Spa/Beauty and wellness industry analysis using Porter's 5 forces model

For this assignment, I decided to do a competitive analysis on the spa/beauty and wellness industry. The spa/ beauty and wellness industry comprises of face and body treatments to maintain, improve and enhance the skin. It also promotes overall relaxation and wellbeing through the services provided by the particular spa. A spa may also sell products to its clientele. By applying Porter’s five forces model, I will analyze substitutes in other industries, buyers, potential new entrants, suppliers and rivalry among current competitors to see how attractive this industry is.

First, to what extent are there substitutes in the spa/beauty and wellness industry? I would say the potential for substitutes is low. The spa/ beauty and wellness industry comprises of facial and body treatments. The potential for substitute for facial treatments is mediocre because customers can purchase alternative facial products such as creams, masks, etc. Even miniature machineries used for a facial treatment can be purchased for at home use. Customers can easily perform facial treatments on themselves at home with such substitutes. However, in products purchased by customers often come from the spa/beauty and wellness industry, so even if this industry loses customers for treatment, they can still obtain customers through sales of products. The substitute for body treatments such as massages and wraps is low. Despite the innovative technologies making massage machines, it is difficult for customers to perform such treatments on themselves. It is often more relaxing and convenient for a professional to perform body treatments on a customer –the results are also more effective. Thus, the threat of substitution in this industry is relatively low, particularly because many people have stress from their daily lives and enjoys being pampered by services from this industry.

Next, I will look at the bargaining power of buyers. I would say the bargaining power of buyers is high in this industry because there are so many selections of spas customers can choose from. For example, in the Chinatown area of New York City alone, there is at least a spa/facial center on every block. Thus, customers have a substantial influence and power over the firms in this industry. Prices must be kept at a competitive level because if spas offered similar services and some were priced lower, customers would much rather join the cheaper spa. The services provided must be of utmost quality because many spas offer similar services at similar prices, so one distinguishing feature is the quality of services provided. Because this is primarily a service oriented industry, customers have a high degree of power in terms of brand loyalty; brand loyalty builds on your ability to communicate and foster a relationship of trust between you and your customer. Clients can switch over to another spa easily with little or no cost. Thus, because there are so many selections of similar products/services at similar price levels, brand loyalty is difficult to maintain.

The bargaining power of suppliers. I think the bargaining power of suppliers in this industry is low. Suppliers in this industry provide products for facial and body treatments. This may include bed sheets, salon-sized washes, creams, masks, facial products, machines, etc. However, because of the fact there are so many suppliers offering similar products at prices which are relatively the same in the United States, the bargaining power of suppliers is rather low. Their power is further reduced by the fact that the cost of the exact same products is substantially cheaper if imported from another country like China. Suppliers of facial product might have a slightly higher bargaining power, since customers develop brand loyalty towards a product they’ve been using. Even so, because there are so many selection of other facial products in the market, suppliers might not have a high bargaining power neither. Also, often times, it is up to the esthetician to recommend or persuade customers to buy a particular product. Prices for facial products are often set at a wholesale price; however prices for all other products are often negotiable. Thus, the bargaining power of suppliers is low.

Rivalry among current competitors. The rivalry among current competitors is high. The spa/beauty and wellness industry is a fragmented one in which there are many small to medium firms. These firms have low to medium market share. Many of these firms are individual firms and some are chains. This means customers have a wide variety of options because they can easily change amongst competitors. This leads to an opportunity for price wars because customers have more power and the fragmented firms need to give customers an incentive to consume from that firm. Also, the demand for services and products in this industry is medium. Services and products are not absolutely necessary, they are things that people enjoy and become necessary when they hope to achieve a desired result and find that product/service effective. Thus, I would conclude that the growth in demand isn’t too high, that’s why there is more competition.

Finally, in looking at exit barriers, if a firm wanted to exit the industry, it is quite easy. They can close down or another firm can buy them out. Although this typically means less competition, the fact that there’s easy entry into this industry balances the easy exit barriers. Also, a startup firm typically stays in the industry for a minimum of one year and during that period, new firms are opening. Service providers have gained enough experience to start up a firm on the own. So, despite the easy exit barriers, the fact that the rate of new firms entering the industry is greater than exiting firms makes the rivalry among current competition high.

Potential New Entrants. What is the potential for new entrants in this industry? It is high. When assessing what the potential for new entrants is, we should look at the capital requirement to start the business and how accessible the capital is. Brand loyalty to current firms, government regulations, switching costs, experiences, and access to key suppliers are factors that should also be taken into account when evaluating the potential for new entrants. If consumers have developed brand loyalty, it would be a barrier for potential new entrants to break into the industry and compete for current customers. Government regulations affect entry into the industry. Laws require industry personnel to be licensed for practice. Also, different insurance regulations affect the industry, which varies on the procedures done. Government regulations don’t pose as a large barrier to entry because a firm needs to comply with licensure requirements to operate, which isn’t too complicated.

Typically, switching costs for buyers are minimal because they don’t have many obligations. They can purchase a package or membership at a discounted price, which would obligate them to use the services or they could do single treatments at prices higher than the package rate, which would be no obligations at all. Similarly, for products, consumers can choose to buy a product with no obligation. They will continue to use the product or services if they feel it’s beneficial to them, which is partially developing brand loyalty. Thus, because switching costs are minimal, the potential for new entrants is high, therefore, the competition is also high. Access to key suppliers is another fact to look at. The more difficult access to key suppliers is, the bigger the barrier to entry. In this industry, the access key suppliers is high because there are many suppliers selling similar products, all competing to sell spas the products.

So in conclusion, by applying Porter’s five forces model, I would say the industry is a competitive one. Substitutes are high, buyer’s power is high, potential new entrants is high, power of suppliers is low, and rivalry among existing firms is high. So overall, this is a competitive industry that might not be too attractive to enter. Since this industry is primarily service oriented, it takes a lot of time for firms in the industry to develop relationships with customers, and patience is something much needed to survive in this industry.

A firm's mission statement

What is a mission statement and why is it important to a firm’s success? Whether a firm is large, comprising of thousands of people, or small, comprising of only one person, a mission statement is the driving force. It is persistently guiding the company to meet its goals. It is like “inner voice” steering the company in the right direction, so without it, it would be difficult to meet the firm’s purpose.

Every company is established to do something, whether it is to provide a product or service in a particular industry. The mission statement is like the backbone of a firm, laying the foundation for what the firm hopes to accomplish in their industry. So a mission statement must be precise in detailing what they do, hope to do and become in the future and what they are committed to doing in the long run. It cannot be too vague, like “we hope to be the best in what we do” because what is the “best”? There must be broad standards, which is what the mission statement should entail. However, the statement should not define every standard for performance because the statement is not a code of conduct to the employees. Parthasarthy and Booke’s Strategic Management textbook has four parts necessary to a mission statement.

The four components of a mission statement they mention are: task (what the firm does), vision (what the firm wants to become in the future), values/beliefs (the ideals the firm is committed to) and goals/objectives (the end results the firm seeks). In evaluating a mission statement, we should look at whether the firm has these four components and if it does, whether they are consistent with what the firm does, in the industry they are in. It is also important to see whether important stakeholders are being considered in the statement since stakeholders influence a firm’s success at every level.

The firm’s task must define what exactly it is they do. A firm may be providing products or services or both, but they need to be clear in what they do. What they do may determine prospective customers they would want to attract, so they can cater their products/services to that clientele.

The firm’s vision must detail what it wants to accomplish in the future. The vision should define and establish goals that the firm would set out to meet in the long run. This provides the firm with direction so it would know what it needs to do to meet its vision. An example would be “to become a leading spa service provider in New York City”.

The firm’s goals/objectives are similar to its vision. The company’s objectives are the specifics detailing how the company will eventually accomplish its vision. Thus, the goals/objectives, whether financial or strategic, should be quantifiable with a precise period in which the goals should be met so it can become a standard to determine whether the company is doing what it should to meet its vision.

The firm’s values should define the culture of the firm. It should detail what the firm believes in. This is important because it fosters a particular type of culture within the company, depending on what kind of values are set.

I have chosen to evaluate Whole Foods Markets’ mission statement.

Declaration of Interdependence

Whole Foods Market is a dynamic leader in the quality food business. We are a mission-driven company that aims to set the standards of excellence for food retailers. We are building a business in which high standards permeate all aspects of our company. Quality is a state of mind at Whole Foods Market.

Our motto — Whole Foods, Whole People, Whole Planet — emphasizes that our vision reaches far beyond just being a food retailer. Our success in fulfilling our vision is measured by customer satisfaction, Team Member excellence and happiness, return on capital investment, improvement in the state of the environment, and local and larger community support.

Our ability to instill a clear sense of interdependence among our various stakeholders (the people who are interested and benefit from the success of our company) is contingent upon our efforts to communicate more often, more openly, and more compassionately. Better communication equals better understanding and more trust.

We Sell the Highest Quality Natural and Organic Products Available

We appreciate and celebrate that great food and cooking improves the lives of all of our stakeholders. Breaking bread with others, eating healthfully and eating well — these are some of the great joys of our lives.

Our goal is to sell the highest quality products that also offer high value for our customers. High value is a product of high quality at a competitive price. Our product quality standards focus on ingredients, freshness, taste, nutritive value, safety and/or appearance. While we have very high standards for product quality, we believe that it is important to be inclusive and open minded, and not overly restrictive or dogmatic.

We Satisfy and Delight Our Customers

Our customers are the most important stakeholder in our business. Therefore, we go to extraordinary lengths to satisfy and delight our customers. We want to meet or exceed their expectations on every shopping trip. We know that by doing so we turn customers into advocates for whole foods. We guarantee our customers 100% product satisfaction or their money will be refunded.

Outstanding customer service is a result of both our Team Members skill and enthusiasm in serving our customers and their in-depth knowledge and excitement about the products we sell. We nurture a quality business relationship with our customers by daily demonstrating our customer service beliefs:

• Customers are the lifeblood of our business and we are interdependent on each other.
• Customers are the primary motivation for our work — they are not an interruption of our work.
• Customers are people who bring us their wants and desires and our primary objective is to satisfy them as best we can — they are not people to argue or match wits with.
• Customers are fellow human beings with feelings and emotions like our own; they are equals to be treated with courtesy and respect at all times.

We continually experiment and innovate in order to raise our retail standards. We create store environments that are inviting, fun, unique, informal, comfortable, attractive, nurturing and educational. We want our stores to become community meeting places where our customers come to join their friends and to make new ones. Our stores are "inclusive." Everyone is welcome, regardless of race, gender, sexual orientation, age, beliefs, or personal appearance. We value diversity — whole foods are for everyone.

We Support Team Member Excellence and Happiness

Our success is also dependent upon the collective energy and intelligence of all our Team Members. In addition to receiving fair wages and benefits, belief in the value of our work and finding fulfillment from our jobs is a key reason we are part of Whole Foods Market. Therefore, we design and promote safe work environments where motivated Team Members can flourish and reach their highest potential. And no matter how long a person has worked or plans to work with us, each and every Team Member is a valued contributor.

There are many Team Members in our company who "work behind the scenes" to produce product, distribute product and generally support our retail Team Members and customers. Although they are not as visible as our retail Team Members, they are integral to the success of our business.

Achieving unity of vision about the future of our company, and building trust between Team Members is a goal of Whole Foods Market. At the same time diversity and individual differences are recognized and honored. We aim to cultivate a strong sense of community and dedication to the company. We also realize how important leisure time, family, and community involvement outside of work is for a rich, meaningful and balanced life. We must remember that we are not "Whole Life Market."

We strive to build positive and healthy relationships among Team Members. "Us versus them" thinking has no place in our company. We believe that the best way to do this is to encourage participation and involvement at all levels of our business. Some of the ways we do this are:

• Self directed Teams that meet regularly to discuss issues, solve problems and appreciate each other's contributions.
• Increased communication through Team Member Forums and Advisory Groups, and open book, open door, and open people practices.
• Labor gainsharing and other Team Member incentive programs.
• Team Member Stock Options and Stock Purchase Plan.
• Commitment to make our jobs more fun by combining work and play and through friendly competition to improve our stores.
• Continuous learning opportunities about company values, food, nutrition and job skills.
• Equal opportunity for employment, with promotion mostly from within the company.

We Create Wealth Through Profits and Growth

We earn profits every day through voluntary exchange with our customers. We know that profits are essential to create capital for growth, job security and overall financial success. Profits are the "savings" every business needs in order to change and evolve to meet the future. They are the "seed corn" for next year's crop. We are the stewards of our shareholder's investments and we are committed to increasing long term shareholder value.

As a publicly traded company, Whole Foods Market intends to grow. We will grow at such a pace that our quality of work environment, Team Member productivity and excellence, customer satisfaction, and financial health continue to prosper.

There is a community of self interest among all of our stakeholders. We share together in our collective vision for the company. To that end we have a salary cap that limits the maximum cash compensation (wages plus profit incentive bonuses) paid to any Team Member in the calendar year to 19 times the company-wide annual average salary of all full-time Team Members.

We Support Our Communities and Encourage Local Involvement

Our business is intimately tied to the neighborhood and larger community that we serve and in which we live. The unique character of our stores is a direct reflection of the customers who shop with us. Without their support, both financial and philosophical, Whole Foods Market would not be in business. Our interdependence at times goes beyond our mutual interest in quality food and, where appropriate, we will respond. We donate 5% of our after-tax profits to not-for-profit organizations.

We Promote Environmental Stewardship

We see the necessity of active environmental stewardship so that the earth continues to flourish for generations to come. We seek to balance our needs with the needs of the rest of the planet through the following actions:

• Supporting sustainable agriculture. We are committed to greater production of organically and biodynamically grown foods in order to reduce pesticide use and promote soil conservation.
• Reducing waste and consumption of non-renewable resources. We promote and participate in recycling programs in our communities. We are committed to re-usable packaging, reduced packaging, and water and energy conservation.
• Encouraging environmentally sound cleaning and store maintenance programs.

Our Business Associates

We are not a fully self-sustaining ecosystem. There are hundreds of other businesses that we depend on to assist us in creating an outstanding retail shopping experience for our customers. We view our trade partners as allies in serving our stakeholders. We treat them with respect, fairness and integrity, and expect the same in return.

Balance and Integration

Satisfying all of our stakeholders and achieving our standards is our goal. One of the most important responsibilities of Whole Foods Market's leadership is to make sure the interests, desires and needs of our various stakeholders are kept in balance. We recognize that this is a dynamic process. It requires participation and communication by all of our stakeholders. It requires listening compassionately, thinking carefully and acting with integrity. Any conflicts must be mediated and win-win solutions found. Creating and nurturing this community of stakeholders is critical to the long-term success of our company.

Final Thoughts

Our Vision Statement reflects the hopes and intentions of many people. We do not believe it always accurately portrays the way things currently are at Whole Foods Market so much as the way we would like things to be. It is our dissatisfaction with the current reality, when compared with what is possible, that spurs us toward excellence and toward creating a better person, company, and world. When Whole Foods Market fails to measure up to its stated Vision, as it inevitably will at times, we should not despair. Rather let us take up the challenge together to bring our reality closer to our vision. The future we will experience tomorrow is created one step at a time today.

The Declaration of Interdependence was created originally in 1985 by 60 Team Members who volunteered their time. It has been updated in 1988, 1992 and 1997.

I think this is an example of a sound mission statement because it involves so many stakeholders who interdependently provide Whole Foods with a clear mission. First, it clearly defines Whole Foods task –which is to provide the highest quality food. In describing its task, Whole Foods mentions why stakeholders’ would want to receive such high quality food. This clearly indicates what the company does and who their customers are. Also, they specifically say what their visions are for the company and for various stakeholders’ and employees. It says they want to sell high quality foods at competitive prices and expect to do so by fostering an interdependent environment with employees, customers, suppliers, etc. One of their visions is to ensure customer satisfaction and to do so, they even specify what and how they want their customers to be satisfied. It also specifies what and how they want to foster an environment that supports team members’ happiness and excellence. All this ultimately leads to their goal of creating wealth, profit and growth. To be able to create wealth, Whole Foods recognizes in their statement that it is crucial to foster good relations in this interdependent web, and that is why they detailed out what is expected of them at each end of this web. The fact that this mission statement is so precise gives the company a very clear focus on what it needs to do and how they should go about doing it.