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Fresh Direct Case

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What actions does FreshDirect need to take in order to keep growing and increase the online grocery market share in near and distant future?
Strengths
• High quality products with low prices
• Good revenues coupled with low overhead due to not having the costs associated with retail locations.
• FreshDirect’s state of the art warehouse with 12 separate temperature zones, ensuring each piece of food it kept at its optimal temperature.
• Expert staff providing excellent customer service.
• Efficient supply chain with the elimination of the middle man.
• Unique industry business model.
• Superior website.
• 5 star food quality rating system.
• Extremely high standards for cleanliness, health & safety. Weaknesses
• The majority sale in perishable items with very few options for un-perishables.
• Constant changes in senior management.
• Limited number of brands and sizes of packaged goods.
• Expensive start-up costs.
• The focus on only certain New York zip codes, with no market expansion strategy.
• The dependence on only one main competitive advantage in the sale of perishables.
• The use of multiple non-environmentally safe cardboard boxes in the packaging of delivered foods.

Opportunities
• Using their reputable brand name expansion of their business to other places locally and nationally.
• International expansion.
• Additional movement into the delivery of a variety of un-perishable items.
• Environmentally safe packaging and delivery methods.
• Strategic merger with other global grocery retailers.

Threats
• Competitors such as Whole Foods and Joe Traders moving into the FreshDirect neighbourhood.
• Other online grocers such as YourGrocer delivering bulk to customers’ homes.
• The increased costs of parking ticket violations, gasoline and congestion charges for inner city truck deliveries.
• Truck driver’s threats of unionizing due to pay, hour and benefit issues and the negative effects that has on FreshDirect’s image.
• Rivals adopting FreshDirect’s advanced food technology software system.

Grand Strategy:
Fresh Market’s grand strategy is to increase market share in the online grocery shopping sector by growing at a faster rate that the industry average.

Short-term Recommendations:
• Research and strategize new areas locally and nationally to begin expansion.
• Find and implement new environmentally safe packaging methods for deliveries.
• Start the research and development of more environmentally safe ways to make deliveries that will reduce fumes being outputted from the large trucks as well as addressing parking and other charges the delivery trucks are causing.
• Research and development for the implementation of additional brands and sizes offered of the un-perishable items.

Long-term Recommendations:
• Carry out an analysis that will determine the changing forces in the marketplace.
• The formulation of new market strategies.
• The expansion into highly populated and high income areas.
• Invest in advertisement to acquire a larger customer base.
• Purchase more fuel-efficient vehicles to cut back on pollution and rising gas prices.
• Implementation of the delivery of non-perishable food products along with keeping it’s popular perishable products.
• Investing in advanced tecnologocal systems that will help with competitors already having these systems.

Exhibit 1.1 Porter’s Five Forces Model
• Threat of new entrants: Low: Startup costs would be very expensive for new entrants to enter into the marketplace. They would have to be highly skilled and with a lot of existing experience with online grocery services, as well as already having a large amount of capital.

• Power of buyers: Medium: With technological advancements it has become easy for people to purchase foods online, but they can also buy products in stores as well which would increase the competitive market.

• Power of suppliers: Medium: FreshDirect is known by their brand and by how loyal their customers are to their products. If suppliers have their own liked brand inside the market that is that is easily accesible in supermarkets or local marts and this won’t be an issue because they already have good relationships.

• Power of substitutes: Low: People who purchase from Fresh Direct are familiar with the brand and are loyal, though there are only products out there that are like it people choose Fresh Direct over the competition.

• Rivalry among competitors: High: Though they are advancing with their use of food technology and are knowledgeable within their management, they are weak on the delivery methods, especially without the offerings of nonperishable food products. The competition has entered into saving items in bulk and offer more non-perishable products.

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