Case Study Description of FreshDirect: Expansion Strategy
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.
Authors :: Timothy M. Laseter, Debashish Chatterjee
Swot Analysis of "FreshDirect: Expansion Strategy" written by Timothy M. Laseter, Debashish Chatterjee includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Freshdirect Steaks facing as an external strategic factors. Some of the topics covered in FreshDirect: Expansion Strategy case study are - Strategic Management Strategies, Internet, Marketing, Strategy, Supply chain and Strategy & Execution.
Some of the macro environment factors that can be used to understand the FreshDirect: Expansion Strategy casestudy better are - – there is backlash against globalization, increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing commodity prices, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of FreshDirect: Expansion Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in FreshDirect: Expansion Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Freshdirect Steaks, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Freshdirect Steaks operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of FreshDirect: Expansion Strategy can be done for the following purposes –
1. Strategic planning using facts provided in FreshDirect: Expansion Strategy case study
2. Improving business portfolio management of Freshdirect Steaks
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Freshdirect Steaks
Strengths FreshDirect: Expansion Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Freshdirect Steaks in FreshDirect: Expansion Strategy Harvard Business Review case study are -
Diverse revenue streams
– Freshdirect Steaks is present in almost all the verticals within the industry. This has provided firm in FreshDirect: Expansion Strategy case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Cross disciplinary teams
– Horizontal connected teams at the Freshdirect Steaks are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management
– Freshdirect Steaks is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Freshdirect Steaks is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Freshdirect Steaks is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in FreshDirect: Expansion Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Freshdirect Steaks is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Timothy M. Laseter, Debashish Chatterjee can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Effective Research and Development (R&D)
– Freshdirect Steaks has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study FreshDirect: Expansion Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Freshdirect Steaks has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in FreshDirect: Expansion Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Freshdirect Steaks in the sector have low bargaining power. FreshDirect: Expansion Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Freshdirect Steaks to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Freshdirect Steaks in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Freshdirect Steaks has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Successful track record of launching new products
– Freshdirect Steaks has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Freshdirect Steaks has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to recruit top talent
– Freshdirect Steaks is one of the leading recruiters in the industry. Managers in the FreshDirect: Expansion Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses FreshDirect: Expansion Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of FreshDirect: Expansion Strategy are -
Aligning sales with marketing
– It come across in the case study FreshDirect: Expansion Strategy that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case FreshDirect: Expansion Strategy can leverage the sales team experience to cultivate customer relationships as Freshdirect Steaks is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study FreshDirect: Expansion Strategy, it seems that the employees of Freshdirect Steaks don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring
– The stress on hiring functional specialists at Freshdirect Steaks has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Freshdirect Steaks is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study FreshDirect: Expansion Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Freshdirect Steaks has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - FreshDirect: Expansion Strategy should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Freshdirect Steaks has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Low market penetration in new markets
– Outside its home market of Freshdirect Steaks, firm in the HBR case study FreshDirect: Expansion Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Freshdirect Steaks has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow decision making process
– As mentioned earlier in the report, Freshdirect Steaks has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Freshdirect Steaks even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study FreshDirect: Expansion Strategy, in the dynamic environment Freshdirect Steaks has struggled to respond to the nimble upstart competition. Freshdirect Steaks has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study FreshDirect: Expansion Strategy, is just above the industry average. Freshdirect Steaks needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities FreshDirect: Expansion Strategy | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study FreshDirect: Expansion Strategy are -
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Freshdirect Steaks in the consumer business. Now Freshdirect Steaks can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Freshdirect Steaks is facing challenges because of the dominance of functional experts in the organization. FreshDirect: Expansion Strategy case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Freshdirect Steaks in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Freshdirect Steaks can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Freshdirect Steaks can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Freshdirect Steaks can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Manufacturing automation
– Freshdirect Steaks can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Freshdirect Steaks can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Freshdirect Steaks to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Freshdirect Steaks to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Freshdirect Steaks to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Freshdirect Steaks to increase its market reach. Freshdirect Steaks will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Freshdirect Steaks can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, FreshDirect: Expansion Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Freshdirect Steaks to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Buying journey improvements
– Freshdirect Steaks can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. FreshDirect: Expansion Strategy suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats FreshDirect: Expansion Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study FreshDirect: Expansion Strategy are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study FreshDirect: Expansion Strategy, Freshdirect Steaks may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Freshdirect Steaks can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study FreshDirect: Expansion Strategy .
Shortening product life cycle
– it is one of the major threat that Freshdirect Steaks is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Freshdirect Steaks business can come under increasing regulations regarding data privacy, data security, etc.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Freshdirect Steaks needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Regulatory challenges
– Freshdirect Steaks needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Consumer confidence and its impact on Freshdirect Steaks demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Freshdirect Steaks can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Freshdirect Steaks in the Strategy & Execution sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Freshdirect Steaks will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Freshdirect Steaks can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Freshdirect Steaks in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of FreshDirect: Expansion Strategy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study FreshDirect: Expansion Strategy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study FreshDirect: Expansion Strategy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study FreshDirect: Expansion Strategy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of FreshDirect: Expansion Strategy is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Freshdirect Steaks needs to make to build a sustainable competitive advantage.
