Q3

a. Acquisitions:

1. Native-digital player acquired the native digital player:

Airbnb has acquired Accoleo, a German based company, and Crashpadder UK based company in 2011
and 2012 respectively. (Airbnb has many acquisitions but we have taken only first two to demonstrate
the strategy they applied and the motivation for acquisition)

Crashpadder was a London based company, provides the platform for people who wants to rent their r
homes and apartments for a shorter stay. The timing of the acquisition is key, before the 2012 Olympics
slated to be held in London.

Accoleo, was German company, is a platform that allows the students to rent out their room, extra beds
to other students. This is marketplace where the it allows the people to rent out their flats.

Airbnb was started by college students who wants to earn few bucks by renting out their living room
with extra bed. The basic business model of the company is to provide a platform for the people who
wants to rent out their extra beds or rooms, later it also started working with hotels in various part of
US. In addition to stays, Airbnb also provides the customers to book activities with local guides, tour
plans.

Airbnb has started acquiring companies which are its competitors in various parts of the world as well as
other complimentary organizations like NabeWise (a city guide which has curated information for
specified locations).

These acquisitions are aimed for the international expansion of the Airbnb and to make itself reliance by
having its own services like city guide, Q&A public form sites, travel accessibility sites. The Airbnb
became the largest became the largest lodging website in UK.

2. Native-digital player acquired the Incumbent player:

OYO Rooms is an Indian hotel chain. Started by Ritesh Agarwal, headquarters in Gurgaon. Started with
targeting to provide budget hotel facilities to the customers. Within span of Six years it has risen to
multinational company and millions of rooms in hundreds of cities in Asia, US, middle east, Europe.

It provides platform to millions of small, medium hotels to rent out their services after standardization
according to the OYO. Now OYO has venturing into acquiring the hotel chains with asset heavy model.

OYO has acquired Chennai based service apartment operator Novascotia Boutique Homes in 2018. This
acquisition was the first ever acquisition. The move was to establish OYO presence in the service
apartment and corporate executive stay. By this transaction OYO had entered into assets-based model
as well. There after it started leasing hotels and apartments, operating them through its team. This
model is basically the Oyo is renting its own hotels which it took under lease or bought with its standard
quality of stay and breakfast services.

OYO with its expertise in digital coupled with the leasing the hotels and apartments has provide an
advantage to attract the existing as well as new customer segment. This clearly shows the OYO has
diversified its product portfolio to serve larger customer base and generate more revenue.

Strategic Investments:

1.Native-digital player invest in the Native-digital player.

 MakeMyTrip (MMT) along with venture capital firm SAIF invest in IXIGO.
 Airbnb invested in OYO

MMT an online travel agent. MMT has bought shares (19.9%) in the IXIGO. This is was strategic
acquisition, so that MMT can have inventory of rooms to serve the customers. It gives the company a
synergy, benefits and helps in expanding the business. Ixigo is a portal enables the users to search the
nearby hotels, compare the prices of air tickets, hotels, bus tickets. This provides the MMT a larger
customer base with help of Ixigo. Ixigo is specialized in Airline traffic sites, so MMT would get advantage
of getting the customer of the airline sites.

Airbnb had invested in the OYO.

Airbnb was not successful in both India and China. The Airbnb has major revenue markets in other than
these two countries and the Airbnb has its business focused on the upper segment (higher price point)
whereas the OYO on contrary positioned for the budget segment. OYO has good market share in India
and China, this provides a complimentary effect on the Airbnb. By this investment Airbnb can get into
the markets which it was not able to make its presence and creates source of revenue.

2. Incumbent player invested Native-digital player:

China lodging group invested $10 million in OYO. This is termed as a strategic alliance where both the
companies would get benefited from the alliance by complimenting each other. Inventory holding by
the China Lodging Group and the digital specialization of Oyo.

b. Technological trajectories:

OYO is using the latest innovative technology solutions in providing the customer services. This
technology helps in standardize the service, amenities and in-room experience across India and
other parts of world. The entire data and infrastructure are hosted through the cloud basis,
which is unique model which is far ahead of the other incumbent players and digital players,
this provides the company an edge over competitors.
Cloud base services is going to be the upcoming technology base which would disrupt the market, this is
going to force the native digital player to adapt to this model or else it would cause the great damage.
Services like on-demand, customized facilities/services for best user experience while optimizing the
cost.

Machine learning is used for the dynamic pricing to make use of time and benefits. Artificial Intelligence
is used in customer service. IOT devices equipped in the rooms for better use of power and also create
better user experience.

Since these technologies were adapted by the native players in a rapid phase, this won’t be creating any
threat to the native players.

C. Regulatory environment changes

Business investments: The major scope for the regulatory changes is in policies for investment
in various countries. The basic regulations to establish the business itself require lot of work to
get the approvals as per the standards specified by the regulatory body of the country/
state/region.

Compliance standards: While expanding into various countries, the native players would face
the compliance issues, such as protection against data breaching, the regulations would change
very frequently based on the changing technology and increasing day -to-day cybercrimes.

Recently India Government has faced the similar issue with the data breach on popular
messaging application “Whatsapp”, To control all these the Gov has come up with amendments
in laws. Similar kind of situations would occur across the globe in multiple folds, this would
trigger the for changes in the rules and regulations.

Company has to spend lot of resources – financial, human and time - to be able to buy/rent and
use the latest technology, updated software’s and follow standard procedures, to overcome the
situations and build trust with government as well as the customers.

D. Change in Supplier power

For the platform like OYO the suppliers are mostly the incumbent players (i.e. The traditional
Hotel operators). Since native players had disrupted the hotel business market with their
advanced technology, data driven marketing and operating business models.

The incumbent players were partnering with the native players as a supplier or even as a
strategic partner, to build their business. At the starting of the business the bargaining power of
the native player was high and the bond works with the terms and conditions imposed by the
naïve player.

Later, due to incumbent player is suffering due to deep discounting, high commissions and
arbitrary contract changes made by native player, this paving path to form a banding of hotel
owners together in a region/city to consider legal action against native player.

Go-MMT, was one of such case where the MMT was boycotted by band of incumbent players
(Gujarat union).
Read more at:
//economictimes.indiatimes.com/articleshow/66890345.cms?from=mdr&utm_source=contentofinterest&utm_medium
=text&utm_campaign=cppst

e. Growth/changes of Native player and impacts on the incumbent players:

Online platform for hotel room booking, has been going through an exponential change by
providing customer friendly and customized services for the customers with data analytics,
Artificial intelligence and Web 4.0. This is a potential threat to most of the digital native players,
because there is good probability of the technologies getting obsolete, this would affect the
investments on digital space. Unless until the firm is upgrading itself to latest technology and
software skills according to the market, it would be obsolete in no time.

This has more impact on the incumbent players, since most of these players were not upgraded
with the latest digital service which create a difference in the customer satisfaction. Entire
business model of the hotel services is in a change phase, where the digital players are captured
the major share of the market and in future digital players are may occupy more than 90% of
market share. The incumbent players do not have any competitive advantage if they are going
head on collision with the native digital players.

But if the incumbent players have option to collaborate/strategic partnership with the digital
players, they could act as suppliers of the rooms and could change their business model (i.e.
from B2C to B2B) or combination of both.

This would help the incumbent player align with the latest changes in market and keep itself
updated with the latest technology and software linked operations without directly investing in
them.
Reference:

1. Airbnb acquires crashpadder : https://techcrunch.com/2012/03/20/airbnb-acquires-uk-based-

crashpadder-as-part-of-international-growth-push/
2. Airbnb acquires accoleo : https://techcrunch.com/2011/06/01/airbnb-buys-german-clone-
accoleo-opens-first-european-office-in-hamburg/
3. Oyo acquires leisure group : https://economictimes.indiatimes.com/small-
biz/startups/newsbuzz/oyo-to-acquire-amsterdam-based-vacation-rental-company-leisure-
group/articleshow/69129470.cms https://www.phocuswire.com/OYO-acquires-Leisure-Group
4. Oyo acquires novascotia : https://economictimes.indiatimes.com/industry/services/hotels-/-
restaurants/oyo-acquires-chennais-novascotia-boutique-
homes/articleshow/63358150.cms?from=mdr
Q4
C. Corporate strategy decisions (along with justification)

In-house development of new digital capabilities vs. outsourcing to digital service providers

The inhouse development of the new digital capabilities will have its own advantages as well as
disadvantages,
Pros:
 The firm can have its own resource that controls the digital ecosystem, which can be a
competitive advantage in the long run over the incumbent as well as native digital
players
 The firm can rent the services of the digital capabilities for the other incumbent players,
which can generate additional revenues
 The firm has its own set of customizations in digital system as per the need of the firm
 It diversifies the firm’s portfolio into other sector (digital services)
Cons:
 The development of the digital capabilities would incur huge cost, which is difficult to
get the ROI in short span
 Top management has to deal with new area, where the firm does not have any
expertise in the domain
 Since already there were lot of many other players were operating in the digital space it
would have face high entry barrier

Outsourcing the entire digital capabilities would have lot more advantage when compared
to in-house development.
 This would provide the ready-made product for the firm to start with its operations and
saves the time to develop in-house digital capabilities.
 It reduces the initial investment of the firm for the development
 It reduces the cost to set up and maintain a new team.
 Firm could be able to hire an expert which has huge knowledge base and R&D for the
digital capabilities than its own in-house.

Hence, outsourcing to digital service provider would be more beneficial to the firm than in-
house development.

Strategic partnership such as long-term contracts, JV with the digital service provider would
be preferred over native digital player, because the bargaining power may change in the
long run due to dependency on the native digital player.
Instead strategic partnership with the digital service provider would give the firm to build its
own network and brand for the platform and can host other incumbent players. This
transformation in the business model would definitely help the incumbent player to cope
up with the digital innovations and market dynamics due to it.
d. external consistency: Since the incumbent players enter into the digital platform-based
service along with their traditional business, by outsourcing the digital service provider, either
by hosting a platform or by listing their hotels on the host site. This provide strong resistance to
digital threat.
The incumbent players would get the data of customers on their sites, which further can be put
into good use for improving its services.
Can also host various services like packages, tour guides etc. to make it customer friendly as
well as adds value to the brand of the host incubator. This could help in capturing the large
customer base and retain the existing customer base.

The incumbent player would be able to implement this because this will diversify the portfolio
of the firm as well as it won’t require huge investment when compared to in-house
development of digital capabilities. As well as the incumbent already had the experience in
providing the hospitality services, they would align the current system into digital system.

5. Provide an implementation roadmap for digital transformation

a. Key obstacles in implementation

 Conceptualizing the product or software or digital services required for hosting is
a challenging task since the incumbent players does not have any expertise or
experience in hosting such kind of digital platforms.

The challenge can be addressed by appointing and expert from similar background
or work experience to handle the project. Benchmarking the product requirements
as per the industry standards with help of consultants.

 Choosing the strategic partner

Selecting the digital service provider as per the firm requirements is a challenging
task since they have no idea of business and technical knowledge about the digital
systems. Also, they don’t have the proper budget estimations due to lack of actual
estimations of the worth of the task and product itself.

This issue can be addressed by providing a training program to the decision makers
to understand product, so that they along with external consultants could work
together to prioritize the task and allot optimum budget.

 Transition to digital
The key challenge is to transform few operations of the business to digital platform,
which is a major task. Most of the employees won’t be able to adapt to the change
easily.
This can be addressed by training sessions by experts and simulation practical.

 Handling the issues raised during operations

In real time scenario the issue raised won’t be easy to handle by the regular work
force even though they were trained before in hand.
This can be handled by hiring the expert services to look after the entire trouble
shooting f the digital system

B. Provide your suggestions on key implementation decisions

Funding of the implementation initiatives

The funding to outsource the task to digital service provider, has to done by the
mixed funding. Since the business is operated mostly in metros and worldwide. The
corporate office will find for the capital investment to push the digital systems in
early stage. But later on, the division has to take the responsibility for the digital
systems. This is to maintain the independence of the divisional offices for best
possible fit to the local environment. So, there should be mixed type of funding.

Role of leadership:
As part of leadership team should focus on clear communications about the
implementation of the digital transactions.
They have to implement best practice of exchange of ideas and information
between the top and bottom of the management.
They have to create an eco-system to encourage local innovations and work to scale
up the ideas.
Identify the champions to encourage the employees to increase their productivity
and satisfaction levels.
They have to focus on the accountability of the tasks and create a simple and
convenient structure to optimize the governance.
They have to create the Measures, Milestones, and feedback to in transparent and
fair process to improve the employee satisfaction.

Q1. Pure digital model or hybrid model:

Pure digital model is considered to be Virtual reality (VR) model where the entire
process is digitized by eliminating the physical world. This is complete an immersion
experience, where no player has achieved this level.
In reality the hybrid model is used, where the digital players partner with the
incumbent player to complete the supply chain.