Revolutionizing Food Delivery in the Digital Age

Introduction

Today, one does not need to physically visit their restaurant for their favourite cuisine. Instead, they only have to use a dedicated online platforms that are linked to particular restaurants to get their favourite meal delivered at their door step. Deliveroo is one among several companies that have ventured into the food delivery business thus allowing customers access to thousands of restaurants and millions of dishes. As at 2019, Deliveroo is one of the UK’s most valuable start-ups with an estimated net worth of at least $2billion. It has attracted the attention of other multinational corporation like Amazon, which has pumped a $575 million investment into the company (Van Cleynenbreugel, P., 2019. Deliveroo currently works with at least 80,000 restaurants, 60,000 riders, 2500 employees and operates in over 500 cities in 14 countries. Students who are interested in exploring such innovative business models might find the most valuable insights through business dissertation help.

However, behind the scenes the online food company has had to apply various models for innovation, which has led to the above milestones. This paper will go behind the scenes to trace and evaluate how the online food giant has used different approaches to enhance its entrepreneurial vision and business model. Using relevant models of strategic management, this paper will examine the competitive strategies of Deliveroo and also look at the relevance of the Blue Ocean Strategy to their success in the online food industry.

Drivers of Innovation

Most organizations derive their success largely from innovation. Although competitive advantage can be derived from the sheer size and assets of an organization, the role of innovation cannot be underestimated because there is an increasing favour in the market for organisations that can mobilize knowledge and technological skills mould new service and products. Innovation loosely translates to change which can take different forms in an organization.

According to Schumpeter (2000), a business like Deliveroo can come up with new and attractive services like the one they currently offer which will give them a strategic advantage over other players in the industry. However, they need to continuously innovate to avoid losing its competitive advantage.

Product Innovation entails the changes in the products or services that an organization offers to its customers (Bellini et al., 2017). In the same vein, Deliveroo has utilised product innovation to achieve its acclaimed success within a relatively short time. When Just Eat launched its food delivery strategy in 2001 it was described as revolutionary and a disruption in the food delivery industry. 15 years later, Deliveroo and Uber Eats have now disrupted the disruptor through technology innovation. Since 2013, Delivery has continued to unleash new offerings including express lunch, alcohol delivery and ‘Roobox’ (Bell, 2019). The decision to add to its list of services the delivery of alcohol to its customers is a reflection of incremental innovation where they are simply increasing the number of services available to its customers.

In 2017, Deliveroo’s Roobox was named number four in the Digital Retail Innovations Report among top 49 top innovations from the UK and Ireland. Basically, Deliveroo took a step to shift from simply delivering service for food to being a food producer as well (Bell, 2019). This move by the online food delivery giant marked a key step towards strategic competitive advantage over other similar companies in the market. This is an example of product innovation that entails a radical dimension of innovation. It is radical because of the novel nature in the industry. The above innovative approach is similar to the introduction of the Toyota Prius model by Toyota which was a radical innovative dimension that thrust it forward in terms of competitive advantage.

More often than not, product and process innovation may mean the same thing especially in services industries like that of Deliveroo (Trimi and Berbegal-Mirabent 2012:36). The decision to roll out the RooBox idea was one way of expanding the business model from transport to production and transport. In consideration of the current trend of unfaithful consumers caused by an array of choices available to them, the move by Deliveroo was intended to increase its market share options to consumers. The use of riders by Deliveroo to deliver food to its customers is one of the ways of process innovation in the company. For instance, Deliveroo ensures that its riders have flexible working hours, insurance for their vehicles, incentives, tips and payment for referrals has the transport aspect of Delivery smooth and high quality evidenced by customer satisfaction.

As an outstanding food delivery platform, Deliveroo has set itself apart by targeting people who would rather eat where they are than go to the restaurant. Because their deliveries take less than 30 minutes and the food is guaranteed to be fresh and hot, consumers see no reason to go to the restaurant for the same dish. In terms of paradigm innovation, the company has introduced virtual kitchens known in the UK as Deliveroo Editions. These virtual kitchens have been lauded for being cost effective to the extent of reducing operation cost by large margin. Deliveroo estimates that virtual kitchens could reduce their real estate costs by 90% and staffing costs by a considerable margin. This change in mental model has been associated with the goal of Deliveroo to cut the cost of food by up to 50 percent (Bell 2019). Surely, this will disrupt the online food delivery market and the company shall have achieved a strategic and sustained competitive advantage.

Competitive Strategies

In light of globalisation and advancement in technology, the business environment has become increasingly competitive. Therefore, businesses have to adopt to the new normal by identifying a potential niche in which they can gain competitive advantage in their industry. Michael Porter (1985) suggested four business strategies that any business would adopt to gain competitive advantage. These generic strategies include cost leadership, differentiation, cost focus and differentiation focus.

Cost leadership is a strategy that entails the business gaining a market share by endearing itself to cost conscious customers and pitching itself as the lowest cost producer in the industry.

Deliveroo is a perfect example of a cost leadership strategy given that the company has adopted approaches that it delivers food to its customers at the lowest cost possible. The company serves over 600 cities in 14 countries which means it does millions of deliveries to its customers. This aspect coupled with the delivery logistics of using riders who work part time drives their costs down. Interestingly, the food company announced in late 2019 that it would be scaling down on its delivery service and allowing customers to collect food from the restaurant, a move that is meant shift costs to consumers (Powell, 2019).

Deliveroo has exploited the differentiation strategy to beat many competitors by use of an effective promotion and marketing. They have been able to do this through their Deliveroo Editions and branded riders who are easily identifiable and recognisable. While their services may not strictly be termed as premium, they offer their customers top quality deliveries that has wide reach in major cities in the UK and other 13 countries. The company has also partnered with restaurants with strong brands like Burger King. KFC, Nando’s, Honest Burgers and Subway, and this has enabled it to become very competitive in the market rivalling Uber Eats.

Cost focus can be achieved by any company that seeks to come up with low cost advantage within a given market segment (Pulaj, Kume and Sipi, 2015). For Deliveroo, they have been able to exhibit a low cost advantage by rolling out the Roobox and Deliveroo Editions which signifies their entry into the production industry. It means that the company can now produce their own food and sell it at cost effective prices that will compete with other restaurants. These strategies appears to be aimed at reaching a market segment that is cost conscious. In terms of differentiation focus, Deliveroo has made attempts in 2019 to differentiate its model from delivery to establishing virtual restaurants. To facilitate this, the food delivery giant has entered into tech partnerships with Yumpingo and Eatsa, which are technology companies that are also revolutionising the food industry.

Businesses must understand that they may not remain competitive in the market for long by simply applying the same strategies year in year out. Igor Ansoff (1957) suggested that a firm should use its products in the existing market but aim to enlarge its market share. For a company like Delivery, it has continued to expand in the UK while offering its products through increased promotion and distribution efforts. The company has invested in targeted paid advertising and real time management and conversation on their Twitter accounts in specific cities like Leeds, Liverpool and Manchester. This approach has reached many tech-savvy individuals in England hence expanding its market share.

In Hong Kong, the company has introduced new marketing tools called Restaurant Home and Marketer which were meant to assist restaurants help restaurants to optimize their menu and business performance. Apart from branding and aggressive advertisement on its channels, Deliveroo has also invested heavily in influencer marketing, stunt marketing and enticement of customers with generous promo codes.

This strategy involves introduction of new products in existing markets. By developing and selling new products to its customers a business will maintain its market share and enhance customer loyalty. Apple’s strategy is probably the best in the tech industry where they release new iPhone models every year and their customers are always eager to get the modified version of the iPhone (Taylor 2012:21). Equally, Deliveroo has also developed a strategy that entails the delivery of alcohol and express lunches. These additional services are aimed at its existing market to increase sales, provides more choices to customers and enhance customer loyalty.

In market development strategy, the business ventures into a new market with its existing product and this can be done by expanding operations to new geographical locations or customer segments. Deliveroo’s global sales have jumped to £476 million, which is an increase of 72 percent. This growth can be attributed to among others, its expansion strategy which has seen it launch its services in 250 new towns and cities in 2018 (Musgrove, 2019). Further, the online food giant launched its operations in Kuwait and Taiwan, which increases its presence in the Middle East. The upshot of the above is that the company has expanding domestically, regionally and internationally thus increasing its revenue and profits.

In utilization of this strategy, the company sells its new products to new markets and the new products could either be related or unrelated to the existing offering. Deliveroo has adopted a related diversification strategy where they have resorted to physical properties in relation to pop up kitchens and virtual restaurants. This strategy is meant to diversify the business from the delivery business into production and possibly even real estate. In their latest move, the company has launched a new pick up feature that will allow users of its platform to place an order then proceed to the restaurant to pick it themselves (Cook, 2019). It appears that the company has sensed that it may not rely on the delivery approach for a very long time given the controversies it has faced with regard to minimum wage issues and unionization of its riders. More importantly, it’s looking to cut the cost of delivery and use the additional revenue from pickup to stay ahead of competitors.

Deliveroo is considered as the fastest growing company in Europe and the questions in everyone’s mind is how they did it. The answer is in the Blue Ocean strategy which entails the simultaneous pursuit of differentiation and low cost to create a new market space and new demand. Chan Kim and Renee Mauborgne (2005) explains that the concept is all about the business creating and seizing uncontested market space with the aim of rendering the competition irrelevant. The two authors likened the market universe to the blue and red ocean.

A red ocean represents the known market space for a business like Deliveroo where the food delivery industry if filled with competitors like Just Eat and Uber Eats that it has to outperform to remain competitive. On the other hand, the blue ocean represents industries that are not in existence today and the unexplored or unknown market space, with no competition. A company in the blue ocean simply has to create demand to succeed unlike the red ocean where there is cut throat competition and businesses have to outdo each other to survive in that market. While the business has to align its activities with its strategic choice of differentiation and low cost in the red ocean, in the blue ocean the business simply has to align its activities to attain differentiation and low cost.

Value Innovation can be created in an area where the company’s activities favourable impacts on its value proposition to buyers and its cost structure. A company implement cost saving by doing away with factors which forms the competition front and buyer values can be enhanced by raising and creating offerings that the industry has never had. Therefore a company that is in pursuit of value innovation must align its cost, utility and price. In the same vein, Deliveroo has strived to achieve the above by reducing the factors that the food delivery industry competes on. In 2013, the founders of the company came up with an idea that would see the company move into the online food industry, which at the time had no serious competition. They exploited technology to come up with an app with platform where people would order food at the comfort of their homes and offices.

The industry at the time was majorly concerned with restaurant offering and dedicated delivery services companies like Just Eat. It basically eliminated the need to own or operate a restaurant to deliver food to people. They found out that the existing companies at the time like Just Eat relied on their staff to deliver food to people which occasioned delay and increased cost of operation. Having considered the above, the company decided to set up its operation such that their deliveries would be carried out by part time riders and drivers who are not employees. Further, they partnered with strong brands like Burger King and Subway to deliver premium services to their customers. As a result buyers found that unlike the other delivery companies, Deliveroo was convenient and offered quality services.

This is a tool for a company to visually show how the industry might be exploited as part of the strategic process. A strategy canvas a line graph representation that plot factors against importance for a firm and then a comparison with industry benchmarks. For the online food delivery industry, the strategy canvas would the factors in the industry plotted against their relative importance. In the same graph, Deliveroo’s curve can be plotted to show a comparison with the industry’s benchmarks. Additionally, other competitors like Just Eat can have their graphs plotted as well to make comparisons.

The strategy canvas below shows the position of Deliveroo in the UK market in comparison with industry standard and its main competitors. Considering the pricing of its product and services, all the three companies have relatively similar prices with marginal differences. However, Deliveroo is more advanced in the use of technology in their business and is far ahead of both Just Eat and Uber Eats. In fact, Technological innovation is one of its competitive niches. Uber Eats and Deliveroo are faster in service delivery than Just Eat. In terms of riders, Uber still has the highest number of riders than Deliveroo and Just Eat given that it already has existing framework for Uber drivers. While Deliveroo has the most valuable brand currently, Just Eat has the largest market share. It follows that Deliveroo is using its strong brand and other leadership position on the canvas to remedy its low market share.

This tool is used to answer four basic questions as outlined in the diagram below. It is used to reconstruct buyer value elements in creating a new value curve or a strategic profile. First, it addresses the issue of elimination where the business must ask itself what is to be eliminated form the industry. Deliveroo success is attribute to the fact that it took steps to eliminate the need for physical space to establish a restaurant and employ staff as chefs and drivers for deliveries. These were the factors that had long been competed on in the market. Secondly, Deliveroo considered the issue of raising certain factors above the industry standard to remain competitive above other competitors. In this aspect, the company resorted to ease the food delivery service by connecting people to their favourite restaurants faster, conveniently and exhibiting high quality service. In fact their online food delivery service has been termed as premium.

In terms of creating new value, Deliveroo considered the factors that needed to be formed that were not present in the industry. As a result, it ventured into virtual restaurants, pop-up kitchens, Roobox and Deliveroo Editions all of which were aimed at offering a different kind of service to its customers. It also create a good customer relationship management system that deals with all the issues raised by their clients. Finally, the company considered which service would be reduced below the industry’s standard. In this regard, Deliveroo dropped the practice of employing drivers to deliver food and instead hired drivers who worked part time thus it reduced cost and did not have to deal with minimum wage issues.

Conclusion

Deliveroo is a relatively young company that only commenced operations in 2013. Nevertheless, it has made inroads into the online food industry in the UK and around the world and it has become a formidable competitor for Just Eat and Uber Eats. It has continued to grow in leaps and bounds in terms of revenue and geographical reach. As extensively discussed above, this kind of growth has been fuelled by various strategic business models and frameworks. Applying the drivers of innovation, the above discussion has established that the company has invested in the 4 Ps of innovation to sustain its success. It has been able to change and revolutionise its offerings to the market.

As one of the fastest growing companies in Europe, it has indeed been demonstrated above that Deliveroo has effectively used Porter’s generic strategies to achieve a strategic and sustained competitive advantage over other companies. Using Ansoff’s matrix, it has been demonstrated that Deliveroo is rightfully ahead of its competitors. In pursuit of creating an unexplored market in the online food industry Deliveroo has applied the Blue Ocean Strategy and made milestones in fending off competitors. Be that as it may, the company still needs to increase its market share especially in the UK where competitors like Just Eat and Uber Eats have larger market share. Further, the company may consider using other business strategies to implement the necessary changes.

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