Just Five Forces Michael Porter identified an industry’s

Just Eat

Introduction

Company Information

Just Eat was launched in Denmark in 2000, through a merger of Just Eat
and competitor FoodZoom. The company first broke even in 2004, and was floated
on the London Stock Exchange in April 2014. It is now present in over 14
different countries. The company provides a food delivery platform, managing
and processing orders placed primarily for restaurants which already offer
their own delivery service. In return for this, Just Eat receives a share of
the value of each order placed (Just Eat, n.d.).

Industry Information

The company operates in the food delivery industry, and forms an
integral part of the market. The industry itself has been on the rise since the
technology boom and is continuing to grow, evidenced by the fact that, in 2016,
Just Eat shares rose by 8.5% to 416p. (Farrell,
2016)

The success of the industry can mainly be attributed to two main
factors. Firstly, the leisurely activities undertaken at home has greatly
increased, and secondly, the innovation and convenience of the food delivery
process has led to many customers preferring having food delivered as opposed
to eating at a restaurant.

Critical Analysis of Industry and Impact

The Industry Sector should be examined to better understand the position
of Just Eat in relation to its competitors.

Porters Five Forces

Michael Porter identified an industry’s structure, and analysed whether
it was an attractive industry to compete in, through the development of his
‘Five Forces’ model (Porter, 1996).
Businesses in today’s world utilize this model to position themselves
advantageously relative to competitors.

Threat of New Entrants

This force analyses the ease with which a company can begin competing in
a specific industry. The lower the barriers to entry, the easier it is for a
new firm to pose threats to existing firms, and the more competitive the
industry becomes. Barriers to entry are the factors that are encountered by new
entrants in an industry if they choose to compete. Entry into an industry is
particularly easy when there are low start-up costs and fixed costs, fewer
requirements to fulfil (e.g. training the workforce).

The main barriers to entry in the food delivery business are that
start-up costs and legal requirements. Start-up costs would include the
following: a development of a website platform and a mobile application, along
with a marketing fee to launch the platform. However, all the aforementioned
entry forces, along with other general ones such as obtaining a company
registration number, will not be onerous for the new entrant to comply with.
The only requirements that will be time-consuming for a new entrant would be
obtaining PCI Compliance for handling credit cards (to assist in customers
making electronic payments) and setting up an Internet Merchant Account.

Power of Suppliers

A supplier provides an organization with what it needs to produce its
product or service. The bargaining power of a supplier can easily eat into the
profits of an organization. This aspect of Porter’s Analysis focuses on the
ability of suppliers in the industry to drive up prices, because of shortage of
other suppliers or when the buyer represents a small part of the market. The
ability to switch to a competitor’s product is also a factor that plays an
integral part in the power of suppliers, along with the fact that the supplier
may be providing a product of a specialist nature.

In this industry, it has been observed that the restauranteurs have a
significant amount of power which is a result of the caution with which
restauranteurs view the food delivery business. In the minds of the suppliers,
venturing into food delivery would damage their reputation since the product
standards would not be maintained.

At present, Just Eat charges the takeaway restaurant roughly 11.7%
commission fee. Over time, it has been found that this may increase to roughly
14-15%, signaling that the suppliers do not have that much power, which is why
they would be left with no alternatives but to increase food prices to match
the increasing commission (Preoday, 2015).

Power of Buyers

In contrast to the supplier power, buyer power focuses on the ability of
consumers to drive down pricing, or perhaps force the company to innovate.
Buyer power is likely to be high when buyers have low switching costs which
means it would be easy to switch between suppliers (e.g. sugar.) Buyer power is
also likely to be high a few buyers account for the majority sales. (Willcocks, 2013)

With the advent of social media, buyer power has also been on the rise
since customers have the option of leaving reviews, which can be detrimental to
the company.

Availability/Threat of Substitutes

This aspect of Porters theory focuses on the competition that all firms
in an industry face from other product substitutes. Substitutes are
products/services that are of a similar nature and offer a similar benefit, but
adopt a different process. The threat to an organization would be considered
high if the substitutes have a higher price/performance ratio. Not only that
but also if the substitute benefits from innovation that improves customer
satisfaction (Willcocks, 2013, p. 102)

The food delivery industry faces threats from two main substitutes:
drive-thru and food delivery by the restaurants themselves. The former does not
pose such a great threat, since the use of drive-thru is mainly restricted to
larger cities, and can only be accessed by residents with cars. The latter,
poses a much greater threat, since the restaurants are unlikely to charge a
delivery fee. However, restaurants delivering themselves usually do not present
customers with the option of innovative digital payments, such as Apple Pay, or
PayPal.

Competitive Rivalry

Competitive rivals are companies with similar services and products,
which target the same customer base, and which operate in the same industry,
therefore, distinct from substitutes. For example, one of Just Eat’s largest
competitors is Deliveroo. This company delivers meals freshly prepared directly
from London’s top restaurants and uses its own delivery means.

There are several factors that increase competitive rivalry in an
industry. Firstly, if there are high exit barriers in the industry, such as
high costs of redundancy. Business exit has been described as an asset
restructuring activity involving a diversified firm’s withdrawal of one of its
businesses (Mellewigt, 2007). Secondly, a
low level of differentiation also increases competitive rivalry. Other factors,
such as size of the competitors, a maturing/declining market, can also increase
rivalry.

In this industry, there is fierce competition which is posed through a
variety of competitive tactics. These include, but are not limited to marketing
campaigns, product innovations, and price undercutting. The ease of entry,
coupled with the competitive tactics, can prove to be fostering immense
rivalry.

Criticism of the Five Forces Model

This model of analyzing a particular industry, firstly, fails to take
account of the core competencies of a company, and rather places the industry
structure as the sole determinant of a company’s success. It has been noted
that this framework assumes too much stability in the industry and does not
highlight the dynamism which is prevalent in today’s market.

In the Five Forces Model, Porter assumers that when there is high
uncertainty in the industry, companies are advised to compete with suppliers,
or to compete with buyers to reduce threats. However, Porter fails to mention
another approach in such a market environment, which is the approach of
outsourcing.

The industry-based view of the Five Forces has been challenged by the
resource-based view on competition for a more internal analysis.

Critical Analysis of Resources and Capabilities

The resource based perspective of competitiveness is premised on the
resources/capabilities needed to compete and tackle the internal strengths and
weaknesses of the company. Ultimately, the business will consider whether these
resources add value and assist the business in exploiting business
opportunities or neutralizing business threats. Resources are the tangible/intangible
assets that are used by a company to implement strategies to excel. On the
other hand, capabilities are the ability of a company to use the resources to
achieve business strategy.

Willcocks divides resources into tangible and intangible resources and
capabilities. Tangible resources/capabilities can further be categorized into
financial (raising capital and generating internal funds), physical (offices,
distribution channels), technological (IP rights and trademarks), and
organizational (management information system and a command and control
system). On the other hand, intangible assets are categorized as human (trust,
talent, culture, and knowledge), innovation (research and development, a
supportive environment, and a capacity for change), and reputational (goodwill,
product quality, and brand loyalty). (Willcocks,
2013, p. 105)

To better discern whether a resource and capability is a core critical
capability, and therefore answering the question as to whether it can be
performed in-house, outsourced, or partnered, a VRIO framework can be adopted.
The VRIO is a resource-based framework that focuses on the following aspects of
the product/service that the company offers by analyzing: the Value (does the
product provide competitive advantage), Rarity (possession of capability by
competitor), Imitability (replication of the resource and capability), and
Organisation (ability to manage social complexity effectively) (Meyer, 2011).

 Applying the theory to Just Eat,
the firm’s key resources are the technological distribution channels, the
customer brand loyalty, and the competitive edge, in terms of the strategy
adopted, which will be explained below. Just Eat operates worldwide and is
distinct in the food delivery industry by allowing the client restaurant to
arrange delivery themselves. According to the resource-based view on
competitiveness, Just Eat adopts the partnership route whereby it has strong
partnering relationships with the clients that it advertises for the delivery (Willcocks, 2013, p. 106)

Sources of strategic competitive advantage

According to the resource-based view, only valuable, rare,
hard-to-imitate resources/capabilities backed by organization can be classed as
providing a competitive advantage (Meyer, 2011)

Just Eat has at the root of its business model the distinct competitive
advantage of being a one-stop shop for all restaurants, regardless of the size
of the restaurant. The partners in the app are often tiny family-run
restaurants relying on a foodtech platform to assist in their incremental
growth. This can be differentiated from Deliveroo, which does not advertise the
options of ordering from smaller family-run restaurants. The small businessmen
and businesswomen that are represented by Just Eat rely on the data collected
and collated by Just Eat which identifies opportunities for growth. The data
can range from the peak times for restaurant delivery demands to which
particular dishes a restaurant should be positioning on which day of the week.

Another key competitive advantage for the business is the fact that the
delivery is only arranged through Just Eat’s online platform. However,
practically, the delivery is arranged by the restaurants, rather than the
application. This is distinct from competitors, such as Deliveroo or HungryHouse.
As a result of this feature, total costs are reduced for the consumer, as Just
Eat would not be charging for the delivery costs.

However, one of the company’s main competitive advantages is the
innovative marketing strategies that the company adopts. The company prides
itself on ‘investing more in marketing than any other brand in the sector’ (Preoday, 2015). Just Eat uses innovating
marketing strategies and aims to attract customers beyond the billboard. The
company has invested money in the keyword-search strategy. In such a strategy,
when customers type in certain catchphrases into a search engine, such as
“takeaway” or “hungry”, Just Eat will appear as a result. The Company offer
regular vouchers and consistently update their social media presence to rank
above their competitors.

Additionally, the company’s strategy when catering to specific markets
is also worth noting. When a company is entering a foreign market, there are
four basic strategies that can be adopted. These include the International
(Home Replication) Strategy (considering the advantages of replicating the
home-country based competencies), the Localisation (Multi-Domestic) Strategy
(considering each country/region as a standalone market which must be catered
to so that profits can be maximised), Global Standardisation Strategy (whereby
economies of scale are sought by distributing standardized products worldwide),
and the Transnational Strategy (the ‘best of both worlds’ strategy, whereby
aggregation and adaptation are both sought). Just Eat has opted for the
Transnational Strategy, whereby, although the business model remains the same.
However, the means through which the company accesses each market varies. (Willcocks, 2013, p. 120)

An example of the company’s approach can be seen from the launch of the
‘Magic Wand’ in the UK. This wand has specifically been adopted as a strategy
in the United Kingdom as a result of the hugely successful phenomenon Harry
Potter and its impact on the millennials, who are the most common users of food
delivery services. If Just Eat users press the button on the wand and wave it,
it emits an encrypted sound signal to the mobile application using Chirp
Soundwave technology. This triggers the app to the users’ last order and places
it for the user, subsequently flashing an LED light on the wand to confirm the
payment (News Desk, 2017).

Continuing to grow through successful partnerships, Just Eat has also
collaborated with other technology platforms, such as Apple TV, Amazon Fire TV
and Alexa, and XBOX, to make the takeaway experience more enjoyable and
convenient for the users (News Desk, 2017).
The company’s strategy is simple: To grow a foodtech sector, and assist small
businesses to grow and impact their livelihood.

Strategic recommendations for the client

One of the biggest opportunities for the online food delivery industry
is the low barrier to entry, whereas the biggest threat remains the high
barriers to growth. For Just Eat, this continues to be a concern as it
indicates the high possibility of competitors, with a stunted growth.

Although Just Eat continues to minimize costs through the absence of a
delivery fee. However, this benefit is negated by the 11.7% average commission
fee which it charges, which places competitors, such as ReadyForFood, at a
higher preference for the consumers.

In order to increase market share and maximise profits, Just Eat can
adopt the following strategic recommendations.

Firstly, the company can initiate a customer loyalty scheme, whereby
customers can accumulate points that they acquire per order. At a certain
threshold, customers can then use their points to place an order, or can choose
to continue to credit their account with the acquired points.

Secondly, Just Eat can also capitalize on the trend towards healthy
eating by adopting strategies, such as enticing restaurants to provide a
calorie count for each meal or providing a healthy eating category in the
application.

Thirdly, Just Eat should adopt more tech-savvy means of customers making
payments. This can include Apple Pay, or even perhaps accepting cryptocurrency
as payment.

Fourthly, the company should invest more into allowing greater
interaction between customers and the takeaway restaurants. Although Just Eat
prides itself on instantly being able to connect the restaurants with local
customers ordering online. However, a Red Brick Research Survey found that 49%
of all restaurants found it difficult to build direct relationships with the
ultimate consumer since Just Eat absorbed the role of the middle-man (Preoday, 2015).

Finally, Just Eat can follow suit from applications such as Deliveroo
and provide an online tracking service, whereby customers can keep a track on
the order.

Recommendations for the law firm’s client relationship team

Just Eat also has a history of acquiring smaller companies in order to
expand. This is further evidenced by the fact that Just Eat plans on acquiring
rival HungryHouse in the near future, a plan which is halted by the competition
regulators (Sullivan, 2017). Therefore,
the client relationship team should also offer assistance in areas of Mergers
& Acquisitions.

The client and its business model is in an industry that is experiencing
rapid growth. With the introduction of digitalized payments, such as
cryptocurrency, and the initiation of artificial intelligence softwares, such
as Alexa, Just Eat has an opportunity to experience immense growth.

It is recommended to the client relationship team to offer assistance to
the client on all Intellectual Property issues and Trademark rights. The client
has a history of pioneering in innovative marketing strategies. Therefore,
since it is also a competitive advantage, the client should ensure that all IP
Rights are registered in a timely manner to avoid any issues at a later stage.

If the client agrees to the recommendations regarding the introduction
of technology, for example the customer loyalty scheme, the firm can assist the
client in data protection issues.

Conclusion

Just Eat has successfully penetrated international markets and managed
to acquire a significant market share in several countries worldwide. The
country has certain strengths which are integral to its success. The main key
success factor for the company is the fact that the company advertises all
restaurants, including the smaller family-run businesses. The fact that Just
Eat does not have any employed persons specifically for delivery will assist in
cutting costs, which can be a competitive advantage. However, the fact that
Just Eat charges a high transaction fee negates this advantage for the company.

Just Eat has recently announced that it is diversifying its clientele by
taking on more branded restaurant chains in the UK, something that was
dominated by Deliveroo and Uber Eats (Sullivan,
2017).

In conclusion, Just Eat has grown immensely over the past few years.
Last year, 2 in every 5 people in the UK alone used Just Eat. The company has
revolutionalised the food delivery industry, and placed itself in a comfortable
spot as a middle-man between the customer and the restaurant, where the
customer will just eat and the restaurant will ‘just cook’ (Grant, 2016).