Online_Groceries_Case

Answers: According to the Porter’s three generic competitive strategies; Low cost position: Webvan had no cost advantage because they spent too much for building a new distribution system, warehouses, marketing and IT infrastructure however they sold the products below market prices by free delivery. (weak 1) Freshdirect had clearly cost advantage for getting delivery charge lower than the competitors and also requesting min order price. Encouraging suppliers for low prices was also a cost advantage fort Freshdirect. (strong 3) Uniqueness perceived by customer: Webvan was the first in the market and online grocery was a very new concept for customers. They were actually unique because they were first. (medium 2) Freshdirect was unique by fresh perishable foods, their customer centric ideas such as produce, packaging, favorites(CRM) and recommendation system. (strong-3) Focus: Webvan had a broad segment that they had warehouses in 7 US cities and they were distributing night and day.(medium-2) Freshdirect started in a narrow segment for local customers and they increased their customer loyalty by their customer centric ideas. (strong-3) Porter’s five competitive forces: Threat of new entrants: Strong, there can be new online groceries any time, especially all existent groceries would be potential threat for entering online sales. Bargaining power of buyers: Strong, because lots of competition and bargaining factor such as delivery fee, product prices, delivery speed, etc. Bargaining power of suppliers: Strong, because quality of products are very important however bargaining power of suppliers can be handled as in Freshdirect example. Threat of Substitute products: Strong, any competitor in the market can improve or redefine their services. Industrial competitors: Strong, because it is a growing industry and service differentiation is very important in this industry. 3. IT Project barrier: High because Freshdirect had a lot of investment on IT such as using SAP, BEA’s weblogic platform, NetTracker. IT Resources barrier: High because they used CRM to get their customers‘ information and connect with them. Also they had a recommendation system due to the customer info they gathered. Complementary resources barrier: Medium, i think there was not a unique difference from the competitors. Preemption barrier: High, they provide the loyalty of the customers. 4. I think, they obviously entered the market with the right strategy however they have to survive in the market in the long term. There will be new entries to the market, Freshdirect should improve their CRM system to keep the customers loyal to them. Also they can use new digital marketing platforms to gain younger customers. Maybe they can create a mobile application of their online services for providing customers to order while they are mobile.