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Ola Cabs-Growth Strategies of a Taxi Aggregator Startup

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 SSIJEM VOLUME 8, SPECIAL ISSUE [SEP 2018] ISSN 2231-4962
SS INTERNATIONAL RESEARCH NETWORK
Available online at www.ssirn.com
SS INTERNATIONAL JOURNAL OF ECONOMICS AND
MANAGEMENT
(Internationally Indexed, Listed & Referred E-Journal )
Ola Cabs- Growth Strategies of a Taxi Aggregator Startup
Thomason Rajan* & Ms. Amrutha KP**
*Krupanidhi Group of Institutions, Bangalore
** Krupanidhi Degree College
____________________________________________________________________________
Introduction almost three times its turnover of Rs. 758
In December 2010, two IIT-Bombay crores (Bansal, 2018).
graduates Bhavish Aggarwal and Ankit The founders of Ola had to face several
Bhati started a cab aggregator company and challenges. The journey for the startup was
registered the firm ANI Technologies filled with interesting twists and turns-
Private Limited in Bangalore (Punit, 2014). starting from driver misbehavior to mass
Like most startups, the idea of creating Ola strikes, music copyright issues and
arose when the founders sensed an allegations of data theft.
opportunity while facing a challenging Background
situation. While Bhavish was travelling from Ola started operations in Mumbai and in
Bandipurto Bangalore in a hired cab, the cab January 2011, its website went live. The
driver suddenly stopped the car and company blog stated that Ola’s “Big Hairy
demanded a higher rate for the journey. Audacious Goal” was to ease the pain
Bhavishrefused and the driver abandoned involved in Car Rentals in India. The
him by the side of the road (Govindraj, company partnered with EBS, a payment
2018). Ola was born and the founders gateway provider. To book a car rental,
quickly sprung to action to build a strong customers had to pay only 20% of the total
company. amount on Olacabs.com and the balance
Seven years later, the firm clocked a could be paid directly to the car driver after
turnover of Rs. 1,286 crores (FY17). the trip (Ola, 2011). It expanded to
However, the company is still a long way to Bangalore and Delhi in early 2012 and
making profits. For example, for FY16, its quickly introduced the service within an
consolidated losses was Rs. 2,313 crores,

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 SSIJEM VOLUME 8, SPECIAL ISSUE [SEP 2018] ISSN 2231-4962
incredible time-frame of just twenty-one
days (Kalpathi, 2016).
In 2015, the company received a funding of
$500 million (Rs.3,000 crores) from investors
that included Japanese conglomerate
SoftBank(Russell, 2017) and the Chinese
company DidiKuaidi (Lunden, 2015).
Ola quickly acquired leadership status in the
personal transportation sector and was
valued at $1 billion (Rs 6,000 crores). The
same year, it acquired its rival TaxiForSurein
a $200-million (Rs 1,200 crore) cash and
equity deal(Business Standard, 2015).By
2017, the company had received $1.23 billion
(Rs. 7,200 crores) in funding from several
investors that included Tiger Global and
Sequoia Capital(BusinessLine, 2017).
Products and Services
The company started adding a fleet of cars at
different price points. It introduced Ola
Mini, with the same starting fare as auto-
rickshaws (Rs. 13 per km) but with a base
fare of Rs. 100 for the first six kilometers
(Amberber, 2014). It started experimenting
with auto-rickshaws and introduced the
service in 2014. The drivers were provided
with Huawei phones to track bookings
(India TV, 2014) and Ola charged a
convenience fee of Rs. 10 per ride. Ola also
allowed customers to make cashless
SSIJEM All rights reserved.
payments using the Ola Money wallet
(NDTV, 2015).
By mid-2014, Ola already had 6,000 drivers
in its fleet and served customers in four
cities. Uber, the global taxi service had
entered India in 2013 and was creating a
strong challenge to Ola. Uber already had a
$258 million (Rs. 1560 crores) investment
led by Google Ventures and was attempting
to position itself as a luxury alternative to
Ola (Sharma, 2013).
In 2015, Ola’s focus started shifting. The
company launched food and grocery-
delivery businesses named Ola Café and Ola
Store and also tested shuttle services.
However, these initiatives ended up
distracting the company from its core
product- the cabs business. Ola’s market
share started eroding and Uber quickly
captured market share, claiming to have
around 35-40% of the market in March 2015
(Chakraborty, 2016). To improve the
margins of the company and to encourage
brand loyalty, Ola introduced Ola Select.
The service helped customers to get sedan
cabs at the cost of a Mini on the Ola
platform (Chakraborty, 2015).
In 2016, Ola launched Ola Micro, which
offered customers rides at Rs. 6 per km with
a minimum fare of Rs. 50 to compete with
Uber's lowest-cost service, UberGo. The
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 SSIJEM VOLUME 8, SPECIAL ISSUE [SEP 2018] ISSN 2231-4962

move transformed the declining share of the lawyers responded that the company was not
company and market share started picking engaged in any wrongdoing.
up gradually (Peermohamed, 2016).
The same year, Unique Identification
Multiple Challenges
Authority of India (UIDAI) registered a case
To ensure safety of passengers, Ola
with the Bengaluru Police against Qarth
conduced background verification of all
Technologies Pvt Ltd, an Ola subsidiary for
drivers, included an Emergency button in
misusing Aadhaar data without any
the app to alert a safety response team and
authentication (Business Standard, 2017).
rated drivers based on their behaviour and
Ola issued a statement that it had neither
driving skills. Despite these efforts, there
commissioned nor was involved in any such
were attempts by drivers to misbehave with
activity.
women passengers (Express News Service,
Brand Building
2016) and to top it all, a tragic rape and
By the end of the year, Ola had a presence in
murder incident by drunk Ola drivers in
10 cities across India and had over 8,00,000
Kolkata (Firstpost, 2016). Ola apologized
vehicles on the road. Sensing the need to
for the incidents and offered to cooperate in
build the brand, in December 2017, the
all the investigations.
company launched a TV campaign titled
Ola cab drivers also went on strikes citing
‘Auto Means Ola Auto’ for promoting the
falling incentives, forcing the company to
Ola Autos service. The idea was to position
rethink on the payments made to drivers.
Ola Auto as an economical, reliable, and
Ola paid incentives based on the number of
convenient mode of transport for consumers.
rides per day and the drivers were not happy
The campaign covered more than 500
about the arrangement (Chakraborty, 2017).
outdoor sites and reportedly had social
In 2017, Lahari Recording Co. filed a
media views of around 3.5 million
copyright infringement case against Ola.
(Upadhyay, 2018).
The case was that songs were illegally
Around the same time, the company also
downloaded and played in the taxis without
developed a large advertising platfom with
the permission of the copyright holder.
Ola Play, a project that company insiders
Police searched the offices of Ola in
believe is No. 1 priority. It fitted more than
Bengaluru and seized hard disks and other
50,000 tablets in its fleet of carsto play
electronic devices (Shankar, 2017). Ola’s
movies, sports, serials, and music. The

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 SSIJEM VOLUME 8, SPECIAL ISSUE [SEP 2018] ISSN 2231-4962

content was sourced through partnerships In 2018, Ola launched its operations in
with production firms like Saregama, Australia, first in Perth and then in Sydney.
YupTV and Hungama (Sen, 2017). The idea It decided on Australia as the first overseas
was to provide a free entertainment platform market keeping in mind profits to help offset
to its commuters, which would also serve as the losses it makes back in
an advertising medium for the future. India(Peermohamed, 2018). The company is
Ola also started working closely with the planning promotions to get customers to
government of India to introduce electric switch over to its service, while its biggest
vehicles in Indian cities. It’s ambitious plan promise to drivers would be better earnings,
was to launch India's first multi-modal support and discounts on fuel through
electric vehicle project on the Ola app, partnerships.
which included more than 200 electric Would history repeat itself with the
vehicles spanning cabs, buses and auto experience that Ola has in India or is the
rickshaws The project is being pilot tested in firm on the verge of becoming a global
Nagpur (Thomas, 2017). brand capable of competing with Uber?

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