In the context of Ch. 2 discuss the following: 1. What is the FreshDirect busine
ID: 397927 • Letter: I
Question
In the context of Ch. 2 discuss the following:
1. What is the FreshDirect business model? What are the reasons for its competitive advantage? What effect did FreshDirect have on traditional grocers operating in New York City and Why? How does its position change with non-traditional participants (like AmazonFresh!) being part of the competitive landscape?
Would a similar business work in your neighborhood? Why or why not?
What do you think this textbook’s author meant when he stated the following: discuss any two out of Q 2, 3 and 4
2. “Management has no magic bullets. There is no exhaustive list of key resources that firms can look to in order to build a sustainable business”.
3. “Technology also opens up opportunities to leverage products provided by others to create new distribution channels to reach customers”.
4. “Timing and technology alone will not yield sustainable competitive advantage”.
Explanation / Answer
FreshDirect aims to provide affordable high quality groceries right to the doorstep of consumers living in the New York City metro area. It bases its operation out of a 300,000 square feet distribution center in Long Island city, New York and has around 4 million people living within a 10 mile radius of the distribution center. With no physical store presence, it combines its retail and wholesale functions. Orders are placed online and are scheduled for delivery the very next day through the 150 strong fleet of delivery trucks owned by FreshDirect.
FreshDirect draws its competitive advantage from its business and operating model or working in a densely populated metro area like New York City. It believes all other areas have a pretty low barrier to entry and hence can have multiple players coming in. Its brand equity created and its strategically located distribution center gives it its share of competitive advantage. Competitors would find it really challenging to own such distribution space due to cost limitations. Overall, FreshDirect does ensure quality products delivered too due to its sorter supply chain.
FreshDirect in order to develop a symbiotic relationship created strong ties with these local producers and grocerers, this would ensure a steady supply of goods and also ensure a certain quality standard. It promotes the products of the local, traditional grocerers on its website in order to grow the revenue of these players.
Amazon recently managed to acquire the necessary warehousing space and the delivery trucks needed to challenge FreshDirect. Here, FreshDirect intends to defend its ground by its brand equity and its reputation for quality goods. It’s banking on its modest delivery fee in comparison to an annual membership fee that Amazon charges.
A similar model would not work in my neighborhood which is sparsely populated because groceries aren’t that expensive in sparsely populated areas and most consumers here own an automobile which allows them to drive to the nearby convenience or grocery store without much hassles. Customers here do not mind driving some distance on a weekend to get the necessary grocery needed for the entire week.
Management has no magic bullets
Though management has been quite efficiently defined over the years with broad classifications into various disciplines that enable the study to be more structured, when it comes to the real world the applications of management study can offer you a limited supply of options to deal with the situation. Management courses make a very brave attempt to encompass all aspects that can prop up for any business situation. However, when it comes to decision making the external factors does throw in a lot of new scenarios which never have been experienced in the past. Despite having faced quite a few economic depressions or slowdowns in the past, the US economy or the world economy at large did spiral to one of its worst economic crises again in 2007-08 due to the subprime crisis. Experts could speculate but could not prevent the inevitable from occurring.
Timing and technology alone will not yield sustainable competitive advantage
The modern day start-up industry strongly believes it is the timing to the market or the technology developed by the team to give their company a strong edge over the other peers. However, the two alone cannot ensure a sustainable competitive advantage as keeping abreast with the changing external scenario is equally important. Companies need to keep pace with the changing trends of the consumer and the market. The first movers often do have an advantage but they need to sustain the leadership position by adopting to the changing business scenarios.