Threat of New Entrants: The threat of new entrants into the industry is low because of low-margin nature of the grocery industry, the high-cost, the competitive reshape is affected towards large companies which can operate resourcefully whereas selling in quantity (Hoovers). The only question is how intense will they be in pursuing whatever profits can be realized from the natural, organic category. This is what Whole Foods should be directing their business strategy around.
Bargaining Power of Suppliers: This is heating up. Food processors have bought up the little guys....gaining all the bargaining power. One of the biggest numbers in this reading turns out to be one of the smallest. Only 1% of farmland is used for natural / organically grown foods. Not only does Whole Foods have to compete with the conventional retailers, they will have to purchase, at least locally sough items, from farmers who are much more likely to turn to the big boys who can buy everything they grow.
Bargaining Power of Buyers: Definitely low. For the most part, the conventional retailers determine what we will pay. Cannot forget they have a marketing strategy too. Wal-Mart to Wal-Mart Supercenters and Kroger to Kroger Marketplaces......and who knows what is next.
Threat of Substitute Products: Buyers can easily switch to the conventional retailers as the cost to do so does not exist. It is to their advantage (cost, convenience, similar quality, one-stop shopping) as “specialty stores” are being built right in to the conventional retailers floor plan before the shovel hits the dirt.
Competitive Rivalry: If conventional retailers are committed to winning market share, Whole Foods will face extreme competition, more than it is experiencing now. Buying up competitors on their level may make some sense, but the capital outlay and assumption of debt puts them in a bad position to deal with the supermarkets etc... Their business strategy is very lofty and growth-oriented but they may...