What is Costco’s business model? Is the company’s business model appealing? Why or why not?

Review Case 4: Costco Wholesale in 2016: Mission, Business Model, and Strategy Case Study in your textbook and the following videos:

Answer the following:

1. What is Costco’s business model? Is the company’s business model appealing? Why or why not?
2. What are the chief elements of Costco’s strategy? How good is the strategy?
3. Do you think Jim Sinegal was an effective CEO? What grades would you give him in leading the process of crafting and executing Costco’s strategy? What support can you offer for these grades? How well is Craig Jelinek performing as Sinegal’s successor? Refer to Figure 2.1 in Chapter 2 in developing your answers.
4. What core values or business principles did Jim Sinegal stress at Costco?
5. (In the event you have covered Chapter 3) What is competition like in the North American wholesale club industry? Which of the five competitive forces is strongest and why? Use the information in Figures 3.4, 3.5, 3.6, 3.7, and 3.8 (and the related discussions in Chapter 3) to do a complete five-forces analysis of

competition in the North American wholesale club industry.

6. How well is Costco performing from a financial perspective? Do some number-crunching using the data in case Exhibit 1 to support your answer. Use the financial ratios presented in Table 4.1 of Chapter 4 (pages 66-68) to help you diagnose Costco’s financial performance.
7. Based on the data in case Exhibits 1 and 4, is Costco’s financial performance superior to that at Sam’s Club and BJ’s Wholesale?
8. Does the data in case Exhibit 2 indicate that Costco’s expansion outside the U.S. is financially successful?

Why or why not?

9. How well is Costco performing from a strategic perspective? Does Costco enjoy a competitive advantage over Sam’s Club? Over BJ’s Wholesale? If so, what is the nature of its competitive advantage? Does Costco

have a winning strategy? Why or why not?

10. Are Costco’s prices too low? Why or why not?
11. What do you think of Costco’s compensation practices? Does it surprise you that Costco employees apparently are rather well-compensated?
12. What recommendations would you make to Costco top management regarding how best to sustain the company’s growth and improve its financial performance?

 

Abstract

Whole Foods Market is the largest supermarket chain in the America which is specialized in serving the natural and organic food products. Its stores are operated in the United Kingdom, the United States, and Canada. Its corporate headquarter is situated in Austin, Texas. Whole Foods was acquired by Amazon in 2017. Its first store was opened in Austin in 1980. The owner of the store is John Mackey. The company is held at the top retailer position in the organic food until Costco took the top position in 2015. This assignment will discuss the chief elements which are used by the Whole Foods Markets to make them unique and different from the other food stores. After that, we discussed the core values of the company which helps them in achieving success. We also described the financial statement data of the company of few years and analyzed their performance in the market from the past few years. After that, we described the strategy which is used by the Whole Foods in order to make them better from their competitors. In the last, we recommended some strategies to the John Mackey which may help him in sustaining the company growth and enhancing the financial performance of the company.

 

 

 

 

 

 

 

 

• What are the chief elements of the strategy that Whole Foods Market is pursuing?
• Do Whole Foods Market’s core values as presented in case Exhibit 2 really matter? Are they “real” or just cosmetic window dressing? What evidence can you cite to support your answer? Have Whole Foods’ core values contributed to the company’s   success; Why or why not?
• Based on the financial statement data in case Exhibit 1 and the store operations data in case Exhibits 3 and 4, how well is Whole Foods Market performing? Use the financial ratio information in Table 4.1 of Chapter 4 (pages 81-83) to assist you in calculating a revealing set of` financial ratios and interpreting them.
• How well is Whole Foods Market performing from a strategic perspective? Does Whole Foods enjoy a competitive advantage over its 3 chief rivals—The Fresh Market, Trader Joe’s, and Sprouts Farmers Market? Does the company have a winning strategy?
• What recommendations would you make to John Mackey regarding the actions that Whole Foods’ management needs to take to sustain the company’s growth and financial performance?

Chief Elements of the Strategy Pursuing by Whole Foods Market

The chief elements of the strategy which the Whole Foods Market is pursuing are to provide the products to the consumers in the market with the finest quality and free from preservatives and another type of genetically engineered products which reduce the quality of the food of being organic. The food products which the Whole Foods are providing to their customers is naturally preserved and contains the least amount of the processed prods. They strive to eventually dominate the international market as well as the local market. Whole Foods promotes the vision of Whole People, Whole Planet, and Whole Food. In the Whole Foods, fresh food with naturally flavorful preserved is available (Bells, 2015).

Another strategy which they used is to have the best store location and have the big store size. So, the features which they involve in their store are improved visibility, premium retail sites with high traffic, and good parking. They also opened new stores in new and different geographical markets to enhance their business. They attract the broader customer base by keeping the percentage higher of the perishable products. The company earns better by following the strategy selling premium at the premium prices. They always take the decentralized decision, and they have the empowered employees (Alotaibi, 2016).

The strategy used by the Whole Market is simple to aware the community and society about the food which they are intaking. They always strive to provide the high quality of food which has not gone from the mass industrial various processes which the other companies used for their food production. They promise to provide the complete nutritional value food which is fresh, and aesthetically pleasing to their customers. This helps the company to gain the competitive advantage in the market over other companies functioning in the same business of food (Harbin, 2017).

Whole Foods’ Core Values

Yes, I agree that the core values as presented in case Exhibit 2 matters to Whole Foods Market as their goal is to provide the higher quality organic products. They have the high regard for the standards which they offered to their customers. The core values matter a lot for any of the company and its management practice. If the employee is not behind the managers, then the company success will be non-existent and poor. Also, the customers can be tough if they see poor displays, unhappy or unfriendly store associates, moldy food, words on a wall. In that condition, the customer would not come back to the store. The core values of the Whole Food are good. But they are very extensive and should probably be trimmed down to convey the message of the Whole Foods which they want to express. I can say from my shopping experience that they follow their core values the store is colorful, clean and the food is superb, tasty and excellent. The core values of Whole Food Market are real and also contribute to the strategic vision of the company (Hill, 2006).

Financial Statement Data

According to the financial statement data in case of Exhibit 1 and the store processes data in case Exhibit 3 and 4, the Whole Foods Market performing well. Between the mid of the 2000s, the Whole Foods shows the consistent slow growth rate. The gross fiscal year from the year 2005 to 2009, the Whole Food Market grow the gross profit margin around 35% which shows the good percentage for Whole Foods. This percentage has not changed much over the many years, but there is still need to cover some of the operating expenses with the revenue. The debt of the asset ratio of the company is around 45% which shows that there are some risks which are involved with the Whole Foods when debt is used for the finance operations. We also analyze that the company is to be more successful in the year 2006-2007. But last year, Whole Food increased their net income. They increased their sale steadily each year. This whole data shows that overcome company performing very well.

During 2009-2013, its profit margin started to shoot wherein 2012; it reached the peak of 22.48 percent. This happens because Whole Foods Market some time spend on awaring public about their diet, benefits of taking the nutrition, fresh, organic products which are free from preservatives. By the year 2010, most of the people were concerned and aware about their food consumption and benefits of the organic food products. It helps the company in increasing their profit margins. Hence, the profit of the company rose exceptionally even during the phase of post-recession. (Lewis, 2017)

Whole Food Market Performance

Whole Foods Market is performing well in the market of supermarkets for providing healthy and natural food from a strategic perspective. The sales of the store are growing each year continuously even on the decline of the economy. Also, the company has grown their store location and also grown through acquisitions (Alotaibi,  2016).

Yes, the Whole Foods enjoys a competitive advantage over its three chief rivals, i.e., The Fresh Market, Trader Joe’s and Sprouts Farmers Market. Wild Oats is no longer a competitor of Whole Food as the company acquired it. Also, the company achieved the competitive advantage over other two companies by narrowing their products by differentiation and also by minimizing their target market. The Whole Food Market has made their brand and shopping at their store a unique and different experience which the consumers live a lot and love to come again and again. The company has the ability to meet their customer’s needs effectively by providing the good quality of products to the customers which matters a lot to the customer.

They focus on the narrow market and sustain this competitive advantage by doing their job better as compared to their rivals. They do this by serving the special needs and taste to their customers. They maintain the competitive advantage with the help of continuous value chain and improvement process by engaging their employees in determining the innovative ways to drive the cost down of their products. Also, they maintain a competitive advantage by maintaining social responsibility program which includes the environmental sustainability (Downie, 2016).

Recommendations

John Mckey has been successful in sustaining the small amount of growth throughout the recession period and then cutting back and turning the company in its hard financial times. According to me, Mackley should stay flexible and should maintain the higher level of liquidity as its safety belt. I think if the company has the ability to invest than I suggest that Mackey invest quickly to the new locations so that Whole Foods can be opened in more locations when the real estate prices are low. It helps the company in enhancing their business and also increase the profit of the company.

According to me, the Whole Foods Market needs to reinforce their values and ensure the customers that our values are the ground basis for them. In order to improve the financial performance of the company, Mackey should make price budget plan for their customers. As for today’s generation, organic food products become more important, but the prices of the company do not fit the budget of their prospective customers. So, the Whole Foods Market need to make sure that they should mark up the price of their product is fair and has a reasonable price which helps the company in earning a profit and enhancing their business.

  

References

Downie, R. (2016). How Sustainable Is Whole Foods’ Competitive Advantage? (WFM) | Investopedia. Retrieved from http://www.investopedia.com/articles/company-insights/092816/how-sustainable-whole-foods-competitive-advantage-wfm.asp+

Lewis, R. (2017). Whole Foods Market | History & Facts | Britannica.com. Retrieved from https://www.britannica.com/topic/Whole-Foods-Market

Hill, C. (2006). Interior Design Whole foods Market Corporate Headquarters, Austin, Texas. Journal of Interior Design, 31(3), 62-63. doi:10.1111/j.1939-1668.2006.tb00532.xBells, S. (2015). Introducing Whole Foods: America’s Organic Food Market – Market Realist. Retrieved from http://marketrealist.com/2015/11/introducing-whole-foods-americas-organic-food-market/

Alotaibi, J. (2016). Whole Foods Market Strategy and Structure. Journal of Case Research in Business, 1-11. doi:0.13140/RG.2.2.32228.99209

Harbin, J. L., & Humphrey, P. (2017). Whole Foods Market, Inc. Journal of Case Research in Business and Economics, 1-19. Retrieved from http://www.aabri.com/manuscripts/09288.pdf