Whole Foods Markets is a threat to Whole Foods Markets that customers will switch their business to competitors which are Wal-Mart and Target within the industry. It makes the Whole Foods Markets’s environment more competitive as it needs to aggressively pricing their products efficiently. Thus, it reduces the Whole Foods Markets’s profit in an industry because there are potential costs that the business needs to consider. In this case, the existence of Target and Wal-Mart competing in the supermarket industry serving grocery products give a stiff competition to Whole Foods Markets as their products is selling at a lower price as compared with Whole Foods Markets.
Therefore, the Whole Foods Markets need to incur costs such as developing or providing unique products to respond to the customers’ preferences, as opposed to one homogenous goods. Besides, the Whole Foods Markets will also facing loss in customers’ loyalty due to the high intensity of rivalry in the industry. When the intensity of rivalry is high, the brand loyalty is becoming insignificant and this leads the reduction of sales of the business for a longer period of time as well as the business lost feedback and opportunity to improve as the customers will go to the Wal-Mart and Target. This causes high exit barriers if no actions are taken to solve this problem such as difficulty to sell or relocate the business’s specialized assets, the exit costs to incur is huge such as asset write-offs and closure costs, and also if there is interrelated businesses. Therefore, it gives an impact to the Whole Foods Markets to put a lot of efforts in building the customer relationship for instance; appreciate the customers by giving discounts to the most loyal customers of the business. Thus, the business is able to retain their customers to purchase products of Whole Foods Markets.
High strategic stakes is also giving an impact on the intensity of rivalry. In order for Whole Foods Markets to success, it must sacrifice the profitability for expansion. High intensity of rivalry with the existence of the competitors which are Wal-Mart and Target will reduce the market share of Whole Foods Market. When the market share is reduced, it gives significant impacts on the Whole Foods Markets’s stock performance, depending on industry conditions which is also resulting the reputation of the Company drops. Reduction in market share due to intense competition between Whole Foods Markets and its competitors which are Wal-Mart and Target is also reducing the sales as well as the profit of the Company.
Whole Foods Markets would be impacted if there is no immediate corrective action is taken to solve the issue of reduction in market share which gives high possibility or chances for the Company to close a part of its operation (downscope) or cease the Company’s business operation forever. This is also may lead to bankruptcy towards Whole Foods Markets if the Company continuously facing the reduction in market share. b. Impact on the bargaining power of buyers The impact on the high bargaining power of buyers when Wal-Mart and Target began offering natural products similar to Whole Foods Markets is the Company earns low profits because of the buyers have many choices to purchase the products from other competitors of Whole Foods Markets which provide the similar types of products selling natural and organic foods. It is because nowadays most of the buyers are price-sensitive which means that they prefer to buy the products at a lower price but in high quality standards from other companies in similar industry. Therefore, Whole Foods Markets needs to take an action in producing more products in order to meet the demand of the buyers and set reasonable prices where supply and demand produces the optimum revenue. Besides, Whole Foods Markets will also facing high switching costs if bargaining power of buyers is increase.
It means that the Company needs to put an effort such as time and energy, and incur costs such as operation costs, production costs, and marketing costs in order to lock-in buyers by searching the right suppliers of its products whichever offer lower cost to the Company. Thus, it can avoid from losing the buyers since the price offered will also reduce due to the costs reduction. If Whole Foods Markets is able to lock-in the buyers, their sales as well as profits may increase since the Company is able to meet the buyers’ demand. Last but not least, the impact on high bargaining power of buyers when Wal-Mart and Target began offering natural products similar to Whole Foods Markets is the Company should take initiative by any means necessary to survive in this competition or rivalry. One of the necessary initiatives is by producing the products that differs from its competitors.
This will make a product more attractive with unique qualities as compared with other competing products within the same industry. For example, the products must have an additional benefit, such as additional features, higher overall quality as well as a lower cost which lead to lower price. These may lead the buyers to buy the products since it satisfied their demand. By producing more unique, beneficial, advantages, and superior products, the competition will arise between these companies within the similar industry which may lead the Company to sustain and create competitive advantages.
Since it creates competitive advantages, thus it may increases brand loyalty and even allow for a higher price point if the products is perceived to be better than the competitors.
