Case Study: Whole Foods
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Whole Foods and Costco are among the leading food retailers in the supermarket industry. Their sensitive vision and well-thought marketing and business strategies have allowed them to stand the competition and remain popular among consumers. A closer examination of their policies will reveal which company is more successful in its vision and strategic framework.
Business-Level Strategy That Whole Foods and Costco are Pursuing
Before the crisis of 2008-2009, Whole Foods benefited from offering organic foods and luxury products, enjoying a competitive advantage. However, after the financial crisis, customers became more sensitive to a pricing strategy, which caused a decrease in the company’s financial performance. The competitiveness of the supermarket decreased as well. In response to these problems, CEO of Whole Foods John Mackey decided to reinforce the mission and provide healthy food options. Re-arranging the strategy and becoming more health-sensitive, the company can contribute to the reduction of heart diseases and other dangerous disorders. As a result of this strategy, Whole Foods has gained many benefits. To begin with, it has attracted new customers and improved its social corporate strategy. Additionally, the new strategic orientation has educated clients making them more aware of health issues. Apart from the improved Whole Foods strategy, the new vision has contributed to cost reduction. In particular, the private-label product line was increased by five percent, which resulted in the delivery of a greater amount of products at lower prices. In order to gain competitive advantage over Costco, Whole Foods also introduces special offers and discounts regularly (Rothaermel 163).
The Costco’s business model focuses on generating high volumes of sales along with inventory turnover by providing customers with low prices for nationally branded, private-label products within merchandise categories. This strategy is combined with operating efficiency that stems frm efficient distribution, volume purchasing, and reduced handling of merchandise in self-service warehouse facilities. It allows the company to increase profitability and reduce grow margins as compared to traditional wholesalers. Specifically, Costco buys only those products that can be sold at bargain levels to provide clients with a beneficial cost-saving opportunity. In other words, “A key element of Costco’s pricing strategy is to cap its markup on brand-name merchandise at 14 percent” (Thompson 5). Therefore, both quality and price policies are presented, although the pricing strategy is too controversial because it does not take into consideration the concerns of other stakeholders. Two Particular Values That Could be Used to Improve Each Firm’s Strategic Position
With regard to the Whole Foods strategy, it should be concluded that the firm focuses on improving the quality of products via the promotion of sustainable agriculture. This new strategic vision implies that the major orientation of the company consists in increasing the perceived value, leading to shifts in prices. In order to sustain a competitive advantage over other companies for a longer period, Whole Foods should be ready to adjust to a constantly changing external environment to better serve its clients and enhance its competitiveness. Hence, the company’s strategic network relies on two major values. The first one focuses on healthy living for their clients who have become more environmentally aware. By introducing healthy agricultural products, the company propagates a healthy lifestyle and an increased concern about the current problems, heart disease, and diabetes. The second value refers to product packaging, offering exclusive products and larger packages for clients. Hence, the ratio price vs. quality is properly defined (Rothaermel 163).
In contrast to Whole Foods, Costco’s philosophy focuses more on keeping the customer attracted by low prices. Its value based on extremely low prices attracted more buyers who were more sensitive tto discounts. At the same time, the quality of products is the highest, although most of goods relate to regional and national brands. In general, the company’s values are focused on taking care of all stakeholders equally, including members, suppliers, and employees. In regards to company’s members, the firm has focused on two major values. First, it strives to provide impeccable quality of products that complies with the highest food standards. Second, the authenticity of products is ensured, which means that clients can have a possibility to buy safe and exclusive goods (Thompson 6).
Analysis of the Best-Positioned Company Enjoying Continued Success
An in-depth analysis of Whole Foods and Costco’s vision, mission, and business strategies demonstrates that both companies have succeeded in their competitiveness and quality of products provided. Nonetheless, the strategy developed by Whole Foods is more persuasive and reasonable because pricing is based on the detailed re-evaluation of the production process, whereby costs have been reduced significantly due to the introduction of larger packages. Additionally, the firm guarantees the highest quality because products are supplied from sustainable agricultural fields. In addition to this vision, the company pays significant attention to training and educational programs, which can make clients pay more attention to the influence of food consumption on their health. Whole Foods is trying its best to educate clients and warn them of the threats of consuming junk food, such as the problems with heart and diabetes. In response, the Costco’s strategy is reasonable and profitable for the company, but pricing is not justified because not all stakeholders can be satisfied with the results. Low prices are based on the bottom line margins proposed to the suppliers of goods, which makes it more difficult for the company to establish a successful partnership with the leading producers. Therefore, Whole Foods is a best-positioned company with a possibility to enjoy continued success.
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