1. How does Whole Foods sustain positive growth in sales? 2. How does Whole Foods cope with the downturn in the economy? 3. How does Whole Foods achieve sustainable competitive advantage? Rationale for Issues One of Whole Foods main strategic issues is how it should sustain positive growth in sales. Sales growth in 2008 was 0. 8%, compared to sales growth increase of 8. 2% in 2007. However, much of these low sales growth figures were at the former Wild Oats stores rather than the stores that Whole Foods Opened.
This is definitely a strategic issue because Whole Foods’ current strategic model is not showing positive sales growth. From $203 million in 2006, it fell to $182 million in 2007. It is clear that Whole Foods is losing its market share in the organic foods industry to its other competitors in the United States, and a new strategy needs to be created in order to increase and sustain its market share which in turn will increase sales. Another important strategic issue that Whole Foods is facing is how it should cope with the current downturn in the economy.
It is currently the world’s largest retail chain of natural and organic foods; therefore it has built a competitive advantage. But this competency needs to be sustained. Whole Foods has developed a brand and an identity for itself, now it is just a question on how to leverage this brand in order to maximize profits, and not let the recession affect Whole Foods negatively. Whole Foods is different from other supermarkets because it has the strictest standards in terms of selling only foods of the highest quality in terms of nutrition, freshness, appearance, and taste.
The question for Whole Foods is how you maintain this core competency over the long run, in which competitors cannot possibly match. In order for Whole Foods to fully distance itself from its competitors it needs to build competitive advantages to develop a clear segment leadership, in which they can leverage and achieve a sustainable competitive advantage. Integrated Strategy for Whole Foods Whole Foods market share is eroding because of various supermarkets now devoting departments to organic foods.
My long term goal for the next two to three years would be to expand Whole Foods evenly across Canada, instead of only having stores in Toronto and Vancouver. Also, I would expand Whole Foods into foreign markets in Europe. Whole Foods has sustained itself in London, U. K. , but now it is time to explore the rest of Europe. These markets are perfect opportunities for Whole Foods to expand to, because the population is an aging middle/high class that is health conscious and becoming more aware of the food they eat.
Once Whole Foods increases expansion to European countries and the rest of Canada, I believe Whole Foods will be able to capture its full earning potential and be able to leverage its sustained competitive advantage to the fullest. In 2008, Whole Foods had stores in 36 states in the U. S. and instead of taking out more debt to open more stores in the United States; this capital needs to be put towards locations where there are no Whole Foods markets in the area.
To obtain the capital funding to expand into Canada and Europe, Whole Foods will have to sell and close some of its stores in the United States where it is well represented geographically. It is clear that Whole Foods has too many stores in the U. S. and these need to be sold or relocated to Canada and Europe where there are no organic and natural food retailers. The former Wild Oats stores have been accounted for much of the slow sales growth in the United States. These are the locations that will be targeted for closure and be sold.
The proceeds will be used to open new stores in the new untapped markets. The competition is fierce for organic and natural foods in the U. S. , and by placing Whole Foods culture in Canada and Europe, people will flock to these markets because there is no other product like it. Whole Foods will be successful again, like it was when it first started to become a grocery chain. I believe there is an unrealized market in central Canada and Europe that needs the presence of Whole Foods. Of course, I would not increase debt greatly and just expand anywhere in Canada and Europe.
To enter foreign markets I intend to create an international business department that will research the cultural customs, tastes, trends, population growth, spending and eating habits etc. This will tell Whole Foods what markets are most lucrative to penetrate. Then Whole Foods would create a test site in the potential market, and if sales are sufficient to justify expansion in the region then more stores will be opened. Whole Foods has a great competitive advantage, as the population of the world is becoming better educated about foods, nutrition, and good eating habits.
Whole Foods has the culture and the know how to accommodate this new population trend and it is just a matter of where to put the stores to achieve a sense of monopoly where people can only come to Whole Foods in order to buy the highest quality, most flavourful and naturally preserved foods available. Once Whole Foods situates itself across Canada and Europe, I believe this will be the best way to pay off its long term debt, because sales will be at all time highs, therefore obtaining positive cash flows from operations that will exceed capital expenditures for years to come.