According to the definition of strategy: it is consists of pattern of actions that management takes to:

Pursue its organizations mission

Achieve its objectives
The mission of Whole Foods Market (for the sake of everyones time, I will call it WFM here onwards) is
short, clear and makes very good business sense. The seven core values of WFM are clearly chalked out
and directly link to companys mission. These guide the pursuit of its mission and are not cosmetic.
They derive their strategy or pattern of actions from the values.
Whole People
Organic & Natural
Foods
Highest Quality
Standards
Team Member
Happiness &
Excellence
Customer Delight
Caring about
communities &
environment
Healthy Eating
Education
Whole Foods
Whole Planet
Win-win
partnerships with
Suppliers
Profits & Growth
Arenas
Market Segment:
Organic Foods Retailing Segment
Product Categories
Fresh produce Fruits, vegetables, meat and poultry and seafood
Baked and other prepared foods
Fine quality cheeses and wines
Household products, Body-care and nutritional
Organic pet food
Floral department
Education material on health
Geographic Area:
Upscale urban metropolitan areas
US, UK and Canada
High traffic shopping locations and other premier real estate sites
Average store size: 45,000 to 60,000
Target Audience:
Niche clientele willing to pay premium prices for healthy foods and a organic lifestyle
Differentiators
Quality/Reliability
Strict Quality Standards Extensive list of unacceptable ingredients (2008 the list had 81
chemicals)
Customization
Each store layout customized to fit the particular site
Best show off the particular product mix chosen for that stores target clientele
Image
Project as authentic retailer of healthy organic products
Styling
Colorful dcor & attractive product displays
Cleanliness
Product design
Wide variety of vegan and vegetarian products
Services
Valet parking, massages, personal shopping and home delivery
Education about healthy foods
Locally made offerings and extensive international sections; grilled to order dishes
Friendly and knowledgeable store personnel
Pricing
Competitive Prices
In-value store guide Whole Deal created that contained cents-off coupons, etc.
Private label offerings that were less expensive
Distribution
Purchased fromlocal, regional and national whole sale suppliers to gain economies of scale
Two procurement centers, ten regional distribution, eight regional bake houses, five regional
kitchens, four seafood processing centers and Allegro exclusive coffee distribution
operation.
Vehicles
1992 2002
Proactive Strategy: Open new stores + Acquire small owner managed chains with capable
personnel
Unanticipated change: Attractive acquisition candidates were hard to find:
2002 2007
Reactive Strategy: Decided to open 10-15 intended bigger stores in metropolitan areas
each year
Unanticipated change: Wild Oats acquisition completed but was divested
after FTC filed a suit against WFM
Reactive Strategy: Going forward growth strategy would be based on opening new stores
Staging
Speed of Expansion
Sequence of Initiatives
2003 WFM designated as first national Certified Organic grocer by Quality
Assurance International.
1991 2008 emphasis on expanding geographically
2008 2009 recession scaled back expansion
Swift cost containment measures, sales improved again by first quarter of fiscal 2010.
Economic Logic
Unique product offering: selective product range, strong mission and core values that were applied aggressively, stringent quality standards
and commitment to sustainable agriculture.
PremiumPricing: Customers enchanted with product offerings & shopping experience overlooked the high prices.
Spent less on national marketing & advertising: relied mainly on word-of-mouth recommendations fromcustomers.
Team member compensation was tied to store profitability motivating the employees and increasing store contributions.
Before entering into new leases, projections had to pass specified profitability hurdles above the capital that would be invested in the new
store.
Purchases were made regionally or nationally leading to economies of scale.
Private label offerings were cheaper and widely available within store.

Please zoom in the image.




Five elements that make up strategy diamond:
Arenas
Vehicles
Differentiators
Staging
Economic Logic
But strategy is more than choices on these five fronts. It is an integrated, mutually reinforcing set of
choices choices that form a coherent goal.
== Basically, WFM we need to explain not only the strategy diamond, but:
1. How it is derived from its mission to its core values and from there the strategy. And how the choices
they make on each of the five fronts are mutually reinforcing. The link among them is very important.




Mission:
Whole Foods, Whole People, Whole Planet.
7 core values were actually converted into strategic and financial objectives and the co. strategy was
truly derived from it. From selling highest quality organic and natural food to delighting customers, retail
innovation and educating customers and team members about healthy living, team member happiness
by providing great growth opportunities and excellent work environment, maximizing profits for
shareholders and caring about communities and environment.
Arenas:
Market Segment: Organic Foods Retailing Segment
Target Audience:
o WFM served a niche clientele, but also managed to attract a new kind of customer - one who
was willing to pay a premium to dabble in health food without being totally committed in
vegetarianism or organic lifestyle.
o Food lovers who were willing to pay a premium to get pleasurable taste and indulgence for what
they saw as a high quality gourmet experience.
Geographic Area:
Upscale Urban Metropolitan Area
US, UK and Canada
High traffic shopping location
Premier real estate sites: freestanding, strip centers, high density mixed-use projects
2001-2009: store footprint 45000-60000 square feet.
Internally developed model to analyze potential markets according to education levels, population
density, and income within certain drive times. Economic Logic
Cash investment: Calculate the total.

Vehicles:
How to get to the arenas?
WFM Growth Strategy:
1. Combination of opening new stores and acquiring small, owner managed chains that had capable
personnel and were located in desirable markets.
1991 2002 Open new stores + Acquire small ones. Proactive Strategy
Unanticipated Change: Attractive acquisition candidates were hard to find. Therefore, WFM reacted to
this change and evolved its strategy:
2002 2007 Management decided to drive growth by opening 10 15 intended bigger stores (40,000
-80,000 square feet) in arenas: metropolitan areas staging: each year. Arenas: These stores were on the
same scale or larger than the conventional super markets operated by Kroger, Safeway, Publix and other
chains.
Change: Unanticipated/Anticipated? Purchased Wild Oats Market for $565 million.
Unanticipated Change: WFM completed the acquisition in Aug 2007 after FTC opposed the acquisition
but a US district court gave a go ahead. But in 2008, the US Court of Appeals reversed the lower courts
order and reopened the proceedings.
Reactive Strategy: Post the problematic settlement was made, management decided that going forward
WFM growth strategy would be primarily based on opening new stores rather than on making
acquisitions.




Differentiators
Image | Customization | Price | Styling | Quality/Reliability
WFM was the worlds biggest seller of organic produce - from 20000 items in small stores to 50000
items in largest stores - including natural, organic, gourmet food items, household products, body
care and nutrition, education materials related to healthy eating, organic pet food, floral
department and other beverages.
Sell foods that met strict standards and that were of high quality in terms of nutrition freshness,
appearance and taste. WFM quality standards team maintains an extensive list of unacceptable
ingredients in 2008, there were 81 chemicals on this list.
WFM clientele were enchanted by their product offerings and shopping experience that they
overlooked the high prices and patronized the store in increasing numbers.
Image & Customization: Each store layout was customized to fit the particular site and building to
show off the particular product mix chosen for that stores target audience.
o Colorful dcor, products displayed in attractive manner to welcomed inspection and
stimulated buying.
o Project as authentic retailer of healthy organic products, lifestyle brand and a supermarket
playground with unusually appealing food selections. Great customer service, wide aisles
and cleanliness.
o
Product design:
o All non-food items entailed the use of non-animal testing methods and contained no
artificial ingredients.
o Private-label offerings led by its 365 Everyday Value and 365 Organic brands which
were less expensive and were available in many product categories.
Pricing:
o Sell at most competitive price as possible.
o Higher prices as compared to conventional supermarkets were due to the higher cost of
growing, distributing and marketing organic products.
o Unanticipated Change: 2008-09 recession
WFM executives had to act swiftly and decisively to change the co. strategy to
better match the economic climate: aggressive campaign to emphasize the
number of value-priced items and communicate with the customers about how
prices stacked up at WFM as compared to their rivals.
Services:
o Education about healthy foods and living and cooking classes.
o Some of the stores had valet parking, massages, personal shopping and home delivery.
o Locally made offerings and international sections from around the world Lebanon,
Morocco, India, Thai, Greece & Hungary.
o Fresh Grilled to order dishes.
o Personal attention by store personnel.



Distribution:
o Purchased from local, regional and national whole suppliers.
o At Regional and national levels to gain economies of scale.
o In 2007, emphasis on buying directly from manufacturers and producers.
o Two produce procurement centers
o Ten regional distribution, eight regional bake houses, five regional commissary kitchens
and four seafood processing centers to supply its stores.
o Allegro central coffee roasting operation




Staging
Growth Strategy: Acquisitions + Open new stores. After the problematic Wild Oats acquisition events,
management decided to rely only on opening new stores rather than acquiring other organizations.

This graphs shows that WFM was aggressively expanding by opening and acquiring new stores until
2007 (The spike at 90 in 2007 was because of the Wild Oats acquisition) but then in 2008-09 recession
hit US, and the company had to scale back its store expansion program.
New stores opened after 12-24 months of signing the lease.


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Increase in stores
Economic Logic

After acquiring Wild Oats in 2007, WFM quickly sold 35 Henrys and Sun Harvest stores
previously acquired by Wild Oats for approx. $165 million, reducing its net purchase price for
Wild Oats to $535 million.
Scaled back expansion program after recession in 2008-09.
Swiftly and aggressively changed the co. strategy to better match the economic climate:
emphasize the number of value-priced items and communicate how prices stacked up against
rivals.
Spent less on marketing and advertising. Relied mainly on word-of-mouth recommendations
from customers. Marketing budget was used in the in-store value guide, e-newsletter and other
promotional activities at individual stores. Knowledgeable and friendly store personnel
proactively helped customers so that the customer had pleasurable experience shopping at
WFM and advocated their positive experiences to their friends and family.
Team member compensation was tied to store profitability and stock option rewards were
given. This promoted strong corporate culture and kept the employees motivated enough.
Local Producer Loan Program provided $10 million in low interest loans to promote organic
farming to small farmers. Their fresh produce was sold at the market.
Before entering into a new lease for new stores, the projections had to pass specified
profitability hurdles over and above a return on the capital invested in the store.
EVA based bonus system that linked profits after taxes and cost of capital to executives
compensation. At store level, it meant linking store performance to the team members working
in it.



Fit Test:
How well does the strategy fit the companys situation?
External
A strategy has to be well matched to industry and competitive conditions. Compare what the
others are doing in the industry.
Companys best market opportunities
o In 1980, when WFM opened with a staff of 19, there were less than half a dozen natural
foods supermarkets in US. By 1991, co. had 10 stores with revenues of $92.5 million and
a net income of $1.6 million, over the next 18 years, sales grew at a compound annual
rate of approx. 28% to over $8 billion.
Business environment: Organic Foods Retail Segment (Detail required)
Internal
Strategy must be tailored to the companys resources and competitive capabilities:
o Acquisition of Harrys Market superstore in 2002 where 75% of sales were perishables,
had provided WFM with personnel having valuable intellectual capital in creatively
merchandising all major perishable categories.
Strategy must be supported by a complementary set of functional activities SCM, operations,
sales and marketing, so on.
o Employees in each store were divided into teams, headed by team leader. They were
empowered to make many decisions to support customer satisfaction. This was to keep
team members motivated enough to go to great lengths to satisfy and delight
customers and operate store as efficiently and profitably as possible.
Strategy must be compatible with a co. ability to execute the strategy in competent manner.

Dynamic
Strategy must evolve over time in alignment with the co. situation as external and internal
conditions change.
o Unanticipated Change: 2008-09 recession: Reactive Strategy:
WFM executives had to act swiftly and decisively to change the co. strategy to
better match the economic climate: aggressive campaign to emphasize the
number of value-priced items and communicate with the customers about how
prices stacked up at WFM as compared to their rivals.
In Nov 2007, the company announced it was scaling back its store expansion
program.
In Nov 2007, the company announced it was scaling back its store expansion
program. Reduction in a gross square footage of stores in development from 4.5
million in Nov 2007 to 3.3 million in Nov 2008 and 2.9 million in 2009.
Average store size was lowered to 44000 in Feb 2010 as compared to
56000 in Nov 2006.
Leaner and more disciplined approach to design and build, smaller
stores with simpler dcor and less labor intensive departments to lower
costs.
Management instituted series of cost containment measures cost of
goods sold, direct store expenses, general and admin expenses, hiring
and salary freeze. Steps to monitor and adjust work hours according to
store traffic and workforce reduction through normal attrition without
involuntary layoffs.


Competitive Advantage Test
Can the strategy help the company achieve a sustainable competitive advantage?
Long term sustainability. The bigger and more durable the competitive advantage, the more powerful it
is.
WFM merchandising skills were one of the prime factors in its success to gain market share and
lure shoppers. Sales per square foot were double as compared to that of Kroger and Safeway.
The Performance Test
Is the strategy producing good co. performance?
Two kinds of performance indicators:
1. Competitive strength and market standing.
o WFM clientele were enchanted by their product offerings and shopping experience that they
overlooked the high prices and patronized the store in increasing numbers.
2. Profitability and financial strength.
Financial performance
o Sales revenues grew 20% annually during 2000-2007.
o Profitable every year except 2000.
o Very strong cash flows from operations prior to Wild Oats acquisition.
o Dividend from 2004
o Unanticipated change: 2008-2009 recession:
Result: In Feb 2010, management was pleased with the results of its new pricing
strategy and emphasis on value. Sales growth per store for the first quarter of
fiscal 2010 was 3.5% and total revenues were up 7% over the first quarter of
fiscal 2009.
Cost containment measures result: gross profit improved from 34.03% in fiscal
2008 to 34.29% in fiscal 2009 and 34.34% in first quarter of fiscal 2010. These
measures also produced very strong cash flows from operations. This money
was then used in repaying long-term debt that was taken while the acquisition
of Wild Oats was going on.
Gain in market share
o WFM clientele were enchanted by their product offerings and shopping experience that
they overlooked the high prices and patronized the store in increasing numbers.
o
Competitive position
Profitability