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Whole Foods SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Whole Foods managers to do a situational analysis of the firm . It is a handy technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Whole Foods is facing in its current business environment.
The Whole Foods is one of the leading firms in its industry. Whole Foods maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Whole Foods to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The core purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Whole Foods strengths, and eradicate its weaknesses.
Step by Step Guide to Whole Foods SWOT Analysis
Strengths of Whole Foods – Internal Strategic Factors
As one of the leading companies in its industry, Whole Foods has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Whole Foods are –
- Highly skilled workforce through successful training and learning programs. Whole Foods is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Successful track record of developing new products – product innovation.
- Strong distribution network – Over the years Whole Foods has built a reliable distribution network that can reach majority of its potential market.
- Superb Performance in New Markets – Whole Foods has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Highly successful at Go To Market strategies for its products.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Good Returns on Capital Expenditure – Whole Foods is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Weakness of Whole Foods – Internal Strategic Factors
Weakness are the areas where Whole Foods can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Whole Foods needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Whole Foods is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Limited success outside core business – Even though Whole Foods is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Whole Foods is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Whole Foods
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
Opportunities for Whole Foods – External Strategic Factors
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Whole Foods to drive home its advantage in new technology and gain market share in the new product category.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Whole Foods.
- The new technology provides an opportunity to Whole Foods to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Whole Foods an opportunity to enter a new emerging market.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Whole Foods to capture new customers and increase its market share.
- The market development will lead to dilution of competitor’s advantage and enable Whole Foods to increase its competitiveness compare to the other competitors.
- Government green drive also opens an opportunity for procurement of Whole Foods products by the state as well as federal government contractors.
Threats Whole Foods Facing - External Strategic Factors
- Liability laws in different countries are different and Whole Foods may be exposed to various liability claims given change in policies in those markets.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Whole Foods in those markets.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Whole Foods
- Rising raw material can pose a threat to the Whole Foods profitability.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
Limitations of SWOT Analysis for Whole Foods
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Whole Foods
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Whole Foods
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Whole Foods managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Whole Foods
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)