Free Tesco and Ocado: Competing Online Models Case Study Solution | Assignment Help

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Written by Gary F. Smith
Publish Date: 2024-12-03

Harvard Case - Tesco and Ocado: Competing Online Models

"Tesco and Ocado: Competing Online Models" Harvard business case study is written by Ralf W. Seifert, Richard Markoff. It deals with the challenges in the field of Operations Management. The case study is 7 page(s) long and it was first published on : Jan 29, 2018

At Fern Fort University, we recommend Tesco pursue a hybrid strategy, leveraging its existing infrastructure and customer base while adopting Ocado's innovative technology and expertise in online grocery delivery. This approach will allow Tesco to capitalize on the growing online grocery market while minimizing risks and maximizing efficiency.

2. Background

The case study focuses on the competitive landscape of online grocery delivery in the UK, specifically between Tesco, a traditional supermarket giant, and Ocado, a pure-play online grocery retailer. Tesco, despite its size and established customer base, struggled to adapt to the growing online market, facing challenges in its delivery network and customer experience. Ocado, on the other hand, had built a robust online platform and efficient fulfillment model, but lacked the brand recognition and physical store network of Tesco.

The main protagonists are:

  • Tesco: A traditional supermarket giant with a vast physical store network and established customer base.
  • Ocado: A pure-play online grocery retailer with a focus on technology and efficient delivery.

3. Analysis of the Case Study

This case study can be analyzed through the lens of competitive strategy, focusing on the operations strategy and supply chain management of both companies.

Tesco:

  • Strengths: Strong brand recognition, established customer base, extensive physical store network.
  • Weaknesses: Inefficient online delivery network, limited technology capabilities, struggling to adapt to the online market.
  • Opportunities: Leverage existing infrastructure and customer base for online expansion, invest in technology and innovation.
  • Threats: Growing competition from online players, increasing customer expectations for online convenience.

Ocado:

  • Strengths: Innovative technology platform, efficient fulfillment model, strong focus on customer experience.
  • Weaknesses: Lack of brand recognition, limited physical presence, dependence on technology and logistics.
  • Opportunities: Partner with established retailers to expand reach, develop new technologies and services.
  • Threats: Competition from established players with greater resources, potential technological disruption.

Strategic Analysis:

  • Porter's Five Forces: The online grocery market is characterized by high competition, low barriers to entry, and strong bargaining power of buyers. This highlights the need for differentiation and efficiency to succeed.
  • Competitive Advantage: Tesco's competitive advantage lies in its brand recognition and existing customer base. Ocado's advantage lies in its technology and efficient delivery model.
  • Value Chain Analysis: Both companies need to optimize their value chains to deliver value to customers. Tesco needs to improve its online delivery network and customer experience. Ocado needs to build brand recognition and expand its reach.

4. Recommendations

Tesco should pursue a hybrid strategy, combining its existing strengths with Ocado's expertise:

  • Strategic Partnership: Form a strategic partnership with Ocado, leveraging their technology and logistics expertise. This could involve joint ventures, technology licensing, or even a partial acquisition.
  • Technology Integration: Integrate Ocado's technology into Tesco's existing infrastructure, creating a seamless online experience for customers. This includes online ordering, inventory management, and delivery optimization.
  • Customer Experience Enhancement: Improve the customer experience through personalized recommendations, efficient delivery options, and convenient payment methods.
  • Data Analytics and Insights: Leverage data analytics to understand customer preferences and optimize operations. This includes demand forecasting, inventory management, and route optimization.
  • Innovation and Product Development: Invest in innovation and product development to stay ahead of the competition. This includes exploring new delivery models, expanding product offerings, and integrating new technologies.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  • Core competencies and consistency with mission: Tesco's mission is to provide value to customers. This strategy aligns with this mission by leveraging Ocado's expertise to enhance the online customer experience.
  • External customers and internal clients: This strategy addresses the needs of both external customers seeking convenient online grocery shopping and internal stakeholders seeking to improve operational efficiency.
  • Competitors: This strategy allows Tesco to compete effectively with other online players by leveraging Ocado's technology and expertise.
  • Attractiveness - quantitative measures: The potential benefits of this strategy include increased market share, improved customer satisfaction, and enhanced operational efficiency. These benefits can be quantified through market analysis, customer surveys, and operational performance metrics.

6. Conclusion

By adopting a hybrid strategy, Tesco can leverage its existing strengths and capitalize on the growing online grocery market. This approach will enable Tesco to compete effectively with pure-play online retailers while minimizing risks and maximizing efficiency.

7. Discussion

Alternatives:

  • Organic Growth: Tesco could invest heavily in developing its own online platform and delivery network. However, this would be a costly and time-consuming process, potentially leading to a delayed response to the growing online market.
  • Acquisition: Tesco could acquire Ocado outright. This would give them immediate access to Ocado's technology and expertise, but it would be a costly and complex transaction.

Risks and Key Assumptions:

  • Integration Challenges: Integrating Ocado's technology into Tesco's existing infrastructure could present challenges, requiring significant investment and effort.
  • Cultural Differences: Merging the cultures of two distinct organizations could lead to friction and conflict.
  • Technological Disruption: The online grocery market is constantly evolving, and new technologies could emerge that disrupt the current landscape.

8. Next Steps

  • Due Diligence: Conduct thorough due diligence on Ocado's technology, operations, and financial performance.
  • Negotiate Partnership Terms: Negotiate a mutually beneficial partnership agreement with Ocado.
  • Develop Integration Plan: Develop a detailed integration plan for merging Ocado's technology into Tesco's systems.
  • Pilot Program: Launch a pilot program to test the integrated platform and customer experience.
  • Scale-up and Expansion: Based on the success of the pilot program, scale up the online grocery delivery service and expand into new markets.

By taking these steps, Tesco can successfully navigate the evolving online grocery market and secure its position as a leader in the industry.

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Case Description

The online grocery market in the UK is one of the largest in the world. It has many players, but two of the most dynamic are Tesco and Ocado. These two companies have taken markedly different approaches to executing and fulfilling online grocery orders from customers. Tesco has an extensive network of stores and primarily uses these stores as picking locations to prepare and ship customer orders. Ocado has no retail stores, and uses highly automated distribution centers to prepare and ship customer orders. This case describes the UK online grocery market and the two companies; it invites students to consider the differences in the approaches, in which ways they offer advantages to the company and to customers, and ultimately which one is better suited to the UK online grocery market. Learning objective: The objective of this case to develop an appreciation and understanding of the different benefits, costs and constraints of supply chain distribution models. By contrasting two companies that have very different supply chain approaches to competing in the same market, the case leads students to make connections between a company's supply chain strategy and its customer value proposition.

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