Marketing

1 Marketing: Case study of Amazon and Whole Food Merger

2 Executive Summary: The purpose of the study is to analyze the case of the acquisition of Whole Foods by Amazon. It is found that Amazon had a good opportunity from the acquisition of Whole Food to enter a new market and to expand the market. It provided the opportunity to Amazon for increasing its market share and sales revenue. Furthermore, it is found that there was a risk of competition, substitution, higher bargaining of the consumers and others. It is found that Amazon segments the market on the basis of four factors such as demographic, psychographic, geographic and behavioral segmentation. It is found that Amazon focuses on the product extension strategy and offers the product at a lesser price online. It uses different tools of promotion such as sale promotion, advertisement through social media and television and others. It is found that Amazon's new business model influenced the economy and environment positively but affected society adversely as it cut jobs.

4 Introduction: The main purpose of this report is to identify and analyze the case study of the Amazon and Whole Food Market. It will identify the opportunity to Amazon in the market with the Acquisition of Whole Food and it will discuss how Amazon achieved and leveraged the opportunity. In addition to this, this report will investigate the opportunities and risk to the Amazon entering in grocer industry through the acquisition. It will include the marketing mix for Amazon developed after the acquisition of Whole Food in the USA. Apart from this, this report will analyze the implication of the new business model of the Amazon on Corporate Social Responsibility of the company.

5 Business Opportunity for Amazon: Market research and analysis: Market research is the process of analyzing the market of businesses. The market is the place where the buyers and sellers meet each other and involve in the process of buying or selling goods or services ( Cateora et al., 2020) . Amazon provides a good platform to the consumer connecting the sellers sitting at their home and shopping the products or services. The acquisition of Whole Food by Amazon provided the opportunity to Amazon in the market to diversify its product portfolio, increase the market share, and enhance the sales. It provided a good opportunity for Amazon to grow in the world and to enhance income. Amazon acquired Whole Food Market for $13.7 billion but decided to sell the grocery under the brand name of Whole Food only (CNBC, 2017). This is because Whole Food was a famous and preferred brand among consumers and it was satisfying its customers effectively. It provided Amazon with already loyal buyers and this improved the capability of the Amazon. Market size: Amazon plunged into the $840 billion us market by acquiring the Whole Food grocery and this led the great challenge to the other physical stores in the country as Amazon saw a vision of bringing grocery customers online through this deal. The merger with Whole Food provided an opportunity to Amazon its market size because it captured 30% online grocery market in the U.S (Melton, 2019). Market profitability and growth rate: The grocery market was growing while Amazon acquired a share of Whole Food Market. The grocery market was growing by CAGR 6.8% and it was expected to grow similarly in the future (CISION, 2019). The positive economic flow in the global market and most of the economies encouraged Amazon to make a deal. Whole Food Market was growing continuously by increasing revenue and profit.

7 Purchasing habits: The purchasing habits of the people were to buy from the physical stores before 2017. It was regularly changing and shifting towards online shopping. It led a good opportunity for Amazon for being dominant in the market for online grocery products for buyers. It started selling Whole Food groceries in California, Taxes, and other towns as it made a partnership with Whole Food as per the region (Skrovan, 2017). SWOT Analysis: Strengths:  Whole Foods is well famous in the market that can improve the demand for service of Amazon in the market  A large customer base of Whole Foods may increase the sales of the Amazon  The massive distribution center of Amazon enabled it to get higher consumer satisfaction by delivery the product to consumer on time (MSG, 2020) Weaknesses:  Higher prices of Whole Foods may be challenging to the Amazon to increase the customer base (CNBC, 2017)  Free shipping facility of the Amazon may influence the margin of the Amazon in case of higher cost and prices of the Whole Foods Opportunity:  Amazon had the opportunity to expand the product portfolio and develop the new market to increase its revenue  It has the opportunity to have a strategic alliance with Whole Foods that can create a good partnership between them and consumers can pick the order from a customer and can order the Amazon website. Threats:  Lack of supply chain visibility in the online or e-commerce operation of Amazon creates challenges in satisfying the consumers (MSG, 2020)  Intense competition in the grocery market from Kroger, Trader Joe, Target and others can threaten to Amazon in the industry

8 Risk and opportunities for Amazon in entering a new market: Competitor Analysis: The competitors are the firms that provide challenges to the businesses operating in the market by selling similar products or services and making difference in the marketing strategies (Hollensen, 2019). Amazon-Whole Food faced competition in the market from many businesses and entities selling similar products online and offline in the market. Trader Joe: It is the biggest competitor of the Whole Food Market in California that is held privately and it was created in 1958. It offers the grocery product through the physical stores throughout the USA and it has more than 1300 stores in the market. It does not offer grocery products and delivery online to US-based customers because people still are buying grocery products from the stores (Trader Joe, 2020). Kroger Chain : It is one of the competitive retail chains in the market offering grocery items to buyers. This organization was founded in 1883 and it has approx 2700 stores across the United States (Kroger, 2020). It offers products or services to the consumer offline as well as an online channel that presented risks and challenges to the Amazon-Whole Food Market in the market. Target: It is also one of the biggest retailers in America and this organization was created in 1962. It is offering foods, beauty and health products, pet supplies, and others in the market (Target, 2020). This could be the huge competitor of the Amazon and can give challenges to the organization. It may affect the operation of the company in the grocery market. Sprout Farmer Market: It is the supermarket chain operating in the U.S. and it offers a wide range of organic and natural foods and others. It has more than 340 stores. It was created in 2002 (SFM, 2020). It offers grocery times similar to Amazon and this could create a higher degree of competition to Amazon while entering the grocery market. Porter’s five force analysis: New entrant risk There is a lesser risk of new entrants to amazon in the new market because of the higher investment required to start a business in the grocery industry. The formalities, regulations, compliance, and other barriers reduce the risk of new entrants

10 Geographic segment : Amazon divided the market of the USA on the basis of suburban areas, urban areas, rural areas, climate, and others. Geographical segmentation enabled Amazon to find the best market where grocery products could be sold effectively. Psychographic Segmentation : Amazon fragment the market on the basis of the lifestyle of people, attitudes, religion, and others. The lifestyle of the people is very higher in the USA and they are ready to purchase expensive against the good value to their money paid to the company. There are different religions in the USA such as Hindu, Christian, Muslim, and others could affect the operation of the company. This difference may put a challenge against the Amazon while operating ( Conaway et al, 2018) . Behavioral Segmentation: This is the kind of segmentation conducted based on the behavior of the consumer and their purchase habits such as type of user, benefit seekers, user status, and others ( Jobber & Ellis-Chadwick, 2012) . Amazon uses user status, benefit seekers, occasions, festivals, and others for the segmentation and prepares the offer accordingly. It enables Amazon to improve customer satisfaction and loyalty to the company. Target Market: The target market is the market that is decided by the firms for serving and to launch its products or services. Amazon expanded the target market by the merger of Whole Food. Amazon expanded its target market by acquiring Whole Food as it has captured the opportunity to serve the consumer of Whole Food in California, Taxes, and other geographic market segments. It increased the target market to all Whole Food Market targeted consumers by offering an online platform to the consumer to purchase the grocery products online ( Polacco & Backes, 2018) . Whole Food Market (WFM) targets the upper-level market and middle as well as higher income class in the USA that has been accessed by Amazon through partnership and merger with WFM. It targeted the higher income class families in the USA for selling grocery products as online shopping has been the biggest source of convenience for the consumers ( Kate & Connolly, 2017) . There was a good size of the market that enabled it to survive and to attain the vision of the leading online grocery store in the market. Amazon captured the opportunity by revising the marketing strategy and selling the grocery products and foods to the consumer under the brand name of Whole Food to keep its customers.

11 Short marketing plan for launching Whole Food and Amazon Corporation: The product life cycle may influence the marketing mix decision of the organizations. There are four stages in the lifestyle of the product such as introduction, growth, maturity, and decline stage. All the stages influence the 4P’s decision of the organization ( Jobber & Ellis- Chadwick, 2012) . Amazon Owned Whole Foods is operating at the introduction or early stage. It is investing good money in the advertisement and promotion of the products, brands, and others in grocery to get growth for its sales. Product: It is a thing to be served to the consumers in the market. Amazon added a new product line and increased the range of the grocer items in its bucket such as dairy & eggs, vegan foods, prepared foods, vegetarian foods, seafood, fruits, body care, Bakery foods, frozen foods, chips and Snacks, and others (Amazon, 2020). Amazon added Vitamin products, household products, and others. It extended the brand under Amazon and increased the market share (Amazon, 2020). There are different four levels of the products that may be offered by the firms to the buyers such as core, basic, expected and augmented. The core product is the whole foods while the basic product is the online order and pick up from the stores of the WFM. Price : It is crucial factors that may affect the operation of the company and the success of the enterprise. The main purpose of the pricing strategy is to enhance the market share and sales revenue of the firm. The value of the product may be determined by using pricing strategies such as cost-plus, market-based, value-based, premium, skimming, penetration, and competition-

13 Impact of the new business model on the social and economic environment: The new business model after the acquisition of Whole Foods by Amazon would have an implication on the economic and social environment. It is the duty of the corporations to perform the CSR for their sustainability and growth in the market. CSR may indicate the social, economic and environmental responsibility of the businesses (UOW, 2020). According to Tripple Bottom Line, businesses should have to focus on the growth of economic performance, protection of the environment and development of the society. Source: (UOW, 2020) Economic: The demand for the grocery can increase for Whole Foods under the Umbrella Brand of Amazon. The farming has been scaled up. Amazon focused on the Profit only from the acquisition of Whole Foods that increased the profitability and sales of both the company. Amazon has increased the sales of the grocery in the market by bringing consumers online and increased the profit (Croft, 2017). Social Impact: The new business model affected the employees and other stakeholders of the companies. Amazon forced elimination of the jobs and focused on the adoption of IT and robotics to replace human capital that is influencing the society and interest of the employee adversely. It is affecting the living of the people and the consumption of the foods that can influence society adversely. Amazon emphasized on making profit instead of caring for people

14 and investing in the social development influences the social sustainability of the businesses (Croft, 2017). Environment: The new business model of the Amazon and Whole Foods is able to reduce the waste of the foods by their network of distribution centers and donating foods to the food banks. Amazon provides more discounts on ugly products to increase the demand and reduce the waste of the foods in the stores (Croft, 2017). Amazon-Whole Foods can focus on reducing the waste by using JIT that may enable them to keep lesser stock of the perishable items or foods.

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