Inputs Diagnosis Whole Foods

The grocery industry has a relatively high market commonality; a lot of grocery stores are somewhat related in terms of technologies used, labor force and the products or services offered in the stores. Differentiation with other competitors is key for survival in this highly competitive industry.

1. The grocery industry is a commoditized industry, which makes it difficult for grocers to sustain through differentiation. Buyer power is high and thus, cost leadership and operational efficiencies are critical. There is fierce competition amongst various grocery stores, with the main players such as Loblaw and A&P holding multi-banner stores in various market segments. Traditional grocery stores also lose some of their market share to drug stores, convenience stores and other retailers who have entered the industry. Threat of substitutes from fast-food and take- away outlets is not as prevalent, since many grocery stores have started stocking ready-to-eat meals and have deli services available for consumers. Competitive

Whole Foods Market is one of the biggest organic and natural whole food suppliers in the world. They provide a wide variety of select foods that are without hormones or antibiotics and are stamped with the U.S. Department of Agriculture’s stamp of approval. They value the fact that they can provide people with access to healthy food and be identified with being socially and environmentally responsible.

In the United States, the food retail industry is absolutely massive. According to Statista, this industry brings in nearly 5.27 trillion dollars annually and 594.4 billion of that is from grocery store sales. In this market, the 20-ton gorilla in the room is Walmart, racking in nearly 20% of the entire market at around 118 billion dollars in 2013 according to the Harvard Business School case study. Following Walmart, Kroger and Costco own the biggest next largest slices bringing in 76 billion and 71 billion respectively. In this highly competitive market that has some of the smallest margins of any industry it can be tough to get ahead and even tougher to grow. However, Trader Joe’s has managed to pierce what was once a very small world

Trader Joe's faces several threats to its business, as competitors try to invade the company’s niche and attempt to imitate the company’s core strategies. The supermarket industry itself faces a major threat, as larger chains such as grocery retailers Wal-Mart and Tesco have begun to open small-format stores that mimic the Trader Joe's approach. This invasion results in additional cost pressure for incumbents like Trader Joe’s, which had to let go employees in order to become more cost competitive.

Grocery shopping is more diversified and evolved than ever before. Individuals across the nation have access to everything from exotic products to unique delivery services. Often, specialty stores have limited locations whereas specialty services have a limited reach. However, two retailers have expanded to hundreds of locations while adhering to unexpected market positioning for previously untargeted market segments. Whole Foods Market and Trader Joe’s have become household names while also innovating beyond regional and national traditional chains. Despite comparable size in

Exhibit A shows Porter’s Five forces analysis for Trader Joe’s. Competition within the incumbents is high. Trader Joe’s biggest competitor would be Whole foods, nation’s largest retailer of organic and natural

1. Location, specifically proximity to strategic markets. Being located close to or within key markets lets firms capitalize on their exposure, allowing them to maximize their control of a region and to enhance their margins. Grocery competition exists locally, since there is only so far that consumers are willing to travel to fulfill their needs, so if a firm can dominate a market with minimal competing operators it will enhance its profitability.

The grocery industry is highly fragmented, with a multitude of strong regional players (Safeway, Publix, Kroeger, Wegmans, etc.). The largest grocery retailer in the United States is Wal-Mart, with an estimated 33% share. Other major retailers are targeting this segment of the industry, focused on a relatively narrow selection of key commodity foods at relatively low prices (Forbes, 2011). Whole Foods competes in a segment occupied by differentiated grocery players including Trader Joe's, Fresh Market and a highly fragmented selection of local and regional upscale and health-conscious grocery stores. The big players in the industry usually carry ranges of organic and natural products as well, siphoning off some business from Whole Foods. As Whole Foods grows, it comes into competition with mainstream grocery retailers more frequently (McLaughlin & Martin, 2009).

The threat of new entrants is measured by the level of entry barriers, brand reputation and customer loyalty, potential for existing competitors to expand, growth of buyer demand,

Factors affecting the ability of new comers to enter the market include capital requirements and cost of fuel, economies of scale, access to channels of distribution, constraint of brand equity, threat of M&A and regulation on Maritime cruises.

This case involves a mid-sized, regional grocery store chain called Reed Supermarkets. Reed has 192 retail stores, two regional distribution centers and 21,000 employees in five states in the Midwest of the United States. This case discusses Reed’s market strategy for the Columbus, Ohio, market in particular, which is one of Reed’s largest markets. The Columbus market has grown slightly over the past five years, while Reed’s market share has dwindled slightly in the market. Reed has watched their market share stagnate with the entrance of new competitors (10% growth in stores) and a dramatic shift in customer preferences to value or

     Porter’s five forces of competition framework can be a valuable tool in analyzing an industry. Porter’s five forces of competition include: competition from substitutes, entrants, rivals, supplier power, and buyer power. We will now analyze the retail grocery industry according to Porter’s five forces. (this is straight out of the Barnes and Noble report I wasn’t sure if we should cite this or not)

Recently the consulting group has elected to use the Nadler-Tushman Congruence Model based on the input/output analysis that the congruence model provides. With this report it will provide an unbiased outlook on how the inputs align with whole foods strategy. In addition to this data we will analyze how the company has been doing with its performance compared to its goals. This report will analyze the company’s business strategy to its operating environment as well as examine the inputs in the organization’s environment, resources, and history, and how they align with the required outputs. Lastly, we will explain to the executives/consulting group how congruent the company’s outputs are across three levels: the overall organizational level, the group level, and the individual level.

Today, consumers have countless options on where to get their groceries. They can go to a traditional retailer like Kroger and Albertson’s, who are currently in the lead with $103B and $58B in revenue, go to a more specialized store like their local bakery, shop at Trader Joe’s, or increasingly turn to the internet for their grocery shopping (source). The amount of options can be overwhelming, with 38,441 supermarkets in the United States alone, supermarkets being grocery stores with sales of $2MM+ annually (source). In addition to the supermarkets, there are 212,000 traditional food stores selling $571B in retail food and nonfood products in 2011 alone (source). Architectural innovations that have allowed e-commerce to take off are also disrupting the food commerce industry as more people, specifically millennials opt to do their grocery shopping online. Today, 23% of Americans are buying good online, a number expected to reach 60% in ten years. (SOURCE IS REPORT IN GOOGLE FOLDER). U.S. online grocery sales represented $7B in sales in 2015, a number predicted to hit $100B by 2025, an upward trend that is only predicted to increase as shown in Figure B (Source).