Justifications for WFMs Acceptance of the Merger Offer
Whole Foods Market (WFM) will accept the acquisition offer because of the convergence in its product offerings and those of Unilever. Both firms deal with food products, which implies that some of their resources are compatible and Unilever can deploy them profitably upon the conclusion of the acquisition deal. Additionally, although the range of the products offered by the two firms is different, both of them pursue the sustainability goal; thus, WFM will accept the acquisition offer because it will facilitate the implementation of its sustainability agenda.
WFM lists the sale of high quality products with natural and organic qualities as one of its core values, just as it does the practice and advancement of sound environmental stewardship principles. However, competitive pressures have resulted in a decline in WFMs sales revenue (Giammona, 2016), which could inhibit its ability to position itself as a leading provider of organic and natural foods; the firm registered a 2.4% decline in sales as at the last financial year, which represented the fourth consecutive decline in quarterly sales.
Analysts have attributed the decline in WFMs sales to customers preference for other brands, a problem that Unilever is likely to solve: at least 2 billion people consume Unilevers products on a typical day (Unilever, 2016), implying that the brand enjoys high recognition, worldwide. Besides, the goal of making sustainable living commonplace comprises an integral organizing principle for Unilever's business operations. Three pillars underlie Unilevers strategy for sustainable business: the improvement of peoples health and well-being, the reduction of the environmental impact of business operations, and the enhancement of livelihoods. Thus, considering the overlap of the tow firms business objectives, WFM- by agreeing to Unilevers acquisition offer- is going to realize some of its core values.
Unilever also has the financial resources to pay a substantively high rate of return for WFMs net assets; WFMs net assets stood at about $3.2 billion as at the last financial year, an amount that Unilever can easily pay and add a premium for the value that WFMs brands will generate over the coming financial years. Whole Foods has been a dominant force in the American organic foods market for the last two decades, and with the organic food industry set to grow by 14% by the year 2018 (Lutz, 2015), there can never be a stronger case for WFM to accept Unilevers offer. The acquisition will position WFM for enhanced competitiveness in a markedly dynamic environmental context.
Unilever's motivation to purchase Whole Foods Market
Unilever would want to purchase WFM for a variety of reasons. As already noted, some of the two firms corporate objectives overlap- they both aim to inculcate sustainability in their operating activities. WFM also has attractive growth prospects: as a dominant firm in an industry that will have expanded by more than 12% as at the year 2018, there is no doubt that Unilever will earn impressive margins from the investment in WFMs acquisition. A review of WFMs past performance exemplifies its attractiveness to Unilever for acquisition. The firm operates more than 400 retail stores in Canada, the UK and United States, with the American market accounting for more than 90% of its turnover.
Despite the challenge that supermarket chains pose to WFMs dominance, it still has a sustainable competitive advantage: it has an exclusive focus on organic products, unlike its main competitors who have a diverse product range. The exclusive focus on organic products enables WFM to develop unique resources and capabilities than its rivals cannot match. One aspect of WFMs distinctive capabilities is in marketing- it incurs lower marketing expenses than its competitors do, and the expenses have averaged about 0.5% of its sales revenue over the past decade. With a year-on-year average sales growth of at least 8%, it is clear that WFM will capture a substantial share of the expanded organic foods market by the year 2018.
In addition, the firms bottom line is likely to grow at a faster rate that the turnover will, considering the aggressive cost management strategies it has instituted in the recent past. The reduction of the firms workforce will go a long way in reducing the payroll expenses, which have comprised the largest cost item in WFMs operating cost structure (Daniells, 2014). Lower costs and increased revenue will surely enhance the firms profits, making WFMs acquisition strategically important to Unilever.
Program for facilitating the merger
A human resources program will be required for the successful merger of Unilever and WFM. Its objective will be to facilitate the integration of the two firms personnel and cultures. As a first step, it will be necessary to examine the two companies organizational charts in order to establish the similarities and differences in the job positions. After comparing the job positions in the two companies, it will be possible to determine the roles to retain-the competitive strengths of the two companies should guide this decision. The program will also entail carrying out job analysis alongside the evaluation of the organizational charts in order to ascertain the key concerns for cross training.
It is essential to analyze the two firms cultures because the employees cultural predisposition has a significant influence on training outcomes. The human resources heads of both companies will have to decide the cultural differences that matter, and the appropriate interventions for addressing their possible adverse effects of the effectiveness of the cross training initiative. Insights from the cultural analysis will also comprise a basis for decisions on the aspects of the two firms cultures that the human resource managers should integrate into a single organizational culture.
Cross training will help Unilever compete effectively in the organic foods industry by integrating best practices of its operations with those of WFM, besides facilitating employee interaction that is essential for fostering teamwork. For cross training to be effective, it will be necessary to specify the crucial tasks for which the current employees do not possess the requisite skills; job analysis then helps in the selection of the pool of candidates who will undergo training for the tasks created by the new corporate dispensation (Durand, 2016).
For Unilever, the operations department, especially in the consumer foods segment, is likely to provide the candidates for the cross training. WFM deals with organic foods, which makes other product segments ill equipped for the tasks necessitated by its acquisition by Unilever. Additionally, the operations department is responsible for product design, which is one of the elements that determine the extent to which a firm will accomplish its sustainability objectives. With sustainability being one of the areas of overlap in WFMs and Unilevers corporate objectives, it is integral to involve the operations department in the cross training.
Danniels, S. (2014). U.S organic food market to grow 14% from 2013-2018. Available at http://www.foodnavigator-usa.com/Markets/US-organic-food-market-to-grow-14-from-2013-18
Durand, M. (2016). Employing critical incident technique as one way to display the hidden aspects of post-merger integration. International Business Review, 25(1), 87-102.
Giammona, C. (2016). Whole Foods Shares Fall as Organic-Food Competition Hurts Sales. Available at http://www.bloomberg.com/news/articles/2016-07-27/whole-foods-market-misses-sales-estimates-as-competition-mounts
Lutz, A. (2015). Whole Foods is falling to competitors because of one mistake. Accessed at http://www.businessinsider.com/whole-foods-biggest-problem-2015-5 on 11-7-2016
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