Strategic Management II Caselet
Strategy Implementation Challenges of Zomato.Com
Submitted to: Prof Sabyasachi Sinha, IIM Lucknow Submitted by: by: Group E2, Section E
Tushar Tushar Gupta #aina $%rawa& 'ansneet (a&ra *asu +ani ustin ames Mathew Sudheer Tatikonda
Introduction
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In August 2014, Deepinder Goyal, Zomato’s CEO was sipping o!!ee sitting on t"e #alony o! "is #ungalow$ %e was deeply engrossed in e&aluating t"e long term strategy o! "is ompany Zomato$ '"ile t"e ompany "as #een seeing a strategi s"i!t !rom #eing a domesti to a glo#al player, it "asn’t #een wit"out its due s"are o! osts and "allenges$ Aggressi&e o&erseas e(pansion "as ost a lot o! money already$ )oreo&er, Zomato is growing at an e(ponential rate and ontinuous inno&ation "as ome out as a ma*or "allenge !or t"e ompany$ +unds do not grow on trees, as is t"e ommon saying, and Zomato needs to asertain its priorities soon$
Background '"ile woring wit" -ain and Company, Deepinder Goyal started +oodie#ay$om . a we#site t"at posted "undreds o! restaurant menus, re&iews o! eating *oints and reommendations$ It was o!!iially laun"ed in /uly 200 wit" in!ormation and menu ards o! 1200 restaurants in Del"i$ ana* C"adda" and Gun*an atidar, olleagues o! Deepinder !rom II Del"i, de&eloped t"e data#ase !or t"e system$ 3ater ana* was to #eome t"e COO and Gun*an assumed t"e position o! CO in t"e ompany$ In August 2010, an*ee& -i""andani, t"e !ounder o! 5auri$om and an a&id +oodie-ay user, in&ested 61 million in Zomato as seed !und t"roug" "is ompany In!o Edge India 3td$ "e ompany t"en o!!ered !our additional rounds o! !unding to Zomato, t"ere#y a7uiring 80$19 stae !or a total o! 628$4 million$ In 5o&em#er 2010, t"e !ounders realised a need gap$ "ey o#ser&ed t"at people in malls "a&e little nowledge a#out t"e restaurants t"ere$ %ene, t"ey deided to de&elop restaurant appliation w"i" an #e aessed on smart p"ones$ "ey "ange t"e name to Zomato and laun"ed Zomato appliation !or Google Android$ It "as #een downloaded o&er 1 million times !rom Google lay tore sine t"en$ Zomato now listed 10,800 restaurants in :; ities$ "e in!ormation on restaurants inluded "ig" resolution p"otos, real re&iews and looalie menus$ Zomato rolled out plans to dou#le its rea" !rom 11 ountries to 22 ountries in t"e ne(t two years$ Its main soure o! inome is !rom t"e we#site, despite t"e popularity o! its mo#ile app$
Zomato’s Current Business Strategy Customer’s Point of View Zomato’s o!!ers to t"e ustomers are< pro&ides t"e data#ases o! &arious restaurants wit" in!ormation lie !ood menu, pries, #udget onstraints, ontat related, woring "ours, loation o! restaurant and more use!ully, t"e re&iews !rom ot"er users$ It also pro&ides t"e option !or mo#ile apps !or almost all mo#ile plat!orms$ Zomato "as a "uge presene o&er soial media w"i" "as !urt"er ontri#uted to app usage$ Restaurant Owner’s Point of View =estaurants t"roug" t"is route "a&e got aess to a large pool o! ustomers registered on t"e app, w"i" is growing at an e(ponential rate$ Zomato pro&ide restaurant owners a plat!orm !or online &isi#ility$ "is is partiularly use!ul !or many small restaurants w"i" an’t a!!ord a we#site t"emsel&es or didn’t "a&e mu" #usiness due to loation draw#as$ "e ontats in!ormation on we#sites "as inreased t"e "ome deli&ery orders to near#y plaes$ "e ustomer interation "appens in t"e !orm o! !eed#a and re&iews$ =estaurants an en*oy additional &isi#ility #y Zomato’s dediated mareting ampaigns, #ut t"is omes at a ost$
Zomato’s Point of View
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Zomato sells ad&ertising spaes on we#sites to restaurant owners and mae reommendations to restaurants #ased on "anging trends > sales per!ormane analysis$ Zomato also initiates &arious paid mareting ampaigns !or lients$ Product pricing which is sustainable, offering products with longevity an expanding operations in a calculated but committed manner are the ways through which Zomato signal their desire for longevity.
HR Turnaround +or any startup a7uiring t"e rig"t talent is t"e most essential part o! t"e strategy$ A startup needs to attrat t"e rig"t minds to tae up leaders"ip positions so t"at saling up operations easy$ +or Zomato, t"e main "allenge was to "ire people in 2 spei!i domains, e"nology and 3eaders"ip$ Zomato ame up wit" inno&ati&e met"ods to "ire people in t"ese positions$ 1
Tria !eek"
o test an engineer’s te"nial sills, not many would agree t"at an "our’s inter&iew is enoug" espeially t"ose t"at "a&e #een looing !or a *o#$ )any ompanies also later reali?e t"at t"e talent t"ey "ired "as not per!ormed as per e(petations$ )oreoe&er, Culture !it w"i" is an important aspet in a startup annot really #e tested in an inter&iew wit" time onstraints$ "us, Zomato laun"ed t"e rial 'ee program$ In t"is wee, students and engineering graduates are in&ited to wor on li&e pro*ets wit" t"e Zomato e" team$ All appliants stay as guests o! Zomato in Del"i and t"eir e(penses lie tra&el and !ood are also taen are o! #y Zomato$ "is maes t"e program more aessi#le to all t"us, #ringing in t"e rig"t talent !rom all o&er$ It "elps Zomato test t"e a#ility o! appliants to wor on real li!e pro#lems in a !ast paed en&ironment and t"eir !it wit" ulture$ Also, t"e appliants get a "ane to e(periene t"e ulture and li!e !or woring wit" Zomato$ #
$eaders%i& Program"
"is aspet o! t"e strategy aims at "iring people w"o "a&e owned t"eir own startups$ Zomato #elie&es t"at !ailing to grow t"eir #usinesses "as ena#led t"em to understand w"at "allenges a startup !aes$ Entrepreneurs possess a uni7ue sillset, t"ey are solution oriented, "ig"ly adapta#le and are !oussed deision maers$ As any startup !aes ups and downs, w"en woring at Zomato t"ese entrepreneurs an o&erome su" "allenges$ '"en Zomato went to international marets, it needed to ensure t"at its leaders are apa#le o! "andling t"e tass o! setting a #usiness !rom srat"$ Getting o!!ie spae, "iring, legal and regulatory "allenges all "a&e to #e taen are o!$ u" "ig" norms are set w"en "iring entrepreneurs$ "ey need to understand "ow to !it t"e o!!ering into di!!erent ultures and also "a&e t"e !le(i#ility to wor in any situation$ As Zomato is e(panding into new geograp"ies and entering into new maret$ It !aes "allenges o! "iring and managing a team$ Also, it needs to test i! t"e a#o&e two "iring models would wor !or all ountries$
'nowedge (anagement Zomato’s e(isting #usiness model is e(tensi&ely dependent on aggregating nowledge regarding loal restaurants$ 'it" a no$ o! ey restaurant inlusions and international a7uisitions, Zomato is !aing "allenges wit" respet to regular updating o! t"ese menus$ "is re7uires o.ordination$ %owe&er Zomato "as a relati&ely !lat struture due to w"i" t"e sills an #e passed on in an easier !as"ion$ Anot"er ey "allenge w"i" Zomato is e(peted to !ae is t"e inreasing ustomer re7uirement o! sear"ing !or restaurants ser&ing a partiular dis"$ +or e(ample a ustomer may want to e(plore t"e restaurant options w"ere a dis" o! "is "oie is a&aila#le$ "is is possi#le only #y "a&ing strutured and odi!ied data !or all t"e dis"es ser&ed in a restaurant$ Zomato made an e!!ort to satis!y t"is re7uirement t"roug" manual entry o! !ew t"ousand menu ards in all t"e ities !or w"i" t"ey pro&ided in!ormation on
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t"e we#site$ %owe&er t"e pro#lem o! "ig" "urn rate in t"e restaurant industry reates omple(ities in manual entry mode o! atering to t"e ustomer re7uirements as it re7uires onstant updating and entering o! num#er o! new menu ards$ Zomato is woring upon reation o! intelligent optial "arater reognition systems @OC= w"i" will supplement t"eir urrent dis" ontology$ %owe&er, t"e *o# #eomes toug"er and ompliated gi&en t"e "ig" !re7ueny o! misspellings in t"e menus and t"ose resulting due to t"e OC= me"anism$ Impediments in in!ormation management are !urt"er ompounded as Zomato aims to o&er all streets in t"e ities w"ere it "as its presene$ o attrat ustomers t"e rele&any and ompre"ensi&e nature o! t"e re7uired in!ormation an’t #e ompromised wit"$ Zomato’s data olletion teams in ea" ity maes daily &isits to ollet !irst "and data$ Zomato’s international e(periene "as #een instrumental in maing it reali?e t"e importane o! own resear" and data olletion$ Also, #e!ore maing a laun" deision Zomato sends out data olleting teams !or souting t"e maret$
Inno)ation at Zomato Zomato operates in a ni"e segment #y o!!ering restaurant data#ase to ustomers along wit" t"e menu, t"e loation and per"aps t"e most important, re&iews$ One an ponder o&er "ow a player operating in a ni"e segment #e so suess!ul t"at t"e segment itsel! "as started gra##ed eye#alls and is #eoming main. stream$ "is "as #een made possi#le #y t"e strategi inno&ations t"e we#site "as arried o&er t"e years o! operation$ A :;0 degree turnaround strategy was employed in t"e sp"eres o! )areting, Operations and I in!rastruture$ '"ile many o! t"e inno&ations an #e termed as proati&e, Zomato managed to !ind reati&e solutions to some o! t"e ma*or pro#lems pre&alent in t"e segment$ (arketing
-eing a ni"e player, it is &ery important t"at t"e masses are aware a#out we#site and its o!!erings$ 5ot only did Zomato a"ie&ed t"e same, it esta#lis"ed ad&ertising as its ore ompeteny$ "ey employ #ot" -elow t"e 3ine @ad&ertising and B ads to remain at top o! t"e onsumer’s mind$ )ost o! t"eir ampaigns went &iral due to reati&ity in t"eir ads, #e it print, soial media or tele&ision$ As a result, Zomato "as #eome synonymous wit" t"e term restaurant data#ase’$ )ost o! t"e ot"er players do not "a&e any signi!iant presene online$ Zomato "as a ma*or presene on soial media i$e$ +ae#oo and witter$ There are two kinds of people in the world’ "as #een t"e most suess!ul ampaign so !ar in terms o! ustomer engagement @ee *+%i,it 1$ Zomato #elie&e in Content is t"e ing’$ "ey ne&er spam t"e wall wit" irrele&ant posts, reate ads around !ood, replies to ea" and e&ery user post and "a&e apps !or all t"e mo#ile plat!orms$ "e re.#randing in 2010 pro&ed to #e a ma*or "allenge$ +oodie#ay #eame Zomato due to i "a&ing t"e term e#ay’ in t"eir name and ii "a&ing reei&ed !unding #y In!oEdge o! w"i" large part was to #e used !or mareting$ "e ompany saw it as t"e rig"t time to adopt a di!!erent identity and lay out a !ormal organi?ational struture and ulture$ "e ompany was growing rapidly and a rule #oo "ad to #e !ollowed$ -ut Zomato lost many loyal ustomers and was a target o! a num#er o! "ate mails due to t"e name "ange$ )oreo&er, t"e sales team wasn’t aware o! t"e reason o! re.#randing and t"ere was widespread on!usion$ "e ompany didn’t do well in t"is regard, none o! t"e employees were in!ormed and t"ere was a !ear t"at t"ey were #eing taen o&er$ "ings "a&e #een mu" #etter lately$ O&erations
Zomato isn’t as in&ol&ed in intensi&e operations as a manu!aturing or +)CG !irm would #e$ "e "allenges #eing !aed #y Zomato are more o! growt" pangs’$ "eir operational strategy is to get t"ings done on priority rat"er t"an reating new proesses !or t"em to #e aomplis"ed$ ine, t"e teams are
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getting #igger and #igger in si?e, ontrolling t"em and in!using order in t"e "aos "as lately #een pro&ing di!!iult$ As t"e ompany is growing, a restriting or some inno&ation in operations di&ision may #e neessary$ )oreo&er, t"e ompany is !ollowing glo#al strategy and will soon #e open !or #usiness in ingapore and Du#ai$ %iring t"e rig"t people "as #een t"e "allenge$ A lingering 7uestion o! w"et"er to "ire Indian !or o&erseas operations or "ire t"e loal personnel w"o may pro&e to #e di!!iult to ontrol, "as always #een at t"e #a o! t"e mind$ )eeting demand !or new !eatures on t"e we#site !rom t"e ustomer "as #een anot"er #ig "allenge$ "e idea may not #e a strategi !it !or t"e ompany #ut t"ey "a&e to t"in "ard on t"e issue i! a ma*or "un o! ustomer demands t"e same !eature$ One su" o!ten re7uested !eature is aepting orders online on #e"al! o! restaurants’$ '"ile Zomato a!!irms t"at t"ey possess t"e neessary te"nial sills and sales personnel to implement t"e same, operational "allenges su" as ustomi?ation o! !ood as per t"e ustomer and ad"ering to promised deli&ery time are yet to #e wored upon$ IT Infrastructure
Zomato’s we#site is &isited #y 20 million !oodies e&ery mont"$ "e we#site pro&ides t"em inno&ati&e !eatures su" as opportunity to s"are t"eir stories #eing a !oodie and allows t"em to reate and s"are t"eir personal !ood diary$ "e we#site automatially detets t"e user’s loation and "as a ustomi?ed page !or e&eryone @see *+%i,it #$ "ere is an ati&e #log updated #y t"e CEO "imsel!$ 5ew !eatures are added almost e&ery wee$ u" large tra!!i "as to #e #aed up #y a ro#ust in!rastruture and Zomato is onstantly woring towards meeting up to t"e "allenges$ As t"e we#site is growing #igger, ustomer re&iews are #eoming all t"e more important$ A re&iew an mae or #rea a restaurant’s #usiness$ 3ately, t"e we#site is seeing a lot o! spam, a lot o! restaurants are planting !ae re&iews$ Zomato "as to e&ol&e its I system !or "a&ing #asi automated spam !ilters to sop"istiated pattern mat"ing algorit"ms$ All t"is will o! ourse in&ol&e osts$ )ost o! t"e ompanies o! Zomato’s si?e do not e&en are a#out load times o! t"eir we#sites$ -ut Zomato is planning to lay in!rastruture in e&ery ountry w"ere it operates, so t"at load times are !aster and users an get !ood !aster$ Cost is again a ma*or issue$
-inancia turnaround strategy of Zomato "ere are 4 ma*or soures o! =e&enue !or !irms lie ZO)AO<. 1
.d)ertising" laing ads !or restaurants on ZO)AO we#site and app onstitutes a ma*or part o! strategies and t"e ey motto o! t"e #usiness model$ "ese ad&ertisements an #e seen under t"e title /Trending Restaurants t%is week0$ In addition, omplementary ad&ertisements regarding e&ents in restaurants in t"e loality aounts !or anot"er 89 o! t"e total re&enue o! ZO)AO$
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*)ent ticket saes" "e tiets !or &arious e&ents are made a&aila#le t"roug" t"e site, t"us woring as an inter!ae um e. tieting partner @somew"at similar to #oomys"ow$om$ "e re&enue generated is ertain perentage o! t"e tiet amount or aording to t"e ad&ertising ontrat wit" t"e restaurant$
Consuting 2Soutions su&&ier3 and ad)isory roes" Data analysis and #usiness intelligene tools are widely used #y ZO)AO ontent e(pert to ad&ie lients on num#er o! issues$ ZO)AO maintains a "uge data#ase @tera#ytes and analy?es t"em to understand demand and rowd patterns, ustomer tastes and pre!erenes, ompetitions, et$ "us,
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indiretly, ZO)AO ats as a onsultant @in!ormation supplier to t"e restaurants, pro&iding t"em speialist solutions to impro&e t"e &isi#ility o! t"e restaurant on t"e online spae$ "e #reaup o! re&enue !rom &arious soures is s"own in *+%i,it .naysis of t%e income statements
"e inreasing losses o! ZO)AO an primarily #e attri#uted to its turnaround strategy o! aggressi&e international e(pansion as s"own in *+%i,it 4$ It "as laun"ed operations in ri 3ana, , Fatar, out" A!ria and "ilippines$ It also laun"ed its operation in ingapore #ut were !ored to roll.#a due to onser&ati&e nature o! t"e restaurants re!using to s"are t"e menus and prie online$ "is made t"e intae o! as" !low imminent !or ZO)AO to sustain amongst ompanies pro&iding similar support ser&ies lie elp, +ours7uare, -urrp, et$ -undings "e !low o! woring apital @in !orm o! as" !low "as #een regular in almost e&ery year sine 2010$ "e reent #usiness !inaning was primarily meant to go glo#al$ Interesting to note t"at, In!o Edge "ad redited all t"e !i&e !unding to ZO)AO$ 2*+%i,it 53 S%oud Zomato go &u,ic in India6
'it" !unding re7uired at regular inter&als and plans to e(pand to 22 ountries in ne(t 2 years, ZO)AO would need a lot o! woring apital or as" !or !inaning its e(penses$ 'it" all 8 !undings, In!o Edge now "as around 819 s"are in ZO)AO$ +urt"er, !unding would mae In!o Edge t"e lear ma*ority in "oldings$ Going pu#li will pa&e t"e way in raising woring apital and diluting t"e ma*ority status #y In!o Edge$ It will also "elp in reating t"e #ase o! #eing an Indian pu#li organi?ation rat"er t"an a BC !unded one @Emulating elp$ Also, t"is will "elp #ans and ot"er !inanial institution to pro&ide asset #ased lending !ailities to ZO)AO to impro&e t"e De#t.#y. e7uity ratio$ In!o Edge "as also #een t"e !inaning ad&isor o! ZO)AO$ %ene, i! In!o Edge plans a turnaround strategy to a7uire ZO)AO, t"e asset #ased lending !ailities pro&ided #y #ans would orrespond to t"e ris assoiated wit" In!oEdge and not on t"e ris o! ZO)AO$ "e !unding appro&ed #y t"e !inaning ad&isor o! In!oEdge is seen as a potential in&estment e(peting "e!ty returns on t"em$ Concusion
Zomato "as #een a#le to grow at su" an astonis"ing pae due to t"e adoption and e!!eti&e implementation o! urnaround trategies in e&ery !ield o! t"e #usiness, #e it mareting, operations, I or %=$ +unds "a&e always #een a ma*or onern and e&ery time Zomato "as managed to o#tain t"em !rom an eager &enture apitalist$ Zomato is "ere to stay, and e&eryone reali?es it$ Deepinder must deide w"et"er t"e ompany wants to !ous on inno&ating its #usiness model and eep pro&iding new !eatures in India or ontinue wit" t"e e(isting model and e(pand glo#ally$ +unds will "a&e to #e direted aordingly$ )ore and more ompetitors are entering t"e maret, alt"oug" t"ey "a&en’t seen as mu" suess$ Can Zomato a!!ord to ignore t"em all and "ope t"at no one repliates t"eir #usiness modelH uddenly t"e p"one rings, a person o! t"e ot"er side says, ir, we are li&e in C"ile$ '"ere do we e(pand ne(tHJ
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References
1$ Behind the making of Zomato The best places to eat are !ust a click away " #n conversation with $eepinder %oyal, &'(, Zomato $@2014, +e# 14$ =etrie&ed !rom K"ttp
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*+%i,it " Re)enue Sources
*+%i,it 4" Income Statement .naysis of Zomato
*+%i,it 5" -undings to Zomato
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