Pertinent Management Issues
The pertinent management issues of Whole Foods Market is to ensure the organization maintains its competitive advantage despite the economy. As discussed in the case study, the decline in the economy had negative impacts on the growth and competitive advantage of the organization. Leaders in Whole Foods Market should continue to focus on their current strategy and examine ways to maintain their competitive advantage.
Analysis and Evaluation
Five Forces Model:
According to Thompson, Strickland, and Gamble (2012), the strategy of Whole Foods Market best aligns with a focused differentiation strategy. A focused differentiation strategy is “concentrating on a narrow buyer segment and outcompeting rivals with a product offering that meets the specific tastes and requirements of niche members better than the product offerings of rivals” (Thompson et al., 2012, p. 136). More simply put, the strategy of Whole Foods Market is a focus on a narrow buyer segment offering unique, differentiated products.
Market Target:
A focused differentiation strategy aims at securing a competitive advantage with a product designed to appeal to a specific group of buyers (Thompson et al., 2012). The specific group of buyers Whole Foods Market works to satisfy are those who have particular interest in natural and organic foods. Whole Foods Market has a strategy that will “help support the health, well-being, and healing of people (customers and Team Members) and of the planet” (Thompson et al., 2012, p. C-10). Additionally, Whole Foods Market places emphasis on customer satisfaction through the second of seven core values, “satisfying and delighting our customers” (Thompson et al., 2012, p. C-11). Whole Foods Market secures their buyers by strategic placement of stores, choosing upscale areas of urban metropolitan locations with high-traffic shopping.
Product Differentiation:
A focused differentiation strategy also aims at securing a competitive advantage through the uniqueness of a product. Buyers must value the brand’s uniqueness for product differentiation to be successful. Thompson et al. (2012) state “successful differentiation allows a firm to do one or more of the following: command a premium price for its product, increase unit sales, gain buyer loyalty to its brand” (p. 146). In the case of Whole Foods Market, the uniqueness of the brand as perceived and appreciated by buyers, which gives them a competitive advantage. Buyers pay more for their products, but feel they are getting better quality so they are more willing to accept the increase in price. Thompson et al. (2012) highlights the importance of uniqueness and states “the most successful approaches to differentiation are those that are hard or expensive for rivals to duplicate” (p. 150). If a Whole Foods Market consumer no longer feels they are receiving the best quality on the market, they will likely begin shopping elsewhere.
Action Plan and Recommendations
Some pitfalls to a differentiation strategy that Whole Foods Market should be cognizant of include the following: charging too high a price premium, the easy development of rival competitors or rapid imitation of a product, and an unenthusiastic response from buyers (Thompson et al., 2012). If Whole Foods Market falls victim to any of the pitfalls, they are at risk to lose their competitive advantage.
My recommendation to Whole Foods Market would be to continue looking for ways to cut organizational costs to ensure they are maintaining competitive prices for their products. If they are unable to do so, product prices will increase which will catapult negative effects for the organization. For example, if prices increase, rival competitors might be able to offer lower prices on similar products and therefore the response from buyers will shift toward favoring the competitor.
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