Ocado Business Strategy: Macro Environment, Capabilities, and Analysis

This report provides a comprehensive analysis of Ocado's business strategy, beginning with an introduction to business strategy and its importance. Section 1 focuses on a macro environmental analysis using PESTEL framework to identify political, economic, social, technological, environmental, and legal factors impacting Ocado's operations. Section 2 delves into Ocado's internal capabilities, evaluated using McKinsey's 7S model and TOWS matrix to assess strengths, weaknesses, opportunities, and threats. Section 3 applies Porter’s Five Forces model to evaluate the competitive forces within Ocado's market sector. Finally, Section 4 interprets and devises strategic planning for Ocado, drawing on a range of theories, concepts, and models. The report concludes with a summary of findings and a list of references.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
SECTION 1: Macro Environmental Analysis.................................................................................3
Applying appropriate frameworks analyse the impact and influence of the macro environment
on a given organisation and its strategies...............................................................................3
SECTION 2: Capability...................................................................................................................7
Analyse the internal environment and capabilities of Ocado using appropriate frameworks.7
SECTION 3: Competitive Analysis...............................................................................................10
Apply Porter’s Five Forces model and evaluate the competitive forces of a given market
sector for Ocado...................................................................................................................10
SECTION 4: Strategic Plan...........................................................................................................13
Applying a range of theories, concepts and models, interpret and devise strategic planning for
Ocado....................................................................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17

INTRODUCTION
Business strategy generally means the actions and decisions which is taken to achieve the
goals and objectives of the organisation. Thus, these strategies also helps to secure the
competitive position in the market. Without strategy company is nothing and even there will be
no smooth functioning of organisation (Chen, Eshleman and Soileau, 2017). Business strategy is
a plan which is implemented to create a place in the market and a strategic move which is used to
attract the people towards firm. Business strategy are further divided into various types they are
cost leadership, differentiation, focused cost leadership, focused differentiation (FERNIE,
FERNIE and MCKINNON, 2018). This project is based on the company Ocado which is one of
the largest food retailer organisation it has no physical shops they operate through internet, they
work according to the strategies which is formulated by them. The mission of the company is to
give their customers wow feeling through fair value and convenience.
SECTION 1: Macro Environmental Analysis
Applying appropriate frameworks analyse the impact and influence of the macro environment on
a given organisation and its strategies.
The strategic positioning of Ocado and its mission statement and long term goals
The strategic positioning of Ocado determines the performance of the company in the
market, the organisation strategic positions should be different from its competitors positions in
the market. Customers get to know easily that whether the organisation is competing on quality
or price (Lin and et. Al, 2021). The strategic positioning of Ocado is to provide the products to
its consumers with best quality. The five strategies through which Ocado can determine their
positioning are-
 Positioning based on their product characteristics
 Positioning based on price
 Positioning based on quality
 Positioning based on product use
 Positioning based on competition
Mission of Ocado-
The mission of Ocado is to make their customers feel wow experience with incredible
combination of unbeatable range, convenience and fair value.

Values of Ocado-
The company beliefs in the team work, by depending on each other they can transform
from something good to something great. Each individual can make a big difference by
achieving the goals by going extra mile (Martínez Hernández, Sánchez‐Medina and Díaz‐
Pichardo, 2021).
Objectives of Ocado-
The objective of Ocado is to provide the products to their customers conveniently without
going to supermarket every week. The organisation can create a new shopping experience for the
customers by meeting their needs and demands.
Ocado PESTEL Analysis
The Pestel analysis is conducted to identify the external factors that affect the operation
of the business (Quenum et. al 2019). It helps Ocado to analyse the forces of external
environment that could change the strategy and competitive edge. The macro environmental
factors are as follows-
PESTLE
Analysis
External factors to
consider
Factors affected within industry Importance
to
organisatio
n
Political Political instability If there is high political stability it
provides a friendly business environment
with market growth and the trust of
stakeholders get reduce in economic and
organisational performance if there is
political chaos (Olson and et. Al, 2021).
Ocado is established in different countries,
each country have its own political
tensions. Instabilities and tensions affect
the growth opportunity available to Ocado.
High
Change in
Government
If there is change in government policies it
will affect the performance of Ocado by
High

policies increasing environmental uncertainties.
Ocado must study the current and future
trends as fluctuations in government
policies may divert the priorities of
government towards the development of
industries.
Economic Economic Growth,
development and
infrastructure
The performance of Ocado get affected by
economic development of a country.
Ocado must understand the life cycle of
the industry, as entering into mature
industries is challenging for the company
due to its market saturation.
High
Labour Market
Conditions
The wage rate is determined by the
demand and supply of the labour (Liu and
Kong, 2021). Ocado have to study the
labour market conditions to know how to
attract the talent labour and use their skills
to improve the performance of
organisation.
Medium
Social Online shopping
trend
In Today's world, customer prefers to
purchase through online platforms, social
media and e-commerce have developed
online shopping behaviour among people.
Ocado have to know the online shopping
behaviour of customers on the basis of
generation differences.
High
Disposable income
and buying habits of
the consumer
The customers spending pattern are
determined by their purchasing power,
Ocado must have to invest their time to
know the trends and consumption
Medium

motivations that could define the
consumption behaviour of the customers.
Technological Technological
Innovations
Ocado have to look out the technological
innovation to be competitive in the market,
this helps to bring transformation in the
industry. Ocado can increase their market
share by keeping eye on emerging
technological innovation.
High
Research and
development
activities in new
technologies
Ocado should invest in research and
development to find out how the new
technologies can affect the value chain and
cost structure of company. Ocado must
invest in technologies to ascertain the
profit and re-invest that profits for future
technologies.
Medium
Environmental Waste management
Activities
Ocado have to work by minimising the
wastage, as environment pollution with
technological advancement has brings the
companies to use waste management
practices.
Medium
Climate Conditions A Change in weather and climate
conditions can enhance the cost of
operation that makes Ocado to make value
chain more flexible. These changes affects
the consumers spending pattern and the
have to revise its marketing and product
strategies (Salehi and Arianpoor, 2021).
High
Legal Intellectual Property
Law
This law is created to protect the patents
and valuable ideas of the organisation. If
the company haven't protect their
Medium

intellectual property rights it can results in
losing competitive advantage which reduce
the positioning of Ocado against its
competitors.
Consumer
Protection Law
Ocado need to understand the data
protection regulation so that they can
protect the customers data. Nowadays, it
becomes important issue because of
customers data and privacy (Prince, 2021).
High
SECTION 2: Capability
Analyse the internal environment and capabilities of Ocado using appropriate frameworks.
Ocado Retail Ltd is a British retail partner of Ocado Group. Ocado Retail Ltd is a high
growth organisation with its major business in UK. The company is headquartered in Hatfield,
England. Ocado management feels that their strong performance was mostly due to pandemic.
They think that their strategy should be revised as per the changing business environment and the
5 year goal that they have set. To evaluate internal capabilities of Ocado Retail Ltd McKinsey's
7S model is applied.

This model is applied on Ocado retail Ltd. To evaluate its internal capabilities and to
exploit new market opportunities by using these capabilities. McKinsey's 7s are classified into 2
categories: Hard S and Soft S. Strategy, structure and systems are considered as Hard S and
style, staff, skills and shared values are considered as Soft S (Stepnov, 2021).
Strategy: Strategy can be explained as a plan which helps in setting path to achieve the
organisational goals and objectives. This further helps in getting competitive advantage and
successful market capture for the expansion of the business. Ocado Retail Ltd will formulate its
strategy to get competitive advantage and improve organisational structure, governance and
culture which will help the business to be more efficient in every management function (Zhang,
2021). The company will also overlook the type of customers in the target market to formulate
such strategies.
Structure: With an efficient organisational structure any business or organisation can
maintain proper accountability and it also facilitates the management and members of the
organisation to easily access every business divisions, departments and units. Ocado Retail Ltd
has a good organisational structure but there is room for improvement in it. The management can
form a proper structure to facilitate the business in different cities and countries all over UK.
This structure is determined by considering the skills and expertise of the organisation and its
employees.
System: System refers to the process or procedure of performing business functions and
operations. This assists the management to evaluate business operations and functions and also to
regulate the system whenever it is required to exercise effective control over the workflow of the

organisation. Ocado Retail Ltd's management design business working regulations which helps
in achieving goals and objectives of the organisation.
Shared Values: It is explained as the values and beliefs that the members of the
organisation carry. It also refers to the core beliefs and values of the organisation which is
depicted and shown in the industry work culture and general work culture. Ocado Retail Ltd has
impressive core values which adds up to the image of the company, it further keeps on
strengthening its core values and beliefs.
Style: This includes the leadership styles adopted by the company. A leader chooses a
leadership style which helps him in providing direction, motivating people and achieving
objectives by implementing plans. There are 7 primary leadership styles; Autocratic,
authoritative, pacesetting, democratic, coaching, affiliate and Laissez-Faire. Ocado Retail Ltd
and its management will choose the most suitable leadership style as per their requirements.
Staff: It refers to the efficient management and skilled human resource of the
organisation. This part requires the organisation to take critical decisions related to its staff. Such
as training, reward system and recruiting. The management of Ocado Retail Ltd gives adequate
importance to human resource department and takes it into consideration in every city and
country it has business in.
Skills: This refers to the ability and capabilities of the company which enables the
management to achieve the set goals and objectives. Ocado Retail Ltd works on skill
development of its staff and members, which helps the company to achieve competitive
advantage in the market (Lavery, 2019).
To further evaluate the strategic capabilities of Ocado Retail Ltd TOWS matrix has been
used.
Internal Factors
External
Factors
Strength Weakness
Threat Ocado has various strengths
and threats. One its major
threat is growing strength of
local distributors as a result
of higher margins paid by
Ocado Ltd has a shortage of
skilled workforce which could
have helped the organisation
to achieve greater heights,
earn more profits, have more

the competitors and rivals.
This can be prevented as
Ocado Group produces a
variety of products and tries
to keep this innovation rate
consistent and growing. It
can provide consumers with
new innovative products so
that they will not shift to any
other brand for similar
products. This will further
prevent local distributors to
shift their distributing
services to other sellers and
rivals of Ocado Group Plc.
growth and expansion
opportunities along with a
scope to capture the market in
the industry. Not only does
Ocado has shortage of skilled
workforce but the whole
industry does. There is a huge
shortage of skilled workforce
in the global retail market
which prevents the industry to
maintain a steady growth and
also prevents the companies
to earn healthy profits. Ocado
will have to train its
workforce in order to be more
profitable which will increase
its cost.
Opportunities Customers are highly
satisfied with the products
and services of Ocado Retail
Ltd. The customer
relationship management
department has achieved
major success in
establishing healthy
relationship with the
customers and creating a
good brand image which
attracts potential customers.
This relationship with
consumers and good brand
Introduction of new
technology provides the
industry with great
opportunity of growth and
expansion. New technologies
and machines can be used in
order to reduce cost and earn
more profit by the companies.
At this point the investment in
technology is not that robust
in Ocado's vision and this can
result in a major shortfall and
decreasing profits of the
company. The company

image will help the
company in identifying new
trends in consumer
behaviour and grab that
opportunity in their favour.
This will provide great
opportunity to Ocado Ltd to
diversify into new product
categories and generate
more revenue and profit.
operates over a vast
geographical area which
means it will require major
investment to grow in this
sector.
SECTION 3: Competitive Analysis
Apply Porter’s Five Forces model and evaluate the competitive forces of a given market sector
for Ocado.
Ocado Porter's Five Forces Model Analysis
The analysis of Porter's Five Forces model helps Ocado to understand their competitive
position in the market and also it helps to ascertain the industry attractiveness. Through these
five forces the company can make strategic decisions to improve their performance for long term
survival.
The porters five forces are as follows-
 Threats of New Entrants-
A new entrants in the market creates a threat for the existing market players as new
entrants brings innovation and new ideas to do the things in a different way, it puts pressure on
Ocado to lower their price, cut the costs and provide products in new value to customers. Ocado
have to look out all the challenges which will be faced by them if new entrant will join the
market and they have to build a effective strategy to their competitive position. Ocado can tackle
the threat of new entrant by innovating new products so that customers get attracted and be loyal
towards the firm.
 Bargaining power of Suppliers-

In retail industry companies buy their raw materials from various suppliers, they have the
power to reduce the margin which is earned by Ocado in the market. Suppliers put pressure on
the company by using different strategies such as reducing quality and product availability or
increasing prices (de Baat Doelman, Joshi and Brüggen, 2021). They create an impact on
lowering the profitability of the organisation. The solution which can help Ocado is to build a
relationship with multiple suppliers and reduce the dependency on few suppliers. A contractual
relationship should be build between the suppliers and Ocado, it lowers the bargaining power of
suppliers but also improve the efficiency of its supply chain.
 Bargaining power of Buyers-
Customers plays an important role without customers business is nothing. They put the
pressure on the company to get high quality of products at reasonable price. The strong
bargaining power of buyers makes Ocado more competitive and reduce its profitability. This
force can be handle by building a strong customer base and innovating a new products. The
company can also use the marketing and promotional tools to reduce the bargaining power of
buyers.
 Threat of Substitute products-
If in the market there is substitute product it makes the competitive environment for
Ocado and other players. High Threat of substitute products reflects that customer can fulfil their
needs and requirement by using the other companies product or services. Ocado can minimise
the threat of substitute product by understanding the needs of their customers rather than
focusing on what customer is buying. The organisation have to show how they offer the better
quality of products than its competitors.
 Competitive Rivalry-
Competitive rivalry shows the number of competitors that are giving tough competition
to Ocado. High rivalry reflects that strong pressure can be handled by Ocado of its rival firms. In
this industry profit margin is low as they use aggressive targeting and pricing strategies against
each other. Ocado can handle the competitive rivalry issue by building a scale that helps them to
compete better in the market. The company can also collaborate with its competitors it increases
the size of the market.
Potential strategic positioning for Ocado by using Ansoff’s matrix