Stock Analysis

The Success story of Ola

“No matter how dark it is today, things will always be better tomorrow” – Justin Kan. His T.V. startup business has played a major role in the global business economy and is all the more relevant today. He believes that figuring out the need of the market and creating, developing and delivering value to customers in a step-by-step process and completing this cycle over and over again does not lead to a business being unsuccessful. However, even today startups exit the market in a short span of time or incur heavy losses due to lack of strategic planning, wrong marketing decisions or inefficient resource allocation and utilization. The Indian startup, OlaCabs operates in a competitive market where several service providers are competing to provide a seamless experience of travel to their customers.

Source – Verzeo

Bhavish Agarwal and Ankit Bhati founded OlaCabs on December 3, 2010. It started as an online cab aggregator in Mumbai and is now a part of the Silicon Valley of India, Bangalore. It was relatively an untapped and lucrative market when it was founded, but today it has a valuation which hovers around billions. In the taxi market in India, OlaCabs acts as aggregators, i.e., a person, who owns and manages a Web-based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator.

There was a huge scope for this start-up because of the dominance of the unorganized sector in this market. Due to this, it attracted investments from SoftBank, Tencent, Microsoft, Flipkart, eBay and alike. This improved the financial soundness of the company which helped them acquire their then competitor, Taxi for sure.

Source – Ola blogs

With the increase in the middle-class population and their disposable incomes, they are willing to pay for better services in the mobility sector. The two major competitors in this segment are the $100 Bn valued global firm, Uber and the $5 Bn Indian start-up OlaCabs. Despite the difference in valuations, OlaCabs captured 80% of the market share. Their success accrues to a two-sided marketplace offering of scaling up users as well as service providers. 

The strong indirect networks result in a more convenient and faster way of mobility for the users and drivers alike. They adopted the model of competitive pricing, offering cabs at lucrative prices which helped them capture a lion’s share of the market. Similarly, incentivizing drivers to ensure that they remain loyal to them was identified to be equally important. They allowed their drivers to buy their own cars at considerably lower prices and affordable repayment methods while collaborating with car manufacturers.

The economic growth augmented by an improvement in infrastructure over the years has helped the start-up make a significant place in the car rental industry. The efforts of the Ministry of Tourism in promoting India as a travel destination (“Incredible India”) also gave a huge push to this start-up. Its collaboration with ‘Make My Trip’ is evidence to this. Ola has been successful in creating and delivering value (value = perceived benefits – price) to its consumers by customizing its services according to the Indian customers. 

The Ola Mini service provided by them was the most successful marketing campaign as it provided cabs at a customer’s doorstep at prices equal to the auto fares. This was possible owing to deep pocket investors who can bear huge costs for the same.

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Ola also adopted an aggressive marketing strategy through traditional as well as modern marketing channels reminding consumers of their presence in this segment, thereby creating a huge customer base to tap in. They offered a variety of services to cater to different demographics – Ola mini, Ola sedan, Ola micro, Ola prime, Ola pink, carpooling for corporate, etc.

From launching its ferry service in order to provide assistance to victims of the Chennai floods and providing emergency services for Covid-19 patients, Ola also takes care of its social responsibility by stepping in whenever the need arises. Hence, the timing, the idea, the business model and the funding, all in tandem, worked a great deal in making the start-up, OlaCabs a success.

Written by- Adrija Poddar

Edited by- Jasmine Kaur Bhatia

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