The questions in this exercise are based on one of the fastest growing food retailers in the United States—Whole Foods Market, Inc. To answer the questions, you will need to download Whole Foods...

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1. Whole Foods Market succeeds first and foremost because of its product
leadership customer value proposition. The first boldface heading in the
company’s Declaration of Interdependence says ―We Sell the Highest
Quality Natural and Organic Products Available.‖ Page 4 of the 10-K/A
indicates that the real source of the company’s product leadership
position centers on perishable products (e.g., produce, dairy, meat,
seafood, bakery, and prepared foods). Perishable product sales account
for about 67% of total retail sales. Customers choose Whole Foods
Market primarily because they are able to buy better natural and organic
foods and higher-quality perishable products than in conventional
supermarkets.
Customer service is also an important part of Whole Foods Market’s
success, but it is secondary in importance to product quality.

2. Whole Foods Market faces numerous business risks as described in
pages 11-15 of the 10-K/A. Here are four of the more prominent risks
with suggested control activities:
 Risk: Customers will defect to conventional supermarkets that are
eginning to stock more natural and organic foods. Control activities:
Whole Foods Market can expand its selection of product offerings,
particularly perishables, and continue to invest heavily in employee
training and retention so that it offers market-leading levels of informed
customer service.
 Risk: Growth targets will not be realized due to failed new store
openings. Control activities: Implement formal reviews of the sight
selection, construction, and new employee hiring and training processes.
 Risk: Adverse economic conditions could reduce consumer spending at
etail locations. Control activities: Continue to develop private label
product categories, such as the 365 Everyday Value category mentioned
on page 8 of the 10-K/A, that are less expensive but meet rigorous
quality standards.
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Research and Application 1-9 (continued)
 Extended power outages could cause severe inventory losses because of
the company’s emphasis on perishable products. Control activities:
Implement a contingency plan that specifies responses in the event of a
power outage.

3. There are no absolute right and wrong answers to this question because
the information available in the annual report is piecemeal. Nonetheless,
students could make the following observations based on available
information. First, the CEO (John P. Mackey) has a layer of senior
managers that report to him including two Co-Presidents/Chief
Operating Officers, and three Executive Vice Presidents. Second, there
are ten Regional Presidents. In the organization chart shown below, we
assume that the Regional Presidents report to the Chief Operating
Officers. Third, each Regional President has a layer of management that
eports to him or her. For example, the Global All-Stars include David
Schwartz, who is the Vice President of the Midwest Region. He would
eport to the President of the Midwest Region. John Simrell is the
Director of Finance for the South Region and he would report to the
South Region President. Robin Graf is the Team Member Services...