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B USINESS P OLICY & P LANNING C ASE S TUDY 2012 WWW. WHOLEFOODSMARKET. COM S TEVEN P ELLETIER, J ARRYD P HILLIPS, O THNIEL H YLIGER, S PENCER J ACOBY,

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Presentation on theme: "B USINESS P OLICY & P LANNING C ASE S TUDY 2012 WWW. WHOLEFOODSMARKET. COM S TEVEN P ELLETIER, J ARRYD P HILLIPS, O THNIEL H YLIGER, S PENCER J ACOBY,"— Presentation transcript:

1 B USINESS P OLICY & P LANNING C ASE S TUDY 2012 WWW. WHOLEFOODSMARKET. COM S TEVEN P ELLETIER, J ARRYD P HILLIPS, O THNIEL H YLIGER, S PENCER J ACOBY, J ERMAINE W EST WWW. WHOLEFOODSMARKET. COM

2 OVERVIEW Company Overview Brief History Current Vision & Mission Current goals and policies New Mission and Vision Statements Core Values Organizational Chart External Assessments Industry Analysis Opportunities and threats EFE Matrix CPM Matrix Internal Assessment Strengths and weaknesses Financial condition IFE Matrix Strategy Formulation SWOT Matrix Space Matrix Grand Strategy Matrix IE Matrix Matrix Analysis Possible Strategy QSPM Matrix Future Strategic Plans Objectives Recommendations Implementation Issues EPS/EBIT Potential issues Sources

3 T IMELINE H ISTORY twenty-five year old dropout John Mackey and twenty-one year old Rene Lawson Hardy, opened the small natural foods store John and Rene partnered with Craig Weller and Mark Skiles to merge SaferWay with their Clarksville Natural Grocery The worst flood in 70 years devastated the city of Austin Whole Foods Market began its expansion We expanded to the West Coast acquiring other natural foods chains throughout the 90's Development of "virtual" store began Site went live Additional acquisitions Whole Foods moved into Manhattan Saw an expansion into Canada Whole Foods Market entered the United Kingdom Merger with Whole Foods Market John Mackey cleared of charges. August voluntary multi-state recall John Mackey voluntarily gave up his chairmanship The stock symbol changed

4 C URRENT V ISION S TATEMENT Our “bottom line” ultimately depends on our ability to satisfy all of our stakeholders. Our goal is to balance the needs and desires of our customers, Team Members, shareholders, communities and the environment while creating value for all. By growing the collective pie, we create larger slices for all of our stakeholders. Our core values reflect this sense of collective fate and are the soul of our company.

5 W HOLE F OODS M ARKET G OALS We aspire to become an international brand synonymous with not just natural and organic foods, but also with being the best food retailer in every community in which we are located. We believe our heavy emphasis on perishables and locally grown products, along with our unparalleled customer service, is helping us reach that goal, differentiating our stores from other supermarkets and enabling us to attract a broad base of loyal customers. We are well positioned to take advantage of changing demographic trends, and I expect our renewed emphasis on healthy eating to help further differentiate us and solidify our unique position within the food retailing universe.

6 W HOLE F OODS M ARKET P OLICIES We believe that much of our success to date is because we remain a uniquely mission-driven Company. We are highly selective about what we sell. We believe in providing an empowering work environment for our team members, and we are committed to sustainable agriculture. Our motto, “Whole Foods, Whole People, Whole Planet,” emphasizes that our vision reaches far beyond just food retailing. We strive to promote a strong Company culture featuring a team approach to store operations that we believe is distinctly more empowering of team members than that of the traditional supermarket. We also promote a decentralized team approach to store operations in which many decisions are made by teams at the individual store level.

7 N EW V ISION & M ISSION S TATEMENTS While we fulfill a part of our mission every day through selling the highest quality natural and organic foods available, we believe we have the opportunity and obligation to do more in terms of educating our stakeholders about the benefits of healthy lifestyle choices. To underscore our renewed focus, we created a new Core Value this year – Promoting the health of our stakeholders through healthy eating education.

8 C ORE V ALUES SELLING THE HIGHEST QUALITY NATURAL & ORGANIC PRODUCTS AVAILABLE SATISFYING & DELIGHTING OUR CUSTOMERS SUPPORTING TEAM MEMBER HAPPINESS & EXCELLENCE CREATING WEALTH THROUGH PROFITS & GROWTH CARING ABOUT OUR COMMUNITIES & OUR ENVIRONMENT CREATING ONGOING WIN-WIN PARTNERSHIPS WITH OUR SUPPLIERS PROMOTING THE HEALTH OF OUR STAKEHOLDERS THROUGH HEALTHY EATING EDUCATION

9 O RGANIZATIONAL CHART

10 EXTERNAL ASSESSMENTS

11 G LOBAL I NDUSTRY A NALYSIS Organic Market Growth Rates Source: Organic Monitor Revenues (US $ Billions)

12 US I NDUSTRY G ROWTH Organic Food Growth Source: Organic Trade Association’s 2011 Organic Industry Survey conducted 12/22/2010 – 3/7/2011 ($ mil consumer sales).

13 G LOBAL S EGMENTATION BY L OCATION United States – 97% of sales Canada and UK – 3% of sales

14 C OMPETITORS

15 O PPORTUNITIES They could sponsor more town events (not just in-store events) to increase recognition of the brand name and make customers more aware of the products they offer. Expand private label selection – lower price for customers Class offerings that educate the new consumer about a new product. (Cooking classes.) International expansion More recently, Whole Foods has implemented a new marketing strategy to combat the perception of high prices. Promote and build brand identity with organic foods, eventually leading to the idea that when people think "organic" they will think "Whole Foods." Rewards program – frequent buyer cards (like Kroger cards) Expand prepared foods. Customer service enhancement Create a discount product line for lower income segment

16 T HREATS Increased competition from existing supermarkets that are re-branding in order to compete with them like; Wal-Mart, HEB, Wegman's (New York), and Publix (Southern US). Local Farmers’ Markets/Independent Retail Chains Low spend per trip due to high prices. Individuals buy the specialty item and not the essentials. Product recalls – Ecoli and salmonella In a recession environment, consumers are concerned with falling home prices, lower job security, and commodity inflation Changes in government regulations on organic food would impact consumer spending even further. Competitors - lower cost or imports; Trader Joe’s, Costco Consumers are avoiding any products that might be considered lavish or more than a necessity.

17 C OMPETITIVE P ROFILE M ATRIX

18 EFE M ATRIX

19 I NTERNAL Assessment

20 S TOCK P ERFORMANCE

21 C LOSEST C OMPETITORS C OMPARISON

22 I NCOME S TATEMENT

23 B ALANCE S HEET

24 F INANCIAL R ATIOS

25 T REND A NALYSIS Recent trends in the industry of grocery stores consist of expanding what they have to offer, trying to draw in customers and keep customers in the store longer. Some examples of these are: Interactive web sites Recipes Earning loyalty cards Providing cooking classes (online/privately or group). Freshly prepared onsite ready to eat meals. Sit down spaces to eat, keeping customer’s onsite longer. Salad bars and coffee areas. There is also a negative side to industry trends too. With the recession being the main reason for these, some are however; also global problems have taken its toll on all industries. For example: Higher gas prices Mortgage failures Job losses Investment fears Food inflation Many grocery shoppers have begun looking for bargains. In the recent economic recession that began to happen in 2008, the wealthy are even showing signs of taking their foot off the gas when it comes to spending and are looking for ways to save a penny wherever they can. A 2008 survey found that many adults are preparing more meals at home (43%), using more coupons (40%), or going out of their way to look for lower-cost items (37%) as a result of higher food costs (Reuters, 2008). Ref:

26 S TRENGTHS The company recorded revenues of $7,953.9 million during the financial year (FY) ended September 2008, an increase of 20.7% over FY2007. High quality food. Strong brand equity – the Whole Food’s brand is known worldwide for its organic products. Staff is passionate about promoting the products and sharing that enthusiasm. Nationally Known Organic/Natural Foods Seller They have an amazing website with blogs, recipes, sale items, tips, podcasts and more. The website is well designed and explains the Whole Foods concept very well. Experience in the Industry Fair labor wages for the farmers. Financial position – consistent annual sales growth Locations based on demographics.

27 W EAKNESSES US government provides money to support the corn growers industry, but not the organic farmer-therefore companies not utilizing organic ingredients can grow more food cheaper and faster. Price – up to 75% higher Viewed as a luxury shopping destination. Weak management team Customer loyalty is missing Number of organic food farmers is growing, but slowly and the supply chain for organic foods is underdeveloped and cannot meet the needs of the American food system. Advertising Budget very low (WOM approach) They are known as "whole paycheck" because some of the foods are higher priced than other grocery stores. Diseconomies of scale Targets a small amount of shoppers

28 IFE M ATRIX

29 S TRATEGIC F ORMULATIONS

30 SWOT M ATRIX S1, O1: Use the significant financial growth to get more involved in the local community in order to appeal to a wider group of potential customers S2, O2: With it's growing presence- and more customers, whole foods have the opportunity to make prices more reasonable. S3, O3: Good opportunity to use the passionate staff to make cooking courses (classes) a noticeable attraction. S4, O4: use experience to successfully expand into international markets- yet still appeal to different countries locals. S7, O5: Expanding into other markets will require a diversified portfolio, which if done correctly will S S7, O7: Use company's name to create a successful growth in prepared organic foods/ meals. SO Strategies W1, O1: they could sponsor some of the organic farmers, if costs for organic farmers are lowered, they will also be able to produce more- could arrange a selling/ price deal between farmers and Whole Foods. W2, O2: with prices 75% higher, would increase sales if prices (even just certain prices) were adjusted to a more reasonable cost. W3, O3: In order to be truly experienced in various industries, you need a management team who is experienced who are also mentoring/ molding newer and less experienced managers for the future. W4, O5: It can and should be a strength to be viewed as a luxury shopping destination, thus a better perception on higher prices and value for money should be encouraged. It can still be luxurious with a more reasonable price range. W8, O6: in order to appeal to a wider range of customers without decreasing their prices, creating a prepared foods/ meals section would appeal to more people because of the convenience. WO Strategies

31 SWOT M ATRIX S1, T1: Concentrate on strengths and what will separate them from all the other stores in order to maintain consistent growth rates. S2, T2: promote brand image in order to make customers and potential customers aware that they cannot receive the same quality and value for money anywhere else except for Whole Foods. S3, T3: The employees can have a huge influence on the atmosphere of the stores, would be important to use employee passion to make customers feel more at home and thus increase likelihood on giving tips. S4, T4: it's important to use staff and industry experience to either inspect foods more, maintain a strict organic profile in order to prevent product recalls. S5, T5: By maintaining a good relationship with farmers, government regulations may have less of an impact on the organic food than farmers may fear. ST StrategiesWT Strategies W1, T1: support farmers in order to help them keep cost of farming certain foods W2, T2: highlight/ promote the benefits of buying from Whole Foods compared to farmers markets. W3, T3: With new brands expanding into markets, cant afford to be stuck with assembly line trends. W4, T4: Sales should attempt to remain consistant, and not fluctuate with seasons. W5, T5: With government regulations and the increase of organic farms, quality may decrease. Important that Whole Foods maintains high level of consistency in food quality.

32 S PACE M ATRIX

33 G RAND S TRATEGY M ATRIX With the way in which the business is currently situated it would be in their best interest to use quadrant I, as they can maintain there hold while integrating themselves into new investments and further move them forward.

34 BCG M ATRIX

35 IE M ATRIX

36 M ATRIX A NALYSIS Alternative StrategiesIESPACEGRANDBCGCount Forward Intergration xxx3 Backward Intergration xxx3 Horizontal Intergration xxx3 Market Penetrationxxxx4 Market Development xxx3 Product Developmentxxxx4 Related Diversification xx 2 Unrelated Diversification x 1 Horizontal Diversification xxx3 Joint Venture Retrenchment Divestiture Liquidation

37 P OSSIBLE S TRATEGIES Market expansion within foreign markets Europe Canada UK Expand advertisement budget Ecommerce Television Product development Prepared meals Expand on Green initiatives

38 QSPM

39 F UTURE P LANS Expand online services Express stores Expansion into foreign markets Celebrity marketing and reality show market

40 O BJECTIVES Objectives listed in 2009 Founder’s address within the annual report More aggressive on purchasing side of business Create more value for customers on pricing side of business Be better stewards of capital Have smaller and less expensive stores Promote healthy eating education

41 R ECOMMENDATIONS Market expansion to foreign markets by adding 5 stores $10,000,000 Expand advertising budget to increase market share and sales$2,500,000 Expand product to include prepared foods that will compete with diet system competitors $2,500,000 Total cost = $15,000,000

42 I MPLEMENTATIONS

43 EPS/EBIT A NALYSIS $ amount needed: 15M Stock Price: $20 Tax rate: 35% Interest rate: 4% # of shares outstanding: $1.283M

44 P OTENTIAL I SSUES Organic food competitors increasing Federal regulations Potential future recessions Crop disease control Employee compensation

45 B ALANCE S CORECARD

46 S OURCE OF I NFORMATION Whole Foods Market Reports First Quarter 2009 Results, Whole Foods Market 2009 Annual Report YCHARTS tartDate=6/30/2007&endDate=12/31/2009&format=real&recessions=false Wholefoods Marketing Information Wholefoods Historical Stock Information 594 Wholefoods Competitor Information Wholefoods SWOT Information Business Source Complete – datamonitor.com Growth Rates Market Trends


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