SWOT Analysis of Whole Foods

2010 words (8 pages) Swot Analysis

5th Jun 2020 Swot Analysis Reference this

Tags: SWOT AnalysisSWOTBusinessWhole Foods

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Introduction

The following is a case analysis of Whole Foods Market this includes the use of SWOT to estimate Whole Food’s strengths, weaknesses, opportunities, and threats. Also, Key strategic elements identify the competitive that reveals Whole Food’s competitive approach. Followed by, a competitive analysis was to evaluate the competitive strengths of Whole Foods Market against Walmart, The Fresh Market, and Trader Joes. Also, a financial analysis based on 2009-2013 balance sheet data. Lastly, a recommendation based on information gathered by the case analysis.

SWOT Analysis

Strengths

  • Strong distributor program - Whole Foods has created a strong culture with distributors now the distributors can encourage company’s products but also invest in training the sales team to explain to the customer how they can obtain the most profit out of the products.
  • High level of customer satisfaction - Whole Foods is dedicated to their customer satisfaction because of that they are now able to obtain a customer review among current customers and lure potential customers.
  • Maintaining Quality - Whole Foods have high standards and their goal is to sell the highest quality products they possibly can. “Whole Foods tries to define quality by evaluating the ingredients, freshness, safety, taste, nutritive value and appearance of all the products they carry” (Gamble 2017).
  • Brand Recognition - “A company’s future can only be determined by its brand image. Customers generally opt for companies with high brand recognition. Moreover, Whole Foods enjoys a solid brand reputation since its inception. It came on the 3rd spot on the Reputation Institute’s 2015 most trusted retail company annual survey” (bstrategyhub).

Weaknesses

  • Weak international operations -The company has minor global presence for example, 13 stores in Canada, and 7 stores in the UK. Therefore, global companies such as Walmart can obtain advantages such as more revenue streams, resources and suppliers, and lastly more diversification within their products.
  • A limited network of suppliers -this weakness directly affects its supply chain operations. According to Gregory (2017), “the fact that Whole Foods Market has a limited network of suppliers that meet the quality specifications makes it difficult for the company to expand its operations as fast as possible”
  • High Prices - They are known as "whole paycheck" because the healthy food products still are perceived to be higher priced than the products sold by competitors. At the time it weakened the brand’s image.
  • Weak Operating Margins - “The last two quarters saw a small rise but before that its operating margins stayed below 3% since the middle of 2016. In last quarter of 2017, its operating margins grew to 3.5% and then in the first quarter of 2018 to 3.8%.” (Pratap 2019).

Opportunities

  • Capitalizing on the current demand for organic products -The demand for natural and organic foods has always been in important to customers because they value health benefits and the need of natural foods in the diets globally.
  • Expand Globally - This will provide Whole Foods the opportunity to reach new customers and provide more stability against the US constant economic changes.
  • Introduce or create more store brand products with its own labeling and branding like Kroger’s and Walmart’s branded items such as water, cereal, etc.
  • Increase social media presence or create an app – Increase social media advertising on a wider scale on app for example snapchat or create an app encouraging the benefits of organic foods and provide a limited discount to those that download the app.

Threats

  • Global low-cost competition such as Walmart. Walmart could attract Whole Food’s customers internationally and locally because of its low prices.
  • Changes in the US Economy can cause customers to relocate and choose a low-costing firm over them.
  • Meeting FDA regulations - Failure to follow FDA regulations could lead to penalties resulting in a seizure of licenses to sell.
  • “Climate change has the potential to significantly alter or reduce food production” (Gregory 2014).

Competitive Analysis

Competitive Strength Assessment   Whole Foods   Walmart   Trader Joes   The Fresh Market
Key Success Factors Importance Weight Strength Rating Score Strength Rating Score Strength Rating Score Strength Rating Score
Product Quality .20 4 .80 3 .60 3 .60 3 .60
Reputation Image .15 4 .60 4   .60 4 .60 3 .45
Price Competitiveness .15 2 .30 4 .60 3 .45 2 .30
Financial Position .15 3 .45 4 .60 3 .45 2 .30
Customer Loyalty .13 3 .39 4 .52 4 .52 2 .26
Global Expansion .12 2 .24 4 .48 3 .36 2 .24
Management .10 3 .30 4 .40 3 .30 2 .20
Total 1.0 3.08 3.80 3.28 2.35

Competitive Analysis Results

The weighted competitive strength assessment results show Walmart to have the strongest resource strengths and competitive capabilities. Also, it shows that Trader Joes also has more competitive capabilities due to their Price Competitiveness and Customer Loyalty. Walmart maintain the largest competitive advantage because of its Financial Position and its Global Expansion.

Key Strategic Elements

The key strategic elements for Whole Foods was to sell “the highest-quality products that it could find at the most competitive prices possible” (Gamble 2017).  Today Whole Foods has dropped prices on key items such as milk, eggs, etc. but it only makes up 1% of the items within the store. This reveals that most of the products prices within the store have not changed.  Therefore, Whole foods key strategic elements shows that company has a more of a best-cost strategy focusing more on quality than competing for low prices. Whole Foods products are higher than the conventional supermarkets. Whole Foods focused on an interactive atmosphere by having product taste test demonstrations for quality. “Whole Foods spent much less than other supermarkets on advertising and marketing, preferring instead to rely primarily on word-of-mouth recommendations and testimonials from customers about quality” (Gamble 2017).

Financial Analysis

The financial analysis is based on Whole Food’s balance sheet in 2009 – 2013.  In 2009 accelerated recession forced an overhaul in the Whole Food expansion strategy. In response to the harsh economic environment Whole cut prices for family sized prepared food sections. During the first quarter of the fiscal 2010 year the continued to use strategic initiatives to boost the sale growth 3.5 percent compared to 2009’s -4 percent. (In millions, except for GPM, NIM, ROA, ROE amounts)
Year Net Sales Gross Profit Cost of Goods Sold Gross Profit Margins Net Income Net Income Margin Return on Assets Return On Equity
2009 $8,032 $2,754 $5,277 34% $0 0 0 0
2010 $9,006 $3,136 $5,870 35% $246 3% 6% 10%
2011 $10,108 $3,537 $6,571 35% $343 3% 8% 11%
2012 $11,699 $4,156 $7,543 36% $466 4% 9% 12%
2013 $12,917 $4,629 $8,288 36% $551 4% 10% 14%
(Table information provided by Essentials for Strategic Management by Gamble, Peteraf, and Thompson in 2017)

Recommendations

Recommendations for Whole Foods should be centered around expanding their company internationally. Currently Whole Foods only sales products to the US, the UK, and Canada. As mentioned earlier Whole Foods have 13 stores in Canada, and 7 stores in the UK which small compared to competitors such as Walmart who has 69 stores in the UK, 400 stores in Canada and a total of 11,766 stores throughout the world. This will provide Whole Foods the opportunity to reach new customers and provide more stability against the US constant economic changes. Also, Whole Foods needs to conduct an effective foreign market research to identify if they can further expand to more countries such as China, France, and India which could greatly impact their market.

Conclusion

In conclusion, the case analysis of Whole Foods has been able to provide better knowledge on Whole Food’s and their competitors current position and strategies in the food market industry. In this analysis SWOT identified core values such as maintaining high quality, customer satisfaction, etc. Key strategic element identified were primarily centered around a best-cost strategy focusing more on high quality than competing for low prices. The competitive analysis revealed Walmart is the biggest competitor in the industry and has the largest global presence. The finical assignment provided the reasoning for the lack of sales in 2009 because of the economic recession. Lastly, Whole Foods should be centered around expanding their company internationally to locations such as, China, France, and India which could greatly impact their market.

References

  • Gamble, J., Peteraf, M. A., & Thompson, A. A. (2017). Essentials of strategic management: The quest for competitive advantage. New York:  McGraw-Hill Education.
  • Gregory, L. (2017, January 31). Whole Foods Market SWOT Analysis & Recommendations. Retrieved from http://panmore.com/whole-foods-market-swot-analysis-recommendations.
  • Pratap, A. (2019, March 09). Amazon SWOT Analysis 2018. Retrieved from https://notesmatic.com/2018/07/amazon-swot-analysis-2018/.
  • Whole Foods SWOT Analysis 2019 | SWOT analysis of Whole Foods. (2019, March 21). Retrieved from https://bstrategyhub.com/swot-analysis-of-whole-foods-2019-whole-foods-market-swot-analysis/.

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