Question

1. How did FreshDirect use strategic management, and what were key forces in the general and industry environments that affected FreshDirect?

Answer 1

How did FreshDirect use strategic management, and what were key forces in the general and industry environments that affected FreshDirect?

See the segments of the external competitive environment that include competitors, customers, and suppliers.

Regarding the general external environment, FreshDirect must consider the political/legal, economic and global, sociocultural and demographic, and technological forces that might affect the ability of the firm to market its services and sustain sales.

Political-Legal: State and city consumer & health regulations, labor issues (unions & undocumented workers) apply to all grocers; parking violations are unique to those that deliver.

Economic: Concerns about the price of consumables drives many consumers to shop in bulk for the anticipated savings. Profit margins are tight, with product spoilage a major issue, so planning for customer demand is critical. Current gas prices make it hard to be competitive and profitable in the online grocery delivery business.

Demographic: Rising levels of affluence may give the grocery industry a boost because families may have more discretionary dollars to spend on food, especially where they perceive an opportunity to get value/quality. If there’s a rise in the wealthy urban population, that makes it more likely for the direct delivery model to have appeal. However, an increasing immigrant population may mean a greater demand for “ethnic” foods, and cheaper foods bought in bulk to serve larger families.

Sociocultural: A greater concern for healthy diets and physical fitness increases the desire for “fresher”, higher quality produce. Customers can also save valuable time by shopping online and not having to drive very far (or at all) to pick up groceries. An increasing interest in “organic” produce and meat means opportunities for these niche providers, however customers with an interest in these foods may like to interact directly with the producer or grower if possible.

Technological: Developments in technology and new uses for existing technologies can help create storage and distribution opportunities for fresh produce and meat. Also, the growth of the Internet makes an online offering available to a wider customer base.

Porter’s five forces model allows strategists to anticipate where the industry might be most vulnerable.

Based on the external environmental factor analysis, although there are not many rivals, the online grocery industry has many challenges to profitability. The fact that this business model is also still fairly new, and may not have progressed much past the “early adopter” phase of consumer acceptance, also means considerable risk of entry. This may explain why there are so few players in the online variant of the grocery business