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Company Introduction and Case Solution
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Whole Foods Company was started in 1980 in Austin as the Headquarter of the company, in Texas, United States. It was aimed at providing whole foods, which are considered to be healthier than the processed food stuff. Many people prefer natural food to processed ones, due to the health benefits derived from such food and the low level or non-chemical content of such products. Indeed, it was part of the mission of the company that was geared towards wellness and vitality of the human body. Therefore, the vision and mission of the company has been achieved greatly, because most of the targeted consumers have been reached.
Notably, processed food has some level of chemicals that are harmful to the body. Thus Whole Foods Company has gained from health specialists, who advise people on the importance of consuming organic foods. The formation of the company was to complement the gap that the food manufacturing companies created. As a result of economic development, there was rise in the manufacturing industries and most of the raw products were being processed to add value and increase their cost. The effects of the processed foods led to the change of perception and subsequent embracing of the organic food products. Really, the latter food stuff is consumer friendly than the processed foods.
For over 25 years of existence, the company has had a wide acceptance among the Americans and the whole of Europe and to the rest of the World population. In addition, there has been a lot of health concerns resulting from the accumulation of toxic chemicals used for preservation. Considering the management, John Mackey created and manages the Company. He is the Director and Chief Executive Officer and works with Walter Robb in the same capacity. Glenda Flanagan heads the financial docket and as the Executive Vice President of the Company. There are other directors in the board of management, whose chairman is Dr. John Elstrott.
SWOT Analysis of the company
The SWOT analysis includes the study of the company regarding its strengths, the weaknesses, the available opportunities, and the threats of the company. Indeed, the emphasis is placed on the company in comparison to the strategies that their competitors implement. Below is a brief outline of the SWOT analysis.
The company is operated in a chain of supermarkets selling organic foods. In these supermarkets, which are located across the United States, the United Kingdom and Canada, consumers have the freedom to select from a range of natural products displayed all over the available space. Therefore, it is through the large networks that give the company the strength in the region.
Secondly, the company acquired support from the groceries that supplied most of the products. Through this strategy, the company made tremendous growth in Austin and later expanded to other regions. In addition, the huge profit that the company has made has created some level of confidence among the customers, who have continuously supported the company. The other strength of the company is the development of a website, designed to give relevant information about the food products that the company sell. Through the website, the company is able to explain its strategies, different branches, and give an overview of the management. Besides, the company also enjoys the warm support from the health industries and specialists. Such support increases customers’ confidence on the products sold in the company, thereby ensuring the streams of the rich and the young people concerned with the health issues.
It has been noted that the subsidies that the United States gives corn growers has led to the faster production of cheap products that are preferred, thereby weakening the company’s market threshold. Consequently, the farmers engaged in organic food production have increased to bridge the gap that had existed. The other weakness that the company experience is the slow in the supply of the natural products they sell. Therefore, the quantity they receive from the suppliers is short of the market demands even within America. This calls for emphasis in the production of more of the products to cater for the increasing demands. In addition, the pricing of similar products that the small scale groceries fix on the products also seen as a weakness to the giant supermarket, since some customers are lost to these grocers.
Despite the weaknesses of the company, the quality products that the company provides together with the health concerns of the people in the developed nations have created an unending opportunity for the company. Besides, the natural food becomes the source of livelihood during recession; hence the company is better place for continued growth. Certainly, the involvement of the company in corporate social responsibility is also seen as an opportunity for growth. This is achieved through increase in awareness to the public and raised interest in the products that the company sells. Finally, the company has built a brand in the natural food sector of the economy, hence enjoys the monopoly of the market. In essence, this is an opportunity to the company because the new players in the market may not get it easy to reach the vast market.
The following is an annual sales of the products expressed as a percentage (the total sales);
Prepared Foods (%)
Other Perishables (%)
From the graph, it is evidenced that the total sales for the grocery, prepared foods and other perishables for the three years; 2008, 2009 and 2010 were fairly the same in percentage. This is a clear indication that majority of the people in the region had preference to organic foods than the processed. Indeed, any form of preparation for food did not attract more buyers, as in the case of prepared foods that only attracted an average of 19.0 percent in annual sales. In addition, other perishable goods attracted many customers since most of them are raw and not contaminated. This shows that a majority of the people had in mind the consideration of the health benefits of such products. The perishable products accounted for 47.1 to 47.5 percent in total yearly sales.
Threats to the Company
The company has witnessed stiff competition from other local supermarkets offering similar products in their stores. Notably, the competition is in terms of pricing of the goods, the kind of after sale service given to the clients and the varieties available for the customers. For example, Wal-Mart, Wengman’s among other supermarkets in the region are considered as threats to the company. The supermarkets above carryout vigorous sales promotions thereby attract more people to buy from their stores. In addition, rules that the government would impose on organic products could have adverse impact, hence might threaten the development of the company. For example, an increase in the tax imposed by the government equally results to the increase in the price of the commodities. In turn, most of the buyers may reconsider their expenditure, thus affecting the company sales.
KSF Analysis of the Company
This is an analysis of the company regarding the distribution of products, manufacturing, research and product development, and the human resources. In reality, the company uses the different chains of supermarkets as the main channel of distribution. This enables the company to reach most of the customers using its products. Concerning research, the company does a lot of research to ascertain the best ways of improving the products and to establish consumer’s preferences. On the human resources, the company has approximately 52,900 employees across the chain supermarkets in Europe and the United States. Moreover, the company uses most of the organics products to manufacture food additives such as masala, which many families prefer to use. It is noted that the use of masala has increased in countries such as Pakistan, meaning that the product would be manufactured and exported to those areas.
DForces Analysis of the Company
In essence, these are the forces that companies give emphasis in the process of doing business. They include the general competition, prospective participant in the same sector, the Suppliers power, the consumers’ power and the effects it has to the alternate goods. Considering the competition, the company has created a strong brand name to counter the emerging competitors. In fact, most of the clients get used to the company as the sole provider of the natural food stuffs.
There are other businessmen who have a lot of interest in processing and selling similar products. Therefore, the company has put aside enough money to marker its products to ensure that it gains from the business. As a result, the company is able to make high profit despite the presence of other key players in the same sector. The company also values their suppliers and gives them the necessary recognition. In this case, the company enjoys the loyalty of the suppliers, who would constantly like to associate and build strong ties with the company.
Regarding consumers, the company ensures that they provide high quality food stuff geared to attract and retain the prospective customers. Customer satisfaction is the primary concern in the company. The company has well trained staff and arranges all the products in an accessible manner, within the supermarkets, to ensure that the customers get the products at their convenience. Besides, the company observes resolute cleanliness across all the supermarkets under their management. Finally, the company has ways to protect substitute goods and those who are engaged in the production and selling of such goods. For example, there is no aggressive campaign against the processed food products. However, caution has to be exercised in the consumption of processed foods.
Whole Foods Company limited has employed a number measures to retain its position as market leader of chain supermarket supplying organic foods through its outlets. These issues include;
Corporate Social Responsibility
The company seeks to be responsible in areas where it operates around the world through the provision of high-quality, ethnically sourced products, appropriately displayed and accurate information to the customers through proper labeling. In addition, the company also reduces its impacts on the environment by using recyclable product containers as well as products that do not emit harmful gases, this has developed customer trust on the products since most of the customers are greatly concerned about their, food safety, health and nutrition, environment, fair trade, as well as the ability to trace back the production process that various organic products under go before reaching the market allowing the customers to make informed decisions before making purchases.
Public and Government Affairs
The company’s stores are subjected to several federal, state, international regulations, laws and administrative rules that affect businesses. The business is obliged to follow the provisions that regulate sanitation and health standards, equal employment, food labeling, minimum wages, licenses required for wine and beer, sale of food alcohol and beverages through manufacturing, formulating, packaging, processing and advertising of the products in accordance with the regulations that federal agencies lay down for example Federal Trade Commission, Food and Drug Commission as well as Consumer Product Safety Commission
Accurate and Reliable information
The company’s corporate website attracts thousands of people daily since it provides detailed information regarding the history, store locations, products offered, recipes, environmental, health, legislative, quality issues, and food safety that justifies the company’s policies for corporate governance, the policies are made available through the company’s website which promote relationship with the investors, suppliers, customers; providing education on a number of issues while improving the service levels.
The company does not spend much on advertising its products as compared to other supermarkets, instead, it relies on direct personal contact (word –of- mouth) and customer testimonies, moreover, the company engage with its customers in channels like the social media in addition to blog, e-newsletters. The social media offers a powerful means of communication and interaction with the customers; this gives a local and global overview about the company’s products and customers expectations. Besides, company initiated a program called The Whole Deal campaign whose main aim was to put emphasis on the value of the company’s products, the program included a guided that highlighted the value of the products on offer in all the supermarkets found in the United States, coupons, money saving tips, budget conscious recipes; the campaign was led by the company’s experts who helped the shoppers in finding the finest deals in all the departments.
Significant factors in whole foods
Like any profit oriented company, whole foods company encounters numerous factors that in one way or the other have great impacts to the general production. These uncertainties include those produced by company representatives, those on the reports and other communications done through writing. In addition, they majorly affect financial and operating flow of the Whole Foods Company. These factors include:
Whenever there is economic crisis globally, it adversely affects the business financial lays out of the Whole Foods Company. In such situations, consumers lack confidence and reduce their buying power in anticipation of future changes. In circumstances when there is hope on consumers’ disposable income for example; employment, availability of credits, good interest rates, Americas’ consumer may change their buying habit positive to the business company. The viability of any business enterprise depends on consumer willingness to buy. It is evident that at times of economic crisis one would survive with difficulties and does well when the economy is stable.
The success of Whole Foods Company depends entirely on their ability to increase sales and open other branches. At times of opening new branches, the sales of other existing stores may go down due to competition or inadequate supply of items. The future of any newly opened stores may no be realized immediately. This is normally witnessed because of increase in operation cost management. The sales team must be trained on company policies and vision so as to be good ambassadors of Whole Foods Company. It is the duty of sales team to design prices that can compete favorably well, so as to attract and retain customers. The sales team have direct contact with consumers therefore should be treated with care so as to maintain the good relationship between the consumers and the company.
The major competitors of are all over the world. The competitors range from local to international to international supermarkets. Others include specialty stores, food stores and restaurants. The great effect on competition is when the competitors are more financially stable or has the market knowledge than the competitor. In such situations, would send experienced sales team and divert more resources to the affected branch. The major challenge is when the cost of competition is higher than sales volume. Subsequently, to survive in a competitive environment, there is need to identify the major weakness and strength so that you capitalize on them and remain the market leader.
Fluctuations and Operation Costs
The fluctuation in is realized in many areas. This occurs, especially when newly opened branches are not doing well, price changes due to competition and economic instability lowering the buying power of consumers. Other economic hurdles that may affect market monopoly include, high cost on health care, high insurance cost and extreme weather conditions. In, operation cost is evaluated on quarterly basis. Moreover, the evaluation is done by comparing the impact of newly opened stores, relocations, existing stores, and seasonality. In addition, when the company realizes greater fluctuation, the company reduces spending rates. The importance on this evaluation helps the management to adjust swiftly so that the fluctuation may not have negative effect on the business progress.
Pricing in Stock Market
The price variation in the stock market depends on the performance of individual business. In some cases, market conditions may lead to fall in price or any other failure that might results not meeting market expectation. Usually stock markets are for the public to gauge different performance on their growth rate. Through stock exchange, has gained confidence to trading suppliers who constantly have managed to supply as per the contract of agreement. Through the standards in the market, Whole Foods Company is one of the leading natural and organic food supermarkets in America. From the good name, it has attracted numerous investors who have constantly availed finance for its expansion.
In business, there exist uncertainties that are inevitable. It’s the insurance companies that take protection against these risks. In, the company uses a combination of insurance policies to cover both the property and the workers. In normal situations, insurance companies give confidence to investors to venture into risky business that might be promising viability. The major insurable risks include fire, theft and workman compensation. In case of a calamity, the insurance company compensates the insured back to normal position before the incidence. For well established business opportunity, it is advisable that, the enterprise be insured so that the workers can gain confidence on the company they are working with.
The company is managed by two principals who are the Director and the other is Chief Executive Officer. The two are known to offer best management skills that are admired in America. In most companies, the management determines the relationship with the employees. The leadership of any company connects it to the public and strives to maintain the good relationship. At times when companies are doing their recruitment, the management should ensure the right candidates are given opportunities rather than whom, you know. The major break up is only realized when management is rocked by politics. As in the case of, it has been exceptional to overcome the menace of politics. This has been there secret for their success.
In order to remain relevant and challenge other big players in organic product marketing, Whole Foods Company should consider putting up the following measures in place;
The Company should consider maintaining the reserves for its retail stores as well as other properties which are not being utilized currently, the company can go for closed leasing operation, where it leases liabilities at a discounted rate in calculating a property’s net present value for the remainder of the non-cancelable payments and termination when closing date is reached that often range between one and nineteen years, examples of reserves that account for closed property may include lease terminations, management estimates and payments for future exited estates. The company can achieve this by estimating its subtenant income together with potential cash inflows that relies on the company’s knowledge of the area where the closed property is located, nevertheless, adjusting closed property reserves that relates to actual exit costs are to be made for the alterations in the period when the changes are detected.
Additionally, the company should consider share based payment option for the purchase of common stock, the company can guarantee an option where a price that is equal to the market value of the stock at the granting date is determined in accordance with the Company’s Board of Directors approval subject to necessary grant conditions that have been communicated to other team members at the that particular period. Likewise, Whole Foods Company should be open to the idea of allowing it its full- time employees who work for a minimum of four hour hundred hours to buy common stock from the company from their payroll under what is termed as the Company Team Member Stock Purchase Plan. Such members should be able to benefit from a given percentage discount on the amount of shares bought as per the market value on the date of purchase that meets the payment provisions on a non compensatory manner. This plan would ensure that no employee is financially feels additional expenses resulting from the plan of purchasing stock.
It is also recommended that the company should recognize deferring income tax as well as liabilities by applying tax rates that effect in the balance sheet. Since deferred liabilities and tax assets are measured using implemented rates that apply to income tax, temporary differences should be able to reverse. Deferred liabilities and taxes show adjustments changes in rates up to the date of enactment. Since the company is exposed to changes in interest rate and market values for the investment, the company should strive to minimize the rate of interest fluctuation through constant evaluation of the composition long term debt together with the investments. Short term investments like restricted and equivalent investments whose rates changes more often are not the best considerations because they fail to attract material effect on the investments when valuation is done. For instance, a hypothetical increase or decrease in interest can result into a decrease or increase in the amount of interest earned on the investment in terms of dollars corresponds to the percentage increase or decrease.
The other benefits like securities should be offered for sale as either long term or short term investments. Securities are normally recorded fairly. The securities also hold the benefit that they are short term investments whose interest rates changes may not have much financial impacts when the investments are being valued. Loan agreements that have the option of alternative base lending rates should be a priority as well as applicable margins. Such loans should be based on fair value risk given that the company believes in loan terms that do not attract many changes in interest rates which incurring erratic risk premiums depending on the company’s corporate ratings. Credit revolving lines that have agreements bearing interest at the company’s option together with applicable margins that do not result into major risks for the value of shares because of the revolving maturities are other options of obtaining finance since the risk premiums involved depends on the company’s rating.
Generally speaking, the sale of natural food products has continued to grow tremendously in retail and consumer outlets. The growth that is mostly driven by increased awareness on the role played by various food products on health has facilitated healthy eating patterns. Product awareness has resulted into a better educated healthier population whose average mean age continues to increase every year.
The wealthier masses have the option to choose from various retailers that stock pure and safe food products free from growth hormones, pesticide residues, genetically engineered produce, artificial ingredients as well as other chemicals. Whole Food Company should diversify its food sources so that there is continuous supply of food to the customers, the company should not relent on its quest to avoid organic food products that have been produced in using technologies that are the populace are uncomfortable in. The company should also insist in product labeling by the suppliers so that consumers are able to make informed decision whenever they are making purchases.
At the stores, it is recommended that company should promote the culture of team work so that all the team members feel empowered. Small and manageable teams that are easy to work with are always necessary per store; each group should responsible for a particular product so that groups become accountable for their accountable for the actions. Decentralization in stores operations equally allows various groups to focus more on a particular product and develop the best methods of handling such products. Nonetheless, the company should create consciousness throughout the company for a shared objective very closely. The company should consider rewarding teams that show efficiency in budgeting planning and control as a way of motivation and encouraging efficiency.
In the business market, there are lots of ups and downs but these should not discourage young entrepreneurs who are anxious of positive future life. The best way is to take the challenges and make good out of them. In addition, they should be seen as stepping stone to a better business environment. As in the case of Whole Foods Company, that was started as a small grocery shop, with sheer determination; today it is one of the biggest food supermarkets in America.
The success of any business enterprise is the management. For this quality to be realized, management board should undertake regular training to its officers so as to get acquainted with changing patterns in the market. More so, this will promote relationship among the senior management to share their ideas for the better team work within organizations. The secret behind the success of is the proper management skill displayed that employees have confidence in. Just to give an example, when there is a problem, the management should find out the cause and deal with it accordingly. It is the duty of senior management staff to set example to their juniors to follow.
When starting a business enterprise, entrepreneurs need to highlight the possible risks he or she is likely to face. From the risks, one can take precaution through insurance to be safe incase of an occurrence. Often people get discouraged after risk occurrence and one may decide to forget the good idea he or she had. Even though, payment of premiums may be expensive. One would enjoy at times of compensation and things continue as if nothing had happened. Through insurance cover, one is sure on the legality of the business is venturing in. The company under study insured company property and the workers; this has significance effect these workers have confidence in the company they are working with. It is advisable these employers should insure their employees against risk so that they feel part of the company and work without fear.
For continual business growth, reasonable amount of capital is necessary. At times of economic crisis, there is tendency of low buying power, an entrepreneur can still withstand by purchasing what seems to be moving and can look for alternatives. If the business is viable it will attract investors and grow fast. It is very easy to maintain the business growth if there is extra source of income to the business. In case of good profits, these are ploughed back to expand the premise. From these perspectives, business need discipline so that business money is not misused.
Most companies gain public confidence through sale of shares, these are securities investors’ acknowledge to agree to get to business. Through t he sale of shares, the company can access large amount of capital for easy expansion. When there is large flow of capital in the business, the companies can higher expatriates to share in the new developments that might be of great importance to the company. The company under study attracted more capital that has made the company diversify its investment to various parts of America. It is true therefore that large capital can be attained by sale of shares and business owners should try to get bigger cash to expand their premises.
Many companies operate in the business market. This has lead to greater competition. With increase in competition, it is realized that the weaker ones drop and the strong survive. To cope with this, it is necessary that one identify the strength and weakness of the competing partners’ then develop mechanism to counteract the same to survive. To compete fairly, you must understand your competitor well so as to be in apposition to beat him or her.
It is not clear why others start business and t his has lead many failing on the way. Before starting a business enterprise, one needs to set mission and vision so that he or she works towards it. Good businesses are geared towards achieving specific goals and objectives. In business, collective responsibility is paramount to meet set targets. As in case of the study company, it begun as grocery shop but with mission set higher, it is now the leading grocery shop in America.
The company’s core values concisely express of the business is solely dependent on profit making but also to add value to the shareholders. Some of the core values like selling high quality natural and organic products, creating wealth, satisfying customers and promoting health through healthy eating. In justifying the core values, the company is striving to offer high quality organic and natural products emphasizing mostly on perishable food products. The company ensures that organic food products that are produced follow best agricultural practices that promote a healthy ecosystem.
The company stocks agricultural produces that have not undergone genetic engineering, no sewage as well as pesticide, fungicide or herbicide residues. Animals’ products are sourced from livestock that were not under antibiotic treatments and growth hormones. Food processing techniques that use irradiation, synthetic preservatives as well as genetically modified organisms are normally not allowed. The core values are achieved by careful evaluation of the products before selling to consumers. Furthermore, Foods that are featured are free from flavors, preservatives, sweeteners, hydrogenated fats and colors. These foods have nutritional components which tastes good, support well being, freshness and are safe to eat.
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