Threat of Entry and rivalry amongst existing competitors
Whole Foods is the largest organic food conglomerate in the United. They gained dominance in the natural food industry through distinguishing themselves amongst competitors.
They reinvented the image of health food stores. John Makey opened the first Whole Foods
Market in 1980 and by 2000 he expanded his company with the acquisition of 40 stores and the construction of 50 new locations. Mackey’s focus was store development. The square footage of stores were larger than competitors; thus, sales per foot increased greatly. Whole Foods held the highest sales per foot for the natural foods industry. They began to outperform competitors in volume of net income, return on common equity and inventory turnover. Their in entrance into the market sharply increased the demand for organic products. It was necessary for clear standards to be set for organic foods. In 1990, the United States Department of Agriculture
(USDA) created a National Organics Standards Board. Growers, handlers, or processors of organic were required to have USDA certification. Farmers and organic growers had to change their work practices to meet standards. Such standards posed challenges on the organic market.
Producers and retailers felt the burden of new requirements and distributors as well. Produce that was organic was came from regional distributors than national ones. Organic foods could not have any use of pesticides, sewage sludge, and synthetic fertilizers. Without the use of pesticides, organic foods perish faster.
Just in a matter of six years, Whole Foods was the nation’s largest natural foods retailer and fastest growing company. Upon the acquisition of Wild Oats, they furthered their competitive edge in the grocery market. Companies in the grocery market include: Kroger,
Safeway, Winn-Dixie, Wal-Mart, Great Atlantic & Pac Tea, and Ingles. Whole Foods was now

competing with mainstream groceries. Wal-Mart and groceries began stocking natural and organic foods that once could only be found in health stores.
Threat of substitute products or service
Whole Foods social mission is to “promote the vitality and well-being of all individuals by supplying the highest quality, most wholesome foods available”, the highest quality natural ad organic foods. The customer is to utilize Whole Foods as a one stop store. Whole Foods faced three types if competitors-conventional supermarkets, small sellers like farmers’ markets, and low cost alternative markets. Trader Joe’s was a primary competitor in the low cost alternative market. Both Whole Foods and Trader Joe’s attracted health nuts, intellectuals, and foodies.
Trader Joe’s did not limit their products to only being organic foods. They carried less products and the selection changed from week to week. Product variability was a result of the company’s goal to stock products that could be bought and sold at competitive prices. Low prices were
Trader Joe’s primary focus. Conventional stores like Wal-Mart, who already advertised low prices, began offering natural foods. SuperTarget and Kroger Inc. received organic certification from the USDA and now began labeling products “organic” to better appeal to customers. This posed a threat to Whole Foods which was viewed as pricey or an expensive place to shop.
Whole Foods created its own private label brand, “365 Organic Everyday Value” to compete with new products. Mackey discerned Whole Foods from other stores by stating, “[Customers] don’t really want to buy [health foods] at Safeway…They want to make a statement about who they are by where they shop.” Although this ties into brand and customer loyalty, Whole Foods still faced smaller competitors. A customer could stop at a produce stand or farmers market to get the true essence of buying local and organic while knowing directly where the product came from.

Bargaining power of buyers
A buyer holds as much bargaining power as a supplier does. The buyer can directly influence what a company supplies. Factors that influence a buyer are not limited to but include costs, customer service, and the store environment. Whole Foods wants the customer to be able to stop and buy everything they need. They want their customers delighted and satisfied.
Employees and customers who strongly resonate with the Whole Foods mission are known as “high mission valence” employees and customers. When Whole Foods attempted to expand its product selection to reach a larger group of customers, buyers felt the spirit of the store was violated. Whole Foods had begun stocking specialty cheeses, sugary snacks, beer, wine, chocolate, and other products. The products met the Quality Standards but lacked to entice the buyer. The Quality Standards regulated ingredients that could be used in products sold and the term “natural” for the company. Any product that had hydrogenated oils, sweeteners, trans fats, preservatives, flavorings, or artificial colorings were prohibited.
Whole Foods takes great care to implement a store atmosphere that is educates and engages the customer. Ways that Whole Foods ensures the customer is comfortable with purchases is through storyboards hanging above produce bins, to display the cycle of the good, and pamphlets and signs. The pamphlets and signs explain various concepts like sustainable, free range, and certified organic.
Bargaining power of suppliers