Marketing Plan: Webvan Case Analysis

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[. . .] Home Grocery is more of a discount operation that markets themselves as a discount vendor in which customers can order straight from the distributer. Each competitor relies on large warehouses to distribute products but not nearly on the scale that Webvan intends to develop.

Operating Model Comparison

Strategic Group

Core Capabilities

Partner Network

Value Configuration

Value Proposition

Customer Relationship

Distribution Channel

Target Customer

Few Markets

Outsource Locally

Partner with Local Retailers

Use Third Party Logistics

Bulk Discounts, Coupons, Loyalty

High Customer Intimacy

Primarily Outsourced

Busy Professionals with Families

Many Localities

Internally Warehousing

Partner with National Wholesalers

Internal Distrabution

Value Added Services, Menus, Recipes, Information

Convenience

Hub and Spoke

Suburban and Urban Families who Value Convenience

Nationwide Coverage

Marketing Limited Items that can be Easily Shiped

For Strategic Partnerships with National Brands

Outsource Majority of Logistics

Offer Deep Discounts on Goods that are Easily Transportable

Charged a Shipping Fee Based on Distance and Location

Shipped from one Distribution Center

Growing Customer Bases and Product Mix

Competitive Comparison Grid

Company

Low Price

Distribution

Variety

Partners

Availability

Streamline

1

2

3

3

1

Homeruns

3

2

3

2

1

Albertsons

3

2

2

3

1

Peapod

1

2

2

3

3

Home Grocer

3

3

2

3

2

Priceline

3

1

2

3

2

Netgrocer

2

2

2

3

3

Poor Characteristic

1

Fair Characteristic

2

Excellent Characteristic

3

SWOT Analysis

Strengths

Webvan has developed a good brand image. The company's leader's developed intelligent delivery systems based on high-technological infrastructure which allowed for competitive prices. The company also had friendly customer service and a flexible and safe payment system. Webvan's management team was composed of experienced professionals who had worked on startup opportunities before and knew how to develop a business. Webvan also advanced logistics technology and distribution channels, an inventory forecasting systems, and high levels of integration with suppliers.

Weaknesses

Webvan was the best capitalized of online grocers, however this served as a weakness that ultimately drove it to failure. Given the enormous amount of capital that the company utilized to try to create quantities of scale, this made the organization less scalable and less responsive to the market. The company placed a significant amount of capital on the line to test a business model that was relatively unproven. Therefore, the organization was overexposed to its ability to attract new customers.

Opportunities

Webvan has the opportunity to virtually revolutionize the way that consumers shop for groceries by utilizing the internet. This provides convenience to the consumer while simultaneously allowing for Webvan to avoid the need for brick and mortar outlets. By developing an entirely new distribution network, Webvan has unlimited potential to acquire market share from the traditional retailers.

Threats

The primary threat to Webvan is simply whether or not the user will adapt and prefer this method of shopping for grocery items. Their business model hinges on the ability of consumers to adopt and entirely new method of acquiring foods. There is undoubtedly some kind of psychological connection between seeing the food for yourself before you purchase it. To break down this barrier, Webvan's quality must be top-notch at all times. If a consumer receives a poor quality perishable item then they will undoubtedly lose faith in the new system. Other consumers will be leery to try online ordering at all. Webvan's success or failure lies with consumer adaption of the platform.

Company Assessment

Webvan's ambitious business model is attempting to revolutionize the way that consumers shop for groceries. The company intends to integrate closely with downstream suppliers to forecast and meet demand. They will work on a hub and spoke system with inventory being moved daily to fill gaps in the inventory in local warehouses. The company plans to use an automated picking system that is far superior in its effectiveness than what is found in the traditional system and eventually be able to deliver products on the same day as they are ordered. The system design has a high level of operational excellence and could provide consumers products in a significantly more efficient method overall than anything that has ever been tried before. The system design begins at the consumer doorstep and works backwards. The ability to go "the last mile" is very difficult in this industry as well as many others. Although it appears that Webvan had initial success with distribution center and the twelve different stations that this center served, it is difficult to know because their financial records from these years are not public information.

Marketing Strategy

To support its growth objectives, Webvan must utilize an effective marketing strategy. Marketing has many obstacles to overcome to attract new customers given the fact that ordering groceries online will undoubtedly feel alien to them. Even when consumers are convinced to give online ordering a try, they then must further be convinced to continue ordering in this way. This will require that consumers go through a learning curve of some kind. Consumers will have to be trained in some manner to rethink the way they shop in regards to grocery items.

Objectives

The ability to gain market share is the primary driver of the business model. The model requires that market share be quickly accumulated to support the large capital investments. However, the market share does not necessarily have to be an exorbitant figure. For example, Webvan started with only a fraction of a percentage of market share in their original territories. If the company could gain a percent and a half of market share then it could be profitable in the first five years. The company should aim for a two percent market share within five years.

Target Market

The ideal Target Market will be the suburban families who are already comfortable ordering online for goods in other industries. These individuals have already overcome much of the necessary training and it will be a small step to get them to try online shopping for groceries as well. The other market segments will be much harder to reach. However, the urban areas will likely be the next best fit. There is a high online presence in urban areas however these areas can also provide logistical challenges for deliveries.

Value Proposition

Webvan's claim to value is that it can offer convenience without sacrificing quality, selection, or price. Consumers will have all of the convenience of shopping from home while simultaneously being able to purchase the same variety of goods that they would from traditional distribution channels. Since shopping for groceries can be quite time consuming, this convenience has substantial value potential among consumer segments.

Distinct Competency

Webvan will undoubtedly have to provide operational excellence which will largely be driven by automation and technology. There is no way to be able to be the low cost leader, or even price competitive, without a high level of automation built into the business model. Furthermore, being able to deliver goods to a consumer within a thirty minute time interval is also tremendously challenging and will require sophisticated information systems to be able to drive this level of organizational coordination. Technology will also have to drive customer service as representatives will have to have instantaneous access to order information to be able to handle customer questions and requests. Operating at this level of excellence will be one of the most aggressive business models ever attempted.

Marketing Mix

Product

Webvan must stock a majority of the same goods that would be found at a brick and mortar grocery store; including perishable items. In fact the quality of the perishable items will be the defining point of the consumer perceptions of the entire model. If goods such as milk, cheese, and meats are not as fresh as they would find in their traditional shopping methods, then it is likely consumers will take advantage of the relatively low switching costs.

Place

Webvan will have a full distribution channel that is hidden entirely from the consumer. The consumer will only see the website and the delivery driver that delivers their orders and have no other means in which to base their perception on other than customer service. Therefore, all three facet of the business model will have to be world-class in order to attract and retain consumers.

Price

The company can differentiate its pricing structure in many ways to achieve value for consumers. Many different options can be utilized for price to allow for differentiation. For example, Webvan could implement either a delivery charge that could also be adjusted for led time and it could also charge a membership fee for the use of its service. Either option would give the company some flexibility in regards to price differentiation. However, with that being said, Webvan should aspire to be the low cost leader in the bulk of the items that they carry as this will support marketing efforts and customer attraction since it has already been identified that the industry is… [END OF PREVIEW]

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Webvan Case Analysis.  (2012, December 11).  Retrieved March 19, 2019, from https://www.essaytown.com/subjects/paper/webvan-case-analysis/7605369

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"Webvan Case Analysis."  Essaytown.com.  December 11, 2012.  Accessed March 19, 2019.
https://www.essaytown.com/subjects/paper/webvan-case-analysis/7605369.