2. Case Study on OLA cabs.
Presented by:
Shreyas Gupta
Oinam Suraj
Mohd. Naeem
Varun Goud
Madhu kumar
Durga Prasad.
3. About OLA
• Founded on 3 December 2010 by Bhavish Aggarwal (currently CEO)
and Ankit Bhati.
• By 2014, the company has expanded to a network of more than
200,000 cars across 85 cities.
• In November 2014, Ola expanded to incorporate autos on-trial basis
in Bengaluru. Post the trial phase, Ola Auto expanded to other cities
like Delhi, Pune and Chennai starting December 2014.
• Value of ola as on September 2015 is $5 billion
4. History of Ola
• Ola means hello in Spanish
• Bhavish Aggarwal and ankit bhati are the founders of the Ola cab
• Both are graduated from IIT Bombay e
• 2010 December ankit bhati joined with bavish
• Ola cabs received first round of funding from angel investors
• Growth of ola cabs with number of cabs in the network growing from
just 7500 in December 2013 to more than 40000 in November 2014
• Now handling 1.5 lakh booking per day
5. SWOT Analysis
Strength Weakness
1. First mover advantage as a taxi aggregator in India
2. Acquisition of Taxi For Sure made it No. 1 in India
3. Top of the mind service
4. High awareness due to aggressive TV, online and
print media marketing
5.Huge customer base & due to network effect it is
increasing
6. Rapid expansion and online application
7. Multiple rounds of VC investments have made the
brand financially strong
1. Drivers are the face of the company and hence their
misbehavior directly affects the brand image
2. While the demand is huge, amount of cash burning
is huge and monetization is very difficult
Opportunities Threats
1. Unorganized market is huge (~90%) and hence
potential is high
2.Increasing internet penetration & smart phone users
3. Rising disposable income
4. Shifting of consumers towards convenience creates
huge demand
5. Acquisition of smaller players
1. Rising competition
2. Uber has deep pocket and hence can burn cash
heavily
3. Presence of many national players
4. Absence of clear government regulations in
developing countries
5. Future is unclear due to lack of regulations and
Customer loyalty is less in this industry
6. Porters five forces model
Porters
5 forces
Threat of
New
Entrants
Rivalry
Among the
Competitors
Bargaining
Power of
Suppliers
Bargaining
Power of
Buyers
Threat of
Substitutes
7. 1. Rivalry Among the Competitors
• The competition among the players in this market will be high and rising.
• Price is not a differentiating aspect of competition. People these days look for comfort, luxury, availabity of
the car etc.
• Other than the fleet of vehicles, the cost of the company has increased on the tech products like mobile apps,
websites and also on call center services to attain competitive advantage.
• Factors affecting the competitive rivalry are that there are few players in the market, Government regulations.
2. Threat of New Entrants
• VC’s are investing in this industry and the new entrants are encouraged by this fact.
• Economies of scale would be a significant factor, the reason being as the industry is growing at a fast pace the
economies which are available to existing players will be reduced.
• The profitability is also affected with entry of new players as this industry has low loyal customers.
• Barriers to entry like the government regulations, skilled drivers etc affect the same.
• Innovation in terms booking service products and facilities to the customers e.g the diamond customer will
get a higher facility for using higher car miles, coupons etc. E.g. Uber has cashless service, Meru does
cabvertising etc.
8. 3. Threat of Substitutes
• The biggest threat to the car rental service is the threat of substitutes.
The biggest substitute is the public transport. It includes Local buses which have also provide luxury buses and
are cheap and comfortable, Rickshaws, local taxis etc.
• Factors that differentiate Substitute with Car rental service are as follows:
• Price, availability of close competence in public transport, cheap , easy availability.
• With advancement in the technology the companies usually can setup the meeting via video conference rather
meeting in person.
4. Bargaining Power of Buyers
• Buyers have high bargaining power as the cost of switching is low or negligible.
• The corporate buyers also have a say in this as they frequently avail the facility and can emphasize on reducing
the cost for the service. E.g of corporate buyers- big corporate houses, hotels.
5. Bargaining Power of Suppliers
• The major suppliers in this industry are Car dealers and skilled drivers
• Car Dealers have reasonably high bargaining power.
• Skilled drivers have a high bargaining power as they are on high demand.
9. SPACE matrix
• The SPACE matrix is a management tool used to analyze a company. It is
used to determine what type of a strategy a company should undertake.
• The SPACE matrix is broken down to four quadrants where each quadrant
suggests a different type or a nature of a strategy:
Aggressive
Conservative
Defensive
Competitive
• Internal strategic dimensions:
Financial strength (FS)
Competitive advantage (CA)
• External strategic dimensions:
Environmental stability (ES) or
Industry strength (IS)
10. Industry position Rating
The taxi business in the country is
growing at 20 to 25 per cent a year.
4
Unorganised sector at $ 800 million ,
expected to reach $7 Billion by 2020
4
Extent leveraged 4
12
Financial position Rating
Capital of more than $700 million. 6
Net loss of -34.22 cr. For 2013/14 2
8
Average FP =
8/2= 4
Average IP =
12/3= 4
SPACE matrix
11. Stability position Rating
Advantage of Price range -2
Price elasticity of demand -4
Competitive pressure -3
-9
Competitive position Rating
Market share of 60% -1
Control over suppliers -3
Presence in over 100 cities and has
250,000 vehicles on its platforms
-1
-5
Average SP =
-9/3= -3
Average CP =
-5/3= -1.67
12. X axis: = (IP-CP) 4-1.67 = 2.33
Y axis: (FP –SP) 4-3 = 1
Aggressive
(2.33, 1)
FP
SP
CP IP
Conservative
CompetitiveDefensive
SPACE matrix
14. Ques: 1. How does OLA position itself? Is it a
low cost provider or a differentiator?
• As mentioned in the case aggregate market of Taxi’s in India is around $8 billion of
which 5% is only organized. That is market is still not mature. 95% of market is still
dealt by unorganized sector like auto rickshaws, private cabs, local travel agents, etc.
as compared to them OLA is a differentiator as it comes with an entirely different
and innovative concept of being a Taxi aggregator. Technology also plays a major role
in it as it serves as a mobile application that will surely avail a taxi within few minutes
unlike to above mentioned examples.
• Now if we see that 5% organized sector which includes its rival UBER that also
provides similar services through a mobile application and comes as an aggregator,
here OLA is a market leader with around 60% of market share. OLA is a cost leader in
this view because it comes with discounted rate. There are some special features
added to this is as, there is no waiting charge for calling an OLA cab unlike UBER.
Specially its new revised rate card where it offers a Taxi cheaper then that of auto
fares.
• Thus OLA is a low cost provider in some case when compared to its competitors in
organized sector. At the same time it is a differentiator when compared to
unorganized sector.
15. Ques: 2. With respect to popular mode of transport,
namely, auto rickshaws in cities like Bangalore, is OLA a differentiator?
• Yes. Auto rickshaws may be a popular mode of transportation but it is not an organized
sector, also OLA is offering the same service in a different way. The innovative idea
where their key core competence lies is availing a similar kind of service through mobile
application. For an auto one may face discomfort regarding hiring auto, there are
chances where fare prices in auto rickshaws are not fair and square, but in OLA one may
hire an AC car with similar or low rate than auto rickshaw with an ease of hiring a taxi at
your doorstep just by a touch on our smartphone. Fare prices are fair as it is all
digitalized through a mobile application.
• At the same time we can rate the driver hired according to the services he rendered.
Same is not available for an auto rickshaw, if an auto rickshaw driver misbehaves we
may find no place to register a complain unless it is criminal offence. But in OLA if u are
not satisfied with driver, we may rate him low or lodge a complain against him in OLA
app and in some extreme cases the driver may end up losing his job. Thus there is a
sense of responsibility and responsiveness in the services offered by OLA.
16. Ques: 3. How long OLA maintains its discounted rate ?
Will OLA have to raise tariff above that of auto to sustain
and continue to provide superior service?
• As we see OLA is offering services which are cheaper than auto rickshaw by
providing discounts, coupons, referral, etc. As we have seen in SPACE matrix it is
approaching market aggressively. As the company is financially viable and stable.
Though they are in net loss of around 34 Cr. The amount is not very huge as
compared to the opportunities available in market. Still 95% of market is
unorganized, within the 5% of total taxi market, they almost occupy 60% market
share. As the market is in early growth stage they may continue to go with same
discounted rate. This will not only help them to explore more market but at the
same time will kill the competitor. Another advantage is threat to new entrants
would be reduced as a new venture cannot afford a price war.
• Thus as long as the market reach a proper growth stage and their financial health
is unaffected they may have similar aggressive approach.
17. Ques: 4. What will be the future implications of
this strategies?
• Being a differentiator in unorganized market OLA may explore the opportunities
in expanding the organized sector from 5%. As it is aggressively approaching
towards capturing and expanding the market, we may see a future growth in
organized Taxi market as well as the market share of OLA
• Being a cost leader OLA is steering the Taxi aggregator industry the way they
wants. It has not only forced rivals to cut down its rates and provides best
services but also they are helping drivers to gain a mileage of good payment as
well as tip. Thus making a win-win situation for both the customers and the
drivers. Thus it may be expected that in future taxi aggregators will not only focus
customers but also to their drivers for their well being.
