Existing trends in the retailing of organic foods are healthier eating habits, concern over purity of foods, health-consciousness and the idea that eating organic foods have a positive effect on the environment (Thompson, 2010). The craze of purchasing only organic foods has an effect on not only Whole Foods but on many supermarket chains. Although organic foods are marked up in comparison to processed foods there is much competition in this market and thus the profit margin is not very high when selling these items.
Evaluate the competitive environment of the firm: Apply Porter’s model and analyze each factor relative to the company.
The five forces in Porter’s Model of Competition are threats of new entrants, rivalry among competing firms, and threat of substitute products, bargaining power of buyers, and bargaining power of suppliers. Each of the forces of Porter’s model is directly related to the Whole Foods Market. Organic foods are extremely popular so there is always a threat of new entrants into the market who want a piece of the profit pie involved in the organic food market. As noted in the text, competition in the organic food market is heavy and causes the profit margin to be low. In this case, stores have competitive prices and although organic foods are more expensive the mark up on these items is not very high at all (Thompson, 2010). The threat of substitute products is not very high as smaller scale supermarkets and even large retailers like Wal-Mart are not sole organic food retailers. However, if mass retailers started to brand their own organic foods and solely start to sell organics then prices would be lower in places like Wal-Mart where prices are generally low. This scenario is not very likely; therefore, Whole Foods Market doesn’t really have to worry about the threat of substitute products.
The threat of bargaining...