«External and Internal Environments: Whole Foods Market, Inc.» - Great Essay Sample

«External and Internal Environments: Whole Foods Market, Inc.»

Introduction

There has been increased inclination among the general population towards organic and natural foods. It is mainly due to the awareness creation regarding healthy eating and its impact on the health of people. The paper focuses on the Whole Foods Market, Inc. The company has expanded mainly through the acquisition of other natural food chains in the United States. Currently, it operates about 400 stores in the United States, United Kingdom, and Canada, and it employs more than 50,000 employees (Pride & Ferrell, 2010). The company deals in diverse products including catered cuisine, pet food, seafood, and household products among others. Thus, the company operates under a differentiation strategy within its focus market. Since it is in the larger food industry, which has numerous players, its concentration on healthy foods sets it apart (Linjawi, Nawrocki, Warnimont, & Zaragoza, 2011). Understanding organizational operations requires an analysis of the internal and external environment. Thus, the current paper seeks to analyze the internal and external environment of Whole Foods Market, Inc.

General Environment

It refers to various factors outside an entity that can impact on its operations and overall performance. Its impact on the business is less direct than that of the internal environment (Lucas, 2012). In the Whole Foods Market, Inc., the two segments of the general environment that would be ranked highest are demographics and sociocultural aspects.

Demographics

The segment relates to different aspects, including population, age, ethnicity, and distribution of income, education levels, and the average number of individuals in a family among others (Lucas, 2012). The business offers its products to the people who are conscious about their food. Its key target is families who have extra income to afford the organic and natural products, whose cost is a bit higher than that of similar non-organic products. However, the company offers additional information on their website relating to recipes, children and parents, and other enlightening information on organic food. Since there are always changes in the external environment, the company makes sure that it changes within times. Whole Foods Market, Inc. has its stores in different locations that have diverse demographic characteristics. In order to blend and satisfy the clients, it offers products that the clients in the locality need. It does not operate like other grocery stores that offer similar products in all their outlets. Thus, the company has a competitive advantage over the competitors.

Sociocultural Aspects

The sociocultural aspects have an immense impact on the corporation mainly due to its organic and environmental perspectives. Many people have protested against animal cruelty, harmful meat additives, and GMOs that could be detrimental to the consumers. The company avails adequate information regarding GMOs to the people to make sure that they are well-advised on the products that they consume. In the recent past, Whole Foods Market, Inc. has gained ground in the dog food market. Prior to its getting into the market, companies were being blamed for their sale of dog food that had additives, which caused the death of the animals. The company started a campaign against false labeling and offered high-quality natural and healthy products, after joining the industry. Environmental awareness has become rampant throughout the world. Customers enjoy associating with companies that show their contribution to the conservation of the environment. Whole Foods Market, Inc. has a movement on “going green,” which fosters its association with clients. On its website, it provides a list of approaches that people can adopt so as to go green, and they also recommend the products that they have on sale, which can be used. They support reuse and recycling of bags to prevent the use of non-biodegradable bags.

Five Forces of Competition

In a business’ environment, there are five forces that relate to the competition. The analysis assists individuals to understand their strengths in relation to competitiveness in the industry (Magretta, 2012). Among the five forces of competition, the two most significant to the company are threats of new entrants and rivalry among existing competitors.

Threats of New Entrants

The threat of new entrants into the industry is moderate. There has been increased number of people seeking to know the content of their food products. In addition, the demand for organic and natural food products is also increasing due to improved health awareness by the consumers. Consequently, new companies have started joining the industry. However, the other major player in the industry is Kroger (Linjawi et al., 2011). They have invested a lot of resources to bolster their position in the industry. Therefore, new companies may have to invest a lot of resources so as to get a significant portion of the market. However, there is also the threat of existing retail outlets, such as, Wal-Mart and HEB, which have started operating their organic food sections. Since they have a large market share, companies, such as, Whole Foods Market can only survive by concentrating on organic products so as to reinforce their brand.

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Rivalry among Existing Competitors

The company’s major rival is in the organic and natural food industry is Kroger Supermarket. However, due to product differentiation the two companies target different audience in the market. However, they depend on the local farmers to supply their products. Therefore, it is possible for Whole Foods Market to adjust its product prices so as to gain an advantage over its major competitor. Previously, there was another competitor in the industry known as Wild Oats that joined Wal-Mart so as to increase its organic food section. Wal-Mart aims at increasing its presence in the industry; thus, creating competition against existing companies.

In the recent past, the company has been dealing with rivalry and threat of new entrants, by campaigning for their products. Whole Foods Market, Inc. indicates to the clients that its products are still the best in the market. It proves that all the ingredients in their products and some of the organic products in the competing firms have banned non-organic ingredients. The management in the company state that the competitors cannot meet the quality of its products as they produce in mass and package for later sale. Through such campaigns, Whole Foods Market, Inc. retains its clients and combats competition.

Future Improvements

In order for the company to continue dealing with the competition and threat of new entrants, it is necessary to strategize on how to deal with them. If the company fails to react to the issues, it is bound to be affected negatively. Among the approaches that the company should undertake is a customer loyalty program. It will benefit the company in retaining their loyal clients. When new companies enter the market, their aim is to maximize on the areas that Whole Foods Market will have ignored. The company should have strategies, such as, cash back options and bundle discounts for their clients. It eliminates the chances of the customers going for other players in the market. Moreover, the company also needs to combat the competition from other major companies, such as, Wal-Mart that are enlarging their organic market. Whole Foods Market should focus on the social aspect of the clients. The company should verify the allegations that some of the organic products by the competitors offer false information on the nutrition. Therefore, the clients will trust Whole Foods Market and remain loyal. The clients also need to understand all the products offered and their nutritional value. Since most clients focus on the price of products as opposed to the content, the company should invest in advertisements. Once the clients understand the environmental impact of the products they may be inclined towards purchasing them.

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External Threats

The changing economy is an external threat being faced by Whole Foods Market. The economy is deteriorating in most areas. As a result, people are forced to cut-down on their spending on groceries. Moreover, since the organic and natural products cost a bit higher, they do not consider buying them. Most of the clients put price before the nutritional value of their groceries. It creates a difficult time for the company to justify the need for clients to purchase their products. There are many super grocery store chains operating in many countries. There is a trend where the major companies are enlarging their presence by introducing their products in new geographical regions. They are taking advantage of globalization. However, Whole Foods Market has failed to expand into new countries, which may offer additional market. The company should also take advantage of globalization and open new outlets in other countries except the United States, United Kingdom and Canada. It will improve the reputation for the brand and increase the returns. The company can utilize its demographic understanding to customize the experience of the clients in relation to their needs and culture. When people understanding and have higher nutritional products availed to them, they will appreciate the idea of healthy families.

Strengths and Weaknesses

Strengths

  1. The company owns and operates numerous stores of natural and organic foods, which has developed its reputation. Therefore, the clients associate it with healthy eating. It should continue in the same line, and open additional stores in other areas.
  2. It has a well-planned development plan that has fostered its growth in the United States, Canada and United Kingdom. It should continue executing the strategy in order to remain germane in the industry, and get into new markets.
  3. It has healthy living brand, which is essential for the affluent and health conscious clients. Majority of the individuals in the world who are conscious about their health are affluent. Therefore, they can afford the commodities sold at the store. Whole Foods Market, Inc. should focus on promotional activities that will create awareness about the advantage of their products. It will have anaffirmativeeffect on its revenue.
  4. It receives strong support from complementary industries including health, fitness, insurance, and wellness centers due to its high-quality products. Clients get recommended to purchase its products, which impacts positively on its performance. The management should implement a strategy that will create a work relationship with such businesses in the localities. It is a strategy that will increase its revenue.

Weaknesses

  1. The price of the organic food stuff sold by the company cost higher than the competitors’ non-organic products. Consequently, some clients will only purchase cheap products. It has led to the company being labeled “whole paycheck.” Hence, it loses some of the market share to the general stores. Since, getting the organic products is equally expensive; the strategy to overcome the weakness is proper product promotion and advertisement. It should make the public aware of the benefits of organic and natural food. It will sway some of the people towards purchasing its products.
  2. Although the company has implemented a development strategy that has fostered its growth in three countries, it has not focused on other areas. The other areas have few outlets. Therefore, many individuals who would purchase its products do not have access to them. It should use its market knowledge and resources to open up stores in different countries so as to tap into the new markets.
  3. The company invests little funds towards advertisement. There are competing stores that sell cheaper non-organic products. It should enhance its advertisement strategy so as to create awareness on its products. It will increase its revenue and brand awareness.

Resources, Capabilities and Core Competencies

The resources of the company are diverse. It has outlets in different areas where it operates. They are located strategically, especially in areas where the population is aware of the benefits of organic and natural products. Its innovativeness and reputation are also resources, which it utilizes to keep its customers while attracting new ones. The human resources are highly competent and understand how to deal with clients. The company has operated for several decades and it has improved its capabilities. For instance, it understands the market and its dynamics. Hence, it can predict the areas that may be offer the best returns if it opens a new outlet. Its management is capable of raising its standards and market position to get to the level of other major stores. The core competencies can be identified in different areas. For instance, it differentiates its products to meet the needs of the clients in a given locality. In addition, its human resource department forms another core competency as it is responsible for the hiring and training of the employees who are instrumental in the company’s operations.

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Value Chain

The logistics in the company seem to be well streamlined. However, there is an opportunity to streamline the operations to enhance efficiency so as to appeal to the clients. Since a large section of the store deals with perishable products, it should focus on wastage reduction and spoilage. Whole Foods Market, Inc. has some unnecessary services such as valet parking and massages, which may be increasing the costs of operations and not giving ample returns. Since it has available financial resources, it should enable its chefs to offer free cooking classes to the customers. Sharing their expertise for free will attract more clients. It should also invest in customer service experts so as to improve the brand’s reputation and loyalty. The company’s marketing is not well-funded (Pride & Ferrell, 2010). It should develop a strategic promotion campaign that reaches to its target market to increase its client base. It should also invest in the use of the social media for publicizing. The company should also ensure that the management and leadership possess the necessary qualities to be in the administration of an organic and natural foods company. Prior experience in the sector should be a necessity for such individuals to qualify.

Conclusion

It is clear that as a player in the organic and natural foods industry, Whole Foods Market, Inc. has cemented its position and has a reputation. It also has strengths that give it an edge over the competitors, but there are also some flaws that require improvements to enhance productivity. The major issue that the company faces is its lack of proper marketing strategies and expansion at the international level. Its presence is well felt in the United States, but it has only a few outlets in the United Kingdom and Canada. It is necessary to embark on a global expansion project that will enable the company to operate in different locations globally. Its understanding of the industry has enabled its differentiation to meet local needs. Therefore, rather than offering similar products in all outlets, it offers what the local people need. It should utilize the expertise to enter into new markets in other countries. Consequently, it will enhance its ability to compete with other contemporary retails outlets.

 

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