Question

1. What is competition like in the grocery retail industry? Which of the five competitive forces is strongest? Which is or are weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants?

2. What does your strategic group map of the U.S. grocery retail industry look like? Is Whole Foods Market suitably positioned? Why or why or why not?

3. What do you see as the key drivers of change in the U.S. grocery retail industry? Based on these drivers, trace Amazon, Inc.’s evolution in the U.S. retail grocery industry. Is the Amazon Inc. / Whole Foods Market combination potentially disruptive? Why or why not?

4. What key factors may determine the success of the Amazon, Inc. combination with Whole Foods Market?

5. What recommendations would you make to Jeff Bezos, CEO and founder of Amazon, Inc. to improve Whole Foods Markets’ competitiveness in the market while mitigating any current and future risks?

Answer 1

1. What is competition like in the grocery retail industry? Which of the five competitive forces is strongest? Which is or are weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants?

Competition in the grocery industry is high, but Amazon’s acquisition of Whole Foods has already had a significant impact on the market. The competitive forces in the newly evolving market for grocery retail industry are moderate to relatively high. The threat of new entry is low, due to the amount of initial capital it takes to enter and become a contender. The threat of rivalry is the strongest force. The threat of substitution is relatively low. In regards to substitutions, you have places like fast food chains, normal restaurants or making their own food.

Because food is a necessity in life and grocery stores are the cheapest place to buy in bulk, the threat of substitution is low. This is the lowest of the forces There are a high number of competitors who share the grocery retail industry, offering similar products, further customer loyalty can be either strong or nonexistent. Major grocers must fight to occupy market share in this industry. The competitive forces that have the greatest effect on industry attractiveness is the threat of new entry. As mentioned above, the capital, supply chain capabilities, ability to procure product is extremely high and therefore makes the industry extremely unattractive to any company without the aforementioned qualities or capabilities.

2. What does your strategic group map of the U.S. grocery retail industry look like? Is Whole Foods Market suitably positioned? Why or why or why not?

At this point in time Whole Foods is positioned well in the grocery industry with high quality products and a good brand reputation. They match the size of industry leaders such as Harris Teeter, and Farm Fresh, and Publix and have a reputation for quality product, wide product offering and a good brand reputation. With this being said they are priced higher than other major grocers in this space, they are able to operate this way because they offer differentiated higher quality product than competitors.

3. What do you see as the key drivers of change in the U.S. grocery retail industry? Based on these drivers, trace Amazon, Inc.’s evolution in the U.S. retail grocery industry. Is the Amazon Inc. / Whole Foods Market combination potentially disruptive? Why or why not?

Some key drivers in the U.S grocery retail industry are the convenience it can bring to the customers buying products and the quality of freshness they can keep in location for a period of time. As technology is progressing, society is becoming more reliant on things being done for them quicker, more efficiently and using less energy. Amazon is excelling in this in regards to the overnight deliveries and the promising future of drone delivery. Soon, for these different grocery stores to build a competitive advantage over one another, they must be able to start delivering groceries to customers in a similar way.

For quality of freshness, these grocery chains need a way to keep their food at the highest quality of freshness for longer periods of time. This will become easier once drones start coming into play, but things like a more improved supply chain operation will have to be executed as well.

4. What key factors may determine the success of the Amazon, Inc. combination with Whole Foods Market?

There are several factors that will determine the success of these two companies. The most dominant factor is Whole Foods understanding and expertise in logistics. The acquisition allows Whole Foods to cut down on existing supply chain costs by offering a physical location in conjunction with their existing online web presence. Amazon’s impact is significant enough that other major grocery retailers must consider cutting costs to remain competitive.

Amazon has significant leverage with their suppliers, so they can continue to disrupt the traditional grocery shopping experience by offering a wide variety in a physical store location, see the product offering for themselves instead of letting someone else serve as their shopper, this is still a market for certain food products to be purchased online. Amazon and Whole Foods needs to evaluate what products are suited to an online platform and continue to innovate in this digital direction.

There is a growing demand for organic products. While Amazon and Whole Foods already offers a wide variety of organic products, as consumers continue to trend towards those foods/lifestyle, they should continue to turn the majority of their product offering organic.Jeff Bezos and Amazon should continue to evaluate the competitors they share the industry with, looking to siphon off any successful strategies/techniques that other industry leaders are employing.