Case_40_Fresh_Direct_TN

Case_40_Fresh_Direct_TN - Teaching Note: Case 40 Fresh...

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Teaching Note: Case 40 – Fresh Direct: Delivering the Goods? Case Objectives 1. To examine how external and internal forces affect competitive strategy. 2. To investigate how innovation and entrepreneurial strategies can be assets in a crowded industry. See the table below to determine where to use this case: Chapter Use Key Concepts Additional Reading and/or Exercises 2: External Environment Industry competition five forces; general environmental factors NOTE additional reading, web links to industry information 3: Internal Analysis Value-chain analysis; resource- based view of the firm; VRIN 5: Business Level Strategy Competitive strategy; generic strategies See Case DVD - also NOTE additional reading, web links 8: Entrepreneurial Strategies Opportunity recognition; blue ocean strategy 12: Managing Innovation Innovation; sustaining vs. disruptive innovation; scope of innovation NOTE additional reading, web links, embedded video Case Synopsis First launched in July 2001, FreshDirect was a New York City based on-line grocery store with a state of the art production center, top-notch personnel, leading edge manufacturing software, the highest standard of cleanliness, health & safety, and an informative and user-friendly website. System efficiencies included: a cost-effective operational design; no middleman; a central production and distribution location; well designed order and delivery protocols; and a policy of no slotting allowances. These system characteristics enabled FreshDirect to maintain a high product quality while keeping product prices low, therefore their promise to grocery shoppers of “higher quality at lower prices.” The ideal FreshDirect customer was described by Jason Ackerman, one of the founders, as someone who buys their bulk staples from a warehouse like Costco on a monthly basis, and buys everything else from FreshDirect on a weekly basis. The website offered a broad selection of products along with information about the food. Products could be compared on taste, price, usage and nutritional information. Custom cuts and seasonings of meat could be ordered. Delivery options included direct to the home in New York City, or office and train parking lot access in the suburbs.
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The on-line segment of the grocery industry was a small percentage of the industry total. Despite a large potential target audience, the on-line segment had been slow to catch on. The total online sales in 2008 were $6.5 billion, and the numbers were expected to reach over $8.4 billion by 2010, but the five million people who shopped online for groceries still represented only 2 percent of the online population. FreshDirect’s competition came from traditional brick-and-mortar grocery chains and a handful of other on-line grocers in New York City. The challenge was to compete on price while covering the cost of packaging items in the warehouse and delivering individual grocery orders. With margins so small, in order to be successful, some analysts estimated that the online grocers had to do 10 times the volume of a traditional grocer. This increased the pressure on FreshDirect to differentiate itself from other online and
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Case_40_Fresh_Direct_TN - Teaching Note: Case 40 Fresh...

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