Global Immersion: Research Paper Chapter 1 - Introduction IIT-Delhi graduates and ex-Bain &Co. employees, Deepinder Goyal and Pankaj Chaddah, created a wide-ranging communication platform between the users and restaurants called Zomato Media Pvt. Ltd. (previously, FoodieBay) in Gurgaon in July 2008. A Delhi-based startup, after expanding its operations within India, is now present in 22 countries across the globe (Regions: India, United Arab Emirates, United States, United Kingdom, Australia, Canada, New Zealand, Czech Republic, Chile, Ireland, Indonesia, Italy, Lebanon, the Philippines, Portugal, Poland, Qatar, South Africa, Slovakia, Brazil, Sri Lanka, Turkey, Malaysia), listing over 1 million restaurants, with a workforce of 2000 plus people, making it India’s leading international eatery finding website and app, with a valuation of USD 660 million. With multiple rounds of funding, Info Edge has by far capitalized INR 4.83 billion in Zomato and holds a 50% stake in the company. Also, Zomato has a traffic of over 100 million people visiting Zomato each month and 82% of the traffic comes from outside India. Zomato’s global strategy involves entering the mature markets through M&A when they recognize that a product-market is right and has a lineup that can move swiftly giving them an already set-up database and customer segment (e.g. in the U.S, Australia). For a newer geography, where there is no market leader, they build from scratch and penetrate the market (e.g. the UAE, London). In 2012, it spread wings internationally and began acquiring restaurant citing companies in embryonic markets and completed five low-key acquisitions before guzzling up UrbanSpoon to mark its admittance into one of the major markets. Zomato believed that acquiring a native company makes it much simpler for them to grow in the market with the help of local outlook given by the people and leveraging their knowledge and expertise. List of acquisitions Country New Zealand Slovakia Czech Republic Poland Italy USA Turkey India USA
Firm Menu-Mania Obedovat.sk Lunchtime.cz Gastronauci Cibando Urbanspoon Mekanist Maple POS NexTable
Year July 2014 August 2014 August 2014 September 2014 December 2014 January 2015 January 2015 April 2015 April 2015
1.1 Why Zomato? Zomato being the first Indian tech company to go global has made its way rapidly up the globalization ladder. As the basis of my research study, I have chosen Zomato as it gives me quite an insight on how a startup, in this extensive competitive world, has managed to enter mature markets with its strategies and even gain high market share and be a dominant player in majority of its markets. Zomato, with its strong ethics, cultural understanding and a hunger
for expansion and development, is rapidly changing its tactics and outlook to keep up with this dynamic world. With its global presence right now, Zomato is surely the ‘Google of food’ as dreamt by the CEO. Understanding its globalization strategy specially in the UAE helps to get a flavor of entering a new market with similar yet a differentiated market. Chapter 2 - What led to Zomato’s success in the UAE market? After seven months of opening up in Dubai, they were already the largest restaurant search and review website in the UAE, with 75 per cent of the market share and getting over 0.3 million users a month. As Dubai was their first international expansion, response from the UAE market acted as a catalyst that gave them a confidence of expanding themselves in other countries as well. As per Alexa.com, Zomato receives 55.3% of visitors from India and 10.2% (the second largest amount of visitors) from UAE. The way Zomato converted its strengths to capture the market opportunity can further be explained with the help of Dunning’s Model.
Figure 1.1 The eclectic theory (Dunning) 2.1 Ownership-specific advantage The ownership specific advantage refers to the competitive advantages that the firm has before entering a particular market. It is the core competencies that a firm can leverage in a market highlighting the strengths of the company. Zomato, before entering the UAE market, already had an established market in India with its coverage in Delhi, Mumbai, Chennai, Kolkata, Bangalore, Pune, Chennai, Hyderabad and Ahmedabad. Post the strong foothold in the Indian territory, they had a choice of going to some other verticals within India or go to some other countries with the same product. Zomato CEO, Deepinder Goyal, believed that entering new verticals would be learning a new business altogether. Therefore, they decided upon learning a new country. Zomato is not just an app for searching for restaurant and reviews, its an enhanced userinteractive platform. It provides for scanned menus, geographical location, users’ rating and reviews, pictures, cost for two people, cuisines served, restaurant timings, availability of Bar, seating, Wi-Fi, etc.
Zomato has an upright rating mechanism and communal platform. They have an automated system to check on spam reviews and a set-up of moderation team which appraises the reviews within a 12-hour period. Zomato stands out because of – (1) Exceptional quality of People (2) Human approach to technical problems by throwing away people to bring solutions to the problem gives them a whole new angle (3) Focus on integration of teams and geographies while balancing the culture. Achieving customer loyalty and brand recall by robust social media existence and dynamic interaction holds crucial to Zomato to leave a mark. Zomato as on January 15, 2016 has more than 235K followers on twitter and about 1272K plus likes on Facebook. Zomato also differentiated itself communally by developing a sociable badge system where users start with ‘foodie’ and move up the ladder by becoming a ‘big foodie’, ‘super foodie’ and ultimately a ‘connoisseur’ as they write further reviews and increase their followers. 2.2 Location-specific Advantage Zomato entered the UAE market, in Dubai in September 2012 with a preliminary investment of USD 1 million and quickly expanded to Sharjah and Abu Dhabi. Dubai, being one of the most accepted business terminus as well as a tourist destination with a lively restaurant industry and elevated internet dispersion, made Zomato to choose it as the first global destination for expansion. Its initial success was primarily due to colossal Indian spread in the UAE. The macro-economic conditions of healthy GDP growth rate (4.6%) and low inflation rate (3.5%) is promising for the business. With a ranking of 31 in ease of doing business index and other factors such as free-tax regime, diversified population-mix (it is estimated that Dubai has around 88% of foreign nationals), Dubai provides a much stable prospective for dining out/food search base. Dubai had two distinct restaurant segments – premium and affordable; due to demographic separation by vicinity in the city and each segment was self-sufficient in the assortment of cuisines. Dubai, per say, has an extremely multicultural and tech savvy populace with an emergent need to try different cuisines like Indian, Japanese, Chinese and Italian food and an alacrity to tryout different savors. The excellent infrastructure as well as availability of high-speed internet (11.7 Mbps) makes it easier to access data online. TimeOut, the Explorer and Fodor’s were Zomato’s only competitors. However as none of them were user-interactive, it had a huge opportunity to enter the market with such an idea. Also, the number of restaurants per person as well as the spending power of the tourists and the residents are quite high with about 4,200 eateries for a population of 2 million. Zomato customized the app according to the needs of the local market by adding a ‘Sheesha’ filter as ‘Sheesha cafes’ are trendy in the UAE. Also, on customers’ demand, the company plans to introduce a ‘sports bar’ as well as a ‘water view’ filter. Likewise, Zomato exemplifies innovation and adaptability by rolling out Cashless payments (in a select syndicate with Emirates NBD) in Dubai first, where there was less stringency in credit card payments making it much favorable for Zomato to pilot Zomato cashless app.
Under this, the users pay by ‘Checking into’ their preferred restaurants on social media omitting the elementary need to carry money. Zomato also partnered with Emirates NBD which lets Emirates NBD customers to use Zomato to get benefit of discounts of upto 30% at their favorite restaurants upon spending through an Emirates NBD credit or Debit card. 2.3 Internalization advantage To evaluate the markets, Zomato follows a top down approach of in-depth ground level study. They segregate and prefer the markets achievable on a macro-level (regulatory, demographics, culture, etc.) and then go with the all-inclusive operations process – from collecting material and talking about conceivable syndicates with local suppliers to engaging with customers by displaying them the merchandise. Zomato provides a trouble-free, understandable interface and a solid content manifesto with real time, up-to-date and relevant data as they collect and publish the content themselves rather than crowd-sourcing the matter and also apprising and reviewing of the data is done every 90 days. With its proficient employees and own set of teams for marketing and research activities, the company is itself responsible for all the inputs and outputs. Before bringing any new innovation into the market, Zomato first tests their technology in India and then gauge into further markets. To expand, Zomato tries to have a first-mover benefit either by entering the market when they recognize a product-market right and have a lineup that can move swiftly or in case of a newer geography where there is no market leader, they build from scratch and penetrate the market. Zomato continuously tweaks its products to have concurrent engagement with the customers. To exemplify this, Zomato has introduced an in-app chat feature (in India and UAE) that lets the user to track/cancel meal orders, check status of refunds, get information on promotional offers, discounts, etc, thus, enhancing the communication flow between the users and Zomato. It has also introduced an innovative feature called Zomato Whitelabel, a platform for corporations to build and administer their own Android and iOS apps- even with slight to notso-much technical proficiencies. Also in working is Zomato Base, a POS (point of sale) technique app which facilitates real time consumer-business interface. To create a stronger interface between the customers and restaurateurs, Zomato has comprehensively invested in SMO (Social Media optimization), SEO (Search engine Optimization) and has worked a lot to develop its UI formulating it to be more communicating. More than 50% of the traffic arises from their mobile app.
2.4 Hollensen’s Model for Foreign market entry
Figure 1.2 Factors affecting the foreign market entry mode decision Source: http://sasa-kovacevic.dk/marketing-in-a-gobal-world-exam/ Using Hollensen’s Model for model of entry, we could point out that it was beneficial for Zomato to enter the UAE market by directly setting up an office there. Zomato’s advantages in the UAE made it fit for high internalization mode of entry in that market. Zomato had high product differentiation, opportunistic behavior and low intensity of competition as there was no other company in the UAE that provided the consumers with a similar app. It also exercised control over product innovations and adaptability. Also, as majority of UAE population consisted of Indians (about 40 %), there was less socio-cultural difference between the home and host country. UAE, because of growing commercial hub, had an ever increasing tourist population (13.2 million tourists visited UAE in 2014) leading to a stable-to-high demand for restaurant search websites/apps. Challenges to overcome As Zomato is a people oriented company, their main challenge rests in identifying and hiring the right people who not only possess the necessary skills but also have a strong understanding of the culture. With the rapid change in technology, Zomato has to keep up with the technological advancement to imbibe the latest change in trends which will effect the consumer demand. The biggest challenge in UAE for the company is adhering to the local regulatory framework. Since the app is a user-interface platform, operating in some diverse languages, is a challenge. Zomato also encounters bandwidth setbacks in their operations and sales team in Dubai to execute everything. Also, fluctuation in the stock and rupee prices leads to effect on funding required for global expansion of the business. Efficacious product migration is important post its seven acquisitions all across the globe.
Full stack and Enterprise Markets Zomato as a company is focusing on the markets which already has significant traction. As now the onus of breaking-even lies in the hands of the company, they have divided the market into ‘Full stack’ and ‘Enterprise’ regions which will help bring back the focus on the different markets and also divide the efforts so as to materialize on the experience in the long run. ‘Full stack’ markets are the Middle Eat, Australia, Southeast Asia (Indonesia and Philippines) and New Zealand which are growing rapidly and Zomato is already the strongest player in line, whereas ‘Enterprise’ regions are trivial, slow-growth economies like Europe and the U.S. where Zomato is facing stiff competition. Due to different market regions, the strategies adopted by Zomato also differentiates. Even though advertising is the main source of revenue from Middle east and Asian markets, the same cannot be applied to the U.S. markets. There the company focuses on earning revenue through transactions businesses which led to shift in focus to table management and reservations engine known as Zomato Book. Through this segregation of markets and business operations, Zomato expects 40% of their revenues from advertisements, 30% of revenues from orders and the remaining 30% from Enterprise products like Zomato Book, Zomato Cashless, etc. Chapter 3 – Conclusion Both the markets in India and UAE turned out to be the profitable segment for Zomato as they have break-even. Due to its high internalization advantages explained in Hollenses’s and Dunning model, and with a direct entry into UAE market, Zomato was able to cash in the opportunity of no-competition market with high demand for the product in the gastronomic hub of tourists. Zomato, with its ability to culturally adapt to the needs of the market and be technologically innovative, has been able to be adept in gaining the market share and maintain a competitive edge. Due to the tie-ups with Emirates NBD and operations in a tax-free economy, Zomato gained a strong regional support from Dubai which facilitated its expansion in rest of the UAE. Zomato acknowledged the need to recruit local people to have a better cultural and groundlevel understanding of the market making it easier, faster and convenient to connect to the restaurateurs and market their products. Zomato has already started to monetize its operations in India and Dubai since they have become profitable. In countries like the U.S., Canada, Australia, Poland, Italy, etc., Zomato was able to fast track its expansion process due to availability of a well established market. Through acquisitions, Zomato was able to tap the market’s potential using the existing network and leveraging its technological expertise. Right now, even though Zomato is going through a turbulent time with its operating revenues and losses increasing three-folds from the previous financial years, Zomato has marked upon a global presence and is receiving a heavy flow of traffic. Given a period of few years, Zomato’s strategies of knowing the markets in and out and accordingly choosing the market, Zomato will be a market player with a dominant market share.
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