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At FreshDirect, Reinvention After a Crisis

By Jessica Bruder

• Aug. 11, 2010

FreshDirect is an online grocer making more than 45,000 deliveries a week to customers throughout most of New York City and parts of Long Island, Westchester County, New Jersey and Connecticut.

THE CHALLENGE Surviving a major crisis — an immigration audit that decimated the company’s work force — at a time when the company was hemorrhaging money and alienating customers because its basic business model was not working.

THE BACKGROUND When FreshDirect was founded in 1999 — in those euphoric days before the Internet bubble burst — the idea of an online grocer in New York City seemed promising. The company would not only sell just farm-fresh food, it would sell time and convenience, too.

FreshDirect started building its 300,000-square-foot headquarters and packing plant in 2000 in the Long Island City section of Queens and made its first deliveries two years later. But little went as planned. “We broke too many eggs,” said Richard S. Braddock, who would become the company’s chairman in 2005 and its chief executive in 2008. “We showed up with thawed ice cream. We bruised the produce. We delivered late. We missed boxes. We didn’t remediate your service issues.”

During FreshDirect’s formative years, the only thing that kept the company alive was its ability to churn through customers. A series of incentives for first-time buyers — including a $50 discount on orders of $100 or more — kept attracting newcomers, but most of them dropped the service after their discounts ran out.

Back then, according to Mr. Braddock, about 85 percent of the company’s customers placed just one or two orders before giving up on the site. Revenue was on the rise, but profits did not follow. Inevitably, FreshDirect started running out of cash.

Against that bleak backdrop, a crisis struck at the end of 2007. Immigration and Customs Enforcement officials announced plans to inspect the company’s I-9 employment eligibility records.

On Dec. 9, the day before the audit was to begin, FreshDirect managers asked their employees to provide documents proving their eligibility to work in the United States. Many of the employees never returned. The few undocumented workers who did come back were fired. As a result, the company lost more than 200 employees, reducing its work force by 15 percent just before the winter holidays.

As FreshDirect limped into 2008, customers fumed about the many sold-out items and limited delivery options. The company sent a mass e-mail message that amounted to something of an understatement, “This January, we’re going to have a harder time meeting your food needs than we usually do.”

At that point, Mr. Braddock, who had been FreshDirect’s chairman for more than two years, decided to take drastic action. A former chief executive of Priceline, he fired FreshDirect’s chief executive and took the reins himself.

Both inside and outside the company, there was concern that if Mr. Braddock failed, FreshDirect would go the way of Webvan, an overly ambitious online grocer that also got its start in 1999.

Webvan had raised $1.2 billion from investors and expanded rapidly to cover 10 markets across the country — but none of those markets ever turned a profit. Two years after it began, Webvan declared bankruptcy and ceased operations.

After that, it became conventional wisdom that online grocers simply could not succeed; among many industry observers, that sentiment persists.

THE OPTIONS After taking over, Mr. Braddock concluded that his only option was to hire employees to replenish his depleted work force and remake the company with a focus on customer service. “It was either that or death,” he said.

In a fundamental shift, Mr. Braddock decided to end the company’s addiction to new customers. For two years, it simply stopped offering promotions to first-time buyers. And the new customers simply stopped coming. The danger, of course, was that the old customers would continue to exit, revenue would decline and the company would run out of money.

Internally, managers disagreed over whether the strategy, the business equivalent of a tourniquet, could work. But Mr. Braddock insisted that it did not make sense to bring in new customers until the company figured out how to serve them. “The trick in this business isn’t to acquire new customers,” he explained, “it’s to make them loyal.”

To strengthen customer service, Mr. Braddock asserted, FreshDirect needed a system of continuous feedback, a real-time database that would follow every step — and misstep — of each business day, so that minor gaffes could be resolved before they turned into big problems.

The software would have to track plant operations, along with data corresponding to some 150,000 active customers and more than 8,500 products. It would take FreshDirect two years to build the database internally.

Today, if a truck goes out 15 minutes late or if a container of jalapeño hummus is left off an order, the problem can be traced to its source. Also, the real-time data reports allow FreshDirect to shift its resources to areas of customer demand, beefing up capacity based on the popularity of delivery zones and time slots, anticipating which products might sell out and stocking up on them in advance.

In another move that was internally contentious, FreshDirect introduced a rating system for its own produce and seafood. Every morning, managers and buyers in both departments rank their products from one star (“below average”) to five (“never better”). The system aims to simulate the in-store shopping experience, allowing the grocers to showcase their best stuff and customers to decide what looks good.

But the strategy came with a big risk: to gain customers’ trust, FreshDirect would have to acknowledge that not every item it stocked was picture perfect every day. Once again, not everyone at the company was enthusiastic about the idea. “Was it scary? Yeah!” recalled Glenn Walsh, the produce manager. “I thought it was insane in the beginning.”

Mr. Braddock also decided to upgrade FreshDirect’s Web site, using the company’s internal database to profile customers and serve a customized online experience.

For example, the site’s software can now analyze order patterns, reminding customers of their favorite products and suggesting other items they might like, a marketing tool that has worked well for Netflix and Amazon. In addition, the database recognizes whether a visiting customer is a new, infrequent, lapsed or loyal customer — and serves appropriate messages and ads.

WHAT THE EXPERTS SAY FreshDirect’s strategy drew these comments from experts on retailing and marketing:

John A. Deighton , a professor at Harvard Business School who specializes in consumer behavior and digital marketing:

“Great execution seldom saves a flawed concept. There’s no shortage of cases to learn from. Consider Webvan, HomeGrocer, NetGrocer, Streamline, Homeruns, WebHouse and Peapod. The pain point for each one of them has been getting groceries to customers’ homes.”

Stew Leonard Jr. , president and chief executive of Stew Leonard’s , a family-owned chain of food stores and wine shops in Connecticut and New York:

“When you go to buy something on the FreshDirect Web site and it recommends another item? I think that’s a brilliant idea. I wish I could do that in the store.”

Gabriel Shaoolian , chief executive and founder of Blue Fountain Media , a Web site design and online marketing company in New York:

“FreshDirect has a great chance to create what we call a stickiness factor, adding features that bring people to their site on a more frequent basis. They need to integrate social media marketing, give people the opportunity to tweet about certain items or post them to Facebook.”

THE RESULTS At nytimes.com/boss, you can offer your own thoughts on Mr. Braddock’s strategy. Next week, on the blog and in this space, we will tell you how things have worked out for FreshDirect.

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FreshDirect Case Study

Introduction, strategic analysis, swot analysis, challenges encountered and the solutions.

Bibliography

FreshDirect launched its grocery delivery service in New York in September of 2002. The food delivery service started out with an initial investment of more than $100 million and 200 employees. FreshDirect has a different product blend and value proposition than most online and brick-and-mortar grocers, with about 83% of its foods being perishables, compared to 20 percent in most. FreshDirect emphasises on the freshness and the quality of its products, since it buys directly from the suppliers, farms and Sherman among others.

Other services like storage, order processing, and food preparation take place in its 300,000 square foot, twelve temperature zone warehouses in Long Island City, New York. [1] This case study looks at the business opportunity explored by the founders of FreshDirect. We shall begin by exploring the businesses behind FreshDirect, examine the challenges that the company has encountered since its founding, as well as the solutions to these challenges.

We shall also look into the effect of the solutions and strategies in place to overcome the challenges put in by FreshDirect management, and their effects, both in the short-term and the long-term. In concluding this paper, we shall put identify some problems that FreshDirect is likely to encounter in the future, and offer some recommendations on how to overcome them.

There has been an increasing interest by consumers to point and click their way through a large number of aspects of daily life. This has in turn fuelled the Internet economy to develop services and sell products online, in many areas including those dominated by traditional businesses including pharmacies and grocery stores.

Online grocery retailers are referred to as e-grocers, like FreshDirect. The value proposition of FreshDirect, like other e-grocers is to become the single-source solution for the busy consumers of this Internet age. E-grocers provide information as well as products and services. Fresh direct makes use of customized weekly shopping lists and lists of frequently ordered products as well as personalized shopping aisles to guide their clients.

There are the obvious advantages of on-line businesses and especially e-grocers, such as: elimination of the high costs associated with multiple retail locations, including rent, parking, and high property taxes; better management of inventory due to centralization of activities, which reduces inventory holding costs and increases inventory turnover rates, leading to less spoilage of products and shorter lead times from the producer to the consumer; and collecting of detailed information about their customers’ buying habits and preferences, which can then be used for targeted marketing and personalized promotions.

Online grocery shopping is quite appealing, though not everyone has embraced it as a replacement to regular trips to the supermarket. One of the problems limiting the adoption of e-grocery is the fact that customers have to plan and think about the delivery schedule.

Most consumers are used to going to the grocery store as part of a long list of activities that include picking up or dropping the dry cleaning, or renting a movie. Besides this, online consumers of grocery have other concerns, which include: shipping costs; credit card security; the need or want for immediate delivery of products; and the social aspects of the shopping experience.

Opportunity

The growth of e-grocers can be attributed to their appeal to customers due to their better prices, larger selection of produce, convenience and time saving. Home delivery of items purchased online is appealing to those for whom going out to shop is difficult for various reasons, such as physical disability, the need to care for small children, the lack of adequate or convenient transportation, and/or a busy lifestyle. The purchase of groceries online prevents the consumers from having to drive to and from the shopping centres.

There are some people who would rather buy their groceries after smelling the vegetables and squeezing the fruit, which may limit the growth of FreshDirect from acquiring clients who are not already e-grocer shoppers, to stealing or wooing clients from their competition

On-time delivery

FreshDirect makes almost 10,000 deliveries everyday in New York City, where the traffic is terrible. The maintenance of a high quality of service through on-time delivery is critical for FreshDirect. To avoid customer dissatisfaction from late order delivery, FreshDirect applied a real-time solution to access delivery performance, whereby delivery rate data was recalculated every five minutes and applied to each route to predict which orders were most likely to be late.

The system uses customer delivery addresses to identify customers at risk of having a late delivery, which are plotted on a street level map of New York City using Centigon Solutions’ GMaps Plugin. This allows the operation managers to pinpoint risk geographically and prioritize where to send auxiliary delivery units each hour. FreshDirect can now serve more customers with the same delivery run and meet its commitment to reducing its carbon footprint, while improving it’s bottom-line.

Rapid growth of e-commerce functionalities

The rapid growth of applications and new e-commerce functionalities is a continuous challenge to the team at FreshDirect. An example of such a situation is when FreshDirect users experienced accumulative login delays, whereby the more times an individual consumer ordered, the longer it took him or her to log on, taking up to 60 seconds at particular times.

This aspect influences whether a customer will continue and return for repeat business. This problem was tied to FreshDirect’s database, and they therefore, consulted with Pythian to fix any problems with regard to its database.

Pythian fixed the problem by rewriting the user authentication process, which included application and database changes, as well as database design elements. The application and database changes resulted in improvements such as reduced log-in time to 0.5 seconds. Throughout the years, Pythian has applied its breadth of knowledge to solve issues that fall within and outside of the scope of database administration.

Network and phone system

Fresh Direct is a leading importer and distributor of more than 400 high-quality produce items from 25 countries around the globe. The firm serves a diversified base of customers across Canada including chain stores, food service distributors, wholesalers, and independent grocers.

To power this global business, Fresh Direct relies on rapid communication with suppliers, business partners, and customers. Produce is a perishable product, and market conditions can change in an instant, so speed is critical to success.

Raid growth of the company needed a better network and phone system to keep up with the fast paced business operations. The current system was cumbersome to manage and update. The company had no wireless networking capabilities, and its call management features were also limited, making it difficult to reach a highly mobile workforce.

To provide its employees with the direct and immediate communications that the business was in need of, Fresh Direct replaced its phone system with the Cisco Unified Communications System to support all voice, data, and wireless communications on one secure network. Its intelligent call-handling features make communication fast and simple, improving the company’s efficiency and productivity.

Website analysis

The FreshDirect website had many products, which required an analysis program to identify the product categories, site architecture, marketing campaigns and product promotions that were working best, not working at all, or could be producing greater ROI. T

o solve this problem, FreshDirect consulted NetTracker from Unica to provide comprehensive web site traffic analysis and online behaviour analysis. NetTracker made short-term and long-term sense for FreshDirect by meeting their immediate need for detailed and customizable click stream analysis reporting.

This was advantageous in that FreshDirect could send More Targeted Email Campaigns with Greater ROI. These statistics are then used to decide which campaigns will be recurring, changed or terminated. NetTracker also provided FreshDirect with an opportunity to exercise Intelligent Merchandising, promotions and Cross-Selling Campaigns. One of the ways that FreshDirect promotes products is to suggest complimentary items when a customer adds something to their cart.

NetTracker has also been useful in providing Shopping Behaviour Insight, by monitoring all behaviour specifically related to check-outs: the most frequent check-out time, the most frequent shopping time, the duration of shopping visits, the average time to complete a purchase, and the day (or dates following campaigns) on which purchases are most frequently completed. In addition to this, FreshDirect has placed various geo-coded advertisements on AOL.

Future growth

FreshDirect has overcome most of the challenges that have been thrown its way, mainly through good partnerships with companies like Cisco, NetTracker and Pythian among others. In their expansion process, for instance, FreshDirect could make use of Cisco to come up with unified communications that will convert voicemails to email attachments, for easier message management, as well as any other communication needs.

In addition to this, NetTracker still has an important role to play in developing an even more personalized experience for customers on the FreshDirect site by learning about behaviour over time based on patterns, such as purchase of items after one, or two or three visits.

Eisner, Alan B. Case 40: FreshDirect . A Basis For Class Discussion, New York: Pace University, 2009.

• Alan, B. Eisner, Case 40: FreshDirect,. A Basis For Class Discussion, New York: Pace University, 2009
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2024, January 16). FreshDirect. https://ivypanda.com/essays/case-study-of-freshdirect/

"FreshDirect." IvyPanda , 16 Jan. 2024, ivypanda.com/essays/case-study-of-freshdirect/.

IvyPanda . (2024) 'FreshDirect'. 16 January.

IvyPanda . 2024. "FreshDirect." January 16, 2024. https://ivypanda.com/essays/case-study-of-freshdirect/.

1. IvyPanda . "FreshDirect." January 16, 2024. https://ivypanda.com/essays/case-study-of-freshdirect/.

IvyPanda . "FreshDirect." January 16, 2024. https://ivypanda.com/essays/case-study-of-freshdirect/.

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FreshDirect SWOT Analysis

FreshDirect is one of the leading brands in the lifestyle and retail sector. FreshDirect SWOT analysis evaluates the brand by its strengths & weaknesses which are the internal factors along with opportunities & threats which are the external factors. Let us start the SWOT Analysis of FreshDirect:

Quick Glance:

• Opportunities

FreshDirect Strengths

• Online grocery store offers the convenience and advantage of shopping at your home. Goods are delivered in refrigerated trucks so that they remain fresh.
• Offers wide range of fresh food at low prices right at the customers’ doorsteps.
• Offers custom made groceries for the customers called just in Time service where orders are made ready as per the unique order.
• Also offers additional attractive services to the customers like fresh from the farm quality food, discounts on bulk purchase, chef made entrees, easy family meals and freshly baked food.
• A very popular brand in New York with efficient services

Above are the strengths in the SWOT Analysis of FreshDirect. The strengths of FreshDirect looks at the key internal factors of its business which gives it competitive advantage in the market and strengthens its position.

FreshDirect Weaknesses

• The range of food offered is limited compared to other supermarkets since it is not possible to keep the entire collection on wheels
• Distribution is limited to the New York. Not spread to other areas.
• Is accessible only to customers with an internet service.

These were the weaknesses in the FreshDirect SWOT Analysis. The weaknesses of a brand are certain aspects of its business which it can improve.

FreshDirect Opportunities

• More young professionals living away from home and working long hours prefer fresh food delivered at their doorsteps. Hence their target group is increasing fast.
• Increasing purchasing power parity leading to improved lifestyles e.g – more ready to eat foods.
• Expand network, wider product range and reach to people by opening up more distribution networks outside the New York city area.

Above we covered the opportunities in FreshDirect SWOT Analysis. The opportunities for any brand can include prospects of future growth.

FreshDirect Threats

• Dependant on internet connectivity for efficient functioning. Network outages can lead to loss of sales.
• Intense competition from corner stores, supermarkets, grocery stores and host of other convenience stores.

The threats in the SWOT Analysis of FreshDirect are as mentioned above. The threats for any business can be external factors which can negatively impact its business.

Read Similar SWOT analysis

• 2) D’Agostino Supermarkets.
• 3) Dean & DLuca, Inc.

Hence this concludes the FreshDirect SWOT analysis.

Continue reading more about the brand/company.

About FreshDirect

The table below gives the brand overview along with its target market, segmentation, positioning & USP

This article has been researched & authored by the Content & Research Team . It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

Browse marketing analysis of more brands and companies similar to FreshDirect. This section covers SWOT Analysis along with Segmentation, Target Market, Positioning & USP of more than 2000 brands from over 20 industry sectors.

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FreshDirect: Expansion Strategy

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Freshdirect: expansion strategy description.

The Big Apple has been just the place for a direct home-delivery business like FreshDirect. Now the company wants to use the additional capacity in its meat-processing facility to expand into national competition. The description of the beef supply chain in this case helps students analyze the best way for FreshDirect to take on a "big boy" such as Omaha Steaks and to serve restaurants.

Case Description FreshDirect: Expansion Strategy

Strategic managment tools used in case study analysis of freshdirect: expansion strategy, step 1. problem identification in freshdirect: expansion strategy case study, step 2. external environment analysis - pestel / pest / step analysis of freshdirect: expansion strategy case study, step 3. industry specific / porter five forces analysis of freshdirect: expansion strategy case study, step 4. evaluating alternatives / swot analysis of freshdirect: expansion strategy case study, step 5. porter value chain analysis / vrio / vrin analysis freshdirect: expansion strategy case study, step 6. recommendations freshdirect: expansion strategy case study, step 7. basis of recommendations for freshdirect: expansion strategy case study, quality & on time delivery.

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Case Analysis of FreshDirect: Expansion Strategy

FreshDirect: Expansion Strategy is a Harvard Business (HBR) Case Study on Strategy & Execution , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. FreshDirect: Expansion Strategy is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. FreshDirect: Expansion Strategy case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. FreshDirect: Expansion Strategy will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

FreshDirect: Expansion Strategy case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Strategy & Execution, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of FreshDirect: Expansion Strategy, is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The FreshDirect: Expansion Strategy case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Strategy & Execution Solutions

In the Texas Business School, FreshDirect: Expansion Strategy case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – FreshDirect: Expansion Strategy

Step 1 – Problem Identification of FreshDirect: Expansion Strategy - Harvard Business School Case Study

The first step to solve HBR FreshDirect: Expansion Strategy case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Freshdirect Steaks is facing right now. Even though the problem statement is essentially – “Strategy & Execution” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Freshdirect Steaks, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the FreshDirect: Expansion Strategy. The external environment analysis of FreshDirect: Expansion Strategy will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in FreshDirect: Expansion Strategy case study. PESTEL analysis of " FreshDirect: Expansion Strategy" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with FreshDirect: Expansion Strategy macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for FreshDirect: Expansion Strategy

To do comprehensive PESTEL analysis of case study – FreshDirect: Expansion Strategy , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact FreshDirect: Expansion Strategy

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ FreshDirect: Expansion Strategy ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Freshdirect Steaks is operating, firms are required to store customer data within the premises of the country. Freshdirect Steaks needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. FreshDirect: Expansion Strategy has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Freshdirect Steaks in case study FreshDirect: Expansion Strategy" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Freshdirect Steaks in case study “ FreshDirect: Expansion Strategy ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Freshdirect Steaks in case study “ FreshDirect: Expansion Strategy ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ FreshDirect: Expansion Strategy ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Freshdirect Steaks can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at FreshDirect: Expansion Strategy case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Freshdirect Steaks needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact FreshDirect: Expansion Strategy

Social factors that impact freshdirect: expansion strategy, technological factors that impact freshdirect: expansion strategy, environmental factors that impact freshdirect: expansion strategy, legal factors that impact freshdirect: expansion strategy, step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: freshdirect: expansion strategy case study solution.

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FreshDirect: Is it Really Fresh? Harvard Case Solution & Analysis

Home >> Harvard Case Study Analysis Solutions >> FreshDirect: Is it Really Fresh?

Introduction

FreshDirect was an online grocery store that was launched in the year 2001. The company was cofounded by Joseph Fedele and Jason Ackerman. The first CEO of the company was Joseph Fedele. The company was introduced as an alternative to the existing traditional form of grocery stores. The company since it started, has offered more than 3000 items which include, meat, vegetables, fruits, bakery items, coffee, deli, cheese, prepared food, etc. The business of the company revolves around the business model which ensures the order received the day should be delivered latest by the next day through its own supply chain system.

The industry of online grocery accounts for a mere 2% of the total grocery market, which includes the traditional grocery industry also. The company operates in New York City, Brooklyn, Manhattan, Queens, Riverdale, Connecticut, New Jersey, etc. The business model which makes the company FreshDirect stand above its competitors is that the company does not depend upon suppliers and intermediaries to purchase different products. In fact, their company directly purchases the productsof grocery from the farmers directly, which ensures that the prices are comparatively low and the quality of goods and its freshness is maintained.

This method of business actually made the company sell grocery items at a cheaper price than other online grocery stores in the country. Basically FreshDirect is a company that allows the customers to order food online which gets delivered the next day. The mission of the company is “Our food is fresh, our customers are spoiled”. The company since its start has offered superior quality items to ensure long term relationships with its customers. FreshDirect also introduced a rating system on the website to further educate the customers about the quality of items delivered the previous day. The introduction of the rating system further enhanced the customers to trust theFreshDirect. However, recently the company has been facing severe competition from rivals along with the increasing fuel prices and the pressure from environmental groups. However, as the case states there is a lot of potential in the online grocery market, which FreshDirect can look to explore in the future?

External Analysis

Porter Five Forces Model

Bargaining Power of Buyer: High

The bargaining power of buyer in the online retail industry is quite high. It is high because of the high price sensitive market. Along with this, customers do not trust the quality of food delivered by the online stores because they feel they cannot assessthe quality of food and its freshness. The switching cost in the industry is also low.

Bargaining Power of Supplier: Low

The bargaining of supplier is low for the industry. The reason it is low because there are a number of suppliers from which the industry players can buy products. Along with this, the brand loyalty in the industry is with the company and not with the supplier. With the increasing competition in the industry, the competitors offer discounts, promotions and lesser prices whichattract the customers. This has made the industry highly price sensitive for the suppliers.

Threat of New Entrants: Low

The threat of new entrants in the industry is low. It is low because of the high startup cost associated with the startup of the business. Along with this, the online grocery industry requires technical expertise, control over supply chain operations also. The industry accounts for a mere 2% of the overall grocery market: Slow growing industry. Along with this, online grocery had to keep material 10 times more than a traditional grocery.

Competitive Rivalry: High

The industry is highly competitive because of the increasing number of competitors. The competitors in the industry include the companies such as Peapod, NetGrocer, and YourGrocer. Strong relationship with farmers and raw material providers makes the industry highly competitive for all the players.

Threat of Substitutes: High

The threat of substitutes in the industry is high. As the switching cost is low in the industry, customers have various options to choose from. Products offered by traditional grocery stores provide as a substitute for the online grocery stores.

Internal analysis

Value Chain Analysis

The primary activities of FreshDirect is to create the value by preparing and providing foods (which is the main business of the company). The process of providing customers with high quality food is based on the “make to order” business model. This means that the products that are delivered to a specific customer are purchased for the customer specifically. FreshDirect has its own refrigerationunitswith specific temperature to ensure freshness and high quality to keep meat, bakery items and grocery items fresh. Along with this, all products which come in the company are tested through in-house laboratory before being distributed to the customer.

The company FreshDirect creates value through outbound logistics by delivering goods to the customer in an efficient and effective manner.................

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Case Description of FreshDirect: Expansion Strategy Case Study

The Big Apple has been just the place for a direct home-delivery business like FreshDirect. Now the company wants to use the additional capacity in its meat-processing facility to expand into national competition. The description of the beef supply chain in this case helps students analyze the best way for FreshDirect to take on a "big boy" such as Omaha Steaks and to serve restaurants.

Case Authors : Timothy M. Laseter, Debashish Chatterjee

Topic : strategy & execution, related areas : internet, marketing, strategy, supply chain, case study solution & analysis of freshdirect: expansion strategy, pestel / pest / step analysis of freshdirect: expansion strategy case study, urgent - 12hr.

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What are the Four Elements of SWOT Analysis? How to use them for FreshDirect: Expansion Strategy case study?

The four key elements of SWOT analysis are - Strengths, Weaknesses, Opportunities & Threats . Freshdirect Steaks can use strengths to create niche positioning in the market, can strive to reduce & remove weaknesses so that it can better compete with competitors, look out to leverage opportunities provided by industry structure, regulations and other development in external environment, and finally make provisions and develop strategies to mitigate threats that can undermine the business model of Freshdirect Steaks.

For more detailed SWOT Matrix strategy please go through the detailed analysis of strengths, weaknesses, opportunities, and threats in next section.

What are Strengths in SWOT Analysis

Strengths - FreshDirect: Expansion Strategy

Strengths are the Freshdirect Steaks capabilities and resources that it can leverage to build a sustainable competitive advantage in the marketplace. Strengths come from positive aspects of five key resources & capabilities - past experiences and successes, human resources, financial resources, activities & processes, and physical resources such as land, building .

- Strong Brand Equity and Brand Awareness – Freshdirect Steaks has some of the most recognized brands in the domestic market it operates in. According to Timothy M. Laseter, Debashish Chatterjee , brand recognition plays a significant role in attracting new customers looking for solutions in Internet, Marketing, Strategy, Supply chain adjacent industries.

- Managing Regulations and Business Environment – Freshdirect Steaks operates in an environment where it faces numerous regulations and government diktats. In Internet, Marketing, Strategy, Supply chain areas, the firm needs to navigate environment by building strong relationship with lobby groups and political network.

- First Mover Advantage – Freshdirect Steaks has first mover advantage in number of segments. It has experimented in various areas Internet, Marketing, Strategy, Supply chain. The Strategy & Execution solutions & strategies has helped Freshdirect Steaks in coming up with unique solution to tap the un-catered markets.

- Intellectual Property Rights – Freshdirect Steaks has garnered a wide array of patents and copyrights through innovation and buying those rights from the creators. This can help Freshdirect Steaks in thwarting the challenges of competitors in various industries Internet, Marketing, Strategy, Supply chain.

- Strong relationship with existing suppliers – As an incumbent in the industry, Freshdirect Steaks has strong relationship with its suppliers and other members of the supply chain. According to Timothy M. Laseter, Debashish Chatterjee , the organization can increase products and services by leveraging the skills of its suppliers and supply chain partners.

- Superior product and services quality can help Freshdirect Steaks to further increase its market share as the current customer are extremely loyal to it. According to Timothy M. Laseter, Debashish Chatterjee in FreshDirect: Expansion Strategy study – there are enough evidences that with such a high quality of products and services, Freshdirect Steaks can compete with other global players in international market.

- Successful Go To Market Track Record – Freshdirect Steaks has a highly successful track record of both launching new products in the domestic market but also catering to the various market based on the insights from local consumers. According to Timothy M. Laseter, Debashish Chatterjee , Freshdirect Steaks has tested various concepts in different markets and come up with successful Strategy & Execution solutions.

What are Weakness in SWOT Analysis

Weakness- FreshDirect: Expansion Strategy

Weaknesses are the areas, capabilities or skills in which Freshdirect Steaks lacks. It limits the ability of the firm to build a sustainable competitive advantage. Weaknesses come from lack or absence of five key resources & capabilities - human resources, past experiences and successes, activities & processes, financial resources, and physical resources such as land, building .

- Low Return on Investment – Even though Freshdirect Steaks is having a stable balance sheet, one metrics that needs reflection is “Return on Invested Capital”. According to Timothy M. Laseter, Debashish Chatterjee in areas Internet, Marketing, Strategy, Supply chain that Freshdirect Steaks operates in the most reliable measure of profitability is Return on Invested Capital rather than one favored by financial analysts such as – Return on Equity & Return on Assets.

- Lack of critical talent – I believe that Freshdirect Steaks is suffering from lack of critical talent especially in the field of technology & digital transformation. Freshdirect Steaks is struggling to restructure processes in light of developments in the field of Artificial Intelligence (AI) and machine learning.

- Implementation of Technology in Processes – Even though Freshdirect Steaks has integrated technology in the backend processes it has still not able to harness the power of technology in the front end processes.

- Customer Dissatisfaction – Even though the demand for products have not gone down but there is a simmering sense of dissatisfaction among the customers of Freshdirect Steaks . It is reflected on the reviews on various on-line platforms. Freshdirect Steaks should focus on areas where it can improve the customer purchase and post purchase experience.

- Track record on environment consideration is not very encouraging – Freshdirect Steaks track record on environmental issues is not very encouraging. According to Timothy M. Laseter, Debashish Chatterjee , this can lead to consumer backlash as customers are now considering environmental protections as integral to part of doing business.

- Freshdirect Steaks business model can be easily replicated even with the number of patents and copyrights the company possess. The intellectual property rights are very difficult to implement in the industry that Freshdirect Steaks operates in. According to Timothy M. Laseter, Debashish Chatterjee , Intellectual Property Rights are effective in thwarting same size competition but it is difficult to stop start ups disrupting markets at various other levels.

What are Opportunities in SWOT Analysis

Opportunities- FreshDirect: Expansion Strategy

Opportunities are macro environment factors and developments that Freshdirect Steaks can leverage either to consolidate existing market position or use them for further expansion. Opportunities can emerge from various factors such as - technological innovations, economic growth, changes in consumer preferences, increase in consumer disposable income, and political developments & policy changes .

- E-Commerce and Social Media Oriented Business Models – E-commerce business model can help Freshdirect Steaks to tie up with local suppliers and logistics provider in international market. Social media growth can help Freshdirect Steaks to reduce the cost of entering new market and reaching to customers at a significantly lower marketing budget. It can also lead to crowd sourcing various services and consumer oriented marketing based on the data and purchase behavior.

- Lucrative Opportunities in International Markets – Globalization has led to opportunities in the international market. Freshdirect Steaks is in prime position to tap on those opportunities and grow the market share. According to Timothy M. Laseter, Debashish Chatterjee , growth in international market can also help Freshdirect Steaks to diversify the risk as it will be less dependent on the domestic market for revenue.

- Opportunities in Adjacent Markets – Freshdirect Steaks can explore adjacent industries Internet, Marketing, Strategy, Supply chain to further market growth especially by extending the features of present products and services.

- Developments in Artificial Intelligence – Freshdirect Steaks can use developments in artificial intelligence to better predict consumer demand, cater to niche segments, and make better recommendation engines.

- Reducing Cost of Market Entry and Marketing into International Markets – According to Timothy M. Laseter, Debashish Chatterjee, globalization along with boom in digital marketing and social media has considerably reduced the risks of market entry and marketing in international market.

- Growing Market Size and Evolving Preferences of Consumers – Over the last decade and half the market size has grown at brisk pace. The influx of new customers has also led to evolution of consumer preferences and tastes. This presents Freshdirect Steaks two big challenges – how to maintain loyal customers and how to cater to the new customers. Freshdirect Steaks has tried to diversify first using different brands and then by adding various features based on customer preferences.

What are Threats in SWOT Analysis

Threats- FreshDirect: Expansion Strategy

Threats are macro environment factors and developments that can derail business model of Freshdirect Steaks. Threats can emerge from various factors such as - political developments & policy changes, technological innovations, increase in consumer disposable income, changes in consumer preferences, and economic growth .

- Threats of New Entrants because of Reducing Costs and Increasing Efficiencies – As Freshdirect Steaks can leverage low cost of reaching customers using social media and e-commerce, so can the competitors – both local and international competitors.

- Increasing bargaining power of buyers – Over the years the bargaining power of customers of Freshdirect Steaks has increased significantly that is putting downward pressure on prices. The company can pursue horizontal integration to consolidate and bring efficiencies but I believe it will be a short term relief. According to Timothy M. Laseter, Debashish Chatterjee , Freshdirect Steaks needs fundamental changes to business model rather than cosmetic changes.

- Growing Protectionism - Freshdirect Steaks should hedge the risk against growing protectionism ranging from – storing data into international market to diversifying risk by operating into countries at different economic cycle.

- Credit Binge post 2008 Recession – Easy access to credit can be over any time, so Freshdirect Steaks should focus on reducing its dependence on debt to expand. The party has lasted for more than a decade and rollback from Fed can result in huge interest costs for Freshdirect Steaks.

- International Geo-Political Factors – Since the Trump election, geo-political factors have taken a turn for growing protectionism. Developments such as Brexit, Russian sanctions, foreign exchange crisis & inflation in Venezuela, lower oil prices etc are impacting international business environment. Freshdirect Steaks should closely focus on these events and make them integral to strategy making.

- Culture of sticky prices in the industry – Freshdirect Steaks operates in an industry where there is a culture of sticky prices. According to Timothy M. Laseter, Debashish Chatterjee of FreshDirect: Expansion Strategy case study, this can lead to inability on part of the organization to increase prices that its premium prices deserve.

5C Marketing Analysis of FreshDirect: Expansion Strategy

4p marketing analysis of freshdirect: expansion strategy, porter five forces analysis and solution of freshdirect: expansion strategy, porter value chain analysis and solution of freshdirect: expansion strategy, case memo & recommendation memo of freshdirect: expansion strategy, blue ocean analysis and solution of freshdirect: expansion strategy, marketing strategy and analysis freshdirect: expansion strategy, vrio /vrin analysis & solution of freshdirect: expansion strategy, pestel / step / pest analysis of freshdirect: expansion strategy, case study solution of freshdirect: expansion strategy, swot analysis and solution of freshdirect: expansion strategy, references & further readings.

Timothy M. Laseter, Debashish Chatterjee (2018) , "FreshDirect: Expansion Strategy Harvard Business Review Case Study. Published by HBR Publications.

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