Porter Five Forces Whole Foods Inc: Essay

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Porter five forces Whole Foods Inc: Whole Foods Market Inc operates within the industry for food and drug retailing. Food retailing is a large, intensely competitive industry. Their competitors include local, regional, national and large international supermarkets, natural food stores, warehouse membership clubs, small specialty stores and restaurants(Whole Foods Market 2011). We will limit the analysis to supermarkets that operate in the U.S market. Further we will limit the industry to Porters definition from 2008, that if the industry structure for different products share the same buyers,suppliers,barriers to entry and so forth they can be defined in the same industry. 1.0 Threat of new entrants 1.1 Economies of scale. Whole Foods Market Inc is the 8th largest food and drug retailer in the U.S and thereby enjoy lower costs per unit since they can spread fixed costs over more units and this enables them to demand lower prices from providers. They have divided their purchasing in two sections where one is regional and the other local which gives them the possibility to both get niche products and the advantage of economy of scale. These two divisions makes it harder for a new entrants to enter the market, both on the general level and on the niche level. The overall market conditions are characterized by large players that heavily tap into economies of scale and are vertically integrated throughout the hole value chain. The best example is Wal-Mart that have private labels and are critiqued for squeezing the margins all the way from suppliers to employees.This creates high barriers for entry for new entrants example; Whole foods Market Inc also own two produce procurement centers which facilitate the procurement and distribution of the majority of the product they sell. They also operate four seafood processing and distribution facilities, a

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