Business Environment Analysis of Ocado: A Comprehensive Report

This report provides a comprehensive analysis of Ocado, an online supermarket operating in the UK. It begins with an overview of Ocado's history, organizational structure, and management, including the roles of the Board of Directors and its relationship with stakeholders. The report then delves into the impact of external environmental influences on Ocado through a detailed PESTLE analysis, examining political, economic, social, technological, legal, and environmental factors. The analysis highlights how these factors affect Ocado's operations, profitability, and strategic planning, providing insights into the company's ability to adapt to changing market conditions and maintain a competitive edge. The report concludes by summarizing the key findings and implications of the analysis for Ocado's future.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK ..............................................................................................................................................1
1. Examine The Management Structure And The Governance Of Ocado..................................1
2. Assess and evaluate the effects of external environmental influences on Ocado...................6
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Ocado is an english online supermarket, working in Internet Retail Industry. It was
founded in year 2000 by Jonathan Faiman, Jason Gissing and Tim Steiner. It has no stores. The
company does only home deliveries from its warehouses. It has its headquarter in Hatfield,
Hertfordshiren, UK. Company only serves its services in England and Wales (Our story so far,
2019). Report will highlight about overview, history and organizational structure of the
company. It will also tell about the stakeholders and their relationships with Board of Directors.
This report also explain about the importance of Pestle analysis for the company and its
influences on the company.
TASK
1. Examine The Management Structure And The Governance Of Ocado
OVERVIEW
Ocado PLC is an English Online Supermarket who mainly deals in Groceries and
Consumer Goods. It provides its services only in England and Wales. This company was started
in year 2000. It was founded by Jonathan Faiman, Jason Gissing and Tim Steiner with the help
of merchant bankers. It has no stores or shops. It only deliveries of goods from its warehouses to
the customers home. It has listed on the London Stock Exchange in year 2010. Its revenue was
£1,598.8 million, operating income was £(31.9) million and net income was £(44.9) million in
year 2018. Its website is www.ocado.com.
HISTORY
Ocado Plc was launched in year 2000. Its operation began in 2001 with the first delivery.
In 2002, its did partnership with Waitrose. Then its started doing commercial deliveries. Since,
then delivery area also increased over 2.2 million households. In 2005, this area increased to 10
million households.
In 2009, Ocado launched its mobile app whose name is 'Ocado on the Go'. In 2010, It
was listed on London Stock Exchange. Also, company raised fund by offering IPO for the first
time. In 2013, Company did commercial delivery to its strategic customer.
In 2015, Ocado's sales exceeded £1 billion in annual, which lead company to earned
profits in 10 years of establishment of company. In 2017, they did deal with French Casino
Group which lead to 20% increased in share price. In 2018, Company did deal with Canada's
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second largest supermarket chain Sobeys and Kroger, the US retail company (Bailey and et.al.,
Ocado Innovation Ltd, 2018).
ORGANIZATIONAL STRUCTURE AND MANAGEMENT OF OCADO
Ocado follows hierarchical structure. Thus, company is governed by Board of Directors.
In hierarchical organizational structure, company's functions are divided into tasks. According to
these tasks, jobs are created. Then, These jobs are converted into Departments. Then Company
employ Chief Officer for every departments. Under the chief officer, general manager,
employers, supervisors, leaders and employees are hired. They are those people who are
specialized in specific fields and they are hired on the basis of their skills, knowledge and
experiences in that field.
In this hierarchical structure, whole organization is working at the basis of power of
authority in which top management and chief officers make decision or policy or strategy and
communicate to the middle management team. Middle management team implement those
decision, policy or strategy and communicate to the front line manager and employee
representative. Front line manager and employee representative work on that decision, policy or
strategy. If they face any organizational issues regarding decision, policy or strategy or they need
to reporting then they go to middle management team who then go to top management team.
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Illustration 1: Organizational Structure
Source: The Official Board, 2018.

Like this, Management process is handle by everyone at their level with their works, powers,
roles and responsibility in the framework of functional based hierarchical structure in Ocado.
Currently, company have 12 directors on the Board. Out of 12, 7 directors are non-
executive directors and rest 5 are executive directors. Chairman of the company is Lord Rose. He
was appointed as a Chairman from May 2013. CEO of the company is Tim Steiner since 2000
and Luke Jensen since February 2017. Both Chairman and CEO are elected by organization's
shareholders (Loro and et.al., 2015).
STAKEHOLDERS
Stakeholders are group of people who is directly and indirectly connected with the firm.
Both firm and stakeholders affects each other and shares interrelationship. Without stakeholders,
Company cannot grow and without company, Stakeholders cannot fulfil their needs (Ramus and
Vaccaro, 2017).
Broadly, Stakeholders are divided into 2 groups, namely -
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11 External Stakeholders – External Stakeholders are those group of people who are not the
part of the management but shown their interest in company. Example of External
Stakeholders are as follows -
Suppliers – The person, who supply raw materials and tools etc. to the company is called
Suppliers.
Creditors – The person, who gives credit to the company is called Creditors.
Government – Government has the authority to frame policy to govern the organizations.
Shareholders – They are real owner of company who own shares.
Society – Society is considered as a group of people whose values, cultures and regions are
same.
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Illustration 2: External And Internal Stakeholders
Source: Overview of Key Elements of the Business, 2018.

Customers – They are the end users of products and services provided by company
(Matuleviciene and Stravinskiene, 2015).11 Internal Stakeholders – Internal Stakeholders are those group of people who plays major
role in the management. Basically, they are within the company as well. Example of
Internal Stakeholders are as follows -
Owners – Owner are the person, who established the enterprise.
Manager – A person who is responsible for company's operations or administration.
Employee – A person who work for company in exchange for salary or wages (Henisz, 2017).
RELATIONSHIPS BETWEEN BOARD OF DIRECTORS (BOD) AND
STAKEHOLDERS
As above mentioned, Both Board Of Directors and Stakeholders are co-related to each
others. Their relationships are as follows -
11 Relationship of BOD with Shareholders - Board of directors and shareholders both are
the owners of the company but they play different role. They are often act as a partner of
the company, thus the board of directors made some decisions regarding the regulations
of the company but they made it with the consent of shareholders. Shareholders of the
company sets the goals and objectives of the company which is to be achieved on the
other hand the board of directors are responsible for achieving those objectives that are
set by shareholders.11 Relationship of BOD with Employees -BOD and employees has good relationship
between them because board of director give reward to employees according to their
work and motivate them and check and investigate time to time for increase profit and it
also make strategy and goal of organization. It also apply law and policies for provide
protection to employees from risk and uncertainty. So through this employees feel
belongingness and do work for meet objective. (Mosey, Kirkham and Noke, 2017)11 Relationship of BOD with Customers – board of director and customer relation is
indirectly because board of director make policy and rule & regulation for provide safety
and equality to all customers and also provide consumer complaint facility if any
complaint want to do customer. So its main purpose is provides facility and motivation to
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customer and establish good relationship between them. So its helpful in attract customer
and make stability with company.(Harrison and van der Laan Smith, 20152. Assess and
evaluate the effects of external environmental influences on Ocado
PESTLE ANALYSIS
Pestle analysis is an analytical tool which is used to analyse the impact of macro-
environmental factors on the organization and accordingly make a strategic plan for the
achievement of objectives of the company. It consists of -
 Political Factors
 Economic Factors
 Social-culture Factors
 Technological Factors
 Legal Factors and
 Environmental Factors (Abbott, 2015).
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Illustration 3 : Factors of Pestle Analysis
Source: PESTLE ANALYSIS, 2019.

IMPORTANCE OF PESTLE ANALYSIS
The macro environmental factors are those factors which cannot be controlled by
company. But the impact of these factors can be reduce. For this, company conduct pestle
analysis which helps company to get to know about the extent to which factors can impact. It
helps the company to think and implement strategic plans so that macro factors cannot impact
too much. It helps company to identify its opportunities and threats. This will lead company to
gain competitive gain and reduce competitive disadvantages over its competitors. It also helps
company to make fast decisions about the projects. It helps company to become alert and aware
about the upcoming changes that can be occur in the future. It helps organization to expand its
business in new market. It helps firms to adapt realities of new environment. It helps enterprises
to be updated with time to time according to the external changes. It helps company to maintain
balance between internal and external environmental changes happening around the firm. It
enables ease of comparison to the organization. It helps company to track the environment, in
which they are operating or running their business. It helps the company to sustain in changing
environment for long term period (This is Why PEST Analysis Is Important For Every Business,
2019).
EVALUATION OF THE FACTORS THAT IMPACTS THE COMPANY THROUGH
PESTLE ANALYSIS
1. POLITICAL FACTORS – These factors tell about the extent to which and how
government, its policies, rules, regulations and guidelines affect the organization.
Example includes - Government policy, political stability or instability, bureaucracy, corruption,
competition regulation, foreign trade policy, tax policy, trade restrictions, funding grants &
initiatives, etc.
FACTORS AFFECTING OCADO -
Changing policies with new government – After every 5 years, UK government can change.
With the new government, Government policies, rules, regulations and guidelines can be change
which might impact the operations of Ocado. Because, every new government's perceptions are
different on service sectors which lead then to change in policy.
Taxation Policy – Ocado has paid low tax which lead company to earn more profits. UK uses
inequality taxation policy which can be change due to strong opposition of public. This will lead
company to pay high tax which means profitability of company will reduce.
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2. ECONOMIC FACTORS – These factors tell about the extent to which and how
economic conditions of nation impact the organization and its profitability.
Example includes - Economic trends, growth rates, industry growth, seasonal factors,
international exchange rates, International trade, labor costs, consumer disposable income,
unemployment rates, taxation, inflation, interest rates, availability of credit, monetary policies,
raw material costs, etc.
FACTORS AFFECTING OCADO -
Exchange Rate – Every countries exchange rate are changing constantly which means Ocado
payments in another countries also change with the change in exchange rate. Also, company's
investment plans and interest will also get affect.
Government intervention – It also affects the company's profitable. If UK government do too
much intervention, Profitability of Ocado will go down and vice vesra.
3. SOCIAL FACTORS – These factors tell about the extent to which and how values,
perceptions, lifestyle and cultures of societies impact the operations of company.
Example includes - Attitudes and shared beliefs about a range of factors including money,
customer service, imports, religion, cultural taboos, health, work, leisure, the environment;
population growth and demographics, immigration/emigration, family size/structure, lifestyle
trends, etc.
FACTORS AFFECTING OCADO -
Demographic factors - UK has more young population rather than old age. So Ocado can use this
factor and cater their segments. They can produce goods and services according to them. This
will lead company to earn profit and enhance their customer base.
Attitude towards health and safety – Attitudes of people towards health and safety are changing
which lead Ocado to produce good and healthy foods and qualitative products. Also, this lead
company to decide new quality standards also so that they cannot compromise with the quality
(Grünig and Kühn, 2015).
4. TECHNOLOGICAL FACTORS – These factors tell about the extent to which and how
technological changes impact the organization.
Example includes - Technology and communications infrastructure, legislation around
technology, consumer access to technology, competitor technology and development, emerging
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technologies, automation, research and innovation, intellectual property regulation, technology
incentives, etc.
FACTORS AFFECTING OCADO -
Transformative change in Supply change – Constantly changing in technologies impact the
supply chain management of Ocado. Now company can use mobile, laptop and wireless device
to track, improve and collect data about its logistic system. This will lead company to use
efficient and advanced supply chain management which is helpful for company to grow and gain
competitive advantages.
Technological Investment - UK government invests huge amount in technologies to provide the
business an opportunity to grow at globally level and provide customers the best products and
services. Ocado can use these technologies to improves its business operations and earn profit.
5. LEGAL FACTORS – These factors tell about the extent to which and how current
legislation impact the firm.
Example includes - current and impending legislation that may affect the industry in areas such
as employment, competition, and health and safety etc.
FACTORS AFFECTING OCADO -
Business, health and safety and Employment law – After every 5 years, new government come
and do amendment in these law which lead Ocado to change in its policy, regulations and code
of conduct which affect the company, its organizational environment and organizational culture.
Data Protection Act - Data protection law in UK helps company to keep their data private and
secure. This makes company to gain competitive advantage over other competitors. It is a robust
mechanism to use against favourable brands to increase productivity and popularity of products.
6. ENVIRONMENTAL FACTORS – These factors tell about the extent to which and how
changes in environment impact the company and its operations.
Example includes - Climate Change, Environmental Policies, Green Agenda, Pollution,
Availability of natural resources, Recycling system, Waste Disposal etc.
FACTORS AFFECTING OCADO -
Environment Law – Change in environment law make company to run their business difficult
because norms has to be strictly follow by company which become constraint in the operations
of company. This lead company to change in its policy according to change in environment law.
Thus, Ocado profits are decreasing due to change in environment law.
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Corporate Relationship Management – CRM also affect the Ocado. If Ocado needs customer
supports and trust. So, company need to keep changing in its CRM strategy which affect the
operations of the company (Perera, 2018).
CONCLUSION
From the above study, it has been summarised that Organizational structure and
management process are interrelated to each other. BOD plays an important part of business. For
the beneficial of company, they need to keep and maintain relationships with every stakeholders
whether its internal stakeholders or external stakeholders. Also, Stakeholders plays an important
role in growth of business. Also, this report tells about the importance of Pestle analysis in the
growth of company. This report also give brief details about the impact of macro environmental
factors on the growth of company. Company should conduct the Pestle Analysis so that company
can identify its opportunities and gain competitive advantages.
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