Introduction
Having been in this market for a long time, Whole Foods Markets have numerous competitive advantages that are derived from its unique resources and capabilities. The most important resources are the company’s strong financial, corporate culture, and its reputation. The capabilities of the company include the ability to differentiate its service, ability to purchase the products in large quantity from suppliers, and the ability to deal with high bargaining power of organic products suppliers. These factors lead to itsmost important competitive advantages, which are the strong brand image, customer experiences, and economy of scale.
Resource
Financial Resource
Whole foods market has a very strong financial resource. Their net income averaged 2.7 billion in the last three years. Their cash flows from operating activities also always cover the capital expenditure to sustain future growth. This acts as one of the reasons why the company is able to stock its shelves with huge variety of products. Consequently, it is capable of serving all the needs of varied customers. They also have a very low debt to equity ratio. As a result, they have a very high borrowing capacity which allows them to borrow money to acquire new entrants or competitors whenever they need it. Its low debt to equity ratio has led to it creating a good rapport with financiers (Organic Trade Association para. 2-5). Its effective performance in the industry gives the financiers a guarantee that it will be able to refund any borrowed money. As a result, Whole Food Market ahs a wide range of readily accessible financial resources.
Corporate culture
Whole Foods Market’s team based operations and employee-oriented work culture, acted as a source of its competitive advantage. Every sensitive figure such as profit margins and salaries are available to every employee. As a result, every employee in the company is highly engaged in the activities and feels like he or she is part of the company. The positive working environment has made the company to be chosen as one of the “fortune best 100 companies to work for” for the last 13 years. The tendency of encouraging employee empowerment within the company has led to employees committing themselves to the activities within Whole Foods market (Urani para. 2). They are always there to identify problems affecting the company, reporting them to the relevant personnel and contributing in coming up with methods of solving them. In addition, it has facilitated in improving customer satisfaction within the company. The services offered in the company makes customers always come back to a good shopping experience they come across.
Reputation
Although reputation cannot be measured, its amount of customer loyalty can be an indication. Most of customers wish to shop in businesses that have good reputation. Even if a person has never shopped in them, the good reputation of the business creates a perception of quality products and services in the mind of the customer. Whole Foods Market is the biggest retailer of organic products. This has led to it becoming more trusted by customers consequently wining their loyalty. Upon mentioning its name, the image of quality, organic, and healthy products come into consumers’ minds (Urani para. 3-5). This keeps customers going back to the shop for products. Its strong brand has made it hard for other investors to venture into this market. This is because it is hard for them to come up with strategies that will help them compete with Whole Foods Market.
Capabilities
Service Differentiation with quality foods
Whole Foods Market’s service differentiation hampers emergence of competition in the market. It becomes difficult for companies to venturing into the market to gain control or lure customers to buy from there. In its operations, the company has differentiated its services by stocking a huge variety of quality organic products in its stores. According to Hoovers, the company stocks about 2,400 different varieties of organic products (para. 1). This makes it standout from other groceries offering organic products as it provides the most varieties. Whole Foods Market works closely with its suppliers when it comes to production of its products. As a result, it is able to come up with quality products and also nurture a good relationship with suppliers.
Generally, it is difficult o locate and identify organic products suppliers who offer quality products (United States Department of Agriculture para. 2). Nevertheless, Whole Foods market has been able to identify and nurture a good relationship with these suppliers. This gives it an advantage in that it is able to stock not only a variety of organic products but also quality products. For new entrants, locating these suppliers is a problem. In the end, such firms end up stock limited variety of organic products as well as products of low quality. It becomes hand for them to compete with Whole Foods market making them be assimilated to it or closing down.
Ability to purchase the products in large quantity
The ability of Whole Foods Market to purchase the products in large quantity from suppliers and its long term mutual trust between them has have made it possible for the company to offer its products to consumers at favorable prices. By being able to buy products in a large quantity, Whole Foods Market purchase its products a low prices making it possible for the company to use strategic pricing strategy in overcoming competition. The company ensures that it offers its products at competitive prices thus attracting more customers. For upcoming companies, they are not likely to sell their products at competitive prices as they purchase them in limited quantities from suppliers. Such companies will have to offer their products at higher prices so as to make profit. Inability of new entrants to competitively price their products leads to them making limited sales and not being able to compete with Whole Foods. Such companies end up succumbing to competition and leaving the market or closing down. This gives Whole Foods Market an opportunity to control the market.
Ability to deal with the high bargaining power of organic products supplier
Suppliers of organic products have a high bargaining power over the retailers. The fact that there is limited number of suppliers who have been approved to distribute the products and the inability by organic product retailers to shift to other products gives suppliers a chance to control the retailers. In addition, the number of retailers dealing with organic products has increased giving suppliers a wide market for their products. This implies that even after suppliers offer their products at high prices, retailers will have to buy from them as they do not have other sources to acquire the products from. In addition, they can not change and start offering non-organic products. The ability of suppliers to have a strong bargaining power over retailers leads to retailers making limited profit from their sales. This is because they can not offer their products at a high price in fear of competition.
However, this has not been a problem to Whole Foods Market. As the company is capable of differentiating its services, it has been able to overcome high bargaining power of suppliers by offering its products at a high price (Spelman para. 2-7). This is achieved through offering quality products and services to consumers. Consumers of organic products give strong attribution to quality. As the highly value their health and environment conservation, they know that this can only be achieved through quality products. Consequently, consumers of organic products perceive the high prices of products to be as a result of quality of products offered. As a result, they are willing to buy the products at higher prices if at all they are of high quality. This implies that so long as Whole Foods Market offer quality products, supplier bargaining power will not affect it as it will be able to pass on the cost to consumers. Other companies dealing with these products are not capable of offering quality products. This implies that they can not offer their products at high prices. Accordingly, they end up making limited profit or no profit at all.
Competitive Advantages
Strong Brand Image
The ability of Whole Foods market to differentiate its services, offer a wide variety of products and at competitive prices has made it develop a good reputation in the public. In addition, this has led to the company having a strong brand image in the organic products industry. The fact that the company has been in this industry for decades, have given it an opportunity to identify and relate with suppliers who offer quality products (Porter 17). Hence, Whole Foods market has been recognized as the major company that offers quality and affordable organic products by most consumers. Having a strong brand image has resulted in a huge base of loyal consumers.
The strong brand image is valuable as it allows consumers to differentiate Whole Foods Market from other grocery stores as the leader in the market providing wide range of quality organic products. It is rare and inimitable as the brand name of Whole Foods Market is copyrighted and cannot be infringed by others. Also, it takes years for a company to build up a strong brand image. Whole Foods Market has done a lot in order to live up to its customers’ expectations. It is non-substitutable as its customers are very loyal to Whole Foods Market.
Corporate culture
The corporate culture has created a positive working environment and makes people want to work in Whole Foods. When people like working at the company, the company tends to have a better customer service and provide better shopping experiences.This has become a competitive advantage for Whole Foods Market as it is not possible for others to replicate its people and its shopping experience of customers (Porter 24). By the company empowering its employees, they have been able to come up with strategies of improving the quality of their products and services in the respective areas. This has also saved the company the cost of employee turnover. Employees within Whole Foods market never feel like leaving the company. It is their long time experience with the company that have helped them come up with better and quality services resulting in customer satisfaction. For other companies, they have not been in the industry for long making it hard for them to upgrade their services to the level of those offered by Whole Foods market. This makes the company stand out from its rivals thus overcoming competition.
The corporate culture is valuable because it differentiates Whole Foods market from others. It is rare, not inimitable, and non-substitutable because its culture is unique. Although various grocery chains have tried to mimic Whole Foods, they will never be able to replicate Whole Foods’ people and its culture. Its staffs have been in the industry for decades thus they have a lot of experience. The corporate culture of the company has led to development of teamwork within the organization. Every staff is always aware of the organization’s vision and mission as well as his or her responsibilities within the organization. By ensuring that staffs are informed of their performance, they become motivated and strive to even achieve more.
Economy of Scale
The ability of Whole Foods market to purchase the products in large quantity from suppliers has made it possible for it to offer its products to consumers at favorable prices.Purchasing the products in large quantity lead to another competitive advantage of Whole Foods Market, which is economy of scale.Its economy of scale is valuable as it provides a lower cost for its customers. It is rare because it is not likely for competitors to acquire such a large range of organic products at a competitive price as Whole Foods Market does. The company has also developed a good relationship with its suppliers which make it hard for them to compromise the quality of products they sell to Whole Foods Market (Hoovers para. 3). On the other hand, other competitors can not be capable of coming up with a similar relationship with suppliers. It is also non-substitutable because there are only a limited numbers of organic food products suppliers.
Conclusion
Being in organic products industry for many years has earned Whole Foods Market huge resources and capabilities which add up to its competitive advantages. The company has earned a lot from its sales making it possible for it to expand its operations. Its stable performance with respect to sales volume and profit margin has led to financiers willing to lend it their money. The corporate culture of the company has empowered employees leading to them improving the quality of services offered to customers. This has led to customers being loyal to the company hence guaranteeing its continuous sales. This has made Whole Food Market develop a good reputation in the public. It is recognized as one of the retails that offer quality organic products. Good relationship with suppliers has made it possible for Whole Foods to offer quality products. This is because the company has been able to identify suppliers that offer quality products and build s strong relationship with them.
Works Cited
Hoovers. “Whole Foods.” 2010. Web.
Organic Trade Association. “Industry Statistic and Projected Growth.” 2008. Web.
Porter, Michael. On Competition: Updated and Expanded Edition. Boston, MA: Harvard Business School Publishing Corporation, 2008.
Spelman Research. “Whole Foods Market Inc.” 2003. Web.
United States Department of Agriculture. “Organic Production.” 2010. Web.
Urani, David. “Whole Foods Market: On Track for Organic Success”. 2008. Web.