Foodpanda PESTEL Analysis - The Strategy Story

Before we dive deep into the PESTEL analysis, let’s get the business overview of Foodpanda. Foodpanda is an online food and grocery delivery service that connects people with the best in their cities. The company operates in multiple countries, primarily in Asia and Eastern Europe.

In 2016, Delivery Hero, a leading global online food ordering and delivery marketplace, acquired Foodpanda. Foodpanda operates in Bangladesh, Cambodia, Hong Kong, Laos, Malaysia, Myanmar, Pakistan, the Philippines, Singapore, Taiwan and Thailand.

Foodpanda allows users to select from local restaurants and place orders via its mobile applications and website. The service is often considered convenient, as it enables customers to order a wide range of food options with a few taps on their smartphone or clicks on their computer.

Business Model

The Foodpanda business model typically relies on three primary stakeholders:

Customers: Individuals or organizations that use the Foodpanda app or website to order food or grocery items.
Restaurants and Retailers: Foodpanda partners with restaurants and food outlets and, in some locations, grocery stores. These partners list their menu items or products on Foodpanda’s platform.
Delivery Riders: Individuals responsible for picking up orders from restaurants or stores and delivering them to customers.

Revenue Streams

Commission: Foodpanda usually charges a commission from the restaurant on each order placed through its platform.
Delivery Fees: Customers often pay a delivery fee unless they meet a certain minimum order value or subscribe to a premium service.
Advertisements and Promotions: Foodpanda may also generate revenue by providing advertising space on its app or website or offering restaurant promotional deals.

As per Delivery Hero’s 2022 annual report, the Foodpanda brand in APAC

has shown adjusted EBITDA improvements through efficiency in marketing spend and investing in healthy customer retention activities such as the rollout of the subscription model, thus focusing the marketing spend on higher value customers through audience targeting.

Here is the PESTEL analysis of Foodpanda

A PESTEL analysis is a strategic management framework used to examine the external macro-environmental factors that can impact an organization or industry. The acronym PESTEL stands for:

Political factors: Relate to government policies, regulations, political stability, and other political forces that may impact the business environment.
Economic factors: Deal with economic conditions and trends affecting an organization’s operations, profitability, and growth.
Sociocultural factors: Relate to social and cultural aspects that may influence consumer preferences, lifestyles, demographics, and market trends.
Technological factors: Deal with developing and applying new technologies, innovations, and trends that can impact an industry or organization.
Environmental factors: Relate to ecological and environmental concerns that may affect an organization’s operations and decision-making.
Legal factors: Refer to the laws and regulations that govern businesses and industries.

In this article, we will do a PESTEL Analysis of Foodpanda.

PESTEL Analysis Framework: Explained with Examples

Political

Government Regulations and Policies: Foodpanda operates in multiple countries, each with its own set of regulations regarding food safety, health standards, and business operations. Failure to comply with these regulations can result in severe penalties and even bar the company from operating in certain jurisdictions.
Political Stability: Political instability can result in unpredictable business conditions, including regulation changes, currency value, and consumer behavior. For example, political unrest can lead to strikes or protests that may disrupt the supply chain or pose security risks to delivery drivers.
Trade Policies: Policies related to tariffs and trade can affect Foodpanda, especially if it sources its technology or goods from abroad. These policies could affect the cost structure and, subsequently, the pricing strategies.
Taxation: Different tax regulations, including sales tax, corporate tax, and other levies, could affect Foodpanda’s profitability. Moreover, cross-border taxation issues might arise if the company operates in multiple countries.
Public-Private Partnerships: In some countries, governments may collaborate with private companies like Foodpanda to promote local cuisine or create job opportunities. Such partnerships could provide Foodpanda with both opportunities and obligations.
Data Security Laws: Foodpanda operates primarily as an online platform, so political decisions around data security and privacy regulations can significantly impact its business model.
Employment Laws: Different countries have diverse laws regarding employee benefits, minimum wages, and working conditions. Since Foodpanda uses delivery riders as part of its workforce, these laws can affect labor costs and operational efficiency.
Lobbying and Political Influence: Foodpanda, like many corporations, may engage in lobbying efforts to advocate for favorable policies. This could include efforts to influence regulations around gig economy workers, a hot topic in many countries.

Economic

Economic Growth: Economic prosperity generally leads to increased disposable income, which could result in higher demand for convenience services like food delivery. Conversely, economic downturns could reduce consumer spending, affecting Foodpanda’s revenue.
Inflation Rates: Inflation affects the cost of goods and consumer purchasing power. High inflation may increase Foodpanda’s operating expenses, such as food costs, fuel, and labor, potentially forcing the company to raise prices and risk losing cost-sensitive customers.
Interest Rates: Interest rates can impact Foodpanda’s financing costs. High interest rates could make borrowing costly if the company seeks external funding for expansion or operations. This would increase the company’s operational costs and could affect profitability.
Unemployment Rates: High unemployment rates could have a dual impact. On the one hand, it might increase the pool of potential delivery riders. On the other hand, high unemployment could decrease consumer spending, affecting Foodpanda’s revenue.
Currency Fluctuations: Foodpanda operates in multiple countries and is exposed to currency risk. Changes in exchange rates can impact the company’s financial performance, particularly if it has costs in one currency and revenues in another.
Competition and Market Saturation: Economic factors like market saturation and competition can also influence Foodpanda’s profitability. In a booming economy, more competitors might enter the market, affecting Foodpanda’s market share and pricing strategy.
Regulatory Costs: Economic conditions may influence the level of regulatory scrutiny and costs associated with compliance. In difficult economic times, governments might increase regulations to protect jobs or increase tax revenues, affecting Foodpanda’s operational costs.
Fuel Prices: Fuel cost is a significant operational expense for a delivery service like Foodpanda. Economic conditions can significantly impact fuel prices, thereby affecting the cost structure and profitability of the company.

Sociocultural

Eating Habits and Lifestyles: Changes in eating habits, such as a shift toward health-conscious eating or convenience foods, can significantly impact the demand for Foodpanda’s services. The rise of on-the-go lifestyles may increase the demand for quick and convenient food delivery services.
Cultural Preferences: Foodpanda operates in multiple countries, each with unique cultural preferences for food and eating habits. Understanding and catering to these local tastes is crucial for market penetration and customer satisfaction.
Social Norms and Taboos: Some societies may have specific norms or taboos regarding food, such as dietary restrictions based on religious or ethical beliefs. Foodpanda must be sensitive to these factors when partnering with restaurants and presenting menu options.
Demographics: The age distribution within a particular market can also affect demand. Younger populations may be more tech-savvy and more likely to use an online food delivery service, whereas older populations may prefer traditional methods of ordering food.
Work-Life Balance: Cultural attitudes towards work-life balance can impact the frequency with which people order food online. In cultures where long work hours are common, there may be a higher demand for convenient meal options, thus positively affecting Foodpanda.
Consumer Attitudes Towards Technology: Consumers’ level of comfort and trust with digital technology and online transactions can influence how widely Foodpanda’s services are adopted in a given market.
Time-Saving Preferences: As life gets busier, more people look for ways to save time, making convenience a major selling point. This societal shift towards valuing time-saving options could benefit a service like Foodpanda.

Technological

Platform Reliability and Scalability: The reliability and performance of Foodpanda’s app and website are vital. Downtime or glitches can lead to lost revenue, frustrate users, and damage the company’s reputation. As the company expands, the technology must scale efficiently to handle increased traffic and orders.
Cybersecurity: Given that Foodpanda stores sensitive customer data, including payment information, maintaining a high level of cybersecurity is essential. Any data breaches or cyber-attacks could severely tarnish the brand and result in financial and legal repercussions.
Data Analytics: Effective data analytics can give Foodpanda a competitive edge. Data can help understand consumer behavior, optimize delivery routes, and even make real-time marketing decisions.
Automation and AI: Artificial Intelligence and machine learning algorithms can optimize various operational aspects, from inventory management for partnered restaurants to route optimization for delivery drivers. Automation can also improve customer service through chatbots and automated support systems.
Payment Technologies: The rise of digital wallets, cryptocurrencies, and other innovative payment methods could affect how transactions are conducted on Foodpanda. Adopting new payment technologies may attract a new customer base or improve the convenience of the service.
Internet Penetration and Quality: Internet service availability and quality can impact Foodpanda’s potential user base. The company might face challenges in regions with poor internet connectivity in offering a seamless service.
Mobile Technology: As a mobile-first platform, Foodpanda benefits from advances in smartphone technology and mobile operating systems. The widespread adoption of smartphones directly correlates with the potential market size for Foodpanda’s services.
GPS and Location Services: Advancements in GPS technology can improve the accuracy and efficiency of Foodpanda’s delivery service, thereby enhancing customer satisfaction and reducing costs.

Environmental

Carbon Footprint: The company relies on a fleet of vehicles for delivery, contributing to its carbon footprint. As awareness and concern about climate change grow, Foodpanda might face pressure to reduce emissions, either through the adoption of electric vehicles or more efficient routing algorithms.
Packaging: Food delivery services often use a significant amount of packaging, contributing to waste and environmental degradation. Sustainable, biodegradable, or reusable packaging options could become necessary to meet consumer demands and comply with regulations.
Food Waste: Food preparation and delivery efficiency can help reduce food waste, a significant environmental issue. Foodpanda may need to collaborate with restaurants to address this aspect, possibly leveraging technology to match supply with demand better.
Local Sourcing: There’s a growing movement towards locally sourced food due to its lower environmental impact. Foodpanda could consider partnerships with restaurants prioritizing local sourcing to appeal to environmentally-conscious consumers.
Water Usage: Water scarcity is a growing concern globally. While Foodpanda is not directly involved in food preparation, partnerships with restaurants that employ water-efficient practices could benefit both from a sustainability and public relations standpoint.
Regulatory Compliance: Environmental regulations are becoming stricter across many jurisdictions. Whether it’s emissions standards, waste management, or other environmental protections, Foodpanda must be prepared to meet these challenges.

Legal

Employment Laws: As Foodpanda employs delivery riders and staff in various roles, it must adhere to local labor laws, which can differ widely by country. These may include minimum wage laws, worker benefits, and conditions for employment contracts.
Food Safety Regulations: Foodpanda is not directly involved in food preparation but facilitates food product delivery. Consequently, it might be subject to food safety laws to some extent, especially in how the food is transported and handled during delivery.
Consumer Rights: Consumer protection laws covering data privacy, product safety, and complaints handling must be strictly followed. Failure to comply can result in hefty fines and damage to reputation.
Intellectual Property: Legal aspects around the use of proprietary technology, trademarks, and copyrights must be managed carefully to avoid potential lawsuits and penalties.
Data Protection and Privacy: Given that Foodpanda collects customer data, it must comply with data protection regulations like GDPR in Europe or similar laws in other jurisdictions. This includes how data is stored, processed, and shared.
Licenses and Permits: Operating in multiple countries means Foodpanda must acquire and maintain a variety of licenses and permits, which may include business licenses, vehicle permits for delivery, and potentially even licenses for storing food in some instances.
Contract Law: Foodpanda enters into contracts with restaurants, delivery personnel, and customers. Legal issues related to contract formation, enforcement, and disputes are critical considerations.
Advertising and Marketing Laws: Promotional activities must adhere to advertising standards and laws that prevent misleading or false claims. These can be particularly complex when operating across multiple jurisdictions.
Cybersecurity Laws: Given that Foodpanda is an online platform, it must also abide by laws governing cybersecurity and online transactions. Non-compliance can result in fines and damage to reputation.
Gig Economy Regulations: The status of delivery drivers as independent contractors or employees is a contentious legal issue in many jurisdictions. Legislation in this area could significantly impact Foodpanda’s cost structure and operational model.