FreshDirect Company’s Strategic Analysis

Company Description

The food industry is a very challenging area to explore for any organization in the modern economy. However, with its innovative approach toward Supply Chain Management, FreshDirect has managed to establish itself as an original and innovative organization (“FreshDirect: How fresh is it?” n.d.). FreshDirect boasts the fastest product delivery with the threat of fruit delivered rotten minimized to zero (“FreshDirect: How fresh is it?” n.d.). Therefore, in the market that is characterized by excessively high demand and just as high-quality standards, FreshDirect has been experiencing quite a bit of success.

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As the PESTEL analysis provided below shows, FreshDirect could use guidance at present as far as its situation in the global market is concerned. The company has the potential of providing high-quality products to its customers, yet the lack of a clear leadership approach, well-defined ethical standards, and, consequently, a memorable brand image affects FreshDirect most detrimentally. While the firm has not fallen into obscurity, it has been underrepresented in the global market, with some of its less productive rivals enjoying significantly more attention.

FreshDirect: PESTEL.
Figure 1. FreshDirect: PESTEL.

Company History

FreshDirect was founded in 2001 with the intent to change the quality standards and prices within the food industry. Specifically, the organization has been positioning itself as the company that offers fruits for the most reasonable price-quality ratio. The firm moved from Queens to the Bronx in 2012 as it decided to expand and gain greater influence in the target market. With its rapid foray into the online market, the company promised to offer “the new way to shop for food” (“FreshDirect: How fresh is it?” n.d., p. 2). The organization has been striving to focus on quality and has attempted at collaborating with other firms, creating new online services and offering new opportunities for online shopping.

However, after entering the online market, the organization realized that customers were not ready to transfer to the same setting as well. Specifically, the same prices and the lack of a coherent brand image have averted customers from FreshDirect (“FreshDirect: How fresh is it?” n.d.). After a string of unsuccessful decisions that involved mismanagement of environmental and HRM-related issues, the latter even leading to a class action suit, FreshDirect is in dire need for a change in its brand image, a marketing strategy, and a leadership approach.

Problems

However, due to the lack of awareness about the options that online grocery shopping provides, FreshDirect has not yet warranted enough popularity and recognition in the target setting. High competition rates also contribute to the aggravation of the problem, allowing the firms that operate in offline retail to surpass FreshDirect despite the evident advantage in the quality of fruits and the expeditiousness of service delivery (“FreshDirect: How fresh is it?” n.d.). The environmental concerns, SCM problems, HRM problems, and the lack of a clear corporate brand complicate the process of advancing FreshDirect to the global market.

Proposed Solutions and Report Structure

To make FreshDirect a more memorable and recognizable brand, the organization will have to rethink its current marketing approach by revisiting its segmentation strategy and deploying a different tool for communicating with its customers. This report will be structured in a manner that will allow scrutinizing the current situation at FreshDirect most effectively and profoundly possible.

The paper starts with a situational analysis and the assessment of external factors and proceeds with the consideration of the internal ones by evaluating FreshDirect’s business decisions. Afterward, the company’s business strategy is defined so that recommendations for the next three years of operating in the global market could be provided. The business-level strategies will include financial, operational, and organizational ones, as well as the ones that are related to marketing and competition. The organization-level strategies, in turn, will address legal, ethical, and socially responsible concerns.

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Situational Analysis: Internal and External Factors

Financial

The current external and internal financial situations that the organization faces can be described as moderate. Internally, FreshDirect has financial assets that it can use to its advantage, yet the high rates of rivalry do not allow the firm to be flexible enough with its funds. Therefore, FreshDirect will need to be very careful in selecting its investment options. Externally, the company needs to face challenges associated with competitive prices. Talent management, R&D, and quality improvement currently seem to be the areas that require the greatest financial support, which means that FreshDirect may need to cut its costs by reducing the amount of waste and minimizing production errors.

Operational

From an internal perspective, the main operational issues within the organization presently stem from the lack of an appropriate time management strategy. Externally, due to the inability to communicate and manage deadlines with its suppliers, FreshDirect has been receiving the products that do not meet the set quality standards. Also, the lack of enthusiasm in employees makes the process of maintaining quality barely possible.

Marketing

The approach that FreshDirect has been using to promote its products currently represents one of the most problematic aspects of the firm’s decision-making. From an external standpoint, the leaders of FreshDirect made the right choice when positioning the company as an entirely innovative e-grocery platform that turned shopping into an easy and quick process. On the other hand, the lack of a tool that could help FreshDirect to deliver this information to its customers is an area of serious concern.

On closer inspection, the described issue reveals even deeper underlying problems, which imply the company’s lack of skills in branding their services and communicate their message to customers. Therefore, the brand image of the organization has been rather vague, which calls for rebranding it and positioning FreshDirect as a combination of quality, low prices, and a vast variety of product options for a healthy menu. The specified concern is the key internal factor defining the firm’s current position.

Competition

Currently, the organization’s attempt to shift the process of fruit purchase into the online environment is thwarted by the efforts of its competitors that operate in traditional settings (USDA, 2017). Due to the lack of awareness, people prefer to shop for fruit in traditional places, thus making local groceries and fruit markets the key competitors of FreshDirect. Nonetheless, the levels of competitiveness at FreshDirect can be deemed as fairly high.

The approach toward quality control within the corporate setting is the key internal element of the organization’s competitive advantage apart from its foray into the online market. With the emphasis on the freshness of the provided products, the firm has the potential to appeal to all types of its demographic and ensure that customer satisfaction levels remain strongly positive. The current make-to-order (MTO) philosophy is another important addition to the framework that the company uses (see Fig. 3).

However, one should note that the specified strategy puts a significant strain on quality control and the SCM process. Indeed, with the implementation of the MTO technique, one has to ensure that every deadline should be met fully and that no delays or misconceptions should occur in the process (“FreshDirect: How fresh is it?” n.d.). Indeed, given the fact that most fruits are prone to fast spoilage, the company needs to reconsider its framework of communication with suppliers.

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Value Rare Inimitable Organized
No No No No Competitive disadvantage
Yes No No Yes Competitive parity
Yes Yes No Yes Temporary competitive advantage
Yes No No Yes Unused competitive advantage
Yes Yes No Yes Sustainable competitive advantage

Figure 3. FreshDirect: VRIN.

Nonetheless, when considering the external issues, some of the organizations that provide grocery products have managed to enter the realm of the online market, which has made the competition levels higher for FreshDirect. By far the greatest threat for FreshDirect is represented by AmazonFresh, which already has an immense customer base due to the recognition of the Amazon brand and the multitude of its customers (“FreshDirect: How fresh is it?” n.d.). Therefore, FreshDirect must build a competitive advantage that will allow it to become easily distinguishable and immediately recognizable while coexisting with a company as powerful as Amazon.

Organizational Structure

As the key internal factor, the organizational structure of FreshDirect is both its strength and weakness. Although the current simple and rigid structure helps the leaders of FreshDirect to maintain control over the SCM processes and all relevant issues, the further expansion into the global market will require a shift toward a more lenient approach such as the Laissez-Faire Model (Jain & ‎Mnjama, 2016). Thus, FreshDirect will be able to maximize its employees’ performance and the subsequent output.

Business Decisions: Analysis

Legal

In the legal domain, the decisions that the company has made so far can be regarded as adequate and complying with the existing legislation. The selected approach toward decision-making allows the firm to bypass complex ethical issues, simultaneously focusing on problematic aspects of its functioning (Hatten, 2018) As a result, FreshDirect can choose the options that maximize its utility and satisfy the needs of all stakeholders involved (“FreshDirect: How fresh is it?” n.d.). Therefore, the proposed tool can be described as valid.

However, some of the steps that the company has taken can be deemed as rather questionable from the legal perspective. For example, the 2015 lawsuit that resulted in FreshDirect paying $1,200,000 in damage for the withheld salaries to its staff members proves that the firm should revisit its current framework of meeting legal standards of the U.S. (“FreshDirect: How fresh is it?” n.d.). Arguably, the specified issue is tied to the flaws in the Human Resource Management (HRM) approach that the firm has been adopting.

Overall, the legal framework that FreshDirect deploys and the decisions that the firm has made in the designated area so far can be deemed as requiring change. FreshDirect will need to pay closer attention to meeting the rights of its stakeholders and the existing standards for financial reimbursement and benefits for its employees.

Ethical

Similarly, the principles of ethics that the company has been following can be described as reasonable and applicable to the settings that imply high rates of diversity.

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The idea of corporate citizenship is inseparable from corporate ethics nowadays, which implies that the specified notion has to be integrated into the ethical framework used at any company. Currently, FreshDirect lacks the atmosphere of corporate citizenship and the notion of Social Corporate Responsibility (CSR), which is intrinsically tied to it. The resulting corporate environment makes the management of ethical concerns rather flimsy.

Consequently, FreshDirect may suffer from the decisions that have not been fully processed and are likely to entail both legal and ethical repercussions. The environmental concerns that the company has failed to address so far are a very accurate example of the problematic side of the company’s ethics. For this reason, the company should consider redirecting its ethical standards toward utilitarianism as the idea of maximizing benefits for all parties involved (Parboteeah & Cullen, 2018). The specified perspective will help the organization to manage some of the most delicate issues such as the environmental concerns, the issue of quality, and the management of employees’ needs.

Finally, the organization has to take significant risks when deciding to be honest about the freshness of its production. Because of the changes in demand and the visibility of changes in its products, the company has to admit to its buyers at certain points that some of the fruit may look not as impeccable upon delivery as they were in the online catalog (Hatten, 2018). The specified step will be seen as a very brave and important decision that has shaped the corporate ethic and affected the ethical standards following which the firm operates. The decision to be honest with its buyer and open about the quality of the product will make it possible for FreshDirect to gain new customers and build their loyalty.

Socially Responsible

The focus on the integration of the corporate social responsibility (SCR) principles should also be deemed as an important stage in establishing the corporate culture and ethical standards according to which decision-making will occur in the organization. However, by far the most complicated issue regarding the introduction of SCR principles in the FreshDirect setting concerns environmentalism. Although an important decision was made when the firm decided to address some of the most pressing issues regarding the environmental problems that it was facing at the time, most problems remain unresolved (Hatten, 2018).

Due to the increase in the levels of global environmental awareness, the questionable reusability of the packaging that the organization has been using needs to be addressed. FreshDirect has considered using only post-customer recycled paper as the wrapping and boxing material, yet the specified change has introduced multiple challenges to the production process, including the need to sustain the quality at the required level (Hatten, 2018). Thus, FreshDirect needs a change in its production process to introduce an environmentally friendly policy (Hatten, 2018). The specified decision will be a noticeable step in the creation of a positive public image for FreshDirect.

Leadership Strategies

Leadership Theories

Approaches to explaining the nature of leadership are numerous and applicable to multiple contexts to improve corporate processes and the overall performance level of an organization. Contextualizing a particular leadership framework helps to understand the connection between the essential elements of an organization and shape employees’ perception of their roles and functions within the corporate setting (Hatten, 2018). Therefore, considering different types of leadership approaches is critical to developing a solid understanding of the changes that FreshDirect will need to implement.

Traditionally, several key approaches to leading a team or an organization are identified. Among these, one should mention the Trait Theory, Contingency, Situational, Behavioral, and Relationship Theories (Hatten, 2018). The specified frameworks differ in the stance that they take when considering the notion of leadership. While the Trait Theory implies that a leader should use their particular qualities to navigate the company, behavioral and Relationship frameworks hinge on the communication between stakeholders (Hatten, 2018).

In turn, the Contingency approach implies incorporating several elements of different styles to manage a specific situation, and Relationship Theories encourage a change in employees’ perspective (Hatten, 2018).

Although it would be wrong to claim that a particular theory should be preferred to others, it is important to deploy the Transformational approach at the stags that involve corporate change so that staff members could remain motivated and accept the suggested innovations without resistance (Hatten, 2018). Therefore, the application of the specified approach will be required at FreshDirect once the organization starts implementing change at the corporate level by altering its values and promoting the shift toward a more rigid quality management process.

Selecting an appropriate leadership framework is a very complicated decision for a company that attempts at gaining influence in the global market. The task becomes all the more difficult in case a firm has to face steep competition in an area that is very restrictive in terms of product choice and quality levels. Therefore, the choice of a leadership approach matters significantly for a company such as FreshDirect. Unfortunately, due to years of poor leadership choices, the company is currently managed rather loosely. Indeed, a closer look at the history of the decisions made by the firm’s CEOs will indicate that there has been a lack of consistency in the development of a leadership framework

Trait and Style Approaches

Since motivating the staff is the first step toward promoting positive change for an effective leader, it is also reasonable to consider the tools with the help of which the specified process will be managed. There have been major debates concerning the nature of leadership skills and whether they can be acquired through training (Hatten, 2018). However, the consensus seems to be that leadership skills can be fostered in any individual by setting one’s priorities and focusing on effective communication, and different aspects thereof (Hatten, 2018).

Whether the personality of a leader affects the performance of a company is a disputable issue; however, the lack of cohesion in the leadership approaches adopted by the company’s CEOs plays a negative role in the development of a firm, as the case of FreshDirect shows. According to the case, the incongruence between the leadership choices and models that CEOs applied at different times of managing the organization has led to vast disruptions and miscommunications. Therefore, a combination of the Trait-based, Transformational, and Situational leadership frameworks are required to address the issue.

Considerations of Power, Influence, Coaching and Mentoring

To succeed in a highly competitive environment of the fruit retail market, FreshDirect will need a leadership approach that will allow it to apply a proper approach toward exerting power in the corporate setting. Currently, the considerations of power lack clarity in the organization since its CEOs have not created a distinctive leadership style and have not communicated their ideas properly. Therefore, the considerations of power and particularly the current corporate hierarchy lack clarity and transparency. Changing the present status and introducing the idea of transparency should be the priority for FreshDirect at present since the firm will need clarity of communication and complete corporate transparency to motivate its staff members for change.

Presently, staff members need a combination of coaching and mentoring to acquire the needed skills. By introducing the strategies associated with the promotion of corporate values such as CSR, corporate integrity, and honesty, as well as the approaches aimed at talent management, such as the promotion of critical thinking, innovativeness, and independence in staff members (Hatten, 2018). Besides, it will be necessary for the leaders at FreshDirect to ensure that employees are provided with the chance for career development and professional growth. Offering courses that improve employees’ competencies and help them to gain new ones is paramount to the successful development of the organization.

Recommendations for a 3-Year Strategy

Strategy

To succeed in the e-market environment, FreshDirect will have to focus on building a memorable, competitive, and well-constructed brand. At present, the firm lacks an identity that would help it to stand out among similar organizations. As a result, FreshDirect remains in the shadow of corporate giants such as Amazon, which has recently launched AmazonFresh. With the brand name being very close to one of its largest rivals, FreshDirect will require a strong competitive advantage, which cannot hinge solely on the freshness of the provided product. Therefore, it is recommended for the company to focus on the process of rebranding, as well as the design of a new and enhanced marketing strategy.

Besides, the issue of quality needs to be addressed as one of the critical concerns, which FreshDirect has to manage within the shortest time possible. Although being honest about the products that customers will receive is an important step toward gaining people’s trust, it is also critical to ensure that the difference between the result and the image that customers will see once they enter the FreshDirect site should not be significantly different from each other.

To accomplish the specified goal, one will need to redesign the current SCM strategy used at FreshDirect. Specifically, the logistics-related strategy and especially the approach toward inbound and outbound transportation should be seen as a crucial point of concern. When comparing the approaches that FreshDesign’s competitors use to maintain the quality of their product consistent, one will notice that AmazonFresh has set a rigid time frame for order placement and delivery for its suppliers. Specifically, the order placed at 10 a.m. is delivered by 6 p.m., and the products ordered way 10 p.m. is provided by 6 a.m. (Hatten, 2018).

The described framework for managing the procurement and transportation issues is very useful since it sets clear and measurable boundaries for the delivery standards. Combined with innovative communication tools and an effective leadership strategy, the proposed technique will allow FreshDirect to reach the quality level of its rivals.

However, by far the most important issue that FreshDirect will have to redesign is its approach toward customer communication. It will be critical for the organization to create a system of feedback that will allow meeting the needs of every client. To attain the described goal, the company will need a more elaborate method of customer segmentation, as well as a change in its current targeting and positioning technique. For instance, the organization will have to provide options for online consultations by offering a 24-hour chat with a food consultant, who will provide buyers with the required information about food-related issues and other concerns.

Engaging with customers via social media should also be seen as an opportunity. The specified method of marketing will allow FreshDirect to construct the desired brand image and represent its services in the required light, thus pointing to the advantages of the company. The format of the specified type of communication may range from posts on social media to blogs and vlogs (video blogs), where expert embers of FreshDirect will educate customers about the company’s products, at the same time engaging them in a conversation.

Although the described tool will not allow the organization to embrace the needs and demands of every single customer, it will provide a more responsive environment, thus cementing FreshDirect’s image of a caring and responsive company. By engaging in the active dialogue with its customers, FreshDirect will be able to create a competitive advantage that will make it easily distinguishable even compared to corporate giants such as Amazon.

The change in the management of the reusable materials and the introduction of new wrappings for products is another change that FreshDirect has to implement immediately. For this purpose, the organization will have to research the available cost-efficient approaches toward product wrapping and the overall management of quality. For instance, the shelf life of fruit will have to be calculated carefully, with spoilt ones being removed from the market immediately. Thus, the issues of quality and customer satisfaction will be managed respectively.

Finally, the shift in the quality management framework will allow FreshDirect to meet the standards that it currently claims to uphold. For this reason, FreshDirect will have to admit that the products displayed at the company’s site may not fully coincide with the quality that the organization delivers. Besides, the process of quality management will have to be updated, which can be implemented by increasing the quality of communication across the SMC and creating new opportunities for improving the approach toward logistics and procurement.

Apart from integrating the latest technology into the SC setting, FreshDirect may need to expand its current network by involving all stakeholders, keeping consistency in the relationships with stakeholders, and managing data successfully. In this regard, the issue of Big Data management needs to be rendered as one of the crucial aspects of improving SCM processes. With the application of the tools that will lead to more effective collaboration between the company and its partners, suppliers, and distributors, FreshDirect will be able to uphold its image of an organization that delivers exclusively fresh fruit and listens carefully to its buyers.

Timetable

The process of introducing changes to the environment of FreshDirect is likely to be quite painstaking and lengthy due to the need to reconsider the corporate philosophy and leadership strategy. Furthermore, with changes having to be implemented at multiple levels, from the communication framework to the corporate structure to the marketing approach, the firm will need to manage its time effectively. Therefore, it is expected that the necessary changes should take at least three years for the firm and its members to adjust to the new standards of operating in the target market (see Table 1). As Table 1 shows, FreshDirect will have to provide the platform for changes by shaping its values and corporate philosophy. Thus, the foundation for changing the relationships between FreshDirect and its stakeholders will be built.

Timetable: A 3-Year Plan.
Table 1. Timetable: A 3-Year Plan.

Resources

To accomplish the set goals the organization will need to maximize the utility of all assets available. For this purpose, the company will need to integrate IT and ICT resources to improve communication with employees, customers, and other stakeholders. Besides, the firm may need additional financial assets for creating a sustainable risk management framework. Furthermore, it will be crucial for the organization to introduce benefits for employees and maintain its cost-efficient approach in SCM and retail.

Thus, FreshDirect will have to reduce the expenses taken for the management of procurement errors and the amount of waste caused by the mismanagement of deadlines. Thus, a sustainable approach toward handling SCM- and marketing-related concerns will be created. The suggested tools will help FreshDirect to find its niche in the global market, withstanding the competition with AnmazonFresh and similar organizations of significantly greater power.

References

FreshDirect: How fresh is it? (n.d.). Web.

Hatten, T. S. (2018). Small business management: Creating a sustainable competitive advantage. Thousand Oaks, CA: SAGE Publications.

Jain, P., & ‎Mnjama, N. (2016). Managing knowledge resources and records in modern organizations. New York, NY: IGI Global.

Parboteeah, K. P., & Cullen, J. B. (2018). Business ethics. New York, NY: Routledge.

USDA (2017). Retail food sector. Web.

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