Introduction
It is important to note that the chosen organisation for the analysis is Ocado Group. It is a British online grocery technology company which specialises in digitalisation and automation of grocery shopping, delivery, and inventory maintenance. Its mission statement collectively focuses on providing “the best shopping experience … pioneering technology … marketing-leading solutions … leading retailers to ever-greater online success” (Ocado Group, 2022, para. 4). The strategic audit revealed the company’s strategic plan since the end of 2018 was to grow and expand as fast as possible since it anticipated a great level of rising in demand for its services. The company was accurate in its predictions because the pandemic massively boosted the need for online groceries among consumers. However, the company failed short of capitalising on this increasing demand by to low financial and business performance. The key factor was the labour shortage and the company’s approach to addressing this issue.
The best strategic actions recommended for the organisation to complete over the next three to five years revolve around various revisions of its strategic approaches. The solutions need to be implemented at a corporate level to evaluate and develop better strategic objectives, human resource management, and innovative technology. The labour shortage is an external threat to the company, which is why it needs to properly adjust and adapt to the difficult labour market situation by focusing on its internal resources. The emphasis is primarily put on managing its workers due to labour shortage, where the focus areas are talent attraction and employee management. The latter element focuses on superior human resource management through retention, efficient use of its existing workforce, and ensuring that no employee is leaving the company. Over the next three to five years, Ocado Group should focus on more effective use of its human resources and talent to drive innovation, growth, and technological improvement.
Strategic Audit
The strategic audit of Ocado Group reveals that the company had major growth-focused plans from 2018-2019, but the goals were not realised. In the Annual Report of 2018, the company stated that it would continue to focus on its Driving Growth strategy. The company was to provide “a superior proposition based upon our ability to do unique things for our customer, and our ability to test in a live environment, iterating quickly to refine our offering” (Ocado Group, 2018, p. 28). The emphasis of the strategic objective was put on the growth and expansion of the service, which meant a heavy reinvestment of the resources back into the development of better and more efficient operations. Since Ocado Group is primarily a tech company, it was critical for it to utilise its superior efficiency of distribution and to sell for growth. Throughout the years 2019, 2020, and 2021, the company expected higher demand for its online services, which it intended to capitalise on to the greatest extent.
However, the company’s strategy resulted in a failure to meet these goals since its current state is even worse than it was by the end of 2018. According to Aylott (2021), “Ocado faced a flurry of setbacks this year that resulted in a 29% decrease in stock value” (para. 9). In other words, “a mixture of labour shortages, rising inflation and high levels of capital spending has led to high pay-outs by Ocado to stay operating” (Aylott, 2021, para. 9). In addition, the demand for the service dramatically decreased as its stock price values. The price per share for the Ocado Group stock was around $9.6, and it increased up to $39 in February 2021, but now, they cost $9.5, as seen the Figure 1 below (Yahoo Finance, 2022). Thus, the chosen organisation’s financial and business performance over the past three years was poor.
From the presented graph, it becomes evident that it had massive success during the start and duration of the initial years of the pandemic. Due to lockdowns, the demand for grocery technology increased dramatically. Therefore, Ocado Group was able to promote its services at a greater rate. The problem emerged at the beginning of 2021 when one could observe a sharp downward trend in the stock price, business performance, and financial performance. The key cause was a labour shortage, and it is stated that “order growth had been restricted by worker shortages in the second half, coupled with a warehouse fire caused by a robot collision” (Kollewe, 2022, para. 6). Although other factors might have additionally influenced the performance, the most important and critical force was the lack of workers.
Analysis
It should be noted that the analysis of Ocado Group’s case reveals that major strategic changes need to be integrated. The strategy evaluation and development process should begin with an assessment of resources and environment in accordance with the purpose, where subsequent options are evaluated (Lynch, 2015). The following actions involve exploring the options and making a decisive choice for further implementation, as shown in Figure 2 below. Since the purpose of Ocado Group is growing and it has vast and extensive resources, its primary limiting factor is the environment in the form of labour shortage. The core proposed strategy for the upcoming years is centred around solutions that need to be implemented at a corporate level to evaluate and develop better strategic objectives through human resource management and innovative technology.
For the first option, the resource-based approach needs to be upstream of the value chain. According to Lynch (2015), such “activities that add value early in the value chain with options including low-cost raw materials bought in standardised bulk products at low cost process innovations to reduce production costs” (p. 19). For the company, it means making its limited workforce as effective and efficient as possible. As a tech firm, its developers and IT specialists are the most valuable producers of the service, which is why the emphasis is put on the corporate level since the purpose of growth and threat is external. In other words, Ocado Group needs to make the best use of its employee pool to grow despite the labour shortage.
For the second option, the goal is innovation through technology by automating many important tasks or outsourcing, which require labour. Ocado Group belongs to the category of specialised-supplier firms. These include “suppliers of high-performance machinery or sophisticated controls, where technology comes from understanding special customer needs and identifying new applications” (Lynch, 2015, p. 48). Therefore, the emphasis is to rely upon less talent and labour in order to be more resilient to labour shortages.
The selection process needs to evaluate whether one option is superior to another. One of the mission objectives of Ocado Group is to “pioneering technology … marketing-leading solutions” (Ocado Group, 2022, para. 4). In other words, it cannot pioneer such technological advancements, such as robotics, without a large group of developers and highly specialised professionals working on them. Automation is effective as long as only efficiency is of major concern. However, Ocado Group cannot grow solely on the basis of efficiency because it still requires more development for further growth. Therefore, considering the environment of labour shortage and the need for growth, the first option is the most appropriate with respect to the company’s strategy, mission, and goal.
One should be aware that any organisation operates in conditions of financial, logistical, informational, and human constraints. The most striking manifestation of the latter is the lack of labour to fulfil the tasks facing the organisation, which was especially evident in 2020-2021 after the first wave of the pandemic. It is important to pay attention to the chronic shortage of specialists in certain professions, which acutely affects Ocado. In real life, these labour shortage factors are interconnected, and they influence each other. The main task is to analyse the organisation’s behaviour in conditions of labour shortage, taking into account the factors of the internal and external environment of its functioning. The emergence of a labour shortage arising from macro-and microeconomic reasons, the situation in the labour market must be provided for by the management and service of the organisation’s labour in human resource planning. In such planning, it makes sense, in particular, to assess the various risks of a shortage of workers.
It is important to note that there are many reasons for the shortage of labour. Some of them arise at the level of the organisation, such as the rapid and largely unexpected forced expansion of the organisation’s scope of its activities. In addition, there are factors such as the retirement of employees who, for some time, there is no one to replace and the lack of proper staff motivation. The latter, in turn, is due to uninteresting work, difficult working conditions, combined with relatively low wages, and the lack of prospects for qualification and job growth. As a result, employees leave the organisation, and replacements are difficult to find.
Among the macroeconomic reasons for the emergence of a shortage of labour in the organisation should be attributed to the budgetary, financial and monetary policy of the state, the situation in its foreign trade sphere, and the sphere of capital exchange with other countries. Labour shortages in certain sectors of the economy may arise from the expansion of employment opportunities in areas of activity with more attractive working conditions in the field of service provision.
The organisation should pay attention to the time during which the vacancy can be closed. Within a short period, the vacancy of the head can be filled if the organisation has an appropriate candidate from the labour reserve. It will take some period of time to fill the vacancies of skilled workers and representatives of specialised professions. It may take a relatively long time to close the shortage of subspecialised professionals. It makes sense to rank jobs in an organisation according to the level of significance and determine its losses and reactions in case they are not filled in the short, medium and long term. It is expedient for each organisation to determine a list of its key positions and employees, scarce and acutely scarce specialists in the labour market. It is important to consider that these two groups of jobs and workers may overlap. It seems appropriate to group the organisation of professions and occupations according to the level of scarcity in the labour market. It is important to know which professions are needed by the organisation and will be more in demand and scarce in the future.
Uncertainty and risk management within an organisation involves the allocation of zones of relative stability and instability in it. If a stability zone in an organisation is planned in relation to the filling of some vacancies, vacancies in some individual services, then often one has to put up with uncertainty regarding the closing of other vacancies, vacancies in other services, and divisions. Many organisations explicitly or implicitly identify a core of jobs that must be filed under all circumstances. This position can be ensured by the rather unstable position of jobs located on the periphery of the organisational hierarchy. In an effort to avoid a shortage of key employees, an organisation can afford to lose less valuable employees. In the context of a severe budget constraint, an organisation can limit itself to increasing salaries only for key employees whose shortages cannot be allowed.
On the basis of the first option, a wide range of measures need to be undertaken to ensure more effective use of the existing workforce. It needs to be done while focusing on their retention and gradual hiring of talent focused on quality rather than quantity. The sources of uncertainty about the emergence of shortages of labour in the organisation are in the macroeconomic area, in the behaviour of consumers, suppliers of production resources and competitors, within the organisation itself. Identifying areas of such uncertainty is an important management function. Acquisitions and losses become an area of uncertainty due to a change in the ratio of the organisation’s need for labour and their satisfaction. Positive changes in the operating environment of the organisation result in its acquisitions and negative changes in losses. They are associated with the solution or prevention, occurrence or aggravation of the problem of labour shortages. Thus, Ocado Group should focus on superior human resource management through retention, efficient use of its existing workforce, and ensure that no employee is leaving the company.
Critical Reflection
It should be noted that many key lessons were learned while writing the report on Ocado Group and its approach toward growth strategy and measures undertaken against labour shortages. Firstly, I learned to be able to differentiate corporate-level strategies from business-level strategies by reflecting on my written preparation for each weekly tutorial. In accordance with topic four of the course, it is critical for the business to be aware of major external threats as well as internal weaknesses. Since the subject primarily tackled the problem of labour shortages, I was able to obtain an insight into the fact that it was an external threat. The company does not determine how severe the economy will impact the pool of available workers in the labour market, which is why its only solution is to adapt and be more resilient to such forces. The strategy of growth makes the challenge even more difficult because growth assumes hiring more talent.
Secondly, in accordance with topic five of the course, I learned the importance of identifying core missions and objectives. Whenever a strategy is being developed, a company should always refer back to and reflect on its main goal. I was able to identify Ocado Group’s key objective, which was growth. As a technology company, it showed a severe shortage of IT specialists and developers needed to further enhance the company’s products and services. An in-depth understanding was gained by utilising the strategy development process through a diagram shown in Figure 2. Thirdly, topic six of the course was highly relevant for the given report analysis on the role of purpose emerging from technology and innovation. The former aspect was especially critical considering that Ocado Group is a tech company. In other words, its sole business model heavily relies on being technologically advanced and innovative with its services. Since it needs to innovate to grow, it additionally requires properly experienced expert talent to do so.
Fourthly, in accordance with topic seven of the course, strategy evaluation and development were of paramount importance for the analysis section. I learned to make recommendations on the basis of insightfully understanding and assessing the company’s available resources and its external pressures. Ocado Group’s situation is a difficult one, which is why it needs to commit to the most effective strategy by still continuing to grow. Since labour shortage cannot be removed due to external nature, the recommendation was to adhere to option one.
Appendix/Reference List
Aylott, T. (2021) ‘The best and worst performers in the FTSE 100 this year’, Trustnet, Web.
Kollewe, J. (2022) ‘Ocado hit by labour shortages but insists it is holding down prices’, Trustnet, Web.
Lynch, R. (2015) Strategic management. New York: Pearson.
Ocado Group. (2018) Annual Report. Web.
Ocado Group. (2022) Who we are. Web.
Yahoo Finance. (2022) Ocado Group. Web.