Whole Foods Market - Competitive Strategy Analysis

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WHULE FUUDS MARKET, INC. COMPF1I1IVF S1RA1F0Y ANAIYSIS 0ROUP H Contnts LxecuLlve Summarv 3 Clobal Craanlc lood lndusLrv 4 uS Craanlc lood lndusLrv 4 llve lorces Analvsls Craanlc and naLural foods lndusLrv Analvsls 4 Whole loods MarkeL lnc 4 SLraLealc Came 8oard Analvsls Whole loods MarkeL lnc 3 Scenarlo Analvsls Wlnds of chanae ln Lhe Craanlc foods lndusLrv 6 Whole loods MarkeL SWC1 Analvsls 8 Whole loods MarkeL CompeLlLlve SLraLeav Analvsls 8 5ttoteov #1 uesloo solotloos wltb tbe costomet lo mloJ 8 5ttoteov #2 8looet ls bettet eveo lo focosseJ Jlffeteotlotloo 10 5ttoteov #J letlsbobles Ao lmpetlsboble sootce of soccess 11 5ttoteov #4 lootooolc otowtb lo Otooolc fooJs motket 13 5ttoteov #5 cboooe ls tbe oolv coostoot 13 5ttoteov #6 1ooolbles ooJ lotooolbles 16 8ecommendaLlons 18 LxhlblLs 19 xblblt 1 Clobol Otooolc looJs Motket voloe ooJ lotecost 19 xblblt 2 Clobol otooolc fooJ motket seomeototloo 20 xblblt J kev llovets lo tbe Clobol otooolc fooJs loJosttv 21 xblblt 4 u5 Otooolc looJs Motket voloe ooJ lotecost 22 xblblt 5 u5 otooolc fooJ motket seomeototloo 23 xblblt 6 kev llovets lo tbe u5 otooolc fooJs loJosttv 24 xblblt 7 wbole looJs ltoJoct lloes / ltoJoct Mlx 1toJemotks ooJ 5obslJlotles 27 xblblt 8 lottets llve fotces ooolvsls of u5 Otooolc fooJs loJosttv 28 xblblt 9 wbole looJs Motket nlstotv of Acoolsltloos 31 xblblt 10 wbole looJs Motket ltoJoct Mlx 33 8eferences 36 Excutiv SummaryWhole loods MarkeL lnc ls a verv lnLeresLlna and rlch sLudv ln Lerms of sLraLeav because Lhere are so manv dlfferenL faceLs of sLraLeav one could observe ln Lhe fooLnoLes of lLs hlsLorv ln each seamenL of analvsls sLarLlna from analvzlna Lhe lndusLrv sLrucLure ln whlch Whole loods operaLes Lo analvzlna sources of compeLlLlve advanLaaes Lo ldenLlfvlna Lhe creaLlon of susLalnable compeLlLlve advanLaae Lo esLabllshlna Lhe sLraLeav behlnd chanaes made Lo counLer Lhe arowlna compeLlLlon and decreaslna consumer confldence on Lhe face of recesslon Lo verlfvlna lf aeoaraphlcal dlverslflcaLlon Lo Lurope would help we have Lrled Lo llnk Lhls analvsls wlLh our course concepLs ln Lrvlna Lo do so we have aalned new perspecLlves whlch have enabled us Lo appreclaLe Lhe power of Lhe Lools and Lechnlques LauahL durlna Lhls course and learned how Lo collaLe and use lnformaLlon from mulLlple sources oba Urganic Food Industry1 1he markeL value of Lhe alobal oraanlc food markeL has seen a subsLanLlal lncrease ln Lhe pasL few vears however Lhls arowLh has been aL a araduallv deceleraLlna raLe 1he Lurnover for Lhe worldwlde oraanlc food markeL was $60 bllllon ln 2009 and Lhls arew aL a 146 CAC8 (Compound Annual CrowLh 8aLe) over Lhe vears 2003 2009 O 8efer LxhlblL 1 for Lhe markeL value and forecasL for Clobal oraanlc foods lndusLrv O 8efer LxhlblL 2 for markeL seamenLaLlon O 8efer LxhlblL 3 for kev plavers(excludlna Whole foods) ln Lhe alobal markeL .S Urganic Food Industry Whlle Lhe markeL value of Lhe uS oraanlc food markeL has seen a subsLanLlal lncrease ln Lhe pasL few vears Lhe arowLh raLe has been araduallv deceleraLlna 1he revenue for Lhe oraanlc food markeL ln Lhe uS was $237 bllllon ln 2009 and Lhls arew aL a 168 CAC8 (Compound Annual CrowLh 8aLe) over Lhe vears 2003 2009 O 8efer LxhlblL 4 for Lhe markeL value and forecasL for Lhe uS oraanlc foods lndusLrv O 8efer LxhlblL 3 for markeL seamenLaLlon O 8efer LxhlblL 6 for kev plavers(excludlna Whole foods) ln Lhe uS markeL Fiv Forcs Anaysis - Urganic and natura foods - Industry Anaysis 1he plavers ln Lhe oraanlc food markeL are Laken Lo be Lhe producers of oraanlc food for Lhe purpose of Lhe llve lorces Analvsls ln Lhe nexL paae ueLalled analvsls ln LxhlblL 8 Wbo Foods Markt Inc. #wbole looJs ls o leoJloo tetollet of oototol ooJ otooolc ptoJocts lt owos ooJ opetotes o cbolo of oototol ooJ otooolc fooJs sopetmotkets tbtooob sevetol wbollvowoeJ

1 uaLa MonlLor Clobal Craanlc lood (lndusLrv proflle) ubllcaLlon daLe uec 2009 sobslJlotles2 PeadquarLered ln AusLln 1exas lL operaLes ln Lhe uS Canada and uk emplovlna close Lo 32900 people 273 reLall sLores are operaLed of whlch Lhere are 264 sLores ln 38 uS sLaLes and Lhe ulsLrlcL of Columbla slx sLores ln Canada and flve sLores ln Lhe uk"3 SupporLlna lLs sLore operaLlons are lLs AusLln headquarLers and 11 realonal offlces realonal bake house faclllLles produce procuremenL cenLres commlssarv klLchens seafood processlna faclllLles and a confecLlonarv amonasL oLhers roducL mlx producL caLeaorles Lrademarks and subsldlarles are llsLed ln LxhlblL 7 Stratgic am Board Anaysis - Wbo Foods Markt, Inc.

2 uaLa MonlLor Whole loods MarkeL lnc (Companv proflle) Aua 2009 aae 43 3 uaLa MonlLor Whole loods MarkeL lnc (Companv proflle) Aua 2009 Scnario Anaysis - Winds of cbang in tb Urganic foods industry4 When Whole foods markeL opened lLs flrsL sLore ln 1981 Lhe world was qulLe a dlfferenL place 1he consumers had no ldea where Lhelr food came from where lL was produced whaL was used Lo produce lL and Lhe farmlna/harvesLlna/arowlna meLhods use Lo produce Lhe foods 1here were few aovernmenL and luA reaulaLlons whlch requlred publlshlna Lhls lnformaLlon Lo Lhe consumerSome facLors whlch affecLed Lhe arowLh of Lhe oraanlc and naLural foods lndusLrv were O lncldence and awareness of Mad Cow dlsease O lnformaLlon and percelved LhreaL of aeneLlcallv modlfled crops / anlmals LoxlclLv of ferLlllzers pesLlcldes and preservlna aaenLs came lnLo Lhe llmellahL

4 MarkeL8usLer Whole loods MarkeL lnc Llndsav PuLL O 1he medlan lncome for Lhe uS household arew durlna Lhls perlod So people who wlshed could spend more on aeLLlna foods whlch were percelved healLhler 1he oraanlc and naLural food markeL was qulLe fraamenLed durlna Lhls perlod 1here were no bla plavers no oraanlzed reLall no naLlonwlde chalns and no repuLed brands ln Lhls space aL Lhls Llme 1here had alwavs been small plavers who sold dlfferenL Lvpes of oraanlc and naLural producLs llke farm produce arocerv meaL and poulLrv bakerv seafood vlLamlns fashlon and bodv care producLs coffee and Leaand nuLrlLlonal supplemenLs 8uL none of Lhese plavers carrled more Lhan a couple of caLeaorles of Lhese producLs 1he shops were small and were ldenLlfled nlche 1he bla plavers ln Lhe foods lndusLrv who supplled arocerles / meaL / fresh produce Lo Lhe consumer dld noL reallze Lhe poLenLlal of Lhls markeL rlahL awav Lven lf Lhev reallzed Lhev made no efforL Lo caLer Lo Lhls seamenLO 8elaLlvelv smaller slze of Lhls seamenL AlLhouah Lhls markeL was arowlna aL a rapld pace Lhe capablllLles requlred Lo caLer Lo Lhls class of cusLomers were verv dlfferenL from Lhe averaae !oe Lhese supermarkeLs were almed aL and Lherefore Lhe smaller slze of Lhls seamenL mav have proved a deLrlmenLal effecL ln Lhe ma[or plavers' conslderaLlon of exLendlna Lo Lhls seamenL O uevelopmenL of a whole new neLwork of rellable suppllers Lo caLer Lo Lhe oraanlc and naLural foods markeL (suppllers who could produce oraanlc and naLural foods) would have been an enLrv barrler and would have requlred qulLe a slanlflcanL lnvesLmenL O lL ls also posslble LhaL Lhe exlsLlna veaeLable/frulLs/meaLs/dalrv produce supermarkeLs dld noL reallze Lhe poLenLlal of Lhls arowlna seamenL As lL so ofLen happens ln buslness someone undersLood Lhere was a arowlna markeL seamenL walLlna Lo be Lapped Powever Lhe challenae of caLerlna Lo Lhls markeL seamenL was manlfold and Lhe sLraLeav lnvolved behlnd some of Lhe ma[or declslons/operaLlonal LacLlcs are qulLe lnLeresLlna Wbo Foods Markt - SWUT Anaysis Wbo Foods Markt - Comptitiv Stratgy Anaysis Struteqy : exlqn xolutlonx wlth the cuxtomer ln mlnJ 5 Cnce !ohn Mackev declded Lo enLer Lhe oraanlc foods buslness convenLlonal wlsdom would have lndlcaLed LhaL he ao afLer a parLlcular Lvpe of Lhe produce (fresh produce or arocerles or oraanlc meaL eLc) as Lhls was Lhe wav ln whlch Lhe exlsLlna plavers caLerlna Lo Lhls cusLomer operaLed Powever !ohn Mackev declded Lo defv convenLlonal wlsdom and Lhlnk abouL lL from Lhe cusLomer polnL of vlew Pe aalned flrsLmover advanLaae Customer's po|nt of v|ew1his is o fictiono/ stotement intended for i//ustrotion

3 MarkeL8usLer Whole loods MarkeL lnc Llndsav PuLL 51kLNG1n5 WLAkNL55L5erlshables locusPlah emplovee and cusLomer saLlsfacLlon loneer ln Craanlc and naLural foods supermarkeLslocussed dlfferenLlaLlon8rand lmaae SLore slLes cusLomlzed lavouLs LxLenslve rlvaLe label producL llnes lnsLore prepared food8ecesslon chanalna cusLomers percepLlon and buvlna power Weak forav lnLo lnLernaLlonal markeLsCCk1UNI1IL5 1nkLA15lncrease ln uS household medlan salarv SLraLealc opporLunlLles for acqluslLlon and meraer especlallv wlLh Lhe recesslon exacerbaLlna Lhe flnanclal woes of several LaraeLsCrowlna awareness of healLhv food opLlons amona Lhe uS and alobal consumersCompeLlLors llke WalMarL enLerlna lnLo Lhe frav8rand lmaae Larnlshed because of sLore sales promoLlna lowcosL deals uecenLrallzed operaLlons as Lhe flrm arows laraer Chanae ln Lop manaaemenL (CLC) afLer 30 vears5WC1 ANAL5I5 WnCLL ICCD5 MAkkL1 INC8etb sovs #As oo otooolc ptoJoce coosomet l om commltteJ to osloo otooolcollv ooJ oototollv ptoJoceJ veoetobles/ ftolts / meots / otbet ltems nowevet l oeeJ to pot lo o lot of effott to ptocote oll tbe ltems l oeeJ 1o moke mv coleslow soloJ l oeeJ to ttovel 10 mlles to tbe sootbeost of tbe towo to bov tbe otooolc lettoce tbot Iocks sells l olso oeeJ to oo to ltee koooe cblckeo to bov fteetoooe cblckeo ooJ otooolc eoos to moke toosteJ cblckeo ooJ poocbeJ eoos wblcb mv soo teollv llkes ltee koooe cblckeo ls mv fovootlte stote ooJ lt ls locoteJ 15 mlles to tbe oottbeost of tbe towo 5loce l bove to ttovel lo so moov Jlffeteot Jltectloos ooJ to Jlffeteot stotes to oet oll tbese ltems sometlmes l bove to comptomlse oo mv ptomlse of bovloo oolv tbe best otooolc ooJ oototol fooJs fot mv fomllv !ohn Mackev's vlslon and ablllLv Lo Lhlnk from Lhe cusLomer's polnL of vlew led hlm Lo develop Lhe concepL of 'Craanlc and naLural loods Supe