Assignment:
Week 4 Case Analysis Whole Foods
Whole Foods Market in 2014: Vision, Core Values, and
Strategy
Before beginning this exercise, you will need to read the
Whole Foods Market case. It will also be helpful to review the tools and
concepts in Chapters 1 through 5.
The following questions will be covered in this exercise:
1. What are the chief elements of the strategy that Whole
Foods Market is pursuing?
2. Do Whole Foods Market’s core values as presented in case
Exhibit 2 really matter? Are they “real” or just cosmetic window dressing? What
evidence can you cite to support your answer? Have Whole Foods’ core values
contributed to the company’s success? Why or why t?
3. Based on the financial statement data in case Exhibit 1
and the store operations data in case Exhibits 3 and 4, how well is Whole Foods
Market performing? Use the financial ratio information in Table 4.1 of Chapter
4 (pages 81-83) to assist you in calculating a revealing set of` financial
ratios and interpreting them.
4. How well is Whole Foods Market performing from a
strategic perspective? Does Whole Foods enjoy a competitive advantage over its
three chief rivals—Wild Oats, Fresh Market and Sprouts Farmers Market? Does the
company have a winning strategy?
5. What recommendations would you make to John Mackey
regarding the actions that Whole Foods’ management needs to take to sustain the
company’s growth and financial performance?
1.
Award: 25out of 25.00 points
Show correct answer
What are the chief elements of the strategy that Whole Foods
Market is pursuing?
Select “” for those statements that accurately describe the
elements of Whole Food’s strategy, and “” for those that do t.
1. The company’s growth strategy has been to expand via a
combination of opening its own new stores and acquiring existing stores.
2. Most of the company’s growth has come from internal
efforts to open new stores.
3. Most of the company’s growth has come from acquisitions
of other grocery retailers.
4. In 2008-2009, the construction and store development
teams for Whole Foods’ new stores adopted a leaner and more disciplined
approach to design and building, including plans for smaller stores with
simpler decor and smaller, less labor-intensive perishable departments.
5. Whole Foods had its own internally developed model to
analyze potential markets according to education levels, population density,
and income within certain drive times after a lease was signed.
6. The layout of each Whole Foods store was standardized so
that a customer shopping at a store in one location would easily find the same
item stocked in roughly the same place in ather store location.
7. The driving concept of Whole Foods’ merchandising
strategy was to create an inviting and interactive store atmosphere that turned
shopping for food into a fun, pleasurable experience.
8. Stores had colorful decor, and products were displayed in
an attractive manner that both welcomed close inspection and stimulated
purchases; the effect was to project Whole Foods as an authentic retailer of
natural and organic products, a lifestyle brand, and a supermarket playground
with both a unique environment and unusually appealing food selections.
9. To create a unified, consistent shopping experience
across all stores, all Whole Foods stores were approximately the same size, in
terms of square footage, and all stores carried mostly the same 50,000 items,
with only very mir variations in different geographic areas.
10. Whole Foods Market sold foods that met strict standards
and that were of high quality in terms of nutrition, freshness, appearance, and
taste.
11. Whole Foods was the second biggest seller of organic
produce behind The Fresh Market.
12. The fallout from the Great Recession of 2008-2009 caused
Whole Foods to swiftly and decisively to change the company’s pricing strategy
to better match the ecomic climate; they also moved swiftly to institute a
series of cost-containment measures relating to cost of goods sold, direct
store expenses, and general and administrative expenses.
13. Whole Foods pricing strategy was to sell the highest
quality products that it could find at prices significantly above the
competition to maintain a very high profit margin.
14. Whole Foods connected and engaged with customers through
social media and the company’s website and blog atwww.wholefoodsmarket.com.
15. Whole Foods spent significantly more than other
supermarkets on advertising and marketing.
16. The 2007-2008 acquisition of Wild Oats Market was far
and away the company’s biggest and most important acquisition.
2.
Award: 25 out of 25.00 points
Show correct answer
Do Whole Foods Market’s core values as presented in case
Exhibit 2 really matter? Are they “real” or just cosmetic window dressing? What
evidence can you cite to support your answer? Have Whole Foods’ core values
contributed to the company’s success? Why or why t?
Select “” for those statements that accurately describe
Whole Food’s core values (and their contributions to the company’s success) and
“” for those that do t.
1. The company’s core value of selling the highest quality
natural and organic products available is t reflected by the merchandise
stocked in the company’s stores and by its purchasing strategy.
2. The company has a number of programs to educate customers
about the merits of the company’s position statements.
3. Team members were quite kwledgeable and enthusiastic
about the products in their particular department and tried to take advantage
of opportunities to inform and educate customers about natural foods, organics,
healthy eating, and food-related environmental issues.
4. One of Whole Foods Market’s core values was to satisfy
and delight customers; however, it did t appear that store personnel and store
management were consistently dedicated to this effort.
5. A core value was “We appreciate and celebrate the
difference natural and organic products can make in the quality of one’s life;”
commitment to this core value seems evident in the company’s product line, in
the company’s educational programs, and in the enthusiasm with which employees
promote the company’s products with customers.
6. The core value relating to “inviting store environments”
seems to be very much in play in the merchandising strategy and in the use of
appealing product displays in the company’s stores.
7. The core values of “empowering work environments,
“self-directed teams,” and “self-responsibility” do t appear to be compatible
with how the stores are organized and managed.
8. Despite all the company’s talk about healthy eating,
there are numerous high calorie food items in Whole Foods stores; thus, a case
can be made that the sizable number of unhealthy food items Whole Foods stocks
and prominently merchandises in its stores is a sign that the company is t 100%
sincere about promoting the health of its customers, selling “good for you”
food products, and aggressively educating consumers about healthy eating
practices.
9. Whole Foods appears to be genuinely trying to practice
what it preaches concerning its core values; the core values seem to us to be
deeply ingrained in the company’s culture and operating practices.
10. Whole Foods’ “open and timely information” core value
appears to be in direct conflict with its closed-pay system.
11. Whole Foods has a salary cap policy that limits the
compensation of any team member to 19 times the average total compensation of
all full-time team members in the company; such a cap is part of the company’s
Shared Fate core value.
12. The activities and efforts that comprise the company’s
comprehensive social responsibility and citizenship strategy are fully
consistent with the company’s core values.
3.
Award: 25out of 25.00 points
Show correct answer
Based on the financial statement data in case Exhibit 1 and
the store operations data in case Exhibits 3 and 4, how well is Whole Foods
Market performing?
Select “true” or “false” for each of the following
statements concerning the data in case Exhibit 1. Use the financial ratio
information in Table 4.1 of Chapter 4 (pages 81-83) to assist you in performing
calculations to determine whether the statements are true or false.
In addition to the financial ratios, you will also need to
calculate compound average growth rates (CAGR) for certain financial measures.
The formula for calculating CAGR (in percentage terms) is as follows:
CAGR % = [ending value ÷ beginning value] 1/n – 1 × 100
(where n = the number of year-to-year or period-to-period
changes)
1. From fiscal 2009 through year-end fiscal 2013, Whole
Foods revenues have grown at a compound average growth rate (CAGR) of 2.61%.
2. Net income climbed from $119 million in fiscal 2009 to
$551 million in fiscal 2013, a CAGR of 46.7%.
3. Basic and diluted earnings per share have exhibited big
increases; for instance, basic earnings per share rose from $0.42 in fiscal
2009 to $1.48 in fiscal 2013, equal to a CAGR of 37.0%.
4. Whole Foods’ gross profit margins have remained steady,
ranging from 34.3% in 2009 to 35.8% in 2013.
5. Whole Foods’ operating profit margins increased from 2.5%
in 2009 to 4.8% in 2013.
6. Whole Foods’ net profit margins more than doubled from
1.5% in 2009 to 4.3% in 2013.
7. Direct store expenses as a % of sales revenues increased
from 2009 to 2013.
8. General and administrative expenses as a % of sales
revenues remained steady at around 3% from 2009 to 2013.
9. Return on equity increased from 7.3% in 2009 to 14.2% in
2013.
10. Return on assets declined from 9.1% in 2009 to 3.9% in
2013.
11. Whole Foods’ long-term debt for the past three years has
been significantly high and should be a source of concern for top management.
12. Net cash provided from company operations has climbed
significantly in the past three years and is big eugh to cover the development
costs of new locations and other expenditures for property and equipment, with
plenty to spare.
13. All things considered, Whole Foods’ financial
performance since 2009 has been good, despite the sluggish ecomic environment
that has prevailed throughout 2009-2013; the company has come through the hard
times in good financial shape, its future prospects seem bright, and it
definitely has the financial strength to open new stores and expand its market
presence into more geographic areas.
14. All things considered, Whole Foods’ financial
performance since 2009 has been fairly weak; the sluggish ecomic environment
that has prevailed throughout 2009-2013 has left the company in poor financial
shape; it would be prudent to avoid opening new stores and it should instead
focus on improving its financial picture.
15. There have been significant across-the-board
improvements in the company’s financial performance since 2009; financial red flags or problems are apparent.
16. There have been significant across-the-board improvements in
the company’s financial performance since 2009; although the company is
profitable, there are red apparent with revenue growth and long-term debt.
4.
Award: 25out of 25.00 points
Show correct answer
How well is Whole Foods Market performing from a strategic
perspective? Does Whole Foods enjoy a competitive advantage over its three
chief rivals—Wild Oats, Fresh Market and Sprouts Farmers Market? Does the
company have a winning strategy?
You will need to analyze the data on store operations in
case Exhibits 3 and 4 in order to answer some of the questions in this
activity.
In addition, you will also need to calculate compound
average growth rates (CAGR) for certain financial measures. The formula for
calculating CAGR (in percentage terms) is as follows:
CAGR % = [ending value ÷ beginning value] 1/n – 1 × 100
(where n = the number of year-to-year or period-to-period
changes)
Select “” for those statements that accurately describe
Whole Food’s strategic performance and competitive advantage, and “” for those
that do t.
1. Whole Foods’ total sales revenues have grown every year
since 2009.
2. Average weekly sales per store have grown from $325,000
in 2009 to $570,000 in 2013, a CAGR of 6.7%.
3. Both comparable store sales growth and identical store
sales increases since 2009 have been strong.
4. Total square footage of all stores rose from 10,566,000
in 2009 to 13,779,000 in 2013, a CAGR of 3.78%.
5. The company has significantly accelerated its opening of
new stores since vember 2010.
6. Whole Foods has strong merchandising capabilities and its
stores are appealing to growing numbers of grocery shoppers who are health and
nutrition conscious.
7. The strategic adjustments that Whole Foods made during
2008-2009 were largely ineffective in drawing shoppers back to Whole Foods;
comparable store sales growth and identical store sales increases have been
weak since 2009.
8. The company’s long-term strategic outlook appears bright;
it is a very strong and formidable competitive in the natural and organic foods
grocery retailing segment and it has ample room for further store expansion in
the years ahead.
9. Whole Foods appears to have a competitive edge over its
rivals as concerns product breadth and selection, and it has much bigger
stores.
10. Whole Foods is weaker than its rivals in terms of
geographic coverage.
11. Whole Foods appears to have a competitive edge over its
rivals with respect to store appeal and shopping environment.
12. Whole Foods appears to have a competitive edge over its
rivals with respect to product merchandising
13. Whole Foods appears to be weaker than rivals with
respect to brand name recognition and reputation.
14. With respect to natural and organic foods, Whole Foods
enjoys a solid competitive advantage over traditional supermarket chains when
it comes to product breadth and selection.
15. Walmart poses a threat to Whole Foods, but the low-price
threat is minimal because Walmart and Whole Foods do t appeal to the same
grocery shopping clientele; the price differential on these few items is t big
eugh for Whole Foods customers to abandon shopping at Whole Foods and transfer
their allegiance to WalmartSupercenters.
16. Whole Foods’ strategy seems very well matched to its
external situation, but poorly matched to its internal situation.
17. Whole Foods’ strategy seems to have produced a
competitive advantage over Fresh Market, Trader Joe’s, Sprouts and others; ne
of Whole Foods’ chief rivals seem to be in a position to challenge or overtake
Whole Foods as the market leader in grocery retailing of natural and organic
foods.
18. Although Whole Foods’ strategy has, so far, produced a
competitive advantage over Fresh Market, Trader Joe’s, Sprouts and others,
these rivals are in an excellent position to challenge or overtake Whole Foods
as the market leader in grocery retailing of natural and organic foods.
19. Since 2009, Whole Foods management has initiated
strategy shifts and refinements that are very definitely resulting in improved
company performance.
