Professional Documents
Culture Documents
Morgan La Femina
MBA 710
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Company History:
Whole foods is natural foods, fresh foods supermarket chain. John Mackey, Rene Lawson Hardy,
Craig Weller and Mark Skiles founded the whole foods market in Austin, Texas. Originally, in 1978 Rene
Hardy and John Mackey borrowed 45,000 dollars from relatives to open a natural foods store in Austin
Texas. Two years later, they partnered with Craig Weller and Mark Skiles merging their natural foods
store SaferWay with Weller and Skiles Clarksville Natural Grocery. The resulting new natural foods store
was named Whole Foods Market and opened in 1980. This store had 10,500 square feet and a total staff
of 19. Whole Foods Market began to expand from Austin to Houston, Dallas and New Orleans beginning
in 1984. In 1989, expansion began on the West Coast with a Super Market in Palo Alto, California. Other
Supermarkets in North Carolina, Detroit, Boston and on the east coast were opened through the 1990s.
This round of store growth was fueled primarily by acquiring Food for Thought and Harrys Farmers
Market stores in2001, located in northern California and Atlanta respectively. In 2002, Whole foods
acquired Fresh and Wild in the United Kingdom. Another venture, Wholefoods.com was developed in
1999 and WholePeople.com in 2000. Later in 2000, WholePeople.com merged with Gaiam, Inc. and
WholePeople.com was subsequently replaced with Gaiam.com.
Whole Foods Markets core values are to provide natural perishable food products that are
wholesome and safe to eat, provided by employees who work as a team, where they can flourish and
grow as individuals. Unfortunately, these values are not stated in their mission statement. Whole Foods
Market mission statement unusually says they are a mission driven company, but the only value
promoted is quality. Their core values can be found not in their mission statement but in various sections
of their financial documents and literature. These values should be aggregated into the mission
statement. This is important for Whole Foods as a company because much of their expansion has been
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through the acquiring of other natural food stores chains. These acquired stores may have internal
cultures dissimilar to Whole Foods whereby Whole Foods would benefit by a strong mission statement.
of high quality organic foods to customers by experienced friendly team members. This strategy
differentiates them from other chain supermarket stores allowing them to compete not on price or
volume but on quality, culture and customer experience.
6. Philosophy (Any?)
Whole Foods philosophy is stated to be a company that is a leader in providing high quality foods
to customers. They set high standards for the food products they sell, the employees they hire and what
distributers they purchase their foods from. These farms and distributers must meet the premium
standards set by Whole Foods for Whole Foods to purchase products from them for resale to the public.
Whole Foods as a company is committed to providing the customer a viable and healthy alternative to
supermarket food while supporting the local community.
7. Self-Concept (Distinctiveness?)
Whole Foods self-concept is only partially apparent in their mission statement. They wish to be
the leader in providing high quality foods to the public. However, in their literature expands on this in
that they view high quality food as an extension of living a whole value filled life. They see whole food as
a lifestyle, including eating healthy food, eating the right foods, exercising, excelling in work, being
vested as a person in the community and being involved in the culture of each community they have a
store in. The company sees itself as an extension of the communities they serve not just a supermarket
selling to those people who happen to enter the store.
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External Analysis:
Industry Analysis: The External Factor Evaluation (EFE) Matrix for Whole Foods
Weight
Rating
Weighted
Score
0.12
0.48
0.11
0.33
0.1
0.40
0.08
0.32
0.09
0.27
0.13
0.26
0.12
0.24
0.09
0.27
0.10
0.1
0.06
0.12
Threats
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Rational:
Whole Foods total weighted score is 2.79, which is slightly above average for companies in the
grocery/supermarket industry. Whole Foods is taking advantage of their opportunities but is responding
poorly to its threats, many of them long term in nature.
External Opportunities:
1. Higher quality products than industry
Whole Foods is a market leader in providing high quality organic and all natural foods to the
public. They are able to compete with larger supermarket chains on quality and partially on cost but
quality is the key differentiator from others in the industry.
2. Emphasis on organic farming, humane grocery
Unlike other chain supermarkets customers know the history of the food products
purchased at a Whole Foods supermarket. This background food history knowledge is unique among
the industry and creates a market for those potential customers who value this type of information.
It is the ability to trace and determine the quality of the food sold at Whole Foods that creates a
market opportunity for the company against its larger competitors.
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External Threats:
1. Increased price pressure from fresh foods
Any dramatic change in weather patterns for a growing season or for several growing
seasons can cause an increase in the price of fresh fruits and vegetables. As they select high
quality foods for sale at their stores, any increase in price and a decrease in quality can impact
their sales and the reputation of the company. An increase in food prices followed by the
inability to find enough high quality food products in a category could be detrimental to the
companys profits.
rules on how a food is stored are enacted then this could increase Whole Foods storage costs. If
the company is required to change or add labeling to certain products this could reduce those
products profit and the companys revenue.
Porters Analysis:
Rivalry among competitors:
High They face very strong competition from other supermarket chains and small individual stores. This
competition is from similar stores as well as superstores. They face completion from similar format
supermarkets such as Trader Joes, Sunflower Farmers Market, Fresh Market chain and Central Market
stores. In addition, Whole Foods also faces completion from more traditional supermarket chains such as
Wal-Mart, Kroger, Safeway, Albertsons, and Winn-Dixie.
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Target Scope
Broad
Low Cost
Product Uniqueness
Differentiated Strategy
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Narrow
Porter rational:
Whole Foods will have to select a broad product line that is differentiated from other
supermarkets with a strong focus on perishable foods. They will need to compete not only on quality but
also on cost for the next few years unlike previously where they competed only on quality and variety.
They need to lower their operating costs or other internal costs in order to lower the overall cost of the
perishable goods they sell to the public. Because Whole Foods expanded as a company during better
economic times, they must now factor in the possibility of a permanent change to consumers shopping
patterns. These altered shopping patterns are being shaped by high unemployment, low economic
growth and stalled wages. Unless Whole Foods offers a variety of fresh food products that appeal to
cost conscious buyers, other competitors like Trader Joes, Wegmans and Safeway will expand market
share while Whole Foods will lose market share.
The Competitive Factor Evaluations Matrix:
Whole
Trader
Foods
Joes
Wegmans
Weight
Rating
Score
Rating
Score
Rating
Score
Brand recognition
0.13
0.52
0.52
0.52
Product Quality
0.13
0.52
0.52
0.52
Price Competitiveness's
0.12
0.24
0.36
0.48
Management
0.12
0.36
0.48
0.48
Financial Position
0.13
0.26
0.39
0.39
Customer Loyalty
0.12
0.48
0.48
0.48
Global Expansion
0.12
0.36
0.24
0.24
Market Share
0.13
0.52
0.39
0.39
Total
1.00
3.26
3.38
3.50
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The Competitive Factor Evaluations Matrix shows that Whole Foods is only marginally positioned
against its competitors Trader Joes and Wegmans. They need to not only compete on price but on
reputation, quality, variety and cost. They have over expanded their store numbers and as a result have
incurred a large amount of debt. Their purchase of Wild Oats caused a significant lost to be incurred by
Whole Foods and shopping at Whole Foods stores has declined by 19%. In addition, on average only 28
dollars is spent by shoppers at Whole Foods while its nearest competitors all average higher, Trader Joes
averages 38 dollars spent per shopper while Safeway averages 45 dollars spent per shopper per store
visit. Whole Foods needs to cut costs, increase value and maintain or expand on the variety of high
quality low cost fresh foods in order to maintain its profitability.
Key Strengths
Brand recognition
0.12
0.36
0.09
0.27
0.1
0.30
0.1
0.20
0.09
0.27
0.1
0.2
development
5
Key
Opportunities
1
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0.11
0.22
0.13
0.26
0.09
0.27
0.07
0.14
Total
Rational:
The average total weighted score for Whole Foods is 2.49, which is just below average for
companies in the supermarket industry. Whole Foods faces strong competition from other supermarkets
in terms of organic certification, quality, freshness, uniqueness, variety, cost and location. Moreover,
Whole Foods has above average long term debt, has closed some of its Wild Oats supermarkets after
their acquisition, has over expanded its market base and has slowing same store sales. They also need to
train new managers for increasingly complex roles and groom them for upper management in the
unfortunate event of a key leader leaving the company. Whole Foods needs to leverage their brand
name and increase marketing as well as incentivize repeat customers return to their stores. They need to
retain quality employees and offer competitive pay for those knowledgeable in whole food products.
Key Strengths:
1. Brand recognition
Whole Foods needs to leverage their brand more than they have in the past few years. This can be
done by increasing in house branded foodstuffs as well as increasing marketing. They can increase
marketing through non-traditional channels, the internet and through mobile technologies. Whole Foods
can offer regional coupons and expand delivery options in areas where their stores are located.
2. Consumer good will towards company
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Whole Foods has moderately strong consumer good will. They can increase this good will through
saving or shopper cards, issuing coupons, partnering with other companies to issue discounts and
through the expansion of employee benefits packages. They can promote some of the good work they
accomplish such as advocating for the treating of farm animals humanly and how they purchase local
farmers produce.
3. Partnered with local farmers
Whole Foods has collaborated with local farms. They can expand this relationship to regional farms
and also promote this relationship with the public at large. They can invest in technologies that allow the
company to ship these farm products quickly to market and develop in store methods that would
maintain the foods freshness longer.
4. Increase low cost/high quality product development
The company needs to increase their assortment of low cost high quality products as well as expand
their in store brands. This is needed in order to offer increased value to customers in a faltering
economy. They also need to do this in order to increase same store purchases of which they rank last
among their competitors.
5. Strong employee empowerment
Whole Foods in 2009 had approximately 53,500 team members of which 43,000 were full time.
Whole Foods involves their team members at all levels of their business. They also award team members
with stock options, leadership grants and service hour grants. Team members are provided with benefits
and are able to vote on the makeup of those benefits every three years.
Key Opportunities:
1. Train and develop new managers for senior roles in the company
Whole Foods needs to aggressively train and groom new leaders for senior roles within the company.
As of 2009, all Whole Foods executive officers were in their mid-fifties with John Mackey the CEO and of
the original founders age 56 with 31 years tenure. With each executive officer having at least 10 years
tenure, any one of them leaving could be detrimental to the management of the company. If Mackey
leaves much of the knowledge that created and also maintains the viability of Whole Foods will be lost.
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2009
2008
2007
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Sales
Gross Profit
-3.1%
4.9%
7.1%
Net Income
146,804
114,524
182,740
371,356
(43,571)
(104,364)
Interest Expense
(36,856)
(36,416)
(4,208)
104,138
91,995
121,827
.85
.82
1.30
.00
.60
.87
.85
.82
1.29
Whole Foods financials show in 2009 that as a company they had a decline in store sales, paid
significant interest on long-term debt, had a high cost of goods sold and did not declare dividends for
that year. In addition, their gross profit grew slightly from 2008 to 2009, increased their provisions for
income taxes, and had a reduction in net income from 2007 but an increase from 2008 to 2009. In 2009,
Whole Foods sales growth was only .98%, gross income growth was only 1.76%, accounts turnover was
76 days, a PE ratio of 12.76, a debt to equity ratio of .49 and a current ratio of 1.35. These financials
show Whole Foods as having high debt, marginal profit and average turnover for the goods they sold in
their industry. Moreover, their gross income was hampered by high debt, their PE ratio is average, and
their debt ratio is above average and their debt to equity ratio shows in 2009 that they would not be
able to meet their debts with liquid assets.
SWOT Matrix:
SWOT
Strengths S
Weaknesses W
Brand Recognition
High debt
Employee empowerment
Slowing revenue
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Opportunities O
SO Strategies
WO Strategies
Increase marketing
brand exposure
management
Threats T
ST Strategies
WT Strategies
brands
partnering stores
brands
distribution
Whole Foods SWOT matrix shows that the company is burdened by debt and by the ability of
their competitors to out sell and out compete them. Whole Foods not only has to increase their same
store sales but also must increase the average amount of sales each customer purchases per visit. They
must reduce the cost to them in selling their products as well as increase low cost high quality brands.
This is something that other larger chain grocery markets can more easily accomplish because they can
purchase at a greater volume. Their competitors are also much more efficient at distributing their fresh
food products as opposed to Whole Foods. I believe the most important goal for Whole Foods in 2009
would be to pay off its long-term debt and then market their brand and products, of which they do little
of while training new managers for advance corporate roles.
Space Matrix:
Financial Position
Ratings
Leverage
Working capital
Cash flow
3
7
Industry Position
Growth potential
2
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Profit potential
Financial stability
2
7
Stability Position
Price range of competing products
-3
Competitive Pressure
-4
-3
-10
Competitive Position
Market Share
-3
Product quality
-1
Customer loyalty
-2
-6
Conclusions:
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FP
6
5
4
3
2
1
CP
IP
-6
-5
-4
-3
-2
-1
-1
-2
-3
-4
-5
-6
SP
The Space Matrix show that Whole Foods is competing fairly well in a very unstable market. The
supermarket industry is comprise of aggressive large chain stores, warehouse stores, small chains, mom
and pop stores, open air markets, farmers markets, discount dollar type stores and even pharmacies and
food delivery companies. These companies compete with Whole Foods on a variety of levels, depending
on the store market niche, the size of the company and where it is located in relation to a Whole Foods
store. Whole Foods is competing fairly well, in that in order to assure its continued existence it needs to
just reduce its debt and slow its expansion. Other factors that will help it compete such as increasing
store brand products and increase its efficiency will have beneficial effects but they are not as critical to
the success of the company as debt reduction.
BCG Matrix:
High
Medium
Low
Medium
Stars
?s
Store brand
Cash Cows
Dogs
Prepared foods
Low
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The BGC Matrix shows that Whole Foods store brands are doing well while high variety specialty
brands are not. For example, high variety specialty brands could be having twenty different varieties of
first press olive oil. These types of products take up a great deal of shelf space while producing little
revenue for the company. High cost prepared foods bring in a great deal of revenue for Whole Foods but
this is changing as the slow economy has altered customers food shopping patterns. Customers are more
likely to prepared foods at home than by already prepared foods at Supermarkets. This will affect their
cash cows and as such, they need to increase their store brands. Because of changing regulations, Whole
Foods organic foods may need to meet certifications that may cost more for Whole Foods and reduce
the profitability of those products for them.
2008
2010
Projected
Sales Revenue
7,956,912
8,500,000
5,247,207
4,500,000
36,545
40,000
Income Statement
Comments
Operating Income
236,238
275,000
Accounts Payable
181,134
175,000
928,790
750,000
Current Liabilities
666,177
600,000
Number of Stores
275
265
Cash
30,534
40,000
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The above pro forma statement shows a portion of the Consolidated Statements of Operations and
Balance sheet affected by my recommendation and the external factors discussed in the Internal,
External and SWOT matrix. The above Pro Forma statement is comprised of actual 2008 data and
projected 2010 data.
Epilogue Section:
Since the case was written net sales have increased, to 10.11 billion dollars, sales growth has
increased to 12.24% and long-term debt has decreased to an amazing 17.44 million dollars. Total
liabilities have decreased to 1.3 billion dollars while total assets have increased by 7.66% to 4.29 billion
dollars. Whole Foods cash on hand has increased to 746 million dollars while gross income is 3.25 billion
up from 2.75 billion in 2009. Whole Foods net income has increased three years in a row from 148.6
million dollars in 2009 to 342.6 million dollars in 2011. However, capital expenditures have cost Whole
Foods increasing from 68.22 million dollars in 2009 to 370.12 million dollars in 2011. This capital
expenditures increase may be due to new store openings and the renovation of existing Whole Foods
stores. Whole Foods current PE ratio is 38.11 which is above average ranked 6 out of 37 while EPS
growth is currently 13.60% ranked 11 out of 37 in the industry. Unfortunately, long-term debt to equity is
still high at .557, which means they do not have enough liquid assets to meet their obligations should
they be required to do so in the future. The above financial data shows that since the case has been
written Whole Foods has made strides to increase revenue, reduce its debt and invest wisely. However,
capital expenditures still show Whole Foods has a capacity to spend money it does not have which is a
cause for concern.
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References
Community Giving | WholeFoodsMarket.com. (n.d.). Whole Foods Market: Natural and Organic Grocery.
Retrieved July 22, 2012, from http://www.wholefoodsmarket.com/company/giving.php
David, F. R. (2011). Strategic management: concepts and cases (13th ed.). Upper Saddle River, N.J.:
Prentice Hall.
Declaration of Interdependence | WholeFoodsMarket.com. (n.d.). Whole Foods Market: Natural and
Organic Grocery. Retrieved July 22, 2012, from
http://www.wholefoodsmarket.com/company/declaration.php
Our History | WholeFoodsMarket.com. (n.d.). Whole Foods Market: Natural and Organic Grocery.
Retrieved July 22, 2012, from http://www.wholefoodsmarket.com/company/history.php
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(n.d.). Home - Whole Foods Market Newsroom. Retrieved July 22, 2012, from
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