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Kurskod
M0007N
Kursnamn
Internationell Affärsmiljö
Datum
2014-01-14
Material
Final project
Kursexaminator
Tim Foster
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e-mail address
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891214-8965
Aldrin
Matilda
matald-1
TCIEA
910124-5182
Berhane
Beilul
belber-1
TCIEA
900403-3560
Ladeborn
Fanny
fanlad-1
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920901-6386
Nilsson
Nadja
nilnad-1
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920802-3391
Norlin
Markus
amuoni-1
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920812-2003
Persson
Annett
annpeq-1
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900409-0081
Perzon
Karolina
akoepo-1
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890509-5207
Svensson
Emma
emasev-1
TCIEA
Course Code:
M0007N
Course name:
International Business Environment
Group name:
Whole Foods Market to Sweden
Document type:
Report
Assignment number:
Final Report – International Business Analysis
Date:
2014-01-14
Teacher’s notes:
4
5
Abstract
This report is the result of a project executed in the course International Business
Environment, M0007N, at Luleå University of Technology. The report is conducted
by eight third year students at the MSc in Industrial and Management Engineering
program. The objective is to analyze the possibility of a brand expanding and doing
business in another country. The report analyzes the possibility for the organic
grocery chain Whole Foods Market to expand their business to Sweden. The market
for healthy, organic products in Sweden has been growing over the last couple of
years and the question of population health has been raised. Therefore Sweden could
be a potential market for a company like Whole Foods Market.
The market environment has been extensively researched both internally and
externally. A PESTEL-analysis and the Hofstede Framework have been conducted to
analyze every part of the Swedish business environment in general. For a more
precise analysis of the grocery market, Porter’s Five Forces and the National
competitive advantage theory have been applied. These analyzes contributed as input
to the SWOT-analysis where the strengths, weaknesses, opportunities, and threats, of
Whole Foods Market entering Sweden, have been laid out. To further investigate
possibilities, in a more detailed approach, the gathered information was used to select
and manage modes of entry, create an international strategy, and formulate marketing
strategy as well as an organizational structure, for Whole Foods to use if they choose
to enter Sweden.
Lastly, based on both the information gathered and the created analyzes, a decision on
whether Whole Foods Market should enter the Swedish market was made. The brand
was given either a red, yellow or green light. Whole Foods was given a green light to
enter the Swedish market.
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Table of Contents
1. Introduction ................................................................................................................ 1
1.1 Background .......................................................................................................... 1
1.2 Goals and Objectives ........................................................................................... 2
1.3 Approach .............................................................................................................. 3
1.4 Globalization ........................................................................................................ 4
1.5 USA...................................................................................................................... 5
1.6 Sweden ................................................................................................................. 6
1.7 Whole Foods Market............................................................................................ 7
2. Situation Analysis ...................................................................................................... 9
2.1 National Business Environment ........................................................................... 9
2.1.1 PESTEL-analysis .......................................................................................... 9
2.1.1.1 Politic ..................................................................................................... 9
2.1.1.2 Economic ............................................................................................. 12
2.1.1.3 Social and Culture ................................................................................ 16
2.1.1.4 Technology .......................................................................................... 25
2.1.1.5 Environment ......................................................................................... 26
2.1.1.6 Legal .................................................................................................... 28
2.1.1.7 PESTEL Core factors ........................................................................... 29
2.2 International trade and investment ..................................................................... 30
2.2.1 Competitive Analysis .................................................................................. 30
2.2.1.1 Primary competitors ............................................................................. 31
2.2.1.2 Secondary competitors ......................................................................... 31
2.2.2 Porter’s five forces ...................................................................................... 31
2.2.2.1 Bargaining Power of Customers .......................................................... 32
2.2.2.2 Bargaining Power of Suppliers ............................................................ 32
2.2.2.3 Competitive Rivalry within an Industry .............................................. 32
2.2.2.4 Threat of substitute products ................................................................ 32
2.2.2.5 Threat of New Entrants ........................................................................ 33
2.2.3 National competitive advantage theory ...................................................... 33
2.2.3.1 Factor conditions .................................................................................. 34
2.2.3.2 Demand conditions .............................................................................. 35
2.2.3.3 Firm strategy, structure, and rivalry ..................................................... 35
2.2.3.4 Related and supportive industries ........................................................ 35
2.2.3.5 Government and Chance ...................................................................... 36
2.2.4 Business government trade relations .......................................................... 36
2.2.4.1 Government function ........................................................................... 36
2.2.4.2 Methods of promoting or restricting trade ........................................... 37
2.2.5 International Financial Markets .................................................................. 37
2.2.5.1 International capital market ................................................................. 37
2.2.5.2 Exchange market .................................................................................. 38
2.2.5.3 Inflation ................................................................................................ 38
2.3 SWOT-analysis .................................................................................................. 40
2.3.1 Strengths ..................................................................................................... 40
2.3.2 Weaknesses ................................................................................................. 41
2.3.3 Opportunities............................................................................................... 41
2.3.4 Threats......................................................................................................... 41
3. International Business Management ........................................................................ 43
3.1 International Strategy ......................................................................................... 43
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3.1.1 Identify Company mission goals ................................................................ 44
3.1.2 Identify Core Competency and Value-Creating Activities ......................... 44
3.1.3 Formulation of strategy ............................................................................... 47
3.2 International Organizational Structure ............................................................... 49
3.3 Selecting Entry Modes ....................................................................................... 51
3.3.1 Wholly Owned Subsidiaries ....................................................................... 51
3.3.2 Joint Ventures ............................................................................................. 51
3.3.3 Strategic Alliances ...................................................................................... 52
3.3.4 Franchising .................................................................................................. 52
3.3.5 Foreign Direct Investment .......................................................................... 53
3.3.5.1 Why be interested in Foreign Direct Investment ................................. 53
3.3.5.2 Management Issues in the Foreign Direct Investment ......................... 53
3.3.5.3 Government intervention in Foreign Direct Investment ...................... 54
3.4 Marketing Strategy............................................................................................. 54
3.4.1 Marketing mix ............................................................................................. 54
3.4.1.1 Product ................................................................................................. 54
3.4.1.2 Place ..................................................................................................... 55
3.4.1.3 Price ..................................................................................................... 57
3.4.1.4 Promotion............................................................................................. 58
3.4.1.5 People ................................................................................................... 60
3.4.1.6 Process ................................................................................................. 61
3.4.1.7 Physical evidence ................................................................................. 61
3.4.2 Segmenting, Targeting, & Positioning........................................................ 63
3.4.2.1 Segmenting .......................................................................................... 63
3.4.2.2 Targeting and Differentiation .............................................................. 64
3.4.2.3 Positioning ........................................................................................... 66
4. Final decision ........................................................................................................... 67
5. Discussion ................................................................................................................ 68
References .................................................................................................................... 69
1. Introduction
This segment of the report will cover background information for the project. It
consists of the process and the reason for selecting Whole Foods for this project as
well as a short report on Whole Foods and a comparison between Sweden and the
United States of America. In addition the section brings up globalization and its
effects on the global business environment. Lastly there will be a brief overview of the
approach to the project.
1.1 Background
This project has been formed to investigate the possibility for the company Whole
Foods Market to expand their business to Sweden. Whole Foods Market is a business
in supermarket format that provides organic food. The company started out small, but
is today an international brand with 365 stores in North America and the United
Kingdom. Whole Foods has developed a concept representing sustainability of
agriculture and high quality of the finest natural and organic foods available.
One of our group members visited the Whole Foods store located in Portland, Maine
and got a good impression of their business idea. The rest of the group was later
informed about the growth of the organic grocery chain and, after some research, saw
a potential market for the company in Sweden.
Vignette
The group was discussing what company that would be analyzed to cross border.
One of our team members then told the group that she had visited one of Whole Food
Market stores in the United States, (Klefsjö, 2009) in the summer of 2009. She had
never seen a store like this and thought it was an experience only visiting the store.
The store gave an overall experience with everything from an inviting environment to
good and healthy groceries. That the store had such a large amount of organic
goods was truly fascinating. The group felt that this was an interesting company to
investigate further and possibly expand to Sweden.
The Swedish society is continuously evolving to where preserving health is a main
concern. Giving tips and sharing your everyday training sessions as well as meals, to
influence others, has become a clear trend in Swedish social media. Statistics shows a
rapid increase of organic food purchase in Europe where Sweden stands out the most
(Sweden.se).
The individual’s workout routine is a major factor that influences the personal eating
habits. In terms of gym trends there are twice as many gyms in Sweden as in the rest
of Europe per capita (Blogg.va.se). Gyms are used as retailers and a way to advertise
a healthy lifestyle. When connecting the increasing gym trends and the healthy
lifestyle promotion by social media and retailers, a gap is shown in the market for a
chain such as Whole Foods Market.
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1.2 Goals and Objectives
The group has chosen to investigate the possibilities for the company Whole Foods
Market to develop their business and expand to Sweden. The outcome of this project
will determine if there is a potential market for Whole Foods. By the end of this
project the group will be able to establish whether the result is green, yellow or red
light. Each light represent different market potentials according to the following
definitions:
Red light: Do not enter this market.
Yellow light: It is possible to enter this market, but beware.
Green light: It is a good opportunity to enter this market.
OBJECTIVE 1: To provide a better understanding of Sweden as a potential market
for the company Whole Foods Market.
OBJECTIVE 2: To arrive at, and motivate, a final decision of “Green, Yellow or
Red Light” for Whole Foods Market pursuing business in Sweden.
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1.3 Approach
The objective with this project is to determine whether taking Whole Foods Market to
Sweden is a good idea from a business perspective. To be able to establish this, the
approach was divided into four steps, which was based on Wild & Wild (2012, p.325)
theories. These steps are: collecting information about the brand, analyzing the
industry and competition in Sweden, analyzing international business environments
and determining segmenting and targeting.
Step one consists of gathering information about the company such as background,
concept, and marketing mix. The origin of the brand and the potential market is of
great significance in this step.
Step two includes an analysis of the industry and the competition in the new market.
Aspects to look into are industry trends, primary and secondary competitors, and
possible suppliers or partners.
Step three involves analyzing international business environment such as political,
economic, social, technological, environmental, and legal-aspects in Sweden. Other
factors to take into consideration are international trade and investments.
Step four concerns segmenting and targeting of the market. This step engages
determination of how the company should position themselves in the new market and
business environment.
After concluding these four steps a SWOT-analysis was produced. This SWOTanalysis shows the company’s internal strengths and weaknesses as well as external
threats and opportunities. Based on these four steps and the SWOT-analysis it is
possible to determine the light of the study.
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1.4 Globalization
In today’s markets the importance of globalization has increased greatly. As new technologies drives down the costs of global communication and travel, countries can
reduce the barriers that are connected to trades and investments. The fact that markets
and countries, due to this, are creating a greater interdependence means that national
and international borders are becoming less relevant (Wild & Wild, 2012, p.31). The
reason globalization is becoming more and more important is that people, culture,
ideas, money, goods and services are becoming more intertwined. Wild & Wild
(2012, p.31) defines globalization as “The trend toward greater economic, cultural,
political and technological interdependence among national institutions and
economies”.
A great number of discussions have been raised regarding globalization as a threat to
the environment. Various environmental groups state that globalization is causing
countries to expend their natural resources without considering future generations.
However there are studies showing that pollution-intensive firms in the United States
tend to invest in countries with stricter environmental standards (Wild & Wild, 2012,
p.43).
One of the foremost organizations involved in sustainable development is the United
Nations, the UN, which today exists of 193 countries worldwide. The UN has created
a framework, which is a global convention with measures to prevent climate change,
called the United Nations Framework Convention on Climate Change
(UNFCCC). The UN developed its environmental protocols even further in 1997
when they adopted the Kyoto-protocol in Kyoto, Japan (Unfccc.int). This is one of the
actions that are taken to minimize the impact that globalization has on the
environment. These actions show that countries are taking their responsibilities and
therefore making their companies do the same.
Globalization is today affecting people’s lives in many ways. It is changing how companies and organizations are interacting and doing business, it causes markets to
expand and therefore also causing companies to reach new markets. It also forces
companies to become more competitive. This means that companies have to have a
good understanding of their business environment and follow the development to stay
competitive. Additionally it is imperative for companies to be aware of the situation
in, not only present business environment they are active in, but also the situation in
countries they are considering expanding to.
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1.5 USA
The United States consists of 50 states and is a multicultural country. A study made in
2008 show that 76% of the population identify themselves as Christians, 15% have no
religious belonging, about 4% stands for other religions as Judaism, Hinduism, Islam
and Buddhism and 5% did not know or refused to answer (Commons.trincoll.edu).
The United States has many different climates, from California's Mediterranean
climate with warm, dry summers and rainy winters to the northern Alaska’s Arctic climate with short, cool summers and long, cold winters.
The United States has for many decades been the world's largest economy and in
2013 the country's GDP was $15.8 trillion (Research.stlouisfed.org). The country is
one of the two largest producers in the world by most types of berries, fruits and
vegetables. The United States is also the world-leading producer of beef and poultry
meat (Ne.se).
Table 1: Facts about The United States of America
Source: Usafakta.se
Figure 1: Flag of The United States
Source: Världensflaggor.se
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1.6 Sweden
Sweden is a country, which was an early adopter of sustainable thinking. The country
works actively with environmental issues, both nationally and internationally. In
Europe, the organic food market is now growing by 5-7 percent per year, and Sweden
is ranked as the number one consumer of organic food. They are also ranked at the top
of the green shoppers list (Sweden.se).
Sweden is a country well known for the company H&M, which according to Textile
Exchange, is the world’s largest user of organic cotton (Sweden.se). The country has
a temperate climate with four seasons that can be quite different depending on the
geographic location in the country. In southern and central Sweden, winters are
milder and shorter in comparison to those in the north, and summer temperatures
normally range from 15 to 25 degrees Celsius. In the northern parts of the country the
winters are long and cold with much snow and the summers can be very short.
Less than half of the Swedish population is religiously committed, but Sweden is
considered a Christian country by tradition (Landguiden.se). The country has a high
standard of living with relatively high income taxes that ensures welfare across the
entire society.
Table 2: Facts about Sweden
Source: Sweden.se
Figure 2: Flag of Sweden
Source: Världensflaggor.se
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1.7 Whole Foods Market
Whole Foods Market is a large chain of grocery stores. The uniqueness with Whole
Foods Market is the fact that they only sell organic products and goods. Their goal is
to provide the finest natural and organic goods available and at the same time not
depart from the highest quality standards in the industry. In addition to this they have
a very strong dedication to the sustainability of agriculture. Whole Foods has about
365 stores, above all located in the United States. Due to expansion they also exist in
both Canada and United Kingdom, with five stores in each country. Whole Foods is
headquartered in Austin, Texas, where their business originally started
(Wholefoodsmarket.com).
In 1978 John Mackey and Renee Lawson Hardy saw the potential in natural food.
They opened a small shop with only natural food, named the Safer Way Natural
Foods. Two years later they merged their business with Craig Weller’s and Mark Skiles’ company Clarksville Natural Food. This resulted in the founding of Whole
Foods Market. The company started expanding out of Austin to other cities and
furthermore to other states. They continued to open new stores from the ground up but
when they, in the beginning of 1990, began acquiring already existing natural food
chains the growth of the company increased quickly. They acquired companies such
as Wellspring Grocery, Bread and Circus, and Mrs. Gooch’s Natural Food Market. In 2001 Whole Foods Market entered Manhattan, which raised a lot of attention from
both media and financial industries. Moreover, in 2002 Whole Foods crossed U.S.
boarders with an expansion to Canada and only two years later they entered the
United Kingdom (Wholefoodsmarket.com). A typical Whole Foods Market store is
centrally located and visually appealing. Figure 3 is an example of how a Whole
Foods Market in the United States can look like.
Figure 3: Whole Foods Market in Paradise Valley, Phoenix Arizona
Source: Wholefooodsmarket.com
Whole Foods always strive to be an integral part of the community and to offer the
customer an experience, in form of design and service, in addition to the product
presented. The size of a Whole Foods store is generally 25 000 to 50 000 square feet
and because of that they are able to hold a wide range of products
(Wholefoodsmarket.com).
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Whole Foods market advocates healthy food, and they feel that quality is a state of
mind. They have their own self-created quality standards stated on their website.
There are special quality standards on each of the sections; seafood, meat and animal
welfare, whole body and organic body care. There is also a list with unacceptable
ingredients that Whole Foods does not approve of. In general they state the following
quality standards (Wholefoodsmarket.com).
We carefully evaluate each and every product we sell.
We feature foods that are free of artificial preservatives, colors, flavors,
sweeteners, and hydrogenated fats.
We are passionate about great tasting food and the pleasure of sharing it with
others.
We are committed to foods that are fresh, wholesome and safe to eat.
We seek out and promote organically grown foods.
We provide food and nutritional products that support health and well-being.
Whole Foods has in a short time gone from being a small grocery shop to becoming
an international corporation and market leader in its field. In 2012 Whole Foods
Market reported a profit of 112.7 million dollar and is continuously looking for
further expansion (Online.wsj.com).
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2. Situation Analysis
This section is conducted to get an insight of the present situation at Whole Foods
Market and the current business environment in Sweden. It includes a PESTELanalysis, which examines the macro environment in Sweden, a competitive analysis
and further analyses of both the competitive environment as well as the environment
for trade and investments in Sweden. Lastly it includes a SWOT-analysis, which
intends to give an overview of the current business situation regarding Whole Foods
Market’s Strengths, Weaknesses, Opportunities and Threats on the Swedish market.
2.1 National Business Environment
The business activity within a country is defined by the specific political, economic,
cultural and legal characteristics in the nation, which in turn creates the national
business environment. From one nation to another, the national business environment
differs, and is therefore important to take into consideration when entering a new
market (Wild & Wild, 2012, p.48). One tool, often used to analyze a national business
environment, is the PESTEL-analysis described further in this chapter.
2.1.1 PESTEL-analysis
A PESTEL-analysis is a tool, which is used to examine the macro factors Politic,
Economic, Social, Technology, Environment and Legal that may affect an
organization in a specific market. The objective is to gather information on current
external factors and factors that may change in the future. By doing this a company
can prepare for opportunities and threats it may be facing. Moreover, the company
will have a better understanding of the surrounding environment. The information
gathered in the PESTEL-analysis is then used to make strategic decisions and
furthermore to reduce market risks (Johnson, 2008, p.55).
2.1.1.1 Politic
When taking a business cross a border it is important to look closely into the political
system of the country being entered. This is, due to the fact that a political system has
the power to gravely affect the way business is conducted any chosen country. The
political system of a country is dictated by what structures, processes, and activities a
country is run by. The political system in any country has its roots in the culture of the
people.
Political systems
Sweden is a constitutional monarchy where the monarch has no actual influence on
the political system. Instead the power is held by a parliamentary democracy with a
proportional representation since 1920. The parliament, which consists of 346
representatives, is elected every fourth year in open elections where all Swedish
citizens over 18 years of age are allowed to vote. Since 2011, the parliament also
elects the Prime Minister (Landguiden.se).
The main duty for the parliament is to found laws and authorize the proposed budgets.
The Swedish political parties have, in recent years, on several issues approached the
middle of the political left-right scale. Today there are mainly seven parties and two
alliances between them, the red-green block and the alliance. In this point of time no
party in Sweden can manage to get their own majority in the parliament and be self9
supported in all decisions, which is why different parties have joined forces. The
major difference between the two alliances lies primarily in tax-policy and how the
public sector is managed (Landguiden.se).
Political risks
As a company is considering entering a new market it is of great importance to look at
the political risks that may occur in the new country. A political risk can be defined as
the likelihood that society will undergo political changes that negatively affect a
company’s local business activity (Wild & Wild, 2012, p.104). According to Wild &
Wild the greatest factors that affect the political risks in a specific country include
government stability, internal and external conflicts, military and religious
involvement in politics, corruption, laws and order, and the quality of bureaucracy.
Therefore, to reduce the political risks, companies must have an insight in local
values, customs, and traditions.
Political risks can be placed into two main categories, macro- and micro risk. These
categories reflect the range of companies that are affected by the political changes. A
macro risk affects the activities of all domestic and international companies in every
industry in the country, whilst a micro risk threatens companies only within a
particular industry.
Sweden has fortunately not been through any major political changes in modern time,
which have led to a fairly stable political environment. The most reasonable political
change is the forming of political alliances by the Swedish political parties. The
forming of alliances have shifted the political focus more to the right and therefore
affected the economy to become more market focused with lower taxes.
Another political change that occurred in 1995 is Sweden’s entrance in the European Union. This membership makes Sweden affected by the rules and regulations that are
centrally controlled by the European Union. Every country has some degree of
political risk in form of, for example, corruption and instability but according to Wild
& Wild (2012, p.106) the political risk in Sweden is very low.
European Union
The European Union, EU, is an unique economic and political partnership between 28
European countries, covering most parts of the European continent. The European
Union was formed in 1958, after the Second World War, to create an economic
collaboration and therefore also an interdependence between the countries
(Europa.eu).
According to Wild & Wild (2012, p.225), the European Union can be considered an
economic union. This definition is used to describe an economic integration where
countries remove their barriers to trade and movement of labor and capital amongst
the involved countries. It also includes a common set trade policy towards nonmembers and a coordination of economic policies. The term economic union is used
in the context of regional economic integration, which describes the process whereby
countries in a certain geographic region cooperates to reduce or eliminate barriers to
the international flow of products, people or capital. An economic union, which EU is
according to Wild & Wild, goes beyond the demands of a common market and
requires that member countries harmonize their tax, monetary, and fiscal policies, and
creates a collective currency. An economic union also requires that member nations
10
concede a certain amount of their national sovereignty to the supranational union
(Wild & Wild, 2012, p.225).
The European Union itself states that it started out as a purely economic union but
later on evolved into an organization spanning over all areas of politics. The union is
founded on principles that states that everything they do is based on treaties that the
member states have agreed on, voluntarily and democratically. The agreements are
binding and contain the European Union’s objectives for the different areas of
activities (Europa.eu).
The European Union continuously grows and works towards their goal to make the
European institutions more open and democratic. The national parliaments have
gained a greater influence and are working side by side with the Union’s institutions,
which mean that the citizens of the union also have gained possibilities to influence
the decision-making. The European Union also seeks to harmonize legalization, in
order to respond to the challenges of globalization and by that be able to adapt to
advances such as use of new technologies (Europa.eu).
One of the pillars of the European Union is the single or ‘internal’ market which was completed in 1992. It consists of an area without internal borders in which people,
goods, services and capital can move freely in accordance with the treaty establishing
the European Community. The internal market is essential for the prosperity, growth
and employment in the European Union and promotes mobility, competitiveness and
innovation (Europa.eu).
Sweden in the European Union
Sweden became a member of the European Union in 1995 and the basis of its
membership is regulated in the accession agreement negotiated between Sweden and
the other membership countries. After becoming a member Sweden declined
introducing the European Union’s own currency, the Euro, as their own (Europa.eu).
National Food Agency
The National Food Agency, NFA, is an autonomous government whose main task is
to secure the food quality in Sweden and also affect food management and the impact
on the peoples eating habits. The NFA´s vision claims that ”Everyone knows the joy of food and is healthy because of it”. It is mainly the European Union who enacts the
rules for NFA and these are valid in all member countries. Anyone who manufactures
or sells food is responsible to make sure that applicable regulations are complied.
Control of this occurs through municipalities, the county administrative board, and the
NFA itself (Slv.se). Besides the fore mentioned responsibilities NFA also control the
environmental issues in the food sector and coordinate the monitoring of drinking
water. It is the government and the parliament who control labor issues and control
the NFA budget.
The trade between member countries of the European Union is normally free, but the
legislation control who the trade should be handled. When importing animal products
outside EU the NFA requires that the products have passed one of Sweden´s five
border controls, in order to prevent contagious animal diseases getting in to the
country (Slv.se).
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World trade organization
The World Trade Organization, WTO, is based on the current works from
negotiations during 1986-1994 called the Uruguay Round, and also from the
previously negotiations under the General Agreement on Tariffs and Trade, GATT.
WTO was established on the 1th of January 1995, and has today a membership of 159
countries. All countries, regardless of their land area, have one vote, and decisions are
normally taken in accordance to the consensus principle. WTO guarantees a nondiscriminatory treatment by and among members. It also stands for sound national
and international politics where the aim is to generate economic growth and
development in accordance with each member’s needs and aspirations. The highest institutional body in the WTO is the Ministerial Conference, which meets
roughly every two years. As well as in other international organizations smaller
countries have less impingement then bigger countries in some issues. WTO´s
overriding objective is to contribute to an increasing living standard, full employment
and an efficient use of resources in accordance to the principle of sustainable
development. To ensure the objectives WTO have three fundamental values; achieve
a freer world trade through negotiations between member countries, create a
framework regulatory for trade, and maintain processes for resolving trade with
positive side effects will be created (Wild & Wild, 2012, p.193). Both Sweden and the
U.S. are members of the WTO since the first of January 1995. WTO works by
liberalization for a smoother trade, such as tariff reductions, reduced trade-distorting
support and stricter regulations on export competition. This is seen as beneficial to
Whole Foods when purchasing goods from other countries.
2.1.1.2 Economic
According to Wild and Wild (2012, p.130) the economic system of a country consists
of the structure and processes that a country uses to allocate its resources and conduct
its commercial activities. A country’s economic system is defined by the nations
tendency to either central planning or individualism. If a country‘s culture tender to
individualism the market will go more towards a market economy and vice versa
(Wild & Wild, 2012, p. 130).
Gross Domestic Product
Gross Domestic Product Gross Domestic Product, GDP, is a monetary value of a
countries total economic activity in a specific time period. It can be expressed as the
value of total consumption of goods and service, gross investment and exports minus
imports. Important to mention is that GDP includes foreign-owned companies
producing in the selected country, but not domestic companies producing abroad. The
GDP per capita indicates a country’s economic health as well as to gauge a county’s standard of living (Wild & Wild, 2012, p.140). GDP can be given in three separate
ways, the income-, production and the expenditure approach, all of which should in
principal, give the same result. Figure 4 shows the GDP of Sweden, U.S., and the
international organization OECD.
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Figure 4: GDP, Comparison between U.S. and Sweden
Source: Ekonomifakta.se
As the Figure 4 shows, Sweden has had a lower economic growth than the United
States over time. The dip in the graph before 2010 shows the severe depression that
broke out in 2008, the crisis generated a record decline in GDP in 2009. A market
recovery has occurred and the trade has now increased its purchasing power.
Economic systems
In Sweden, the ownership of land, factories and other economic resources are rather
equally split between private and government ownership, making Sweden a mixed
economy. In a mixed economy, the government tends to control the economic sectors
that are considered important to national security and long-term stability. This is also
the case in the Swedish political system where the government is involved in, among
others, the mining industry and the energy industry.
The government also influences other economic activities by incorporating special
incentives, including subsidies to key industries, and through significant government
involvement in the economy. As many other mixed economies, Sweden maintains a
generous welfare system to support the unemployed and to provide a well-developed
health care system for the general public.
The United States can be considered a mixed economy margin on a market economy
with the majority of its economic resources privately owned. The U.S. economy
therefor differs in some ways compared to the Swedish economy. Two forces
primarily control a market economy, supply and demand. This leads to a price which
changes depending on the proportions of these two forces.
Looking at the market for food service the differences between Sweden and the
United States are less significant. As well as in the United States the Swedish food
market is primarily privately owned and controlled. The biggest differences in this
market can be found looking at taxes and regulations.
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To get a grasp of the differences between the economic market in Sweden and the one
in the United States a comparison between the levels of economic freedom in both
countries can be conducted. According to Wild & Wild (2012, p.134) Sweden has an
economic freedom of 70-79.9% compared to the United States, which have an
economic freedom of 80-100%.
Taxes
Swedish income taxes are among the highest taxes in the world. For citizens earning
less than 35 525 SEK/month (Ekonomifakta.se), about 5500 USD/month, the income
tax is about 30%. For citizen making more than 50 392 SEK/month a wealth-tax is
applied making the income tax about 56.6%. The high taxes in Sweden means that the
government is able to provide more or less free health care for all citizens as well as
free dental care for children and youths.
For a limited company, Ltd Company, in Sweden there is a corporation tax on the
company’s profits, at about 22%. When hiring employees in Sweden it is important to
include the general payroll tax and social contributions when calculating costs. These
two factors are added as a percentage of the gross salary, making hiring personal in
Sweden expensive. Including in the general payroll tax and social contributions are
for example pension charge and insurance fees (Ekonomifakta.se).
The salaries for employees in the business of groceries are regulated by a trade
agreement between the Union and the employers. These trade agreements are taken
up for discussion on a three-year basis and dictates, besides the salaries of the
employees, also their holiday- and overtime compensation. The trade agreement gives
minimal space for negotiations and it is therefore essential that it be followed when
doing business in Sweden (Handels.se).
The European Union does not intervene in separate countries tax politics, if the
member state is able to provide an effective tax solution. The EU works to remove
cross-border taxes to create a union where workers and goods can travel as easy
across borders as it does in one country. To be able to meet this goal the EU works to
remove double taxation, make it easier to obtain tax information from all countries
and enforce calming tax refunds (Europa.eu).
Financial Crisis
Sweden, as well as many other countries, was severely affected by the financial crisis
in 2008. A plurality of explanations exists about the financial crisis, both in origin and
spread. The crisis was initiated by the financial bubble in the United States,
particularly related to the market of home loans. The reason why the financial crisis
spread to Sweden was that Swedish banks had, and still have, a large collaboration
with most U.S. banks. All countries’ economies are today very integrated, and
investment of funds can be placed in any country desired. When investments made in
U.S. began to sink American and foreign investors lost large sums of capital. In
connection to investor’s loss, the stakeholders increasingly lost faith to the
surroundings and most stocks and mutual funds were sold off. Since confidence in the
market has a large impact it resulted in a quick collapse of the stock exchange.
A recession is a period of low growth, normally a bit under 2 percent, in a sharp
recession the growth may even be negative. The period between recessions is often
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characterized by higher unemployment, lower rates of production and lack of
investment. Figure 5 shows the economic rates from January 1997 up to today
(Ekonomifakta.se).
Figure 5: Tendency Survey
Source: Ekonomifakta.se
As seen in the chart, Sweden has been above normal economy rates since October
2013, with the exactly value of 101,7. This indicates that even though the Swedish
economy is still rebuilding from the economic crisis it is still relatively stable
compared to other countries with similar environments.
Purchasing power party
Purchasing Power Parity, PPP, is an economical measurement that indicates the
difference between two countries when comparing price levels of goods and services.
Wild & Wild (2012, p.141) define PPP as “…the relative ability of two countries’
currencies to buy the same basket of goods in those two countries”.
The “basket” normally consists of ordinary, daily-use products so that PPP indicates
what a currency can acquire in actual terms. PPP reduces the misleading international
comparisons that can arise with use of market exchange rates. When entering a new
market, PPP can be used to set the right price on a product in the specific market.
The law of one price is another measurement, which applies to individual
commodities whilst PPP applies to the general price level. A popular measure of the
law of one price is the Big Mac Index, which compares the price of McDonalds Big
Mac burgers in different countries. A higher price on Big Mac in Sweden implies that
there is a higher relative price in the local currency. Table 3 shows a comparison
between Sweden and the U.S., using the Big Mac index.
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Table 3: Big Mac Index
Source: Bigmacindex.org
As seen in the table, the local prices in USD differ, meaning that a USD in the U.S.
would be able to buy more than it would in Sweden.
Doing Business Project
The World Bank, which is an international financial institution, has conducted a
project called the Doing Business Project, which indicates what type of business
environment that exists in different countries. This project provides objective
measures of business regulations and their enforcement across 189 economies and
selected cities at the subnational and regional level (Doingbusiness.org). The project
is based on 11 indicators and gives an insight on the ease of doing business in the
different countries.
In Doing Business 2014 Sweden was ranked 14 overall compared to the United
States, which was ranked as number four. Looking at the indicator “trading across borders” Sweden was ranked 6 compared to the U.S. ranking of 22
(Doingbusiness.org, Doingbusiness.org).
2.1.1.3 Social and Culture
When analyzing a country’s business environment, culture is among the most
important factors since it permeates every aspect of society. Wild & Wild (2012,
p.66) defines culture as a “Set of values, beliefs, rules and institutions held by a
specific group of people”. Culture consists of eight different main components;
religion, social structure, manners and customs, values and attitudes, aesthetics,
physical and material environment, education, and personal communication (Wild &
Wild, 2012, p.69). These eight components are shown in figure 6.
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Figure 6: Components of culture
The components are all building blocks of culture, but depending on which country a
company operates in, they will have different significance to the business
environment. The components can be described as primary and secondary depending
on the role they play in a country’s culture. Furthermore culture can be analyzed by
looking at the Hofstede Framework, which compares cultures in five dimensions
concerning Individualism versus collectivism, Power distance, Uncertainty,
Masculinity versus femininity, and Long-term orientation. The eight primary and
secondary components of culture are analyzed along with the five dimensions in the
Hofstede framework. Additionally the Swedish culture is analyzed based on the
Human Development Index (HDI).
2.1.1.3.1 Primary components
Whole Foods Market is an organic food chain, which means that information
concerning food, culture, aesthetics and different values in Sweden will affect the
outcome of their business the most. Therefore these components are considered most
important for Whole foods when they enter Sweden.
Aesthetics
According to Wild & Wild (2012, p.69) the definition of aesthetics is what culture
considers as “good taste” in the arts (including music, painting, dance, drama and
architecture), the imagery evoked by certain expressions, and the symbolism of
certain colors. This is a component of culture that is important to consider when
expanding to a new country (Wild & Wild, 2012, p.69).
The color is an aspect that can affect people to a great extent. The color of a brands
logo, the store interior and, often the color of the products, are all very important
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factors. Whole Foods Market’s logo mainly consists of the color green, which in
Sweden is a color that symbolize nature and has a calming and refreshing effect. The
appearance, the interior and structure of the store will also evoke impressions. When
entering a Whole Foods store, there will be certain expectations and requirements
based on the products appearance and the layout of the store. Organic food is
expected to look fresh and healthy, and the décor in the store can preferably give the
impression that it is locally produced.
Values
Ideas, beliefs, and customs to which people are emotionally attached are called values
(Wild & Wild, 2012, p.69). Patriotism is important to Swedes, whom are very proud
of their nation, towns, and regions. Swedes also value a healthy lifestyle, healthy
food, a sustainable environment, and foremost they appreciate time. Even though a
sustainable environment is important to Swedes, they do not work as much for this as
most would want. Therefore a store as Whole Foods Market would be welcomed in
Sweden since it would make it easier for citizens to create a lifestyle that is more
environmentally friendly but without having to put in too much time. The ability for
home delivery and recipes on the Whole Foods webpage would also encourage this
lifestyle.
Food culture
When entering the Swedish market, from a grocery store perspective, it may be
important to be aware of the food culture and the dates for special celebrations. In
Sweden there are three main holidays that are important to be aware of, Christmas,
Easter and Midsummer. During these holidays the demand for certain products will be
higher. Other special occasions in the year are the crayfish season, held in August,
and the tradition of eating fermented herring “surströmming”, mostly popular in the north of Sweden.
Some other typical products eaten in Sweden are cripsbread and pickled herring.
Crispbread has been baked in Sweden for over 500 years and are among the most
versatile edible products. Pickled herring is a typical occurrence on every Swedish
buffet. It comes in a verity of flavors including mustard, onion, garlic and dill and is
often eaten with boiled potatoes. Another popular dish in Sweden is crayfish, which is
a national delicacy eaten by the majority of Swedes.
Attitudes
Attitudes are positive or negative evaluations, feelings, and tendencies that
individuals harbor toward objects or concepts (Wild & Wild, 2012, p.69). Swedes are
generally economical, and can therefore have negative feelings about overpriced food.
People in Sweden often feel some uncertainty and fear for food coming from abroad,
especially from specific countries. This can affect how much they will consume in a
store as Whole Foods Market.
2.1.1.3.2 Secondary components
Sweden is a highly developed and sympathetic country and therefore cultural factors
as manners and customs, religion, personal communication, education and
infrastructure will not play as great role in the Swedish business environment as
previously mentioned factors. These factors are so developed that they can be
considered natural for Swedes. However the components must still be considered
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when Whole Foods Market enters Sweden to be able to provide the best possible
foundation for the company to do business.
Manners and Customs
Appropriate ways of behaving, speaking, and dressing in a culture are called manners
(Wild & Wild, 2012, p.73). In order to avoid making embarrassing mistakes, it is
important to have knowledge of these aspects before starting a business in another
country. At meetings in Sweden people are expected to be in time and to shake hands
with everyone present. Swedes are factual, practical, and precise, reserved and get to
the point quickly. When communicating with Swedes, it is important to be clear and
concise in detailing what is expected from them (Ediplomat.com).
When habits or ways of behaving in specific circumstances are passed down through
generations, they become customs (Wild & Wild, 2012, p.73). In Sweden one of the
most important customs is the law of Jante. This is a custom, which explains the
pattern of group behavior within Scandinavian communities. The law of Jante
basically means: “You are not to think you are anyone special or that you are better
than us”, with “us” meaning the collective population.
The law of Jante consists of following rules:
1. You are not to think you are anything special
2. You are not to think you are as good as us
3. You are not to think you are smarter than us
4. You are not to convince yourself that you are better than us
5. You are not to think you know more than us
6. You are not to think you are better than us
7. You are not to think you are good at anything
8. You are not to laugh at us
9. You are not to think anyone cares about you
10. You are not to think you can teach us anything
Whilst the Swedes are very humbled and follow the Law of Jante it is custom to give
each other praise, and for the recipient of the praise to be humble.
Religion
For a business to adapt to a new country and a new market, it is important to know the
country's religion. Different religions have different views on work, material goods
and savings and it is therefore essential for companies to find information about the
country's culture before entering the market (Wild & Wild, 2012, p.76).
The majority of the population in Sweden is officially Christian but most states that
they are not religious believers, meaning that the Whole Foods variety of food will
not greatly affect the Swedes in a religious aspect. Although, Whole Foods should
consider including products that are adapted for Muslim and Jewish diets since it is
common in most grocery stores and is considered decent to keep in the selection.
Moreover religion generally does not define and influence what the population in
Sweden should eat, meaning that the individuals diet can be very varied. Therefore
religion in Sweden will not be a problem for Whole Foods Market.
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Personal communication
Different cultures and countries have different ways of communicating. A
communication system means conveying thoughts, knowledge, feelings, writing and
actions. It is also very important to be aware of the body language since it can be
significantly different between countries. By learning a country's body language, it is
easier to avoid misunderstandings.
Native speaking Swedes are, according to a survey conducted in 2013, the best in the
world in English as a second language (Ef.com). Thanks to the Swedish language
skills, the name Whole Foods Market will not be misunderstood or translated in an
irrelevant way. For those who want to translate the name Whole Foods Market to
Swedish the name stands for a company with a wide range of products.
Education
Educating the population is an important factor for a country and its future. In Sweden
education is mandatory and free for all children ages 7-16. The formal education in
Sweden is primary school, upper secondary school and college. Upper secondary
school is voluntary and offers, for example, a pre-university vocational training.
There also exist schools that are run by private owners. Independent schools are
available on both primary and secondary level. A global ranking from 2012, that
shows countries higher education, places Sweden at number one in Europe and
number two in the world (Universitas21.com).
Physical & material environment
For a company to enter a new market they generally have two conditions to be
considered, of which one has to be satisfied. The first condition is that the
infrastructures in the market have to support the production. The second condition is
that the demand for its products has developed (Wild & Wild, 2012, p.85). Sweden
has a well-developed infrastructure with many harbors, roads, railways and airports.
Therefore it will not be a problem for Sweden to receive shipments of goods coming
by sea, rail, road or air.
2.1.1.3.3 Hofstede Framework
The Hofstede Framework is a five-dimensional tool that is used to compare different cultures. The five dimensions of culture compared in the study are;; Individualism versus collectivism, Power distance, Uncertainty, Masculinity versus femininity, and Long-term orientation. Every culture is scored in all dimensions and based on that score the comparison of the different cultures can be done (Wild & Wild, 2012, p.88).
Figure 7 shows the cultural differences between the U.S. and Sweden based on the scores of the five dimensions obtained by the Hofstede framework.
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Figure 7: Hofstede framework, Sweden compared to the U.S.
Source: Geert-hofstede.com
These dimensions will each be described and discussed further and the score of
Sweden and the United States will be analyzed.
Individualism versus Collectivism
This dimension considers whether a culture interests individualism or collectivism. Individualism is the promotion of individual people focusing on their own goals and held accountable for their engagements. Innovation is a result of the promotion of entrepreneurial freedom. A positive aspect of individualism is that it can increase the availability of employments, which is beneficial for a culture. In collectivistic cultures people rely and answer to a group and where the group shares the responsibility of each group member’s well-being. People usually work towards a collective goal and the whole group shares any kind of accomplishment or defeat (Wild & Wild, 2012, p.88).
Sweden as a culture is considered to be a very individualistic country, with a score of 71 the self-image is mostly expressed as “I” (Geert-Hofstede.com). An aspect that differentiates Sweden from other cultures and indicates an individualistic culture is the fact that when older people no longer are capable to take care of themselves properly their families often put them in nursing homes. This action is taken instead of taking them in to their homes to take care of them. In the Swedish culture it is very important for young men and women to become independent at an early stage of their lives. At the age of 18 it is very common to move out of your family house. This is an important factor for Whole Foods to consider and can have both advantages as well as disadvantages. The drawback is that most Swedes at that age have a very limited budget and, presently, the view of organic goods is that it is expensive. An advantage to their limited budgets is that the people of that age are eager to work, which makes 21
it easier for Whole Foods to recruit and select human resources. Younger employees are mostly cheaper to hire and at the moment 7.5% of the population between the age ranges of 15-24 are unemployed. (Scb.se).
Power Distance
Power distance is a dimension that involves a culture’s attitude towards its inequality among and towards one another. A culture with a high degree of Power distance, and a high score, is usually defined by the power distance between the subordinates and the superiors. Another characteristic is the hierarchical structure in organizations. The people in such cultures are often driven by prestige, rewards, and special privileges, also called entrepreneurial drive (Wild & Wild, 2012, p.89).
Sweden scores 31 points in this dimension, which is relatively low and implies independence, standing for equal rights and decentralized organizational structure (Geert-Hofstede.com). In the Swedish culture it is very common to call or name managers by their first name. Uniforms at workplaces are often informal and relaxed. These are typical factors that indicate Sweden’s relatively low score. To Whole Foods advantage the United States also scored low in this dimension, meaning that managers usually consult their employees and rely on their experience and expertise. The U.S. works towards “liberty and justice for all” (Geert-Hofstede.com). which matches the Swedish culture and makes it more adaptable for a corporation like Whole Foods to settle down in a society of a similar sort, in these regards. These are important factors, for Whole Foods, to take into consideration when recruiting and selecting Human Resources, and structuring their organization.
Uncertainty avoidance
Cultures with high degree of uncertainty avoidance tend to have high level of security, which results in low employee turnovers. This dimension deals with how a society decides to act towards the future, either try to control what is meant to happen further on in time or let everything happen the way it is supposed to naturally happen. Low scores in this dimension often result in openness towards new ideas and changes. The people of cultures with less uncertainty avoidance are usually more fearless and have a more entrepreneurial mentality. This can lead to more employee turnovers, due to less security and control by managements (Wild & Wild, 2012, p.89).
Sweden scores 29 and is therefore a more relaxed society where innovation and entrepreneurial ideas and actions are more appreciated and less threatening. On this dimension the United States managed to score 46, which make it a society where uncertainty is accepted and caution is taken at an earlier stage compared to the Swedish culture. Whole Foods is originated in the U.S and the culture is generally open and tolerant to new ideas that are beneficial for e.g. business, technology, and different food industries and therefore critical thinking is less emotionally attached. Freedom of expression is an important matter and therefore innovative ideas are nourished and appreciated (Geert-Hofstede.com). Whole Foods is also available in Canada and the United Kingdom and is therefore seen as a foreign, new, and unaccustomed concept, which makes the Swedes’ reactions towards this brand very crucial. Sweden being a lower-scoring nation gives a potential platform for Whole Foods to expand and market themselves, and it indicates good response by the 22
Swedes.
Masculinity versus femininity
The dimension of masculinity and femininity covers how a culture’s different factors such as wealth are divided and viewed. A high score in this dimension resembles masculinity, a society where personal accomplishments, wealth, and success often indicates the winner and can be translated into entrepreneurial drive. The quality of life in a masculine society greatly differentiates from a feminine society. A low score in the dimension leans more towards a feminine society and points to a culture where caring for others is admirable and dominates personal materialistic accomplishments (Wild & Wild, 2012, p.90).
Whole Foods’ main concern is working towards a healthier planet and per definition this is best applicable in a feminine society. The United States scored 62, which is a relatively high score and results in a masculine society (Geert-Hofstede.com). Whole Foods’ success in such a culture makes the chances for a market in Sweden theoretically better. The culture of Sweden scores 5 on the Hofstede scale, which is a very low score (Geert-Hofstede.com). A score of 5 is a result of a feminine society. This kind of society can be exactly what a corporation like Whole Foods Market should enter. A part of what Whole Foods stands for is preserving and taking care of the environment and in turn make the earth a better place for the next-coming generation. The people of this culture can appreciate organic food much better when withholding a mentality as such. Long-term orientation
This dimension is concerned with the perspective of a society, whether it projects long-term or short-term attributes. A typical short-term oriented culture scores low on the Hofstede Framework and is usually described as strong individual stability. People of these societies are aware of their reputation and feel that they have social obligations to satisfy. Commitments such as traditions are not of great importance and due to this reason may change a lot over time. Long-term oriented cultures on the other hand, that scores high on the Hofstede scale, have more respect for tradition. The people of long-term oriented societies are more concerned with being rewarded for their work in a long-term perspective and therefore withhold strong work ethics (Wild &Wild, 2012, p.90).
Sweden scores 20 on the Hofstede scale meaning that it is a short-term oriented culture (Geert-Hofstede.com). This fact is of great significance when investigating the potential market for Whole Foods. Sweden being a short-term society could be an advantage as well as a disadvantage. The beneficial aspect is that the people are concerned with their reputation and social status. The consumption of organic food is a trend that has begun and is a result of fashionable thinking. Consuming organic food can therefore affect their social statuses in a positive way. The drawback is that the people of short-term cultures might not believe in long-term thinking where it is important to preserve the environment to save the people of the next coming generations. It is apparent that Whole Foods Market and its concept is very successful in the United States and with the U.S. score of 29 point on the Hofstede Framework
scale (Geert-Hofstede.com), there might be potential for Whole Foods in a culture like Sweden.
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2.1.1.3.4 HDI
Human Development Index, HDI, is a statistical tool used to rank countries based on
people’s well-being and lifestyles. HDI includes different components such as
education, income, and life expectancy. This instrument projects a culture’s values, mentality, and views on the variables of the Human Development Index, and can
therefore be used to compare different cultures in order to make decisions that are
based on mentioned information. Figure 8 and table 4 shows the HDI rankings over
the 1-10 highest placed countries.
Figure 8: Sweden's HDI ranking
Source: Hdr.undp.org
Table 4: HDI world ranking
Source: Data.undp.org.
Sweden being ranked seventh in the world, the year of 2012, shows that the
inhabitants generally are healthy and educated. This can indicate that the Swedish
24
culture is concerned with elements such as sustainability and quality of life for themself as well as for the next coming generations. A culture that values elements like
these is a well-suited culture of a brand like Whole Foods to enter.
2.1.1.4 Technology
In today’s society technology is associated with almost everything. You use
technology to reach out and to be updated. For companies it means that they can get
hold of materials from far away and they can also sell their own goods abroad.
Innovations in technology are continuously happening, which contributes to
everything happen faster and easier. It impacts on globalization because it decreases
boarders. Moreover it also results in reduced cost, better quality and a base for future
improvements. If a nation is falling behind when it comes to technology, it
automatically means that the nation will not be as modern and competitive as
possible. In other words technological investments often increase a nation’s ability to productivity and competitiveness (Wild & Wild, 2012, p.38).
Sweden’s technology
Sweden is a modern country and is forefront when it comes to technology. Relative to
its population, Sweden is one of the top nations in devoting money to Research and
Development. In 2013 Sweden expenditures for Research and Development were
3.6% of GDP and ranked fourth in the world (Vr.se). The amount of money that
Sweden devotes proceeds to increase in all areas, except the Military. Companies in
Sweden finances most of their research by themselves, but also get contributions from
the government. In 2010 an examination of 50 countries’ use of technology, such as telephones, computers and networks was done where Sweden was ranked as number
one. The US was ranked as number two. This indicates that both Sweden and the US
are countries that embrace contemporary things (Reuters.com). Moreover this means
that Whole Foods will have a great opportunity to use Internet to reach out to Swedish
people. Whole Foods is known for using social media to market themselves and that
will likely fit the Swedes.
Green Technology
Sweden promotes green technology, investments and sustainability. The Swedish goal
is to be “the green pioneer country” and to move away from using fossil fuels to the
greatest degree possible. Therefore energy efficiency and use of renewable energy
resources are something that Sweden works hard to uphold. The Swedish government
has set the goal that, before 2020, the use of renewable energy should stand for 50%
of the total energy use. The Swedish government also stated a new environmental
technology strategy in 2010. The main purpose with this strategy is to make
conditions that benefit the development of environmental technology companies. The
strategy also promotes export of Swedish environmental technology, research and
innovation of environmental technology, and thus promoting sustainability to grow
globally (Sweden.se).
In 2013, sustainability was evaluated in 59 countries from both a developed and
emerging point of view. The purpose of the report was to give an understanding of
potential investment risks and opportunities. The countries were graded on
environmental, social and governance factors and Sweden was ranked as the most
sustainable country due to its high use of renewable energy sources, low carbon
footprints, labor participation and education (Enviromentalleader.com). Due to the
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efficient Swedish recycling system, large amounts of garbage can be reused or
recovered. Only 1% of Swedish trash goes to landfills, while the average in the whole
of Europe is 37% (sweden.se, euractiv.com). Sweden is even importing garbage from
neighbor countries where recycling is not as developed. Additionally, Sweden burns
the garbage to generate heat to, for example, residential buildings (pri.org).
Whole Foods Market’s motto “Whole Foods, Whole People, Whole Planet” reveals that they are aware of the role companies have when it comes to the environment. To
make up for their carbon footprints and their environmental impact of greenhouse
gases, they compensate 100% of their energy use with reusable energy credits.
Furthermore, when Whole Foods build new stores they are constructed to be “green buildings” with as little impact on the earth as possible. Whole Foods has several
recycling programs that are to be followed by the entire company. The golden
statement, called the 3 R’s, includes the company’s attitude towards reduce, reuse and
recycle. Whole Foods wants to reduce their influence on earth by for example using
paperless ordering systems, carpooling, composting and banning plastic grocery bags.
They also reuse all types of materials whenever it is possible. They recycle spoiled
products and compostable materials into compost, which they then either sell in the
stores or donate to community gardens (Wholefoodsmarket.com). Both Sweden and
Whole Foods invest a great deal in sustainability and have a green way of thinking.
This gives a foundation for Sweden to attract Whole Foods and vice versa and
therefore also embrace their concept.
2.1.1.5 Environment
When entering a new market regarding the grocery business, especially in the locally
grown food business, it is important to have a good understanding of the local
climate. The Swedish climate differs in many ways from the north to the south of the
country. In the southern parts of Sweden the climate is milder than in the north, with
mild winters and fairly long summers. The northern parts of Sweden have a differing
climate with only a couple of hours of sunlight per day in the winter to 24 hours of
sunlight per day in the summer. This makes the northern part of Sweden non-suitable
to grow food in. Figure 9 shows the most common locations of food production in
Sweden.
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Figure 9: Food production in Sweden
Source: Jordbruksverket.se
Figure 9 shows that large amounts of food production in Sweden are focused on the
Swedish regions “Skåne” and “Västragötaland” where the climate is more suitable.
Additionally the figure shows the difference between organic and conventional food
production in the different regions of Sweden.
A big part of the environmental footprint of organic food comes from transportation.
Figure 10 shows the greenhouse gas emissions by transport in Sweden between 1990
and 2011.
Figure 10: Greenhouse gas emissions
Source: Naturvårdsverket.se
Transportation of groceries is done mainly by trucks, which is shown as the light
green segments of the bars in Figure 10. Since 1990, the emissions of carbon dioxide
in Sweden have increased by just under 2 million tons. The member countries of the
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EU have decided to cut the emissions of carbon dioxide by 21% before 2020. Sweden
has set an even higher target, at 40% (Naturvårdsverket.se). In 2011 national
transportation stood for 33% of the total carbon dioxide emissions in Sweden
(Trafikverket.se).
2.1.1.6 Legal
Paying attention to a country’s legal system is important before entering a new
market. The legal system determines in which way a company is allowed to conduct
their business. It can differ between countries and that can complicate the possibilities
to do business. (Wild & Wild, 2012, p. 110)
Grocery stores
To manage a grocery store in Sweden the store needs to be registered and approved
according to the environmental administration, “Miljöförvaltningens”, regulations (Göteborg.se). The environmental administration is the authority that operates for
maintaining a fresh and healthy environment for the citizens. They control the
handling of the groceries and the place where it is being handled, according to the
strictly regulations in the law of groceries, “livsmedelslagen” (Notisum.se).
A grocery store in Sweden needs to be equipped and customized in an appropriate
way to uphold good food hygiene. In addition there must exist a control system to
ensure that bacteria or other dangerous microorganisms do not thrive, when handling
the food. The grocery stores are continuously being controlled by the environmental
administration to ensure that the standards are maintained. How often controls occur
depends on the risks associated with the business; the greater the risk, the more
controls. Which food that is allowed to be sold in a grocery store is controlled both by
the law of groceries and by the European Union. The food needs to have the right
labeling and fulfill the requirements of which substances, and levels of substances,
that are allowed. It intends to help the customers to be aware and not misled in their
food buying (Foretag.stockholm.se).
Environmental labels
There are two types of environmental labels in Sweden. A type 1 environmental label
is a certification that is reviewed by a third party. To get this type of certification a
product needs to fulfill a certain degree of environmental sustainability based on the
specific requirements. A type 2 environmental label is one that the company itself has
stated, based on its self-made environmental sustainability standards. The Swedish
and foreign certifications below are all type 1 labels.
Swedish grocery labels
There are two different Swedish certifications that are used to label environmental
friendly groceries seen in table 5.
Table 5: Swedish grocery labels
The label KRAV stands for good environmental care, animal care, health
and social responsibility. They operate for increased organic production
and consumption. Groceries labeled with this label do not consist of
chemical pesticides, fertilizer or genetically modified organisms (Krav.se).
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The label Svenskt Sigill guarantees that the grocery is produced according
to Swedish requirements on good animal care, open landscapes and
environmental responsibility. This is not an organic certification but a
quality guarantee (Svensktsigill.se).
Source: The sources for the pictures of above-mentioned labels can be found as a link in each labels picture
Foreign grocery labels
There also exist foreign certifications that stand for environmental friendliness as seen
in table 6.
Table 6: Foreign grocery labels
EU has a certification for groceries that fulfill EU’s own organic requirements. At least 95 % of all ingredients need to be organic and
there are strict regulations when it comes to the use of chemical
pesticides, fertilizer or genetically modified organisms (Ec.europa.eu).
Demeter is an international network of control of biodynamic growth.
The groceries with this label need to consist of at least 90 %
biodynamic and 95 % organic ingredients (Demeter.nu).
United States Department of Agriculture, or USDA, is the U.S.
national label for organic food. It guarantees organic cultivate and
produced groceries (Ams.usda.gov).
Source: The sources for the pictures of above-mentioned labels can be found as a link in each labels picture
For Whole Foods the most important labels to include, to products sold in Sweden,
would be KRAV, Svenskt Sigill and EU’s own certification. This is due to the fact that
these are the most commonly used labels for organic food in Sweden, meaning that
Swedish customers will have most trust in them.
2.1.1.7 PESTEL Core factors
All factors, which build up the PESTEL-analysis, have been analyzed and core factors
have been identified. These core factors are those most likely to influence Whole
Foods Market if they should expand their business to Sweden. Figure 11 illustrates
the core factors for each element in the PESTEL-analysis.
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Figure 11: PESTEL's core factors
These specific core factors are those, which play the biggest part in the market for
organic food and organic products in Sweden. Therefore it is important that Whole
Foods forms a market strategy, adapted to the Swedish market, with these specific
factors in mind.
2.2 International trade and investment
Buying goods and services from all around the world is something that people has
grown accustomed to. In this point in time people can experience different cultures by
purchasing merchandise from all corners of the world. This section will narrowly
analyze the competitiveness in the grocery industry, by using for instance the National
Competitive Advantage theory, and additionally give a description of both the
business government trade relations and the international finance market.
2.2.1 Competitive Analysis
To clarify which competitors that exist on the market a competitive analysis can be
used. It is a fundamental part of a company’s strategy and it identifies both opportunities and threats (Mossberg & Sundström, 2011, p.65). The competition is
divided into either primary or secondary competitors. Primary competitors offer
almost the equal product or service, while secondary competitors offer an alternative
that fulfill the same requirements. Table 7 shows Whole Foods Market’s competitive
analysis.
Table 7: Competitors analysis
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2.2.1.1 Primary competitors
Grocery stores with an organic food collection (e.g. Ica, COOP, & Willys)
Stores, such as Ica, which offer their customers an organic food collection, are
primary competitors to Whole Foods Market. They offer the same products, but not
the same concept. These competitors can be hard to compete with since they offer an
assortment of both organic and non-organic food.
Online grocery bag with organic food (e.g. Ekoviva & Mathem)
Ekoviva and Mathem can be seen as primary competitors to Whole Foods. These
companies offer organic food to order on the Internet and to be delivered to your
door. Ekoviva only sells organic food while Mathem offers a mixed collection.
Organic shops (e.g. Gryningen & Ekoaffären)
Additionally there are shops that only offer organic food, these are also categorized as
primary competitors. Organic food stores offer both the same products and a very
similar concept. Gryningen and Ekoaffären are shops, both located in Stockholm.
Gryningen offers over 4000 organic and biodynamic products and Ekoaffären offers
organic and environmently-friendly products (Gryningen.eu, Ekoaffaren.se).
2.2.1.2 Secondary competitors
Health Shops (e.g. life)
Smaller health shops with limited range of organic food can be seen as secondary
competitors. An example is life, a chain of stores that offers health foods and herbal
remedies.
Restaurants
All restaurants are secondary competitors. Restaurants offer food to their customers,
which is an alternative to buying organic food at Whole Foods Market.
Markets (e.g. Hötorget)
Hötorget is a marketplace in Stockholm that provides mainly fruits, vegetables, and
berries. The marketplace gives the customers a genuine feeling of locally produced
food.
Grocery stores without an organic food collection
All grocery stores are secondary competitors. They offer a similar product that fulfills
almost the same customer needs.
2.2.2 Porter’s five forces
Porter’s five forces was founded by Michael Porter 1979 (Hbr.org) and consist of
competitive forces that shape the industry competition. It is a useful instrument since
it provides information about where the power lies in different business
circumstances. By using this model a company can gain beneficial knowledge about
their power in their present competitive state and how it would change if they were to
move into another industry or market (Mindtools.com). The five forces are:
Bargaining Power of Customer, Bargaining Power of Suppliers, Competitive Rivalry
within an Industry, Threat of substitute products and Threat of New Entrants.
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2.2.2.1 Bargaining Power of Customers
Bargaining power of customers is one of Porter’s five forces and is concerned with
the power and impact the customers can have on a company. The customer’s power increases with the increasing amount of options the customer is provided with. These
options correspond to both primary and secondary competitors. If the customers are
offered many options that can satisfy their needs, then these companies will be forced
to try to exceed the customer’s expectations in order to win orders. This can result in
decreasing prices, which is beneficial for the customer. Innovation will play a big part
in a matter like this. Whole Foods Market will have to stand out and the fact that the
chain is American can both harm and help the company. At the moment there are not
enough options and competitors for such a situation to appear (Mindtools.com).
2.2.2.2 Bargaining Power of Suppliers
This force involves the power of the suppliers, which depend on the amount of
suppliers that are able to provide a store’s core components. If monopoly or
oligopolies occur, meaning that there is just a few or even one supplier that can
provide this particular component for a specific product, the power is in the supplier’s hands (Mindtools.com).
2.2.2.3 Competitive Rivalry within an Industry
The market in Sweden is growing and is found in a time where there is a high request
of organic food and healthy lifestyles. A major threat to Whole Foods Market is the
online organic food and goods shops that are, to a certain extent, competitive. Some eshops only provide organic goods that can handle the transportation. Currently the
biggest competition is considered to be Mathem, which offers a rare service that
involves home delivery of both foods and goods. At the moment there are not any
physical grocery stores of the size of Whole Foods’s therefore Mathem will be a
primary option for families that do not have a store nearby.
There are grocery stores such as Gryningen and Ekoaffären that only offer organic
food and everyday goods but these brands are not as big and established
internationally as Whole Foods. On the other hand it is only a matter of time until
brands such as these grow into recognized chains due to the rapid expand of the
market. Until then they must work much harder because of the big existing grocery
stores, such as ICA and COOP, that are aware of the demand of organic food and has
invested in multiple food lines within the same store. This concept helps them attracts
more than one target group.
Grocery stores like these have been around for a long time and most Swedes are very
familiar and confident in the stores and what they stand for since most people have
been brought up shopping in these stores. Therefore Whole Foods most challenging
task will be to change the Swedes routines and make them comfortable so that Whole
Foods eventually can become their everyday grocery store.
2.2.2.4 Threat of substitute products
A factor that may affect the profitability of Whole Foods is the substitution of
products on the market. This concerns the availability of products that are similar or
in a functional aspect is a substitution. Are the customers able to find the product they
are looking for, in other places apart from Whole Foods? If that is the case then not
only is there a risk that Whole Foods’s customer base may diminish but it can also
32
mean that they are forced to lower their prices. This is a threat that is projected in the
profitability (Mindtools.com).
Products concerning this matter are different and may be many due to Whole Foods
wide range of products. Many of Whole Foods products can be replaced by
Gryningen, which is a big organic grocery store located in Stockholm and are
considered to be one of the primary competitors among others such as Mathem. The
availability of organic fruits is extremely high and can be found in any grocery store
around the country. There are different types of customers; those that only consume
organic food and others that partly consume organic food upon request. The fact that
grocery stores such as ICA provides their customers with an organic collection of
food, as well as a non-organic collection is a great advantage for both types of
customer. It can also be a major threat to a chain like Whole Foods Market
(Mindtools.com).
2.2.2.5 Threat of New Entrants
The Swedish market is in need of grocery stores like Whole Foods Market. The
people are ready for a more organic world. In this point in time there are not many
options for the typical Swede to get hold of organic food and everyday goods. To
increase the amount of people interested in purchasing organic goods it can be
beneficial to have more retailers and stores open in Sweden. Actions like these can
influence the Swedes to change their lifestyles and support organic living as well as
croppers and farmers. If there are more organic stores available before Whole Foods
enters the market, it could mean that there is a bigger chance to make money due to
the fact that the existing organizations already has made an impression on the people
that were not ready for organic food. This impression can have a positive effect in
terms of Swedes getting more interested in starting to live a healthier lifestyle. This
would benefit the individual as well as the next coming generations by protecting the
environment (Mindtools.com).
2.2.3 National competitive advantage theory
Michael Porter’s national competitive advantage theory is described by Wild & Wild
(2012, p.171) as a trade theory stating that “… a nations competitiveness in an
industry depends on the capacity of the industry to innovate and upgrade”. Researchers have tried to find answers to a question that is related to this theory; how
do companies in a certain country develop a competitive advantage in specific
industries? To answer this question the national competitive advantage theory, which
integrates four elements, was developed. The theory is shown in the figure 12.
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Figure 12: Porter's diamond
Each of the four elements will be discussed and analyzed further and conclusions will
be drawn regarding their effect on Whole Foods, if they were to expand to Sweden.
2.2.3.1 Factor conditions
Porter mentions two different kinds of factor conditions, basic and advanced factors.
Basic factors are a nation’s resources, such as labor force, climate, and national resources. Advanced factors are a result of education and innovation. Technological
infrastructure in a nation and skill level of the workforce is also seen as advanced
factors. Figure 13 shows the hourly cost for employees in different European
countries.
Figure 13: Wages for hours worked and employer contributions
Source: Ekonomifakta.se
As shown in figure 13, Sweden has Europe’s fourths most expensive labor force. For
one working hour the average cost is 356 SEK and one third of this cost is employer
contributions (Ekonomifakta.se). Therefore, if Whole Foods Market chooses to
expand to Sweden, this could end up as a big cost. However there is labor force
available, the unemployment in Sweden is 7.5 % (Scb.se).
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Agriculture represent 1,8 % of all occupation in Sweden and there is about 71 000
farms in Sweden, although 40 years ago these numbers were doubled. The production
is still the same but the farms are bigger (Jordbruksverket.se). Of Sweden’s total farmland, about 15.7% is organically cultivated. This presents an opportunity for
Whole Foods to find suppliers in Sweden.
2.2.3.2 Demand conditions
Significant to national competitive advantage in a product area are sophisticated
buyers in the home market. If there is a sophisticated domestic market it drives
companies to develop and design new products and technology (Wild & Wild, 2012,
p.172). Whole Foods Market is already an established company with a strong image
and well thought out concept. This may be because of a sophisticated domestic
market
in
the
U.S.,
which
made
them
more
competitive.
Many of Sweden’s inhabitants are concerned about preserving their health. Due to
this concern a lot of people are interested in the benefits of organic food. Not only
because it is more nutritious and free of chemical additives, but also for its care for
the environment (Organicconsumers.org). Demand in the Swedish market makes it
possible for Whole Foods Market to enter, but they may have to consider the Swedish
values.
2.2.3.3 Firm strategy, structure, and rivalry
The actions of a company have long lasting effects on future possibilities of being a
strong competitor. It is fundamental for companies to create a strategy and to find
managers that are dedicated to produce quality products. Moreover the industry
structure is essential, as well as the rivalry between a nation’s domestic companies. If there is a high rivalry between a country’s companies, it will make them try harder to be more competitive. This will make it more difficult for other companies to try to
import or develop a production presence (Wild & Wild, 2012, p.172).
There are some competitors to Whole Foods Market in the Swedish market that are
described and explained in the section “2.2.1 Competitive analysis”. They are divided
into primary and secondary competitors. All these companies can in some ways make
it harder for Whole Foods to be successful in the Swedish Market.
2.2.3.4 Related and supportive industries
Supporting industries cooperate in a nation’s internationally competitive industries. They support each other and a cluster is formed. Companies within the cluster can
take benefit from each other. Each business in the cluster assists to strengthen the
competiveness of all the other companies (Wild & Wild, 2012, p.172).
If organic food were more established in Sweden it would probably be easier for
Whole Foods to enter. If the public saw organic food as a necessity it could be easier
to market their products and get more customers. Furthermore if the U.S. were known
for healthy food and life choices, Whole Foods would be able to take benefit from
that. Possibly Whole Foods Market’s image would have been stronger and that could
have given them an advantage.
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2.2.3.5 Government and Chance
Porter also mentions a fifth factor, which is called Government and Chance. This
factor discusses how government actions can influence competitiveness among
companies and, sometimes, whole industries. It also discusses how chance can both
support and threaten the competitiveness of companies and industries depending on
the situation (Wild & Wild, 2012, p.173).
The events of chance are hard to predict which means that companies can only work
with preventive measures and minimizing risks. Therefore Whole Foods should keep
good relations with all suppliers and have some geographic dispersion of suppliers of
products, which might be in risk areas. Furthermore, regarding Whole Foods,
government trade relations will be of most significant part. Therefore this will be
discussed further in the following section.
2.2.4 Business government trade relations
Even in today’s global market, there still retains many regulations regarding trades in between countries. The active role national governments have in international trade is
a strong influence on this fact. This, in turn, means that it is imperative for companies
to be aware of how governments control and affect trades in the countries they are
active in.
2.2.4.1 Government function
According to Wild & Wild (2012, p.180), governments impose restrictions on free
trade for three main reasons, political, economic or cultural. The main political
reasons that governments intervene are to protect jobs, preserve national security, to
respond to other nation’s unfair trade practices or to gain influence over other nations.
Since Whole Foods Market, expanding their business to Sweden would increase job
opportunities and since it is not a case of products that could affect national security,
these are not factors that would influence governmental control. Furthermore, the
majority of products sold at Whole Foods in Sweden would most likely be imported
from countries worldwide. This would in turn mean that the risk of governmental
influence regarding unfair trade practices, affecting the selection as a whole, is very
small. The United States government has been known to control trades to gain
influence over other nations in the past. However, it is a very low probability that this
method of gaining control would be practiced in trades with Sweden since the
Swedish political system does not motivate this type of intervention.
The economic motives for governmental control are mainly to protect infant
industries or the promotion of a strategic trade policy. Since the market for food and
groceries is well developed in Sweden, there is no economical reason for the
government to intervene in trades in this market. The most common reason to restrict
trades due to cultural objectives is to preserve national identity. Because of the fact
that culture and trade are intertwined, it follows that these factors very much affect
one another. If the cultural influence of one nation on another is unwanted, the
government can block imports that are seen as harmful (Wild & Wild, 2012, p.183).
According to Wild & Wild (2012, p.184), the United States is often seen as a threat to
local culture. Wild & Wild states that the reason this view has spread is the power of
the United States entertainment, media and consumer goods. Even though the cultural
36
influence of the United States is very strong in Sweden this will not represent a
problem for Whole Foods from a governmental perspective. Since the Swedish
culture is already influenced by the United States there is no reason for the
government to oppose a U.S. company expanding in the Swedish market.
Furthermore the concept of Whole Foods is very adaptable to Swedish culture, which
means that the company does not put up a real threat to the national culture.
2.2.4.2 Methods of promoting or restricting trade
There are different ways for governments to promote or to restrict trade. The methods
of promoting trade exist of subsidies, export financing, foreign trade zones and
special government agencies. To restrict trade, the most common methods are tariffs,
quotas, embargoes, local content requirements, administrative details and currency
controls (Wild & Wild, 2012, p.187). U.S. companies are offered help financing
exports through institutions like the Export-Import Bank of the United States, or ExIm
Bank for short. The ExIm Bank can also offer companies insurance on foreign
accounts receivable. Another institution that promotes trade in the U.S. is the
Overseas Private Investment Corporation (OPIC), which provides insurance services
for investors (Wild & Wild, 2012, p.186).
Since Whole Foods Market is a large established company and, as said before, the
goods sold in Sweden will most likely be imported from countries worldwide,
government subsidies, export financing or other methods of promoting trade will not
be crucial for the advancement of Whole Foods to Sweden. Whole Foods are already
established in the United Kingdom, which like Sweden is a member of the European
Union. This means that the methods of promoting and restricting trade that may occur
in Sweden follows the same rules and regulations as the ones existing in the United
Kingdom. For Whole Foods, this is an advantage seen as they have already expanded
into the European Union.
2.2.5 International Financial Markets
Having a functioning financial market is vital for the international business
environment. To be able to transfer money from one market, where organizations and
economics have excessive funds, to a market in need is important to keep the world’s
financial market floating. Another important part of the international financial market
is the trading of currency and the ability to exchange currencies at internationally set
rates, which is imperative for companies to do business over national borders (Wild &
Wild, 2012, p.250).
2.2.5.1 International capital market
Wild & Wild (2012, p.250) defines the capital market as a ”System that allocates financial resources in the form of debt and equity according to their most efficient
uses”. The meaning of an international capital market is to facilitate borrowing and
investing money on the international market for companies and governments as well
as individuals. For companies the international capital market is a way to obtain longterm finance through getting equity from the stock market. When a company performs
well their stock will go up and the owners will make money and vice versa. As a
result the company obtains capital from many different sources instead of getting a
few individuals or companies who invest. A few investors would each risk a large
amount of capital and therefore get a larger say in how the company is ran (Wild &
Wild, 2012, p.251).
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Another way to acquire capital on the international capital market is by debt. A way
this works is through loans, where companies lend money against a predetermined
interest. Companies can also acquire capital through debt by selling bonds, which is
the most common. By buying a bond at a predetermined value, the buyer will get the
invested money plus interest back after a certain amount of years. This is among the
safest way for an individual to invest their money and the interest is usually higher
than what is offered at most banks. Although the payoff dealing with bonds, is not as
high as the one dealing with stocks, the risk is much smaller (Wild & Wild, 2012,
p.251).
2.2.5.2 Exchange market
As this report analyzes the possibility for Whole Foods Market to expand their
business to Sweden, the exchanges rates and the inflation between the countries will
pay a roll in whether it is a good idea to expand into Sweden.
The exchange rate between Sweden and the U.S. in 2014-01-04 was 6.9294
SEK/USD (forex.se). Figure 14 shows the exchange rates between Sweden and the
United States.
Figure 14: Exchange rates between USD and SEK
Source: Forex.se
Looking back in time, the exchange rates have been circa 10 SEK/USD, which means
that importing goods into Sweden is more expensive today, and then it has been
historically. However, the profit earned in Sweden will buy more USD, meaning that
Sweden is a profitable market if the imports from the U.S. are kept to a minimum.
2.2.5.3 Inflation
An increase in the general price level is described as inflation. When inflation occur
the prices rise and the value of the currency is undermined. Although not all increases
in price are due to inflation. Some may occur if the demand is higher than the supply
of a certain product.
38
Inflation can arise by a number of causes. One of these causes is if a central bank
were to supply too much currency. It can also be caused by companies and
households believing that general prices will rise. This generally makes employees
demand higher wages to be able to afford the same lifestyle in the future. In turn
employers are forced to raise their prices, making the expectations of inflation selffulfilling (riksbank.se).
The difference in inflation rate between two countries also affects the exchanges rates
between two currencies. Figure 15 shows that the difference in inflation rates between
Sweden and the U.S. has been quite equal since the graph started in the early 1960’s. Figure 15: Inflation rates
Source: Ekonomifakta.se
Since the biggest difference shows in the early 1990’s, recording a difference of about 4%, the changes in inflation should not be a problem for Whole Foods Market in
Sweden (ekonomifakta.se).
In conclusion the collected factors regarding the elements of the PESTEL-analysis,
the competitive analysis, the influence from the government regarding trade and the
effect of the current situation of the international finance market will all influence the
macro environment of Whole Foods Market in Sweden. To further consider doing
business in Sweden it is important for Whole Foods to analyze both external and
internal factors that can affect their business.
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2.3 SWOT-analysis
A SWOT-analysis is an important tool in a company's strategy formulation and
business development. The SWOT-analysis is a structured way to assess a company's
strengths, weaknesses, opportunities and threats, and also gives a structured overview
of the current situation and what needs to be developed in the business (Jobber &
Fahy, 2009, p.323). Figure 16 shows the SWOT-analysis conducted regarding Whole
Foods current situation in the Swedish market.
Figure 16: SWOT-analysis
The Strengths and Weaknesses of the SWOT-analysis are representing internal factors
affecting Whole Foods in Sweden while the Opportunities and Threats represent
external factors (Mossberg & Sundström, 2011, p.367). The different factors, building
the SWOT-analysis, will be discussed and analyzed further to emphasize what Whole
Foods should focus on, if they were to expand in to Sweden.
2.3.1 Strengths
One of the strengths in Whole Foods Market is that they are a well-established
company. They have about 365 stores in both North America and the UK
(Wholefoodsmarkets.com), and are the industry leader in their segment. As previously
known, the organics industry is increasingly popular, and Whole Foods Market’s
great commitment regarding environmental issues, sustainability and a healthy
lifestyle gives them a good concept. The world cares more than ever about the
planet's health, human conditions, health, and wellness. Good quality and service are
two other strengths Whole Foods has. They offer high quality and fresh products that
are all organic. Their business is to sell the highest quality food they can find at the
most competitive prices possible. According to Whole Foods Market, their search for
quality is a never-ending process (Wholefoodsmarkets.com).
As mentioned, there exists a good customer service that is aimed at individual
customers, businesses and employees. These are services as personal shopping, office
kitchen shopping, pantry makeovers and healthy eater starter kits. A good relationship
with their farmers and ranchers is also an important part of Whole Foods. They have
a strong commitment to encourage and help local producers, and one way they show
this support is in offering “a local producer loan program”. Whole Foods market,
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through this program, support small producers who need a hand to make their dreams
come true (Wholefoodsmarket.com).
2.3.2 Weaknesses
Whole Foods Market’s first weakness is the difficulty of finding potential suppliers
in Sweden. Due to the company’s specific standards on their products finding
potential suppliers can be difficult to fulfill in a country like Sweden. The reason for
this is the difference in climate meaning that the possibility of producing similar
products in Sweden as in the U.S. will be hard.
The second weakness for Whole Foods Market is the drive of Swedes to consume
locally produced food. Since it will be hard to find local producers that can provide
organic food, the supply of locally produced food in Whole Foods Market in Sweden,
will be limited. This can in turn create some dissatisfaction with customers and
therefore it is important for Whole Foods to take this into consideration.
Organic and pesticide-free products have a worse durability than non-organic
products. This means that Whole Foods Market must bring in new products much
more frequently than what other supermarkets might need. This is costly and requires
good suppliers who can promise good delivery. The price of the organic food is also
more expensive than other groceries, which means it is important that the customers
get what they expect. The final weakness mentioned in the SWOT-analysis is the
price. The organic products are much more expensive than regular products which
other grocery stores offers.
2.3.3 Opportunities
The Swedish population is aware that it is important to eat and live healthy. It is today
fashionable to be concerned with the environment and eating organically. There
are a few stores of this kind on the market therefore it opens an opportunity for
Whole Foods Market to be market leader. Whole foods market is already
established in the UK and therefore creates a great opportunity for Swedish society
to adapt and accept their existents. The overall economy is growing and will create
demand to think of a sustainable society and choose a more environmentally friendly
alternative.
2.3.4 Threats
The first threat to Whole Food may be that Swedes have preconceptions about the
American food culture. Some may believe American food is neither healthy nor
organic and will connect the country with fast-food chains such as McDonalds or
KFC. It is also possible that the Swedish population will not approve their
American Organic label mentioned in section 2.1.1.6 regarding legal aspects. This
may be because the Swedish prefer Swedish environmental labeling since these are
more trustworthy to them. Additionally it is hard to know if there will be enough
suppliers who can supply organic food in Sweden. The company may need to import
products, which cannot be cultivated in Sweden.
When entering a new market there is going to be a number of competitiors. As
discussed in section 2.2.1 there are a few stores, similar to Whole Food Market,
existing in Sweden that will be direct competitiors. Additionally the regular grocery
41
stores as well as the alternative to get a basket of groceries delivered to the door will
become competitors since they to offer organic food.
42
3. International Business Management
In the final project this section will analyze Whole Foods Market's opportunity to
expand to Sweden, select ways of entering the Swedish market and develop a suitable
marketing strategy.
3.1 International Strategy
The actions that managers plan ahead, to reach the company’s goals and objectives, are developed into a strategy. A strategy is, for a company, a way to achieve business
accomplishments set up in advance. It is not always easy for a manager to develop a
strategy since every strategy needs to be adjusted and accustomed depending on the
company, the company goals, strengths, weaknesses, opportunities, and threats. The
process of developing a strategy is relatively similar when dealing with a domestic or
an international company. What complicates the process for international managers
are factors that need to be taken into consideration such as cultural mixtures of
language as well as legal, political and economic traditions. To be able to determine
what to produce, where to produce, how and where to market the company’s
products, it is of great importance that managers have a clear view of the different
cultural mixtures. The process of strategy-formulation concerns the managers’
perspective of the present and their view for the future. This process can be divided
into three steps; Identify Company Mission and Goals, Identify Core Competency and
Value-Creating Activities and Formulate Strategies (Wild & Wild, 2012, p.302).
These three steps and the factors they consist of are presented in figure 17.
Figure 17: Strategy formulation process
Further discussion regarding the steps in formulating an international strategy will
follow along with analyses of how Whole Foods position themselves in each step.
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3.1.1 Identify Company mission goals
This stage involves the search of the company’s purpose of existence with the help of a mission statement. A mission statement often includes information about how the
operations affect the different parties involved in the company’s business, such as suppliers, employees, customers, and stakeholders (Wild & Wild, 2012,
p.302). Whole Foods Market’s mission; “Our motto—Whole Foods, Whole People,
Whole Planet — emphasizes that our vision reaches beyond food retailing. In fact,
our deepest purpose as an organization is helping support the health, well-being, and
healing of both people — customers, Team Members, and business organizations in
general — and the planet”(Wholefoodsmarket.com).
This mission statement clearly explains what Whole Foods want to achieve with their
business, it does not bring up the profit aspect of the business but instead refers to the
stakeholders’ health and well-being. Whole Foods succeed to capture the issues that
the world has by not only focusing on the customers’ well-being but everyone’s and everything’s health even competitors and the environment. This gives the impression
that Whole Foods are more concerned with saving the world than making money. In a
customer perspective this can give the customer an emotional or self-expressive
benefit, which refers to the benefits that reflects on the self-image and the feelings the
customer gains after the purchase (Marsdd.com). In this case the feeling that the
money the customer spends goes to a good cause and therefore they feel better about
themselves. This in can be considered as competitive advantage because it can affect
the customer value positively. It is a good and valuable mission statement and should
be advertised and used as a competitive tool.
3.1.2 Identify Core Competency and Value-Creating Activities
Knowledge about the company’s industries or future industries is extremely important to analyze before formulating a company’s strategy. This stage is the identification of the company’s core competency and value creating activities. A core competency is a company’s extraordinary ability that differentiates a company from its competitors. Competitors often find it impossible, or very hard, to equal these unique
abilities. Companies use to develop these core competencies in order to produce
superior products (Wild & wild, 2012, p.302).
To identify and analyze a company’s core competencies managers use a tool called value-chain analysis. When selecting and formulating a firm’s strategies the managers
need to identify, analyze and base the strategies on the firm’s strengths and weaknesses and therefore a value-chain need to be created. “A value-chain analysisthe process of dividing a company’s activities into primary and support activities and
identifying those that create value for customers” (Wild & Wild, 2012, p.304). A
company’s primary activities are those that create direct value from the customer’s perspective. These activities are mostly described as the activities that are part of the
creation of the products, such as: inbound and outbound logistics, marketing and
sales, production, and customer service. Support activities are described as the areas
in which give support and feed the primary activities. Activities as such could be
Business Infrastructure, Technology Development, Sourcing, and Human Resources
(Wild & Wild, 2012, p. 304). Whole Foods Market’s potential value chain on the Swedish market has been constructed and is shown in figure 18.
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Figure 18: Value chain
The primary activities identified in the figure 18 are; Farmers as suppliers,
Distributor, Headquarters, Promotion, and Consumption of product by customers. The
farmers contribute with the raw material and act as first and main suppliers. The
activities by the farmers start the product value chain, which gives them a lot of
control and responsibilities. This in turn means that Whole Foods must be very
selective and cautious when choosing suppliers. It is important that both parties are
well familiar with each other’s brand and what they stand for in order to have the
most successful partnership possible.
The distributors of Whole Foods’ products have a great influence in the packaging and transport part of the process. It is Important that the Headquarters are involved so
that the distributors maintain the standards of Whole Foods. The Headquarters will
influence the choice of vehicle that transport the goods to the Whole Foods store, and
the packaging material so that such activities are completed in a way that does not
jeopardize what Whole Foods stands and strives for, a healthier planet. The
distributors will also act as a factory and manage the production part of the process
for the products that are in need of it. The store operations within the store cover the
placement of the product and how they are displayed in a customer perspective, as
well as in the healthiest and freshest way possible. It is an advantage to have a
coherency when it comes to the furnishing and structure in the store because it can
make customers of other Whole Foods stores around the world feel comfortable by
recognizing the environment. Other store operation activities can be the customer
service and uniforms that the employees wear.
The Promotion activities cover all kinds of marketing actions and play a big and
important role in the communication with the customers. It is therefore important that
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these activities are completed properly and that there is a lot research behind it in
order to avoid misunderstandings and unnecessary costs. The consumption of
products by the customers is a critical activity because the customers are Whole
Foods’ ambassadors therefore it is important that they are satisfied with the product.
The customers need to be not only satisfied with the actual product but also the whole
experience of the visit at Whole Foods so that they can recommend the brand to other
people.
The Support activities include Government regulations, Infrastructure, Media,
Human Resources, Technology Development, Economy, and Research and
Development. Government regulations affect all the different primary activities in
different ways and it is important to know how they differentiate from region to
region in order to know how they can affect the business in each particular country.
The Infrastructure in the country where the business takes place plays an important
role because it can restrict as well as forward activities within logistics such as
transportation. The Media is a support activity that can play to Whole Foods
advantage as well as disadvantage therefore it is important for Whole Foods to stay
active and know what is mentioned in the media about industry, the brand itself, and
other factors that can affect the business. The media has influenced Whole Foods
positively because organic food and actions that make the planet a healthier place
have been promoted in different media channels such as blogs and newspapers. This
shows that it is a good time and place for a brand as Whole Foods to enter the
Swedish market.
Human Resources are the most important and valuable tool a firms has because
ultimately the employees are the ones that sell the product and interact directly with
the customers. The employees inside the store will support and affect different store
operations and the customer’s experience. Other employees employed within Whole
Foods but outside the store, such as the department of economy or marketing, are also
important and need to know what Whole Foods Market stands for and where the firm
is going in order to produce a successful joined organization.
The Technology Development covers the different technological solutions that can be
used to optimize different parts of the firm’s processes. It is therefore important to constantly be aware the different developments within this area in order to be
competitive. The Economy of a country and the different economic trends in the
world play a huge role in Whole Foods business. It affects the customer’s buying behavior and ultimately it affects Whole Foods economic business situation.
Activities within Research and Development support different strategic decisions and
the primary activities. The market is constantly changing and it is of great
significance that Whole Foods are aware of the different changes with the purpose of
preventing any negative potential consequences. By being aware and prepared for
changes in the market Whole Foods can differentiate themselves from their
competitors and use it as a competitive tool.
Factors that manager’s study are the national and international business environments,
these are analyzed and taken into consideration in order to be able to produce the most
effective and efficient strategy possible. Differences in cultural components such as
religious belief, language, politics and other factors in the supply chain will create
complexity and increase the cost of the strategy formulation process. For Whole
46
Foods Market this could mean adapting and making adjustments such as: creating a
website in Swedish, locating and finding suppliers as local as possible that can
maintain Whole Foods international standards, and at an early stage reaching out to
customers and getting their feedback in order to satisfy the customer’s needs.
Before entering the Swedish market Whole Foods need to review any political risks
analyzed in the PESTEL-analysis, seen in section 2.1.1.1. Additionally any legal
activities, when it comes to recruiting and selecting human resources or any other
aspects of the corporation, should be reviewed. When communicating with customers
through any kind of marketing it is important to primarily use the Swedish language
in order to avoid misunderstandings and unnecessary costs. It is not recommended to
include or associate religion with Whole Foods due to the fact that the Swedish
culture is not considered to be a united religious society. The manufacturing process
needs to be adapted and optimized to the work ethics of the Swedes in a way that is
most cost effective. It is highly relevant to modify the packaging sizes and quantity of
items per package. Statistics show that Swedish families, on the average, have 1.9
children per family compared to the U.S’ 2.1 children per family (Globalis.se). All
these adjustments that the managers need to make increase the cost of the strategy
formulation process.
Based on the different areas in the value-chain and the SWOT-analysis formulated,
Whole Foods core competencies can be identified as: concept, brand, and quality.
Whole Foods Market has a strong concept that differentiates itself from many other
food chains. What makes the concept a core competency is that it is highly relevant in
this time, which opens up a space for them on the market. The Swedish market does
not have a retailer in a supermarket format that only provides organic goods, of this
international standard. What separates Whole Foods from other firms with the same
concept is their brand. When entering a new market Whole Foods take with them their
international success, experience and magnitude from their 365 stores in three
different countries. This gives them a competitive advantage because customers may
have interacted with them before and at the same time Whole Foods have a clearer
and ready strategic plan on how to take on a new market, than any other brands in
Sweden. A matter that Whole Foods works hard with is quality. The quality is one of
the brand’s strongest attributes and the firm works hard to not depart from the highest
quality standards in the industry. Whole Foods state their own quality standards on
their website to inform their customers that they only provide products of the highest
quality.
3.1.3 Formulation of strategy
The third and last step of the strategy-formulation process involves the formulation of
strategy. There are two different international strategies, multinational and global
strategy. These strategies are not applicable for companies that export. After deciding
on what international strategy to use, multinational strategy or global strategy, it is
time for the managers to formulate strategies on corporate-level and business-level.
The multinational strategy is defined as the strategy where the products and the
marketing of the product are accustomed and adjusted to each national market and its
circumstances in order to be as efficient and successful as possible. The strategy is not
applicable for every market because it is formulated independently for every national
market. When a company provides their customers with exactly the same products
with help of the same marketing tools, regardless of where in the world they are, then
47
a global strategy is being used (Wild & Wild, 2012, p.306). For Whole Foods to be
successful in the Swedish market it is extremely important for the company to adjust
as much as possible in terms of product packaging, marketing, size, location as well
as other factors. Therefore a multinational strategy is best suited for Whole Foods
Market.
There are four different strategies included in corporate-level strategies and these are;
growth, retrenchment, stability and combination strategy. Growth strategy is a
strategy developed for firms with the intention to increase the scope size of the
corporation’s activities. Retrenchment strategy refers to the exact opposite of the
growth strategy meaning that the company’s scale and scope decreases. The third strategy at corporate-level is the Stability strategy, which is used by corporations that
want to remain in their current business situation and prevent changes. These three
strategies can be combined with the use of the fourth strategy called Combination
Strategy (Wild & Wild, 2012, p.308). The most appropriate corporate-level strategy
for Whole Foods is the Growth strategy. This is due to the reason that they are
constantly searching for new locations to market themselves. An action that indicates
the Growth strategy is how Whole Foods market themselves in the United Kingdom.
Whole Foods took over an existing chain of 8 stores without changing the name to
Whole Foods with the aim to gain market shares, which they successfully did.
Expanding the concept and brand to Sweden is an activity influenced by the Growth
strategy. When the corporate-level strategy is determined a business-level strategy
must be established.
According to Wild & Wild (2012, p.308) “The key to developing an effective business-level strategy is deciding on a general competitive strategy in a
marketplace”. There are three different business-level strategies; Low-cost
Leadership strategy, Differentiation strategy, and Focus Strategy. The Low-cost
Leadership Strategy is mostly applicable for companies with price sensitive buyers
and products that are mass-marketed. The strategy is defined by Wild & Wild (2012,
p.309) as “A strategy in which a company exploits economies of scale to have the
lowest cost structure of any competitor in its industry”. The Differentiation strategy is
designed so that a company constructs their products in a way that the buyers
experience the products as unique. What differentiates this strategy from the low-cost
leadership strategy is that it gives the buyer a feeling of exclusivity, which in turn
allows the company to charge a higher price. According to Wild & Wild a Focus
strategy is “…one in which a company focuses on serving the needs of a narrowly
defined market segment by being the low-cost leader, by differentiating its product or
both” (2012, p.309).
The recommended business-level strategy for Whole Foods is the Focus strategy
because the company only provides organic goods, which means that they only feed a
narrowly defined market segment. This strategy best suits Whole Foods and their
mission. They will be able to use this strategy with the help of their differentiating
products.
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3.2 International Organizational Structure
It is important for an organization to have a structure that suits the strategic plan in
order to achieve the best outcome possible. The structure divides and coordinates the
organizations activities into different units. There are different forms of structures to
be used. Centralization is a form to use in order to help coordinate international
subsidiaries and departments. Decisions based on centralization are made from a
department on a high organizational level, a department such as the headquarters.
Decisions made from a lower organizational level are often decentralized and usually
come from departments such as international subsidiaries. Decentralized decisions are
helpful and mostly used in businesses that find themselves in fast-changing national
environments where local expertise is demanded. Important to remember is that
organizations are rarely fully centralized or decentralized because when making
decisions it is more important to achieve efficiency and effectiveness rather than
staying to a predetermined approach (Wild & Wild, 2012, p.312).
For Whole Foods it is extremely important to adjust the structure to each individual
market and if the mode of entry changes then so should the structure. The Swedish
market is very different in comparison to the market where Whole Foods first as
originated, therefore local expertise will be needed. Decisions regarding the local
market should be decentralized but at the same time sensitive decisions regarding the
brand should at some point be centralized. In this way there will be some kind of
coherency in the branding of the company and the employees, managers, and
subsidiaries will grow more dedicated with the organization regarding promotion,
distribution, production, and pricing strategies.
Wild explains chain of command as “the lines of authority that run from top
management to individual employees and that specify internal reporting
relationships” (Wild & Wild, 2012, p.312). Every structure that any organization uses
needs well-defined areas of responsibility and chains of command in order to properly
design a structure where the right areas and departments that cooperate can work
closely together. When designing these structures it can be important to remember not
to make them permanent so that they remain flexible. Flexibility is an important
factor so that the company can react internally to external changes from the national
business environment.
There are different types of organizational structures; International Division
Structure, International Area Structure, Global Product Structure, and Global Matrix
Structure are four examples. When international business activities are separated from
the ones taking place on domestic ground and each division has its own manager, then
that is an international division structure. International area structure is used so that all
global operations of a company are divided according to country, continent or any
other geographic region. Companies can also divide all of their operations taking
place anywhere in the world by each product area and this type of structure is called
Global Product Structure. Wild explains that fourth structure “splits the chain of
command between product and area division” (Wild & Wild, 2012, p.315). The aim
of this structure is to make the two managers of geographic area and products area
join the decision making process by letting every manager report to both these two
bosses.
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Figure 19 shows the organizational structure constructed for Whole Foods Market in
Sweden. Whole Foods will be using an International Division Structure and when
the brand has expanded to more countries in different continents an International
Area Structure will be more appropriate.
Figure 19: Structure of organization
The regional office will be experts regarding the Swedish market and will at this stage
be responsible for strategic planning, plan and budget for departments of Economy,
Marketing, and Human Resources. The regional office will make decisions of what to
outsource and what agencies and companies to turn to. The store will have a Store
Manager that manages activities inside the store. This manager will be responsible for
the training of new recruited staff, purchase of goods, and every-day in-store
operations.
The objectives of this structure is to allow the organization to make decisions quickly
and easily adapt and respond to environmental as well as market changes. With this
structure the Swedish division will be able to entirely focus on their region and its
changes that can affect the business in terms of different components within culture,
economy, politics and technology. More managerial positions within the company in
different regions will be needed which can be an advantage as well as a disadvantage
since it does not only contribute with know-how but also increases costs.
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3.3 Selecting Entry Modes
If and when Whole Foods Market expand and make the decision to enter Sweden,
they will have to select which entry mode they should use. An entry mode is the
institutional arrangement by which a firm gets its products, technologies, human
skills, or other recourses into a market. The specific mode chosen depends on many
factors, including experience in a market, the amount of control managers’ desire, and
the potential size of the market (Wild & Wild, 2012, p. 350). In this section different
entry modes will be presented and examined. Followed by this there will be a
recommendation of which of these Whole Foods should proceed with if they choose
to enter the Swedish market.
3.3.1 Wholly Owned Subsidiaries
A wholly owned subsidiary is a facility entirely owned and controlled by a single
parent company, who owns 100% of the company's outstanding common stock.
Wholly owned subsidiaries allow the parent company to retain the greatest amount of
control, but also leave the parent with all the costs and risks of full ownership
(Investinganswers.com, Investopedia.com). By forming a new company and
constructing entirely new facilities or by purchasing an existing, companies can create
a wholly owned subsidiary. One of the advantages with wholly owned subsidiary is
that managers have complete control over day-to-day operations in the target market
and access to valuable technologies, processes, and other intangible properties within
the subsidiary. This makes it easier to control the company’s competitive advantage. The entry mode is also good when a company wants to coordinate the activities of all
its national subsidiaries. The ability to exercise complete control over a wholly
owned subsidiary makes this entry mode attractive to companies that are purchasing
global strategies (Wild & Wild, 2012, p. 364).
There are also some disadvantages with wholly owned subsidiaries. The two primary
disadvantages are that it can be expensive and that the risk of exposure is high. One
source of risk can be political or social uncertainty, or sometimes-outright instability
in the target market. The reasons why this entry mode can be expensive are since
companies usually finance investments internally or raise funds in financial markets.
Forming and owning a subsidiary is rarely an option for small and medium-sized
companies, as it is very resource intensive. It is almost only large companies that can
afford this and has skilled personnel in the area. Based on how the market is in
Sweden, and the fact that whole foods are new in the country, this seems to be an
entry mode that would be suitable for them.
3.3.2 Joint Ventures
Joint venture is when one or more companies create an alliance, or start a new
business.
This is a way to spread risks along with large projects, and also often a quick way to
establish them in a new country. Sometimes it takes a local partnership in order to be
allowed to operate in the country (expowera.se). Joint venture partners can be
privately owned companies, government agencies, or government-owned companies
(Wild & Wild, 2012, p 364). Joint ventures can have many different forms and
structures, but the four main configurations are forward integration-, backward
integration- buyback and multistage joint ventures. A forward integration joint
venture is when the parties choose to invest together in downstream business
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activities that often are performed by others. When companies instead choose to
invest into upstream business activities, activities earlier in the value stream it is
called backward integration joint venture. Buyback joint venture is formed when
each partner requires the same component in its production process. The input and the
output of the joint venture are both provided and absorbed by each of its partners. The
result of when one company produces a good or service required by another company
it is often called a multistage joint venture. It is a joint venture that features
downstream integration by one partner and upstream integration by another (Wild &
Wild, 2012, p. 366).
One of the disadvantages with joint ventures is the ownership; joint venture
ownership can result in conflict between partners. However conflict is most common
when management is shared equally, which is known as a “50-50 joint venture”. By establishing unequal ownership the parties can therefore reduce the possibility of
conflict and indecision. Another disadvantage is the loss of control over a joint
venture’s operations, which can happen when the local government is a partner. The situation occurs most often in industries considered culturally sensitive or important
security (Wild & Wild, 2012, p. 366).
3.3.3 Strategic Alliances
When two or more companies have decided to share resources and cooperate to
achieve the strategic goals of each, it is called strategic alliance. A strategic alliance is
less involved and less permanent than a joint venture, in which two companies
typically pool resources to create a separate business entity. In a strategic alliance,
each company maintains its autonomy while gaining a new opportunity. The alliance
can be established between a company and its suppliers, and even its competitors.
Some important advantages that strategic alliances offer are the share of costs and the
tap into competitors’ specific strengths. The possibility to gain access to a partner’s channels of distribution in a target market is also a good reason till why companies
turn to strategic alliance. On the other hand the disadvantage that may arise with
strategic alliance is that it can create a future local or even global competitor. A
company can reduce the likelihood of creating this competitor by declining to
cooperate with others in the area of its core competency (Wild & Wild, 2012, p. 367).
3.3.4 Franchising
When one company, the franchiser, lets one or more other companies use its brand
and business concept over an extended time period it is called franchising. The
cooperation is bounded by a contract, which comes with both rights and
responsibilities. The most common franchisers are the ones with well-known brand
names, because the brand names are often the most attractive aspect for the
franchisee. Therefore companies with a less known trademark will have a hard time to
franchise their business (Wild & Wild, 2012, p 368).
The concept and methods that the franchiser has developed are to be used thoroughly
in the whole chain of franchisees to ensure unity. In turn that creates an advantage on
the market. The franchiser and franchisees work together towards to achieve common
goals. The franchiser takes care of education, guidance, quality control and market
strategies, while the franchisee manages the daily activities and is responsible for its
own result (franchisenet.se). A benefit with the franchise system is that it is an entry
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mode with low costs and risks. The franchisers depend on the consistency of their
already proven concept. Additionally the franchisers can make great use of the local
manager’s cultural understanding. A drawback with franchising is that it can be difficult for the franchiser to control the consistency in quality and promotion among
the franchisees in the different markets (Wild & Wild, 2012 p 369).
Whole Foods Market does not use the franchise system, they own and operate all their
stores. At the moment they do not have any plans of beginning to franchise their
business. However, we believe that their strong brand, and the fact that they are
widely spread through the North America, may fit a franchise system in the future.
Today Whole Foods only exist and operate in North America and United Kingdom,
but with further expansion to other parts of the world, a franchise system may work
properly.
3.3.5 Foreign Direct Investment
Foreign Direct Investment, FDI, is characterized by a certain degree of influence,
ownership, and control over assets of a company in another country to gain a measure
of management control (Wild & Wild, 2012 p. 210). There is a wide disagreement
between nations what exactly constitutes foreign direct investment. All nations around
the world set different thresholds as which they classify as an international capital
flow, FDI. Most governments set the thresholds between 10 to 25 percent of stock
ownership in a company abroad and in the U.S. the commerce department has decided
that the investor should have at least 10 percent (Wild & Wild, 2012, p. 210). FDI has
increased the globalization and also causing a growth number of emerging markets
around the world. Another factor that also drives the FDI is mergers and acquisitions.
The cross-border mergers and acquisitions are concentrated in developed nations and
these countries are also the prime destination for FDI (Wild & Wild, 2012, p. 212).
3.3.5.1 Why be interested in Foreign Direct Investment
According to Wild & Wild there are a number of main reasons why companies
engage in foreign direct investment. A theory that possibly could meet a strategy for
Whole Foods Market to invest in FDI would be Market Power. The theory states that
a company tries to establish a dominant market presence in an industry by
undertaking foreign direct investment (Wild & Wild, 2012, p 214). Whole Foods
Market could with this theory buy a supermarket chain in another country and get the
benefit of the market power through an existing supply chain and customer stock.
This gives a chance to better be able to dictate the price of its output and the costs of
its inputs.
3.3.5.2 Management Issues in the Foreign Direct Investment
Before considering investigating in FDI, several important issues regarding
management of market activities and analyses of the company are required. First issue
is regarding Control, which means how to control activities that occur in the local
market. It is normally important for companies to maintain control over the firm
abroad and that is why many companies have strict policies regarding ownership. This
could mean that companies want their product or concept to be marketed and have the
same price as in the home country. Another important issue is the knowledge about
customer’s needs and behaviors. Local presence can help companies to better
understand local conditions and tailor their products. The last issue to investigate is
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how your competitors act. For a company that choose not to enter a market when their
competitor does it, the result can be shut out of potentially lucrative market (Wild &
Wild, 2012 p. 215-218). Most of the issues that are described above could be
concerning for Whole Foods Market, if they consider entering into Swedish market.
Having control in all parts of the chain is probably an important issue. Marketing and
pricing is of course utmost important for a successful investment. The Swedish
market is different from the one in the U.S. and therefore the local presence and local
customer knowledge is probably necessary. It would help to know the Swedish
customer relations and habits regarding healthy and organic food before entering. It is
probably not relevant for Whole Foods to use FDI when entering the Swedish market.
Although, the issues mentioned are good to know regardless using FDI or not.
3.3.5.3 Government intervention in Foreign Direct Investment
The government can create regulations and enact laws to protect domestic companies,
jobs and the existing cultures in the country. They may do this to create administrative
hurdles that companies from other countries have to overcome if they want to invest
in the country. There are a number of reasons for both the home country and the host
country to intervene in FDI. The home country can see this in both pros and cons.
Countries can encourage outgoing FDI in industries that use outdated technologies or
workers with low-wage and few skills. When these jobs go abroad and instead
retraining workers in higher-paying skilled work both the industry and the country
can upgrade their economies. The FDI can also cause that jobs that are resulting from
outgoing investment may replace jobs at home (Wild & Wild, p. 219-222). This is not
a relevant issue for Whole Foods to reflect upon due to that the Swedish government
will probably not restrict or promote to enter with FDI. Therefore government
intervention is nothing they have to consider if entering Sweden.
3.4 Marketing Strategy
The way a company creates an image of itself on the market can be the difference
between success and failure, which forces companies to put great effort into
marketing themselves. In the following section, Whole Foods Market’s marketing
strategy will be analyzed by using their marketing mix as well as their segmentation,
targeting and positioning.
3.4.1 Marketing mix
The marketing mix is a well-known tool used in the marketing business. This tool is
also called the four P’s and stands for Product, Price, Promotion, and Place. This
model is used to determine a products or brands pulling power on a market (Mossberg
& Sundström, 2011, p.32). When analyzing Whole Foods, using the marketing mix,
the four P’s can be extended to include three more P’s making it a total of seven. The three additional P’s are Process, Physical evidence, and People (Mossberg &
Sundström, 2011, p.34).
3.4.1.1 Product
The Product, which can be either a product or a service, is what the company offers to
the market. In many cases where a company sells a product, they also offer a service
that complements the product (Mossberg & Sundström, 2011, p.32). The product
provided can be described in three dimensions; the core product, the actual product
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and the extended product. The core product is what motivates the costumer to buy a
product by satisfying certain customer needs (Mossberg & Sundström, 2011, p.246).
In the case of Whole Foods, the core product is food. The customer will primarily
shop because of human need for food. The actual product for Whole Foods is the
wide selection of organic, quality food. Furthermore, Whole Foods Market states,
“We like to think that it isn't just the food that makes shopping at Whole Foods a
great experience, but the store itself is a part of the experience”
(Wholefoodsmarket.com). They want the architecture, location and the arrangement
of the products in the stores to be unique and contribute to the customer value. The
extended product is a combination of great customer service and additional service in
form of recipes and special offers. Regarding Whole Foods Market, the highly trained
personal is part of the product and gives additional customer value for their clientele.
The main focus of Whole Foods is to improve both customer health as well as
environment sustainability. Some of Whole Foods products come from local farmers
and therefore their offers can differ from store to store. Even though many products
can differ between stores, Whole Foods have certain brands that are available in all.
One example is the “365 Everyday Value”-line, which is their low price-line of
products. The “365 Everyday Value”-line covers most products needed in everyday
life, from coffee to frozen pizza. A Whole Foods store can provide all the same
products that could be found in a normal grocery store, with the addition that
everything is organic (Wholefoodsmarket.com). Additionally Whole Foods Market
promotes partnerships intended to create new, unique and innovative products. These
partnerships enable Whole Foods to remain in the forefront regarding the retail food
industry (wholefoodsmarket.com).
Because Whole Foods uses local products to some extent, it is important for them to
choose products with high brand recognition and a good reputation. Having a good
mix between products, which are available in general, grocery stores with products
that are hard to find in other stores is important. Having this mix will make the store
familiar to costumers as well as interesting enough to differentiate from the general
stores.
3.4.1.2 Place
In the marketing mix, place is often connected to the distribution of products,
meaning the flow of products, information, and payments (Mossberg & Sundström,
2011, p.333). A distribution channel describes all parties involved in the flow of
products, from raw material to the end product purchased by a customer. These
parties have an important role regarding physical distribution, warehouse
management, specialized knowledge, time and space aspects, financing, and sales
promotion (Mossberg & Sundström, 2011, p.334).
Since Whole Foods Market offers products from all over the world, they collaborate
with suppliers in many different countries as well as a selection of local suppliers
connected to each store (Wholefoodsmarket.com). This means that the importance of
supplier-relations is high and that great value is put on the distribution. Whole Foods
Market works closely with their suppliers to make sure that the products they offer are
of the highest quality available and they make a point of treating their suppliers with
respect, fairness and integrity.
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Since sustainability is a key factor in Whole Foods business they seek suppliers that
share their concerns and states that they “… seek to create transparency from ‘farm to fork’ with respect to production, planning, sourcing, ingredients, product safety and
efficacy in order to bring to market the safest highest quality products available”
(Wholefoodsmarket.com). Additionally, Whole Foods works with local suppliers to
eliminate unnecessary production and distribution costs in order to ensure their
customers the best possible prices. Whole Foods also partner with their suppliers to
educate, inspire and communicate a lifestyle of health, balance and well-being. The
values of Whole Foods, regarding distribution and suppliers, are well suited to
Swedish values and should therefore satisfy the Swedish market.
Whole Foods Market is constantly looking for new locations to open stores and
expand their business. Information regarding demands for locations is easily found on
their website and it states (Wholefoodsmarket.com):
Typically, 200 000 people or more in a 20-minute drive time
25 000-50 000 Square Feet
Large number of college-educated residents
Abundant parking available for our exclusive use
Stand-alone preferred, would consider complementary
Easy access from roadways, lighted intersection
Excellent visibility, directly off of the street
Must be located in a high traffic area (foot and/or vehicle)
In other words, Whole Foods prefers to be located in areas with a high flow of people
that are likely to be interested in organic food. The newer Whole Foods stores are
larger than the stores originally were which means that they can offer a greater
selection of products. Although stores are getting bigger, Whole Foods emphasizes
the importance of respecting the local neighborhood and strive to become an
integrated part of it. Since Whole Foods target group, in the United States, is mainly
college-educated residents they prefer to be located in areas includes these groups.
Additionally, easy access from roadways, high traffic areas, and excellent visibility
are desired to reach as big customer group as possible (Wholefoodsmarket.com).
The concept Whole Foods uses is proven to be successful in the United States,
although it would have to be adapted to the Swedish market, if Whole Foods choose
to expand to Sweden. Therefore, the project group recommends that the original
points, which are used in search for a location, should be revised to the following in
Sweden:
Circa 5000 Square Feet
Centrally located in highly populated areas or placed in trade areas
Must be located in a high traffic area (foot and/or vehicle)
Excellent visibility, directly off of the street
Easy access (public transport and/or vehicle)
Good parking availability
These points should be used as guidelines for Whole Foods when choosing a location
in Sweden. Although, they can be further revised if a new target market arises or new
56
opportunities are presented. Figure 20 shows an example of how a possible Whole
Foods Market could look like in Sweden.
Figure 20: A picture a Whole Foods Market store
Source: Whole Foods Market
This type of store would be suitable in the Swedish market since it can be located in
highly populated areas, like bigger cities, and still have the characteristic Whole
Foods attributes regarding visibility and presentation.
3.4.1.3 Price
The price is a strategic tool companies use to reach the market position wanted,
compared to their competitors. The price often signals a message concerning the
brands image or the quality of the product (Mossberg & Sundström, 2011, p.33).
There are three main ways to decide the price of a product; cost based, competition
based and demand based. Cost based pricing is conducted by looking at the cost of
producing, then adding an overhead cost to cover the fixed cost and a profit mark-up.
This system of pricing is easy to implement (Mossberg & Sundström, 2011, p.317).
Competition based pricing deals with pricing based on the price competitiveness
existing on the market. If competition by lowering prices is conducted, this strategy
can be problematic since it is hard to know what margins the competitive companies
have. Companies with higher margins, in the same market, can dump prices to
diminish competitors and, by that gain market share (Mossberg & Sundström, 2011,
p.318). Demand based pricing is based on what the customer is willing to pay for the
product. A company, using this pricing strategy, must be aware of the customers’
perceptions of the products value. In addition, the company must also be aware of the
customers’ perceptions of the competitive products (Mossberg & Sundström, 2011,
p.319).
For Whole Foods Market the cost based and the competition based pricing strategies
are most significant. The cost based strategy is easy to implement and is combined
with the least risk. Whole Foods will use this strategy in combination with
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competition based pricing, where the prices of competitive businesses are compared
to make sure their prices does not deviate too much from the prices of Whole Foods.
Demand based pricing is not considered suitable since it requires extensive surveys to
examine the specific demands for each product.
The general pricing for food, in Sweden, is high. Therefor it will be possible to
implement dual pricing, where the price of products is higher in Sweden than in the
U.S. To be able to successfully implement dual pricing, it is important to keep the
market separate to avoid customers boycotting the chain because the price differs
more than what is seen as reasonable (Wild & Wild, 2011, p.391). In the grocery
business this is not considered a problem since it is usually not an extensive process to
buy groceries. Additionally to dual pricing, companies can use worldwide pricing,
meaning that the price is the same in all countries the company exists. This strategy is
hard to achieve due to the different costs in different countries (Wild & Wild, 2011,
p.391). This strategy will not be suitable for Whole Foods since the cost of food in
Sweden widely separates from costs in the U.S.
Whole Foods Market has a reputation for being relatively expensive and customers in
the U.S. often use the term “Whole paycheck” to describe shopping at their stores. It is to get past this reputation Whole Foods have launched their “365 Everyday Value”line. This line quotes “Our 365 Everyday Value products can fill your pantry without emptying your pocketbook” (wholefoodsmarket.com). In order to be more price
competitive, Whole Foods have also introduced so called “flash sales”. This type of sale represents a short period of time where customers are offered an extra low price
on specific products. The sales are not presented ahead of time, forcing the customers
to constantly keep checking Whole Foods’ social media and different commercial
sites. Additionally Whole Foods offers certain days where a percentage of sales are
donated to local charity. This does not affect the price towards the customers but it
gives a greater incentive for the customers to purchase Whole Foods products when it
is known that they are supporting the local community.
3.4.1.4 Promotion
Promotion is an important part of the marketing mix and the purpose of the promotion
is to raise the company’s brand and increase market shares. This is usually done by commercials, but there are other tools such as: Marketing campaigns, Social medias,
Advertisement, and Sales promotion (Mossberg & Sundström, 2011, p.33).
Whole Foods Market’s brand is not particularly strong in Sweden therefore it is important to go in with a strong marketing campaign when first entering Sweden.
When a strong brand is built it is easier to overtake market shares from the
competitors (Wild & Wild, 2012, p.300). If Whole Foods get high brand recognition it
is important to continuously stay with the same level of marketing degree. Whole
Foods primarily uses social medias to promote their brand by staying active on the
major social sites such as Facebook, Twitter, and Flickr. They have close to 3.6
million followers on twitter, which is the highest amount in the grocery business.
Additionally to the social media sites Whole Foods also run a number of blogs to
promote their business. Whole Foods sends out a flyer every other month called “The Whole Deal” filled with coupons, recipes and tips on how to save money by cooking with the right ingredients (wholefoodsmarket.com).
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Advertising is in most cases associated with marketing, where the purpose is that a
costumer discovers and consumes the advertised product. When expanding to new
markets it is important to adapt the advertisement to the region’s cultural differences in order reach out to new target groups (Mossberg & Sundström, 2011, p.33).
Whole Foods Market´s advertisement is today inspired to raise feelings of the
individuals in the current country, and therefore the advertisement in the U.S. is
customized to the American country life. The same advertising strategy must then be
used in Sweden. Instead of promoting the typical American culture and needs, Whole
Foods should promote a sense of the Swedish culture and traditions. Figures 21 and
22 show two types of advertisement, one American and one Swedish.
Figure 21: One of Whole Foods Market’s thanksgiving adds
Source: Noclipmode.com
Figure 22: Possible add for the Swedish market
Source: Adapted from Klickochklang.se
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As seen in figure 21, the American version shows a cooked turkey, which is a
traditional American dish served at the feast Thanksgiving. The Swedish ad shows a
midsummer table, a feast that Swedes have a strong relation to and that has been a
longstanding tradition in the Swedish culture. In summary, it is imperative to publish
an advertising that is perceived authentic, in order to make the greatest impact
possible.
Like mentioned in the previous section, Price, “flash sales” is a great way to promote a company’s brand as well as a particular product. . This is a type of sales promotion,
which is a short-term activity that aims to promote the purchase (Mossberg &
Sundström, 2011, p.293). Another way of using sales promotion is to give the
customer the opportunity to stimulate a variety of senses. Whole Foods could enhance
a product to the costumers by having taste tables in the stores where a cook prepares a
small taste of a specific product. This is a good way to make people buy products that
they did not plan to buy when walking in to the store.
3.4.1.5 People
Trained employees, with the right skills and qualities, is an important factor in the
production of service since the company, in almost all cases, has a direct contact with
the customers. Moreover the company’s human resources have a major impact on this
P. In the purchasing situation people are one of the few elements of the service that
customers can see and interact with. The employees have therefore a high impact on
the atmosphere and how the customer experience the purchasing situation (Mossberg
& Sundström, 2011, p. 108)
Whole Foods considers it is essential that the team members are the heart and soul of
the company. They are therefore putting great pride in having well-educated
employees with deep knowledge about the products, the store and the company. This
can be seen as a significant factor in the organic food business, and additionally in
this P, since there can exist people whom are not familiar with organic food. The
employees are responsible for making the customers feel welcome and seen. Due to
the fact that Whole Foods wants to be perceived as a homely local grocery store this
is important. It is essential to their business that the employees understand the
importance of every costumer (Wholefoodsmarket.com). Whole Foods is proud to say
that they take good care of their employees and have been on the Fortune Magazine
“100 best Companies to Work For” every year since the list was created in 1998. In 2013 Whole Foods was ranked at place 71 (Greatplacetowork.net).
The project group believes that Whole Foods’ strategy, concerning employees and costumer treatment, would be suitable in Sweden, if Whole Foods chooses to enter.
Primarily due to the fact that it is something Whole Foods values as a core point of
their business, and therefore it should be kept consistent even when entering a new
market. Secondarily being well received by knowledgeable employees is something
that is appreciated in Sweden as well as in the United States.
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3.4.1.6 Process
The process involves the actual procedures, mechanisms, and the flow of activities by
which the service is transferred from the company to the customer (Mossberg &
Sundström, 2011, p.33). For Whole Foods Market, this process involves everything
from the experiences, impressions and the feeling they offer when the customer visits
the actual store, but also the processes behind all other available services.
It is important to work hard with the process in the store that can add customer value
because if a customer has a bad experience while shopping at Whole Foods, the
visitor can share its opinion and experience of the visit, which may damage the brand.
A way to work with this is by asking customers to fill out surveys about their
customer service experience. This is a widely used method among companies with
private costumers, which gives a stabile ground to create guidelines for costumer
integration (Cim.co.uk).
In-store processes can include various payment methods, logistics, POS systems,
uniforms, qualified employs and, aesthetics. It is of great significance that these
processes are continuously improving in order to expand their customer base and
overtake market shares. Other processes that create value are services such as: a wellfunctioning website that gives the impression of reliability and professionalism,
promotion, and distribution. Finally if Whole Foods chooses to expand into Sweden,
they should seek an environmentally friendly and sustainable mindset throughout the
value chain. This is because it is important to maintain the brand's foundation.
3.4.1.7 Physical evidence
A company’s physical environment contains factors that affect both customers and employees’ gratification and behavior. Therefore it is imperative that the physical
environment is considered to create an added customer value. The interior and design
of a store can convey what target group a company wants to attract and what type of
products they offer. An environment where the costumer feels at home tends to
generate more sales and a greater profit (Mossberg & Sundström, 2011, p.172).
In physical sale spaces like a Whole Foods Market there are different factors, which
can be used to define how to design the space. These factors are those concerning
atmosphere, space and functionality, and symbols and signposts. The atmosphere,
which counts for factors concerning the five senses, can be used to create a pleasant
environment as well as positive feelings regarding products. For example the smell of
freshly baked bread can attract the passing customer to buy the product, even though
this was not a planned purchase (Mossberg & Sundström, 2011, p.175).
The second factor is space and functionality, which may mean that the store is
accessible for people with disabilities, as well as the store design, should be wellreasoned and airy. Symbols and signpost are the last factor, where the purpose can
be to simplify the purchasing process for the customers. By for example using signs
and symbols, in order to show where products are located in the store (Mossberg &
Sundström, 2011, p.178).
For Whole Foods, dealing with organic food, it is important that the products look
fresh and inviting. They work with this in some different ways, stacking products as
vegetables and fruits in a great and thoughtful way are one of them. They also try to
61
create a feeling of nature combined with country life by decorating with wooden
details. Most Whole Foods stores have fruits or flowers presented outside of the stores
in order to create an inviting atmosphere. This is a good way to display and advertise
goods for people passing by. The aim is to create a homely grocery store rather than a
big multinational company. Figure 23 shows a typical Swedish local grocery store
while figure 24 shows an example of Whole Foods store.
Figure 23: Typical Swedish grocery store
Source: Wordpress.com
Figure 24: Whole Foods Market Store
Source: Thecollegianur.com
The differences between the figures above are striking and shows that the Whole
Foods store looks more like a farmers market and is more welcoming. The Swedish
store is neutrally decorated and does not raise any specific feelings.
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3.4.2 Segmenting, Targeting, & Positioning
To choose the right market strategy, is today the one key issue of success. There are
three major building blocks in the market strategy, segmenting, targeting and
positioning. All of these should be adjusted and tailored in order to get the most
profitable strategy. Figure 25 shows the three major steps to finding the most
profitable strategy.
Figure 25: Segmentation strategy
Source: Mossberg & Sundström, 2011, p.93
The first step to find the most profitable strategy is to determine which type, or types,
of customers the company is best fit to satisfy, in other words segmenting. This is
followed by selecting the most attractive and profitable targets. The last step is to
create competitive advantage in relation to other companies, called positioning
(Mossberg & Sundström, 2011, p.193). These three steps, all together, are beneficial
instruments to develop a more customer-driven market strategy and will be more
thoroughly described in the following sections.
3.4.2.1 Segmenting
Segmentation means that the market is broken down into smaller parts, segments.
There are four major segmentations variables, geographic segmentation, demographic
segmentation, behavioral segmentation and psychographic segmentation. Each
segment is treated individually and will be given an individual product design and
marketing. Segmentations main function is to meet the customer needs, achieve
greater customer loyalty, create growth opportunities, and a more efficient marketing
communication. (Mossberg & Sundström, 2011, p.195)
The geographic segmentation divides the market into different geographical areas.
The geographic segment for Whole Foods Market in Sweden, if they choose to
expand, would be focused to the major cities. This is based on the fact that Whole
Foods wants a broad customer base and the cities are most dense in population. In the
cities, Whole Foods would also find customers who work in the cities but live outside
of them. This means that they can target additional customers they would have
missed, would they have been placed outside of the cities. It would also be to Whole
Foods advantage to be placed near or in a high intensity flow of daily passers people.
Such sites are often associated or near a central hub for communication links.
The next segment is demographic segmentation, which can be grouped into
segments based on age, gender, marital status, education and income. This segment is
important in terms of deciding the most advantageous market segmentation. Whole
Foods Market is not dependent of gender and that is the reason why both males and
females are potential consumers. Education is an important variable due to the current
issue of a sustainable society and the knowledge about how the food industry can
affect Whole Foods both positive and negative. Organic food has in some cases a
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higher price than non-organic, which also makes income as an important variable.
Hence middle class to upper middle class and literate consumers, in scattered ages,
been seen as the main group in the demographic segmentation for Whole Foods.
Naturally there will be consumers who feel a high moral responsibility to buy organic
food, but do not belong to any of mentioned social classes.
Besides the two mentioned segmentations above, a third more refined segmentation,
behavior segmentation. This segmentation takes note of different types of consumer
behavior. Behavior segmentations involve, for instance, buying habits among
consumers, as to what and at which point they consume, customer loyalty and what
the customer expects to get out of the product. These can Whole Foods utilize by
creating customer directory where the buying habits of consumers will be registered.
A directory can be beneficial in personal offer via publicity mailing, as well as it can
be helpful for planning and scheduling of staffing. Perhaps the most obvious point of
use of a directory is to plan purchases and volumes of the organic products.
The last major segment is psychographic segmentation, a segmentation group
which today is becoming more evident. These then consumers today are becoming
more and more sophisticated and harder to located. Hence it will be of great
importance for Whole Foods to use this segmentation. In today’s society, where sustainability and healthy living are becoming increasingly important, people who
advocate the importance of these will become an obvious clientele. Likewise,
customers who have a high awareness of their body, like an active lifestyle, and a
healthy food intake will be included to potential customers.
To sum up all mentioned above Whole Foods primary segment includes people with a
highly interested and awareness of organic food. Given that organic food is more
expensive than non-organic food, likely that the segment belongs to middle class to
upper middle class. Another factor to potential customers is that they live alternatively
working in the selected city. Of the above mentioned things age will be the
determining variable, as the other are constant, in the decision of the target, which
will be discussed in the next paragraph.
3.4.2.2 Targeting and Differentiation
Profitability and potential growth are important variables that a company must look
upon before deciding which segment or segments they should target. They also have
to know about their own recourses, capacity, and which strategies and activities they
will use for each segment. All these data should be collected and analyze thoroughly,
it may have a great effect of the choice of segment. (Mossberg & Sundström, 2011,
p.208)
Figure 26 shows a visualization of the selected target groups based on the derived
decision during segmentation, where age will be the determining variable. Whole
Foods will have different target groups, but it is those who are considered the largest
consumers in the development of target group.
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Figure 26: Segmentation groups
Group number two was after analyzing decided to be the target market, and the
segment number three will be their secondary market. This is based on that people
between the ages of 30-50 are more likely to eat healthy and uphold a sustainability
environment to a greater extent than group number one with younger ages. It is also
likely that people in this group have children living at home, who also need good
nutritious food for both their physical and mental development. People in this age
range often have children, which gives them a higher buying power due to bigger
families, which resulting in increased profitability for Whole Foods.
Segment number three are people in the upper ages which feel that they can afford
healthy food, which in the same way has a low impact on the environment. Some of
them may have grown up children and therefore have greater incomes to spend on
themselves and can afford to purchase more expensive products.
The group of segments that are not mentioned, one and four, are spillovers, which
means that they will not be targeted directly but they might purchase at Whole Foods
as well. A typical spillover is group one is, regardless of gender, a person who likes to
work out and take care of their body.
The stereotypical Whole Foods customer is a person between 30-50 in the middle
class to upper middle and very likely a parent. The key in the family’s food consumption is an environmentally friendly and nutritious product that is healthy for
the whole family. Whole Foods use different types of media and communication
channels daily in order to advertise and to reach out to customers. The purchases by
the families will be done weekly, often in conjunction to the weekend. This is an
aspect that Whole Foods should take into account when formulating their marketing
strategy.
There exist tree different types of marketing strategies on today’s market, undifferentiated marketing, differentiated marketing and concentrated marketing
(Mossberg & Sundström, 2011, p. 208). Undifferentiated marketing means that an
offer goes out to all segments, which in everyday language called mass marketing.
Differentiated marketing refers to a modified marketing for each separate segment
65
or adaptation to the specific product. The priority of only one target segment in
marketing is known as concentrated marketing, and disregards to the large market.
In order to the chosen segments, group one and two, it was resolved that differentiated
marketing would be the best way to reach the customers. This due to fact of that the
two segments are using different types of daily medias.
3.4.2.3 Positioning
The final step is to establish how the company´s offers should be designed in order to
perceive as attractive as possible for the customer. Positioning is about the association
and the perception that the customer receives by its products in relation to
competitors. It is a constant battle between companies about which brand or product
customers initially think of, which in turn has a significant impact on the company´s
market share and profitability. One thing that companies always should keep in mind
is that the current positioning has to be clear, consistent, credible and competitive, and
to really reach through the customer (Mossberg & Sundström, 2011, p. 211).
Differentiating their products from other competitors is crucial for all company. The
marketing must therefore be able to demonstrate why a brand or a product is better
than the competitors. Whole Foods focus should be on quality and a greater
experience, from purchase to the taste experience. The customer will pay more but in
return they also buy products that support a sustainable society. It will be important
for Whole Foods to underline that all their products are organic, and by buying those
products all costumers also support farmers and producers who believe in good
health, quality foods, and earth-friendly sustainable agricultural practices.
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4. Final decision
The decision on whether Whole Foods Market should enter the Swedish market or not
will be presented with a red, yellow or green light. A red light indicates the
recommendation that the company should not enter the market, a yellow light
represents doubtfulness and the company should be cautious entering the market. A
green light symbolizes good opportunities for a company to enter. Whole Foods
concept is highly relevant in Sweden from the health and sustainability aspect, as well
as a trendy way of thinking in this time. Although it is very appropriate in time there
are no purely corresponding concepts of equivalent scope, thereof we believe there
are good chances for Whole Foods Market to succeed on the Swedish market. Sweden
is a country with well-developed infrastructure with good trade relations and through
its membership of the EU also has free trade opportunities. This along with the fact
that Sweden has no import limits increases the possibilities for a green light for
Whole Foods on a Swedish market.
By using the Swedish market as a test market and locating the Whole Foods store in
the capital city Stockholm, with good transport connections, the opportunity for a
successful business will increase. With respect to the above-mentioned
recommendations and information the Swedish market is given a green light.
Figure 27: Green light
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5. Discussion
This report has been constructed as a basis for the decision of whether Whole Foods
Market should expand and enter the Swedish market. The process of making this
decision started with the creation of a situation analysis, which mainly focused on a
PESTEL-analysis and a SWOT-analysis. These two gave us the information that
Sweden is a top user of new technology and above all green technology. That makes a
good foundation for bringing a new type of grocery store to Sweden, because there is
likelihood that the Swedes will embrace it. A disadvantage on the other hand is the
environment. Sweden does not have a warm climate all year long, which will
complicate the possibility to get hold of local grown organic groceries. On the other
hand we believe that the cooperation between the nations in EU will simplify import
due to decreased barriers.
An advantage is the financial situation in Sweden and a great result of that is how
well the country managed the financial crisis. Moreover we realized that the law of
groceries might be an obstacle because of its strict regulations regarding starting
grocery stores. It is therefore important that Whole Foods Market pays attention to
this and implements that in their strategy. It is of great importance that Whole Foods
achieves and satisfies the requirements and certifications needed to be able to use the
appropriate environmental labels. Understanding and view over the company’s internal and external segments was gained from the SWOT-analysis. One of Whole
Foods main strengths is their good concept, their modern mindset regarding
sustainability and the fact that a healthy lifestyle is popular in Sweden. Since Whole
Food Market already exists in another European country, the UK, we believe there are
opportunities for them to establish their business in Sweden.
Based on the Hofstede Framework and the PESTEL- analysis made, there are clearly
a lot similarities and differences between the Swedish and U.S. culture. Overall the
similarities overweight the differences and are therefore more influencing. Wholly
Owned is the chosen entry mode for Whole Foods grounded on the main fact that is
the most suitable entry mode for a company of this size. Another factor of
significance is that Whole Foods will be able to control all daily operations. This
plays to their advantage since our recommendation is that Whole Foods treats the
Swedish market as a test market. Finally the Swedish market does not have an
existing chain or brand to either implement their concept in or to create a jointly
owned business with.
At last, the project has been very educational for each individual of the group. It has
brought us the opportunity to see connections and associations between theory and
practice. This has given us greater understanding of how companies and organizations
operate in different countries depending on different variables such as culture,
politics, and environment. By using different analyzing instruments as informationgathering tools it has given the group members knowledge about how they can be
applied in different ways. This project may resemble future work situations where
there are groups composed of members with different experiences and competences.
In these situations it is important to give and take constructive criticism in order to
develop as an individual, and all this in order to generate a better project results.
Finally this project has required us to use our creative abilities and encourage us to
think outside the box.
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69
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m
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From:http://www.universitas21.com/news/details/61/u21-rankings-of-national-higher-educationsystems-2012
Vetenskapsrådet (2013) R&D amount of GDP
From:http://www.vr.se/inenglish/researchfunding/applyforgrants/theswedishsystemofresearchfundin
g.4.aad30e310abcb9735780007228.html
Reuters (2010) usages of technology ranking
From: http://www.reuters.com/article/2010/02/11/us-countries-ranking-idUSTRE61A13F20100211
Environmental leader (2013) Sustainability in Sweden
From:http://www.environmentalleader.com/2013/08/19/sweden-most-sustainable-country-in-theworld/
Sweden (2013) Recycling – that’s the Swedish way
From: http://sweden.se/nature/99-recycling-thats-the-swedish-way/
EurActive (2013) Landfills
From: http://www.euractiv.com/sustainability/landfills-continue-rule-despite-news-518229
PRI (2013) Sweden imports waste
From:http://www.pri.org/stories/2012-06-26/sweden-imports-waste-european-neighbors-fuel-wasteenergy-program
Whole Foods Market (2013) Green mission
From: http://www.wholefoodsmarket.com/mission-values/environmental-stewardship/green-mission
Trafikverket (2013)Transport in Sweden
From: http://www.trafikverket.se/Privat/Miljo-och-halsa/Klimat/Transportsektorns-utslapp/
Göteborgs stad (2013) To start a food store
From:http://www5.goteborg.se/prod/Miljo/Miljohandboken/dalis2.nsf/vyFilArkiv/N800_startaLivsve
rsamhet.pdf/$file/N800_startaLivsversamhet.pdf
Rättsnätet (2006) Food laws
From: http://www.notisum.se/rnp/sls/lag/20060804.HTM
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Stockholms stad (2013) Grocery business
From: http://foretag.stockholm.se/Tillstand/Livsmedelsverksamhet/
Krav (2013) Food labeling
From: http://www.krav.se/krav-markningen
Svensk Sigill (2012) Food labeling
From: http://www.svensktsigill.se/Om-Sigill/Intressenter/Svenskt-Sigill-/
European Commission (2013) Food labeling
From: http://ec.europa.eu/agriculture/organic/consumer-confidence/logo-labelling_sv
Demeter (2013) Food labeling
From: http://www.demeter.nu/index.php?id=1
USDA (2013) Food labeling
From:http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004446&a
cct=nopgeninfo
Gryningen (2013) Competitor
From: http://www.gryningen.eu/butiken-i-stockholm
Ekoäffären (2013) Competitor
From: http://www.ekoaffaren.se/index.php/varide
MindTools (2013) Porter´s five forces
From: http://www.mindtools.com/pages/article/newTMC_08.htm
Ekonomifakta (2013) Labor costs
From:http://www.ekonomifakta.se/sv/Fakta/Arbetsmarknad/Loner/Arbetskraftskostna
der-internationellt/
SCB (2013) Labor force survey
From:http://www.scb.se/sv_/Hitta-statistik/Statistik-efteramne/Arbetsmarknad/Arbetskraftsundersokningar/ArbetskraftsundersokningarnaAKU/
Jordbruksverket (2013) Farmers in Sweden
From:http://www.jordbruksverket.se/amnesomraden/konsument/faktaochrapporter/ba
sfaktaomsvensktjordbruk.4.5125de613acf69a0f680001878.html
Organic Consumers Association (2013) Organic food
From: http://www.organicconsumers.org/organlink.cfm
Forex (2013) Exchange rates
From: http://www.forex.se/
Sveriges Riksbank (2013) Inflation
From: http://www.riksbank.se/sv/Penningpolitik/Inflation/Vad-ar-inflation/
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Whole Foods Market (2013) Organic food
From:http://www.ekonomifakta.se/en/Facts-and-figures/Economy/FinancialDevelopment/Inflation-rates/
Whole Foods Market (2013) Local producers
From:http://www.wholefoodsmarket.com/mission-values/caring-communities/localproducer-loan-program
Whole Foods Market (2013) Values and mission
From:http://www.wholefoodsmarket.com/mission-values/caring-communities/localproducer-loan-program
MaRS (2012) Developing values
From: http://www.marsdd.com/articles/the-meaning-of-benefits-and-value/
Globalis (2014) childbirth
From:http://www.globalis.se/Laender/Sverige/%28show%29/indicators/%28indicator
%29/185/%28country2%29/373
Investing Answers (2012) Wholly owned subsidiary
From:http://www.investinganswers.com/financial-dictionary/businessescorporations/wholly-owned-subsidiary-1413
Investopedia (2013) Wholly owned subsidiary
From: http://www.investopedia.com/terms/w/whollyownedsubsidiary.asp
Expowera (2012) Joint venture
From:http://www.expowera.se/mentor/foretaget/tillvaxt_jointvent.htm
FranchiseNet (2013) Franchising
From: http://www.franchisenet.se/vadarfranchising1.html
Whole Foods Market (2013) Real estate
From: http://www.wholefoodsmarket.com/company-info/real-estate
Whole Foods Market (2013) 365 Everyday Value
From:http://www.wholefoodsmarket.com/about-our-products/product-lines/365everyday-value
Whole Foods Market (2013) Ongoing win-win partnership with our suppliers
From:http://www.wholefoodsmarket.com/mission-values/core-values/we-createongoing-win-win-partnerships-our-suppliers
Whole Foods Market (2013) Globally inspired, locally produced
From:http://www.wholefoodsmarket.com/blog/whole-story/globally-inspired-locallyproduced
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Whole Foods Market (2013) The Whole Deal
From: http://www.wholefoodsmarket.com/about-our-products/whole-deal
Whole Foods Market (2013) Careers
From: http://www.wholefoodsmarket.com/careers
Great Place To Work (2013) Best companies to work for
From:http://www.greatplacetowork.net/best-companies/north-america/unitedstates/fortunes-100-best-companies-to-work-forr/1556-2013
The Chartered Institute of Marketing (2013) Marketing and the 7Ps
From: cim.co.uk
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