Ocado vs. Tesco Case Report.docx - Ocado vs Tesco Case...

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Ocado vs. Tesco Case Report 1. Issue Introduction Since 2009, the race for the United Kingdom’s greatest grocery market share has tightened. There have been several companies enter the fray with the introduction of online grocery retailing, and at the forefront are Ocado and Tesco. Ocado boasts an online-only business model, which challenges the more traditional grocery retail model. Tesco, on the other hand, has adapted their traditional model to include the capabilities and functionality of an online model as well. Tesco’s CEO Terry Leahy believes that an online-only model is unsustainable because is subjects a company to the grocery market’s low margins and competitive positioning[ CITATION Sla17 \l 1033 ]. It is at this assumption we set off to determine which “way” is more adaptable and sustainable. 2. Purpose The purpose of this report is to identify the qualities of each model, decern the differences, determine sustainability, provide suggestions to investors, and provide an operational recommendation to both companies regarding their strategy. The questions that I will use to guide and analyze these topics include: 1. What is “The Ocado Way”? 2. What are the business models of each organization? How are the same, or how are they different from each other? 3. How does each firm position itself with the “sustainability” movement? What does “going green” really mean? 4. Which firm do you believe is positioned best for the future? 5. Which firm would you suggest to investors? Why? 6. What do you believe to the best course of action for the future of both of these firms? 3. Ocado Model vs. Tesco Model Option #1: Ocado Model Description: Ocado was founded in 2000, and over the course of nearly a decade had established a central distribution center (CFC) capable of storing 25 supermarkets-worth of inventory, created a mobile ordering application, are capable of processing 12,000 orders daily, make up 14% total market share in the United Kingdom (50% market share in London), employ over 3,000 people, own five trans-regional shipping points, own over 70 fleet shipping trucks, and operate over 500 delivery vans [ CITATION Oca201 \l 1033 ] . Ocado’s accomplishments are quite impressive given the period of time, but despite their accolades, Ocado received a Net Profit Loss of £38.6 million in 2009. Ocado, a distributer of Waitrose-owned products, is offering online price-matching on 5,000 similar Tesco products, an industry-best one-hour delivery window, competitive delivery fees, and reduced online prices on items that are sold in Waitrose’s supermarkets. At the heart of this model is an online ordering process and central distribution center that deploys shipping trucks to regional shipping points, which in-turn distribute the products to individual residences via delivery van. Ocado’s

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