Expanding Ocado in the Netherlands: A PESTLE and Porter's Analysis

This report examines the potential for Ocado, a British online grocery service, to expand its operations into the Netherlands. It begins with an introduction to Ocado and the business environment of the Netherlands, highlighting the country's favorable economic and political conditions. The report then conducts a PESTLE analysis, assessing the political, economic, social, technological, environmental, and legal factors influencing business in the Netherlands. Following this, a Porter's Five Forces analysis is used to evaluate the competitive landscape, including industry rivalry, buyer power, new entrants, and the power of substitutes and suppliers. The report concludes by summarizing the key findings and implications for Ocado's expansion strategy, suggesting that the Netherlands presents a promising market opportunity due to its strong economy, technological infrastructure, and supportive business environment.

Expand Ocado in
Netherlands

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
2) Background of Ocado-............................................................................................................1
3) Business environment background of Netherlands-...............................................................1
3.1) PESTLE analyses of Netherlands external environment-....................................................2
3.1.1) Political factors- ...............................................................................................................2
3.1.2) Economic factors-.............................................................................................................3
3.1.3) Social factors-...................................................................................................................3
3.1.4) Technological factor-........................................................................................................4
3.1.5)Environmental factors-......................................................................................................4
3.1.6) Legal factors- ..................................................................................................................5
3.2) PORTER's Five Forces-.......................................................................................................5
3.2.1) Industry rivalry- Low risk-...............................................................................................5
3.2.2) Power of buyers- Low risk-..............................................................................................5
3.2.3) New Entrants- Low risk- ..................................................................................................6
3.2.4) Power of substitutes- Medium risk-..................................................................................6
3.2.5) Power of suppliers- Medium risk-....................................................................................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business is related to production, buying, selling of products and services. It is the legal
entity of country which has to follow government rules and regulations. Ocado is a British online
grocery service provider. It was found in April 2000 by Jonathan Fiman and Tim Steiner. It
started trading business as a partner with Waitrose in 2002. It has no chain supplier store in
competitive market. It operates all business empire from own warehouses. Company
headquarters in different places and having a good position in 2010 on United Kingdom stock
market (Edwards and Rodriguez, 2018). Firstly, report will explain the history of Ocado plc.
After this, it will discuss about Netherlands business environment background. In the next step,
report will talk about PESTLE analysis in Netherlands business environment and at last, it will
describe Porter's Five Forces Model on different business risk level.
2) Background of Ocado
In April 2000, Ocado was founded by Jonathan and Jason. It was launched in January
2000 as a normal concept and started business in partnership in 2002 with Waitrose. It is a
famous British online supermarket. Ocado has no chain stores and run all business from
warehouses. The organization was floated on United Kingdom Stock Exchange on 21 July 2010.
Its headquarters located at United Kingdom, Hertfordshire, Hatfield. In July 2009, it released
their first mobile application and this app called 'Ocado on the go' (Gülseven and Davidsson,
2017Lubián and Esteves, 2017). This facility allows consumers to do their shopping without the
use of personal computer. In 2010, it launched mobile app for every android device. Recently it
signed a deal with the Sobeys which is a Canadian supermarket. August 2017, company
launched online app for Amazon's Alexa voice assistant, that is allow users to share their
demands to an Ocado order via voice. Since 2014 January, company have been delivering
groceries online for grocery rivals Morrison’s.
3) Business environment background of Netherlands
Culture of business in the Netherlands is defined by business communication, meeting
etiquette, internship, living cost, balance between work and social life. The Netherlands has a
temperate marine climate with mild winters. Distinctive feature of the country geographically but
also logistically and economically too. Other countries like United State love to do business in
Netherlands. United State partnership is the oldest business relationship with Ocado. Netherlands
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is a small geographically, populated country occupying strategic economic commercial location
with Europe. According to a survey, Netherlands favourite business place among the top world
industrialized countries. Country economic, political and legal environments are suitable for all
type of businesses. Investors want to invest their money and earn more business profit. United
State is the largest foreign investor and has the greatest trade surplus. GDP of Netherlands is
healthy and it provides a good business culture (Rossi and Krey, 2017). A strong GDP is the sign
of a business environment where everyone wants to operate their business. Because of a good
business culture its ranks 12th in the world by GDP per capita.
3.1) PESTLE analyse of Netherlands external environment
PESTLE analysis is helpful to describe Netherlands external environment. This analyse
highlights various challenges which influence the economic investment. Country is dependent on
oils and export products, which is one the main issue. Netherlands government business policies,
trade investment are the open invitation for other countries. Its low rate rules for different
business plans are the attractive factors for investors. Netherlands have a good geographical
position in the whole world. Its open economic policy force an organisation to develop other
business plans and they are like to establish their organization. It is most favourite country of
United State, which is preferred for running Business Empire.
It has a high class social environment; the citizens carry a rich life style. Its commercial
and economic culture provides great development opportunities for all kind of companies (Van
Gysel, 2017). It has strong communication network and technologies in the Europe, which
beneficial for political support and technical development. Its telecommunication market has
most advanced infrastructures in European countries, which helpful in providing a strong
foundation services. Netherlands legal systems encourage others to operate their business
without any barrier. Environment of the country is healthy and liberal for business. Netherlands
has to depend on other foreign countries for food meals because it does not have high agriculture
productivity.
3.1.1) Political factors
The Netherlands is well known in the world for its economic, commercial and business
investment policies. It has internationalization economy with low government interference and
business trade policy is the open for every country. Government offers different kind of policies
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to motivate global investment and provide their support when they invest in its economy. Its
government has good taxation system and healthy commercial environment. Low tax rate, tax
revenue at large scale makes its network strong in Europe and is the reason that they make
taxation culture attractive. Ocado is online grocery provider and political factors of Netherlands
make its business condition easy (Wells, 2017). Low business tax rate and revenue at huge level
are the factors who motivate company to run business. The new telecom rules are easy, no entry
barriers, and no bound on business operating system. Because of this reason a great numbers of
investor’s countries like to invest in telecommunication sector. Political culture of Netherlands is
an open gate invitation for foreign countries and they like to establish their organization in an
appropriate business favourable political environment.
(Source: Supermarkets in the Netherlands - Statistics and Facts, 2017)
3.1.2) Economic factors
The Netherlands has a bright and open economic system which depends on foreign
business trade at large scale. It is called the 'Economic gate' because of its geographical position
in the world (Supermarkets in the Netherlands - Statistics and Facts, 2017). It is the one of the
most favourable and attractive business centre for foreign investors. It plays an important role in
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Illustration 1: Sales turnover of supermarkets in Netherlands

the trading development sector and has a large numbers of users in other European countries.
Ocado easily capture the local country market due to strong economic condition. It provides
developed communication medium, strong transporting network (Supermarket chains in the
Netherlands in, 2017). It has the third largest airport facility in the Europe, which more useful
medium to deliver company's order at different places. It is famous across for its innovative
technologies and management work experience in other fields. Developed transport system,
communication, infrastructure, large and developed logistics facilities, fair government support
or strong commercial background are the reason to make Netherlands most attractive economic
environment for local and international investors. Their economic conditions encourage other
countries and local marketers to operate their business and increase revenues. From the expert’s
point of view, economic downturn in other countries affected the telecommunication industry.
(Source: Supermarket chains in the Netherlands in, 2017)
3.1.3) Social factors
Netherlands has a high level and modern living style. The society has a unique quality of
life. Its open social culture is very comfortable for outside people. It has massive immigrants
from all over the world. It has a colourful social background and global culture makes it most
favourable area for the local and foreign investors. Commercial policies and humble political
environment provide equal opportunities for local and global companies. Netherlands social
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Illustration 2: Total numbers of Supermarket in
Netherlands

culture provides wide market to operate it business. Country environment give equal chance to
expand its customers’ numbers. Company provides online services at different places. Education
level in country is quite high, people are qualified with complex skills which are needed in high
technological business culture (Zou, Koster and Xu, 2018). Factors in business environment
impact the Ocado in few ways like demographics and skill level of country population, education
level, gender roles, health, etc. Telecommunication market has consistently ranked among other
countries provide a good network services for Ocado online organization. Recessionary situation
is like economy downturn and crisis in European area which sometimes become a critical
working conditions. Shared beliefs of the common people plays a role in Ocado market and give
a brief idea about customers’ requirements.
3.1.4) Technological factor
Netherlands has a strong technical trap which help it to lead in competitive market. It has
the longest communication network and the newest technologies in European countries. Good
technical environment result of government support to develop their technical country
environment (Edwards and Rodriguez, 2018). In the past, industries had limits to confined
services, which makes IT and computer world part of common life. A company should not do
technical analysis of any industry buy also speed at adopted technology by organization. Ocado
uses the latest technologies of the country to operate their business easily. Company provides its
products and services into the market and other countries with the use of technologies.
Netherlands technical factor influence Ocado in such ways- technological factors have
impact on goods and services offered by company, retail industry cost structure, customer
service chain methods etc. These constituents can have impact on work in a positive and negative
way. Country telecommunication area is the most advanced infra of Europe. Netherlands
commercial laws and good users market have provided healthy business culture for the different
companies to improve their technical background. Technology is backbone of every business
entity in current world and efficient use of this make a perfect business environment.
3.1.5) Environmental factors
In Netherlands densities of economic and population activities have impact on the
country's environment. Different markets have different country environmental level which
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might have impact on company’s profitability (Gülseven and Davidsson, 2017). Every country
has their own environment laws and rules. Before entering in new markets and starting a new
business, company needs to evaluate the environmental factors that are needed to be considered.
Ocado online services influenced by weather and climate changes, laws for pollutions, disturbed
air and water natural structure rules in retail industries, mismanagement in customers’ services
and governmental support for renewable energy. These factors of nation impact Ocado online
service. It is responsibility of company that they have to maintain country environments in order
to earn high profit.
3.1.6) Legal factors
Legal institute of Netherlands is highly admired because of its business laws which
assisted legal theories. A company should evaluate before entering in markets as it can lead to
theft of organizations business secrets plans from overall competitive market (Lubián and
Esteves, 2017). Ocado services impacted by country legal factors like- discrimination law,
employment law, employee’s health and security, copyright or patents law, etc. Before starting a
business in Netherlands, company has to follow all rules and regulations. These laws protect
company's products or services and provide a qualitative goods in different market area.
Company has to secure their employees and is requires maintaining healthy working
environment.
3.2) Porter's Five Forces
Porter's five forces model is a tool for analysing business competition. This structure
evaluates macro and micro environment. It is helpful to identify power lies in an organization.
This model is useful in understanding the strengths of a business present competitive market
position and future prospective situations. This body structure finds different risk level in a
business/ organization.
3.2.1) Industry rivalry- Low risk
Competitor’s numbers and capability in the market are main factors which have effect on
business. They all offer different schemes on same products and services to affect the market.
Rivalry among the existing competitors in an industry will drive low prices and reduce the
industry profitability. But, in Netherlands, Ocado has fewer numbers of competitors which
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increase its profitability. Company provides online products and services and it wants to expand
business in Netherlands. In this country, it has low risk before entering the market. There are
fewer companies which is providing same services. It is quite easy for Ocado to established its
business in Netherlands as there is low risk
3.2.2) Power of buyers- Low risk
Buyers are generally demanding. They always want to buy the best quality products by
paying minimum prices for goods and services. In business sector it happened that it is less
beneficial for organization to sell their products at low price (Rossi and Krey, 2017). But Ocado
is the best online service provider and good quality of products offered by company increases
chances of growth in Netherlands. Company has less competitive market and it is a profitable
opportunity for business expansion at low risk. Netherlands do not have huge numbers of online
service providers and it is good indication of less competitors in market. Low market risk
increases the chance of business profitability. Buyer is the king of market and Ocado fulfil the
nutriments of its customers and makes more profit.
3.2.3) New Entrants- Low risk
Netherlands market has good economic conditions, which attract new entrants. After the
expansion of business in Netherlands Ocado's economic status attract new entrants. They also
want to earn profit and increase their business. New entrants are less risky for Ocado. It not easy
for new firms to capture unknown market instantly, it will take time. Company should be aware
from all these challenges and build an effective barriers who keep it safe from competitors.
Ocado to reduce market risk will provide qualitative and quantitative goods at low cost. This
small steps reduce its market risk (Van Gysel, 2017). Unless entrants have strong entry barriers
like copyright or patent law, initial capital requirements, government’s business rules and
regulation, all these factors reduce Ocado risk from new entrants in Netherlands.
3.2.4) Power of substitutes- Medium risk
Presence of substitute products and services in a market, increase the chances of users
switching to alternatives goods in reply to high price. This decrease the supplier’s power and
market attractiveness. During business expansion if Ocado has substitute products in Netherlands
market is quite risky. In this situation, if company has high priced goods and services, it will
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increase the chances of market risk. Organization does not want to lose their customers just
because of expensive services. Company's profitability suffers when a new product meets a
similar users requirements. It increases risk in market and reduces profit. Before entering in
new market Ocado make its strategies to reduce risk factor. Substitute services are always a
threat for other business organization.
3.2.5) Power of suppliers- Medium risk-
Ocado is an online retail company which provides services with the help of technologies.
It buys raw material from numerous suppliers (WElls, 2017). Because of new entrants in market
suppliers in dominant position can reduce the Ocado market profit margin. Their response arises
a little risky situation for the organization. Netherlands is a developed country which has strong
market environment. Impact of higher supplier bargaining power decrease the profitability of
company. High competition in market provide chance for suppliers to increase their prices and
business have to purchase material at high cost. Company has fewer number of competitors in
Netherlands which reduces high risk situation and create a profitable environment.
CONCLUSION
Above report explained different market conditions for Ocado online grocery service
provider. Company wants to expand business from home country to Netherlands. It has good
business environment. Government’s business policies and regulations are easy for entrants. It
provides a safe and healthy working environment to employees. Country’s different factors like
political, economic, social, technical, environmental or legal influence business entities. When an
organization is expanding its business in other country, it has to face many challenges which can
reduce profitability and increase market risk. Netherlands is a developed country and has a sound
economic status. Ocado wants to expand its business to utilize the available resources.
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REFERENCES
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Supermarkets in the Netherlands - Statistics and Facts. 2017. [Online]. Assessed through:
<https://www.statista.com/topics/3478/supermarkets-in-the-netherlands/>.
Supermarket chains in the Netherlands in. 2017.[Online]. Assessed through:
<https://www.statista.com/statistics/684675/top-10-supermarket-chains-in-the-
netherlands-by-customer-base/>.
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