In the present competitive business environment, companies are looking for overseas expansion for fulfilling business aims and objectives. Overseas expansion provides greater access to the market that can have major impact on the overall business level. For that reason, organizations look to initiate different strategies for capturing the significant portion of the global market share. Technological enhancement has provided business entities the opportunity to maintain coordination among different branches located in different geographical areas. It has helped the organization to enhance the overall sales volume in a major way.
In this study, the focus would be on the business expansion strategy of a UK based retail organization namely Ocado. The organization was established in April 2000 with the objective of providing superior quality of groceries and consumer goods products. Ocado is extremely popular in the UK market, as its revenue was recorded 1.108 billion GBP in 2016 (ocado.com 2017). From the beginning, all the initiated strategies of Ocado have able to create maximum impact on the UK market. For that reason, the organization is looking to expand its business in the Chinese market for enhancing the revenue level in an effective way. The study would focus on identifying the present market situation of China in order to assess the best possible way to enter into the market. The study would focus on highlighting competency areas of Ocado that can create major impact on the business expansion perspective. It would also recommend strategies for Ocado so that it can capture major share of the Chinese market.
Government rules and regulations can have major impact on the business level of retail industry. It has been assessed that Chinese government has specified different rules for the businesses outside the country (Baker and Parkinson 2016). Moreover, political factor has also induced government to collect more tax revenue from the foreign businesses that can have major impact on the international expansion perspective.
As highlighted by Dunning (2012) China’s economy has achieved rapid GDP growth in past few years. Factors like Sigh rate of savings, urban growth, export business and abundant & skilled labour have enhanced the per capita income in a major way. As a result, Chinese people are spending greater amount on daily shopping activities. It has increased the business opportunity for the foreign retail organizations.
Cultural and social aspect of China also plays a greater role in the business opportunity created in the market. For instance, population growth and age distribution dictates the demand of a particular product in the market (Cavusgil et al. 2014). It also determines religion, lifestyle, emigration and education level of the economy that eventually contribute to the increasing business opportunity in the Chinese market.
Technological enhancement is China’s economy has allowed foreign organization to reinforce their position in the market. It has allowed foreign organizations to coordinate with other branches in an effective manner (Solomon 2014). As a result, it has allowed organizations to position itself in bigger market, which is more likely to create positive impact on the business.
Environment is another crucial factor that can have major impact on the business level of the organizations (Majaro 2013). It has been assessed that China has developed specific environmental rules and regulations that each business will have to follow in order to avoid any type of unnecessary challenges. For that reason, it would induce organizations to invest larger amount on CSR activities that can have impact on the overall revenue level.
Maintenance of legislative rules and regulations is essential for sustaining business in the foreign market (Terpstra, Foley and Sarathy 2012). China has developed legislation like intellectual property rights, tax and subsidies that can create major impact on the businesses. It can also direct the best possible way to establish itself in the Chinese market.
Chinese retail sector represent an extremely profitable market with high returns. Specifically, the GDP growth of China has increased the spending pattern of the people in a major way (Hussain and Khan 2013). Therefore, it is providing more business opportunity to all the retail organizations. This would eventually attract new businesses to establish its presence in the market. Thus, Chinese retail sector posses’ greater threat regarding new entrants.
It reflects the existence of products outside the realm of the popular product boundaries that can increase the probability of customer switching to other alternatives. Now, Chinese market has different brands in the retail sector products that have provided more alternative opportunities to the customers (Solomon 2014). Thus, threat of substitution is high in Chinese retail market.
It reflects the degree to which buyer can influence the price of any particular product. Now, as buyers have different alternative options, it can influence the price level of retail products in a major way (Tan and Sousa 2013). In addition, retail sector in China has grown in past few years, which has increased options for the customers.
It describes the degree to which suppliers can create impact on the price level in Chinese market. Now, increasing completion in the retail sector has also increased the number of suppliers available in the China market. Therefore, it has reduced the bargaining power of suppliers in a major way.
Retail sector of China has intense competition among several competitors. For that reason, all the organizations need to initiate different strategies to grab the attention of the customers (Turnbull and Valla 2013). In addition, high rate of new entrants is likely to enhance the intensity of the competitiveness even further.
As per the article by Killing (2012) organizations need to evaluate the effectiveness of the tangible and intangible resources in fulfilling all the business objectives. It has been assessed that appropriate use of all the resources can allow organizations to maximize the impact of all the strategies. Ocado also have to focus on utilizing both tangible and intangible resources for creating desired impact on the market. In case of tangible resources, Ocado has the capacity to borrow huge amount of capital if necessary to establish its presence in the Chinese market. Ocado also maintain a formal reporting structure for fulfilling all the activities in a systematic way. In addition, Ocado also have sophisticated manufacturing and warehousing technologies that will help the organization to establish its presence in the Chinese market. In addition, as one of the popular retail sector organizations in UK, Ocado has copyrights, patents, trade secrets and trademarks.
It will allow the organization to position itself distinctively in the Chinese market (Berthon et al. 2012). On the other hand, Ocado has three prime intangible resources including human resource, innovation resources and reputational resources. Human resource of Ocado includes trust, knowledge, skill and ability to handle pressure situation. It has allowed Ocado to handle different types of market related challenges in an appropriate manner. On the other handle, business strategies of Ocado has always focused on providing some value added services to the customers so that they can able to handle challenges of the market in an effective way.
It is necessary for the organization to utilize all resources in such a way so that it can able to enhance the capability of the organization. For instance, Ocado can utilize its strong brand presence in the UK market as the core competency factors. It is expected that strong brand reputation in UK market will allow the organization to capture the faith of the Chinese people in an effective way (Cavusgil et al. 2014). On the other hand, technological superiority will help Ocado to provide superior quality of products to the new market. It is also expected to create maximum impact on the competitive advantage perspective.
The vision statement of Ocado focuses on becoming the most popular brand in retail supermarket industry across the world. Ocado also aims to position itself as a customer centric organization that provides best products at the cheapest price. For that reason, the organization focuses on implementing different strategies in order to maximize the impact on the global market. On the other hand, the mission statement of Ocado focuses on developing strong brand reputation in the global market so that customers can purchase products without concerning about the quality of the provided products. For that reason, Ocado has tried to understand the differences in market culture, values and background in different economies.
It has also focused on developing products as per the needs and wants of the specific market for achieving sustainable growth in the market (Turnbull and Valla 2013). It has also initiated effective customer service department that would take care of all the queries and complains of the customers comprehensively. For that reason, it can be mentioned that the vision and mission statement of Ocado has covered up all aspect of the international business expansion. Therefore, it does not have to reframe its mission and vision statement for establishing its business in the Chinese market successfully.
As per the article by Papadopoulos and Heslop (2014), proper assessment of organizational strengths and weaknesses is essential for fulfilling all the desired objectives. Ocado will also have to focus on analyzing its strengths and weaknesses for maximizing the impact of all the initiated strategies. The SWOT analysis of Ocado is provided as follows:
|
Strengths |
Weaknesses |
|
· Ocado has strong brand presence in the UK market. It will help to increase the trust level of the organization · All the initiated strategies of Ocado has created maximum impact on the UK market · Ocado possess strong internal culture values and ethics that allow organization to achieve the trust level in an effective manner · Ocado maintain high level quality for each of the product segment for maximizing the satisfaction level of the customers |
· Ocado has very list experiences about the market culture of China. In fact, the entire revenue of the organization is heavily depended on the UK market · Ocado does not have the human resources that are experienced in handling all the international customers · Ocado need to focus more on the technological enhancement process for fulfilling all the targets in an effective manner |
|
Opportunities |
Threats |
|
· Ocado have very little presence outside the UK market. Therefore, it has huge potential world market that the organization can focus on enhancing the sales volume in an appropriate manner · Ocado also has the opportunity to diversify its product range more. Therefore, it will help the organization to target larger share of the market in an effective manner · Ocado also can focus on utilizing e-commerce platform for increasing the convenience level of the customer in an effective way |
· Increasing cost of the operational process can be regarded as the prime threat for Ocado. Increasing operational cost will eliminate the price advantage of the customers · The competition level in the retail sector is extremely intense. Therefore, Ocado will have to face huge amount of challenges for capturing major share of the market in an effective manner |
Table 1: SWOT analysis of Ocado
(Source: Terpstra, Foley and Sarathy 2012)
Porter generic strategies focus on three prime approaches that organization can use for achieving competitive advantage in the market. Firstly, cost leadership focuses on utilizing minimum prices for all the products for capturing all the price sensitive customers. The business strategy of Ocado has always focused on providing superior quality of products at the cheapest price available in the market. On the other hand, differentiation strategy allows organizations to differentiate all the provided products and services in the market (Baker 2014). Now, Ocado has always focused on utilizing its brand value and reputation for positioning itself uniquely in the market. Moreover, it also has focused on providing some value added services to the customers for retaining them longer period of time (Cavusgil et al. 2014). Finally, focus strategy allow organizations to target a particular niche market with the proper understanding about the dynamics of the market. Historically, Ocado has focused on using differentiation strategy for creating popularity in the UK market (Fletcher and Crawford 2013). However, as the organization is looking to expand its reach in the China market, it will have to focus on utilizing cost leadership strategy in an efficient way.
In order to establish its presence in the China market, Ocado will have to focus on identifying the best possible strategy for entering the market. Several options are available for new market entry including exporting, licensing, strategic alliances, acquisitions and new wholly owned subsidiary that Ocado can utilize for creating desired impact on the China market (Cavusgil et al. 2014). Each of the market entry modes has some pros and cons that Ocado needs to evaluate in an effective manner.
From the available mode, Ocado needs to focus on two types of entry mode namely strategic alliances and acquisition primarily. It has been assessed that effective utilization of strategic alliances would help the organization to share the total amount of cost required for fulfilling all the organizational responsibilities. Moreover, it would also help Ocado to understand the culture and values of China market effectively. On the other hand, Ocado can also focus on utilizing acquisition technique for grabbing the major share of the China market. Acquisition technique would help the organization to establish its presence in the new market effectively. On the other hand, people from china will feel connected with the organization due to experiences with the acquired organization (Paliwoda and Thomas 2013). For that reason, Ocado will have to select a particular entry mode depends on the amount of investment. It has been assessed that acquisition strategy requires huge investment at the initial stage. Therefore, it also posses’ higher risks related with the international business expansion process. On the other hand, strategic alliances do not require too much investment but it can create major damage on the internal environment.
Conclusion:
The study has established the fact that international business expansion is essential for the organization for fulfilling all the business objectives. It has established the fact that international business expansion would help the organization to achieve sustainable growth in the market. However, it will also have to face different challenges at the time of establishing the business in the China market. For that reason, it is necessary for Ocado to analyze market environment of China in an effective way. It would help Ocado to eliminate all the market related challenges associated with the international business expansion perspective. To conclude, it can be mentioned that Ocado will have to take certain amount of risks for achieving success in the global market.
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