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Sample Essay Paper on Whole Foods

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Sample Essay Paper on Whole Foods

INTEGRATED SEMESTER ASSIGNMENT

(FINC 300, INFO 300, MGMT 300, MKTG 300)
MARKETING ASSIGNMENT (2)
  1. Marketing Strategy and Actions.

The location of the 365 stores in Silver Lake neighborhood of Los Angeles, which is named America’s No. 1 hippest hipster neighborhood, requires an effective marketing strategy to attract the customers. Notably, the targeted customers are characterized with a population that is tech-savvy. Thus, the marketing strategy to be used must incorporate technology into its stores because hipsters are not attracted to radio, television, and conventional print (Mangold & Faulds, 20). Therefore, the company must set a website and use social media networks to reach the targeted consumers. In addition, online shopping websites would be appropriate because rather than visiting the stores, the customers would purchase online and have the products delivered at their door step or workplace. Social media networks such as Facebook, You Tube, and Twitter enable social media marketing. Social media marketing strategy can increase the presence of 365 stores in the targeted market (Mangold & Faulds, 15).  According to Kotler and Keller (2005) the use of a social media marketing strategy to target hipsters can increase sales volume by 15%.  Social media sites can be used to provide information related to new products, prices, discounts, and message to the consumers. Moreover, most of the traditional Whole Stores operate under brick and mortar.

  1. Impact Those Marketing Recommendations

All business activities are interconnected directly or indirectly. Thus, when WFM changes the marketing activities from conventional to social media marketing, some changes are expected in financing, management activities, and operational activities. According to Yannopoulos (2), “Internet influences a firm’s pricing strategy in multiple ways, including providing consumers with more information, increasing competition, increasing the number of suppliers, the establishment of various auction houses, and pricing research”. Therefore, the marketing recommendation is expected to increase information availability to customers.

When websites, social media networks and mobile application are used, the company would increase its sales, meet customer demand, and reduce operational costs. Subsequently, the profitability and revenues of 365 stores would be promoted. Yannopoulos (3) pointed out that the use of social media provides an interactive platform whereby customers are provider one-click access to products and prices. The sales can also be increased by 15% improving the market share and position of the company (Kotler & Keller 31).

  1. Positioning Statements

Position Statement for 365 Lines Store

The 365 line store is a new retail chain store with a mission of providing convenience-oriented natural and organic food products. The targeted customers are the typical young customers with the need for tightly-edited food assortments. The customers targeted are also budget conscious. The unique customer benefits are high quality and affordable products that can be purchased by making online purchases through mobile applications or the company’s website. The customers will also enjoy tightly-edited assortment products that consider social media presence, attitude, fashion, and lifestyle of the customers. The chain differentiates itself from competitors by providing quality and affordable products at convenience.

Position Statement for traditional Whole Foods stores

The traditional WFM is a retail chain store that provides affordable and high quality organic and natural food products to its targeted customers. The targeted customers are persons who want experiential, innovative, healthy, and prepared foods. The key customer benefits include: more experience and satisfaction, more prepared foods, and innovative products. The chain differentiates itself from the competitors and traditional by providing quality products that are innovative and affordable.

FINANCE ASSIGNMENT (2)

  1. Main Items on the Income Statement and Balance Sheet

According to Kuppapally (250), financial statements provide information related to assets, liabilities, equity, cash flows, income and expenses, and contributions. On the other hand income statement provide information related to revenues, gross and net margins, and net profit margin. These are to be affected when new 365 stores are opened. For instance, making new sales to hippies will increase the revenues. To earn revenue, cost revenues such as direct expenses, labor, and materials will also be affected. Other costs to be impacted include general overhead, selling overheads, and administrative costs (Kuppapally 250).

The balance  sheet  has items that can be  impacted  and they include  cash  and  cash  equivalents, cash, inventories, receivables,  property, fixtures  and  equipment, ,  plant  and  equipment, equity, account payable, capital leases, and accumulated depreciation (Kuppapally  250). Cash equivalents and cash are required during the purchase of materials and making payments (Jean-François 141). On the other hand, receivables are also expected to increase credit sales because of the inventories required to launch 365 stores, purchase new stores, equipment, and deliver products. The use of capital leases and long term assets when setting up new stores will result to an increase to credit purchase. Also, the equity is expected to increase as a result of additional fund collections for the 365 store chain. 

  1. Financial Decisions for the 365 Supermarkets

The management is required to identify the resources, risks, and costs of return linked with the investment in order to maximize the profits. The financial decision is affected by the management when identifying capital expenditure needed for 365 stores. Moreover, management can be applied when determining the course of action required to promote effective management of the resources. Effective management is required to promote governance and accountability in monitoring and control of expenses. This can ensure that the best financial decisions are made to run the 365 supermarkets. The  financial  decisions  are  linked  to  marketing  decisions  with regard to  choosing  effective marketing  strategy. For example, after establishing the aspects of the financial statements to be affected, the financial decisions can be helpful in identifying the alternative strategies required to cut down marketing costs.  A marketing strategy that maximizes sales can be adopted based on the financial decisions.

The price of the products to be sold relies on the financial information available to make such decisions. Financial information can be used to increase sales, increase brand value, through the adoption of low costs of operation.  Thus, Financial decisions  are  linked directly to  operations  decisions  and they can be used to  maintain  daily activities. It can be used in the control and monitoring of operations at 365 stores chain. In order to maximize profits, costs and expenses required in operations must be minimized, and this depends on financial information available.

  1. Five Ratios for WFM.

Five ratios for whole food market for last 2 years

Ratios

2015

2014

Gross Margin %

35.2

34.4

Operating income margin %

6.6

5.6

Return on costs%

9.33

10.26

Return on Invested Capital %

13.91

14.88

Assets turnover ratio

2.68

2.54

The gross margin ratio which was high in 2015 would be affected after the 365 stores have been opened. This is because sales and costs of 365 stores would also lead to an increase in the total sum of sales of WFM. In addition, the operating income of the other hand would also increase, especially when operating income of WFM increases too. When more stores (365 stores) are opened, the total assets would also be expected to increase, hence impact on the return on costs and return on invested capital. An increase in the capital and assets would result to increase in the asset turnover ratio. Therefore, gross margin, operating income margin, return on costs, return on invested capital, and asset turnover ratio are to be impacted after the 365 stores are opened in the different locations identified.

Two competitors of WFM are:  Sprouts Farmers Market (SFM) and Costco (COST). The companies have been selected because according to Bells (1), the two are close competitors and rivals in the organic and natural food industry. The table below provides contrast of ratios of WFM and the two competitors.

 

Ratios

WFM

SFM

COST

Profit Margin %

3.38

3.59

2.03

Operating Margin%

6.03

6.42

3.11

Return on Assets

9.62

10.31

6.46

Return of Equity%

14.64

17.10

20.22

Current Ratio

1.63

1.5

1.03

 

Based on the above analysis, WFM perform better than its competitors, SFM and COST. The current ratio for WFM is higher based on the conversion rate for SFM and Costco. On the other hand, the return on equity for WFM is lowest, which implies that the company has the least amount of profit compared to SFM and Costco.

  1. Annualized Stock Price Return of WFM over the last 3, 5, and 10 years

The Annualized Stock Price Return of WFM over the last 3, 5, and 10 year is related to the price-earning ration for WFM and the two competitors as presented in table below .

Annualized Stock Prices

 

Companies

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

WFM

33.4

34.2

12.8

28.1

31.9

36.0

34.4

39.4

32.3

22.6

Costco

6.7

31.95

(24.74)

12.70

22.04

15.39

18.49

20.55

19.10

13.93

SFM

(39.36)

(13.0)

(76.8)

190.7

84.3

37.54

31.01

26.88

(12.8)

(33.5)

S&P 500 Index

 

16.8

16.5

10.9

18.6

15.5

13.7

15.0

18.6

18.6

19.0

                       

 

Based on the findings, WPM performs better than its competitors and its annualized stocks are above the S&P 500 Index. The higher the PE is an indication of the amount the investors have to pay per share. To remain competitive, the company needs to go ahead and to open the lower-cost 365 supermarkets and provide organic and natural foods. The company needs to invest more on technology and social media marketing to reach its customers. A participative management strategy can be used to reach out to the targeted customers.

MANAGEMENT ASSIGNMENT

  1. A SWOT- style analysis (matrix) and Introduction of 365 Store Chain

SWOT analysis provides the strengths and weaknesses of the company, and the threats and opportunities to the organization from the external environmental conditions. The table below is SWOT analysis for the Whole Foods Store (WFS)

Strengths

§  Whole Foods’ highly decentralized organizational structure,

§  Team-oriented type of decision making

§  Attractive workplace environment

§  Environmental stewardship

§  Unique human resources processes

§  WFM ranked 3rd on the EPA’s Top 25 Green Power Partners

§  WFM donates 5% of its earnings to charities.

§  Supply of organic foods  by suppliers

Weaknesses

§  The WFM is located near other competitors and this makes it vulnerable to competitors

§  Laying off employees

§  Decline in stock price

§  Cannibalizing of the business by competitors

§  Partners of WFM not classified as typical corporate leaders

§  Absence of internet based selling

Opportunities

§  Growing market for organic and natural food consumers

§  Potential increase in consumption of natural and organic foods

§  Possible growth of the food market

§  A large number of potential affluent shoppers

§  Upward trends and patterns of hipsters

§  Opportunity to partner with Instacrt in the future

Threats

§  Competition from new entrants and existing competitors

§  Possibility of close substitute goods in the market

§  The competitors are closely located to the company

§  Competitors use similar advertising campaign.

§   

 

The introduction of the 365 store chain by WFM is an important strategic plan because it can play an integral role in capitalizing on the opportunities in the market and dealing with the possible threats. The chain is appropriate because it can offer tightly-edited assortment of goods and products to less affluent consumers. The current upward trend in the market of the hipsters accompanied by the number of the less affluent provides the opportunity to operate the 365 stores. Therefore, if the company can properly run the chain, it would optimize profits through social responsibility. Thus, the company makes a strategic sense through the introduction of the 365 chain. Subsequently, the company could increase its market share and profits in the long-run.

  1. a) Advisability and Potential Impact of the Employee Layoffs

Layoffs, downsizing, and reduction in workforce potentially create legal costs, especially when the employees were under an employment contract. According to Ginsburg, Liu, and Sivayoganathan (18), layoffs may result to legal costs especially when the laid off employees take their employers to the labor courts to be compensated.  With reference to financial operations, WFM is expected to make profits because direct and indirect costs related to employment are reduced. However, the company may be required to pay extra for overtime for the employees. Training and development costs are also expected to increase as the company acquires new employees to occupy the new positions.

With regard to physical operations, The WFM will function with a smaller staff. It will also be compelled to rework its operational plans to replace the laid off employees. Nonetheless, profit margin is expected to increase as a result of decreased payroll expenses (Ginsburg et al., 20).Laying off staff may compel the company to incorporate new technology in its stores. This will increase operations in terms of efficiency and effectiveness (Mackey para 1). For instance, the incorporation of ordering kiosks and Self-checkout counters as well as other inventions are attractive to the younger generation because they provide a convenience

  1. b) The challenges and/or benefits the reduction in force

The possible challenges include creation of legal costs, discrimination of employees as a result of reduced workforce, and emotional distress after being laid off.  In addition, when employees are laid off, the relationship between employees and customers is affected, hence low customer satisfaction. Reduction of employees reduces the ability by employees to perform as a result of burnout, and this can result into production decline (Holzer 244). Employees’ turnover is also related to reduce performance, and this may impede profits and revenues. The reduction of the employees in WFM can impede decision making process, planning and implementation processes in the workplace.

The reduction of the workforce can be beneficial to the company’s operations. For instance, the company can save overhead costs incurred when large number of employees is employed (Holzer 224). It also reduces the direct expenses and costs linked to employment in terms of training of employees and paying of bonuses and wages. The company can effectively redesign office closures, departmental consolidation, and job description. Subsequently, efficiency is increased after ineffective and unproductive employees are downsized.

  1. Motivation Approaches or Theories

Democratic or Participative Leadership style is required in the WFM for the 365 store chain to be successful. This is a balanced approach that can be used to complete a task. Under this leadership style, team members have the flexibility to make decisions and be involved in the decision making process (Kapena 24) Moreover, it promotes problem solving and creativity which is required when operating the 365 store chain.  This leadership style can remove emotional distress and encourage the employees to permanently stay within the company. Therefore, a participative form of leadership is needed in the new chain to solve problems, accumulate new ideas, increase performance of employees, and promote productivity (Kapena, 214).

The organization uses a decentralized organizational structure, which implies that the current leadership has some elements of participative form of leadership. In addition, team­-oriented decision and problem-solving process is applied.  When an organization operates a decentralized organizational structure, employees have the authority to make decision deemed beneficial to the company (Kapena 25). The business and organizational structure adopted indicates the use of delegative kind of management style. 

OPERATIONS ASSIGNMENT (2)

Process Design: Process design relates to the development of new facilities and expansion of existing facilities to capture emerging markets. Whenever WFM designs new facilities or expands its business to new regions, the company ensures that its values align with the design and management of the new locations. Currently, WFM has 450 stores and plans to design and implement 1200 stores in the U.S. Therefore, finance is required to facilitate the design based on market research on demand of WFM’s products. In addition, management of the new facilities is also required to ensure the needs of the customers are met. Lastly, the company has to undertake the process design in such a manner that financial benefits are experienced by the shareholders

Managing quality: This is necessary to ensure that the products are consistent and unique from those of competitors. To achieve this operation and to promote their core values, WFM “offers more than 25,000 certified organic products and over 8,500 Non-GMO Project-verified products” (Nijjar 1). In addition, the company sells the best quality products, thus creating value to the customers. Notably, the high value is linked to competitive prices and high quality products. The company focuses on the quality standards by emphasizing on ingredients, taste, freshness, nutritive value, appearance, and safety of the products.  As part of management, the company uses decentralized form of leadership and teamwork to ensure that quality products are made available to the consumers.

Location strategy: This ensures that a company is strategically located in an area which is accessible to its targeted customers. For instance, the new 365 stores are to be located in highly populated place which are accessible to hipsters. For instance, WFM uses market penetration to enter into already existing markets. After the locations have been identified, intensive growth strategy is applied to ensure that new stores are profitable, and this is realized by selling of natural and organic products. The company also ensures it works with the local communities to advance environmental stewardship. Thus, as part of marketing strategy, WFM uses population and 4ps to reach the demands of its customers.

Layout strategy: The objective of layout strategy in WFM is to ensure that the company develops cost effective layouts for its stores in order to meet its financial and competitive needs. The products are arranged in the 450 stores in such a manner that they are within the reach of the customers. It is also carried to realize utilization of space, people, and equipment as well as the flow of materials and information. With a decentralized form of management that encourages teamwork, information flows freely up and downwards, hence improved employees’ morale. When employees are motivated, they perform better. Also, the layout strategy of WFM allows flexibility and improved employees and customer interactions.

Supply chain management: SCM is the process of managing all the activities involved in the supply chain, including the supply of products to delivery to different stores. The company creates ongoing win-win partnership with its suppliers through business collaboration. Moreover, 24% of the organic and natural products are local sources to ensure that the customers can access the products on time. The company also cooperates with local producers by supporting them financially as a way of producing quality products at the desired quantity and time. Management decisions relate to the integration of different stakeholders in WFM supply chain. The financial function is needed to make financial decisions on the SCM to ensure the process aligns with the values of the company.

 

 

 

 

 

 

 

 

 

 

 

Works Cited

Bells, Sonya. How’s the Retail Food Sector Reacting to Brexit? 30 Jun. 2016. Web. 17 Nov. 2016. < http://marketrealist.com/2016/06/retail-food-sector-remains-strong-june-despite-brexit/>

Ginsburg, Joshua, Yiwei Liu, and Bhalayogasthini Sivayoganathan. Layoffs and alternatives to layoffs. 3 Sep. 2010. Web. 17 Nov. 2016. < https://web.wpi.edu/Pubs/E-project/Available/E-project-121410-110306/unrestricted/Layoffs_4.3.pdf>

Holzer, Harry J. Reshaping the American Workforce in a Changing Economy. Washington, DC: Urban Institute Press, 2007. Print.

Jean-François, Emmanuel. Financial Sustainability for Nonprofit Organizations. , 2015. Print.

Kapena, Sumbye. How to Be a Wise Leader: Principles That Work. Nairobi, Kenya: Paulines Publications Africa, 2000. Print.

Kotler, Philip and Kevin Lane Keller. Marketing Management. Thousand Oaks, Calif: SAGE Publications, 2005. Prin

Top of Form

Kuppapally, Jelsy J. Accounting for Managers. India: PHI Learning, 2010. Print.

Mackey, John. Whole Foods Market Inc. Cut Employees. Now What?. 7 Nov. 2016. Web. 17 Nov. 2016. < http://www.fool.com/investing/general/2015/11/07/whole-foods-market-inc-cut-employees-now-what.aspx>

Mangold, W. Glynn  and David J. Faulds. Social media: The new hybrid element of the promotion mixBusiness Horizons 52.4(2009): 357–365. Print.

Nijjar, Palbir. How Whole Foods Market Lives Its Values. 24 Jan. 2016. Web. 17 Nov. 2016. < http://www.fool.com/investing/general/2016/01/24/how-whole-foods-market-lives-its-values.aspx>

 

 

Yannopoulos, Peter.  ‘Impact of the Internet on Marketing Strategy Formulation’., International Journal of Business and Social Science, 2.18(2011): 1-11. Print.

 

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