{"id":878,"date":"2015-10-01T16:23:02","date_gmt":"2015-10-01T20:23:02","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/ola-cabs-the-copy-cat-beating-uber-at-its-own-game-in-india\/"},"modified":"2015-10-01T16:25:14","modified_gmt":"2015-10-01T20:25:14","slug":"ola-cabs-the-copy-cat-beating-uber-at-its-own-game-in-india","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/ola-cabs-the-copy-cat-beating-uber-at-its-own-game-in-india\/","title":{"rendered":"Ola Cabs: The \u201cCopy-Cat\u201d beating Uber at its own game in India."},"content":{"rendered":"

Context:<\/strong>
\nThe Indian market provides a huge opportunity for online cab aggregators with estimates suggesting growth levels of 30%-50% month-on-month. This has led to an intense competition to win in the market and billions of dollars of investments in this space. The two major competitors in this space are the $100Bn valued and global firm Uber and the $5Bn India based Ola Cabs. The results to date are quite surprising \u2013 Ola Cabs, which built its business model on Uber\u2019s success in the US, is significantly ahead of Uber in India with estimates suggesting an almost 80% market share to Ola. How could an India based start-up beat a giant like Uber which has\u00a0expressed a strong intent to win the Indian market? What lessons can be learnt from the Ola success for other players planning a similar strategy? Is this initial success of Ola Cabs sustainable in the long term?<\/p>\n

Building Business Through Indirect Network Effects:<\/strong>
\nThe success of the cab aggregator business model, like any other two-sided market place offering, depends on the ability to scale both the users of the service and providers of the service. There are strong indirect networks effects in the model where the higher users on the platform lead to higher drivers coming onto the platform as they can get more rides which in-turn drives a higher number of users who can now access the cab service in a more convenient and faster way.
\nOla Cabs has been extremely aggressive in capturing both sides of this market. They priced their offering at a very attractive price (at the levels of auto rikshaws \u2013 a 3 wheeler typically used for local commute in India). In parallel, they started to incentivize drivers heavily to ensure they do not leave the platform in the initial periods when not sufficient users were on the platform.<\/p>\n

Value Creation:<\/strong>
\nOla Cabs has been very successful in creating value through their business model. The users were able to get a much better and convenient mode of transport for an attractive price. The drivers were earnings higher than they normally do due to Ola\u2019s high incentives. Where Ola differentiated themselves to create value was through the customization of the business model for the Indian customer:<\/p>\n

i. Ola used smaller hatchbacks for their attractive price which was an instant hit with customers. This also helped them to bring a lot of drivers onto the platform as such hatchbacks were a much larger portion of the Indian Market. Uber on the other hand announced their entry by providing premium cars to attract consumers at a higher price which was not as successful.<\/p>\n

ii. Ola created value to customers who did not use \/ were not comfortable with sharing credit card details by having a pay-with-cash model which significantly expanded the user base and allowed them to create value for a larger customer base<\/p>\n

iii. Similarly, Ola understood the relatively low smart phone penetration in India and had an option of booking cabs through their call-center \u2013 another area where Uber still lags<\/p>\n

iv. For drivers, Ola was the first to come up with apps based on local languages for the drivers who were not educated in English and could not use the traditional English app of Uber<\/p>\n

Value Capture:<\/strong>
\nOla has been able create a lot of value through their business model but yet unable to capture any value for themselves given the intense competition and their fear that Uber will take market share. The pricing of Ola for the customers is low. In addition, the incentives to drivers are such that they get paid 3-4x the value of a trip that they ply. Ola has put itself in a precariously delicate situation to create value for the customers and users but is unable to capture any of it because of the intense competition they set-off with Uber through their pricing and incentives to drivers.<\/p>\n

Will Uber be Able to Win in India:<\/strong>
\nThe learning from the US is that there can be 1 large player and a close second. The market gives the opportunity to grow without getting into a price war. Ola, like most Indian consumer start-ups, missed this and has put themselves in a position where they need to burn cash to maintain their share. However, the moment Uber and Ola stop a price war and move to a fair pricing Ola has its significant share which will help it capture a lot more value than Uber can. The question now is whether Ola can continue to raise cash till that happens (not difficult given the support they enjoy from SoftBank, Accel Partners, GIC etc) or will Uber, with its own huge cash pile, drive Ola out of business and aim to capture share. Whichever it is, the biggest winner, for the time being, seems to be the user in this battle for indirect networks effects!<\/p>\n","protected":false},"excerpt":{"rendered":"

Ola Cabs, which built its business model on Uber\u2019s success in the US, is significantly ahead of Uber in India with estimates suggesting an almost 80% market share to Ola. How could an India based start-up beat a giant like Uber which has expressed a strong intent to win the Indian market? What lessons can be learnt from the Ola success for other players planning a similar strategy? Is this initial success of Ola Cabs sustainable in the long term?<\/p>\n","protected":false},"author":60,"featured_media":879,"comment_status":"open","ping_status":"closed","template":"","categories":[385,21,383,386,384],"class_list":["post-878","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-cab-aggregators","category-network-effects","category-ola-cabs","category-two-sided-market-place","category-uber"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/competing-with-network-effects\/","yoast_head":"\nOla Cabs: The \u201cCopy-Cat\u201d beating Uber at its own game in India. - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/ola-cabs-the-copy-cat-beating-uber-at-its-own-game-in-india\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Ola Cabs: The \u201cCopy-Cat\u201d beating Uber at its own game in India. - Digital Innovation and Transformation\" \/>\n<meta property=\"og:description\" content=\"Ola Cabs, which built its business model on Uber\u2019s success in the US, is significantly ahead of Uber in India with estimates suggesting an almost 80% market share to Ola. 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