Business Strategy: Analysis of External and Internal Factors of Ocado

This report analyzes the impact of external business atmosphere on Ocado, evaluates the internal abilities and business atmosphere of the company using suitable models, and provides a strategic plan for the next five years.

Unit 32: Business
Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
P1 Utilise suitable models to analyse impact of external business atmosphere on the
company .....................................................................................................................................3
TASK 2 ...........................................................................................................................................5
P2 Evaluate the internal abilities and business atmosphere of the company using suitable
models.........................................................................................................................................5
TASK 3 ...........................................................................................................................................9
P3 Competitive analysis of the industry by application of Porter's five forces analysis ............9
TASK 4..........................................................................................................................................11
P4 Construction of strategic plan by using appropriate theories and models...........................11
CONCLUSION..............................................................................................................................13
REFRENCES.................................................................................................................................14

INTRODUCTION
Business strategy refers to collection of all decisions made and operations completed by
the organisation in order to fulfil business objectives and gain a competitive advantage over their
business rivals. The present report is based on the British organisation Ocado with their
headquarters in Hatfield, England and offers online retail grocery services to consumers across
the globe. This report includes analysis of extrinsic and intrinsic factors influencing the
enterprise. Competitive analysis of the industry of Ocado is also provided in this report. In
addition to this a strategic plan for the firm is developed in this report which directions and
tactical operations for the next five years.
MAIN BODY
TASK 1
P1 Utilise suitable models to analyse impact of external business atmosphere on the company
Background of the firm: Online retail giant Ocado was founded in the year 2000 and
provides online retail services to their customers. The organisation was listed in LSE in 2010 and
has won various awards for using advanced technology to deliver consumer goods across the UK
effectively. The organisation offers a wide range of goods and services which include various
products sold under their own label as well as products from M&S house brand. The company
does not own any physical outlets and delivers goods from their warehouses located across
Britain. The organisation currently employees more than 10,000 workers and was able to earn
revenue of £1,756.6 million in the year 2019.
Mission statement: The mission statement of the firm is to modify shopping experience
of consumers by offering them innovative and sustainable option to conventional grocery
purchasing.
Business Objectives:
 To continuously enhance business proposition
 To increase efficiency of various operations
 To perpetually improve technological structure
 To maximise consumer satisfaction
Analysis: The respective organisation has been able to secure profitable position in the
retail industry by utilising advanced technology in various operations and boost organisational

efficiency. Building partnerships with various retail organisation such as Marks and Spencer and
Morrison has helped the company expand their consumer base and construct a brand for the
enterprise .
Analysis of extrinsic factors affecting the company
PESTEL analysis: This is a framework used to identify and analyse various extrinsic
factors affecting the organisation. PESTEL analysis of Ocado is provided below: Political factors: Implementation of Brexit has introduced complicated legislation which
resulted in increase of prices of various food products. Apart from this Brexit
destabilised political environment of Europe (Borland and et. al., 2018). This is matter of
serious concern for the company as the supply chain is highly affected by the new laws.
Recently Ocado had to apologise for postponement of delivery and absence of certain
products due to the disruption in supply chain.
Positive Effect: The respective company has the opportunity to move to EU to avoid
costs and expand their business.
Negative effect: Disruption in supply chain and flow of goods from Eu to UK has
negative impact on Ocado. Economical factors: One of the major economic element influencing the daily
operations is continuous decrease in disposable income of the consumers due to global
pandemic. This has negatively affected the growth potential of the firm as the company
had a joint venture with Waitriose until 2019 which mainly caters to upper class
consumers. In addition to this UK economy has grown by 16% in third quarter of 2020
which is positive indicator for retail business firms.
Positive Effect: Increase in possibility of growth for Ocado due to Growth in UK GDP.
Negative effect: Decreasing disposable income of the consumers has negatively affected
sales of the online retailer.
 Social factors: The recent increase in online shopping and 117% increase in online
grocery business has helped the respective organisation achieve profits during
nationwide lock-down in Britain. The firm can exploit the opportunity given by
increasing usage of online shopping channels by young consumers all over the globe.
Increasing popularity of online shopping in developing nation is another social trend
affecting future potential of the firm.

Positive Effect: Increase in online business has positive effect on growth of the company.
Negative effect: Rising popularity of online retail has introduced international
competition in British online retail market which has negative impact on the respective company
due to increased competition.
 Technological Factors: Advanced technology such as Big Data, internet of things and
AI have provided business organisations in the retail sector opportunity to build efficient
infrastructure, reduce costs and increase profitability of the company (Browne and et. al.,
2018). Modifications in intellectual property legislations has allowed the company to
protect their technological infrastructure from misuse and gain competitive advantage by
securing such knowledge. Apart from this latest development in automation technology
allows the organisation to reduce labour costs and improve speed and accuracy of
activities related to warehousing and product delivery. This has helped the company
achieve their business goals of increasing efficiency through advanced technology.
Positive Effect: Automation and Big data allows the respective organisation to reduce
costs while improving consumer experience.
Negative effect: Utilisation of digital technology by Ocado increases the risk of cyber
crime.
 Environmental factors: One of the primary aim of the company is to offer consumers a
sustainable option for conventional shopping methods (Mubako, 2017). In order to
achieve this objective the company is using technology to reduce energy use and
enhance sustainability of the firm. The company can benefit from such initiatives as
consumers prefer firms which are sustainable and minimise environmental harm . Such
practices also give the organisation competitive advantage as the company stands out
from their rivals in terms of environment friendly practices.
Positive Effect: The respective firm can gain positive effect of reducing environmental
harm can enhance brand image of the company.
Negative effect: Utilisation of technology to reduce energy usage has negative effect of
increased costs of the company.
 Legal factors: Norwegian technology company Autostotre has filed patent infringement
lawsuit against the firm related to their smart platform technology used in warehousing
operations. Ocado has dismissed such claims and is aiming to fight legal battles to gain

ownership of their inventions. This has reduced reputation of the company and the
organisation needs to get rid of this legal matter as soon as possible in order to minimise
damage to reputation. Apart from the firm needs to modify their business plans
according to data protection laws implemented by the British parliament in order to
avoid any other legal troubles.
Positive Effect: Data protection laws can helps the respective company conduct their
business operations in a legal manner and protect the firm from legal troubles.
Negative effect: Lawsuits against Ocado have decreased their reputation.
Major elements of macro environment affecting the company include implementation of
Brexit and growth of online grocery sector. Recent advancement in technology is highly
beneficial for the firm as it will not only help improve efficiency of the company but also support
the organisation attain their objective of constructing environment friendly business. The
organisation needs to use AI, Big data and smart technology to minimise environmental harm,
improve productivity and exploit increasing usage of online shopping platforms .
TASK 2
P2 Evaluate the internal abilities and business atmosphere of the company using suitable models
McKinsey’s 7 S framework
Strategy
This element of the framework in considered with plans and schemes used by the
company in order to gain and secure beneficial position in their industry. The respective
company uses unique technology in the field of AI and robotics to increase the overall efficiency
of the company and minimise environmental harm (Sundharavadivel and Hemamalini, 2018) .
This helps the company develop unique brand image which emphasises their environment
friendly technique without compromising on maximising consumer satisfaction. Advanced and
unique technological infrastructure along with strategic partnerships with leading members of
the retail industry have helped the company secure beneficial position in the highly competitive
online retail sector. The company aims to improve shopping experience of customers by offering
sustainable option to various conventional purchasing practices.
Structure

Organisational structure of the company is described in this part of the framework. The
structure of the company includes distinct division of duties and responsibilities to each division,
clear description of authority and framework of policies covering all areas of business. This
helps the company accomplish various objectives swiftly by making a co-ordinated effort and
minimises miscommunication between staff members.
System
The daily operations conducted at the organisation and help the company create value are
described in this part of the analysis (Trigkas and et. al., 2018). The respective organisation does
not own any physical outlets despite operating in retail industry. The stores their products in
warehouses and delivers fresh products in limited time by using advance navigation technology
in their vehicles. The organisation owns hive style storehouses which are equipped with AI and
automation. This technology helps the company manage 220,000 orders per week which includes
the usage of 3,500 robots running daily. This helps the company quickly respond to consumers
orders as the warehousing system starts collecting food items as soon as the order is placed on
their official website. Apart from this consumers can also order food through voice command by
using any Amazon's smart device.
Shared Values
Overall values of the company which are showcased workplace culture and general moral
values of the organisation are described in this part of framework (Zaitseva and et. al., 2018) .
Every staff member of the respective company is committed to provide an innovative and
environmental friendly option to conventional grocery shopping. Major values of the company
include dedication to achieving business goals, emphasis on teamwork to accomplish tasks and
respecting each member of the company despite their position in organisational structure. The
organisation emphasises the need to minimise environmental harm by implementing various
initiatives which increase sustainability of the company and society.
Skills
As the respective organisation is heavily dependent on technology to perform their daily
activities, they have developed a workforce filled with employees which is digitally literate and
team of engineers who are passionate about helping the company construct and maintain superior
technological infrastructure. In order to continuously develop skills of their employees, the
organisation has build a training academy. The Ocado academy is digital training academy which

gives all data workers need related to learning and development. The organisation collects
feedback from new recruits in enhance their training sessions in a way which helps them boost
their abilities swiftly.
Styles
This part of the framework involves description about the leadership styles and methods
used by the company in order to manage their workforce (Chadraba and Springer, 2020) . The
respective firm understands the importance of effective leadership in contributing to the success
and growth of the company. The organisation utilises democratic leadership style in situations
related to formation of business strategy. This involves including every member of the firm in
decision making process and giving their opinions equal value and consideration. This reduces
disputes and helps the company understand different viewpoints in their decision making
process. In situations which involve forming decisions swiftly, leadership at Ocado uses
authoritarian leadership style to complete decision making process swiftly and gain results by
forming clear chain of command.
Staff
Each member of Ocado is given liberty and responsibility in their jobs. Apart from this
the organisation helps their employee develop new skills so that they can make career
advancements. The company aims to maintain a work culture which celebrates and values
cultural differences. This has helped construct a diverse workforce which involves employees
from various cultural and economical backgrounds. The organisation also gives their employees
various benefits such as health insurance, life insurance, income protection and pensions. This
has helped in developing talented workforce which is connected with the company and stays
committed to working with the organisation for a longer period of time.
Valuable Rare Imitable Non-substitutable
Human resources Yes No No No
Financial
resources
Yes Yes No No
Technological
resources
Yes Yes Yes No
Brand Image Yes Yes Yes Yes

 Valuable: Human resources, financial resources, brand image and technological
resources are valuable to the company and help the company satisfy their target consumer
base. Rare: Financial resources, technological resources and brand image of the company is
rare competency of the firm which is used by the firm to provide additional value to the
consumer. Imitable: Technological resources and brand image of the company is a rare and valuable
competency of Ocado which help the company gain sustainable competitive advantage.
 Non-sustainable: Brand image of Ocado to provide expectational shopping experience
through advanced technology is a non-substitutable competency of the firm.
TWOS matrix
Strength
Utilisation of advanced technology
Partnerships with well established
organisations
Weakness
Small consumer base in the UK
market
Minor growth outside core business
Opportunity
Expansion to other
countries and
developing
economies.
Licensing
technologically
advanced
warehouses to
generate profits.
 The organisation can use
their advanced technology to
expand in foreign markets
and exploit opportunities
present in developing
economies (Chen, 2019) .
 The organisation can
generate new sources of
income by licensing their
warehouses to various
partner firms.
 By expanding in global
markets the organisation
can increase their
consumers base.
 The enterprise can expand
their sources of income by
giving licenses to use their
technology and warehouses.
This will helps the company
develop new business
model.
Threat
Competition from
 The organisation can use
their technology such as AI
 The organisation needs to
expand their global presence

foreign online
retailers such as
Amazon.
Continuously
changing consumer
behaviour.
and robotics to improve their
delivery services and give
tough competition to online
retailers.
 The firm can use AI
technology to predict
changes in consumer
behaviour .
in order to tackle
competition and increase
growth .
 The organisation needs to
form strong partnerships
with foreign firms to
achieve success in foreign
markets.
TASK 3
P3 Competitive analysis of the industry by application of Porter's five forces analysis
Porter’s Five Forces analysis
Bargaining power of consumer: The industry in which Ocado operates in has consumers
with high bargaining power. This is because the consumers have variety of online retail
organisations to choose from. Small consumer base of the company has ability to seek increasing
discounts and avail offers which (Kumar and Lakshkar, 2017) .
Bargaining power of supplier: Bargaining power of suppliers in the British online retail
industry is low . This is because there are huge number of suppliers in comparison to few
consumers. This gives the ability to purchase quality amount of material needed to conduct
their daily operations at low costs. The organisation can further reduce bargaining power of
suppliers by by building supply chain with multipole suppliers.
Threat of new entrants: Online retail industry requires high amount of investment which
reduces the threat of new entrants by a significant amount. This results in low danger from new
entries. The organisation is able to maintain their business for longer time without new firms
taking their market share and reducing their profitability.
Threat of substitutes: There is low threat of substitutes in the industry in which the
organisation operates. This allows the company to generate high profits despite their small
consumer base and maintain stable growth even in adverse economic conditions (Sturgeon,
2019) .

Industry rivalry: The industry rivalry in the automation and software development
industry is high as various traditional retail organisations have developed online sales channels
to increase their profitability. In addition to this, international online retail firms are business
opponents of the respective organisations. The respective organisation faces tough competition
form various business firms which include TESCO, Waitrose, Asda, Sainabury's and various
other organisations.
Ansoff matrix
 Market penetration: This strategy involves increasing the market share of the company
by reducing their price of products and enhancing promotional techniques (Moskowitz,
2017). Ocado needs to use this strategy in order to gain beneficial market position. The
organisation needs to promote their CSR initiatives, improve technology to reduce prices
and partner organisations to increase their sales.
 Product development: This strategy involves developing new range of products or
services and offer them in heir existing market . The respective firm neds to use new
technology such as drones to offer fast delivery services for their current consumer base.
This will help the company stand out from their competition and develop new source of
income.
 Market development: This strategy involves expanding to new market which helps the
organisation find new consumers and increase their international presence (Zhao, Dong
and Cheng, 2018). The respective firm neds to expand to global markets and developing
economises which provides huge opportunities for growth .
 Product diversification: This strategy includes entering new market with recently
developed products. The organisation needs to enter developing countries which have
developed technological infrastructure and low competition in online retail sector. The
organisation neds to offer new products such as advanced technology or service in order
to gain increase their sales, international presence and exploit opportunities in regions
which have low competition.
The respective firm needs to use product development strategy and develop a new service by
using technological advancements and creating services which help the company gain
competitive advantage. This strategy is useful for the company as they it does not require heavy

investment and the organisation can use their existing technological resources to develop a new
product.
Porter's generic strategies
Cost leadership strategy: It is a strategy where charging of lower prices can help in
enhancement of present market share. There can be few expenses that can lead to managing of
cost by enhancing the share of revenue. Such
Differentiation Strategy: It is a Strategy in which customers can be attracted by use of
some unique approach,. It is based on durability & utility of business. Ocado group is a online
groceries brand that is dealing products based on getting higher value as compared to competitor
brand amazon. The main differentiation feature of this brand is that they posses no chain of
stores and are working towards home deliverers delivery through their warehouses. It is one such
aspects that can be used in achievement of the present laid strategy .
Focus strategy: In this strategy organisations are focussing on one or more specific target
segment of customers that is generally denotes as niche markets segment (Aguinaldo and et. al.,
2019). Ocado is focussing on approaching a complete different segment of customers compared
to their present base. They are willing to reach to a new territory of customers by using of some
promotion and marketing strategies There is focus on commercial advertising by television and
digital marketing platforms.
From above mentioned different strategies of porters generic model it can be said that in
case of present strategic plan one of the suitable strategy is to use a differentiation approach that
can help them in expansion of their business and revenue according to the available time period.
TASK 4
P4 Construction of strategic plan by using appropriate theories and models
Business strategy The business strategy suitable for the company involves developing
their technology to enter new markets and exploit opportunities in the developing industries. In
the next 5 years the organisation needs to develop new services by using technological
advancements in the field of automation and robotics. This will help the company increase their
consumer base and enhance their product portfolio . This strategy will help the company achieve
their business objective of improving consumer satisfaction and technological infrastructure.
SMART Objectives

Specific Measurable Attainable Realistic Time bound
Ocodo needs to
develop
technological
infrastructure of
the company in
order to expand
into developing
countries in Asia.
The main aim of
this strategic plan
is to increase
revenue form
domestic market
by 10% and
successfully
expand in Asian
retail market.
Ocado needs to
measure their
international
expansion in Asia
with the help of
key performance
indicators such as
growth in revenue
and operational
cash flow.
This goal of the
company to
enhance their
technological
competencies and
use them to
expand in Asian
online retail
business is
attainable as
growing
economies in
Asia provide high
growth
opportunity.
Ocado has
technological
competency
which needs to be
improved in order
to reduce costs in
their current
market and
successfully
expand in Asian
markets which
have high growth
opportunities.
The organisation
needs to enhance
technological
capabilities in the
next five years
with the aim of
increasing
domestic sales by
10%.
STP analysis
Segmentation:The firm's current segmentation practices include demographic
segmentation and dividing their consumers on the basis of their age and cultural backgrounds .
This information along collected by AI technology which also helps the company predict future
behaviour of their consumer groups . This will help the company achieve their business objective
of increasing consumer satisfaction by giving them experience according to their expectations.
Targeting: The firm targets consumers from all economic backgrounds by offering wide
variety of products at competitive prices. The organisation needs to increase their consumer
group by offering exotic food items with fast delivery speed. This could be accomplished by
partnering with foreign well established brands.

Positioning: The organisation needs to position their brand to every consumer in UK and
reach every geographical location by constructing efficient delivery routes in 5 years and using
automation technology such as Drones to deliver their products .
Financial Requirements
The financial requirements for this five year plan include monetary funds of £5 million.
Monitoring and controlling
In order to supervise effective implementation of this plan the organisation needs to take
corrective action to and construct both long term and short term goals. The organisation needs to
take regular feedback from major stakeholders in order to gain information about the
performance of their strategy . Apart for this key performance indicators need to be used by
Ocodo in order to continuously track progress of their business strategy and ensure that their firm
is moving according to objectives devised in the business plan. Revenue growth is a key
performance indicator which helps in determining financial growth of the firm. Ocado needs to
utilise this in order to monitor their international expansion efforts and attain goals of increasing
domestic sales by 10% in the next five years. In addition to this the company needs to utilise
growth in profit margin which is another key performance indicator for monitoring their business
strategy for international expansion.

CONCLUSION
From the the compete discussion it has been concluded that for the smooth flow of the
organisation activity's and its sustainability in competitive environment along with success is can
be achieve by the effective business strategy and for the development of effective businesses
plan strategy organisation need to conduct the various research for the analysis of external and
internal environment factors. Because they impact the organisation performance in different way.
For the study of macro and micro environmental factors there are some models and tools which
aid to analyses this factors correctly such as PESTEL analysis, TOWS analysis, for macro and
porter's five force model for internal factor analysis.

REFRENCES
Aguinaldo and et. al., 2019. Climate change perspectives and adaptation strategies of business
enterprises: A case study from Italy. International Journal of Sustainable Development
& World Ecology, 26(2). pp.129-140.
Borland and et. al., 2018. Creating theory for business strategies for sustainability and climate
change. Business Strategies for Sustainability. pp.65-80.
Browne and et. al., 2018. Shaking up business models with creative strategies: when tried and
true stops working. Journal of Business Strategy.
Chadraba, P.G. and Springer, R. eds., 2020. Business strategies for economies in transition: book
of readings on CEE countries. Cambridge Scholars Publishing.
Chen, H., 2019. A pilot study of business travelers’ stress-coping strategies. Tourism and
Hospitality Research, 19(2). pp.252-258.
Donnelly, R., 2021. Nurturing a teaching and learning community in business education:
Disseminating practical strategies from a Technological University. Journal of
Education for Business, pp.1-8.
Kumar, K. and Lakshkar, S.K., 2017. A study of innovation and diffusion process in the context
of digitalized business strategies. International Journal in Management & Social
Science, 5(3). pp.74-85.
Moskowitz, S., 2017. Cybercrime and business: strategies for global corporate security.
Butterworth-Heinemann.
Mubako, A., 2017. Digital transformation. The realignment of information technology and
business strategies for retailers in South Africa. Anchor Academic Publishing.
Sundharavadivel, G. and Hemamalini, D.K., 2018. Business strategies in corporate social
responsibility. International Journal of Research in Social Sciences, 8(6), pp.532-538.
Trigkas and et. al., 2020. Business model for developing strategies of forest cooperatives.
Evidence from an emerging business environment in Greece. Journal of Sustainable
Forestry, 39(3). pp.259-282.
Tsuruta, D., 2018. Do working capital strategies matter? Evidence from small business data in
Japan. Asia‐Pacific Journal of Financial Studies, 47(6), pp.824-857.
Zaitseva and et. al., 2018. The features of the marketing strategies formulation and their
application in hotels (by the example of business-hotels). Modern Journal of Language
Teaching Methods, 8(10). pp.642-651.
Zhao, M., Dong, C. and Cheng, T.C.E., 2018. Quality disclosure strategies for small business
enterprises in a competitive marketplace. European Journal of Operational
Research, 270(1). pp.218-229.