STRATEGIC

ANALYSIS
OF
OLA CABS

Group 2
Sarthak Jalali (B19044)
Sharmishta R Somayaji (B19046)
Shashwat Nandan (B19047)
Shobhit Sharma (B19048)
Shrey Bhala (B19049)
Vivitsa Upasti (B19059)
Executive Summary

Before the introduction of online ride hailing services, the taxi market was fairly fragmented in
India. After the introduction of Ola and Uber, this market has consolidated to some extent and
these two are dominating this space. Ola, being the first mover in India has enjoyed the majority
of market share by employing certain strategies that have been discussed in the report. We have
tried to analyze the industry, the company and have tried to come up with recommendations on
the basis of the facts and our understanding of them.

Introduction

Ola Cabs is an Indian ridesharing company based in Bangalore which has been valued at $10
billion as of October, 2019. It was founded in December 2010 by Bhavish Aggarwal, the current
CEO, and Ankit Bhati. Ola has enjoyed the first mover’s advantage in India, albeit facing fierce
competition from Uber. Despite Uber being a global player, Ola has managed to hold the Indian
market due to its aggressive expansion domestically, with its presence in more than 250 cities
and towns. They have now expanded internationally as well.
Keeping up with the changing trends in the automobile industry, Ola has also ventured into the
EV market with Ola Electric, which has recently been infused with $250 million by SoftBank.

Industry Analysis

Porter’s Five Forces Analysis

To understand the attractiveness of the industry through competitive ferocity, we have used the
Porter’s five forces framework. This will set the tone for a thorough analysis of the external
environment of this industry.

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Rivalry among competitors

Rivalry in this industry is intense as has been evident from the constant discounts and coupons
offered by major players like Ola Cabs, Uber. In light of so many discounts offered by the
players, price is no more a point of differentiation. Other factors such as availability of the cab
have taken precedence over price, which tends to be similar. There are also the conventional cab
service providers like Meru which specialize in airport drop offs and pickups.

Threat of new entrants

The technology, although recent, is easy to replicate and so is the business model. VCs are ready
to invest in such companies as we have seen, which further increases the threat of new entrants.
Customer loyalty in this industry is low, which means that customers would lean towards lower
prices. There could be barriers in the form of government regulations, lack of skilled drivers etc.

Threat of substitutes

The industry has substitutes in the form of public transport, private vehicles. However, private
vehicles are becoming less, and less popular and public transport is not easily available
everywhere. The convenience of this industry offsets some part of the threat.

Bargaining power of buyers

Low switching cost in the industry along with high market knowledge makes the bargaining
power of buyers high.

Bargaining power of suppliers

Suppliers like car dealers have low bargaining power since they are many but their customers are
limited. However bargaining power of skilled drivers is high because they are lesser in number
and are in high demand.

With Ola and Uber retaining a stronghold of the market and analyzing the five forces, the
industry cannot be deemed attractive. However, with services such as Electric Vehicles, the
dynamics can change.

Company Analysis

To understand the internal capability of Ola in depth we have used the VRIO framework and
Porter’s Value Chain analysis.

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1. VRIO Analysis

On talking to Mr. Dinesh Kumar, HR Manager (Performance & Rewards) at Ola, we concluded
that the culture of Ola stood out as a resource that can be categorized as a sustained competitive
advantage. Apart from this, resources such as services, brand reputation can be strengthened
further to get a sustained competitive advantage.

2. Porter’s Value Chain Analysis

Inbound Logistics

Ola does not own the vehicles it uses to serve customers. The vehicles are owned by the drivers
or renting companies. The drivers are not employees of the company, they are on contract basis.

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Despite having large operations, inbound logistics are limited to hardware like smartphones and
the internet.

Operations

Ola’s operations are majorly on its application which is its main source of value. The operations
from Ola’s side involves onboarding the drivers onto the application, after which the application
does all the work, right from booking a ride to payment.

Outbound Logistics

Owing to the nature of the industry, there’s no outbound logistics as such.

Marketing and Sales

Ola relies on social and traditional media marketing. It is also heavily dependent on word of
mouth marketing. It offers a lot of promotional offers to retain existing customers and attract the
slippery ones from competitors.

Service

Ola has been credited with good customer service. Customer’s feedback is immaculately
incorporated in the application. Better the feedback for a driver, more rides he gets. There is also
a user-friendly grievance redressal procedure for handling customer complaints.

Recommendations

The recommendations are based on the core business of Ola and the key stakeholders that are
involved at each stage.

● Technology: Ola needs to do continuous improvement on their app platform as it is the most
important part of the business. They must continuously research about what difficulties its
customers and drivers face on the app. E.g. Drivers often find it difficult to reach the exact
location based on the suggestion from the app. On talking with some of the Ola drivers, they
complained of inaccurate map locations. Therefore, they must improve the GPS technology in
their app. This is the backbone of their business and hence this needs to be perfected.

● Driver partner: They also need to make efforts to make the experience of the driver better,
especially considering the lack of trained drivers in the market. Proper training must be
provided to the drivers who have just been on boarded for using the app. Apart from this they
should also penalize errant drivers, as some of the drivers remain online even when they are
unavailable to accept user requests. They do this simply to earn a bonus which the company
provides for being online for a certain threshold time. In addition to this, it being a service

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 industry, Ola can also undertake training for drivers on how to interact with customers to
make their experience better, which in turn will result in more rides for the drivers as well.

● User experience: Ola should also work towards improving the user experience. E.g: Drivers
get to know the destination only by asking the user, once the driver has confirmed the ride. If
the destination is not favorable to the driver, they often cancel it. Users face a lot of trouble
due to this. The company must penalize such drivers so as to curb this practice in order to
provide a better user experience.

● Subsidiary:

○ Ola electric: Electric vehicles are the next big thing in the automotive industry.
The next 3-5 years are going to be critical in the electric vehicle industry.
Therefore, the company must keep a close eye on its development so that they can
leverage it. They have already made good progress in this direction, as the
concerned subsidiary, Ola Electric, has become the second fastest unicorn (after
Udaan), when it confirmed $250 million funding from Softbank group in July,
2019. Apart from this, they should also give due focus to the self-driving vehicles
segment, which will aid them in expansion outside of India majorly.

○ Foodpanda: Ola acquired FoodPanda’s India unit in Dec, 2017. It started off
well, but couldn't compete with the likes of Swiggy and Zomato as these
companies have been providing heavy discounts.Ola took the right decisions by
divesting money in it by laying off several employees. They should continue to
leverage their cloud kitchen brands through other platforms instead of providing
complete food delivery services for now.

● International expansion: Ola has done pretty well in the three international countries in
which it expanded its business, namely, Australia, UK and New Zealand. Ola was supposed to
expand to the Netherlands, Kenya, Dubai, Israel, and Brazil but because of a lot of
developments and some troubles that Ola faced in the home country, they have paused their
future international expansion plans.
So instead of expanding to new countries, they should focus on consolidating the market in
the three foreign countries where they are already present and can later venture to more
countries.

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References

● https://en.wikipedia.org/wiki/Ola_Cabs
● https://www.livemint.com/companies/start-ups/how-ola-swung-a-funding-flip-
1565195590035.html
● https://www.livemint.com/companies/start-ups/ola-drops-foodpanda-delivery-lays-
off-several-employees-1558463350377.html
● https://inc42.com/buzz/ride-hailing-unicorn-olas-international-expansion-plans-
may-halt-report/
● https://www.businessinsider.in/here-are-10-facts-youve-never-known-about-
ola/articleshow/50729669.cms
● https://techcrunch.com/tag/ola/
● https://theatlas.com/charts/SJzf5hc8z
● https://tech.economictimes.indiatimes.com/news/internet/uber-and-ola-claims-to-
control-market-share/74049217
● https://bstrategyhub.com/business-model-of-ola-how-does-ola-make-money/

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