Harvard Case - Glovo 1.0. Launching a New Business Model in the Ultra-Competitive Last-Mile Delivery Landscape
"Glovo 1.0. Launching a New Business Model in the Ultra-Competitive Last-Mile Delivery Landscape" Harvard business case study is written by Joan Enric Ricart, Mathieu Carenzo, Albert Tapia. It deals with the challenges in the field of Strategy. The case study is 14 page(s) long and it was first published on : Sep 1, 2019
At Fern Fort University, we recommend Glovo adopt a multi-pronged strategy focused on rapid expansion, strategic partnerships, and technology-driven innovation to solidify its position as a leading player in the last-mile delivery landscape. This strategy will leverage Glovo's existing strengths in technology and analytics, international business and entrepreneurship to capitalize on the growing demand for on-demand delivery services globally.
2. Background
Glovo, a Spanish startup founded in 2014, entered the highly competitive last-mile delivery market with a unique value proposition: offering a platform for delivering anything, anytime, anywhere. This disruptive innovation challenged established players like Deliveroo and Uber Eats, offering a broader range of services and a more flexible business model.
The case study focuses on Glovo's initial growth strategy, highlighting its expansion into new markets, its focus on technology and analytics, and its efforts to build a strong brand identity. However, the case also emphasizes the challenges Glovo faces, including fierce competition, regulatory hurdles, and the need to maintain profitability amidst rapid growth.
3. Analysis of the Case Study
Porter's Five Forces analysis reveals the highly competitive nature of the last-mile delivery market:
- Threat of New Entrants: High, due to low barriers to entry and the availability of technology platforms.
- Bargaining Power of Buyers: Moderate, as customers have multiple options and can easily switch providers.
- Bargaining Power of Suppliers: Low, as Glovo relies on a large network of independent couriers.
- Threat of Substitutes: High, due to the availability of alternative delivery options like traditional courier services and in-store pickup.
- Competitive Rivalry: Very high, with numerous established players and new entrants constantly vying for market share.
SWOT Analysis of Glovo highlights its strengths, weaknesses, opportunities, and threats:
Strengths:
- Technology and Analytics: Advanced platform for order management, logistics optimization, and data analysis.
- International Business: Rapid expansion into new markets, leveraging local knowledge and partnerships.
- Entrepreneurial Spirit: Agile and adaptable to changing market conditions and customer needs.
Weaknesses:
- Profitability: Challenges in achieving sustainable profitability due to high operating costs and intense competition.
- Regulatory Compliance: Navigating complex regulations in different markets, leading to potential delays and legal challenges.
- Brand Awareness: Building a strong brand identity in a crowded market requires significant marketing investment.
Opportunities:
- Emerging Markets: Expanding into untapped markets with high growth potential, particularly in developing countries.
- Strategic Partnerships: Collaborating with retailers, restaurants, and other businesses to offer integrated delivery solutions.
- Technology Innovation: Leveraging AI, machine learning, and automation to optimize delivery processes and enhance customer experience.
Threats:
- Competition: Intense rivalry from established players and new entrants, including potential disruption from new technologies.
- Economic Fluctuations: Sensitivity to economic downturns, potentially impacting customer spending and demand for delivery services.
- Regulatory Uncertainty: Changing regulations and potential policy changes could impact Glovo's operations and business model.
Value Chain Analysis reveals Glovo's key activities:
- Inbound Logistics: Sourcing and managing couriers, ensuring their availability and quality.
- Operations: Processing orders, dispatching couriers, and monitoring deliveries in real-time.
- Outbound Logistics: Delivering goods to customers, ensuring timely and accurate delivery.
- Marketing and Sales: Promoting Glovo's services, attracting new customers, and building brand awareness.
- Customer Service: Providing support to customers, resolving issues, and enhancing customer satisfaction.
4. Recommendations
To address Glovo's challenges and capitalize on its opportunities, we recommend the following:
1. Rapid Expansion and Market Penetration:
- Target High-Growth Markets: Prioritize expansion into emerging markets with high demand for on-demand delivery services, such as Latin America, Africa, and Southeast Asia.
- Leverage Local Partnerships: Collaborate with local businesses, retailers, and delivery partners to establish a strong presence in new markets.
- Tailor Services to Local Needs: Adapt Glovo's services to meet the specific needs and preferences of local customers, offering localized options and payment methods.
2. Strategic Partnerships and Diversification:
- Partnerships with Retailers and Restaurants: Integrate Glovo's platform with online retailers and restaurants to offer seamless delivery options for their customers.
- Expand Service Offerings: Diversify beyond food delivery to include grocery delivery, pharmacy deliveries, and other essential services.
- Vertical Integration: Consider acquiring or partnering with logistics companies to gain control over key aspects of the delivery process, such as warehousing and transportation.
3. Technology-Driven Innovation:
- Invest in AI and Machine Learning: Leverage AI and machine learning to optimize delivery routes, predict demand, and personalize customer experiences.
- Develop a Robust Data Analytics Platform: Continuously analyze data to identify trends, optimize operations, and improve customer service.
- Explore New Technologies: Investigate emerging technologies like drones and autonomous vehicles to enhance delivery efficiency and expand service offerings.
4. Brand Management and Customer Experience:
- Build a Strong Brand Identity: Develop a consistent brand message and visual identity that resonates with target customers.
- Focus on Customer Experience: Prioritize customer satisfaction by offering reliable and convenient delivery services, competitive pricing, and excellent customer support.
- Leverage Social Media and Influencer Marketing: Engage with customers on social media platforms and partner with influencers to build brand awareness and generate positive word-of-mouth.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Glovo's current situation, the competitive landscape, and industry trends. They consider:
- Core Competencies: Leveraging Glovo's expertise in technology, international business, and entrepreneurship.
- External Customers: Meeting the evolving needs and preferences of customers for convenience, speed, and reliability.
- Competitors: Differentiating Glovo from rivals through a broader service offering, strategic partnerships, and technological innovation.
- Attractiveness: Focusing on high-growth markets with significant potential for revenue generation and profitability.
6. Conclusion
Glovo's success hinges on its ability to adapt to the rapidly evolving last-mile delivery landscape. By embracing a multi-pronged strategy focused on rapid expansion, strategic partnerships, and technology-driven innovation, Glovo can solidify its position as a leading player and achieve sustainable growth.
7. Discussion
Alternative strategies include:
- Focusing solely on food delivery: This strategy would allow Glovo to specialize in a specific niche and potentially achieve higher profitability. However, it would limit Glovo's growth potential and expose it to increased competition from specialized food delivery platforms.
- Acquiring smaller competitors: This strategy would allow Glovo to consolidate its market share and gain access to new markets and technologies. However, it would require significant capital investment and could lead to integration challenges.
Key risks and assumptions:
- Regulatory changes: Changes in regulations could impact Glovo's operations and profitability.
- Economic downturn: A decline in economic activity could reduce consumer spending and demand for delivery services.
- Competition from new technologies: Emerging technologies like drones and autonomous vehicles could disrupt the last-mile delivery market.
8. Next Steps
To implement the recommended strategy, Glovo should:
- Develop a detailed strategic plan: Outline specific goals, timelines, and resource allocation for each initiative.
- Establish key performance indicators (KPIs): Track progress towards strategic goals and identify areas for improvement.
- Build a strong management team: Recruit and develop talented individuals with expertise in technology, international business, and operations.
- Invest in technology and infrastructure: Allocate resources to develop and deploy advanced technology solutions.
- Foster a culture of innovation and collaboration: Encourage employees to think creatively and work together to achieve strategic objectives.
By taking these steps, Glovo can navigate the challenges of the last-mile delivery market and achieve its ambitious growth goals.
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Case Description
In the context of the digital revolution and the mass use of smart devices connected to the Internet, consumer habits have changed radically. Now a large proportion of the population shops from home, and consumers can compare and choose products from a wider variety of options and sellers. So competition is fierce. Local businesses, such as restaurants, no longer compete with only the business next door but also with other businesses located elsewhere in the city or even in another city or country. With the increase in competition and the implicit rise in the variety on offer (both food and other products), consumers have become more demanding as they have more to choose from. At the same time, new communication channels and social media have established a new relationship between buyers and sellers. Vendors can reach their customers directly and create new and improved customer-satisfaction and persuasion strategies. This case study analyzes Glovo's first business model and describes the evolution of the on-demand delivery company from its beginnings up to the late summer of 2016, when a change in model seemed to be needed. The case looks at the different aspects of Glovo's first business model, aimed at the continuous acquisition of new users to continue growing through innovative marketing techniques. In addition, the case compares Glovo's value proposition and business model with those of the competition at that time, when most of its competitors offered only food-delivery services. In the late summer of 2016, almost two years after it had been founded, Glovo was at a crossroads. Already established in Barcelona, Madrid and Valencia and having started to operate recently in Milan and Paris, Glovo's growth prospects were doubtful. Nevertheless, as the company had just closed a financing round, its leadership team still had the time and money to rethink its business model and improve the situation.
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