Case Study Fresh Direct

Topics: Grocery store, Safeway Inc., Supermarket Pages: 7 (1549 words) Published: June 22, 2013
FreshDirect Case StudyJeffrey Nash
COMPANY NAME/WEBSITE/INDUSTRY
FreshDirect/www.freshdirect.com/Online grocery store
BACKGROUND/HISTORY
FreshDirect is an online grocery store that launched in 2001 offering shopping and delivery service to more than 300 zip codes in the New York tri state area. The company’s current CEO is Jason Ackerman, who is also one of its cofounders along with Joseph Fedele. In 2010 FreshDirect reported revenue of more than $250 million an increase of $20 million from the previous year and had grown its customer base 20 to 25 percent (Dess et al., 2012, p. C126). FreshDirect has had ups and downs over the years. Initially its goal was to get ahold of five percent of the grocery market in the New York area but in order to maintain its superior service and product quality it expanded slowly and was not able to achieve this goal until 2011. In 2007 the company faced some serious drawbacks facing unionization from workers and later a terrorizing immigration inspection that led to resignations, leaving a small workforce. Despite these issues they were able to create their four minute meal line which helped stimulate sales (Dess et al., 2012, p. C125). SWOT ANALYSIS

StrengthsCost is one of their strongest strengths, cutting out the middlemen going directly to the supply foundation, the local farms in the New York metropolitan area.Product prices are relatively low, especially compared to competitors.FreshDirect had extremely high standard for cleanness, health and safety.| WeaknessesArea of business coverage is limited.The senior management of FreshDirect had continually changed that make slow or delay on the work progress. They are now their 4thCEO.| OpportunitiesFreshDirect had reputed brand name and its customers are highly trusted on FreshDirect products.FreshDirect may expand their business local, national or international level.FreshDirect may also start delivery of un-perishable products along with its popular perishable products.FreshDirect to take over, merge with, or from strategic with other global grocery retailer, focusing on specific market, such as Europe or the UK.| ThreatsWhole Foods supermarket chain threatened FreshDirect sales in Manhattan.Trader Joes opened a store in downtown union square, prime territory for FreshDirect.YourGrocer was created with a bulk buying strategy.In 2007 NYC government proposed congestion charges for traffic entering into Manhattan.Rising of fuel prices are a potential threat to FreshDirect; and penalties from parking violations has been a threat.The rival of FreshDirect may adopt the advanced food technology software system.|

ANALYSIS VIA PORTER’S FIVE FORCES MODEL
New Market Entrants:
* Strong distribution network required
* Entry barriers are high
* High learning curve
* Creating a large distribution network is expensive

New Market Entrants:
* Strong distribution network required
* Entry barriers are high
* High learning curve
* Creating a large distribution network is expensive

Buyer Power, eg:

* buyer choice
* buyers size/number
* change cost/frequency
* product/service importance
* volumes, JIT scheduling

Buyer Power, eg:

* buyer choice
* buyers size/number
* change cost/frequency
* product/service importance
* volumes, JIT scheduling

Buyers Power:
* Product is important to customer
* Buyer loyalty is essential to grow business
* Buyer requires special customization
* Limited buyer choice

Buyers Power:
* Product is important to customer
* Buyer loyalty is essential to grow business
* Buyer requires special customization
* Limited buyer choice

Competitive Rivalry:
* Fast industry growth rate
* Relatively few competitors
* Hold large market for NYC area
* Exit barriers are low

Competitive Rivalry:
* Fast industry growth rate
* Relatively few competitors
* Hold large market for...

References: Dess, G., Lumpkin, G. & Eisner, A. (2012). Strategic Management (6e). Boston: McGraw-Hill Irwin.
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