lOMoARcPSD|8467297

Deliveroo - Competitive advantages - Porter's five forces

International Strategic Management (Rijksuniversiteit Groningen)

StuDocu is not sponsored or endorsed by any college or university

Downloaded by charles oviri (charlesu69@gmail.com)
 lOMoARcPSD|8467297

Deliveroo: theory of competitive advantage.

A competitive advantage is when the firm can create more value than its rivals,
and when this firm’s rivals cannot replicate the source of value that the firm
creates.
There are two classes of theories on how to create a competitive advantage. I
will talk more in debt about the market based model since we believe that
Deliveroo is in a quite dynamic and interesting environment. But first I will talk
a bit about the resource-based model.
- Resource-based ‘inside-out’ models: focuses on the organization in
considering the source of competitive advantage.
Resources:
- Tangible: physical resources, like its software platform, this allows
customers, riders and restaurants to have the best possible experience
on the platform. The company is at the forefront of innovation and
introduces new technology to stay ahead of competition. One innovation
is the Deliveroo Toolkit, which was introduced in 2017.
- Intangible: are not physical. Knowledge from, for example, engineers
who maintain the platform and delivery drivers. (5)

Capabilities: is the ability to perform or achieve certain actions or outcomes.

International expansion represents one of Deliveroo’s capabilities. (6)

VRIN/ VRIO framework…

Valuable, rare, inimitable, non-substitutable / organisational support.

- Market-based ‘outside-in’ models: Porter-type models. These models

suggest that the firm must position itself against five external
environmental forces.
The threat of entry: this shows how difficult it is to enter a particular market.
Due to beneficial governmental policies, low capital requirements and minor
fixed costs, barriers in this market are low. The business of online food delivery
is increasing day by day, making it a promising market for entrants. The
entrants may be able to produce products at a lower cost than Deliveroo can,
so Deliveroo’s customers may get attracted to the new entrants. Providing
quality and working on customer loyalty is therefore crucial. (1) (2) (3)

The threat of rivalry: this shows the number of existing firms, or competitors.
Strong competition can limit the growth as firms can use aggressive strategies
against each other. We saw that entry barriers are relatively low and its
competitors can offer a service similar to the one of Deliveroo. Especially in big
cities there is a high concentration ratio, leading to a very competitive
environment. To strengthen its position, Deliveroo could raise switching costs
by developing long-term customer relationships.. (1) (3)

Downloaded by charles oviri (charlesu69@gmail.com)

 lOMoARcPSD|8467297

The threat of substitutes: If substitutes are easily available at low costs, it

can retain customers from Deliveroo. In this market many products can
substitute for the food products of Deliveroo. Substitutes range from food
cooked at home or services that provide quick meals such as restaurants, or
“ready-to-cook-boxes” and “frozen meal services”. However, most of these
substitutes already existed before Deliveroo and don’t provide as much
convenience as Deliveroo. Therefore the risk is not high. Deliveroo should try
to offer customers a better experience and high value for money. (1) (2) (3)

The threat of powerful suppliers: reflects the pressure exerted by suppliers

on business organisations by adopting different tactics like reducing the
product availability or quality or increasing prices. Food delivery companies
aim to provide its customers a diverse offer of restaurants to choose from,
therefore the number of restaurants in the network is limitless, which makes
Deliveroo highly independent from their suppliers. To even decrease risks
more, Deliveroo could set up its own control channel to minimise supplier’s
power, or create a long-term contractual relationship. (1) (2) (3)

The threat of powerful buyers: this means other consumers can easily
choose other companies and the substitutes of the products. There are many
competitors of Deliveroo so customers can easily and costless switch to other
companies. Hence, buyers have a lot of power. Surprisingly, however, 80% of
customers act loyally to the chosen service. This is beneficial for Deliveroo as
it was one of the first to enter the market. To increase power, Deliveroo can
target new market segments and adopt product diversification strategies. (1)
(2) (3)

Downloaded by charles oviri (charlesu69@gmail.com)

 lOMoARcPSD|8467297

https://www.case48.com/porter-case/49232-Deliveroo-The-Food-Delivery-Startup-on-an-Expansion-
Spree
https://www.locusassignments.com/solution/deliveroo-organisational-structure-assignment-help
https://hospitalitydreamteam.wordpress.com/2019/11/03/competitive-analysis/

https://outsideinsight.com/insights/how-deliveroo-uses-machine-learning-to-power-food-
delivery/#:~:text=Key%20Takeaway,%2Ddriven%20decision%2Dmaking%20processes

https://www.cleverism.com/company/deliveroo/#:~:text=Deliveroo%27s%20main%20resource%20is
%20its,drivers%2C%20and%20customer%20service%20employees.

https://medium.com/startup-and-modern-business-stories/deliveroo-the-making-of-an-on-demand-
giant-39ce85849726

The crux of the company’s success lies in its quick responses to customer concerns and
demands, thanks to its data-driven decision-making processes. For Deliveroo the use of data
has been absolutely critical to ensuring that customers, riders and restaurants have the best
possible experience on the platform. Deliveroo brings life to its data-driven approach to
strategic decision-making. The company is at the forefront of innovation and constantly
introducing cutting edge technology to power efficiency and to stay ahead of competition. An
example is that in 2017 Deliveroo adopted a new technology called the Deliveroo Toolkit,
When brought into service, the technology will help restaurants optimise their service by
speeding up food preparation, preventing bottlenecks in kitchen operations and speeding up
orders for customers. (4)

Downloaded by charles oviri (charlesu69@gmail.com)