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Whole Foods MarketWhole Foods Market Case Study Case Study
By: Dan McLindonBy: Dan McLindonKyle McDanielKyle McDanielJeremy SmileyJeremy SmileyTom AndersonTom AndersonRay MoormanRay Moorman
Whole Foods Whole Foods Key QuestionKey Question
Can Whole Foods remain competitive in Can Whole Foods remain competitive in face of major changes in the competitive face of major changes in the competitive environment?environment?
Overview of Whole FoodsOverview of Whole FoodsFoundedFounded 19801980
VisionVision Create an international brand , change the Create an international brand , change the whole diet of consumers for the better, whole diet of consumers for the better, pace setter in the industry, be the best in pace setter in the industry, be the best in food retailfood retail
Brand ValuesBrand Values Natural & Organic FoodsNatural & Organic Foods
Competitive PositionCompetitive Position Premium Products at a Premium Premium Products at a Premium PricePrice
Source of DifferentiationSource of Differentiation Best Quality, least processed, Best Quality, least processed, most flavorful, naturally preservedmost flavorful, naturally preserved
Status in 2008Status in 2008 275 stores, 3 countries, $6.6bn in 275 stores, 3 countries, $6.6bn in revenuerevenue
Corporate ObjectiveCorporate Objective 400 stores, $12bn in revenue400 stores, $12bn in revenue
What is changing in the What is changing in the external environment?external environment?
PEST Analysis for Whole FoodsPEST Analysis for Whole FoodsCategoryCategory IssueIssue Threats/Threats/
OpportunitiesOpportunitiesRanking (1-5)Ranking (1-5)
PoliticalPolitical 4 tier class 4 tier class system i.e. system i.e. Organic Organic DefinitionsDefinitions
OpportunityOpportunity 1 or 21 or 2
EconomicEconomic 2008 Economy 2008 Economy SoursSours
ThreatThreat 55
SocialSocial More health & More health & environmentally environmentally conscious conscious population.population.
OpportunityOpportunity 4 or 54 or 5
TechnologicalTechnological
What are the changes in What are the changes in demand? demand?
Overview of the MarketOverview of the MarketTotal Food RetailTotal Food Retail $850bn$850bn
Natural & Organic RetailNatural & Organic Retail $62bn (7.3%) – niche market$62bn (7.3%) – niche market
Growth RateGrowth Rate Growth slowed since 2000 (7-9%)Growth slowed since 2000 (7-9%)Organic $17bn (1/3 of natural foods)Organic $17bn (1/3 of natural foods)
Key Items PurchasedKey Items Purchased Fresh fruit &vegetables – 73% Fresh fruit &vegetables – 73% (largest category)(largest category)Big growth is processed itemsBig growth is processed items
3 Key Barriers for Consumers3 Key Barriers for Consumers Prices of organic foods – likely to Prices of organic foods – likely to decline as competition/supply decline as competition/supply increasesincreasesLack of availability – more supply in Lack of availability – more supply in the futurethe futureBrand loyalty to natural & organic Brand loyalty to natural & organic foodsfoods
Porter’s Five ForcesPorter’s Five Forces
Heating Up
Cool To Warm
Porter’s 5 Forces – Whole Foods MarketPorter’s 5 Forces – Whole Foods Market
Whole Foods AnswerWhole Foods Answer
Changes in the Competitive Landscape Changes in the Competitive Landscape Should they really welcome competition?Should they really welcome competition?
Local, regional, independent, national, and specialty Local, regional, independent, national, and specialty stores are all competitors.stores are all competitors.
CEO say it is a gateway for customers to try CEO say it is a gateway for customers to try natural/organic foods or opportunity for the natural/organic foods or opportunity for the competition?competition?
Take a look at Store Sales GrowthTake a look at Store Sales Growth
Sales growth has been cut in half since 2004!Sales growth has been cut in half since 2004!
2004 2005 2006 2007 2008
14.9% 12.8% 11.0% 7.1% ???
Changes in the Competitive Changes in the Competitive LandscapeLandscape
We may be seeing a revolution in the food retailing We may be seeing a revolution in the food retailing business.business.
Supercenters – Marketplaces – Wholesale ClubsSupercenters – Marketplaces – Wholesale Clubs
Will the competition force Whole Foods to rethink Will the competition force Whole Foods to rethink their strategy?their strategy?
2006 US Grocery Sales # of Stores Revenue in Billions $
Conventional Retailers 25% 5812 $377
Whole Foods 0.7% 188 $5.6
What is Whole Foods Strategy?What is Whole Foods Strategy?
MarketingMarketing GrowthGrowth OperationalOperational
Marketing StrategyMarketing Strategy ProductProduct
High Quality Natural and Organic Food and nonfood High Quality Natural and Organic Food and nonfood itemsitems
Offerings vary based on store size and tastes of local Offerings vary based on store size and tastes of local clienteleclientele
Exotic offerings and product varietyExotic offerings and product variety Ex) Japanese eggplant, 40 cheeses, 20 coffeesEx) Japanese eggplant, 40 cheeses, 20 coffees
Private label productsPrivate label products Emphasis on perishables (fruits/veg., bakery goods, Emphasis on perishables (fruits/veg., bakery goods,
meat, seafood) – 67 % of salesmeat, seafood) – 67 % of sales
Marketing StrategyMarketing Strategy PricePrice
Goal is competitive price at highest qualityGoal is competitive price at highest quality Organic foods are 25 – 75% more costly to Organic foods are 25 – 75% more costly to
grow and marketgrow and market Price and Quality are competing forcesPrice and Quality are competing forces
Whole Foods chooses to focus on Quality, Whole Foods chooses to focus on Quality, therefore prices are higher than conventional therefore prices are higher than conventional grocersgrocers
Marketing StrategyMarketing Strategy PlacePlace
No standard store design. Layout No standard store design. Layout customized for site and product mix.customized for site and product mix.
Colorful, inviting, funColorful, inviting, fun Gathering place to learn, interact, eat, and Gathering place to learn, interact, eat, and
grocery shopgrocery shop PresentationPresentation
Highly regarded food displays, cleanliness, wide Highly regarded food displays, cleanliness, wide aislesaisles
Marketing StrategyMarketing Strategy PromotionPromotion
Primarily rely on word-of-mouth Primarily rely on word-of-mouth recommendationsrecommendations
0.5% of revenue spent on advertising0.5% of revenue spent on advertising Most marketing spend is for in-store signage Most marketing spend is for in-store signage
and eventsand events Store personnel is knowledgeable and Store personnel is knowledgeable and
personable personable
Growth StrategyGrowth Strategy New stores and acquisitions of small New stores and acquisitions of small
owner-managed chains in desirable owner-managed chains in desirable marketsmarkets
Ideal store size is 45,000 – 60,000 sq. ft.Ideal store size is 45,000 – 60,000 sq. ft.
Operational StrategyOperational Strategy Team-based management of store operationsTeam-based management of store operations
Many personnel, merchandising, and operating Many personnel, merchandising, and operating decisions made at store leveldecisions made at store level
Buying responsibility at the national and Buying responsibility at the national and regional levels for volume discountsregional levels for volume discounts
Own and operate many distribution centers: 2 Own and operate many distribution centers: 2 for produce, 9 bake houses, 5 commissary for produce, 9 bake houses, 5 commissary kitchens for prepared food, and a central kitchens for prepared food, and a central coffee roastercoffee roaster
What are the strengths, What are the strengths, weaknesses, opportunities, weaknesses, opportunities,
and threats for Whole and threats for Whole Foods?Foods?
SWOT AnalysisSWOT AnalysisWhole FoodsWhole Foods
STRENGTHSSTRENGTHSExperience in the IndustryExperience in the IndustryLarge, customized storesLarge, customized storesHuge selection/variety – over 30,000 itemsHuge selection/variety – over 30,000 itemsNationally Known Organic/Natural Foods Nationally Known Organic/Natural Foods Seller Seller
WEAKNESSESWEAKNESSESPrice – up to 75% higherPrice – up to 75% higherLocations – only in affluent areasLocations – only in affluent areasAdvertising Budget very low (WOM Advertising Budget very low (WOM approach)approach)Promotional Offers – no couponsPromotional Offers – no coupons
OPPORTUNITIESOPPORTUNITIESExpand private label selection – lower price for Expand private label selection – lower price for customerscustomersAdvertise more, create coupons and promotions Advertise more, create coupons and promotions to get people in the storeto get people in the storeHype right now is to eat healthier and protect the Hype right now is to eat healthier and protect the environmentenvironmentRewards program – frequent buyer cards (like Rewards program – frequent buyer cards (like Kroger cards) Kroger cards) Back to Basics – buy more local products that Back to Basics – buy more local products that people will pay more forpeople will pay more for
THREATSTHREATSConventional Supermarkets Conventional Supermarkets Bad EconomyBad EconomyLocal Farmers’ Markets/Independent Local Farmers’ Markets/Independent Retail ChainsRetail Chains
What are the future What are the future challenges for Whole challenges for Whole
Foods?Foods?
Future ChallengesFuture Challenges Conventional Grocery Stores over saturate Conventional Grocery Stores over saturate
Market & offer Organic & Natural FoodsMarket & offer Organic & Natural Foods Convince new customers to shop at WF rather Convince new customers to shop at WF rather
then more convenient storesthen more convenient stores
Pricing – being able to compete against the Pricing – being able to compete against the conventional grocery chainsconventional grocery chains
Getting more people in the storeGetting more people in the store
Recommendations for Recommendations for Whole Foods MarketWhole Foods Market
RecommendationsRecommendations Lower Price to Compete with Grocery StoresLower Price to Compete with Grocery Stores
Add a customer rewards program for frequent Add a customer rewards program for frequent buyersbuyers
Mail coupons to customersMail coupons to customers
Expand Private Label SelectionExpand Private Label Selection Lowers mfg costs, could offer discounts to Lowers mfg costs, could offer discounts to
customer for using WF brand productscustomer for using WF brand products
RecommendationsRecommendations Personalize Service at WFPersonalize Service at WF
3 days after purchase, email Thank You cards to 3 days after purchase, email Thank You cards to customers after purchasescustomers after purchases
7 days after purchase, email 10% coupon to use on 7 days after purchase, email 10% coupon to use on next purchasenext purchase
Email recipesEmail recipes
Advertise, Advertise, AdvertiseAdvertise, Advertise, Advertise Mail fliers to local zip codes – show locally grown Mail fliers to local zip codes – show locally grown
foods, classes offered, items on sale, couponsfoods, classes offered, items on sale, coupons
RecommendationsRecommendations CateringCatering
Offer catering to local businesses & eventsOffer catering to local businesses & events Do Not Buy Wild OatsDo Not Buy Wild Oats
Halt expansion until WF builds up more cashHalt expansion until WF builds up more cash Focus on profitable stores and use that Focus on profitable stores and use that
philosophy to improve unprofitable storesphilosophy to improve unprofitable stores