EXPANDING BUSINESS TO FOREIGN MARKETS

CIA 3

Submitted in partial fulfillment of the requirements for the award of the

Degree of Bachelor of Business Administration (Honours)

CHRIST (Deemed to be University)

By

MANAN NAHATA 2023220

SUDESHNA CHANDRA 2023273

ISHIKA JHA 2023257

K CHAITHRA 2023292

Under the guidance of

Dr. Manikandan M K M

School of Business and Management

CHRIST (Deemed to be University)
BENGALURU
2022-2023

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Contents

Company Profile...................................................................................................................................3
Porter's Five Forces Analysis.............................................................................................................4
Country expanding to - United States of America............................................................................5
Why the USA?...................................................................................................................................5
PESTEL Analysis of the United States Food Delivery Market.........................................................6
Challenges..........................................................................................................................................8
Opportunities......................................................................................................................................9
Market Entry Strategies....................................................................................................................10
Country Expanding to – Mexico.......................................................................................................12
Why Mexico?...................................................................................................................................12
Challenges........................................................................................................................................16
Opportunities....................................................................................................................................17
Market Entry Strategies....................................................................................................................18
References...........................................................................................................................................20

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Company Profile

Deliveroo, headquartered in London, was founded in 2013 by Will Shu and Greg Orlowski. The
company makes revenue by charging restaurants a commission fee, as well as by charging customers
a per-order fee. It operates in two hundred cities in the U.K., the Netherlands, France, Belgium,
Ireland, Italy, Australia, Singapore, United Arab Emirates, and Hong Kong. In 2022, Deliveroo
launched an advertising platform enabling businesses to promote products across its app.

Customers place orders through its app or website, then self-employed bicycle or motorcycle
couriers transport orders from restaurants to them.

Deliveroo works with some of the most well-known chain restaurants across the U.K., most being
available exclusively on the Deliveroo app and thousands of independent restaurants. In September
2021, it was announced that Deliveroo was taking its first step into rapid grocery deliveries by
opening its dark store in London in partnership with supermarket chain Wm Morrisons. The new
service, "Deliveroo hop," is designed to serve residents within 10 to 15 minutes. Deliveroo's main
competitors are Just Eat, Grubhub and Uber Eats. In 2021, Deliveroo expanded U.K. population
coverage to 77% compared to 53% at the end of 2020. However, its market share remains behind that
of Just Eat.

Deliveroo has made public its goal to build a leading market position (#1 or strong #2) in every
market it operates. In 2022, it announced it was proposing to consult on ending its operations in the
Netherlands, citing that "it would require a disproportionate level of investment, with uncertain
returns, to reach and sustain a top-tier market position."

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Porter's Five Forces Analysis

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. Online food delivery business is increasing daily, 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.

The threat of rivalry: This shows the number of existing firms or competitors. Intense competition
can limit 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 Deliveroo. Especially in big
cities, there is a high concentration ratio, leading to a very competitive environment. Deliveroo could
raise switching costs by developing long-term customer relationships to strengthen its position.

The threat of substitutes: If substitutes are readily 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,
ready-to-cook-boxes, and frozen meal services. However, most of these substitutes already existed
before Deliveroo and did not provide as much convenience as Deliveroo. Therefore the risk is not
high. Deliveroo should offer customers a better experience and high value for money.

The threat of powerful suppliers: Reflects the pressure suppliers exert on business organizations by
adopting different tactics like reducing product availability or quality or increasing prices. Food
delivery companies aim to provide their customers with 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 decrease risks, Deliveroo could set up its control channel to
minimize supplier power or create a long-term contractual relationship.

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The threat of powerful buyers: This means other consumers can easily choose other companies and
substitutes for the products. There are many competitors of Deliveroo, so customers can quickly and
costless switch to other companies. Hence, buyers have much power. Surprisingly, 80% of customers
act loyal to the chosen service. This benefits Deliveroo as it was one of the first to enter the market.
Deliveroo can target new market segments and adopt product diversification strategies to increase
power.

Country expanding to - United States of America

Why the USA?

The U.S. attracts businesses worldwide because of its sizable and lucrative market, talent and
innovation, accessibility to capital investment, and many other factors. Some of the world's sharpest
brains, businesses, and connections are found in the United States, with the Northeast hosting many
Fortune 500 corporations. Moving to the United States has unequaled potential for expanding the
consumer base, leveraging resources, and risk diversification.

Since 2017, the market for Food Delivery has more than tripled, reaching a value of more than $150
billion. Following a remarkable historical increase of 8%, the market has more than doubled in the
U.S. during the COVID-19 pandemic. The North American market for internet food delivery in the
United States is expanding significantly. The creation of user-friendly applications supports the
sector. A busy lifestyle, a sizeable metropolitan population, and a lack of domestic help in the area
are other factors helping the market flourish.
Thus all factors considered, the U.S. market is the most attractive option for online food delivery
companies like Deliveroo and the chances of success are on the positive side.

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PESTEL Analysis of the United States Food Delivery Market

Political factors: The political climate in the U.S. is stable, and trade and commerce are encouraged.
Aside from having strong trading links with most countries, including China and Russia, the nation
also has free trade agreements with many others. For example, New York has created new legislation
requiring businesses to pay the delivery drivers the continued minimum wages beginning in FY2023
as opposed to the current delivery system. Various regulations are being developed in the U.S. for
food delivery companies.

Economic factors: According to projections, the U.S. growth rate is expected to drop from 5.7% in
2021 to 4% in 2022 and 2.6% in 2023 (IMF, 2021). This may affect the businesses and the industry's
consumers' purchasing power. As the unemployment rate declines, more people may switch to full-
time jobs to supplement their income, which may result in a decline in the number of gig workers,
making it difficult for food delivery companies to find drivers at a reasonable cost. 
Regarding industry growth, the U.S. online food delivery market is anticipated to have a spectacular
expansion at a CAGR of 10.5 percent by 2026. The industry is expected to reach a value of $33.7
billion by 2026, which is good news for the sector.

Social factors: In the U.S., ordering food through delivery services is a popular trend, with 31% of
consumers choosing to do so at least twice per week. Additionally, businesses can profit financially
because 20% of clients spend more money ordering food online than they do eating in (Resendes,
2020).

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Technological factors: The U.S. government spent $157 billion on research and development in
2021, and the budgetary allotment has been boosted to $171 billion for 2022.
The food delivery industry has benefited from several innovative technologies, including the delivery
of food by robots. This can be quite beneficial for businesses in big cities because it can help them
avoid traffic jams and deliver goods much more quickly. The majority of delivery firms' activities are
tech-based. Thus using various cybersecurity technologies might help secure the data. 

Legal factors: The Fair Food Delivery Act, which is applicable in California, is one of the U.S. laws
governing the food delivery sector. Food delivery services are forbidden by law from changing food
pricing. The law prohibits businesses from increasing the price after a client has placed an order,
whether by adding additional delivery fees or any other fee without the restaurants' permission.
Furthermore, businesses must reveal all order information by breaking down the cost of each
transaction and cannot keep any share of the tips that customers pay at restaurants (Cohen & Jessup,
2021).

Environment factors: The food delivery industry significantly increases carbon emissions due to
gasoline-powered delivery vehicles and single-use packaging for order packing. Delivery vehicles
pollute the air, and plastic waste ends up in landfills and waterways, where it causes the release of
dangerous gases and the extinction of marine life. The U.S. government has set a goal to outlaw
gasoline-powered automobiles by 2035 to solve this issue. The need to convert their entire fleet of
cars to electric vehicles would increase costs and affect the food delivery sector.

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Challenges

 Inflation: 7.5% inflation is at an all-time high because of a shortage of goods brought on by

COVID. The price of several essential commodities, including car fuel and other components,
will rise due to the rising inflation. As a result, businesses like Deliveroo would have to
charge customers more, which could reduce the demand for delivery platforms. This also
means that they have to pay the drivers handsomely.

 New laws increasing operational cost: New York has created a new law requiring
businesses to pay delivery drivers the minimum wage beginning in FY2023 instead of the
current delivery system. The companies' operating costs would rise as a result of this.
Additionally, the companies may encounter difficulties when delivering in some locations
because the drivers have the legal right to disregard excursions that require driving through
tunnels and across bridges. Furthermore, New York has set a 15% cap on the fees that
delivery services can bill eateries. As a result, the companies' sales may be lower than in the
past.

 Commission rates for restaurants: Five primary revenue streams are used by delivery
platforms to support their operations: restaurant commission fees, customer delivery fees,
customer service fees, in-app advertising, and tips (which go to drivers directly but
effectively cover operating expenses for platforms). Restaurant commission fees are a subject
of considerable debate. Many local and state governments in the United States put caps (15%)
on these commissions during the pandemic, and some locations are thinking about making
these caps permanent.

 Fierce competition: Rival systems will keep competing for drivers, restaurants, and clients
in each specific market, which could eventually result in more consolidation. As platforms
expand the range of services they offer, this conflict will spill over into new industries outside
eateries.
Specialized delivery apps targeting a particular client group or culinary style, like Slice for
pizza and HungryPanda for Chinese food, have also made a successful entry into the industry
recently, further enhancing the competitive climate.

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Opportunities

 Improvement in Logistics networks to diversify product categories: Numerous platforms

have already started to broaden the use cases for their logistics networks. This activity is set
to increase with platforms enhancing their overall economic profiles by supplying other,
higher-margin products in new categories like alcohol, drugs, food, and more. Adding these
new categories expands the client base, raises the average order value, and permits the
stacking of deliveries to boost the effectiveness of each delivery run.

 Menu Engineering: Restaurants can create personalized menus for each customer using the
data supplied by delivery platforms, boosting opportunistic sales, total order value, and
conversion rates. End-to-end customization enables more precise food recommendations and
helps ensure that client preferences, such as food allergies, are considered for every meal.

 Dark Kitchens: Dark kitchens—also known as ghost kitchens—market and prepare food for
delivery orders without having an actual restaurant or retail space attached. They remove
delivery from the "front of the house," enabling eateries to grow and experiment with little
financial risk. With its Neighborhood Kitchens idea, REEF Technology is one of the
businesses giving established and new eateries access to dark kitchens (among other
infrastructure and services).

 Innovation in customer attraction: Creativity is necessary for the growing food delivery
ecology and will probably be rewarded. One possible illustration is the "taste your favorite
culinary shows at home" products, allowing viewers to dine at home "with" their favorite
celebrity chefs. Meals are delivered as part of these programs.

 Virtual Concierge: Efficiency gains made possible by the consolidation, or "stacking," of

many deliveries benefit drivers and customers. This is made possible by virtual concierge
services, who, for instance, arrange for a vehicle to pick up a customer's groceries or dry
cleaning in addition to their restaurant order. These services can also stack orders from many
consumers who reside in the same apartment complex or neighborhood.

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Market Entry Strategies

 Acquire capital before acquiring companies: Acquiring capital includes making the
difficult choice of prioritizing revenue over profits. However, such strategic acquisitions have
proven to allow them to quickly gain strength and scale higher in the target geographical
locations of the U.S. Acquisition of core food delivery and quick commerce verticals startups
and companies will help Deliveroo gain access to the markets and also their innovation and
employees.

 The New Delivery Business model: Through a single website or app, the new delivery
players enable customers to evaluate menus and purchase meals from several eateries.
Notably, the participants in this category also handle the restaurant's logistics. By doing this,
they can introduce home delivery to a previously untapped market for restaurants: upscale
eateries. The restaurant pays the new-delivery players a fixed margin for the order and a
small flat fee from the consumer.
The potential for new delivery is increasing the number of establishments and customers
receiving food. New delivery players are growing the market instead of directly competing
with the aggregators. This model will benefit new entrants like Deliveroo to ease into the
market.

 Meal Kits delivery: The industry of meal kit delivery services has experienced rapid growth
throughout the five years leading up to 2022, thanks to the growth of internet services,
shifting customer preferences, and an expanding economy. Consumers have developed a
greater awareness of their health throughout the five years, and several dietary trends have
emerged. As increasing disposable income levels typically translate into a more remarkable
ability to pay premium prices for industry items, rising per capita disposable income has
contributed to the industry's brisk growth. Furthermore, industry revenue is anticipated to
grow at an annualized pace of 19.0% to $6.9 billion over the five years to 2022 as consumers
continue seeking better food options.

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 Food delivery via drone: Using drones to replace car deliveries and bring food right to
customers' doorsteps is the most popular and inventive technique for food delivery. Using this
technique, customers can order food online, which will be packaged and affixed to a carrier
by a drone. The food is delivered straight to the customer's drop-off location by the drone,
which someone frequently watches. Once there, the drone hovers above the location and
lowers the package via a cable or wire, typically in the recipient's backyard. The drone
returns to the restaurant once the meal has been delivered. 
Based on several analyses, the drone food delivery market is projected to grow from USD
1,522.4 million in 2021 to USD 31,188.7 million by 2028. It is hence a brilliant opportunity
for Deliveroo to capture the market innovatively.

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Country Expanding to – Mexico

Why Mexico?

The successful international expansion enables your business to penetrate new, diverse markets,
expand its customer base, and boost sales. Additionally, it makes it easier for you to find local
employees with specialized industry knowledge. In particular, Mexico might be pretty helpful if you
need a strategic trade location where business is simple.

Mexico provides promising investment and business opportunities to foreign companies wishing to
extend their reach.

Taking advantage of Mexico's trade policies is one of the main benefits of doing business there.
Mexico is situated in a strategic area. The nation effectively links the consumer economies of North
and South America by opening its borders. In addition, its currency is lower than those of other
countries, and China is a competitor in terms of labor prices. Together, these elements make Mexico
a formidable opponent.

Many international brands and goods are familiar to the majority of Mexican consumers. As a result,
such adaptability and familiarity make starting and growing new firms in Mexico easier.

 Numerous free trade agreements

Mexico's optimal location along the United States' southern border gives it convenient access to both
the U.S. and Canadian markets. Mexico exported goods worth approximately 491.6 billion U.S.
dollars in 2019 due to numerous duty-free, free trade agreements (FTAs) and simplified cross-border
trading processes, ideal for companies seeking cost-efficient exports. Mexico currently has 12 trade
agreements with 46 different countries.

One of the most profitable trade agreements is the United States-Mexico-Canada Agreement
(USMCA), an update to the North American Free Trade Agreement (NAFTA) that established strong
trade ties between the three countries.

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  The ease of doing business

A country's "ease of doing business" score, or D.B. score, looks at factors like getting credit, starting
a business, taxes, cross-border trading, and resolving insolvency to gauge how easy it is to run a
company there. Mexico's cumulative score is 72.4, with its highest category being the ease of getting
business credit. Mexico's newly simplified minimum wage program also supports its overall ease of
doing business score.

 A robust and stable economy

Mexico's leading political party continues to adapt to global business trends that support a stable
market that welcomes international expansion.
Political stability has increased consumer spending, scoring a 105 on the consumer confidence scale.
Depending on your industry and location, many local governments offer incentives for doing
business — including tax reductions and reduced costs for some purchases and services.

 A renewed focus on research and development

Urging from the Inter-American Development Bank (IDC) and a renewed interest in technological
advancement have enticed Mexico to invest more in the R&D economy through incentives. Over the
past decade, changes to the Mexican Income Tax Law now give a 30 percent tax credit for R&D
expenses.

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PESTEL Analysis of the Mexico Food Delivery Market

Political Factors

Mexico's system of governance and administration is presidential democratic. There are 31 states in
the nation. Mexico has a massive impact on the region and international politics. By the end of 2050,
the nation hopes to be a significant force on the world stage. However, the nation has developed
excellent diplomatic ties with many other nations.

Economic Factors

According to an estimate, the annual nominal GDP of Mexico in 2020 was 1.322 trillion U.S. dollars,
the 15th world's highest. The country's per capita income was 10,405 dollars, the 64th world's
highest. Mexico is a member of the MINT Group, comprising Mexico, Indonesia, Nigeria,
and Turkey. The purpose of the MINT organization is to increase economic development, growth,
and foreign investment. Compared to 2020, the Mexican online meal delivery industry generated
approximately 250 million more dollars in sales in 2021. Similar to previous years, most of this
revenue came from the restaurant-to-consumer delivery segment, which generated approximately $1
billion as opposed to the platform-to-consumer delivery sector's $580 million.

Social Factors

Richness, poverty, urbanization, and natural beauty coexist in Mexico's diversified socioeconomic
system. Mexico has a sociocultural framework despite its societal difficulties. In many cities around
the world, Mexican cuisine is particularly well-liked. During the study period, online meal delivery
in Mexico expanded quickly. The COVID-19 epidemic in 2020 and social rules of distance caused a
decrease in the number of footprints in eateries. However, online shipping in Mexico has increased
significantly. Major industry participants created e-commerce websites during the pandemic, which
boosted food sales online even more. Customers choose to use online food delivery services due to
the convenience of the delivery service. Consumers are also drawn to online food delivery services
by the user-friendly interface of the websites and applications of the food delivery players.

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Technological Factors

The second-largest city in Mexico, Guadalajara, has recently seen a considerable increase in R&D
facilities. The administration is very serious about utilizing technology. Consumers' lifestyles and
shopping habits can alter as a result of technology. Recent advancements in the microcomputer
industry have significantly increased the possible client base and produced countless chances for
firms to conduct online commerce. Similarly, technological advancements lowered computing costs
and increased the potential market for online meal delivery. Due to the increase in technology, This
statistic illustrates the number of transactions processed through food delivery apps in Mexico in
2011 and 2016, as well as a forecast for 2021. In 2016, there were approximately 96.48 million
transactions processed by food delivery apps, and the source projected that the number would
increase to around 112.93 million by 2021.

Legal Factors

The legal system of Mexico is free and impartial. Everyone is treated equally, regardless of their
background. The judiciary of the nation has suffered from corruption damage. However, employees'
rights are safeguarded under Mexican labor law. Mexico has a well-established, standardized system
of food law. Food law in Mexico has evolved due to several problems, including opening the
Mexican market to numerous free trade agreements and the emergence of new food production and
processing technology.

Environmental Factors

Information about the nation's performance on environmental indicators and policies is provided in
the environmental section. Mexico has a history of working together on issues relating to the
environment and natural resources, especially in the border region, where there are significant
environmental difficulties brought on by fast urbanization, industrialization, and population
expansion.

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Challenges

 Complex business taxes: Mexican companies pay more than six different types of taxes
which includes the CIT, the VAT, for purchases, Excise taxes, and withholding taxes.
Moreover, Mexico has different taxation laws for resident and non-resident companies.
Managing, calculating, and paying business taxes can become a vast and time-consuming
task for any business considering indulging in the Mexican market.

 Competition: With Mexico already coming among the top food-loving countries, companies
have already targeted it as a potential market for supplying food from restaurants to
customers in such a competitive environment, Deliveroo can find it a difficult task to grab a
percentage of the customer from its potential rivalries who have already established its brand
image and customer loyalty.

 Adhering to the food quality standards: due to a massive demand for online orders,
delivering food from a restaurant far away from the customer's place while maintaining the
utmost quality becomes challenging for the delivery partners, with Mexico having high-grade
food critics Deliveroo has to emphasize its quality of food and service it provides.

 Lack of I.P. protection: I.P. protection is crucial across industries, including films, books,
artwork, software, food, beverages, etc. I.P. infringement and trademark fraud can cause a
company to lose revenue, court costs, and legal fees; while Mexico has several agencies
responsible for I.P. management and protection,  the country is not seen as efficient at
removing and preventing I.P. infringement as other markets are. This leads to a lack of anti-
piracy efforts,  slowing down processes, etc., which can hinder Deliveroo services and affect
the customer experience since the whole business depends on a digital platform; the
Deliveroo app highlights the technical aspects of the business.

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Opportunities

 Availability of ready-made information about the market: A similar business exists in

Mexico. So, it will be easier for delivery to enter the market with less investment in research
and development about the market. For example, Uber Eats, DiDi Foods, etc., dominate the
mexican market and prove to be beneficial to Deliveroo even as a rivalry.

 Strong and stable economy: Mexico has found its strong and stable economy with the
government in charge vowing to adapt to global business trends that support a stable market
that welcomes international expansion with such support from the local government offering
incentives for doing business, including tax reductions and reduced costs for some purchases
and services, the market becomes a viable option to expand into.

 Financial ease of doing business: Mexico's cumulative ease of doing business score or D.B.
Score is 72.4, with its highest category being the ease of getting business credit. This is
primarily due to Mexico's new law, which allows the general description of assets to be
granted as collateral in Mexico City and Monterrey. The second highest factor in its score is
starting a business with such financial support, a business thinking of expanding into
Mexico's food delivery industry Deliveroo finds it an opportunity as the ease of doing
business, and financial aid has been taken care of.

 Customer demand and willingness: Mexico is known for its scrumptiousness and variety in
cuisines, and the people of Mexico are known to be great food lovers. In such an
environment,  the demand for food automatically takes a peak. It makes it easy for Deliveroo
to fulfill the consumer's hunger and love for any food since consumer willingness is a prime
factor in determining the demand for a particular service or a product, Mexico as a market
best suits the food delivery industry.

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Market Entry Strategies

The New Delivery Strategy

The opportunity for new delivery is to extend food delivery to a new group of restaurants and
customers. Rather than competing directly with the aggregators, new-delivery players are expanding
the overall market.

Two sources of customer demand are responsible for the increase in new deliveries. The first one
serves as an alternative to eating at a restaurant. Customers may enjoy the same high-quality meals
they find at a good restaurant while dining at home, thanks to new delivery services. In some places,
platforms even offer Michelin-starred restaurants as part of their offerings. The second reason for the
demand is to replace meals made and eaten at home.

Food Kits

Consider meal kits as an alternative to single-meal delivery to make your food delivery more
environmentally friendly.

By purchasing ingredients depending on your order that is pre-portioned to the grams, food
companies like Deliveroo have taken the required steps to reduce their carbon impact and food
waste. Additionally, they deliver groceries directly to your door without stopping at stores or
warehouses. In turn, less time is spent on transportation, which lowers CO2 emissions.

Getting numerous meals delivered at once is a significantly better option than a single-meal delivery
service, even though shipping and delivery still generate emissions.

Email marketing

Even though email marketing strategy seems outdated, to date proven to be the most effective.
Deliveroo can send users q substantial coupon code that gives discounts along with subject lines such
as click-bait through posters.

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Search Engine Optimization

It helps improve the company's reach to the users; for a brand to rank organically high, it is crucial to
have a good SEO strategy. Deliveroo has to work on its SEO strategy with an appropriate meta title
that includes its main keywords like food, online, food delivery, order, and restaurants near you that
will be used as a direction for the consumers to fall on Deliveroo's website or app.

Social media marketing

It has been crucial in taking a business from zero to zenith. Many food delivery companies like
Sowiggy are known to have set their place apart from their competitors with their remarkable social
media campaign strategies.  Mexico is a country of color, food, and culture. Deliveroo has to include
the festival, traditions, and cultures that the people of Mexico hold and promote through its social
media platforms.

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References

 Food Delivery Services: What Is The Environmental Impact? (n.d.). Eco Quote Today.

 Accounting, 3.E. (2019, May 24). Doing Business in Mexico - Advantages and Challenges.

3E Accounting International.

 Ahuja, K., Chandra, V., Lord, V., & Peens, C. (2022, June 21). Ordering in: The rapid

evolution of food delivery. McKinsey & Company.

 United States Online Food Delivery Market Report and Forecast 2022-2027. (n.d.). Expert

Market Research.

 Future Market Insights Global and Consulting Pvt. Ltd. (2022, September 15). Online Food

Delivery Services Market to Surpass US$ 97 Billion by 2032; Platform-to-Consumer

Interface to comprise 55% of total demand | Future Market Insights, Inc. GlobeNewswire

News Room.

 FarEye Technologies, Inc. (2022, October 26). How effective technology can improve food

delivery management. FarEye.

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