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Please read the Fresh Direct (C 19) case analysis carefully and produce a case analysis report following the instructions that are given in the Case Analysis report Answer

Homework: Case Analysis

Please read the Fresh Direct (C 19) case analysis carefully and produce a case analysis report following the instructions that are given in the Case Analysis report document in Doc Sharing.

FreshDirect is an online grocery that conveniently sells and delivers fresh foods and popular household items, to certain residents of the New York City Area. This online grocery market offers organic, farm-fresh produce than most market places. It covers most of Manhattan and certain parts of The Bronx, Brooklyn, Queens, Staten Island and limited areas in New Jersey. Company’s goal was to capture around 5 percent of the New York City grocery market. FreshDirect offers online grocery shopping and delivery service to more than 300 zip codes in Manhattan, Queens, Brooklyn, Nassau County, Riverdale, Westchester, select areas of Staten Island, New Jersey, and parts of Connecticut. Fresh Direct is a company that allows you to order your food online and get next day delivery, their moto is “Our Food is fresh, our customers are spoiled….. Order on the web today and get next-day delivery of the best food at the best price, exactly the way you want it with 100% satisfaction guaranteed.” The primary business is to allow customers to order their food online and avoid going to a grocery store they can buy anything they want online and you can have it delivered to you house. Key players would be the people who launched the business in 2001 Joseph Fedele and Jason Ackerman. Many companies have fallen online with the grocery service and they boldly stated they were the “greatest way to shop for food” this again was a bold statement in many of these chains have fallen. Company launched in 2001 and by 2011 you had to have a order of 30$ with a delivery fee associated with it. The company started to fall apart when the competition start to raise in the industry that is when they started offering local grown and organic but their were some fields they just couldn’t compete with.

FreshDirect is a privately held company that offers online grocery shopping and delivery service in New York, New Jersey, and surrounding areas covering 300 zip codes. This grocery retailer is based in Long Island City. The company was co-founded in 1999, but launched in 2001 by Jason Ackerman and Joseph Fedele. Jason Ackerman currently holds the position of Chief Executive Officer (Company Overview of FreshDirect, LLC, 2012). In a 2010 article from Daily Finance, Rick Braddock, who was the CEO at the time said, “ The company has grown at an accelerated rate compared to 2009, when it generated more than $250 million in revenue” (Cohan, 2010). Another milestone was just recent this past May when FreshDirect expanded its service area to the Bronx and the USDA approved a test program that will allow the company to serve a sampling of food stamp users (Johnston, 2012). Total Profit and Loss for this company is not readily available to the general public since it is a privately held company.

In the online grocery service industry, FreshDirect seems to be one of the highest rated with lower delivery rates than its competitors. Their minimum delivery order and delivery charges, and all around product pricing, was lower than other online grocery services (Dess, Lumpkin, Eisner, & McNamara, 2012). FreshDirect buy straight from suppliers and cut out the middleman so they are able to extend their savings to their customers

 

SWOT ANALYSIS

Strengths

  • Convenience is their greatest attribute, by selling and delivering grocery products online.
  • FreshDirect does not paying high rent to store their products, eliminating the middleman.
  • Advanced product inventory software.
  • Reputable brand name.
  • FreshDirect had strong financial assets.
  • FreshDirect is a powerful online grocery brand; it has reputation of low price withhigh quality.
  • FreshDirect used advance food technology software system.
  • FreshDirect had strong relationships with local stores and its distributors.
  • FreshDirect approach is very innovative; its products have differentiation withrivals.
  • FreshDirect have excellent customer services.
  • FreshDirect’s warehouse had 12 separate temperature zones, ensuring that eachpiece of foods kept as it optimal temperature.
  • FreshDirect had extremely high standard for cleanness, health and safety.
  • FreshDirect had refrigerated loaded trucks that keep their foods fresh.
  • Weaknesses
  • High CEO turnover.
  • Customers want to be able to see touch and smell their products before they buy them.
  • Slow expansion and company growth.
  • Only serve selected zip codes areas
  • FreshDirect sold perishable and they had not attentions customer demandingabout un-perishable products.
  • They are only focusing selected zips area of New York and have not expandedmarket strategy.
  • FreshDirect is on depended on a main competitive advantage, the retail of perishable products. This could make them slow to diversify into other sectors(un-perishable products).
  • The senior management of FreshDirect had continually changed that make slowor delay on the work progress. They are now their 4th CEO.
  • Opportunities
  • Potential expansion to other areas.
  • Customer rating of products
  • FreshDirect increase sales of organic foods.
  • Smartphone apps to order food
  • FreshDirect had reputed brand name and its customers are highly trusted onFreshDirect products.
  • FreshDirect may expand their business local, national or international level.
  • FreshDirect may also start delivery of un-perishable products along with itspopular perishable products.
  • FreshDirect to take over, merge with, or from strategic with other global groceryretailer, focusing on specific market, such as Europe or the UK.
  • Threats.
  • Whole Foods, the Austin, Texas based supermarket chain with the organic healthfood focus, had already threatened FreshDirects sale in Manhattan.
  • Trader Jos another specialty food retailer was also opening a store in downtownunion square, prime territory for FreshDirect.
  • YourGrocer was created with a bulk ± buying strategy, believing that customerswould order large, economical quantities of goods from the web site and thecompany would make home deliveries in company trucks.
  • Another big threat for FreshDirect that; early 2007 NYC government proposedcongestion charges for traffic entering into Manhattan.
  • Local stores or distributors also make a strategy for delivery perishable productsto the customers.
  • Rising of fuel price may also a potential threat on FreshDirect; and penaltiesoccurred from parking violation has also big pressure on FreshDirect.
  • FreshDirect visible cardboard boxes are also environmental threat.
  • FreshDirect trucks parked in big city streets had made the traffic congestionproblems worse.
  • The rival of FreshDirect may adopt the advanced food technology softwaresystem. Threat of New Entry: Buyer Power:  the exit barriers are low in this industry. As the firms exit from this industry, the existing firms firms need not compete with each other for larger market share. of grocery and other food items, which are the necessities for the consumers, their substitute Low Threat of new competitors: High entry barriers, requirement of high end entering the market. shopping of food items, they can bargain for better deals. company can easily shift to other sellers. All the online grocery retailing business continued to mature, all players needed to payattention to customer perception. Online retailing giant amazon.com had entered the drygoods grocery delivery business, posing a threat to other online retailers because of itsexisting loyal customer base and legendary customer service. Creating a grocerysection in 2006, Amazon offered over 10,000 nonperishable items including ³long timestaples, from Kellogg’s to Jiffy pop´. The selection of dry goods rather than perishables meant Amazon, unlike FreshDirect and Peapod, did not have to worry about deliverycosts on time and climate sensitive items. However, even Amazon suffered grocerydelivery failures. From out of stock problems, delivery glitches, and Web site technicaloutages, online grocery retailers needed to ³serve their online customers just like theywould serve the customers who come into their physical stores´.Even though FreshDirect had been able to woo local New Yorkers, gaining a FastCompany ³Local Hero´ award in 2006, the company had to absorb ³hundreds of thousands of dollars in parking tickets to get its customers its orders within the deliverywindow´. And in early 2007, New York City government proposed a congestion chargefor traffic entering Manhattan, adding to FreshDirect’s delivery expenses. The rising costof fuel was also a potential threat. Even though FreshDirect included a fuel surchargesto orders based on the average retail price of gasoline, these expenses coupled withpenalties accrued from parking violations might have put significant pressure onFreshDirect’s ability to achieve its target profit levels. a. overall cost leadership -FreshDirect related to online grocery chain; soonline order safe the paper cost. FreshDirect may reduce its managementstaff by using of de-layering policy; that why there is no middle man;products are high quality with low prices. FreshDirect delivered effectivetraining and coaching to the staff and get the result with betters qualityproduction and safe the time. Low cost also provides defensive strategyagainst input cost increases. FreshDirect may also negotiate withsuppliers to deal with minimize their margin and use the advancedtechnology to reduce the cost or extra scale of production.c. Focus – This strategy of focusing on a particular customers groups or segments of the production line. FreshDirect need to focus to improve thequality of products and looking what customer wants; FreshDirect alsofocusing non-perishable products because mostly customers wants tocollects different range of products from one point
  • References:
  • Opinion:
  • b. Differentiation – FreshDirect need innovative approach regarding itsproducts and services. Its brand must unique among the customers; it¶s allmanagement and production staff must highly expert regarding their tasks, its online webside must be innovative designed and attractive to itscustomers; develop the knowledge and technology with differentiate thenother not easily adopt it.
  • FreshDirect current generating strategyis low price with differentiations and high quality, focusing on perishable products; anddelivers its direct to the customer window in selected zip areas. We may adopt these strategies to get better result for FreshDirect.
  • Course of Action Recommended
  • The issues and Challenges facing the company:
  • Strategy Used:
  • Weak Bargaining power of suppliers: There are large numbers of sellers and the
  • High Bargaining power of customers: Since customers have many other options for
  • technology and presence of a good distribution network demotivate new competitors from
  • products are not available.
  • Low Threat of substitutes: Since FreshDirect has a core competency in efficient supply
  • get higher market share and thus higher profits. Because of the high growth rate of industry, the
  • Low Existing competitive rivalry: Currently the number of competitors is less and also
  • This threat can be a potential risk in a similar way Wal-Mart has bullied others with their low prices. However, Wal-Mart is not a major
  • While on shelves existing stores are a constant threat, there are not equipped with online delivery options. However, Amazon’s new entry to the grocery market share can potentially impact FreshDirect’s options.

 

Analysis Via Porter’s Five Forces Model

Threat of New Entry:

While on shelves existing stores are a constant threat, there are not equipped with online delivery options. However, Amazon’s new entry to the grocery market share can potentially impact FreshDirect’s options.

Buyer Power:

This threat can be a potential risk in a similar way Wal-Mart has bullied others with their low prices. However, Wal-Mart is not a major

 

Low Existing competitive rivalry: Currently the number of competitors is less and also

the exit barriers are low in this industry. As the firms exit from this industry, the existing firms

get higher market share and thus higher profits. Because of the high growth rate of industry, the

firms need not compete with each other for larger market share.

Low Threat of substitutes: Since FreshDirect has a core competency in efficient supply

of grocery and other food items, which are the necessities for the consumers, their substitute

products are not available.

Low Threat of new competitors: High entry barriers, requirement of high end

technology and presence of a good distribution network demotivate new competitors from

entering the market.

High Bargaining power of customers: Since customers have many other options for

shopping of food items, they can bargain for better deals.

Weak Bargaining power of suppliers: There are large numbers of sellers and the

company can easily shift to other sellers.

Strategy Used:

 

The issues and Challenges facing the company:

All the online grocery retailing business continued to mature, all players needed to payattention to customer perception. Online retailing giant amazon.com had entered the drygoods grocery delivery business, posing a threat to other online retailers because of itsexisting loyal customer base and legendary customer service. Creating a grocerysection in 2006, Amazon offered over 10,000 nonperishable items including ³long timestaples, from Kellogg’s to Jiffy pop´. The selection of dry goods rather than perishables meant Amazon, unlike FreshDirect and Peapod, did not have to worry about deliverycosts on time and climate sensitive items. However, even Amazon suffered grocerydelivery failures. From out of stock problems, delivery glitches, and Web site technicaloutages, online grocery retailers needed to ³serve their online customers just like theywould serve the customers who come into their physical stores´.Even though FreshDirect had been able to woo local New Yorkers, gaining a FastCompany ³Local Hero´ award in 2006, the company had to absorb ³hundreds of thousands of dollars in parking tickets to get its customers its orders within the deliverywindow´. And in early 2007, New York City government proposed a congestion chargefor traffic entering Manhattan, adding to FreshDirect’s delivery expenses. The rising costof fuel was also a potential threat. Even though FreshDirect included a fuel surchargesto orders based on the average retail price of gasoline, these expenses coupled withpenalties accrued from parking violations might have put significant pressure onFreshDirect’s ability to achieve its target profit levels.

Course of Action Recommended

 

FreshDirect current generating strategyis low price with differentiations and high quality, focusing on perishable products; anddelivers its direct to the customer window in selected zip areas. We may adopt these strategies to get better result for FreshDirect.

  1. overall cost leadership -FreshDirect related to online grocery chain; soonline order safe the paper cost. FreshDirect may reduce its managementstaff by using of de-layering policy; that why there is no middle man;products are high quality with low prices. FreshDirect delivered effectivetraining and coaching to the staff and get the result with betters qualityproduction and safe the time. Low cost also provides defensive strategyagainst input cost increases. FreshDirect may also negotiate withsuppliers to deal with minimize their margin and use the advancedtechnology to reduce the cost or extra scale of production.
  2. Differentiation – FreshDirect need innovative approach regarding itsproducts and services. Its brand must unique among the customers; it¶s allmanagement and production staff must highly expert regarding their tasks, its online webside must be innovative designed and attractive to itscustomers; develop the knowledge and technology with differentiate thenother not easily adopt it.
  3. Focus – This strategy of focusing on a particular customers groups or segments of the production line. FreshDirect need to focus to improve thequality of products and looking what customer wants; FreshDirect alsofocusing non-perishable products because mostly customers wants tocollects different range of products from one point
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