Case 14 Whole Foods

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CASE 14 – WHOLE FOODS
Whole Foods is a retailer that specializes in organic foods and it has done an excellent job of determining its target market and how to position itself. Instead of going head to head with large food retailers such as Wal-Mart, Whole Foods has found a niche market that works perfectly for itself. This niche market is one that prides itself on being health conscious and environmentally responsible and Whole Foods has done a great job of positioning itself in the same way through its environmentally safe actions and its use of the local community to stock its stores. However, as Whole Foods grows and expands, a person has to wonder if the company will be able to maintain this same position or will have to make sacrifices if it wishes to grow. QUESTION TWO

Organic foods are becoming very popular. Many chains, including Wal-Mart, have begun offering and expanding their selection of organics. Does this pose a competitive threat to Whole Foods? I believe that some of the larger store chains such as Wal-Mart may pose a competitive threat to Whole Foods by taking a portion of their sales away from them. According to the Food Marketing Institute, organic food is available in 82% of mainstream supermarkets and some food organizations say mainstream grocery stores account for a majority of the organic food sales. Due to these factors, Whole Foods is most likely losing some of their sales to the mainstream supermarkets. However, because of how Whole Foods has positioned itself in the organic food market, I believe that its position reduces the competitive threat from mainstream grocery stores as Wal-Mart. Whole Foods has chosen not to directly compete with the larger chains and therefore has chosen to market to a niche market. Even though larger chains are offering organic foods, the consumers in this niche market choose to shop at a store such as Whole Foods for factors that they consider more important than price. Therefore, even though the mainstream supermarkets may attract some of Whole Foods customers with their lower prices, I believe that Whole Foods will still retain its niche market. QUESTION THREE

With respect to Whole Foods’ targeting and positioning strategies, what challenges will the company face in the future as it continues to grow and expand? As Whole Foods continues to grow and expand, it will face numerous challenges to its targeting and positioning strategies. One of those challenges is its distribution network. Currently, Whole Foods distribution is localized, but as it continues to grow, it may have to develop a more centralized distribution strategy. The company wants to avoid a supply chain distribution network, but it cannot expect to expand the company and still keep a localized distribution network. As the company opens more stores, the local network may not be able to keep up with the growth and Whole Foods will be forced to come up with a more centralized strategy. A second challenge the company could face is maintaining the culture of the company. Part of the appeal of Whole Foods is the company’s unique culture which includes the treatment of its employees to the charitable acts that the company takes part in. As Whole Foods continues to grow, it will also see an increase in its expense, which could affect how it operates. For instance, the company currently pays 100 percent of its employees’ health-care premiums and places a cap on salaries of its highest-paid team members. However, as the company grows and hire more employees, it may not able to continue these same practices. As employees see the company grow, they may become reluctant to settle for a capped salary. They may feel that as the company is growing, the company should be able to compensate them accordingly. Also, if the company keeps a localized distribution network, there is no guarantee that the company will be able to offer the same loans that it is currently offering to local farmers....
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