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Digital Strategy - Assignment
Company in Focus:
GMITE 2018 Assignment
Study Compiled by:
Amit Kumar - GMITE12109
Amit Agarwal - GMITE12108
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This analysis is prepared as part of Digital Strategy assignment where we analyzed Delivery Hero groupsâ performance in
food delivery industry and its digital strategy to remain on top, where we will target the following
o About Hero Delivery Group
o Understand what Business Model is & analyze the Business Model of Delivery Hero group and look
into Digital interface in its Business Model.
⪠Along with Companyâsâ Balance sheet to understand its performance,
o We look into financials and market reach,
o Market Opportunity & Growth strategy
⪠We use below tools and technique to analyze its position in market.
⪠Appraisal of Business Model/Business Model analysis
⪠Tech Life cycle analysis
⪠VIDE analysis
Based on analysis above, we sum-up its total score and see if itâs performance and evaluate worth trust in management, its
plan and future growth potential.
Scope of Study
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Delivery Hero holding was founded by Nikas Ostberg, Kolja Hebenstreit, Markus Fuhrmann and Lukasz Gadowski in
May 2011, with the goal of turning Delivery Hero into a global online food ordering platform. Its headquarters located at
Berlin Germany. Delivery Hero expanded very quickly and by the year 2017, it is operating in 40+ market with 17000
employees.
It provides online food and beverages for delivery or pick up. It created a largest network in the world with approximately
1,90,000 restaurant partners.
It got listed in Frankfurt Stock Exchange in June 30, 2017. It was largest German IPO in 2017. It raised close to âŹ1 billion
with issue price of âŹ25.50. Since then the share price has increased by more than 50% and the company is growing
rapidly.
In 2017, revenues have increased by 60% for the full year â 65% on a constant currency basis â to âŹ544.2 million
Mission
The mission of the company is to provide an amazing takeaway experience, creating joyful moments and connecting
people with great food.
Since the Delivery hero is started, it is transforming the way people order food. By offering choice, convenience,
reliability and quality, it become the easiest way for our customers to discover and order food online.
Delivery Hero - An Amazing take away Experience
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Today Delivery Hero is one of the worldâs leading online food ordering and delivery marketplace. It is having fascinating
long-term growth story.
It operates in over 40 countries, and in 2017 it continued to consolidate the market leadership positions bu increasing its
gross merchandise value (âGMVâ), orders and revenues. In 2017, revenue increased by 60% to âŹ544.2 million.
Investing in the products
The key to create a long-term leadership is through creating a superior product experience based on three pillars
Delivery Hero increased its investment in product and technology during 2017, leveraging the data they gather from
millions of customer orders, and will continue to do so. This has enabled them to further personalize their products,
displaying restaurant options tailored to a customerâs preferences.
Investing in accelerating the channel shift with marketing
While customers referrals and word of mouth remains a major channel for new customers, it continues to invest in
marketing to accelerate the channel shift from phone ordering to online ordering. While allocating this investment, it
takes a strong return on investment approach to determine the optimal spend for each country and marketing channel. In
2017, it continued to increase their customer acquisition investment with additional âŹ71.7 million.
Global Leadership
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Investing in the LOCAL Neighborhood
It continues to invest in its local restaurant supply in each neighborhood, adding in-demand restaurants to its platform.
This includes scaling its own delivery capabilities in neighborhoods where there is a shortage or missing restaurant
supply. In addition, it strengthens its restaurant partnerships with additional tools and services to improve their business.
In 2017 it delivered 28.7 million orders with its own local delivery capabilities.
Global Presence as on 09 Sept 2018 - Active in 47 countries
Operating in the world with 29 brand names
[Combination of group of companies and not single company itself.]
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High Returning Customers
Through customer experience, Delivery Hero has built a service that commands a high degree of loyalty and which forms
the foundation of its business model. The majority of its orders come from returning customers. These costumers value
our extensive restaurant partnerships, the wide variety of cuisines, seamless ordering experience, and the level of
personalization and localization.
In 2017 it increased its orders to 292 million, of these 94% were from returning customers, which is very similar to
subscription business models, in its case organic in nature. By focusing on developing a better customer experience â
meaning having access to more restaurants, a smother ordering process, fast and reliable delivery â it can continue to
improve its customer frequency and retentions.
New Customers
Its loyal base of satisfied customers helps to attract many new customers to its platform through referrals and in 2017
this was one of its largest new customer acquisition channels.
In order to accelerate the adoption of its technology and shift customers from phone ordering to its platforms, it targets
them via paid marketing channels. It has a return on investment focused marketing strategy which dynamically applied
across the whole Group. It takes a data driven approaches and continuously evaluate the behavior of its new and returning
customers, analyzing their cost per acquisition on a channel level, the incremental profits they bring to the company and
their lifetime value.
Elements of the business model
⢠Type of customers to serve - hungry, urban life style, time conscious
⢠Ways customers use the product/service - convenience @ door step
⢠Distribution - cooking via local restaurants & food delivery via delivery Heroâs
⢠Promotional strategy - like piggy bank, free delivery on weekends etc, % discounts etc or different combination
⢠Operational tasks to be performed - online order, tracking, delivery
⢠Resource requirements - delivery agent
⢠How profit and revenue is generated - commission
Business Model
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Problems, Advantage & leveraging Opportunities
Problem â low switching cost
Advantage - first mover Adv., high exp, deep learning and continuously improving process.
Opportunity â using Advance and NextGen technology like Machine learning, Robot, Drone and autonomous
driverless cars for delivery , shaping up industry and setting standard.
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In order to provide its services, it changes a commission to its restaurant partners as a percentage of the gross food value.
This percentage varies across countries and is based on the level of service it provides to its partners. If it provides the
delivery services, the commission rate can be twice the normal amount, given the restaurant no longer needs to employ or
contract the rider.
It generates additional revenue streams by providing restaurants with various extended services:
- It receives a delivery fee when it provides the delivery services. This is common in the countries where it
operates and typically the restaurant charges tis directly to customers when providing delivery services
themselves.
- It receives premium placement revenues, which totaled 9% of all revenues in 2017. This comes from its
product feature which gives restaurants the opportunity to pay for top position listings clearly marked
accordingly, or access to new customers that have not previously ordered from their restaurant.
It measures the performance of its delivery capabilities by measuring the profit contribution margin per order, which
deducts all costs associated with hiring, employing or contracting riders and dispatching riders.
When it has scaled its delivery services, it is able to generate the same â if not a slightly higher â profit contribution where
it provides delivery as when it is handled by the restaurant. This is the case in developed countries where there is a higher
average order value and labor costs are higher, and in developing countries with a lower order value and lower labor costs.
It has been able to achieve this through the considerable technology investments it has made over past five years. In 2017
it continued to increase out rider efficiency, reaching an average of more than two deliveries per hour in the three
segments where it has scaled out delivery operations.
Operating a hybrid delivery platform â meaning operating as a marketplace as well as having own delivery capabilities â
has several advantages. It provides delivery services to increase its supply of delivery in neighborhoods with higher order
density. Additionally, it can leverage the order volume that it already has due to restaurants providing the delivery.
Multiple Revenue Streams
Measuring Delivery Performance
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Food delivery is a very localized business model, Within each region, country and neighborhood, the consumer
preferences, restaurants, delivery and logistical environmnet is extremely complex and varied. This is why, it has a central
support infracstructure based in Berlin, with city, country and regional level teams that are responsible for the adaptation
and execution of strategy in each area. It does customize to the needs to support a better customer experience, although we
centralize common functions whereever possible.
Building a leading technology team in Berlin
Berlin is one of the worldâs leading technology hubs and is the ideal location for its central office. The cityâs board appeal
enables us to attract the best local and global talent, building a world-class team to help us build leading technology to
disrupt the food delivery industry.
Our operations team is able to leverage its centralized data systems, enabling performance comparisions between each
neighborhood, city and county across multiple KPIs, using the learning to roll out best practices globally.
Its global technology tea, based in Berlin is responsible for developing cutting edge technology, including investments in
search, discovery and personalization.
International Approach Local Execution
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Having berlin-based central headquarters benefits us in many other areas of our business. In 2017 it has been able to
further leverage the expertize of the central team, including the centralization of many performance marketing channels.
This has given them increased visibility, optimization investmnet and results, and facilitated the sharing best practises.
Deep Local Learning for Customers & partner Restaurants using Technology & leveraging
same worldwide
How to distinguish good from exceptional restaurants
Tracking data on restaurant performance and customer satisfaction provides Agronâs team with meaningful information
on what works well, and what doesnât: âWe take a very close look at operational key performance indicators, since they
determine how customers will experience online food delivery and how they will judge the restaurant.â These indicators
include, amongst others: fail rate (e.g. orders that were declined or not delivered by the restaurant), issue rate (e.g.
customers receiving the wrong food), and customer feedback submitted via rating (zero to five stars) for food quality and
service.
Educating, rewarding, removing: How to ensure customers will only choose from the best
Restaurants with great operational performance will get a higher ranking, whereas consistently poor performance can
result in a restaurant being removed from the platform
Automation and machine learning will shape the future of restaurant partnerships
âIn the end, happy customers are all that matters â both for restaurants and for us. Hence, we will continue to improve our
processes, for example by driving automation and implementing self-learning algorithms.â To reach that goal, experts
from Delivery Hero such as the Data Science team have implemented machine learning into the process. We aim to
ensure real-time data exchange with our restaurant partners. This will enable them to improve and adjust quickly in cases
where there are changes or issues with the order.
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They are specialists in a complex industry. Food ordering is a personal experience which can be influenced by
multiple factors. the way the food is cooked, presented and delivered varies for each person, country and culture. On an
even more local level, every neighborhood has access to different restaurants and choices of cuimones the quality of our
experience, driven and impacted by the data that they aggregate on users' behaviors and preferences.
In order to lead in this complex industry, Delivery Hero operates a tightly managed marketplace which integrates with
every step of the food ordering and delivery value chain. This allows their customers to consistently have an amazing
experience, no matter what or where they order.
Customer Experience
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Customer Journey - Food ordering and delivery value chain
It continually look to accelerate growth through select M&A. It acquire business in its segments to give them access to
additional customers and restaurant, which allows them to better tailor our products and provides them with additional
logistical or technological capabilities.
Driven by this strategy for profitiable growth in scale and reach, it has completed multiple acquistions in 2017. Acquring
carriage in the Middle East and Foodify in South Korea has enabled them to scale its delivery capabilities in both regions.
Its acquisition of Appetito24 in Panama has extended its leadership status across latin America.
Given its disciplied M&A approach, it is rational about capital allocation and only spend capital where it expect the
highest returns.
In 2017 the UKâs competition and Market authority [ the âCMAâ ] unconditionally cleared the sale of our operations in
the UK for GBP 240 million. This has enabled them to reinvest across its other markets and continue to focus out
operations where it has a leadership position. It sold its brands in Kazakhstan, Slovakia and Georgia for the same reason.
Where it makes sense strategically, it partner with local operators who have built leading business. Over the last 12
months it has entered into a joint venture with AmRest in Poland, who operates a number of restaurant brands such as
Merger and acquisitions as a growth accerlator
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KFC, Burger King or Pizza hut in many Central and Eastern European countries. In India it divested its business to Ola,
the operator of a rider sharing platform, in return for a stake in their business.
In order to expand really FAST , Delivery Hero belives majorly in InOrganic growth.
Delivery Hero Groups India Connection and its competitor space in India.
Delivery Hero Group in India
Delivery Hero acquired foodpanda and its subsidiary foodpanda India in December 2016 and sold Indian
business, foodpanda India, to Ola, Indiaâs most popular mobility platform, in return for shares in Ola. At the
same time Ola commits to investing $200mn in foodpanda India.
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This contribution is in-line with Delivery Heroâs strategy to further build its leadership positions and
consolidate markets. The India business represents a small portion of Delivery Heroâs overall business,
contributing 1.9% of total segment revenues for the first 9 months of 2017. At the same time the equity stake in
Ola will allow Delivery Hero to participate in the long term Indian food delivery opportunity.
Niklas Ăstberg, CEO of Delivery Hero, commented:
âThe partnership with Ola will allow us to further consolidate markets where it strategically makes sense to
collaborate with leading local players. At the same time we consider our stake in Ola as a very valuable asset,
while Olaâs investment commitment in Foodpanda India is a clear and confident signal to the Indian market.
The foodpanda India team has done a tremendous job building the business and we look forward to supporting
them and the Ola team in the future.â
Bhavish Aggarwal, CEO of Ola, commented:
âIâm excited about our partnership with Delivery Hero as we team up to take foodpanda India to the next level.
As one of Indiaâs pioneers in the food delivery space, foodpanda has come to be a very efficient and profit
focused business over the last couple of years. Our commitment to invest $200mn in foodpanda India will help
the business be focused on growth by creating value for customers and partners. With Delivery Heroâs global
leadership and Olaâs platform capabilities with unique local insights, this partnership is born out of strength. I
look forward to welcoming the foodpanda India team to the Ola family.â
Delivery Hero Group competitorsâ space in India
About notable Competitors who recently joined market:
UberEATS recently started its operations and delivers in about half a dozen Indian cities while foodpanda is
present in more than 100 cities. Other online food delivery services include Sequoia Capital-backed Zomato
and Swiggy which is backed by Naspers.
Competitors:
- UberEATS backed by Uber. (Appendix3& Appendix1)
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o 3 billion USD gross sales as compared to 563 billion Euros gross sales.
- Zomato backed by Sequoia capital.(Appendix5)
o 100 million USD
- Areo backed by Google (Appendix6)
o Just started operation in Bangalore (not even in US)
Struggle story for other local Competitors in In India (Revenue figures in CR Rupees) Appendix7
- Swiggy backed by NasperCapital
- Zomato (already data provided above)
- FreshMenu
- Box8
The food delivery market is one of the largest global opportunities and is still highly fragmented, locally based and
predominantly offline. Currently the industry offers little transparency to cinsumers, allowing them to create a significant
value preposition for our marketplace business.
Current Food Delivery Market
Today Delivery Hero operates in countries where the existing food delivery culture is strong representating an addressable
market of more than 70 billion annually and having an addressable customer base of more than one billion in more than
40 countries. Yet, the penetration of customers ordering food online in ore markets is just 11% - it still has a huge
opportunity to surpass its biggest competitor, the telephone.
Distrupting the Food Services Industry
In addition to the existing food delivery market, it continues to disrupt the food services industry which is a more than
âŹ500 billion opportunity in the countires that it opertaes in. The entrie restaurant industry is switching towards on-demand
delivery and take-away, impacted by the growth in urbanization, middle classes, and the evolution of âmillennialsâ that do
appreciate time and convenience more than other generations.
Hence, a large part of the restaurant market of over âŹ500 billion in its more than 40 countries will soon be significally
penetrated by further ciurrent âŹ70 billion market opportunity.
Delivery Hero is able to provide own delivery services to restraurants without this capability and hence cater for the shift
towards on-demand services. Over the past five years, its investment in these services has enabled them to partner with
Market Opportunity
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additional restaurant, including higly demanded or higher quality restaurants, popular chains and leading international
brands. As a result it has seen its customers increasing the frequency at which they order on its platform.
Our new restaurant partners are now able to reach new customers seeking greater avaliability, speed and reliability, and
give customers the convienence of eating in their own home. Thanks to its significant investment over the past years, we
remain the number one choice for delivery services in our countries, given that reliability and speed is so important to its
partners.
It has also seen the emrging trend of âcloud kitchensâ â restaurants that completely optimize their operations for food
delivery and only require kitchen space â develop across its countries. This distruption is supported by the cutomer trend
of convience and demand for additional restaurant supply, which will continue in the next years to come, helping them to
further disrupt the food services industry.
Strategic Study: Map Representing
⢠Countries in each Business Area
⢠Total poulation in each Busines Area
⢠Target Urban Population
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- Already using Robots, Drones and Autonomously driving car for delivery and Keen to expanding Out Robot
Food Delivery in German cities Appendix8
-
- Could disrupt the takeaway market and provide opportunities to relieve rider fleets during busy times.
Appendix8
- In May 2017, Delivery Hero and Starship Technologies (a company that is building a fleet of robots designed
to deliver goods) launched their joint pilot project in Hamburgâs Schanzenviertel. Since then, Foodoraâs fleet
in Hamburg boasts two autonomously driving robots, complementing the brandâs zero emission delivery
options. Appendix8
- Also in 2017, Delivery Hero partnered with IE Digital and tested a drone delivery system in Melbourne,
Australia to deliver takeaway food to Foodora customers. Appendix8
Delivery Excellence using NextGen technology
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Business Model Analysis [ high -3, Medium -2 and low -1 ]
Component of
Business Model
Bench Mark
questions
Rank(X/3) Reason
Customer Value Is the customer value distinct
from that of competitors? if
not is the firms level of value
higher than competitors?
2 Personalized product offer variety of
food by partnering with Local
restaurant. On time delivery. User
can see and give reviews and
feedback, set expectation for order
only a bit higher value then
competitor like Uber Eats ,zomato
or swiggy but no strong competition
in overall market.
Is the firmsâ rate of increase in
Customer value high relative
to that of competitors?
3 Yes. More personalized product as
per individual customer need. Used
of latest technology in delivery like
Drone, Robot, Driverless cars.
Sub Average 2.5
Scope Is the growth rate of market
segment high
3 Yes , huge untapped market of 500
bn & 1.5 billion urban population.
Refer Market opportunity
Is firmsâ market share in each
segment high relative to that
of competitorsâ?
3 Yes, biggest player. Refer Exhibit 4
Is potential erosion of products
high? If so, in what segments?
3 No product erosion. Food is daily
need.
Sub Average 3
Price Is the quality adjusted price
low
3 Yes, Commission and delivery
changes are low in compare to the
benefits and provide coverage to
wider areas.
Revenue source Are margins and market share
in each revenue source high?
3 Margin is low but market share is
high.
Are margins and market share
in each revenue source
increasing?
3 Yes. Exhibit 3
Are margins and market share
in each revenue source
distinctive?
2 Market share is not distinctive.
However tough to replicate it at
same scale. Also, margins are low.
Sub Average 2.66
Analysis of Business using different techniques
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Connected activities
(What is the extent to
which activities :)
Are consistent with customer
value and scope
2 Provide great customer experience
and penetrating the untapped market.
Refer Market Oppotunity
Reinforce each other
(like delivery, ops, pricing etc)
3 Yes. Delivering on time with great
customer experience with low
margin.
Take advantage of industry
success drivers?
3 Yes. They are increasing market
penetration leveraging mobile,
internet, lifestyle etc. Refer
âInternational Approach Local
execution â
Are consistent with the firmsâ
distinctive capabilities
3 Developed partnership with Local
restaurants. Developed delivery
chain. Believe in having Merge and
acquisition and divestment as
needed.
Make industry more attractive
for the firm
3 They are first mover and shaping up
the industry.
Sub Average 2.8
Implementation Is the quality of the team high? 3 Best local and global talent,
Centralize data system. Partnership
with local partnership.
Capabilities To what extent are the firms
capabilities
- Distinctive
- Non-imitable
- Extendiable to
other product
markets?
2
3
2
Capabilities are not much distinctive
however it is tough to replicate them.
There existing capabilities can be
extended to other products like ice-
cream, cake, juices etc. In India
from OLA [ Foodpanda] One can
order ice-cream etc.
Sub Average 2.66
Sustainability Has the firm been able to
maintain or extend its lead in
its industry?
3 Huge untapped market of 500 bn.
Even in existing market penetration
is 11%. Evergreen business.
Cost structure What is the cost structure
relative to strategic
competitorsâ:
Cost per revenue dollar/rupee
Cost per unit of customer
value
2 analyzing their cost per acquisition
on a channel level, the incremental
profits they bring to the company
and their lifetime value. Refer New
customer
Sub average 2.5
Average Total Score 2.68 out of
3
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VIDE Analysis
Criteria Question Answer
Customer value Does the capability make an unusual
high contribution to value that the
customer perceive?
Yes. Food is at your door step from
your favorite restaurant without
getting out [own home convenience].
On time delivery. Variety of option
available to choose.
Imitability How quickly and to what extent can
the other firms duplicate or substitute
the capability?
It is possible but takes time to
develop the delivery chain and
partnership with restaurants.
Competitor differentiation Is the type or level of capability
unique to the firm?
Provide market inside to partner
restaurant which in turn provide the
value to end user.
Extendibility Can it be used in more than one
product area?
Possible, other product or services
also can be delivered at door steps
like ice creams, cake, Juices.
Technology Analysis
Utterback Abernathy phase Characteristics Hero groups core competencies to
succeed in this phase
Fluid - Technological and market
uncertainties
- Customer needs not well
defined
- Rapid entry of firms
- Competition of product
offering
In this industry technology will
evolving and market is very certain
and evergreen.
Customer and their needs are very
well defined.
There is huge untapped market,
which attracts new entrance.
Competition is there in offering food
from different restaurants.
Transitional - Standardization of product
offering
- Dominant design emerges
- Emphasis on process
improvement
- Consolidation of existing
players, but new players may
enter
Partnership with new-new
restaurants to increase the reach and
offering.
Customize and personalized online
platform
Focus on process improvement and
customer experience.
Huge untapped market still scopes
for new entrants.
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- Competition based on
differentiation Only differentiation factor is
service. On time delivery.
Specific /Mature - Incremental product
innovation
- Few firms remain
- Competition on low cost
- Serving hot Food
Standard packaging for
advertisement, promotion etc.
Huge untapped market, scope for
new entrants.
Due to huge untapped market each
player have its own targeted
territories.
As per Our analysis, we got following insights about Position of
- Where is technology?
o Technology is at mature stage. In fact technology is always ahead of business so it is able to solve all
business problems.
- Where is Industry?
o Industry is in Fluid phase; Due to huge untapped market of 500 bn and 1.5 bn urban population is not
covered yet. Scope for new entrants. Still penetration is 11% in even in existing market. Refer
Market Opportunity.
- Where is Hero delivery group?
o Transition phase. It has a stable ecosystem and it is leveraging its capablities with less learning cost
(that specific to region like Saudi Arabia doesnât have street numbers etc âş).
o Delivery hero group is shaping up the industry.
Delivery Hero Group: Using Technology at its core
- Already using technology to stay at forefront, shaping up food delivery industry.
- Technology is the core of our success and the backbone of our business. Tech allows us to be efficient in
marketing, excellent in customer support, and flawless in operations. Technology also deeply integrates us
with our restaurant partners, runs our delivery fleets, and helps our customers finding the food they love.
- The tech team is responsible for building an incredible range of tools and tech solutions which connect
customers, restaurants, and riders. Almost all areas of our business â from customer care and restaurant
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operations to billing, sales and finance, as well as marketing and logistics, can benefit from our smart tech
solutions to reduce manual effort and improve speed.
- We put a lot of effort into localization and meeting the needs and characteristics of each market. For
example, you would not believe how complicated address systems are around the world.
o Take Saudi Arabia where there is no such thing as a house number; or Bogota where you describe
your location based on distance from the next street crossing; or
o Turkey where people like to use license plate numbers to provide their location. Our systems help
matching customer location and restaurant delivery polygons in all of these cases in an optimal way.
Of course, we also need to consider cultural specifics too.
o In Singapore we must not transport halal and non-halal food in the same box.
o In Saudi Arabia we close restaurants automatically five times a day during prayer time.
o We also have a special Monsoon feature in Asia that enables us to close down regions quickly during
a flood with a custom message. The challenge for our tech team is to bring all these local needs to our
platforms.
- Accepting Orders via Voice Ordering Appendix-7
o Even Live tracking via voice: âWhere is my food?â
Company looks good and has shown fantabulous performance, high potential future growth and, sustainable & evergreen
business. Since it shares large market share and pioneer in shaping up industry itself, need to be bit careful and conscious
as competitors are growing still far away from its position and scale.
Business analysis shows the score of 2.68 which means this industry is having suitable growth and revenue earning
potential with great customer experience. Even though it has low margins. Delivery Hero have central databases with
efficient and skillful talented Team compromises local as well Global talents.
VIDE analysis shows that they provide great customer experience and value. It is tough to imitate the business model as
one has to development partnership with local restaurants and create delivery chain. In this business service and food
choose offers is differentiation factor. Current infrastructure can be leverage to other products.
Conclusion - Based on different analysis technique:
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Technological analysis shows that due to huge untapped market of 500 bn and 1.5 bn urban population the industry itself
is in fluid phase. However, Delivery hero is first mover they are shaping the industry and developed infrastructure. So,
they in transition phase.
Insights specific to Delivery Hero Group:
- Hero delivery group totally rely and leverage on technology. It does not
Own any restaurant but serves millions of the customers and solves their major problems, like.
o Manages end to end life cycle using technology.
o Last mile delivery
- Provides insight to the partners so that they can excel in market.
- Convenience due to delivery increases restaurantsâ market share and reach in cost effective way