A Food Supermarket Chain Marketing Essay

INTRODUCTION

Whole Foods Market is a food supermarket chain founded in 1980, which emphasizes in “natural and organic products”, based in Austin, Texas. John Mackey, founder of Whole Foods Market, has currently 331 supermarket stores in both the United States and Europe.

In this report, PEST analysis and Porter’s 5-Forces would be used to analysis the general environment of Whole Foods Market. Using the above mentioned analysis, a value chain would then be recommended to identify which areas or stages of the product would need to be changed in order to improve Whole Foods Market market value, allowing it to remain competitive and ensure business sustainability.

ADDED VALUE IDENTIFICATION

Whenever a customer intends to patronize Whole Foods Market, the first thought that comes into majority of customer’s minds is that foods sold there are healthier choices. And with the presence of Whole Foods Market’s house brand, 365, customers would be able to purchase healthier foods at affordable prices.

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As compared to Whole Foods Market’s competitor, Kroger Supermarkets, Kroger does not emphasize on selling healthier foods, in fact they emphasize more on selling produces at affordable prices. Majority of customers patronizing Kroger Supermarkets have the idea that it’s a one-stop shopping place.

Both companies also give their customers the idea that poultry, meat and other fresh produces are of the freshest and highest quality.

PEST ANALYSIS

The PEST analysis is a business tool used for measuring market growth or decline, hence allowing the business to identify its position, potential and direction. PEST analysis comprises of Political, Economic, Social and Technological factors shown in (fig1.1):

(fig. 1.1)

POLITICAL

Before June 2011, body care products sold at Whole Foods Market need not comply with U.S. Department of Agriculture (USDA) standards for sale as being organic. After June 2011, body care products are needed to comply with USDA standards to be labeled as organic.

ECONOMIC

Economy in the U.S has been declining due to its global huge debt incurred. Recession has set in causing high unemployment rates and failed businesses. The same situation has been experienced in Europe, Euro Crisis, due to Greece’s huge debt incurred. Fall in value of the U.S. dollar and Euro currency has been experienced until present day.

SOCIAL

Consumer trends have also changed. Modern day consumers tend to go for “healthier choice” foods, especially organic products. Consumers also tend to shun away from foods, especially poultry and meat, where animals have been treated inhumanely. Organizations actively involved in Corporate Social Responsibility (CSR) are more welcomed by consumers.

TECHNOLOGICAL

Present day consumers are more engaged in on-line shopping from the internet. Compared to other sectors, the supermarket sector has fewer technologies being implemented in its day to day operations.

CONCLUSION

The supermarket industry is being regulated regularly with new legislations being imposed to improve quality of foods sold. This industry needs to constantly adapt to the needs of consumers which are ever changing based on population, lifestyle, and buying power of consumers. This industry would continue to see growth due to consumers welcoming organic foods.

PORTER’S 5-FORCES

Porter’s 5-Forces model enables business managers to identify how an industry is being influenced by five forces, as shown in (fig. 1.2)

(FIG 1.2)

Each individual force would be explained as wise:

Threat of New Entrants

New firms entering the supermarket industry would pose a threat to Whole Foods Market. Since Whole Foods and Kroger Supermarkets holds majority of the market shares, new firms entering would be deterred as these firms are required to invest lots of resources just to compete with major players in this market.

Bargaining Power of Buyers

With more buyers emphasizing on healthier and organic foods, Whole Foods Market have been able to control their prices of products sold as they are the only major supermarket dealing with “Healthy and Organic” foods.

Bargaining Power of Suppliers

Whole Foods Market acquires their produce from different local farmers and suppliers, hence giving Whole Foods Market the advantage to source for suppliers or farmers offering lower prices.

Threat of Substitutes

Whole Foods Market would face little threats from substitutes as they are able to produce their own organic, seafood, bakery and coffee products at low prices, deterring substitutes intending to enter this industry.

Rivalry Among Existing Competitors

Whole Foods Market’s and its rival Kroger Supermarket both target different market audience, due to product differentiation. But both players depend on local farmers for their fresh produce, hence prices for fresh produce might be adjusted to allow Whole Foods Market to gain a temporary advantage.

VALUE-CHAIN ANALYSIS

Value-chain analysis allows the activities taking place in a business be compared to competitive strength of the business. It identifies the potential for adding value via cost advantage or differentiation in the company’s primary activities, as shown in (fig 1.3):

(FIG 1.3)

Inbound Logistics

Whole Foods Market currently oversees its own store network, which is inefficient in supplying its entire supermarket chain. This results in Whole Foods sourcing products from local farmers. If the primary farmer is not able to supply the product, the secondary farmer would then be able to inflate the prices causing high product costs. Buying in bulk would decrease costs of product.

Operations

Product quality is of utmost importance. Hence, Whole Foods should ensure that the products being carried meets USDA and FDA standards. This would allow products to be sold at higher prices.

Outbound logistics

On time delivery of customer orders would allow Whole Foods to become value-added by consumers, justifying higher prices consumers need to pay.

Marketing & sales

Understanding different customer needs, so as to adjust product prices catering to both high income and low income earners. This would help balance out the difference in product prices.

Services

Customer service ensures customer loyalty. As in a recent survey conducted by U.S. Census Bureau, 46% of consumers would shop at a higher priced supermarket with excellent customer service as compared to 21% who would shop at a cheaper supermarket with lousy customer service. Additional services like insurance can be sold at Whole Foods, creating a “one-stop” supermarket for customers.

Support activities of Whole Foods Value-Chain

Infrastructure and technology from acquisition of other companies allows Whole Foods Market to produce organic products at lower costs to satisfy consumer needs. Staffs at Whole Foods Market are adequately and well trained by mentors to provide quality service and product knowledge.

CONCLUSION

Strategic planning and management satisfying consumer’s needs for healthier foods, coupled with Corporate Social Responsibility (CSR) implementation would allow Whole Foods Market to remain competitive and sustainable in the ever changing market.