Introduction
For modern entrepreneurship, economic growth means expansion and exploration of other markets, as well as other types of customers and their preferences. Thus, an organization continues to evolve and strengthen its grasp on its industry, accumulating the potential for gaining more weight in it (Zhang et al., 2018). The Food and Beverage Industry has become a particularly challenging environment for companies to dominate. FreshDirect is one of the organizations that has been striving to introduce innovative food delivery services using a digital application, thus taking a comparatively small niche. Although the specified niche has already been taken by a larger organization in China, FreshDirect still has strong changes at entering the Chinese market successfully.
Issues Associated with Entering the Chinese Market
When entering the Chinese food and beverage market, one should take note of the key characteristics of the specified environment in order to avoid the threats that the specified setting represents and use the available opportunities accordingly.
Cultural Issues
The first characteristic of the target market, of which FreshDirect must be readily aware of, is the difference in cultural perceptions and the key cultural specifics of customers’ behaviors (Blake, 2018). Thus, FreshDirect will set clear expectations for its performance and identify the standards and criteria that it will have to meet in order to enter the Chinese food and beverage market. First and most obvious, one should address the phenomenon of the increasing influence of the middle class population in China (Blake, 2018), the specified type of customers currently dictates the market demand, defining new trends and setting standards for the organizations (Paudyal et al., 2018). Therefore, it is crucial for FreshDirect to find balance between price and quality in order to meet the demands of the specified population.
Additionally, most Chinese customers within the food and beverage market tend to prefer packaged food to other types of the specified product, which is why FreshDirect should avoid the approach to marketing itself as the replacement of homemade food (Du et al., 2017). While the latter strategy would be appreciated in Europe and the U.S., Chinese customers are likely to ignore the specified product type (Du et al., 2017). Therefore, the propensity toward packaged food observed among Chinese customers must be reflected in FreshDirect’s range of product options, in order to meet cultural needs and expectations of its target Chinese audiences.
Likewise, the preference for Western food and beverages presently observed in the Chinese food and beverage market must be taken into consideration when shaping FreshDirect’s marketing approach. In fact, the described tendency makes the task of marketing FreshDirect’s products to its Chinese audiences significantly easier since the organization does not have to emulate Chinese food culture (Kendall et al., 2019). Instead, FreshDirect must incorporate the key markers and signifiers of what the Chinese audience perceives as Western food into its brand image.
Remarkably, the requirement for packaged food coexists quite naturally in the Chinese market with the increasing demand for healthy products. Namely, recent reports have shown that Chinese customers have been paying significantly more attention to whether the purchased products can be deemed as healthy (Kendall et al., 2018). The increasing awareness for healthy eating has been shaping Chinese customers’ buying behaviors recently, which can be considered an excellent sign for FreshDirect, which seeks to provide sustainable food options to its target audiences. In turn, the current circumstances in which the Chinese agriculture exists do not allow for a significant increase in the amount of available healthy products since only a small portion of the Chinese land is arable (Paul & Förste, 2019). Therefore, the Chinese food and beverage market will need to rely on imported products, which is why FreshDirect is likely to become a welcome member of the Chinese food and beverage market.
In order to approach the issue of catering to the needs of Chinese customers and their culture, one may need to apply Hofstede’s model of cultural dimensions as a framework for understanding the underlying motives of their choices. Specifically, the propensity toward collectivism as opposed to individualism, noticeable power distance, strong masculinity-femininity dichotomy, and high uncertainty avoidance in Chinese society allow modelling customers’ behaviors, thus forecasting their future choices (Rana et al., 2019). Therefore, to succeed in the target environment, FreshDirect will have to create a strong support system for its brand so that customers would homogenously choose it instead of the products by other companies. Similarly, the product will have to be diversified based on gender to appeal to Chinese buyers stronger.
Marketing Issues
When integrating into the environment of the Chinese market, the organization is likely to have several problems due to the presence of an incredibly powerful rival. As emphasized above, Meituan has been dominating the food and beverage industry of the Chinese market for a long time. Presently, the services of Meituan are used regularly, particularly, due to the pandemic (Hosen, 2020). However, Meituan also has several weaknesses that FreshDirect can exploit in order to gain a strong position in the target market, namely, the increased workload and the associated challenges for staff members, which often result in quality management issues (Tobin & Matsakis, 2021).
PESTEL Analysis
It is also worth bringing up that the political setting of China can be described as quite challenging for foreign businesses to enter or maintain business in due to the multiple restrictions imposed by the ruling part. Since the Chinese government dominated by the Communist Party, the legal standards for functioning in the state are significantly different from the ones in the U.S. (Guo et al., 2019). Moreover, the fact that China has been placed under multiple sanctions due to the current political confrontations implies that the process of integrating into its market and economic system is going to be challenging. The specified political changes are likely to have a large impact on FreshDirect’s operations in China since they will impair the company’s ability to collaborate with Chinese partners, including suppliers and retailers.
SWOT Analysis: FreshDirect Analysis
As the table above has shown, FreshDirect has a range of opportunities for keeping its presence in the Chinese market. Although the influence of Meituan is still very powerful, FreshDirect can use social media effectively to increase its impact and make its voice heard in the Chinese market (Lähteenmäki-Uutela et al., 2017). Specifically, the SWOT analysis above shows that FreshDirect will need to introduce an aggressive marketing strategy in order to be on par with its main rival, Meituan. The need to gain greater publicity stems from the necessity to attract the attention of target buyers, who will be reluctant to switch to FreshDirect unless a solid reason is provided.
Competition
The presence of a strong, nearly unbendable power represented by a massive competitor is the primary issue that FreshDirect will face as soon as it tries to enter the Chinese market. Currently, the target economic environment, namely, the market for companies offering digital apps for food and other products delivery is dominated by Meituan Waimai (Che et al., 2018). While providing all kinds of delivery services, Meituan centers 60% of its efforts on offering food delivery services (Sun et al., 2019). Having pioneered the Chinese digital food delivery environment, Meituan has had an iron grip on it since then (Shi et al. 2019). Although Ele.me, a rival organization, also had impressive chances for success and strived to retain its presence in the target market, Meituan managed to arrange a merger with Ele.me, assimilating the organization successfully (Shen, 2018).
As the Porter Analysis conducted below indicates, Meituan has been thriving in the Chinese food delivery market mostly due to the huge customer base that it has accumulated over the years of its experience (Lee, 2018). Moreover, the restrictions imposed on citizens recently due to the outbreak of coronavirus have necessitated the active use of digital delivery systems, which has skyrocketed Meituan’s influence and has been allowing the company to keep its ratings among its target audiences high (Lee, 2018).
Porter’s Five Forces Analysis
As the Five Forces Analysis results provided above indicate, FreshDirect will face very stiff competition in the Chinese market due to the power and influence that Meituan has garnered over the course of its operations. Nevertheless, the fact that FreshDirect has a clear advantage, namely, the focus on quality and communication with its target buyers (Blackburne & Buckley, 2019).
Market Entry: Strategy and Justification
The fact that FreshDirect does not have a middleman in its framework for product delivery, as well as the fact that the organization centers direct communication with customers in its approach are the main factors defining the selection of the described approach to market entry. As the assessment of FreshDirect’s main competitor has shown, the lack of focus on the feedback and the absence of a communication channel for processing customer feedback effectively are Meituan’s main disadvantages. The describe property of the competitor stands in direct opposition to what FreshDirect has been promoting in its approach to customer relationships (Zhou et al., 2020).
Thus, in light of the fact that FreshDirect has been viewing the dialogue with its buyers as its main focus, the idea of amplifying the specified approach toward increasing customer satisfaction seems a legitimate step. Specifically, it could be suggested that FreshDirect should consider a strategic alliance with some of its suppliers and other potential partners. Thus, the company will gain influence in the target market rather fast.
Moreover, the focus on the dialogue with customers must be promoted as one of the foundational business strategies that will elevate FreshDirect above its current competitors, primarily, Meituan. Since the latter has been defaulting on establishing a fast and effective communication channel with its customers due to a vast range of areas in which the company operates, FreshDirect will benefit profusely from an effective communication network (Wang et al., 2020). Listening to buyers and improving services accordingly will allow FreshDirect to win the Chinese audiences’ trust and appeal to the target demographic easier.
Therefore, FreshDirect will need a market entry model based on a combination of partnering and the development of a unique competitive advantage will be required. Thus, the organization will remain an important player both in local and global economies. Consequently, creating a framework for collaboration in the target market will help the company to progress.
Marketing Mix Decisions: Analysis
Product
To succeed in the Chinese market, FreshDirect will have to be very careful with the selection of the products that the organization will advertise to its target audiences. As the analysis of the Chinese food and beverage market has shown, it is presently overly saturated with traditional Chinese food, which is why emulating its characteristics and flavors in FreshDirect’s products would be unreasonable (Chen, 2020). Instead, the products offered by the organization should incorporate the characteristics of Western food to attract Chinese audiences.
Furthermore the issue of packaging needs to be addressed. Reports show that Chinese customers tend to prefer packaged food over other options, which is why FreshDirect should consider using containers when portioning its product (Paudyal et al., 2018). Finally, the propensity toward sustainability and healthy eating has been quite noticeable in the Chinese food and beverage market recently, which calls for the application of green and healthy choices such as vegetables and lean meat, as well as recyclable packaging. The described framework could be seen as an adaptation to home marketing since the focus on recycling as a part of lean management will help to build a sustainable approach similar to those of home markets.
Price
When considering the problematic aspects of FreshDirect’s main competitor’s operation in China, one will notice that Meituan has been struggling with keeping its prices reasonable (Zhou et al., 2020). Therefore, by introducing a pricing strategy based on discounts, sales, and overall lower pricing options, FreshDirect will be able to advance in the Chinese economic setting despite the presence of a powerful rival (Zhou et al., 2020).
Given the focus on collectivism and unity within the Chinese society, the discounts that FreshDirect will offer to its Chinese customers should also involve appreciation for the described concept of unity. Namely, referral programs offering significant discount and extra options for inviting a friend, as well as opportunity for saving when ordering food and drinks for several people (such as family dinners, parties, or a meal for two or more people), should be included into the company’s approach toward pricing (Kendall et al., 2019). Thus, FreshDirect will be able to gain a distinctive identity within the Chinese market and gain the trust and loyalty of its target customers.
Place
As emphasized above, FreshDirect operates entirely in the digital realm, which implies that the company needs to use appropriate digital marketing tools in order to gain a strong position in the specified setting. Namely, the use of social networks, such as Weibo and RenRen, for digital marketing, must become FreshDirect’s main strategy in advancing within the Chinese market (Sun et al., 2019).
Promotion
In order to promote its product effectively, FreshDirect will have to brand its products as distinctively exotic to Chinese people, while retaining the key cultural signifiers that will allow the target audience to relate to the brand. Specifically, FreshDirect will need to offer Western packaged food with the emphasis on its sustainable and healthy components. At the same time, FreshDirect will need to ensure that its brand image is clear and concise, with few elements and a direct message to the customers (Zhou & Wang, 2014). The specified message might need to be slightly adapted in order to meet culture-specific requirements of Chinese customers.
Namely, the message will need to incorporate the idea of seeking harmony with nature as one of the principal elements of the brand philosophy (Zhou & Wang, 2014). Thus, the existing brand image needs to undergo no major adjustments before being introduced to the target market. The current color scheme of green and orange, as well as a memorable logo with a lively fond is likely to be integrated into the Chinese environment organically.
In addition, social media marketing must be used to promote the product effectively. The company must consider social platforms of different types, such as WeChat, RenRen, as well as Weibo and Youku Tudou (Shao & Wang, 2020). In addition, the products will have to be featured on DianPing and DouBan to ensure that the target audience is reached. Furthermore, it is highly advisable that FreshDirect should use blogging as the means of attracting customers’ attention and increasing the traction of its products (Zhou et al., 2020). Thus, the company will keep its target customers updated while attracting new ones.
Finally, press releases and video, as well as the multitude of review sites that Chinese buyers frequent to learn about various food products, are not to be dismissed. The specified options provide a plethora of opportunities for positioning the brand as accessible, sustainable, and of high quality. Thus, the target demographic will become enthusiastic about trying it (Xie et al., 2020).
Although the four items analyzed above are typically seen as the crucial points of the Marketing Mix analysis, additional parameters have been added over the course of the theory development (Sugiyarti & Ardyan, 2017). Since FreshDirect is likely to struggle significantly when entering the Chinese food delivery market, extra steps must be taken to ensure a smooth transition from one economic environment to another, which is why the remaining aspects of the Marketing Mix have also been introduced into the analysis.
People
To gain a competitive advantage that will allow FreshDirect to compete alongside Meituan without being crushed by the rivalry, the company must focus on people-oriented practices. Currently, Meituan’s main problem is its inability to focus on individual needs of its multiple customers due to the dispersed focus of the company’s branding and management (Zheng et al., 2017). Therefore, FreshDirect, the products of which are less diversified, must build a strong connection with its target audiences (Zheng et al., 2017). Thus, FreshDirect will gain a strong leverage in the Chinese Food and Beverages industry. Specifically, the company will utilize digital tools, including applications and surveys, to obtain feedback from customers and deliver the services of the expected quality, which will allow FreshDirect to gain more power than its key rivals currently have.
Process
To ensure that the service is delivered to the end customer, FreshDirect will implement an intricate supply chain framework. Namely, the organization will maintain close contact with its delivery department so that the process of service delivery could be implemented impeccably. Additionally, to ensure proper follow-up, an application for customers to rate the service and leave their commentaries will be developed.
Physical
To ensure that the physical experience of target customers is positive, FreshDirect will need to create a series of outlets where customers can enjoy the food dully. Additionally, quality assurance at FreshDirect will need to include meticulous checking of the food quality. In addition, marketing the product as a natural addition to the existing Chinese food culture should be avoided since the target audience is interested in foreign product. Thus, the Western cultural aspect of the provided food should not be concealed or avoided; instead, it needs to remain one of the central elements of the marketing strategy and the brand image of FreshDirect (Lin et al., 2018). Thus, the organization will be able to get traction in the Chinese food and beverage industry quite quickly.
Conclusion
In order to enter the Chinese market successfully, FreshDirect will have to adopt a rather counterintuitive strategy and focus on positioning itself as a Western product. In addition, a strong emphasis must be placed on the packaging of food items and the promotion of sustainable and healthy eating. The described requirements are quite understandable given the fact that FreshDirect will have to appeal to middle-class Chinese customers, who have become the dominant force in the food and beverage market.
Furthermore, the organization must make effective use of the available social media outlets. By using the promotion options that social networks such as Weibo, Youku Tudou, DianPing, and DouBan provide, FreshDirect will be able to establish its presence in the Chinese market and become immediately recognizable among Chinese audiences. Therefore, FreshDirect currently has quite a number of chances at succeeding in the Chinese economic environment despite the presence of an incredibly strong rival.
Although FreshDirect is unlikely to ever surpass Meituan and take its place in the Chinese food and beverage market, the company will still be able to gain traction in the specified environment by appealing to the needs of Chinese customers. Specifically, the focus on foreign food and the promotion of healthy and sustainable products should be considered some of the key components of an effective and memorable brand image.
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