Executive Summary
Although in two different perspectives, Freeman and McIntosh point out that the success and reputation of an organization heavily dependent on innovations in both its external and internal environments. Ocado Group PLC is an online grocery retailer located in the UK, with its headquarters in Hatfield, England. This business majors in the retail and distribution of FMCG products within the borders of the UK. The Ocado Group has partnerships with notable chain brands such as Carrefour, Waitrose, and Morrisons. Ocado was founded in 2000 but was listed on the London Stock Exchange in 2010. In 22 years, Ocado has leveraged technology to remain one of the top online grocery retailers in the UK. The company has continually upgraded online platforms to interact with customers and suppliers and use robotics in two warehouses. With attention to the use of robotics and online platforms used by Ocado, this report expects to examine the impact of innovation on the competitiveness of organizations, corporate reputations, and success in caring for stakeholders.
Introduction
The business environment in the modern retail world is innovation and technology-driven, both internally and externally. In the fast-changing retail world, retailers are forced to adjust to those changes to retain their customers. These changes include behavioral changes in consumer expectations and shopping habits, such as increased convenience shopping. This puts pressure on online retailers such as the Ocado Group to innovate better features and online shopping platforms that improve their customer experience. Founded in 2000 (Mason, 2019), Ocado claims to be the pioneer of online grocery retail. Ocado has managed to stay in business for two decades since 2000 due to its ability to take on new advanced innovations as soon as they emerge. The case of Ocado Group PLC is proof that efficient introduction of new advanced innovation is the key to competitive performance, and stakeholders’ needs and business environment consideration ensures the success of the organization.
PESTEL Analysis
Technological- Ocado has the benefit of AI that can automate its warehouses to help pack and sort customer orders. It has access to big data, which can be used in making supply and marketing plans. Last, it has a strong online interface that is the foundation of new partnerships and customer experiences.
Political- Brexit and the current Russian invasion of Ukraine will slow down investment spending and create a political uncertainty that might affect Ocado’s operations.
Social- There is an increase in healthy eating habits and consumer focus, affecting grocery shopping behaviors. People will be more inclined to buy organic foods to the benefit of Ocado.
Internal Environment
One impact of innovation on the online retail of groceries by Ocado is the use of online platforms to provide a better customer experience to their shoppers. Ocado has an outstanding End-to-End operating system based on the organization’s innovation, called the Ocado Smart Platform (Fraser, 2020). This platform supports Ocado’s online retail services and customizable solutions to the specific requirements of partners and customers. This platform has enabled Ocado to integrate loyalty schemes and grocery ranges, improving cost and time efficiencies in doing business. The company continually implements simultaneous incremental innovation to this platform to improve its efficiency in dealing with customers, suppliers, and partners.
The Ocado Smart Platform has given the organization gives thus business a competitive technology platform that has provided a growing market in the United Kingdom. The technology gives Ocado’s shoppers are great customer experience, which grows the business’ market share while retaining existing customers. Also, this platform offers shoppers a “live retail” shopping experience that drives the rates of buying up. Ocado’s online platforms have been evolving alongside the internet since 2000. The organization gradually adopted advancements in web technology into its online platforms and eventually adopted mobile apps when smartphones later emerged in the late 2000s. Mobile apps and various website versions enable the organization to easily reach consumers in different demographics using different technologies that suit each.
Incremental innovations to keep up with modern technology have enabled Ocado to grow over time to become one of the leading online retailers in the United Kingdom. This technological advancement has provided endless growth opportunities to Ocado for 22 years, marked with big improvements. The company’s strategy to embrace emerging technologies has given it a sizeable advantage in satisfying its customers and remaining in operation in different ages of technological advancement. Additionally, technological advancements such as robotics and automation have enabled the Ocado to serve its growing market effectively and fast because machines are more accurate and quicker than the human hand.
Freeman argued that activities contributing to efficient exploitation of new and improved processes affect the competitive performance of a business organization. This is evident in the advancement of Ocado from the use of websites to developing mobile apps offering its services. This advancement has kept the organization relevant and profitable in the online retail industry. These changes have enabled Ocado to grow its market share and adjust its services to the changes in the business environment. Had Ocado retained technologies used when it was started in 2000, the organization would be irrelevant in the current online retail industry and perhaps lost plenty of its customers because they have moved away from the 2000s technologies too.
McIntosh added that an enhanced corporate reputation gained through the recognition of producers, the community, environment, and customers is vital to the success of a business organization. Ocado Group recognizes the importance of making internal technological changes and innovation to keep up with its technology native target market. Embracing innovation into its business model has enabled Ocado to create a platform that offers outstanding services to customers and partners, creating a positive reputation that has made it the UK’s biggest online retailer. The innovations and technologies have increased the efficiency of Ocado’s partnerships with other retailers. Their system can co-operate to satisfy Ocado’s customers and iron out supply challenges that reduce the supply chain. A shorter supply chain lowers inventory handling, and groceries can reach buyers in a short time they will be fresh, a key feature in grocery shopping.
External Environment
External innovations such as auto helping, Artificial Intelligence, and Big Data analytics have can help an organization better its customer experience and operational efficiency. Data is vital in operations planning, market research, and customer satisfaction in online retail. Using cookie technology, big tech companies can generate this data through websites logs and inventory data. Ocado uses AI and the help of big data to generate consumer behavior data on the organization’s app and web platforms (Weber, Felix & Reinhard, 2019). There has been a significant advancement in robotic technology in the technological world. Ocado is leveraging this robotics advancement to create next-generation wireless automation platforms to handle inventory in its warehouses-this has been already implemented in East London and Andover warehouses.
The strong momentum to embrace changes in the technology speeds up the agility of an online retail organization by presenting it with the essential tools needed to compete, grow and thrive in competitive markets. Automation of warehouses can help reduce inventory costs by introducing tools that require fewer man-hours to handle inventory. It allows a retailer to move merchandise from suppliers to their warehouse then to buyers in automatically updated systems that are far more effective than traditional file and paper tracking. Using AI in inventory handling can help organizations automate their inventory control and improve efficiency by preventing over-ordering or under-buying as explained by Riahi et al. (2021). Supplies can be automatically adjusted to meet demand sales patterns and determine when to order goods.
The external technology advancements incorporated into Ocado’s warehouses, online platforms, and operations have created new customer experiences and alliances. Also, the use of AI and other external technologies have helped Ocado keep up with the strong momentum of the online retail grocery market that heavily relies on sellers’ appetites to embrace new technological innovations. Ocado has shown its appetite for technological inventions through the Ocado Smart Platform, and the development of online channels has positioned this organization optimally in the UK market. This platform has also facilitated the positioning of Ocado effectively in markets outside the UK, replicating the same capabilities that the organization has in its original country for partners and customers in foreign countries.
According to Freeman, improved processes are vital for competitive performance. Ocado has implemented external technologies such as AI and automated inventory in its East London and Andover warehouses, which is an epitome of the large extent to which this organization is willing to embrace external technologies. External technologies have enabled provide customers seamless services. Therefore, the technology has enabled Ocado to compete favorably in the retail industry. The new technology has made operations more cost-efficient, flexible, low-risk, and faster for the organization and its customers. For the customers, the online grocery shopping services are improved and easier to subscribe to.
In McIntosh’s opinion, the recognition of stakeholders enhances brand reputations, and Ocado has maximized its reputation in growing its operations. Ocado has applied modern technology in making fast and reliable delivery, including AI and robotic help. The organization has built a strong brand name with a reputation that it is the only retailer in the UK that does not have a single brick-and-mortar store. It entirely relies on technology to buy from suppliers and sell to buyers. Ocado was set up as an online retailer from the start in 2000, making a firm stand as a technological company. It continues to perpetuate the idea through extensive use of robots which are used in keeping inventory and helping in activities such as sorting, picking, and packing. Due to the absence of physical stores, the short supply chain makes the delivery faster, further building its reputation. The brand reputation built on external technology has helped the organization become a leading retailer among its competitors.
Recommendations
Ocado has numerous opportunities presented by the flexibility of using technology and innovation in its operations. The organization has great potential to explore the European market because it can use its technology to replicate its services in large markets outside the United Kingdom. However, the company is reluctant to expand its operations to other parts of Europe in fear that an expansion would dent its profits. The retailer can take advantage of its technology investments and capabilities to set up activities in other countries because fewer resources will be needed to start and run operations in new locations. To the organization’s advantage, products can be shipped from the UK to customers in other countries without necessarily opening warehouses in the destination countries. Opening operations in other countries will scale up Ocado’s market, which is limited to majorly the UK, a very limited grocery market compared to that served by other online retail sellers such as Amazon Fresh. Also, these competitors share the UK market with Ocado, scaling it down further. Applying technology to expand its operations to other major European cities would expose Ocado to a bigger market, reducing its dependency on the UK market.
In recent, the United Kingdom licensed the use of robotics in warehouses. Currently, Ocado only uses robotics in two warehouses (the East London and Andover warehouses). Ocado should maximize this opportunity by having robotics in all of its warehouses which will help reduce the cost of inventory handling and consequently operations costs (Wang et al., 2021). The reduced costs will increase the retailer’s profit margins and could even enable it to give customers discounted services and goods and lower prices. With low prices and huge discounts, Ocado will be able to grow its market share while retaining its existing customers. Additionally, it will have a competitive edge over other online retailers operating in the United Kingdom. Also, having more partners would expand Ocado’s brand range, grow its in-house brand and labels, and strengthen the organization’s brand presence.
Ocado has existing partnerships with other businesses that offer online retail services in the United Kingdom, such as Carrefour, Waitrose, and Morrisons (Leite, 2020; Gonzato, 2018). Partnering with these three organizations has helped improve Ocado’s shoppers’ performance and customer satisfaction. In addition to these partnerships, Ocado should partner with other online grocery retailers such as Amazon Fresh. This will reduce threats or intense price wars between Ocado and those giants. Reduced price wars will create a stable market for Ocado’s groceries. It would help overcome economic factors such as cost inflation in the European grocery market. Also, it will give Ocado access to advanced technology and big tech data that can be used in optimizing the customer experience, marketing, and planning.
Conclusion
In order to drive brand reputation, satisfy stakeholders and ensure good performance, organizations need to embrace innovations to accommodate the changing times and differentiate themselves from other businesses selling similar products. Therefore, business leaders must think creatively and explore new ways of selling their products, like in the case of Ocado’s online retail startup in 2000. Also, they should bring new innovation to life in their organization, both externally and internally, to provide real-world customers and stakeholders with new and existing experiences. These experiences will ensure brand reputation, performance, and stakeholders’ satisfaction, as highlighted by Freeman and McIntosh.
References
Fraser, A. (2020). The digital revolution, data curation, and the new dynamics of food sovereignty construction. The Journal of Peasant Studies, 47(1), 208-226.
Gonzato, A. (2018). Business model innovation reshaping the grocery retail.
Leite, B. T. D. S. (2020). Marks & spencer out of fashion the case of an outdated brick and mortar (Doctoral dissertation).
Mason, R. (2019). Developing a profitable online grocery logistics business: Exploring innovations in ordering, fulfilment, and distribution at Ocado. In Contemporary Operations and Logistics (pp. 365-383). Palgrave Macmillan, Cham.
Riahi, Y., Saikouk, T., Gunasekaran, A., & Badraoui, I. (2021). Artificial intelligence applications in supply chain: A descriptive bibliometric analysis and future research directions. Expert Systems with Applications, 173, 114702.
Wang, L., Liu, Z., Liu, A., & Tao, F. (2021). Artificial intelligence in product lifecycle management. The International Journal of Advanced Manufacturing Technology, 114(3), 771-796.
Weber, Felix Dominik, and Reinhard Schütte. “State-of-the-art and adoption of artificial intelligence in retailing.” Digital Policy, Regulation and Governance (2019).
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