Abstract
Understanding a business may take two forms of case study analysis. That include the identification of what happened and the reasons it did and the other being analyzing the business problems and possible solutions. In that respect, the former is applied in analyzing the Whole Foods Market in 2014 case study. With that, the analysis uses the case information to identify what happened in terms of the firm’s performance and why it did. To achieve that, performance measures, and the business position have been noted in addition to identifying the various strategies that the business used to achieve those results. Among the key identified strategy areas are marketing and customer service strategy, purchasing and distribution, product line strategy, stores location strategy, incentives and compensation, store operations and work environment, CSR and community initiative as well as merchandising strategy. The business effectively applied the strategies to achieve growth and success by addressing competition and customer issues.
Introduction
Analyzing a business can take various forms including looking at what happened and why it happened as well as analyzing the problems and identifying suitable solutions for such problems. With that, this case study analysis seeks to presents an overview of the Whole foods market with the approach of looking at what happened and why it happened rather than identification of the problems and solutions. In that respect, the following report presents a summary of the company in 2014 covering the various aspects including its performance and the strategies applied.
Whole Foods Market
With the growing demand for the organic food, the Whole foods market was founded in Texas when John Mackey and three grocers felt that the industry was ready for a supermarket. In 2013-2014, vast retail sales of organic products were made through the natural food supermarkets that included the Whole Foods market. In that period, just a small portion was sold through the independent chains and natural grocery stores. There had been mounting consumer enthusiasm about the organic products that allowed the supermarkets to earn high margins. Also, the demand for the organic products was three to four times faster than the demand for the traditional grocery products. Among the key factors that operated to drive the organic food growth into a niche market can be summarized as follows
Growing consumer concerns on foods safety and purity owing to the presence of the pesticide residues, artificial ingredients, growth hormones, genetically modified ingredients.
Increased wellness health awareness by people of different ages and mangy age groups.
The growing belief that the organic farming had some environmental benefits in terms of better soil and water conditions
The heightened awareness on the role of nutrition in health as well as the role that the good eating habits had on the long term health.
In February 2014, the Whole foods market acquired leases from safeway for Seven Dominick’s Supermarket stores in Chicago with plans to remodel the stores and reopen them as Whole food in year 2015. Further, in March 2014, the Whole foods purchased four stores from New Frontiers Natural Marketplace with the stores averaging 22,000 square feet and being in Prescott, Sedona, Flag Staff, Arizona and San Luis Obispo and California.
The store location strategy
The Whole foods market had its own model of internally analyzing the market by income, education levels and population density within certain drive times. Then regional teams worked to make profits and sales projections for each location where a store could be opened upon cost estimations and evaluations.
In that respect, the whole market entered the best markets as the locations had to meet a ser Economic value hurdle that was based on the Company’s weighted average cost of capital. By May 2014, the Whole Food had 379 stores including a record 114 new stores that had an average of 40,000 square feet in various stages of development. For the new projects to be continued, they had to show projections for a positive cumulative EVA in five or less years. By the end of year 2014, the company aimed to have opened a total of 400 stores.
Product line strategy
The Whole food had different clientele for different products hence had stores of varied sizes and product brands that varied from about 10,000 in a small store to about 50,000 in the large stores. The food included natural food, gourmet as well as organic and non food items. The Whole foods Market was the global largest seller of the organic foods with the organic food accounting for 30% of its total sales. The Company ensured quality standards in that one of its merits was its quality in terms of taste, appearance, nutrition and freshness.
Merchandising strategy
The Whole foods stores’ layouts were customized to fit the particular site as well as well as building configurations in a manner that could best show off the particular product mix that was chosen for the store’s clientele. In that respect, the driving concept was to be inviting and create an interactive store atmosphere that turned the shopping for food from a chore to being fun and pleasurable experience. Also, its stores had colorful décor with products being displayed in an attractive way that was both welcoming close inspections and stimulated purchases. Most of the stores featured the hand stacked produce and appealing as well as fresh meat and sea foods.
They also featured open kitchens with teams of in store chefs and prepared food stations as well as scratch bakeries, gourmet food sections and salad bars. Those featured foods from around the world and had ever changing merchandise displays. As a means of furthering a sense of community and interaction with the customers, Whole foods features sit down eating areas and customer feedback booths as well as multiple brochure displays. The displays would be on various topics of interest to customers including the organics, sustainable agriculture, supplies, product quality and healthy eating as well as food quality and environment.
For merchandising, Whole foods got high marks from customers and experts for its presentation ranging from the displays’ bright colors, customer service and cleanliness as well as wide aisles. With that, the management always experimented with new concepts for purpose of keeping the stores fresh and exciting the customers.
Marketing and customer service
The business had much less spending in advertising and marketing compared to the other supermarkets with its preference for the word of mouth and testimonials from the customers. Every store was also marked by marketers who were dedicated to provision of the best in-store shopping experience to customers. Thus, the stores spent much of their promotion on the in store. The business marketers also participated in community events and programs.
Social media: The business published over 1000 messages in a day in over 800 social media platforms. Thus, it connected with the customers through its website and blog. The model of communication was perceived by the management as well suited for the technologically savvy. It also helped the management understand how the Whole food was viewed as well as learn about the market’s expectations. The company also communicated widely on the Face-book and the twitter with many positing on both
Store Operations and Work Environment
The business applied a team based and decentralized approach in its stores with each being lead by a store leaders. The company has between 50 and 650 team members per store depending on the size. The members are organized into 10 teams per store that are responsible for various product categories. The teams are empowered to make decisions regarding the manner in which they would please customers in their departments. It is also notable that all teams were evaluated on measures of sales with their results being reported to the teams and the headquarters for motivational purposes. Also, there was competition between the teams that was encouraged to ensure that they remained motivated. Further, there were inspections on the team’s activities by leaders from the headquarters that kept the teams on the line and ensuring that they were working in line with the business standards. Promotions were offered for the effective team members to work in the new stores as well as stores in other regions.
The teams’ members were also trained through various platforms including online platforms where they were taught on various topics including dietary, the company’s standards, rewards and pay system as well as about the organic products. The training programs were aimed at connecting the team members with the company’s values as well as core operations. Also, all the stores had allocated budgets for enhancing their teams’ performance and operations. At the management level, it was felt that the teams motivated the members and kept them inspired in line with the business vision. By early 2014, the business had about 80,000 team members including the fulltime and the seasonal ones. The teams were considered diversity hence enhancing the stores experience and customer experience.
Compensation, incentives and Benefits
The business sought a compensation, incentive and reward policy that could be viewed as fair to all the stakeholders. The wage and salary differential was minimized by a cap on any team members salary up to the salaries of 19 team members Further, there was a fate sharing program with the shareholders that involved the gain sharing as a means of motivating the company’s leadership. With that, the executive believed that an AVA based bonus sharing with the shareholders was the best incentive for the team members. With the system, all the store teams were motivated to find the best means to enhance the firma EVA even having the teams’ assistant leaders compensation tied to the system.
Further to using the EVA for the compensation and reward system, the company also used the calculations to project the need for investment. It was also used as a guide for the stores closings as well as a means of evaluating new acquisitions. With that, the Whole Foods executives believed that the system provided an incentive for the team members to work effectively and efficiently for their departments by harnessing their collective intelligence and energy for the better of the organization.
Stock options
It is also notable that the business applied other means of linking the interests of the team members with those of the shareholders. One of the methods entailed three kinds of stock ownership programs that can be summarized as follows
Team member stock option plan: With the plan each team members who had attained 6000 service hours was eligible for an annual grant of a stock option on basis of their length of service and leadership performance. The number of the shares available for the program was determined by the company board on an annual basis and the grants on basis of the outstanding leadership were determined by the team’s regional presidents. However, the options were only available to the full time members of the teams and were awarded on a value equivalent to the stock price on the grant date.
Team member stock purchase plan: The plan involved deductions from the payroll for team members with minimum of 400 service hours that would purchase the stock at 95% of the purchase date price.
Team member 40k (k) retirement savings plan: The team members with a minimum of 1000 service hours were eligible and all members were automatically enrolled unless one opted out.
Benefits package
Whole food market sought to motivate its employees not only through the basic and stock pay but also through benefits packages. Some of the benefits included medical care coverage. Part of the package was approved by the team members and was provided at no cost to the members working 30 hours or more and who had accumulated 20000 service hours. The company also provided an incentive through a total health immersion program that involved provision of educational opportunities for all members who were fully paid by the company.
Purchasing and distribution
The business sought to enhance its performance by negotiating discounts with its suppliers hence had a centralized purchasing group that would buy from the national wholesale and regional vendors. With that, United Natural Foods is identified as the business largest single vendor that accounted for 32% of the supplies. For some other supplies, the company has its own processing and distribution systems including specialty coffee and tea roasting as well as seafood distribution facilities. That was meant to enhance sustainability in the products in terms of their freshness and quality.
CSR and Community citizenship initiatives
The business had a comprehensive CSR strategy that covers various areas including animal welfare, organic farming support, sustainable agriculture, healthy eating education, responsible sea food practices promotion, good environmental stewardship and a donation policy of 5% after tax profits as well as wise environmental practices. Some of the company’s notable CSR initiatives have involved the wise environmental practices such as the paperless ordering, paper recycling, use of recyclable materials as well as organizing community recycling drives for electronics. Others include the use of renewable energy and energy efficient consumption operations. With the initiative strategy, the business has been able not only to enhance its operations through sustainable operations but also create an image as a social citizen hence becoming a favorable shopping place for customers who value CSR efforts.
Conclusion
In view of the case analysis, it is clear that the Whole Foods Market had been a success by the year 2014. That was after its establishment given the onset and rising demand for the organic food and the ensuing customer awareness on the benefits of their products. With the supermarket platform, the business was able to apply various strategies covering various aspects of the business as a means of enhancing performance. The strategies have been noted to range from marketing, merchandising, incentives and compensation, store location, product line and store operations and work environment related strategies, purchasing and distribution as well as CSR and community initiatives. With that, the management was not only able to motivate its teams but was able to keep the business enticing and inviting to customers providing a unique shopping experience through a mix of operations.
