Question

Detail explanation of Porters 5 Force Analysis for Whole food market?

Answer 1

Whole Foods Market - Porter’s Five Forces Analysis

Porter's Five Forces is a model developed by Michael Porter that helps to identify and analyze five competitive forces that impact in an industry's weaknesses and strengths. Whole Foods Market is a grocery and health food store that is part of the retail industry. In Whole Foods Market’s case, this Five Forces analysis acts as a tool to pinpoint the issues and concerns that outlines the strategic direction which either supports or limits the growth of the firm. Currently, the intensities of the Five Forces in Whole Foods Market’s business are as follows:

1. Competition (Strong force):

This force determines the effects of firms on each other. Competitive rivalry is a strong force for the Wholefoods market because of the following:  

• A high number of firms
• High aggressiveness of firms
• Low switching costs

Wholefoods market can differentiate from its competitors by offering high-quality products as customers can easily switch to other retailers if they are not satisfied with that Wholefood market is offering.

1. Bargaining power of customers (strong force):

This force determines the effect of buyers on businesses. The bargaining power of the customers is a strong force for the Wholefoods market because of the following:

• Switching costs are low (strong force)
• Quality of information is high ( strong force)
• The small volume of individual purchases (weak force)

The Wholefoods market needs to increase the customer base which not only helps to reduce the bargaining power but also gives an opportunity to streamline the sales and production process. Introducing new and innovative products also limits the existing customers’ bargaining power and shifting of the customers to other retailers.

1. Bargaining power of suppliers (moderate force):

This force determines the degree at which suppliers impose their demands on business and the industry. The bargaining power of the suppliers is a moderate force for the Wholefoods market because of the following:

• Moderate level of supply (moderate force)
• The large size of individual suppliers (moderate force)
• The high number of suppliers (weak force)

Wholefoods market needs to build the supply chain with multiple efficient suppliers and by having dedicated suppliers and third-party manufacturers similar to Walmart or Nike.

1. The threat of substitution (strong force):

This force determines the impact of substitute products on business and the industry. The threat of substitution is a strong force for the Wholefoods market because of the following:

• High availability of substitute products (strong force)
• Low cost of substitutes (strong force)
• Low switching costs (strong force)

The Wholefoods market can tackle this element by being service oriented instead of just focusing on the product and by delivering what the customer needs instead of focussing on what the customer is buying.  

1. The threat of new entrants ( strong force):

This force determines the effect of new firms in the industry. The threat of new entrants is a strong force for the Wholefoods market because of the following:

• The High ease of doing business (strong force)
• Low switching costs (strong force)
• Moderate cost of doing business (moderate force)

Wholefoods market needs to find innovative methods and invest in developing the products and services and by building economies of scale so that fixed cost per unit can be reduced.