NX/LD 9628 Graduate Certificate in Business
NX/LD 9628 Graduate Certificate in Business
1. Introduction
The following management report will be focused on the current business environment effectively in the industry where PESTLE analysis and Porter’s five forces will be focused analytically along with analysing companies’ strategic capabilities. In addition to that, VRIO and value chain framework would be structured that would lead to a comprehension of business strategies. Through this report, a competitive advantage of the organisation will be identified along with analysing of the external business industry.
Overview of the company
The online grocery industry is increasingly having a strategic growth with numerous investments in technology innovation that has created a sense of development. Regarding this, the following management report has been produced focusing on Ocado Group operating in the online retail grocery industry. The organisation has been identified to be offering services in terms of grocery and consumer goods. Organisation has been identified to be one of the true pioneers of the online grocery market while having over 50,000 products along with including big brand names, for example, Ocado own-label items and M&S food (SupplyOcado, 2023). Besides this, the organisation has numerous competitors existing in the industry, for example, Walmart, Tesco, Sainsbury’s, Asda, and numerous others (Global Data, 2023).
| 2022 | 2021 | 2020 | 2019 | 2018 | |
| Revenue | $3,133.703 | $3,438.16 | $2,987.502 | $2,237.03 | $2,143.991 |
| Gross profit | $1,202.096 | $1,283.719 | $1,042.769 | $753.657 | $734.197 |
| Operating Income | $-564.211 | $-185.237 | $11.275 | $-236.617 | $-42.778 |
Table 1: Financial statistics of Ocado Group in between 5 years (Source: Macro Trends, 2023)
In this connection, as referred in a table 1, the appropriate context of financial statistics in terms of organisation has been showcased in between 5 years that reflects organisational position in the existing industry. In terms of determining in measuring business success a few difficulties have been noted that impact on the entire management of organisations, for example, not aligning metrics with goals, improper collecting and analysing data along with poor overall system implementation (Suša Vugec et al., 2020).
2. Analysis of the current business environment affecting the industry
While most grocers still primarily sell their storefronts, internet sales significantly increased during the outbreak because so many businesses swiftly modified their product lines and business practices (Weersink et al., 2021). In order to satisfy the demand of customers there are going to be more opportunities in the upcoming year driven by the growth of technology development, rising competition, and changing consumer expectations.
Internet users have expanded to include more customers, online grocery shopping was more popular before the outbreak, especially among young, wealthy urban families who wanted to have a full basket delivered right to their houses (Gu et al., 2021). In this connection, from the referred figure above, it can be stated that the online grocery market is significantly very aggressive and competitive in the UK
PESTLE analysis
A common approach for obtaining a broad overview of an industry landscape is a PESTLE analysis. It enables an organisation to get a sense of the variables that could affect a new venture or industry. The framework has a limitation because it requires frequent repetition of the procedure to be successful (Thomas et al., 2021).
Furthermore, considering Ocado Group and the online retail industry a PESTLE analysis will be presented below.
| Factors | Justification | Implication |
| Political | ● The political stability of the UK is 0.54 points (The Global Economy, 2023)
● The government are supporting business in terms of funds and capital |
Positive |
| Economical | ● The current GDP of the United Kingdom is $3070.67 billion (Trading Economics, 2023)
● Britain’s inflation fell to 4.6% in October 2023 (Trading Economics, 2023) |
Positive |
| Social | ● In May, retail food sales in the UK rose at an annual rate of 9.6% (Romei, 2023)
● Consumers are more into fast-delivery services in online shopping |
Positive |
| Technological | ● AI systems assist merchants in analysing the product varieties in their stores, examining past sales data, and identifying warning signs of impending stockouts (Weber & Schütte, 2019)
● In 2021, the net amount of money spent by the UK government on research and development (R&D) was £14.0 billion (Gov, 2023) |
Positive |
| Legal | ● General Data Protection Regulation (GDPR) (GDPR, 2023)
● Consumer Rights Act (Gov, 2023) |
Negative |
| Environmental | ● Energy-intensive practices should be followed by organisations for better ecological benefits (Hasan et al., 2021)
● Sustainable business operations are the mainstream company practices |
Negative |
Table 2: PESTLE analysis
Political factor
It has been identified that the political factor is reflecting a positive impact on the Ocado Group’s business operation. For instance, the government is supporting businesses with funds and capital, other than this, there is political stability in the UK with 0.54 points reflecting a harmonious business landscape (The Global Economy, 2023).
Economical factor
Referring to the economic factors, the current GDP of the United Kingdom is reflected as approximately $3070.67 billion (Trading Economics, 2023).
Other than this, as reflected in the above figure, the inflation of the UK has fallen 4.6% in October 2023 (Trading Economics, 2023). This reflects a positive impact on Ocado’s business construct with better future possibilities in terms of economic aspects.
Social factor
It has been identified that the social context of the UK reflects a positive aspect of the business operation, as the retail food sale has risen annually by 9.6% (Romei, 2023). Other than this, consumers are having a context of fast delivery services in online shopping which is required to be considered by Ocado Group.
Technological factor
Considering technological factors, the positive implication has been noted for the Ocado group as the AI system has been identified to be extensively used by online grocery businesses, in terms of examination of past sales, analysing data, and stocks. Other than this, the government is also focusing on improving R&D expenditure, which the government has spent £14.0 billion in 2021 (Gov, 2023).
Legal factor
Legal factors are the most critical threat for an organisation as significant laws, for example, GDPR and Consumer Rights Act have been noted in the UK retail industry, which can negatively impact Ocado Group’s business operation with several restrictions (GDPR, 2023) (Gov, 2023).
Environmental factor
The environmental factor is critically focused on sustainable and ethical business practices, which might negatively impact Ocado Group’s business operation. For example, it has been noted that energy-intensive practices and sustainable business operations are the main aspects that businesses focus on in terms of reflecting positively on the environment (Hasan et al., 2021).
Porter’s Five Forces
Porter’s Five Forces is an approach that assists in determining the strengths and weaknesses of every company by identifying and analysing the five competitive forces that impact all industries. This framework, however, has limitations because it is a short-term analysis and the data is subject to sudden changes (Budiharso, Makruf & Mujahid, 2020).
Considering the understanding, Porter’s 5 forces would be identified referring to Ocado’s business operation with adequate impact and justification.
| Forces | Impact | Justification |
| Threat of New Entrants | Medium | New entrants to the retail space can bring innovation and fresh approaches that can pressurise Ocado Group’s value propositions by lowering prices and cutting expenses. However, operating in a retail business requires huge capital and brand value, which create a median impact on the business operation. |
| Bargaining Power of Buyers | High | A major contributing aspect to customers’ bargaining power is the abundance of rival retailers in the market. Companies like Sainsbury’s, Greggs, Coca-Cola, Imperial Brands, and others are examples (MarketBeat, 2023). This puts a lot of pressure on Ocado Group and its business operation reflecting a high bargaining power. |
| Bargaining Power of Suppliers | Low | Numerous suppliers typically supply retail stores with their goods. For any retailer, there are several suppliers offering the same products, which gives the retailer the option to switch to a different supplier (Agrawal & Lee, 2019). As a result, the negotiation power of suppliers is low. |
| Threats of Substitute | Medium | Ocado Group sales products are meant to fulfil basic necessities despite the fact that there are many products that can be used in place of actual ones. Besides this, the organisational product portfolio can allow the company to have a strengthened position in the marketplace (Global Data, 2023). |
| Competitive rivalry | High | The competitive rivalry for Ocado Group is significantly high, as it has been noted that there are numerous competitors in the existing industry for example Sainsbury’s, Coca-Cola, Greggs, Imperial Brands, and others. |
Table 3: Porter’s Five Forces
Main opportunities and threats
Referring to the opportunities identified in the online grocery industry of the UK, specifically considering Ocado Group would be the support of the government along with economic context, which reflects positive future operation for the businesses. Other than this, a context of social support has been identified as there is an increase in consumer spending in terms of retail sales (Romei, 2023). Moreover, a technological aspect is one of the other opportunities for Ocado Group, as there is a growing concern about considering AI in business operations.
Besides this, it has been noted that there are numerous threats for Ocado Group in the existing current business environment, for example, in terms of legal laws that can restrict the entire business operation of the company. Other than this, sustainable and energy incentive practices should be incorporated into the organisation for an environmental aspect that showcases and a better understanding of ecological benefit (Hasan et al., 2021). In addition, there are threats in terms of consumer preferences as there is an extensive level of competitiveness in the industry with numerous organisations, for example, Coca-Cola, Sainsbury’s, Greggs, and numerous others. Regarding these threats, while influencing their opportunities, the organisations are required to focus on an adequate understanding of competitiveness and the potential strategies and practises the competitors have considered operating successfully.
3. Analysis of the company’s strategic capabilities
Companies are more reliably delivering projects and services on schedule by practising effective resource management. Through this, organisations have been able to improve the resource management while enhancing forecasts and better insights into resource availability. In this context, the tangible resources of Ocado Group are land, equipment, materials, supplies, facilities, and infrastructure (Dalla Longa, 2023). On the other hand, intangible resources are brand reputation, patent and copyright, intellectual property, trade names, goodwill, databases and trade secrets, customer experience, video and audiovisual materials, customer and supplier relationships, and marketing rights (Cuthbertson & Furseth, 2022).
Analysis of Ocado Group’s resources and capabilities through VRIO
| Resources | Valuable | Rare | Imitable | Organised | Competitive advantage |
| Market presence | ✓ | ✓ | ✓ | Sustainable | |
| Supply chain management | ✓ | ✓ | ✓ | ✓ | competitive advantages |
| Marketing | ✓ | ✓ | ✓ | Temporary | |
| Reputation and brand image | ✓ | ✓ | ✓ | Sustainable competitive advantage | |
| Customer service and support | ✓ | ✓ | ✓ | Long-term
|
|
| Technological developments and innovation | ✓ | ✓ | ✓ | Long-term
|
Table 4: VRIO analysis
Based on the above VRIO analysis, it has been observed that the tangible resources of the organisation including its market presence, supply chain management, and technology have been positively contributing to the organisational competitiveness. Specifically, in terms of market presence, the organisation has been operating in Britain, France, Canada, Bulgaria, Poland, South Korea, the US, Sweden, and Japan (Global Data, 2023). On the other hand, intangible resources such as effective customer service and support marketing, reputation, and technology innovations are also valuable resources of the organisation that are not only improving its overall capability but also positively contributing to its long-term success. In particular, the Ocado smart platform has been emphasizing the usage of robotics automation and artificial intelligence in order to satisfy customers’ unique demand regarding online grocery delivery (Ocado Group, (2023). Hence, the organisation has been able to ensure its financial stability.
Value Chain framework
Through Porter’s value chain framework, the activities of Ocado Group that have been contributing to its competitive advantage can be analysed thoroughly (Refer to appendix). Through this framework, it is possible to analyse the primary activities and supportive activities of businesses (Eisenreich et al., 2022).
Primary activities
In terms of inbound logistics, Ocado Group has been observed to operate with automatic warehouses along with the usage of advanced robotics and other technologies (Ocado Group, 2023). Along with this type of tangible resource, the company has also been using effective software and algorithms in order to optimise inventory management for order fulfilment payment. In order to hold frozen goods before delivery to the CFCs for client pickup and delivery, Ocado uses an outside consolidator called Lineage and for frozen products to be launched, suppliers must ship to Lineage (Ocado Group, 2023). On the other hand, in terms of outbound logistics, tangible resources of the company include a fleet of its product delivery vehicles, which are equipped with effective cooling systems in order to transfer groceries.
Additionally, the operational management of the organisation also includes the usage of a range of cutting-edge technologies including automated packing systems and picking systems (Ocado Group, 2023). The organisation also has a great focus on sales and marketing initiatives and in this regard, the company has been effectively using its mobile application and website along with social media platforms. Thus, the organisation has ensured growth in its revenue throughout the years and it was approximately GBP 1.60 billion in 2018 which became approximately GBP 2.51 billion in 2022 (Financial Times, 2023). Services are one of the most specific primary activities of the company that has been emphasizing effective customer service, through CFCs (Customer Fulfilment Centres), by providing knowledgeable customer support and complaint resolution.
Supportive activities
In terms of procurement, a great focus of Ocado Group on managing effective relationships with suppliers in order to get freshly produced and packaged products, along with its effective expertise for supply chain management has been observed (Ocado Group, 2023). On the other hand, the in-house team of the organisation for technology development is one of the most significant tangible resources of the organisation, which has also been playing a role of supportive activity to ensure its competitiveness. For evidence, the company is at the forefront of software and hardware engineering, with over 2,500 technologists on its staff and over 2400 granted and filed patents related to its technologies (Ocado Group, 2023).
Through HRM (human resource management), the company has been emphasizing having a positive work culture by providing employees with effective training programs and growth opportunities. As a result of this, the company currently has approximately 19,744 employees (Global Data, 2023). However, in terms of HRM the organisation has been encountering challenges, as it has not been able to satisfy employees with working conditions and effective payments (Wickens, 2021). In terms of firm infrastructure, the company has headquarters and customer service centres. In particular, the organisation has CFCs at various locations such as Hatfield, Dordon, Andover, Bristol, and others (Ocado Group, 2023).
The external environmental analysis of the company indicates that there is extreme competition in the retail industry and technology, as a factor that has been influencing the overall business activities of a retail company like Ocado Group. With a great focus on the incorporation of advanced technologies, the organisation has ensured its competitiveness in the global market. Along with the focus of the company on technology and innovation, its global presence, supply chain initiatives, and reputation can also be seen as the specific strengths of the company, which are helping it to tackle competitive rivalry. As a result, the organisation has ensured effective revenue growth (Financial Times, 2023).
However, a weakness of the organisation has been observed in terms of HRM and satisfying its employees through effective payment, who are also tangible resources. In this regard, dissatisfaction of employees can harm the level of employee engagement as well as overall organisational performance (Winasis, Riyanto, & Ariyanto, 2020). Thus, there is a great need for the company to emphasize satisfying employees for enhancing its competitive advantages and acquiring a great position in the market. As the market capitalisation of the company has declined significantly and became approximately $6.17 billion in 2023, which was approximately $28.54 billion in 2021, the company needs to emphasize maintaining all of its tangible and intangible resources effectively to ensure organisational growth (Companies Market Cap, 2023).
4. Conclusion
Based on the overall management report numerous key identification has been acquired. A few strategic aspects that need to be addressed by the company management in the future refer to improved focus on consumer preferences, legal regulations along with sustainable and environmental prospects. Apart from this, an adequate understanding of competitiveness in the industry should be noted. Apart from that, the strengths such as effective market presence, financial growth, and supply chain management are positively contributing to the organisational success of Ocado Group. However, a weakness of the company has been observed in terms of effectively managing employees, who are also effective tangible resources.
Recommendation using SAFe criteria
| Recommendation | To focus on investing in sustainable practices | |
| Suitability | Acceptability | Feasibility |
| This is suitable as it can improve overall organisational CSR context | It is acceptable in terms of company management for measuring long-term growth | It is feasible, as the organisation has a range of resources and capabilities with a better reputation and customer-supplier relationship |
| Recommendation | To communicate business goals with employees and suppliers | |
| Suitability | Acceptability | Feasibility |
| This is suitable, as it can improve overall brand performance | It is acceptable in terms of increasing overall organisational internal productivity | This is feasible, as the organisation has better infrastructures with equipment and material that can impact on overall relationship management and business success |
| Recommendation | To improve business analytics | |
| Suitability | Acceptability | Feasibility |
| This recommendation is suitable, as in current existing marketplace understanding consumer preferences is essential and business analytics can impact on it positively | This is acceptable, as through this organisation would be able to operate successfully while balancing the bargaining power of consumer adequately | This is feasible, as the organisation has adequate range of resources and capabilities that impacts the overall goodwill and brand success |
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