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FACULTY OF ACCOUNTANCY STRATEGIC MANAGEMENT (MAF661)CASE STUDYWHOLE FOODS MARKETS: HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?GROUP : AC2208GNAME ID NUMBERKHAIRI NAIM BIN KHALID 2015142979NINIE AMIRA BINTI ABD HALIM 2015125799NUR HANIS BINTI ANUAR 2015115889ANNA NABILA BINTI PAWANTEH 2015136723NURUL FATIHAH BINTI HAMZAH 2015116115PREPARED FOR:MADAM NIK ANIS IDAYU NIK ABDULLAHQUESTION 1Impact on the intensity of rivalryThe impact on the intensity of rivalry when Wal-Mart and Target began offering natural products similar to Whole Foods Markets is a threat to Whole Foods Markets that customers will switch their business to competitors which are Wal-Mart and Target within the industry. It makes the Whole Foods Markets’s environment more competitive as it needs to aggressively pricing their products efficiently. Thus, it reduces the Whole Foods Markets’s profit in an industry because there are potential costs that the business needs to consider.
In this case, the existence of Target and Wal-Mart competing in the supermarket industry serving grocery products give a stiff competition to Whole Foods Markets as their products is selling at a lower price as compared with Whole Foods Markets. Therefore, the Whole Foods Markets need to incur costs such as developing or providing unique products to respond to the customers’ preferences, as opposed to one homogenous goods.Besides, the Whole Foods Markets will also facing loss in customers’ loyalty due to the high intensity of rivalry in the industry. When the intensity of rivalry is high, the brand loyalty is becoming insignificant and this leads the reduction of sales of the business for a longer period of time as well as the business lost feedback and opportunity to improve as the customers will go to the Wal-Mart and Target. This causes high exit barriers if no actions are taken to solve this problem such as difficulty to sell or relocate the business’s specialized assets, the exit costs to incur is huge such as asset write-offs and closure costs, and also if there is interrelated businesses. Therefore, it gives an impact to the Whole Foods Markets to put a lot of efforts in building the customer relationship for instance; appreciate the customers by giving discounts to the most loyal customers of the business.
Thus, the business is able to retain their customers to purchase products of Whole Foods Markets.High strategic stakes is also giving an impact on the intensity of rivalry. In order for Whole Foods Markets to success, it must sacrifice the profitability for expansion. High intensity of rivalry with the existence of the competitors which are Wal-Mart and Target will reduce the market share of Whole Foods Market.
When the market share is reduced, it gives significant impacts on the Whole Foods Markets’s stock performance, depending on industry conditions which is also resulting the reputation of the Company drops. Reduction in market share due to intense competition between Whole Foods Markets and its competitors which are Wal-Mart and Target is also reducing the sales as well as the profit of the Company. Whole Foods Markets would be impacted if there is no immediate corrective action is taken to solve the issue of reduction in market share which gives high possibility or chances for the Company to close a part of its operation (downscope) or cease the Company’s business operation forever. This is also may lead to bankruptcy towards Whole Foods Markets if the Company continuously facing the reduction in market share.Impact on the bargaining power of buyersThe impact on the high bargaining power of buyers when Wal-Mart and Target began offering natural products similar to Whole Foods Markets is the Company earns low profits because of the buyers have many choices to purchase the products from other competitors of Whole Foods Markets which provide the similar types of products selling natural and organic foods. It is because nowadays most of the buyers are price-sensitive which means that they prefer to buy the products at a lower price but in high quality standards from other companies in similar industry.
Therefore, Whole Foods Markets needs to take an action in producing more products in order to meet the demand of the buyers and set reasonable prices where supply and demand produces the optimum revenue.Besides, Whole Foods Markets will also facing high switching costs if bargaining power of buyers is increase. It means that the Company needs to put an effort such as time and energy, and incur costs such as operation costs, production costs, and marketing costs in order to lock-in buyers by searching the right suppliers of its products whichever offer lower cost to the Company.
Thus, it can avoid from losing the buyers since the price offered will also reduce due to the costs reduction. If Whole Foods Markets is able to lock-in the buyers, their sales as well as profits may increase since the Company is able to meet the buyers’ demand. Last but not least, the impact on high bargaining power of buyers when Wal-Mart and Target began offering natural products similar to Whole Foods Markets is the Company should take initiative by any means necessary to survive in this competition or rivalry. One of the necessary initiatives is by producing the products that differs from its competitors.
This will make a product more attractive with unique qualities as compared with other competing products within the same industry. For example, the products must have an additional benefit, such as additional features, higher overall quality as well as a lower cost which lead to lower price. These may lead the buyers to buy the products since it satisfied their demand. By producing more unique, beneficial, advantages, and superior products, the competition will arise between these companies within the similar industry which may lead the Company to sustain and create competitive advantages. Since it creates competitive advantages, thus it may increases brand loyalty and even allow for a higher price point if the products is perceived to be better than the competitors. QUESTION 2OperationsOperations include all activities associated with transforming inputs into the final product form.Operations could create value for both the business and customers by efficiency of plant operations.
Whole Food Markets should conduct the operations of its plant efficiently by focusing on the process that bring added value to the operations while eliminating the process that bring non-added value to the operations. This is because it will help to increase the productivity of the company and it will not bring any benefits if the company still operate the activities that does not bring any value to the whole operations. The company can reallocate the budget that have been allocated for non-added value activities to operations that bring added value. Thus, by doing so it will help the company to minimize the unnecessary costs and increase the effectiveness of transformation process of products.
Next, operations could create value for both the business and customers by efficiency of store layout and workflow design. Whole Food Markets should rearrange the store layout and redesign its workflow as mentioned in the case the company do not have standard store design, thus the store’s design is customized to fit the size and configuration of the site selected. By doing so it will help the company to fully occupy the space in the store and it will attract the customer to visit the store and buy the products due to the positive image with an inviting appearance. Besides that, by redesign the workflow it will help to ease the staff to perform the daily operations as have been instructed.
Lastly, operations could create value for both the business and customers by improvisation of appropriate process technology. Whole Food Markets already have their own test before the products been accepted and put it on their stores such as quality standards but it just need a slightly improvisation. This is because as mentioned in the case there is lack of available nutritional brands with a national identity. The company could tap in the market and persuade the customers to try the products that have been produced by themselves. By doing so it will help to persuade the customers to continue buy the products due to high quality of products being produced. Marketing and salesMarketing and sales activities are associated with purchases of products and services by end users and the inducements used to get them to make purchases.Marketing and sales could create value for both the business and customers by using an innovative approaches to promotion and advertising.
The company can use a promotion as a one of the ways to attract the customer to buy the products especially during festive seasons. Combination of promotion and festive seasons will increase the customer’s desire to buy the products and tend to spend more due to reduction in prices as compared to prices during non-festive seasons. Besides that, the company can apply the approach using combination of display and advertising. It is a good way to support and increase the sales of products.
This approach will captive the customer’s attention within six seconds, create a desire for them to buy and sell the product. As a result, it will helps to maximize the sales of the company.Marketing and sales could create value for both the business and customers by using proper identification of customer segments and needs. The company need to identify their customer segments and needs properly because if they make a mistakes in identify it will bring negative effect to the sales. As mentioned in the case, the company carries all the items that one would expect to find in a grocery store and also plenty that one would not. The company should focus on the products that the customers buy more and stop from taking the products that the customers would not purchases it. This is because it will helps the company to minimize the unnecessary cost and prevent from excessive stocks due to inability to sell the products.
Marketing and sales could create value for both the business and customers by exploiting the channel expansion opportunities. Nowadays the customers are technology savvy and if the company does not take a proactive action to tap the opportunities it will bring downturn to the sales. The company may create company’s website or selling on online marketplaces platform. As the customers now technology savvy, they are preferred to shopping online or check the availability of the products on the website or online marketplaces before they go to physical stores. The company may create online marketplaces as they are so many platform that offered this services besides they are less cost need to be incurred.
This approach also may increase the product sales and helps to maximize the sales of the company.QUESTION 3Short-term perspectiveThe accreditation of Certified Organic grocer by federally recognized third-parties will create a sustainable competitive advantage to Whole Foods Markets from short-term perspective.This is because the accreditation of Certified Organic grocer by federally recognized third-parties is valuable since it can neutralize threat and exploit opportunity from short-term perspective. By having the accreditation certification, it helps the company to gain customers’ trust and confidence and thus increase their sales drastically since customers are focusing more on their products rather than their competitors’ products.
It is also gives an opportunity to Whole Foods Markets to enhance their company’s image as by having the accreditation is a source of pride to the company.Next, the accreditation of Certified Organic grocer by federally recognized third-parties is rare for the business from short-term perspective because it is not possess by other competitors. The competitors cannot easily possess the accreditation in a short time as it requires the company to undergo a lot of processes and thus it gives Whole Foods Markets competitive advantage over their competitors.Other than that, the accreditation of Certified Organic grocer by federally recognized third-parties is not easy to imitate from short-term perspective. This is because to obtain the certificate is very hard since there are unique conditions applied, which includes, they have to comply with stricter guidance on federal regulations and the business also needs to follow the Organic Rule. Futhermore, to receive the certification, retailers must agree to adhere to a strict set of standards set forth by the USDA, submit documentation and open their facilities to on-site inspections.
All of this is not something can that easily be followed by the competitors from short-term perspective thus gives Whole Foods Markets competitive advantage.Lastly, the accreditation of Certified Organic grocer by federally recognized third-parties will be a source of competitive advantage for Whole Foods Markets since there is no substitute available. From short-term perspective, there will be no other bodies available that offer certificate with the same quality as provided by USDA. Thus, it is difficult for the competitors to compete with Whole Foods Markets in a short amount of time because they are not able to acquire the same accreditation certificate and are not able to gain customers’ trust.
Long-term perspectiveThe accreditation of Certified Organic grocer by federally recognized third-parties will not be a source of competitive advantage to Whole Foods Markets from long-term perspective.This is because from long-term perspective, the accreditation of Certified Organic grocer by federally recognized third-parties no longer be able to neutralize threat and exploit opportunities for the business. In a long run, once competitors saw the advantages of having the accreditation, they will plan a strategy for their business to obtain the accreditation to win back the customers and thus it no longer can neutralize the threat. Other competitors will not sit back and watch the company grow bigger thus, they will take on the opportunity to compete by acquiring the same accreditation.Next, the accreditation of Certified Organic grocer by federally recognized third-parties is not rare from a long-term perspective since other competitors will possess the same accreditation if they follow all the conditions needed to get the certification. When all the competitors received the accreditation of Certified Organic, it will no longer be a source of competitive advantage to Whole Foods Markets.
Other than that, the accreditation of Certified Organic grocer by federally recognized third-parties is easy to imitate since it is not a unique accreditation that cannot be obtained by other business that offer organic products. If the competitors undergo the same proceeses and comply with the rules and regulation set by USDA, they will get the accreditation in long run.Lastly, the accreditation of Certified Organic grocer by federally recognized third-parties will have a substitute from long-term perspective. There will be bodies that offer accreditation of the same quality with less rules and regulation that need to be complied with.
Thus, it is more easier for other competitors to obtain the accreditation and compete with Whole Foods Markets in the future.QUESTION 4Attract human capital especially the younger generation that are known to be impatient and demanding.The first approach to attract young generation of employees to Whole Foods Market is by giving them purpose beyond the position. A study conducted by Deloitte shown 6 out of 10 millennials stated ‘a sense of purpose’ as part of their calculation in accepting an employment. It is said that they declined working at organizations that contradicts with their values. This gives a vision to companies to create values in the organizational goals other than only being a place to work towards profitability of the organization but also a place that employees can grow and experience life-long education.
For the millennials, working environments that foster teamwork and leadership development are the best place to work because being unexperienced people in the field; they need a lot of guidance in order to perform any sorts of tasks. They will feel secured when they knew that the seniors there or their mentors are there when they needed assistance. Organizations also need to give constructive feedbacks as soon as possible to keep the young talents aware of their productivity level so that they can improve to the satisfied terms of the organizations as well as themselves as a person. Based on facts, millennials are not afraid to leave as soon as they started to work and they are well aware of their career paths due to being proactive in current issues and technology-savvy means they can easily find organizations that offered better career development opportunities for them. Team is the best way to gain their sense of purpose The second approach for Whole Foods Market to create attractive hiring strategy for younger generations is by having ‘Let them have a life’ practice. Companies should take note that the younger generations are uninterested seeing how Generations X who only works until they cease to provide for their families.
Hence, they are prone to work with companies that offered assurances that they can get vacations when they applied for the job. Vacations can come from either from the company’s outdoor activities like family day or company trips to fun places where people can relax and unwind their undue work stress or by approving employees their annual leaves when they asked for it. These types of companies are surely to have the younger generations to apply for a position there as it ensure them how much the company cares for the well-being of the employees by giving them breaks. This boost their motivation to go to work and perform well because they well-known to support work-life balance so they will work as hard as they play because they know that nothing comes easy in life and force themselves to the high level of productivity to make the vacations worth it. Retain human capital especially the younger generation that are known to be impatient and demanding.The professional development approach can be used by Whole Foods Markets to retain their human capital especially the millennial generation.
Among the most important factors driving employee retention are opportunities to develop and advance in their careers. Therefore, Whole Foods Markets shall focus on offering more opportunities to these young employees to further their experiences by giving them changes in developing their skills and learn new ones. There are many ways to do this such as offering a workshop and courses to employees, sending them to industry conferences or even bringing expertise into your company for an engaging lunch-and-learn on niche topics like business networking.
Since millennial generation is also known as a generation that easily triggered over any challenges, Whole Foods Markets should take this opportunity to challenge them with difficult and interesting projects. As long as it is not too far outside of their skill set and you give the support needed to complete them, it will be a positive learning experience. While not every employee will take advantage of all the opportunities the company offer, knowing that it is an option for them down the road is a big reason to stay with the organization. And those who actually take up the offer will always be thankful for the advantages they can access by working for your company, which will help to make them more loyal to the company and reluctant to leave which is lead to the company success in retaining their human capital.
Another approach that Whole Foods Markets can use in order to retain human capital, especially the younger employees is by recognizing the employees and makes them feel valued and important through financial and nonfinancial rewards and incentives. Some example of financial incentives that can be offered to these young employees other than common salary, annual bonus and others is a financial support or scholarship to further studies. Hiring young generations means most of them are fresh graduates and still have the intention to further their studies. Therefore, providing a fund to support their studies would be a good retention strategy to retain the employees because giving a scholarship or funding to the employees would mean they will be bonded with the company at least until they finished their studies. However, incentive and reward systems do not have to be all about money. Compared to other generations, these young generations more demanded to be appreciated for their contributions to the team and company, therefore, by recognizing their good work through simple incentives and small rewards such as gift certificate for dinner, coffee gift card or even an extra day off would make them feels valued and it also gives them a sense of belonging and they are more likely to feel like they are part of the team which is good because they will not think about leaving the company at least in a near future.