Case Whole Foods Market Inc 2009 PDF

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Case AnalysisOnWhole Foods Market, Inc.-Introduction:Whole Foods Market Inc. is an American supermarket chain exclusively featuring foods without artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats. It is the United States' first certified organic grocer, which means it ensu...

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Case Analysis On Whole Foods Market, Inc.-2009

Case Analysis On Whole Foods Market Inc. page-1

Introduction: Whole Foods Market Inc. is an American supermarket chain exclusively featuring foods without artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats. It is the United States' first certified organic grocer, which means it ensures, to National Organic Program standards, organic integrity of the heterogeneous products from the time they reach stores until they are placed in a shopping cart. It opened on September 20, 1980, in Austin, Texas, its current headquarters. As of September 2015, it has 91,000 employees and 431 supermarkets in the United States, Canada, and the United Kingdom, and has its main produce procurement office in Watsonville, California. As of 2015, founder John Mackey and Walter Robb were co-CEOs of the publicly traded company, with John Elstrott as chairman. In November 2016, the company announced that Walter Robb would be stepping down as co-CEO at the end of year and would remain with the company as a director. It became a Fortune 500 company in March 2005 and is the 30th largest retailer in the U.S., based on 2014 revenue

Organizational Profile: o Name of the Company: Whole Food Market, Inc. o Founder : John Mackey, Renee Lawsan Hardy, Mark Skiles, Craig Waller o Date of Incorporation: Whole Food Market, Inc. was incorporated in 20 September 1980. o President and CEO: Walter Rob & John Mackey o Telephone: o Industry: Food Service. o Type: Public limited company. o First Capital: $45,000 o Present Assets: US$ 5.5 billion o Number of Employees: 91,000 (Approximately) o Number of Stores: 467 stores o Total Customers: o Slogan: “Whole Foods, Whole People, Whole Planet” o Logo: o Website: www.wholefoodsmarket.com

Case Analysis On Whole Foods Market Inc. page-2

Product and services: Whole Foods Market is a dynamic leader in the quality food business. We are a mission-driven company that aims to set the standards of excellence for food retailers. We are building a business in which high standards permeate all aspects of our company. Quality is a state of mind at Whole Foods Market. Whole Foods Market only sells products that meet its self-created quality standards for being "natural", which the store defines as: minimally processed foods that are free of hydrogenated fats as well as artificial flavors, colors, sweeteners, preservatives, and many others as listed on their online "Unacceptable Food Ingredients" list. Whole Foods Market has also announced that it does not intend to sell meat or milk from cloned animals or their offspring, even though the U.S. Food and Drug Administration (FDA) has ruled them safe to eat. Company also sells many USDA-certified organic foods and products that aim to be environmentally friendly and ecologically responsible. Stores do not carry foie grass or eggs from hens confined to battery cages due to animal cruelty concerns, as a result of successful advocacy by animal welfare groups. Whole Food Market, Inc. provides Variety of different products to their customers. They provide fresh & organic foods to their customers. Whole Food Market, Inc. provides Variety of different products includes: • Coffee, tea • Fresh fruits & vegetables, • Frozen fruits & vegetables • Nuts, seeds, trail mixer, nuts, seed butters • Rice, grain, dry bean and spices • Natural cosmetics • Baby clothes approximately 20,000 different food & non-food product types at each store

Case Analysis On Whole Foods Market Inc. page-3

Figure: Whole Food Properties (as of September 28, 2008) (WFMI, Annual Report 2007)

Goals: •

Whole Foods Market goal to reach 1,000 stores in the Target U.S.

•

Older citizens and Urban singles Offer

•

Enjoyable shopping environment

• An amazing variety of items approximately 20,000 different food and non-food product typeset each store location

Vision: Whole Food Market, Inc. is to “Whole Foods, Whole People, Whole Planet” emphasizes the company’s vision as more than just a food retailer.

Mission: Whole Foods' mission was "to promote the vitality and well-being of all individuals by supplying the highest quality, most wholesome foods available." The core of the mission involved promoting organically grown foods, healthy eating, and the sustainability of the world’sentire ecosystem

Core Values: The following list of core values reflects what is truly important to us as an organization. These are not values that change from time to time, situation to situation or person to person, but rather they are the underpinning of our company culture.

Case Analysis On Whole Foods Market Inc. page-4

Board of Directors:Dr. John Elstrott has served as the Chairman of the Board since 2009 and has served as a director of the Company since 1995, serving as Lead Director from 2001 to 2009 Dr. John B. Elstrott

Chairman

John Mackey

Chief Executive Officer

Walter Robb

Chief Executive Officer

Mary Ellen Coe

Director

Shahid (Hass) Hassan

Director

Stephanie Kugelman

Director

Jonathan A. Seiffer

Director

Morris (Mo) Siegel

Director

Jonathan D. Sokoloff

Director

Dr. Ralph Z. Sorenson

Director

Gabrielle Sulzberger

Director

William A. (Kip) Tindell, III

Director

Case Analysis On Whole Foods Market Inc. page-5

Organizational Chart: Dr. John B. Elstrott Chairman

John Mackey, CEO

Walter Robb, CEO

Mary Ellen Coe, Director

Shahid (Hass) Hassan,Director

Stephanie Kugelman,Director

Jonathan A. Seiffer, Director

Morris (Mo) Siegel, Director

Jonathan D. Sokoloff, Director

Gabrielle Sulzberger, Director

William A. (Kip) Tindell, III, Director

Dr. Ralph Z. Sorenson, Director

External Assessment: Environmental Forces: Today’s race is running for organic foods whether the question about what is it or how is it organic remains in customers head but this demand creates a huge external threat for whole food market. Competitive Forces: Whole Food is facing lots of competitive threats from its competitors as we can see from its decreasing market share. The reason behind this can be their high price and the demand of organic foods in the market. Case Analysis On Whole Foods Market Inc. page-6

Pestel Analysis: A pestel analysis refers the external environment of an organization by which an organization can identify the Threat and opportunity of an organization ( SWOT Analysis) Pestel Stands for P-Political E-economical S-social T-Technological L-legal Political Factors: Whole Food market address the consumer safety policies among its all the remote business environment. In USA it is practice the peaceful political activities and Whole Food market has the advantages to work with this political environment Economic Factors: Whole food market’s stock remains constant compare than last year. Social Factors: Whole food market has demographic of families with higher income level and it basically targeting that local person who has the ability to buy their product which it tagged in their products Technological: Research on the effects of pesticides and preservatives will add more value to their business in future. Keep update their with recent technologic in production higher efficacy and yield of organic and natural farming.

Case Analysis On Whole Foods Market Inc. page-7

Legal: The USA department of agriculture continuously monitoring and evaluating country’s production of food and sales. These regulation slightly effect on Whole food market because it is seller of and related food products. All though the labor law infrequently changing but it also effect on whole food market.

External Factor Analysis (EFE):The EFE matrix lets a strategists assesse the external factor very easily. First the strategists have to assign some points to their opportunities and threats according to their responses. Such as: 4 = the response is superior, 3 = the response is above average, 2 = the response is average, and 1 = the response is poor. It shows how effective the strategies are for company.

External Strategic Factors

Weight

Rating

Weighted score

Opportunities Growth through acquisition

.20

3

.80

A vast varieties of item selection

.20

3

0.6

Distribution of retail store in such place where

.15

4

0.6

competitor’s store is unavailable Threats Local grocers increasing organic food options

.15

3

0.45

High price of product Economy troubles: customers switching to lower

.15 .15

2 1

0.3 0.15

cost products 1.0

Total

2.9

Comment: We know that the highest possible total weighted score is 4.0 and the lowest is 1.0. The average total weighted score is 2.5.

Case Analysis On Whole Foods Market Inc. page-8

Here we see that the total weighted score is 2.9 out of 4 where 4 means outstanding response to organization’s threats and opportunities. But Whole Food is having score slightly below the average score which means company is not responding well. They need to concentrate to these points because nowadays they are facing a lots of controversies for their strategies.

Competitive Analysis: Porter’s Five Forces Model.

According to market conditions of Whole Food Market the Porter’s Five Forces Model are:     

Rivalry among existing competitors : (strong force) Threat of new entrants: (strong force) Threat of substitute product or service: (strong force) Bargaining power of suppliers : (moderate force) Bargaining power of buyers : (strong force)

Rivalry among existing competitors: The Competitors of Whole Food Market have created strong force impact in term of Rivalryamong existing competitors. Major competitors are: Kroger, Safeway and Walmart. Some external factors are contributing this strong force. These are  Large number of Firms.  Other firm’s new step towards organic food Case Analysis On Whole Foods Market Inc. page-9

 Other firm’s aggressiveness.

Threat of substitute product or service: Whole Food Market faces strong force in term of the element Threat of substitute product or service of the Porter’s Five Forces Model. Some Factors behind this force are:  Available substitute product in market.  Local producers directly selling to customers.  Product demand decrease for low price cost of other firms.

Threat of new entrants: The new entrants impact strong force of Whole Food Market. There are some external force which are responsible for this strong force. These are:  Profitable industry  Low operating expense  Easy way doing business.

Bargaining power of buyers: Bargaining power of customer on this market is quite strong as the amount of buying product of customer in sales revenue amount is so low. Customer can easily choose the other source of buying their product if the cost becomes higher than their budgets. So this force is quite strong in market.  Large number of firms  Availability of product  Small volume of consuming product.

Bargaining power of suppliers: Whole Food Market has a significant number of suppliers. As a resultbargaining power of supplier’s impact moderate force of Whole Food Market. This element indicates availability of market supply in the industry. Some force are relate in this element. These are:  Large number of suppliers  Huge size of supply  Low price of supply products.

Case Analysis On Whole Foods Market Inc. page-10

CPM (COMPETITIVE PROFILE MATRIX): Critical success factor

weight

Whole Foods Market

Kroger

Walmart

Rating

Score

Rating

Score

Rating

Score

Brand Recognition

0.20

4

0.80

4

0.80

4

0.80

Product Quality

0.13

4

0.52

4

0.52

3

0.39

Management

0.10

2

0.20

4

0.40

4

0.40

Price Competitiveness

0.15

2

0.30

3

0.45

4

0.6

Financial Position

0.15

2

0.30

3

0.45

3

0.45

Customer Loyalty

0.15

3

0.45

4

0.60

4

0.60

Global Expansion

0.12

2

0.24

2

0.24

3

0.36

Total

1.0

2.81

3.46

3.6

Comment: The Competitive Factor Evaluation Matrix reveals that Whole foods is only partially positioned against its competitors. Shoppers spent only few dollars at Whole Foods while shopper spent more dollars in nearest competitor because whole foods prices are high. They have to provide high quality on low cost and fresh foods in order to maintain its profitability.

Case Analysis On Whole Foods Market Inc. page-11

Internal Environment Analysis: A.

Corporate Governance

Board of Directors John Mackey as a cofounder and CEO Dr. Ronald Chwang (Chairman and President, iD Ventures America, LLC) George C. McNamee Dr. Jacques S. Gansler (Director, Center for Public Policy and Private Enterprise, University of Maryland) General Paul J. Kern (U.S. Army, Retired) (Senior counselor, The Cohen Group) Deborah G. Ellinger (President, Ellinger Enterprises)

Top Management John Mackey as a cofounder and CEO John J. Leahy (Chief Financial Officer) Jeffrey A. Beck (Chief Operating Officer) Glen Weinstein (Senior Vice President and General Counsel) Dr. Tom Wagner (Chief Technology Officer) Alison Dean (Senior Vice President of Corporate Finance and Principal Accounting Officer)

Corporate Resources: Marketing More to the below the line marketing strategy (less advertising, more with word of mouth) Do a great efforts to educate people about natural and organic foods, nutrition, and environment change due to organic consumption For military products were produced solely for the U.S. government

Case Analysis On Whole Foods Market Inc. page-12

Finance Income Statement Ratios Gross Profit set by company to Pre-Opening and relocation as a achieve 34 percent as a percentage of Gross Margin shows minimal consumption of Gross Profit Net Profit Margin averaging 5. Percent of sales Earning Per Share (EPS) favorable. From 2004 to 2007 but drops to Direct Store Opening Expenses as.insufficient level in 2008 a percentage of Gross Margin shows large consumption of Gross Profit. Current Ratio on gradual decline .Debt to Equity Ratio show debt indicating Cash and Receivables averaging 50 percent of the are insufficient to cover current equity stake in assets then liabilities increases to 120 percent .Debt to Asset Ratio shows rapid .Days of Inventory show 9 days increase in debt from line of on average sell inventory credit and long term loans and capital leases .Inventory Turnover shows monthly average to sell its merchandise inventory. Current Ratio Current Ration = Current Assets / Current liabilities 667986/772350 622606/666177

2007 2008

0.86 0.93

Quick Ratio Quick Ratio = (Current Assets- Inventories)/Current liabilities 2007 2008

667986 – 288112 / 772350 622606 – 327452 / 666177

0.49 0.44

Debt-to-Total-Assets Ratio Debt-to-Total-Assets Ratio=Total debt/Total assets 2007 2008

760868 / 667986 927170 / 622606

1.14 1.49

Debt-to-Equity Ratio Debt-to-Equity Ratio=Total debt/Total stockholders’ equity 2007 2008

760868 / 1458804 927170 / 1506024

0.52 0.61

Total Assets Turnover Total Assets Turnover= Sales/Total assets 2007

6591773 / 3213128

2.05

Case Analysis On Whole Foods Market Inc. page-13

2008

7953912/ 3380736

2.36

Operating Profit Margin Operating Profit Margin= Earnings before interest and taxes (EBIT)/Sales 2007 2008

304567 / 6591773 206519/ 7953912

0.046 0.026

182740 / 6591773 114524/ 7953912

2.77% 1.43%

Net Profit Margin Net Profit Margin= Net income/Sales 2007 2008 Return on Total Assets (ROA) Return on Total Assets (ROA)= Net income/Total assets 2007 2008

182740 / 3213128 114524/ 3380736

5.68% 3.38%

Return on Equity (ROE) Return on Stockholders’ Equity (ROE)= Net income/Total stockholders ’equity 2007 2008

182740 / 1458804 114524/ 1506024

12.5% 7.60%

Earnings Per Share (EPS) Earnings Per Share (EPS)= Net income/Number of shares of common stock outstanding 2007 2008

182740 / 1232845 114524/ 1066180

14.82% 10.74%

Case Analysis On Whole Foods Market Inc. page-14

Research and Development (R & D) 

The company spent nearly 6% of its revenue on R&D.

 USIn 2009, its total R&D costs were US$45.5 million, of which US$14.7 million was internally funded Human Resources Management (HRM) 

they had 538 full-time employees, 254 of which were in R&D.

Operations and Logistics Decentralized team management & process Highly dependent on team members and associates led by team leaders Each product category have different team member for responsible, respectively Store team leaders were paid a salary plus a bonus based on EVA contribution Customizing the looks and product display to best show off the particular product mix for the store’s target clientele Total Quality Management Define quality by evaluating the ingredients, freshness, safety, taste, nutritive value and appearance of all of the products that they carry Maintain the list of unacceptable ingredients (about 81 ingredients) Purchasing and Distribution Whole Foods used regional and national suppliers so the company in a better position to negotiate volume discounts Some perishable product, like seafood, coming from distant supply sources were flown in to stores to ensure maximum freshness.

Value Chain analysis: Whole Food Market Inc. Analysis presented below:

Value chain activity

How does Whole Food Market Inc. create value for the customer?

Primary: Case Analysis On Whole Foods Market Inc. page-15

Provide standard product and food, with the recipes, always launch new product based on demand. Made product with the organic and natural ingredients for reduce the cost for price. Look after distribution and customer service for trust in brand. Provide store facilities and they are doing the best service for online marketing, on time. Try to got Multicultural and diver’s audience with their best services, investment for customer problem solution care facilities.

Inbound logistics

Operations Outbound logistics Marketing and Sales Service

Secondary : Product Inno...