Whole Foods Market: Competitive Environment Analysis

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Table of Contents

Trends in Organic Foods Retail and Their Impact on Whole Foods Market
Porter’s Five Forces Model
Environmental Factor Posing a Threat to Whole Food and How to Combat It
SWOT Analysis
Using Strengths and Opportunities to Achieve a Sustained Competitive Advantage
References

Trends in Organic Foods Retail and Their Impact on Whole Foods Market

The retailing business of organic food in the United States of America is on the rise; this has been facilitated by enlighten of the American on the health advantages brought about by organic food consumption as well as a realization of danger likely to be brought about by eating non-organic foods.

In 2005, there were 14,000 small and medium scale outlets of organic and natural foods; the estimated sales of the 14,000 units totaled to $18 Billion; the market offered a variety of products that shoppers could choose from, the establishments were mostly small scale, however giant stalls were established to tap the growing market.

Some of the giant malls that were introduced between 2005 and 2008 are Wal-Mart and Whole Food Company.

The raised demand for organic food in the American food industry forced Whole Food Company to change its business approach and target to tap the growing market; generally the trend in a market has an effect on the kind of products that a company stocks and the area that the company will concentrate on.

Whole Food Company had to focus on the new market demands and started to stock products like wild oats, fresh produce and millet.

Porter’s Five Forces Model

Since 2000, before the wave to organic foods, many companies in the food industry were experiencing a reduced business and they recorded losses; an example of a company that recorded a loss was Whole Food Company: the competitive environment of the company looks as follows (using porter’s five forces):

Buyer’s Bargaining Power

The market is driven by the demands made by the customers, it is the customers who decided they needed organic and fresh foods, the supermarkets and small scales stores had no option that supply the commodities. In the market, the buyer’s power is more evident and strong.

Suppliers Bargaining Power

Suppliers of organic foods have increased with the demand of the foods; however, the production of the foods is dependent with the climatic conditions, which may sometimes not be favorable. However, the markets benefit a great deal from the growth of international market, which has continued to supply organic foods to the supermarkets and small outlet chains.

Threats of Substitute

Although consumers have access to cheaper non-organic foods, they have strongly opted to use organic foods for the benefits it has on their health. Threats to substitute are manageable if the company has a constant supply of organic foods.

Threat of New Entrants

In every business, there is a threat to entry of new businesses, however Whole Food Company is a giant in the industry thus it has an upper hand to be able to maneuver in the market despite entry of new players.

Competitive Rivalry in the Industry

Since the industry is consumers driven, the success of a company is dependent on how well it can meet consumer’s needs. A strong business like Whole Food Company has no worries to have since it has the financial base, the reputation and the will to succeed (Hughes & Beatty, 2005).

Environmental Factor Posing a Threat to Whole Food and How to Combat It

The environmental factor that offers Whole Food Company the greatest challenge is Suppliers bargaining power; the reason for the above is because suppliers in the market are growing but their effect and the rate they are producing is also affected by climatic conditions in the country.

The world is facing threats from global warming and seasons are not precisely predictable, the suppliers have the likelihood of not being able to produce the quantity wanted by the market. The effect on climate is not limited to the United States however; it cuts across other organic foods producing countries.

The dependency that the company can have on international trade is limited to international relations affecting the world; if the relations do not support production, then the effect is negative and the country will miss the much-needed suppliers. The rising demand has led to a rising needs for the produces; there are a number of companies with different packages evading the market; they are likely to lead to a hiked prices of the produce.

Whole Food should develop a good business relationship with its suppliers, as this will assist in making sure that there is reliability in the supply of materials. Suppliers in the company fall in the category of contractors and those companies in the business of supplying raw materials and semi finished goods.

This will ensure that the company manufacturing is kept with the right materials always. On the other hand, it is easy to get goods at a better price and market data from suppliers whom the company has established good business relations.

SWOT Analysis

Strengths

The company has a strong financial base and enjoys a wide range of customers; it can use this advantage to buy products from suppliers at a slightly higher price that the one offered by competitions. The management is futuristic and makes effective and strategic decisions when called upon to.

Weakness

The company seems to depend on suppliers who cannot be fully dependent on; it would have been better if the company had a farm of its own where it is producing the commodities for its stores.

Opportunity

The main opportunity facing the firm is an increased demand for organic foods and massive campaigns by third parties on the goodies of eating organic food

Threats

The company is threatened by unreliable international relations; this threatens the companies continued supply of organic goods.

Using Strengths and Opportunities to Achieve a Sustained Competitive Advantage

The company has a strong brand name and a reliable financial base; it should use these strengths to enlarge its business via stocking of a variety of products in its shopping malls. With increased sales, the company can be able to buy from suppliers at a fair price and enjoy the benefits of economies of scale.

The growing demand for organic products is offering the company an increased demand of its products; thus, the company can diversify its operation in the niche of the market and enjoy increased sales. Globalization and growth in international market offers the company an increased market base and increases the material sources (Adam, Jochim & Cutting, 2008).

References

Adam, L., Jochim, D., & Cutting, T. (2008). The art of strategic leadership: A proven approach to optimizing your organization. New York: Beck.

Hughes, R., & Beatty, K. (2005). Becoming a strategic leader: Your role in your organization’s enduring success. San Francisco: John Wiley & Sons.

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