused by the effective corporate culture. The company enhanced good customer services, provides quality products, fosters employee motivation, and job satisfaction, and also plays a significant role in promoting corporate social responsibility. Despite the current success in the company, there are some challenges that may slow down the future growth. Some of the challenges that might affect growth and development are stiff competition and bad economic situations. The following recommendations will be vital in fostering a sustainable growth in the Whole Foods Market:
Low cost of foods
Lowering the cost of foods will attract and retain customers, especially those who are sensitive to prices. Also, lower costs will give the company a competitive edge over its rivals. However, in order to lower the cost of food products, the company will need to work with the suppliers who will be able to provide raw materials at a lower cost. Purchasing goods in larger quantities will also ensure that the Whole Foods Market gets the large discounts, which will have a positive influence on the final of the product. Also, minimizing other costs of operation within the company will also play a significant role in lowering the cost of goods.
Rationalization
In relation to business, rationalization means the ability to control, coordinate, and organize business operations with an aim of cutting down the cost of operation. One of the main goals will be to ensure that the workforce commensurates with the existing functions in the company. Overemployment will increase the cost of operation. Where possible, it is important to merge the related departments, so that related functions are performed by fewer people. The reorganization will ensure that the company increases its asset base and a positive cash flow. With such status, the Whole Foods Market will be able to overcome the existing challenges of economic depression when they occur.
Increase its product line
The management should ensure that customers are able to access virtually all the organic food under the same roof. Apart from being a competitive edge, such a move will increase revenue in the company and also a rise in customer base. The company will also be prepared to overcome the significant economic challenges in future.
References
Thompson, A. (2014). Whole Foods Market in 2014 : Vision, Core Values, and Strategy, cases in Crafting and executive strategy.
