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LONDON COLLEGE OF ACCOUNTANCY AND MANAGEMENT

Programme: BTEC Extended Diploma in Strategic Management & Leadership Level 7

Assignment Title: Student Name: Student ID: Date Issued: Final Submission Date:

Strategic Planning and Implementation (Unit-12) Malik K.S Awan LCMA/PB/10439 12 April 2011 22 April 2011

MODULE TUTOR:

Archana Karki

Email address: archansk@gmail.com

Table of contents Topics Task 1: Introduction 1.1 1.2 Introduction of FreshDirect Mission and Vision statements Pages no 3 3 4 5 5 6 6-7 8 9 10-11 12 13 13-14 15-16 17 18 18-19 20 21 21-22 22 23 24 25-26 27 28 29-30 31 31 32 33-34 35 36 37-38 39-41

Task 2: The external environment 2.1 2.2 2.2a 2.2b 2.2c 2.3 2.4 Stakeholders expectations and needs The general environment PESTEL analysis Porters 5 force analysis Industry life cycle Comparative environment Comparative analysis grid

Task3: Internal Analysis 3.1 3.2 3.3 Resource base view (RBV) Porters value chain analysis VIRO framework

Task4: Problem diagnosis 4.1 4.2 SWOT analysis Main problems and challenges of FreshDirect

Task5: Generating and evaluating strategies options 5.1a 5.1b 5.2 5.3 5.4 5.5 5.6 5.7 Porters generic strategy The strategy clock Ansoffs Matrix TWOS Matrix Stakeholder mapping Success criteria of strategic options Method of pursuing the FreshDirect strategy Balance score card

Task 6: Examine factors affecting the organizational strategy plan 6.1 6.2 6.3 Compare core FreshDirect values Develop specific management objectives FreshDirect resources management

Task 7:Implementation plan for FreshDirect strategy 7.1 7.2 Develop outline timetable implementation strategy for FreshDirect Design the FreshDirect to bring intended strategies to reality

References

Task One: Introduction of FreshDirect 1.1: Introduction FreshDirect was founded in 1999 by Jason Ackerman and Joseph Fedele founded the company in 1999 in the wake of others' failed attempts at an online grocer. Three years later its orange and green refrigerated trucks hit the Manhattan streets. Those trucks have become almost as ubiquitous as yellow taxicabs. According to reports, 15 per cent of 1.6 million Manhattanites have used FreshDirect. The company delivers to more than 250,000 customers in New York and New Jersey. The idea of FreshDirect is eliminate the middleman. By taking orders in advance, FreshDirect devised a made-to-order model. It prepares the foods, and as a result, according to Ackerman, this is a more cost-effective and less wasteful process than the regular grocery-store model. Ackerman and Fedele split up the responsibilities based on their expertise. In that Bloomberg interview, Ackerman said, Joe, having worked at -- and built -- Fairway was responsible for bringing in all of the supply. And I focused on how to actually take all the supply and get it within the warehouse and actually get it to the customer. Goals and Objectives
y y y

Boost average order size by roughly 10%, to $110. Deliver seven days a week, up from the existing six-day schedule. Begin tracking speed and quality metrics, such as time to process order from raw material to delivery. Allow managers to access metrics. FreshDirect key stakeholders are investors or shareholders,

Key Stakeholder government.

customers, employees, suppliers, General public, New York City, and central

1.2: Mission and vision statements Mission Statement Entire operation had been designed to deliver on simple promise to online grocery shopper; High Quality and Lower price by Joseph Fedele and Jason Ackerman in July 2001.
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Use the modern techniques and innovative ideas to provide superior solution for

customers in term of the shopping experience. When we looking back when the online grocery idea. The first two online grocers both exist in west; in their first phase they running price line. They have lot of failure and need occurred, first free capital market because it give free capital and shortly took back. First they doing very well expanded aggressively; one is expanded 1 to 11 cities and another is expanded 1 to 30 cities; but later on both these companies are bankrupt. They are not focusing customer rather than expanded their market.

Vision Statement FreshDirect has been focused on customers wants and preparing customer data base on daily, weekly and monthly on regular basis. As we put it, Our food is fresh. Our customers are spoiled. FreshDirect learned from the mistake of their competitor Web wam and home grocer; they had the market under control and expanded it aggressively but they could not manage the capital and later on both bankrupt.

C.E.O Richard Braddock interview with business week

Task Two: The External Environment The external environment is essential elements of business strategy analysis because of the dependencies organizations have upon their markets and because of the way in which unexpected changes can result in business struggling to cope (Lynch, 2006) 2.1: Stakeholder expectations and needs It is important for FreshDirect to analysis the expectations of different stakeholders and the extent to which they are likely to seek influence over FreshDirect strategies. y Investor/Shareholders maximum return of profit of their investment, annual

dividends or increase share price y Managers responsibility y y Distributors On time and reliable deliveries Suppliers products y Customers Customers always looking low price with good quality and some vouchers and benefits y Employees Employees looking good rate of wages, bonuses, incentives, holidays and job security y Government Government drawing taxes of each private organization Payment of their supplies on time and good margin of their Good salaries and bonuses, facilities, status, power, status and

according to their profitability y y Financiers Society Interest payment and loan repayment Social responsible actions and positive attitude about environment

2.2: The General Environmental 2.2a: PESTEL Analysis (Source: Johnson et al., 2008, p56) PESTEL Factor Political
y

Key Points

Strategy implication

NYC proposed a congestion FreshDirect plan to increase charges for traffic entering some delivery charges from Manhattan customers to financial coupe; accrued from and sort out the parking violation problem. FreshDirect have no middle man; so we safe management cost; after rising of the fuel cost keep balance pressure on customers. Penalties

parking violation Economical

y y

The rising cost of fuel Low prices because no middle man

Social

y y

Unemployment FreshDirect wastage food

FreshDirect creating full time private sectors jobs. FreshDirect work hard to make sure that surplus food will be giving to New York's neediest. FreshDirect donate its kitchen uses cooking oil to Tri-State for use in non-toxic diesel fuel.

Technological

Software (service production, house of E-customer, state of art production, advance food technology

FreshDirect will maintain their advanced technology and also seeking innovating technology to keep better technology then competitor

Environmental

FreshDirect

cardboard

FreshDirect use lot of

packing an visual pollution

cardboard

packing

system at the processing facility; produce came in one box, dry goods in another and a single delivery toothpaste in its separate cardboard container Legal
y y y

Health and safety law Taxes Employment laws

FreshDirect tested food in house laboratory, which ensured the facility adhered to USDA guidelines. FreshDirect disclose its financial statement publically and paid the taxes regularly; and not taking any step against the employment regulations laws and

2.2b: Porters 5 Forces

(Source: Johnson et al., 2008,p56)

It is important to analyse the competitive nature of the online grocery industry in order to assess the position of FreshDirect. The Porters 5 Forces tool will enable to make strategic decisions in orders to increase profitability. Force Threat of New Entrants The e new entrants requires a big capital, experience, understanding the advance technology system, learning online grocery suppliers and distributors Threat of Substitute The local suppliers, distributors and corner stores are other options of customers to buy fresh food. But FreshDirect is familiar of its brand name, and mostly customer are loyal with FreshDirect Power of Suppliers FreshDirect has known by its brand its customers are loyal with its products. If the supplier has its own good brand in market they can easy access with local shops or supermarket; but FreshDirect has already had good relationships with suppliers and local stores. Powers of Buyers In the modern era the awareness of the online customer is high; they have access everything by using of internet and ability to analysis the price and quality of FreshDirect and its competitor and can switch over very easily. Competitive Rivalry The FreshDirect have advance online and food technology and had good expertise in management but FreshDirect is weak to delivery coverage and daily food usage products. NetGrocers and YourGrocers are entering FreshDirect main focusing area and offering saving in bulk. NetGrocer offered its customers a large selection of brand name and speciality nonperishable items that were difficult to find in a local market. Medium High Medium Low and access to Strength Low

2.2c: Industry life Cycle FreshDirect industry life cycle is a positive because they have innovative regarding advance food technology and their customers are very loyal with organization. FreshDirect price is low and their quality is better than their rivals. FreshDirect Managers and financial management is performing their job very well; in case of slow growth progress they handle professionally. In the online grocery system the buyers are very aware about price and products; they access each online grocery and can easily switch over. FreshDirect has strong brand name regarding their innovations low price and fresh foods and their customers are regularly increasing so there is less chance of decline.

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2.3: The Competitive Environment FreshDirect Strategic groups Fresh direct related to on-line grocery system; main FreshDirect strategic groups are Whose Foods, YourGrocer, NetGrocer, Amazon and Safeway. FreshDirect Rivals Marketing Segment a. Whole Foods, the Austin, Texas based supermarket chain with the organic health food. b. YourGrocer was created with a bulk buying strategy, believing that customers would order large, economical quantities of goods. c. NetGrocer offered is customers a large selection of specialty

nonperishable items that were difficult to find in a local supermarket. The key customer segment of NetGrocers services were busy families, urban dwellers, special needs groups and senior citizens. d. Giant amazon.com Online retailing giant amazon.com had entered the dry goods grocery delivery business, posing a threat to other online retailers because of its existing loyal customer base and legendary customer service. Creating a grocery section in 2006, Amazon offered over 10,000 nonperishable items including long time staples, from Kelloggs to Jiffy pop. e. Safeway began an ambitious online grocery venture by establishing Grocery Works, an online shopping system that included a series of warehouses dedicated to filling online orders. FreshDirect Market Segment FreshDirect had focused on organic foods to response to the threats of Whole Foods and other specialty food stores. With the shift among some customers to pay attention to local, sometimes organic suppliers, FreshDirect highlighted its support of

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and partnership with the local companies who provided produce, poultry, fish, cheese, milk, eggs and specialties such as wine. However, its efforts have been inconsistent in that area. For example in order to facilitate shoppers and checkout operators to distinguish between organic and nonorganic produce, FreshDirect wraps them in plastic, which in itself is not organic. FreshDirect Chairman Jeff Turner recognized that such an approach seemed incongruous. FreshDirect Strategic Customers direct, local stores and restaurants. FreshDirect Critical Success Factors (CSF) The proximity of FreshDirects processing facility to its Manhattan customer base was also a critical factor in its cost effective operation design. The processing centre location in Long Island City put approximately 4 million people within 10 -mile radius of the FreshDirect facility allowing the firm to deliver a large number of orders in a short amount of time. FreshDirect has computerized conveyor system to be sorted, assembled, and packed into a refrigerated truck for delivery. FreshDirect has latest food technology (SAP manufacturing software) that controlled every detail of the facilitys operations. All of the thermometers, scales, and conveyor belts within the facility were connected to a central command centre. The system was also equipped with a monitoring alarm that alerted staff to any deviation from the programmed settings. Main FreshDirect strategic customers are

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2.4: Competitor analysis grid We are grading 1- 5; where 1 is lower and 5 is greater Name Product features Brand name 4 2 2 1 2 3 2 FreshDirect 4 YourGrocer 3 Peapod 2 NetGrocer 3

recognition Compatibility of 5 products popular platforms Access distribution channels Quality products Ease of use Price Marketing support Quality customer services Total 35 23 19 20 of 4 2 4 1 3 4 2 2 3 3 2 2 1 1 2 2 of 4 3 3 3 to 5 3 2 3 with

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Task Three: Internal Analysis 3.1: Resources Based View (RBV) It is suggested that an organizations competitive advantages and superior performance is resulted from its distinctive capabilities (Johnson et at., 2008 p95). The resource based view highlighting FreshDirects resources and competencies is outlined below:Resources Threshold Resources Tangible y FreshDirect has enough financial resources to meet its criteria; they had 30% to 40% gross margins Threshold capabilities that were higher than the industry average and was targeting revenue of $12 billion by 2007 y The FreshDirect of had 12 300,000 separate Competences Threshold Competences y The company had been on track, hitting $90 million in revenue in its first year with low cost.

square foot production facility was composed temperature zones Intangible y A senior management had very of

FreshDirect

experts

regarding their fields.

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Unique resources Capability for competitive Tangible y advantages FreshDirect had an advanced food technology software system (SAP) that controlled every single detail of the facility operation.

Core competences y The FreshDirect had adopted advanced system food technology to central software system (SAP); all its connected command centre. Each specific setting was programmed into the system by an expert from the corresponding department.

Intangible y FreshDirect recorded every single internal and external activities detail and evaluate it regularly

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3.2: Porters Value Chain Analysis Firm Infrastructure Structure hierarchy allows FreshDirect to use of specialist knowledge in order to get competitive advantage over rivals. Human Resources Supportive activities FreshDirect management is very competent to recruiting, training and promotions of the employees; and its employees had to ability to learn and easily adopt latest knowledge and advanced technology software system with very efficiency. Technology Development FreshDirect had innovative approach they spend to research of new recopies and new developing technology. FreshDirect encouraged the employees to learn the new knowledge and technology operating system. Procurement Due to size and excellent relationships with suppliers; FreshDirect is able to leverage suppliers and through economic of scale make efficiencies where rivals may have not. Primary activities Outbound Marketing and Sales logistics FreshDirect

Inbound logistics FreshDirect high stock

Operations FreshDirect offered where a its

Customers Services FreshDirect allowed its customers the processing center;

has around 5,000 perishable FreshDirect deliver customers are very to pick up their orders directly products loyal with its products from to on the due to its high quality business customers in Manhattan its FreshDirect offices. customer services

qualified products;

controller; typical grocery store had directly Mostly work its everyday

they have good about 2,200 perishable customers window and low price; and could also order for deliver at the relationships with products. all its suppliers. operation by schedule planed. marketing strategy is FreshDirect

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advanced technology

food software

to deliver direct to the has also offer home delivery customer window, so within its customers and the city and send save refrigerated trucks to sub-urban they sub-urban area collect their

system; then they save the labour cost; they have also no middle management.

money from parking areas; where the customers of charges also save their time orders at specific delivery point.

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3.3: VIRO Framework VIRO is a model which allows FreshDirects whether the resources and capabilities translate to the potential for sustained competitive advantage. We can analysis after collection information from RBV and Porters Value Chain as below: Resources and capabilities Financial resources Management capabilities Physical resources Intangible resources Inbound logistics Operations Outbound logistics Marketing and Yes Sales Services Procurement Technology development HRM Firm infrastructure Yes Yes Yes No No No Yes No Temporary Advantage Normal Yes Yes Yes No Yes Yes No No Yes No Yes Yes Normal Temporary advantage Sustained Advantage No No No Normal Yes Yes Yes Yes No No Yes Yes Temporary advantage Temporary advantage Yes Yes No Yes Temporary advantage Yes Yes Yes Yes Sustained Advantage Yes Yes No Yes Temporary advantage Yes Yes No Yes Sustained Advantage Valuable Rare Costly to imitate? Yes No Yes Yes Temporary advantage Organized properly Competitive implications

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Task Four: Problem Diagnosis 4.1: SWOT Analysis Based on the above external and internal environment analysis we present SWOT analysis; after that we highlighted what main problems and challenges being faced by the FreshDirect. Strengths y y FreshDirect had strong financial assets. FreshDirect is a powerful online grocery brand; it has reputation of low price with high quality. y y y FreshDirect used advance food technology software system. FreshDirect had strong relationships with local stores and its distributors. FreshDirect approach is very innovative; its products have differentiation with rivals. y y FreshDirect have excellent customer services. FreshDirects warehouse had 12 separate temperature zones, ensuring that each piece of foods kept as it optimal temperature. y y FreshDirect had extremely high standard for cleanness, health and safety. FreshDirect had refrigerated loaded trucks that keep their foods fresh.

Weaknesses y FreshDirect sold perishable and they had not attentions customer demanding about un-perishable products. y They are only focusing selected zips area of New York and have not expanded market strategy. y FreshDirect is on depended on a main competitive advantage, the retail of perishable products. This could make them slow to diversify into other sectors (un-perishable products). y The senior management of FreshDirect had continually changed that make slow or delay on the work progress. They are now their 4th CEO.

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Opportunities y FreshDirect had reputed brand name and its customers are highly trusted on FreshDirect products. y y FreshDirect may expand their business local, national or international level. FreshDirect may also start delivery of un-perishable products along with its popular perishable products. y FreshDirect to take over, merge with, or from strategic with other global grocery retailer, focusing on specific market, such as Europe or the UK. Threats y Whole Foods, the Austin, Texas based supermarket chain with the organic health food focus, had already threatened FreshDirects sale in Manhattan. y Trader Jos another specialty food retailer was also opening a store in downtown union square, prime territory for FreshDirect. y YourGrocer was created with a bulk buying strategy, believing that customers would order large, economical quantities of goods from the web site and the company would make home deliveries in company trucks. y Another big threat for FreshDirect that; early 2007 NYC government proposed congestion charges for traffic entering into Manhattan. y Local stores or distributors also make a strategy for delivery perishable products to the customers. y Rising of fuel price may also a potential threat on FreshDirect; and penalties occurred from parking violation has also big pressure on FreshDirect. y y FreshDirect visible cardboard boxes are also environmental threat. FreshDirect trucks parked in big city streets had made the traffic congestion problems worse. y The rival of FreshDirect may adopt the advanced food technology software system.

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4.2: Main problems and Challenges of FreshDirect All the online grocery retailing business continued to mature, all players needed to pay attention to customer perception. Online retailing giant amazon.com had entered the dry goods grocery delivery business, posing a threat to other online retailers because of its existing loyal customer base and legendary customer service. Creating a grocery section in 2006, Amazon offered over 10,000 nonperishable items including long time staples, from Kelloggs to Jiffy pop. The selection of dry goods rather than perishables meant Amazon, unlike FreshDirect and Peapod, did not have to worry about delivery costs on time and climate sensitive items. However, even Amazon suffered grocery delivery failures. From out of stock problems, delivery glitches, and Web site technical outages, online grocery retailers needed to serve their online customers just like they would serve the customers who come into their physical stores. Even though FreshDirect had been able to woo local New Yorkers, gaining a Fast Company Local Hero award in 2006, the company had to absorb hundreds of thousands of dollars in parking tickets to get its customers its orders within the delivery window. And in early 2007, New York City government proposed a congestion charge for traffic entering Manhattan, adding to FreshDirects delivery expenses. The rising cost of fuel was also a potential threat. Even though FreshDirect included a fuel surcharges to orders based on the average retail price of gasoline, these expenses coupled with penalties accrued from parking violations might have put significant pressure on FreshDirects ability to achieve its target profit levels.

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Task Five:

Generating and Evaluating Strategic Options

What is Strategic Choice? ..... the process of choosing among the alternatives against each other with respect to other ability to achieve sustained competitive advantage (White, 2005) . requires the organization to identify the set of functional, business, global and corporate strategies that would best enable it to gain competitive advantage (King, 2004) FreshDirect current competitive strategy FreshDirect current generating strategy

is low price with differentiations and high quality, focusing on perishable products; and delivers its direct to the customer window in selected zip areas. 5.1a: Porters Generic Strategy Porter (1990) has presented three internally consistent generic strategies, which can be used singly or in combination to create a strong position in the long run. The three strategies are overall cost leadership, differentiations and focus. We may adopt these strategies to get better result for FreshDirect. a. overall cost leadership FreshDirect related to online grocery chain; so

online order safe the paper cost. FreshDirect may reduce its management staff by using of de-layering policy; that why there is no middle man; products are high quality with low prices. FreshDirect delivered effective training and coaching to the staff and get the result with betters quality production and safe the time. Low cost also provides defensive strategy against input cost increases. FreshDirect may also negotiate with suppliers to deal with minimize their margin and use the advanced technology to reduce the cost or extra scale of production. b. Differentiation FreshDirect need innovative approach regarding its

products and services. Its brand must unique among the customers; its all management and production staff must highly expert regarding their tasks,

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its online webside must be innovative designed and attractive to its customers; develop the knowledge and technology with differentiate then other not easily adopt it. c. Focus This strategy of focusing on a particular customers groups or segments of the production line. FreshDirect need to focus to improve the quality of products and looking what customer wants; FreshDirect also focusing non-perishable products because mostly customers wants to collects different range of products from one point

5.1b: The strategy clock This explores Porters generic strategies in more details. Johnson and Scholes, quoting Bowman describe the eight routs of strategy clock. Route 1: Route 2: Route 3: Route 4: Route 5: Route 6-8: No Frill Strategy Low Price Strategy Hybrid Strategy Differentiation Strategy Focused Strategy Failure Strategy

FreshDirect adopting route 3 (Hybrid strategy); because their products are differentiate quality or taste wise than their rivals; they are receiving low price from the customers.

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5.2: Ansoffs Matrix Ansoffs Matrix strategy describe how to growth (generating direction) corporate level strategy. There are four direction of Ansoffs strategy (1) Market Penetration, (2) Market Development (3) Product Development and (4) Diversification FreshDirect adopting market penetration strategy; because it is least risky since it leverages many of the firm's existing resources and capabilities. FreshDirect is focusing to increase its revenue by large volume of customers; they offering the customers high quality products with competitive price. They are focusing only perishable products and focusing on business class customers as the most profitable segment of the business. FreshDirect also approach renovation and modernization of brand image in an attempt to gain market share.

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5.3: TWOS Matrix TWOS is opposite of SWOT analysis; this help to create for strategies: SO strategies, WO strategies, ST strategies and WT strategies Strengths and Opportunities (SO) FreshDirect strength is using advance food technology; this give customers quality products with great taste of food; this create brand reputation among the customers; FreshDirect also great relationships with local stores and distributors so they have opportunity to have acquisition with other sources as well. Weaknesses and Opportunities (WO) FreshDirect sold only perishable products and they delivered their products selected zips areas; FreshDirect cover this weakness by also starting delivery of un-perishable products and expanded their delivery areas. Strengthen and Threats (ST) One of the biggest threats to FreshDirect that Whole Foods, the Austin, Texas based supermarket chain with the organic health food was were entering the FreshDirect main centre Manhattan; and YourGrocer was created with a bulk buying strategy, believing that customers would order large, economical quantities of goods; FreshDirect approach is very innovative; its products quality is high with low price then rivals; their customers are loyal and they only trusted FreshDirect products. Weaknesses and Threats (WT) FreshDirect main weaknesses marketing strategy segment is that FreshDirect deliver its products only specific class customers; with only selected zips areas. This will lead to FreshDirect to loss of majority of customers; so FreshDirect avoid this strategy.

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5.4: Stakeholders Mapping (Power Interest Matrix) (source Johnson et al., 2008, p156) Interest Low P O W E R L o w Minimum Effort Charities Keep Informed Creditors High

FreshDirect work hard to make Must be informed because money owed sure that surplus food will be however this would not impact on the giving to New York's neediest choice adopted at FreshDirect as they have and donate its kitchen uses a good credit rating. cooking oil to Tri-State for use in non-toxic diesel fuel Keep Satisfied Government Regulators Key Players Employees the FreshDirect image employees have the to influence customers. They

New legislation if introduced can Customer services being a key part of H i g h have great impact i.e. on organization Congestion power

charges, VAT and other taxes Employees looking good rate of wages, and employment laws Customers bonuses, incentives, holidays and job security.

Customers provide all of the Shareholders sales but have low interest in Shareholders have a high interest to gain how the FreshDirect is financially. The shareholders must be managed; but they still have a informed of the risks of the strategies and high impact as the goal is to period of time before returns are expected attract more customers. and the size of those returns. Competitors FreshDirect main rivals within their strategic group have both a high interest and power in influencing FreshDirects

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strategy. Suppliers FreshDirect main suppliers are farmers, slaughter house and perishable products food manufactures. They have a high interest and power over FreshDirect as FreshDirect is a big source of income for them and FreshDirect in turn relies upon them. Supplies always looking on time payments and good margins. Financial Institutions Financial companies reliable; institutes whose to are funds profitable those and for

Financial institute looking

Interest payment and loan repayment. Society-local community FreshDirect continues to show corporate social responsibility and positive attitude about environmental issues. If there are any environmental issues, it should be a negative image of FreshDirect.

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5.5: Success Criteria of Strategic Options There are three success criteria that can be used to assess the viability of strategic options; Suitability, Acceptability, Feasibility; we may analysis of these criteria for FreshDirect from following table; (worse) 1 to 5 (best) Criteria Suitability 1. Whether 2. Does the FreshDirect strategy strategy the addresses 3 FreshDirects 1 4 2 3 2 2 4 4 3 5 3 circumstances in which is operating? exploit strength? 3. Does the option fit in with the FreshDirects purpose Acceptability 1. How will FreshDirect perform in profitability terms? 2. How will the financial risk change? 3. Will FreshDirects relationships with outside stakeholders need to change? Feasibility 1. Whether FreshDirect strategy can be made to work in practice 2. Can the strategy be funded? 3. Is FreshDirect brand capable of performing quality services? 4. How will FreshDirect ensure that the required skills at both managerial and operative level? 5. Will the technology the available to compete effectively? Total 30 23 32 36 4 3 4 3 4 1 3 4 1 5 3 2 1 4 3 3 2 2 2 4 3 2 1 2 1 2 3 2 3 4 3 1 SO ST WO WT

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5.6: Method of pursuing the FreshDirect strategy (organic or external growth) In organic growth the organization building up their own products and developing their own market; and in external growth organizations may choose to buy readymade other organizations by using of Mergers and Acquisition strategy or by joint venture. But here we are recommended for FreshDirect to carry on their organic growth strategy; because they have enough financial resources; they can expanded their business in national or international level with their own resources. In this way FreshDirect controlled the company products quality and finance properly. Here is also FreshDirect profit ration are not distributed among different people; while in merging and acquisition production are more costly and less financial profitability because its distributed; FreshDirect also keep secret managerial and operative by pursuing the organic growth method.

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5.7: Balance score card (Source: Garrison et al., 2003) Financial perspective CSF Improved FreshDirect financial performance Measures Sales growth end of Quality year ratios Share Shareholder value Increase awareness price and Customer service Customer questionnaires and feedback brand Through advertisement increased customers volume Internal perspective CSF FreshDirect Customer oriented Measures Increased volumes grocery Penetration market into Increase customers; quality with low price. revenue Highly skilled staff high Innovation and learning perspective CSF and advanced innovation Measures into Although FreshDirect advanced using food and dividends per share and FreshDirect profitability liquidity products Customers perspective CSF Measures of Control measurements quality products of

sales Investment

profitability of online technological

technology but still need to spend in R&D By motivation staff to learn and spending on staff training

by large volume of products

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The balance score card is used as a tool to analyze the progress of the strategy in the review occurring every six months (Johnson et al., 2008). FreshDirect had strong financial with an increasingly lower gearing ratio and better liquidity they should be able to secure some funding from financial institutions and obtain the rest from retain profits. The recommendation strategy for FreshDirect to improve relations with all stakeholders; success in changing the employment relationship will be determined by FreshDirects ability to work efficiently. Improvement of customer relations may be hindered by uncooperative employees; highlighting the importance of ongoing training and support. Similarly, a technological stance will require FreshDirects employees to develop service knowledge, and it is imperative for the organization to support them in doing so on a continual basis.

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Task Six: Examine factors affecting the organizational strategy plan 6.1: Compare core FreshDirect Values The Cultural of FreshDirect to assess to direct to customer with no middleman. By taking orders in advance, FreshDirect devised a made-to-order model. It prepares the foods, and as a result, according to Ackerman, this is a more cost-effective and less wasteful process than the regular grocery-store model. FreshDirect follow the ethical and social responsibility rules; FreshDirect work hard to make sure that surplus food will be giving to New York's neediest; FreshDirect also donate its kitchen uses cooking oil to Tri-State for use in non-toxic diesel fuel.

FreshDirect current business Objectives

y y y

Boost average order size by roughly 10%, to $110. Deliver seven days a week, up from the existing six-day schedule. Begin tracking speed and quality metrics, such as time to process order from raw material to delivery.

Developed FreshDirect Mission Statement

We promise to serve our online

grocery customers that we deliver direct to your door Fresh products with high quality at low price. Use the management skills and advanced food techniques with great experience and innovative approach other online grocery companies all looking to expand but we are focusing perishable products with high quality and we will expand gradually.

Developed FreshDirect Vision Statement

FreshDirect employee are dedicated

and work with professionally and provided customer fresh and tasty products; we always focused on our customers what they wants and preparing customer data base on daily, weekly and monthly on regular basis. Our all stakeholders are equal rights and their advice and feedback are very importance to FreshDirect.

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6.2: Develop specific management objectives for evaluating the strategic plan For Successful organization objectives are always SMART; we may develop following management objectives for FreshDirect. FreshDirect objectives: y y y y FreshDirect making a milestone of its earnings growth to higher margin Boost return on equity investment to a higher figure Using advance food technology to maximum production with minimum cost There is no concept of middleman; so we safe the cost and provide low price of our products from customers. y Continue the drive for increase margins through proper inventory management and fewer, but better products.

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6.3: FreshDirect resources management There are four key resources areas to achieving strategies success: y y y y The management of people Access to and processing of information The management of finance to create financial value The management of technology

After identify the management resources factors; we may propose following strategic plan Human resources FreshDirect management keeps hard and soft approaches towards employees and other stakeholders. FreshDirect management must be competent to recruiting, training and promotions of the employees; they are able to reduce the cost; they have well known the needs and expectations of stakeholders; if there is any resistance they communicate and educate the people and try to divergence to convergence them. Financial resources FreshDirect has enough financial resources to meet its criteria; they had 30% to 40% gross margins that were higher than the industry average and was targeting revenue of $12 billion by 2007. The company had been on track, hitting $90 million in revenue in its first year with low cost. Financial management uses the assets or cash with responsibility and audit all the financial correspondence. They controlling the stock well and have good relationships with shareholders or financial creditors. Information sources A senior management of FreshDirect had very experts regarding their fields. Management must have information and mapping stakeholders. They have do some meeting / presentation and listen the stakeholders or get feedback from them. They also update the changing knowledge and applying of advance technology.

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Technology resources FreshDirect had innovative approach they spend to research of new recopies and new developing technology. FreshDirect encouraged the employees to learn the new knowledge and technology operating system. The key strategic issue innovation and technology should be seen as a means of underpinning innovation in FreshDirect. The technology itself may be easy to acquire by competitors so is not necessarily a source of advantage. Better technology resources increase the production growth; the management must be know how took advantage of this technology and its employee have enough training or knowledge to able to operate it. 5.4: Stakeholders Mapping (Power Interest Matrix) (source Johnson et al., 2008, p156)

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Task Seven: Implementation Plan of FreshDirect Strategy 7.1: Develop an outline timetable for the implementation of the strategy of FreshDirect FreshDirect may monitor that its plan is according to mission and vision statement; or its achieve our goals and targets. Control makes corrective action for FreshDirect; if things are not going according to plan. Establishing Standards: We may establish FreshDirect a standards orders to analysis of profitability, productivity, employment attitude and balance between short and long run goals. It is apparent from an examination of this list that strategic standard can be expressed as objectives. Methods of establishing standard include: y y y y y 2. Analysis of past performance Judgments based on a managers past experience Appraised standards Objectives, quantitative analysis of specific work situations Ambition targets of individual managers

Performance Evaluation

FreshDirect may assess the information feedback for control purpose should be y y y y y 3. Provided to the appropriate person Be in the relevant format Revels trends as well as the current situation Be supplied punctually Be cost effective Taking Corrective Action FreshDirect may take action that managerial

style and employment attitude is fine or need to corrective. It must be appreciated that

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some failures to attain standards are symptomatic of more fundamental causes. Changes in standards and overall objectives should not be ruled out. Management by Objectives (MBOs) We may assess of MBOs by setting annual of FreshDirect objectives. The objectives which are at the heart of MBO, spell out the individual actions needed to fulfill the units functional strategy and annual objectives. The MBOs provides a way to integrate and focus the efforts of all FreshDirect members on the goals of higher management and overall FreshDirect strategy. The process involved is one in which mangers agree specific, measurable goals with each employee on a regular basis. The employee is then responsible for attaining these goals within a certain time. After this time has elapsed, the employee and superior meet together to discuss results and establish new objectives. Advantage of MBOs MBOs have the advantage of ensuring better and more

effective management. It results clarification in organizational roles and structure and responsibilities of individuals for achieving the goals. Problems with MBOs The major drawbacks of MBO are that it presupposes fixing

of individual goals and responsibilities. It is difficult to make comparative ratings of individuals because each individuals goals are different from those of other in term of complexity.

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7.2: Design the FreshDirect to bring intended strategies to reality An organizations consists of the structure, process and the relationships. Organization configuration Structure - Processes - Relationships Structure types y The functional structure: In a function structure people are organized according to work they do. y A multidivisional structure: Division into semi-autonomous divisions with

its own revenues, expenditure, and profits. Communication between divisions is formal and restricted but influence is maintained by the headquarters power to hire and fire managers y The matrix structure: In a matrix organizational structure, people have to

report to two bosses, one being the head of the department in which they are working and the other being the leader or coordinator of the project. y Multinational or Transnational structures: The transnational structure

attempts to reconcile global scope and scale with local responsiveness. Choosing a structure An organizational structure must: y y Provide means of exercising appropriate control Respond to the challenges of rapid change, knowledge management and globalization y No single model of organization is suitable for all purposes and managers must make a choice as which challenges they regard as most pressing Comparison of structure Challenge Functional Multidivisional Matrix Transnational Project

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Control Change Knowledge

*** * **

** ** * **

* *** *** ***

** *** *** ***

** *** ** **

Internationalization *

* stars indicate typical capabilities to cope with each challenge, with three stars indicating high, two indicating medium and one indicating poor Dissemination Process we may design FreshDirect process by input and output controls. Direct or indirect input controls y Supervision: Direct supervision can be used for strategic controls and

also in crisis when firm and rapid action is vital. This requires that managers thoroughly understand all aspects of the business. y Planning process: Primarily budgetary control but also includes schemes

for standardization of work process (IS 9000 certification). y Self control: By promoting a high degree of motivation combined with autonomy leading to effective coordination of activities by individuals. y Cultural processes: Cultural control processes are indirect and

internalized by employees. Culturally conditioned behavior can provide effective response to environments that are both dynamic and complex. Training and development systems are important aspect of cultural control system. The negative side is that they can create rigidities of thought and behavior. Direct or indirect output controls y Performance targets: Performance can be judged against pre-set targets or

key performance indicators (KPIs). This system is objective and permits the establishment of supporting objectives that cascades down through the managerial structure.

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The negative side is that it can be difficult to identify appropriate KPIs, particularly non-financial targets References The Lecture Notes: Introduces you to the complete Strategy planning and implementation process and the various tools and techniques that can be used at each stage. Reference Materials and Samples: Refer also to reference material and samples provided. Case study prepared by Professor Alan B. Eisner of Pace University et al. Consult the following resources: Essential resources If learners cannot use their own organisations as the basis for assessment, access to local organisations will be a valuable resource. Textbooks Barney J Gaining and Sustaining Competitive Advantage, 4th Edition (Pearson Education, 2010) ISBN 0132479060 Cusumano M A and Markides C Strategic Thinking for the Next Economy (JosseyBass, 2001) ISBN 0787957291 De Wit, B and Meyer R Strategy: Process, Content, Context, 3rd Edition (Cengage Learning EMEA, 2004) ISBN 1861529643 Grant R Contemporary Strategy Analysis, 7th Edition (John Wiley and Sons, 2010) ISBN 0470747099 Gratton L Living Strategy: Putting People at the Heart of Corporate Purpose (Financial Times/Prentice Hall, 2000) ISBN 0273650157 Harrison J S Strategic Management of Resources and Relationships: Concepts and Cases (John Wiley and Sons, 2002) ISBN 0471222925 Johnson G, Scholes K and Whittington R Exploring Corporate Strategy, 8th Edition (Financial Times/Prentice Hall, 2008) ISBN 1408206935

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Johnson G and Scholes K Exploring Public Sector Strategy (Financial Times/Prentice Hall, 2000) ISBN 0273646877 Kaplan R and Norton D The Strategy-focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment (Harvard Business School Press, 2000) ISBN 1578512506 Lynch R Corporate Strategy, 4th Edition (Financial Times/Prentice Hall, 2005) ISBN 0273701789 McGee J, Thomas H and Wilson D Strategy: Analysis and Practice (McGraw-Hill Higher Education, 2005) ISBN 0077107055 Mintzberg H The Rise and Fall of Strategic Planning (Financial Times/Prentice Hall, 2000) ISBN 0273650378 Mintzberg H, Ahlstrand B and Lampel J Strategy Safari: Your Complete Guide Through the Wilds of Strategic Management, 2nd Edition (Financial Times/Prentice Hall, 2008) ISBN 0273719580 Pettigrew A M, Thomas H and Whittington R (Eds) The Handbook of Strategy and Management (Sage, 2006) ISBN 141292121X Stacey R D Strategic Management and Organisational Dynamics, 6th Edition (Financial Times/Prentice Hall, 2010) ISBN 0273725599

Journals Academy of Management Journal (Academy of Management) British Journal of Management (John Wiley and Sons) California Management Review (University of California, Berkeley) C.E.O Richard Braddock interview with business week Crazy Business Ideas That Actually Worked: FreshDirect By Ryan Goldberg Jul 17, 2010

European Management Journal (Elsevier) Harvard Business Review (Harvard Business Publishing)

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Journal of Business Strategy (Emerald) Journal of Management Studies (John Wiley and Sons) Long Range Planning (Elsevier) MIT Sloan Management Review (Massachusetts Institute of Technology) Strategic Change (John Wiley and Sons) Strategy and Leadership (Emerald) Websites www.ft.com Financial Times www.managers.org.uk Chartered Management Institute www.sps.org.uk Strategic Planning Society www.strategic plan and Implementation\FreshDirects Secret Ingredient Customer Focus - CRM Magazine.mht www.strategic plan and implementation\Fresh Direct Responds to Environmental Critics.mht