Strategic Audit of

Whole Foods Market Corporation

Current Performance
Whole Foods Market experienced tremendous growth in sales during the fiscal
year of 2006. For the 52 week period in 2006, Whole Foods Market increased their sales
19% to approximately $5.6 billion, while on the other hand; comparable stores only grew
at a rate of 11%. In addition to their increased sales margin, Whole Foods Market
produced $453 million in cash flow and received $222 million in proceeds from stock
options. Also, they were able to improve their (EVA) from $38.6 million to $64 million
and they were capable of returning approximately $358 million in cash dividends to their
shareholders.
Strategic Posture
The mission, policies, objectives, and strategies of Whole Foods Market are
clearly stated in their 2006 Annual Report.
Mission. Whole Foods Markets mission is to promote the vitality and well-being
of all individuals by supplying the highest quality, most wholesome foods available.
Their primary goal is devoted to the promotion of organically grown foods, food safety
concern, and the sustainability of our entire ecosystem. Whole Foods Market is a
corporation within the Natural Foods Industry operating in the segment of natural and
organic food supermarkets.
Objectives. The corporate objectives of Whole Foods Market is to branch out in
becoming an international brand synonymous with not just natural and organic foods, but

also with being the best food retailer in every community in which they are located. Our
motto- Whole Foods, Whole People, Whole Planet- emphasizes that our vision reaches
far beyond just being a food retailer. Whole Foods Market believes that all shoppers, not
just natural and organic food shoppers, appreciate great produce, dairy, meat, seafood,
bakery and prepared foods. It is their business and functional objective to provide
supreme customer service in addition to the products they offer to give their customers a
complete satisfactory experience shopping their stores.
Strategy and Policy. Whole Foods Market is a mission-driven company. They
believe in providing exceptional quality products. Their motto is a restatement of their
mission Whole Foods, Whole People, Whole Planet. Their success is fulfilling their
vision and measured by customer satisfaction, team member excellence and happiness,
return on capital investment, improvement in the state of the environment, and local and
larger community support. Their ability to instill a clear sense of interdependence among
various stakeholders is contingent upon their efforts to communicate more often, more
openly, and more compassionately. Better communication equals better understanding
and more trust.
Mission Consistency. Whole Foods Market is an amazing company, from the
founder all the way down to the customers. Relevant to their mission statement, WFI is
not just an ordinary food chain; they are looked at as an extraordinary food chain. Their
beliefs and values stay consistent with their mission statement throughout every intricate
part of their company. They sell the highest quality natural and organic products
available; they believe that their customers is the most important and vital stakeholder in
the company; they support team member excellence and happiness; they create wealth

through profits and growth; they support communities and encourage local involvement;
and they also promote environmental stewardship.
WFIs mission statement isnt just a set of guidelines; it is a way of life for them.
John Mackey, co-founder of WFI, is working to create a better lifestyle for people and
their environment. He is helping to create a healthier and better lifestyle for all people by
being committed to customers and our environment.
Board of Directors
The Board of Directors of Whole Foods Market is comprised of both internal and
external members that contribute a wealth of experience and knowledge.
Board Members. John P. Mackey, 52, co-founder of the Company, who has
served as Chairman of the Board and Chief Executive Officer since 1980 and also served
as President from June 2001 to October 2004. David W. Dupree, 52, has served as
director of the company since August 1996. He brings outside business and
entrepreneurial experience through his position as Managing Director of The Halifax
Group, a limited partnership founded in 1999 whose purpose is to pursue small and midcap investment opportunities and his involvement on the board of Insight Health Services
Corp. Dr. John B. Elstrott, 57, has served as a director of the company since February
1995. He brings outside knowledge and experience through his position as a Clinical
Professor of Entrepreneurship and the founding director of the Levy-Rosenblum Institute
for Entrepreneurship at Tulane Universitys Freeman School of Business, which was
started in 1991. He has been on the faculty at Tulane since 1982. Mr. Elstrott also serves
on the board of Spectrum Organic Products, Inc. Gabrielle E. Greene, 45, has served as
director of the company since September 2003. Since January 2002, she has held the title
of Chief Financial Officer of the Villanueva Companies, a private holding company with

diverse investment interests. From August 2000 until January 2002, she has served as
CFO of Crown Services, a construction services company. From January 1998 until
August 2000, Ms. Greene was a partner in BE/Greenwich Street Capital, a private equity
firm. Hassan Hass, 58, has served as director of the company since June 2005. Mr.
Hassan brings experience from the whole foods industry as well as managerial skills from
his involvement as General Partner of Greenmont Capital, an investment firm. Mr.
Hassan founded Fresh & Wild, Ltd., an organic food retailer in the United Kingdom and
served as President and Executive Chairman of Fresh & Wild until 2004 when the
company was acquired by Whole Foods Market. Mr. Hass brings international
experience to the board. Morris J. Siegel, 56, has served as director of the Company since
September 2003. He brings entrepreneurial business knowledge and skills through his
current investment firm named Capitol Peaks. He was the co-founder of Celestial
Seasonings, Inc. serving as Chairman and CEO from 1970 until 2002. Celestial
Seasonings merged with The Hain Food Group forming The Hain Celestial Group of
which he served as Vice Chairman from 2000 until retiring in 2002. He currently serves
on the board of CNS Pharmaceutical Company. Dr. Ralph Z. Sorenson, 72, has served as
a director of the company since December 1994. Dr. Sorenson is Managing Partner of the
Sorenson Limited Partnership, a venture investment partnership and President Emeritus
of Babson College and Professor Emeritus and former Dean of the University of
Colorado College of Business Administration. He also serves as a director of Eaton Vance
Corp. 1

Information obtained from www.wholefoods.com corporate governance

Company Stock. Whole Foods Market stock is publicly traded. There is only
common stock options available for stockholders. The total share volume is 5,987,975
and there are 140,580,000 commons shares outstanding. Only 1,331,302 shares are
owned by the Board of Directors. This amount is less than 1%. Mr. Mackey directly owns
1,153,230 of Common Stock and 60,000 shares indirectly by virtue of a Trust. Mr.
Dupree currently owns 22,892 shares of Whole Foods common stock. Dr Elstrott
currently owns 27,800 shares of common stock. Ms. Greene currently owns 2,046 shares
of Common Stock. Mr. Hassan currently owns 30,002 shares of Common Stock. Mr.
Siegel currently owns 3,000 shares of Common Stock. Dr. Sorenson currently owns
32,332 shares of Common Stock. 2
Strategic Management Involvement. The board of directors is involved in all
aspects of strategic management. They have an e-mail address where shareholders can
send them suggestions and ideas. They have open communication with the personnel of
Whole Foods Market in order to keep information flowing throughout the entire
corporation through a forum called Shareholder Communications with the Board.3
Top Management
Top Management for Whole Foods Market is called the Executive Officers.
Members of this group are John Mackey, A.C. Gallo, Walter Robb, Glenda Chamberlin,
James P. Sud, and Lee Valkenaar.

Information of Stock obtained from the following web page, and the title of Form 4 where it shows what

stock is owned by whom: http://www.nasdaq.com/asp/quotes_sec.asp?

symbol=WFMI&selected=WFMI&page=filings
3

Information obtained from www.wholefoods.com

Executive Officers. John P. Mackey, co-founder of the Company, has served as

Chairman of the Board and Chief Executive Officer since 1980. Mr. Mackey also served
as President of the Company from July 2001 through September 2004. A.C. Gallo has
served as Co-President of the Company since September 2004 and as Chief Operating
Officer since December 2003. Mr. Gallo has held various positions with the Company
and with Bread & Circus, Inc., which was acquired by the Company in October 1992,
including Vice President and President of the North Atlantic Region, and Executive Vice
President of Operations. Walter Robb has served as Co-President of the Company since
September 2004 and as Chief Operating Officer since December 2003. Since joining the
Company in 1991, Mr. Robb has also served as Store Team Leader, President of the
Northern Pacific Region, and Executive Vice President of Operations. Glenda
Chamberlain has served as Executive Vice President and Chief Financial Officer of the
Company since December 1988. James P. Sud has served as Executive Vice President of
Growth and Business Development since February 2001. Mr. Sud joined the Company in
May 1997 and served as Vice President and Chief Operating Officer until February 2001.
Mr. Sud served as a director of the Company from 1980 to 1997. Lee Valkenaar has
served as Executive Vice President of Global Support since September 2004. Mr.
Valkenaar has held various positions with the Company since 1987, including Store Team
Leader, Vice President and President of the Southwest Region, and President of the MidAtlantic Region.
Involvement. Top Management has been responsible for the corporations
performance over the past few years. Four of the six members of top management have
been there for three or less years. These members are: A.C. Gallo, Walter Robb, James P.

Sud, and Lee Valkenaar. All Executive Officers that makes up top management have been
promoted internally.
When asked the question What is top management level of involvement in the
strategic management process, it can honestly be said that a huge portion of the success
of Whole Foods has to do with top management. In the situation with CEO John Mackey
and Lauren Ornelas, director of Viva! USA which is a group devoted to improving the
living conditions of farm animals, after having gone back and forth in dispute with each
other John Mackey did almost the unthinkable and decided to make sense of her beliefs
instead of dismissing her completely.
Going the extra mile, he educated himself by reading dozens of books about
Japanese management in the 1970s to figure out how Whole Foods should be organized,
for example, or becoming a student of labor unions when he was confronted by
unionization efforts in the 1990s. Over three months, he gave himself a solo tutorial on
modern factory farming. "I read a dozen books about how animals are raised in this
country," he says, "going all the way back to Peter Singer's Animal Liberation in 1975.
The more I read, the more I was interested in it. I said, Damn, these people are right. This
is terrible."
Mackey did two things. He changed his vegetarian diet to vegan (he no longer
eats food produced from animals, including dairy products). And he sent Ornelas an
email telling her she was right -- not just about ducks, but about chickens, pigs, and cows.
Mackey wrote that Whole Foods would immediately begin using its influence and buying
power to demand that the meat it sells comes from animals that have been treated with a
measure of dignity before being slaughtered. He invited Ornelas to help4.
4

http://www.fastcompany.com/magazine/84/wholefoods.html

Systematic Approach. Top Management has established quality enhanced

products at the most competitive price possible as being their systematic approach to
strategic management. They believe that by carrying natural and organic products they
are offering the best tasting and most nutritious food available. The quality of their foods
is measured by nutrition, freshness, appearance, and taste. In their search for foods that
meet their quality standards, Whole Foods realize that it is a never-ending process that
involves careful judgment of their buyers.
Along with the quality of their foods, top management has gone even further to
offer customers a rewarding experience as they shop in their store. The atmosphere of
Whole Foods is in the form of a celebration of food: bright, well-staffed, and seductive; a
mouth-watering festival of colors, smells, and textures; and homage to the appetite5.
These strategic approaches to management have led Whole Foods to a distinct
success as they provide and educate the environment about the natural and organic foods
they offer and how they support health and well-being.
Internal Communication. As top management continuously discover innovative
market ideas that will enhance the brand reputation of Whole Foods, they communicate
these ideas to the board of directors and lower-level managers. This communication is
evident in their growth trends. A typical Whole Foods store that did $15 million in
business in 1999 did $21.4 million in 2003 -- $6 million in added sales that it mostly took
away from the likes of Safeway, Kroger, Albertson's, and Food Lion6. Top management
tries hard to ensure that every manager and employee is treated ethically. Each store had a
book in the office that listed the pay of every employee for the previous year. The book

5
6

http://www.fastcompany.com/magazine/84/wholefoods.html
http://www.fastcompany.com/magazine/84/wholefoods.html

was available to anyone -- and was especially valuable if you were promoted or if you
relocated, and wanted to see how your pay compared with your colleagues'. The pay
book, surprisingly little used, set a tone of what Mackey called "no secrets management."
Strategic Decisions. When a decision is made at Whole Foods it is either by vote
or consultation with the people who are involved. This is something top management
strives not to override. The decisions that are made by consultations usually involve
senior top management. This is where John Mackey consults with the people he trust to
make a decision for the best of the company. The decisions that are made by vote
(consensus) usually include the leadership team and/or individual store teams. Each
individual store has a set of teams that can lead all the way to the national corporate
headquarters. The teams make decisions for hiring new employees. Every new employee
must be voted onto the staff after a tryout; it takes a two-thirds yes vote from the team to
stay7.
Executive Compensation. Stock options play a big role in executive
compensation. Approximately 35% of the compensation that Executive Officers receive
in the long-run comes from stock options. These options are broken down into long term
incentive plans, exercised options, exercisable options, and unexercisable options. Stock
options for executive compensation in total amounts to $2.4 million dollars.8 The
Company recognized a share-based compensation charge totaling approximately $17.4
million. The calculation of this charge required that management make estimates and
assumptions concerning future team member turnover.

7
8

http://www.fastcompany.com/magazine/84/wholefoods.html
http://host.businessweek.com/businessweek/research/stocks/options/options.asp?symbol=WFMI.O

Coping With Future Challenges. Based on the information stated in this portion
of the strategic audit, Whole Foods top management will be able to sufficiently cope with
future challenges. They have a solid strategy that will continue to assist them along the
way. Because they are so different, and sometimes referred to as weird their systematic
approaches apparently works for them and their customer base.

References

Whole Foods Market Inc.

Strategic Audit
External Environment: Opportunities and Threats
(SWOT)
Team Erie: April Van Rivers, Justin Miller, Tammi
Thompson, Michelle Perez-Macias

07

Running Head: STRATEGIC AUDIT

Strategic Audit: Whole Foods Market Inc.

April Van Rivers
Justin Miller
Tammie Thompson
Michelle Perez-Macias
Florida Gulf Coast University

Societal Environment
Whole Foods present and future threats are growing at a rapid speed and the SEC
is now starting to look at its operations as far as purchasing its leading competitors. The
SEC doesnt want Whole Foods to monopolize the industry. An opportunity for Whole
Foods is organic farming can take a strong leadership role in the restoration of life's value
and meaning. Whole Foods competitors are its threats. The top competitors are Wild
Oats and GNC.

Economic. With an economy that is becoming conscious of their environment,

whole foods market is doing the right thing: Farming Organically in a Complex World
Environmentally, organic farmers has a much gentler impact on the earth than their
conventional counterparts. The organic farmer pays a price for that in higher labor but the
rewards are commensurate if you believe in the land and want to take care of it.
Organic products cost more than conventional products because the price more
accurately reflects the actual cost of food production. Society as a whole bears the health
and environmental costs of toxic chemical use in agriculture, such as the cleanup of soil
and water contamination, while organic farmers must bear the cost of the increased labor
i

and intensive management required as a substitute for chemicals and the use of

genetically modified seeds.

Technological.

People are looking for something better. They're looking for

meaning and value in their lives." In today's world, farming organically seems to be a
step back from our technologically advanced society. "Food is part of the foundation of
culture and community we need to pay more attention to it.

Political-legal. On May 23rd, the SEC intervened, now Whole Foods will have to
wait another month to finish its acquisition of Boulder-based competitor Wild Oats
because federal regulators are taking an unexpectedly lengthy look at the deal.

Sociocultural. Clean, nutritious food untainted by toxic chemicals and grown in

healthy soil teeming with beneficial life is what more and more people want these days.
As a result, while total US food sales have increased between two to four percent a year
for the last seven years; organic products have grown on average more than twenty
percent a year, making it the fastest growing segment of agriculture.
In essence, the purpose of organic farming is to work as a partner with nature to
promote natural and compassionate husbandry of plants and animals while conserving
soil and water resources. As mandated by the USDA National Organic Standards, soil and
plants are not treated with toxic chemicals or persistent pesticides. No toxic fertilizers or
sewage sludge is used to promote growth, nor are genetically engineered seeds allowed.
Animals are fed organic feeds and their natural behaviors must be accommodated to

make their lives as comfortable and stress-free as possible. The use of synthetic growth
hormones and antibiotics are forbidden.

Forces in other regions of the world (Are they

different). Though still a small industry compared to conventional agriculture,
increasing interest by consumers and the resulting growth in organics bodes well for the
future of human health and the planet as a whole and confirms that organic farming will
continue to grow and have a positive impact on our world.
The world's #1 natural foods chain, the company operates about 185 stores in 31
US states; the District of Columbia; and in Canada and the UK. The stores emphasize
perishable products, which account for about two-thirds of sales. Whole Foods Market
offers more than 1,500 items in four lines of private-label products (such as the premium
Whole Foods and a line of organic products for children, Whole Kids).

Task Environment
There seems to be limited amount of forces in the health food industry that drives
competition. In the last 15 years, Whole Foods Market has swept across the country
buying out the little community stores and not to mention, WFM is in the process of
acquiring Wild Oats; Wild Oats is deemed to be WFMs strongest competitor, but it looks
as if WFM is going to buy out another strong competitor and increase their market share
substantially.
In the past couple of years, WFM entered the UK with the acquisition of seven
Fresh & wild stores. WFMs market share in Europe is not as strong as it is here in the

states, but its not impossible to see WFM take a large share of the market in Europe
within the next decade or so.
a)
b)
c)
d)
e)
f)

Threat of new entrants: Low

Bargaining power of buyers: Low
Threat of substitute products or services: Medium
Bargaining power of suppliers: Low
Rivalry among competing firms: Medium
Relative power of unions, governments, special interest groups:
Medium

The most important key factor affecting the company right now is their customers.
According to their Declaration of Interdependence, their customers are the most
important stakeholder in our business. Therefore, we go to extraordinary lengths to
satisfy and delight our customers. We want to meet or exceed their expectations on every
shopping trip. We know that by doing so we turn customers into advocates for whole
foods. We guarantee our customers 100% product satisfaction or their money will be
refunded. Their customers have provided them with unbelievable loyalty and profits
and in return, WFM is going above and beyond to satisfy their customers by developing
more stores and increasing the quality of their foods and the environment around them.
One of the most unbelievable and genius ideas WFM has had was to mainly buy
out not just their competition, but also their suppliers. Just to name a few, they now
acquired Wellspring Grocery, Bread & circus, Fresh Fields, Allegro Coffee, Harrys
Farmers Market, and Select Fish. With these acquisitions, they supply themselves with
most of their own products; they always have the freshest vegetables, fish, and bread on
hand and thats what sets them apart from competitors and enables them to do the what
they believe is the best for the environments, employees and the most importantly, the
customers.

The only main threat is our government. The government is investigating WFMs
acquisition of Wild Oats right now because believe that if this goes through, WFM could
be considered a monopoly with is illegal here in the states.

External Factors (1)

Opportunities:
Strong leadership role in the
restoration of life's value
and meaning.
Reaching all parts of the
world
Becoming top leading
organic producer
Threats:
competitors
Governmental takeover
Total

Weight
(2)

Rating
(3)

Weighted Score
(4)

.3

5.0

1.5

.2

4.5

.9

.3

5.0

1.5

.1

3.7

.37

.1
1

3.0

Comments
(5)

References

http://www.wholefoodsmarket.com/issues/organic/farming.html
http://www.hoovers.com/free/company-information
http://retail.seekingalpha.com/article/27713

Corporate Culture
Beliefs, Expectations, and Values.

Whole Foods

core values reflect what is truly

important to us as an organization. These are not values that change from time to time,
situation to situation or person to person, but rather they are the underpinning of our
company culture. Many people feel Whole Foods is an exciting company of which to be a
part and a very special place to work. These core values are the primary reasons for this
feeling, and they transcend our size and our growth rate. By maintaining these core
values, regardless of how large a company Whole Foods becomes, we can preserve what
has always been special about our company. These core values are the soul of our
company.

Supporting Team Member Excellence and Happiness.

Empowering Work Environments

Our success is dependent upon the collective energy and intelligence of all of our Team
Members. We strive to create a work environment where motivated Team Members can
flourish and succeed to their highest potential. We appreciate effort and reward results.
Self-Responsibility

We take responsibility for our own success and failures. We celebrate success and see
failures as opportunities for growth. We recognize that we are responsible for our own
happiness and success.

Self-Directed Teams

The fundamental work unit of the company is the self- directed Team. Teams meet
regularly to discuss issues, solve problems and appreciate each others' contributions.
Every Team Member belongs to a Team.
Open & Timely Information

We believe knowledge is power and we support our Team Members' right to access
information that impacts their jobs. Our books are open to our Team Members, including
our annual individual compensation report. We also recognize everyone's right to be
listened to and heard regardless of their point of view.
Incremental Progress

Our company continually improves through unleashing the collective creativity and
intelligence of all of our Team Members. We recognize that everyone has a contribution
to make. We keep getting better at what we do.
Shared Fate

We recognize there is a community of interest among all of our stakeholders. There are
no entitlements; we share together in our collective fate. To that end we have a salary cap
that limits the compensation (wages plus profit incentive bonuses) of any Team Member
to nineteen times the average total compensation of all full-time Team Members in the
company.

Information Systems (IS)

Technology.

WFM uses a central financial management and accounting system from

Peoplesoft. This system is available to all accounting personnel in the stores, warehouses
and regional offices. The system consolidates the companys financial reporting, and
makes all vendor payments. Currently, Peoplesoft is the only enterprise-wide system used
at WFM.
Stores have a stand-alone Point of Sale system called RBX. This system is used to
scan and record product sales and also maintains the item master with the latest product
prices. The POS system allows store managers to monitor what has been sold. However,
there is no central inventory system at the store level for tracking which items have been
purchased. Buyers order new products largely by visual inspection (or physical count).
Most orders are placed by phone and faxed, though some stores have MSI machines,
which are handheld instruments that relay orders through a modem. Stores load sales and
purchase information through a custom made application onto Peoplesoft. Peoplesoft
does not keep track of item-wise inventory at a store level. As a result, physical inventory
levels are not tracked at the store level.
WFM has seven company-owned distribution centers. Three of them run an
application called EXE which tracks inventory at the distribution center. The other four
run their own legacy software applications for inventory--a result of acquisition.
Five of the eight regional centers also have a system called CIX, which is a product
master database for the region. It provides a regional view of the RBX product master.
The data variables, however, are different in each of the regions. For example, one region
uses 18 digits for unique tracking of UPC codes. The others may use the standard of 13 or

14 digits. The MA and SO regions do not use CIX and use their own application. Book
value currently prohibits replacement.

IS Organization.

The IS organization led by Mike Clifford, CIO, has a matrix

structure. Each region has an IS coordinator who reports to the business unit as well as to
the CIO. At the head office, WFM has five groups reporting to the CIO:
1

Strategy & Planning group

National Infrastructure Team

Supply Chain Automation Team

Business Systems Team

Retail System Team

The director of each of the five head office groups has a business partner with whom
they work (e.g., the Supply Chain Automation Team works with the Vice President of
Purchasing). There are around 80 people working at a national level in IS. The regional
IS coordinators typically have 6-8 people reporting to them. Requests for new technology
support stem from the businesses. IS planning is done on a quarterly basis where
directors plan projects with their business partners. The regional coordinators are
responsible for the day-to-day support of the businesses. The IS structure, like the rest of
WFM, is decentralized with operational responsibility residing at the regional level. Past
efforts at centralization have not been very effective due to WFMs entrepreneurial
culture.

Large implementations in the recent past. The company had decided a few years
ago to install an ERP system. They had chosen Peoplesoft as the platform and had
utilized the services of a large big five consulting firm. However, they faced major
implementation issues with Peoplesoft. The project took longer to implement than
originally envisaged. This left a very bad feeling within WFM about large-scale
implementations as being not only time-intensive but also very costly. The company
actually disengaged the consulting firm prior to completion.

B2B initiative.

was not convinced. Adopting any system always comes at a cost and would

the cost justify the benefits of a new system? According to Mike, B2B could potentially reduce
purchasing costs by 2% on average but what would be the cost of implementing such a
system. To further study B2B applications for WFM, Mike called on Jeff Zon, Director of IS.
Jeff plunged into a study of B2B implementation at WFM. Jeff knew that any B2B effort would
need to have the following implications for WFM:
1

Build capabilities within WFM IT. In the past, all programming and infrastructure
projects were implemented by a patchwork of consulting organizations.

Develop a shopping list of B2B products, which could then be evaluated for their
suitability for WFM.

As Jeff studied the fascinating world of B2B, he knew he had to answer key strategic
questions:
1

Should they build a B2B system or purchase a shrink wrap (packaged) solution?

Should they hire a consultant or conduct the study internally?

Should they implement on a company wide basis or begin with a small pilot program
and progressively implement site by site?

Should they look at implementing all suppliers to a store or a subset of suppliers?

Organizational structure...?

Build vs. Buy.

After a few weeks of research, Jeff concluded that there were 2 broad ways for
implementing B2B--WFM could either become a member of a B2B exchange or develop their
own B2B system tied to its own suppliers. The second approach seemed to be more applicable
as there were no credible B2B exchanges in the grocery industry.
In building their own B2B system, WFM had basically 3 options:
1

Shrink-wrap Software

Electronic Data Interchange (EDI)

Custom Application

Shrink-wrap Software.

Jeff was aware of several vendors selling B2B software. A few

them were Ipnet and Bak-Tek. Both these vendors offered an ASP model where they would
also host the application. Using shrink-wrap software would cut down the development effort.
However, most of the software also required that the suppliers have certain installations on
their IS. The fee structure was quite economical to WFM--it involved a small upfront (or
onetime) license fee and a monthly usage fee. Total cost of ownership was expected to be
under $100,000 (indicative). Most applications also collected a monthly fee from the suppliers.
The investment involved in this option was not very large and it also had the advantage of
offering a ready-made solution from vendors experienced in the field. WFM could chose
vendors who had a proven track record in the industry and who would be able to deliver a
time tested robust solution.

Electronic Data Interchange (EDI). EDI involved exchanging information between

suppliers and WFM in standard EDI formats, over secure Value Added Networks (VANs).
The installation of EDI for WFM would be quite easy through established EDI vendors.
There was also a perception that EDI was more secure as it operated over proprietary
networks. EDI, however, also required smaller suppliers to have EDI-compatible
information systems, which would ensure that they could communicate order information
between WFM and themselves. In addition EDI had the following characteristics:
1

It cost about 25 cents for 1000 characters--each order would be around 1000
characters.

Both WFM and the supplier would be charged by the EDI service provider.

Suppliers would need to be connected to the VAN to receive EDI messages.

A few of WFMs suppliers were already using EDI. These suppliers insisted that
WFM become a part of their VAN in order to transact with them. So far, WFM had
resisted joining their VANs. The EDI option would generally cost more than the shrink
wrap solution. However, the EDI solution would provide a very high level of security.
Security was important to WFM not only for itself but also to provide comfort to its
suppliers. With the number of Internet frauds increasing daily, this solution would
definitely be attractive to any security conscious organization. A lot of large organizations
did not mind paying the extra cost of EDI in exchange for the security benefits.

Custom Application.

Jeff figured that building an XML and email based B2B system

would be quite simple for WFM. It would involve employing a developer and purchasing

some hardware and software. A simple email-based system could be developed where a
purchase order could be generated by WFM and sent to the supplier via e-mail. The
supplier, upon receipt of the email would accept the purchase order and then fill out an
invoice form (which could be a standard form attached to the email) and return it to
WFM. This standard invoice form would then be integrated with WFMs financial
system. In this method, the entire supplier needed was email access, which was fairly
common even among smaller suppliers. The other advantage of building in-house is that
it would build B2B capabilities and also allow the IS team to experiment with several
different new products while building the system. A homegrown solution would probably
cost less than $ 100,000 (indicative) as well. There remained several pitfalls, however, to
this approach. The first was the question of how robust of an application could the IS
team develop? While developing a homegrown solution would not be difficult, could it
compare with that of other vendors who have already developed and tested robust
systems over time? In a way, this approach was also like "re-inventing the wheel."
Second, would this method be cheaper than existing off-the-shelf solutions? Third, how
much security could WFM achieve in such an application given that information was
being transmitted over email.

Internal Factor Analysis Summary (IFAS Table):

Internal factors
Strengths:
Empowering Work
Environments
Shared Fate
sustainable future
Experienced top
Management

Weight

Rating

.30

5.0

.15
.20
.30

3.0
3.9
4.2

.05

2.0

Weaknesses:
sell stock directly to
the public

Situation Analysis- SFAS Matrix

Theyighted
Score

Long

Intermediate

Weight Rating

Short

Strategic Factors

Comments

S1-Empowering Work
Environments

.10

.50

x x

Shared
independence and
commitment

S2-Sustainable Future

.15

2.8

.42

x x

Key to success

S3-Customer Satisfaction

.15

.75

W1-High Prices

.10

2.2

.22

x x

May deter
potential
customers

W2- Market Risk

.10

2.0

.44

Sell of stock
decreasing

O1-Strong leadership role in the

restoration of life's value and
meaning.

.10

.50

O2-Intl awareness

.10

4.0

.40

x x

.10

3.0

.30

x x

.10

1.8

.27

Spread goodwill
and knowledge
Key to ultimate
success

T1- Competitors

T2- Governmental takeover

Generic/substitute
products, and
imitators
Could be
considered a
monopoly

Strategic Audit
Total Scores

1.00

3.80

Review of Mission and Objectives. Whole Foods Market is a dynamic leader in

the quality of natural and organic food business. They are a mission-driven company that
aims to set the standards of excellence for food retailers. They are building a business in
which high standards permeate all aspects of their company. Quality is a state of mind
and a form of action at Whole Foods Market.9
In light of the key strategic factors, their mission and objectives are deemed
appropriate. Starting with their aim to empower their employees, their success is
dependent upon the collective energy and intelligence of all their Team Members. They
strive to create a work environment where motivated Team Members can flourish and
succeed to their highest potential.10

Whole Foods Market

Whole Foods Market

10

30

Strategic Audit
When speaking of a sustainable future, Whole Foods not only offer natural and
organic foods but they also educate people and provide support to farmers. This is an area
that is being done strategically well for the sustainability of the environment and Whole
Foods.
Whole Foods extend extraordinary lengths to satisfy and delight their customers.
They want to meet or exceed their expectations on every shopping trip. They know that
by doing so they turn customers into advocates for their business.11 This is how Whole
Foods have managed to stay ahead of competitors. Advocates do more than shop; they
talk about Whole Foods to their friends and others and persuasively create an interest.
Whole Foods Vision Statement reflects the hopes and intentions of many people.
They do not believe it always accurately portrays the way things currently are at Whole
Foods Market so much as the way they would like things to be. It is their dissatisfaction
with the current reality, when compared with what is possible, that spurs them toward
excellence and toward creating a better person, company, and world.
The mission and objectives of Whole Foods Market is precise and should not be
changed. We believe that it is their mission and their actions toward achieving this that
has kept them on a competitive edge. With their long-term goal being to expand out
internationally and educate for a more sustainable future, their current mission and
objectives will help them to get their. We recommend that in addition to the current
objectives that Whole Foods put more focus into their opportunities and capitalize from
them. Whole Foods have an advantage because they are willing to educate for health and
11

Whole Foods Market

31

Strategic Audit
well-being which is becoming a nationwide concern. While they are already educating
they can also make it an objective to host or sponsor seminars for children that will help
them acquire a healthy lifestyle at a young age.
Strategic Alternatives and Recommended Strategy. We believe that with more
careful implementation of present strategies Whole Foods can meet their current and
proposed objectives.

32

Strategic Audit
TOWS Matrix

EFAS/IFAS

Empowering Work Envir.

Sell of Stock

Shared Fate

High Prices

Sustainable Future

New hire confusion

Exp. Top Management

Non-traditional policies

Quality Standards

Transparency of strategy

Customer Service
Education
O

Retail Innovation
SO Strategies

WO Strategies

Nationwide Appeal

Offer products that can only be

Offer the best products for the

Educate value of well-being

found at WFM

buck

Make WFM an eponym for top

More nationwide expansion

quality organic/natural food

Constant innovation and

Leading organic producer

status

capitalism that is hard to imitate

Retail innovation and

capitalism

ST Strategies

WT Strategies

New entrants

Acquire new quality standards

Competitive pricing

Substitute products

that are hard to substitute

Constant innovation of strategy

Stay ahead technology and

and products

Culture imitators

agricultural concerns

Competitors
Governmental Powers

Diversify retailing efforts

33

Strategic Audit

Major Feasible Alternatives. The major feasible alternative strategies are:

staying ahead of technology and agricultural concerns, competitive pricing, global
expansion, and diversifying their retailing efforts. The pros for staying ahead of
technology and agricultural concerns are 1) being able to predict industrial changes 2)
fluctuation of operations 3) being able to remain constant with their high quality
standards 4) being able to keep suppliers and environmentalist satisfied. The cons of
staying ahead of technology and agricultural concerns are 1) could be a costly and
difficult to maintain 2) time consuming, WFM would need to hire additional workers.

The pros for competitive pricing are 1) WFM can offer products at a profitable
price 2) WFM would be able to remain in competition with competitors 3) WFM would
be able to offer top quality products at reasonable prices. The cons for competitive
pricing are 1) customers may be deterred if the price it too high 2) may cause bad
publicity from customer advocate 3) the price may not match the quality.

The pros for global expansion are 1) more stores, more profit 2) more global
awareness of WFM 3) more chances of WFM becoming a nationwide eponym for top
quality natural foods 4) could decrease competition 5) WFM can educate on a broader
spectrum. The cons of global expansion are 1) very costly and require a lot of capital 2)
could have a diminishing effect on income statement and profits 3) may not appeal to
every country 4) will drive up S & A costs and reduce profits. 5) May take a while to
break-even.

34

Strategic Audit

The pros for diversifying their retailing efforts are 1) decreasing competition
without buying out competitors 2) offer more services for customer satisfaction 3)
becoming more known 4) appeal to more market segments. The cons for diversifying
their retailing efforts are 1) this could require more use of machines including
automobiles 2) environmentalist may not consider this to be favorable 3) may lead to a
purchase of more wind energy.

With the suggested alternative strategies falling within the societal, industry, and
company environment, we feel that Whole Foods will have no problem agreeing and
adapting to this change. These alternatives are in compliance with WFM current mission
and objectives. We feel that in the long-run these strategies can have a beneficial affect on
the company.

Recommended Strategy. For the corporate level of WFM we are recommending

global expansion and retail diversification. These two are chosen to implement the
growth strategy for WFM. Global expansion will give them more stores and exposure.
Retail diversification is very broad but will grow their business into a new segment.
While WFM is currently in one location they can implement this strategy into becoming
more transitional and offer mobile delivery services to customers or businesses.

For the business level of WFM we recommend competitive pricing. This is

chosen to implement the competitive strategy. Currently WFM offers competitive pricing;

35

Strategic Audit
however, our recommendation is for a more innovational approach with incentives for
buying. We do not recommend a rewards program because WFM is made up of creators
and not imitators. We do recommend in-store incentives that will give customers more
reasons to shop at Whole Foods Market and pay the competitive prices.

For the functional level of WFM we recommend staying ahead of technology and
agricultural concerns. Nothing is worse for a business than finding out something that
was not in compliance by someone who is not affiliated with the corporation. For WFM
this would mean possibly hiring or expanding job descriptions for select employees to
have direct communication with suppliers. This is something that is already in place at
WFM but not to this degree. This would help in predicting operations and industrial
changes that could directly affect manufacturing processes at WFM. By doing this WFM
would be able to reinforce their corporate and business strategies.
Impact of Recommendations. Whole Foods Market is a company that expounds
a great quality, great food, and a rewarding shopping experience. Their employees are
empowered to know and do their job better than anyone else. Their top management are
very experienced in the natural/organic food industry and the Board of Directors are
diverse enough to give advice in just about every area. With a company that extends this
much knowledge and competence to from the top down, it is not a question of
competency. Whole Foods Market has the ability and know-how to adapt and implement
these recommendations. Based on their previous accomplishments they will probably
exceed our recommendation with more innovativeness.

36

Strategic Audit
References

Whole Foods Market Website http://www.wholefoodsmarket.com

September 26, 2006. Retrieved June 11, 2007

37

Strategic Audit: Whole Foods Market Inc.

Team Erie: April Van Rivers
Justin Miller
Tammie Thompson
Michelle Perez-Macias

Part VII : Implementation (missing)

Part VIII: Evaluation and Control

Evaluation
Whole foods Information System is called People soft. Their communication structure is set up as a
matrix. Through this system, people in all levels of the business can communicate with each other.
Ultimately, the IS system is decentralized with operational responsibility at the regional level. Stores
have a stand alone Point of Sale system called RBX, which is used to scan product sales and maintain
current prices. Each region has an Information System coordinator reporting to the CIO. Regional
managers are responsible for the day-to-day support of the business. At the main office, there are five
groups that report to the CIO. These groups are the Strategy and Planning group, the National
Infrastructure Team, the Supply Chain Automation Team, the Business Systems Team, and the Retain
System Team. (1)
Each region has a CIX, which is a product master database. Even though the system is the same, it is
composed differently in each region to fit the regions needs. Depending on the region, the tracking
codes and amounts vary. The CIO and his team are always on the search for ways to do things better.
They consistently compare themselves to their leading competitors (Wild Oats at this time), and use
their growth strategy to meet the corporations goals. They continuously use benchmarking as a tool to
enhance their profitability and market share. (2)

Controls
Whole foods has managed to get their employees involved in its strategic plan by striving to build
positive and healthy relationships among team members (Declaration of Interdependence). Whole
foods believes that the best way to encourage participation and involvement at all levels of its business,
every team member has to be involved. They have Self directed Teams that meet regularly to discuss
issues, solve problems and appreciate each other's contributions. They have increased communication
through team member forums and advisory groups, and open book, open door, and open people

practices. They have labor gain sharing and other team member incentive programs, team member
stock options and stock purchase plans. They offer continuous learning opportunities about company
values, food, nutrition and job skills, and promotes mostly from within. Overall, Whole foods has a
commitment to make their employees jobs more fun by combining work and play and through friendly
competitions to improve their stores.
Whole foods truly believes that their team members play a critical role in helping build the store into a
profitable and beneficial part of its community. They empower their employees to make their own
decisions, creating a respectful workplace where people are treated fairly and are highly motivated to
succeed. With their open communication policy, they have created better communication and a better
understanding of the business as a whole, and have instilled trust amongst their stakeholders. (3)
1 http://misbridge.mccombs.utexas.edu/knowledge/cases/wholefoods/background.asp
2 http://misbridge.mccombs.utexas.edu/knowledge/cases/wholefoods/MISBridgeCase-Wholefoods.pdf
3 http://www.wholefoods.com/company/declaration.html