Question

Please read the following article: Whole Foods_ Walmart, Costco Steal Grow:

Over much of the past 30 years, Whole Foods Market co-founder John Mackey enjoyed wild success selling organic groceries to the masses. That brought media buzz, fast growth, and high profit margins to his grocery chain. It's also attracted imitators. Now, with the likes of Kroger and Wal-Mart Stores muscling into everything from organic milk to sustainably raised salmon, Mackey finds himself fending off challenges from bigger rivals intent on eating Whole Foods' lunch. Just how well the competition is doing became clear on May 6 when Whole Foods reported that sales growth at stores open more than 57 weeks had slowed to 3.6 percent in the most recent quarter, well off the 5.3 percent gain forecast by analysts. Mackey also announced a plan to revive growth by starting a lowerpriced chain aimed at millennials next year. The disappointing growth and seeming change in strategy spooked investors, who trimmed almost 10 percent from Whole Foods' stock price on the day after the news. "Business has really slowed down compared to what it used to be," says Brian Yarbrough, an analyst at Edward Jones. "I fear they're being a little complacent about what's going on in the competitive environment." So far, Whole Foods has said only that its as-yet-unnamed chain for millennials will be smaller and more focused on value, convenience, and technology than traditional Whole Foods markets. They'll also be cheaper to open and build, Mackey said.

With the new stores, Whole Foods is targeting younger consumers who may not be as dazzled by its organic offerings, particularly when many of those items are increasingly available at their neighborhood grocery stores, says Virginia Morris, vice president for global consumer strategy at retailing consultant Daymon Worldwide. "It's not unique to millennials-they've grown up with it," she says. "There's no cachet."

The grocer was founded in 1978 in Austin, Texas, by Mackey and a former girlfriend. It expanded quickly in the 2000s-there were fewer than 200 Whole Foods stores in 2006, compared with more than 400 nowas it helped introduce items such as kale and quinoa to mainstream Americans. In its glory days, from 2000 to 2008, Whole Foods' average annual sales growth was 20.4 percent. Stores opened quickly, as the company snatched up cheap real estate that defunct retailers such as Circuit City had abandoned. Those gains slowed to 9.9 percent in the fiscal year ended Sept. 28, 2014, the smallest annual increase since 2009. Kroger and Fresh Market, which sells high-end produce, both logged better sales growth in their latest fiscal years. To hold on to shoppers, Whole Foods since 2014 has focused on lowering prices, especially on fresh fruits and vegetables. It also started running its first national ads, dubbing its campaign "Values matter." But it hasn't pulled back on the fancy amenities that have given it an image to match its prices. A new store in Boston, for instance, has a spa; many others offer valet parking. Sales of organic foods in the U.S. jumped 11.3 percent, to $39.1 billion, last year, according to the Organic Trade Association. The problem for Whole Foods is that an increasing share of those sales is going to mainstream players in the U.S. grocery store business, which logged $1.07 trillion in sales last year, according to Euromonitor International.

Kroger's natural and organic Simple Truth line has become a $1 billion-a-year brand. Costco Wholesale sells organic and grass-fed beef and organic coconut oil under its Kirkland Signature brand; its total organic sales were close to $3 billion last year. Even Wal-Mart is hawking everything from organic chia seeds to its Wild Oats Marketplace organic marinara sauce. There are about 3,800 Wal-Mart stores in the U.S. that have at least 30 Wild Oats items, the company says, plus about 2,300 Walmarts have separate organic produce sections. "You've got a number of competitors out in the marketplace that are growing very rapidly -Kroger, Sprouts Farmers Market, Trader Joe's, Fresh Market," says Bruce Cohen, senior partner at consulting firm Kurt Salmon. "It's caused Whole Foods to pause." Whole Foods concedes that rivals are encroaching on its sales gains. "Everybody is jumping kind of on the natural and organic food bandwagon, and that's really frankly due to our success," Mackey said on a May 6 analyst call. He and co-Chief Executive Officer Walter Robb declined to be interviewed for this story. Developing a grocer specifically for millennials could be a gamble. Americans under the age of 35 prefer natural and organic food, which often costs more, and seek more transparency on labels, according to recent Goldman Sachs research. Yet, while millennials tend to marry later and put off having kids, once they settle down and form families, their shopping habits aren't that unusual, says Sucharita Mulpuru, a Forrester Research retail analyst. "It's all delayed, but once those things happen, they spend just like their parents." That means the biggest determinants of where they will shop will be value, convenience, and selection.

Even if Mackey is right about a need for stores tailored to a younger demographic, his new tack could present problems, says Edward Jones's Yarbrough. The smaller locations will likely have lower profit margins and may cannibalize customers from Whole Foods' namesake chain, he says. Some analysts think Whole Foods may be taking aim at Trader Joe's with its new concept. That 440-store chain appeals to young consumers who have broad, global tastes and like to hunt for items they might not find elsewhere, Daymon's Morris says. But Trader Joe's benefits from a perception that its products are cheap-chic, while Whole Foods continues to grapple with its "Whole Paycheck" image. Says Morris: "That's something they really haven't been able to shake."

Write a 500 Word document. Please respond to the following questions:

After reading "Whole Foods or Walmart?" what is your opinion about whether they believe that the new concept from Whole Foods will work.

What are at least three ways that companies can develop innovative practices based on demographic trends?

How can companies make good decisions about what trends should impact their corporate strategies?

Answer 1

As given in the case, Whole foods is facing a big challenge from established retailers and supply chain giants and it is trying a new strategy to maximize revenue. The strategy they are embarked upon is starting a supply chain specially designed for millennial generation. They are targeting the younger generation who are not looking at the organic products in awe since they are readily available in their neighborhood grocery stores. Whole food is planning to obtain the interest of these millennial generation by providing them better value, higher convenience and technology based solutions. On the whole, it looks like a strategy they are being forced to adopt since the traditional route of business is not reaching its required targets. The time period when Whole foods was growing exponentially and opened up many stores has come to a halt and they are facing high losses due to challenges from other bigger players in the industry. John Mackey is confident that their solution is the next best thing and can draw the new generation towards them. While it may be true that the younger generation would prefer shopping for groceries in a more technology based continent platform it would be only a matter of time before other big giants follow the same suit. Giants like Walmart will have more agile supply chain which can adapt itself to changing environments and market demands faster. While the strategy adopted by Whole Food is good and is necessary in some ways, it will be difficult to keep all the customers hooked on their customer base for a long time. John Mackey certainly believes that they can succeed using this strategy and that is why they are going aggressively in this market. Even though there are lot of challenges, Whole Food management and leadership team believe they are right to start this new era in their business venture before it is too late and get the business growing again.

For any organization to succeed in the long term, there should be constant changes in terms of solutions offered and the strategic views. An organization which was focused only on traditional mode of business may find it difficult to sustain itself in the technology era. Few of the ways in which companies can develop innovative practices are:
• Provide customized services based on the segmented customer based. Segmentation can be done basis demographics
• Identify the platform and technology which are widely used in different demographic sections and develop the same
• Create a service catalogue of value added services which can change based on segmentation and customer preference and subscriptions
Using these methods, organizations can develop practices based on demographic trends which can help them in the long term sustainability and growth.

For any company to take the best decision on the long term solution, they have to understand the customer expectations and the industry trends. The environmental analysis plays a huge role in these situations. In any business scenario and environment, there is a constant change in the macro and the micro environment factors that affect the business portfolio. To identify this, there are multiple techniques that are used. Few popular tools are:
• SWOT Analysis
• Pestle Analysis
• Five forces
• Balanced scorecard etc.
In all these above techniques there are various factors that are considered by the company before implementation or going to full scale rollouts. Few of the major elements that are focused highly by companies are Strengths, differentiation value and threats from other areas. In case of Pestle analysis, the focus is towards getting input and changes in business environment from political, economic, social, technological, legal and environmental perspective. The focus area in these parameters is the immediate and long term threat that can happen to the company. In case of five force model, again the focus is on the powers in the industry and the consumers. It also gives an inference which relates directly to the threat that a company can face. These tools give an insight of customer expectations and the industry pattern towards certain trends. Companies can undertake in depth market and customer research to ascertain the insights obtained from environmental analysis. If the studies reveal need for change in solution and long term strategy, companies will discuss the benefits and ROI for each change. Based on the positive outcomes, leadership and management teams decide to rollout projects and start new initiatives to give an augmented customer experience.