Whole Foods, American Multinational Supermarket

Subject: Case Studies
Pages: 2
Words: 679
Reading time:
3 min
Study level: College

Introduction

Whole Foods is an American multinational supermarket chain headquartered in Austin, Texas. The company specializes in selling natural and organic foods and ensures its customers are provided with a wide variety of products. Due to its certification by USDA, the company is also referred to as America’s healthiest grocery store. In addition, Whole Foods has been named one of Fortune magazine’s 100 best companies to work for and has consistently been a leader in corporate social responsibility (Kaul, 2021). However, it has recently encountered a situation that seems threatening to the company. Therefore, this essay aims to discuss the increasingly competitive market in the grocery and food industry that threatens the expansion of the Whole Foods supermarket chain by causing margin pressures for the company.

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The Issue: Whole Foods’ Competition Threats

Whole Foods faces margin pressure since it competes uncontrollably against traditional grocery and big-box retailer stores such as Walmart and more miniature organic food chains like Trader Joe’s. Competition increases because the competitors offer similar natural and organic foods like Whole Foods at lower prices and within their loyalty programs for more benefits for buyers (Nastasoiu & Vandenbosch, 2019). Margin pressure has led Whole Foods’ stock price to drop significantly, making it challenging to grow in this competitive market (Kaul, 2021). Thus, the obstacles to competitive advantage development constitute a significant issue that should be resolved.

Possible Solution to the Issue

In the situation of margin pressure, I would realign and adopt an operating model to change the grocery retail business model to ensure lower prices for value products for customers. In addition, Whole Foods needs to position itself as a brand that prioritizes consumers’ benefits by building their long-term loyalty, which is a cornerstone of sustainable competitive advantage (Nastasoiu & Vandenbosch, 2019). Furthermore, I would resolve the nickname of Whole Paycheck by realizing operational efficiencies for lower prices. Therefore, the margin pressure requires strategic planning to lower prices for the company’s profit-making.

Company Resistance to the Margin Pressure

Although Whole Foods Market is facing the issue of margin pressure, it succeeded at launching the 365 Whole Foods brand line. This effort has helped the company leverage better-aligned models, especially a lower-cost alternative to its flagship. The store has been readily aligned to more competitive low-price for the natural and healthy grocer. In addition, the store supports the company’s expansion into lower-income markets where stores with lower prices are competitive. The original Whole Food Market was not competitive against existing and new entrants (Kaul, 2021). The 365 brand line has shown its results where it accounted for 11% of the total sales in 2009 (Conaway et al., 2018). Therefore, the 365 brand line concept is perfect, and it will encourage a new idea of new stores that have an operating model that supports a lower-cost business model for Whole Foods’ customers.

On the other hand, Whole Food failed to maximize its advantages when it acquitted Wild Oats. At first, this deal seemed appropriate for Whole Foods since it was another expansion to increase its profitability. It transformed into an issue when Federal Trade Commission (FTC) came up with an administrative complaint challenging the acquisition (Conaway et al., 2018). This tendency led to the court case, and finally, Whole Food sold the Wild Oat chain. Currently, this is an issue for Whole Foods because if it tries acquisition of another company, it will lead to investigation and other legal actions from FTC.

Conclusion

In conclusion, although Whole Foods is facing the issue of margin pressure, it has made some strategic decisions to handle the margin pressure situation. A perfect move the company made was to introduce the 365 brand line. The concept 365 brand line has shown capability by being among the most significant contributors to annual sales. On the other hand, the company has made unsuccessful decisions like the Wild Oats Chain acquisition. The Wild Oats Chain acquisition has made it challenging to have future purchases. Thus, despite strong competition and increasing margin pressure, the company advances its opportunities for competitive advantage by implementing successful marketing strategies.

References

Conaway, R., Regester, K., Martin, S., Nixon, C., & Senior, B. (2018). Amazon-Whole Foods: When e-commerce met brick-and-mortar and saved the brand of conscientious capitalism. Journal of Marketing Development and Competitiveness, 12(3). Web.

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Kaul, S. (2021). Venture capital accelerates food technology innovation. Nature Food, 2(12), 909-910. Web.

Nastasoiu, A., & Vandenbosch, M. (2019). Competing with loyalty: How to design successful customer loyalty reward programs. Business Horizons, 62(2), 207-214. Web.