The GAP Model was first proposed by A. Parasuraman, Valarie Zeithaml and Leonard L. Berry in 1985. The GAP Model of Service Quality helps the company to understand the Customer Satisfaction. In-Service Industry, the GAP Model is widely used to understand the various deviations that are occurring in the process of service delivery to potential customers. GAP Model creates a roadmap for the overall service delivery process and identifies the gap between the processes so that the complete model works efficiently and effectively. The GAP Model of Service quality helps to identify the gaps between the perceived service and the expected service. Five Gaps occur in the Service Delivery Process Like The gap between Customer Expectation and Management Perception, Service Quality Specification and Management Perception and many more. Full Detail in Blog.
Do you know what GAP Model is? How it is evolved and what are its applications! The GAP Model was first proposed by A. Parasuraman, Valarie Zeithaml and Leonard L. Berry in 1985.
The GAP Model of Service Quality helps the company to understand the Customer Satisfaction. In-Service Industry, the GAP Model is widely used to understand the various deviations that are occurring in the process of service delivery to potential customers.
GAP Model creates a roadmap for the overall service delivery process and identifies the gap between the processes so that the complete model works efficiently and effectively. This helps the service providers to map the inefficiency that is occurring in the service delivery process.
The GAP Model of Service quality helps to identify the gaps between the perceived service and the expected service. Five Gaps occur in the Service Delivery Process. They are:
The gap between Customer Expectation and Management Perception
The gap between Service Quality Specification and Management Perception
The gap between Service Quality Specification and Service Delivery
The gap between Service Delivery and External Communication
The gap between the Expected Service and Experienced Service.
GAP MODEL OF SERVICE QUALITY
GAP 1: Gap between Management Perception and Customer Expectation
This gap arises when the management or service provider does not correctly analyze what the customer wants or needs. It also arises due to insufficient communication between contact employees and managers. There is a lack of market segmentation. This Gap occurs due to insufficient market research. For Instance- A café owner may think that the consumer wants a better ambience in the café, but the consumer is more concerned about the coffee and food they serve.
GAP 2: Gap between Service Quality Specification and Management Perception
This gap arises when the management or service provider might correctly comprehend what the customer requires, but may not set a performance standard. It can be due to poor service design, Inappropriate Physical evidence, Unsystematic new service Development process.
An example would be restaurant Managers who may tell the waiters to provide the order of the consumer quick, but do not specify “How Quick”.
GAP 3: Gap between Service Quality Specification and Service Delivery
This gap may arise in situations existing to the service personnel. It may occur due to improper training, incapability or unwillingness to meet the set service standards. It can be due to inappropriate evaluation and compensation systems. Ineffective Recruitment is the main cause of this gap.
The failure to match the supply and demand can create this gap. There is also a lack of empowerment, Perceived Control, and framework. An example would be a restaurant having very specific standards of the food communicated but the restaurant staff may not be given proper instruction as to how to follow these standards.
GAP 4: Gap between External Communication and Service Delivery
Consumer Expectations are highly influenced by the statements made by the company representatives and advertisements. This gap arises when these assumed expectations are not fulfilled at the time of Delivery of Service.
An example would be a restaurant that has printed on its menu that it serves 100% Vegetarian Food but in reality, it serves Non-Vegetarian Food as well. In this situation, consumer expectations are not met.
GAP 5: Gap between Experienced Service and Expected Service
This gap arises when the consumer misunderstands the service quality. For Instance, A Restaurant Manager may keep visiting their consumer to ensure quality check and consumer satisfaction, but the consumer may interpret this as an indication that something is fishy or there is something wrong in the service provided by the restaurant staff.
IMPROVING SERVICE QUALITY AND PRODUCTIVITY
What is Service Quality?
Service Quality is defined as an evaluation of how well the delivered service matches consumer expectations. It is done to assess the deviations that are occurring while delivering the services to potential customers.
Businesses that meet or succeed expectations are considered to have high service quality. Service Quality defines the retention power of the company concerning its customers. Customer Retention is the best measure of Service Quality.
The Five Dimensions of Service Quality
Reliability- It is the ability to perform the set service dependably and accurately. It focuses on providing the services right the first time and maintaining error-free records.
Assurance- It is the Knowledge and Courtesy of Employees and their ability to convey trust and confidence. Employees who instil confidence in customers and Make Customers feel safe in their transactions.
Tangibles- It contains Physical Facilities, Modern Equipment, appearance of personnel, Visually appealing materials associated with service.
Empathy- Caring, Individual Attention a firm provides to its customers. Convenient business hours, Having the customer’s best interest at heart.
Responsiveness- Willingness to help customers and provide prompt services. Readiness to respond to customers’ inquiries.
SERVQUAL
Servqual is a survey research instrument developed by Zeithmal to measure customer satisfaction with various aspects of service quality. This Scale contains 22 items that reflect five dimensions of Service Quality.
It is based on an assumption that consumers evaluate a firm’s service by comparing:
Their perceptions of service received.
Their prior expectations of companies in a particular industry.
Respondents complete a series of scales that measure their expectations of companies in a particular industry on a wide array of service characteristics.
They are asked to record their perceptions of a specific company whose services they have used.
When the perceived performance ratings are lower than the expected service, it will be termed as Poor Quality and Vice-versa.
The 22 items that are contained in the scale are:
T1: Clean and Comfortable work environment.
T2: Modern and Advanced work equipment.
T3: Office area marked.
T4: Staff with a neat and professional appearance.
L5: Staff working time and intensity are appropriate.
L6: Hospital is interested in solving the problems at work.
L7: Hospital is reliable.
L8: Working Processes are clear and concise.
L9: Welfare benefits promised by the hospital can be realized.
S10: Hospital can satisfy the staff’s working needs.
S11: Hospital is willing to help staff to solve working problems.
S12: Hospital can process the staff’s complaint in a timely fashion.
S13: Hospitals can process the staff’s major and unexpected events actively.
A14: Hospital is reliable.
A15: Staff feels comfortable at work.
A16: Staff is friendly and polite to each other.
A17: Hospital pays attention to the training of the staff’s professional knowledge and skills.
E18: Hospital can show concern for individual staff.
E19: Hospital can give personalized care to staff.
E20: Hospital knows the staff’s needs.
E21: Hospital pays attention to staff’s Interests.
E22: Hospital pays attention to the staff’s needs.
IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943. Everybody knows that Ikea offers the products at a very lower price than any retail shop. Ikea has invested 800 crores in India, It has more than 9500 Products and has more than 350 stores in 35 countries. the new store is spread across 400,000 square feet in the southern city of Hyderabad & plans to invest 105 billion rupees in India. the company is a non-profit. IKEA employs about 135,000 people. Because of tax rules for non-profits, IKEA pays about 33 times fewer taxes than their for-profit competitors. The Ikea trademark and the concept is owned by another private company named Inter Ikea Systems. It acquired TaskRabbit on Sep 28, 2017. IKEA has many mobile apps. But the most popular app is IKEA STORE. The app is having almost 9,60,333 monthly downloads. IKEA is the lead investor in 4 companies. Full Detail in Blog.
Everybody knows that Ikea offers the products at a very lower price than any retail shop.
In this blog, we’ll talk about Ikea Case Study(Business Model) as the Swedish furniture company opened its first retail store in India.
Like Walmart acquired Flipkart and entered the Indian Market. Ikea can destroy the Whole Furniture Market in India.
Ikea has invested 800 crores in India, It has more than 9500 Products and has more than 350 stores in 35 countries.
According to CNN, the new store is spread across 400,000 square feet in the southern city of Hyderabad & plans to invest 105 billion rupees in India.
But have you ever wondered? How does Ikea work?
What is the meaning of IKEA?
How IKEA works?
How IKEA business model earns ?
You must have many questions regarding IKEA, like What is the meaning of IKEA?
How IKEA works?
What is IKEA?
How IKEA earns?
This will be the most detailed case study on IKEA.
I will be answering all of your questions.
Let’s START WITH
WHAT IS IKEA?
IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943.
IKEA is a globally renowned furniture retailer that sells ready-to-assemble furniture, kitchenware and home accessories.
The company started with selling pens, wallets, jewellery with the concept of meeting consumers demands at the most affordable prices.
After five years into the business, IKEA brought in the furniture. Since then furniture has been the mainstream for the business.
IKEA furniture is now a well-known multinational brand.
IKEA MEANING
You must be wondering that what is the story behind the unique name the brand has.
The name IKEA isn’t just a fun.. it stands for – Ingvar Kamprad Elmtaryd Agunnaryd.
Short-form is cooler to pronounce right? But it actually has a deeper meaning.
The first two letters of IKEA i.e. I and K are the initials of the name of the founder Ingvar Kamprad.
While ‘E’ comes from the name of the farm he grew up on – Elmtaryd.
And the last letter ‘A’ comes from the Swedish village, Agunnaryd,
where the farm was located.
HOW IKEA EARNS? – IKEA BUSINESS MODEL
They follow Price-leadership model. Low prices are the main concern stone of the IKEA vision, business idea and concept.
In the world of IKEA furnishings, the products are named after Swedish towns like Aneboda, Akurum and Anordna.
But the costumers worry less about the names and care more about how much they cost.
Ikea furniture is a beacon for bargain hunters. Its whole business model evolves around selling their product at the lowest price possible.
IKEA business model revolves around their vision which is – offering a very wide range of well-designed, functional home furnishing products at so low prices that as many people as possible will be able to afford them.
Anybody can make a high-quality product for a high price, or a poor-quality product for a low price.
IKEA follows a different approach, they have developed methods that are both cost-efficient and innovative. Before designing the product… they decide the price tag.
Their designers begin with designing of the product after keeping the price in mind. The IKEA Group has 31 distribution centres in 16 different countries, supplying goods to IKEA stores. It has about 45 trading service offices in 31 countries.
They have very close relationships with their 1,350 suppliers in 50 countries.
IKEA’S SMART SECRET
Is IKEA – a Non- profit organization. ?
WHAATTTTT?
You must be having a lot of questions by now, like if IKEA is a non
profit organization then –
How do they manage their running cost?
Where all the money goes away?
Where does all this money earned is utilised?
You will get all your answer right away as you continue reading.
I would say a big YES,
IKEA has a little known secret: the company is a non-profit
They grew with a vision that states ‘to create a better everyday life for as many people as possible. And on a mission to offer a wide range of home furnishing products at a price so low that as many people will be able to afford them.’
Besides the vision and mission, the main motive of showing itself a non profit organization could seem as business-driven.
IKEA employs about 135,000 people. Because of tax rules for non- profits, IKEA pays about 33 times fewer taxes than their for-profit competitors.
There is one more big hole in this whole IKEA non-profit organization.
Money is not trapped inside Ikea’s foundation.
The Ikea trademark and the concept is owned by another private a company named Inter Ikea Systems.
So, to operate Ikea stores and use the brand name, the non-profit Ikea have to make payments each year to the private company – Inter Ikea Systems.
This clearly means money is paid directly from IKEA profits to the owners of this private company to license the trademark.
The beneficiaries or we can say owners of this private company are not publicly recorded, but it’s not hard to speculate that the Kamprad family is on the receiving end of this loophole.
HISTORY – STARTING AND GROWTH OF IKEA
Let’s talk about the exciting history timeline of IKEA.
From the of how it is started to the story of how it evolved exponentially.
1926
It all started in 1926 when founder Ingvar Kamprad is born in Småland
in southern Sweden.
The 1940s-1950s
In the year 1948 – Furniture was introduced into the IKEA range.
Local manufacturers produced the furniture for IKEA in the forests close
to Ingvar Kamprad's home.
In the year 1956 – IKEA came up with the idea of designing furniture for
flat packs. It started focusing on self-assembling furniture models.
The 1980s
In the year 1980s – IKEA expands dramatically into new markets such
as the USA, Italy, France and the UK.
In the year 1984,
Ikea family was introduced a new club for the customers was launched.
Today, Ikea family is in 16 countries (over 167 stores) and has about 15
IKEA has many mobile apps. But the most popular app is IKEA STORE.
The app is having almost 9,60,333 monthly downloads.
Website and its monthly traffic IKEA is ranked 166 among websites globally.
And having almost 146,040,680 monthly visitors.
Investments
IKEA is the lead investor in 4 companies. Those are –
XL HYBRIDS – IKEA announced its investment in this company on
October 12, 2017
MAT SMART – IKEA announced its investment in Massmart on Jan
23rd, 2018
TRAEMAND – IKEA announced its investment in Traemand on Dec
19, 2018
LIVSPACE – IKEA announced its investment in Livspace on Dec 19,
2018
MANAGEMENT AND THE CORE TEAM
CEO – Jesper Brodin
CFO – Alistair Davidson
FOUNDER – Ingvar Kamprad
HEAD OF CORPORATE FINANCE & TAX – Krister Mattsson
HEAD OF DIGITAL – Christian Moehring
HEAD OF E-COMMERCE, SOUTHEAST ASIA – Koen Besteman
HEAD OF UK MARKETING PROCUREMENT – Maria Malpartida
HEAD OF INNOVATION – Jens Heitland
8 IKEA Marketing Strategy
Many people confuse marketing with promotion. People believe that marketing is something you do to sell your product. But, this is not completely true. Marketing begins even before the production stage, as designing a product based on the demand and needs of the customers is also a part of marketing. This is what IKEA Believes in. Everything in IKEA is from a customer’s point of view. Let’s dive deep into learning different strategies of IKEA.
1. Amazing Customer Experience
Have you tried shopping from IKEA? If not, then I would strongly recommend you to try IKEA next time you need a piece of furniture.SHopping at an IKEA store is a different experience than shopping from any other furniture store. Whenever adults go out shopping with their kids, both the kids and parents face issues.
IKEA has got an amazing solution for this where none of them would feel any type of burden and in fact, both of them would like to spend more time at the IKEA store. Yes, I am talking about the free childcare facility provided by the IKEA stores. You can just leave your child safely with them and enjoy hustle free shopping and the child will also spend some quality time playing and making new friends.
Another amazing thing is that instead of standing and having a long discussion about which product to buy and calculating your cost, you can have a seat ad enjoy your paneer butter masala meal while discussing the furniture.
These little things not only add a value to the customers shopping experience but also give them a reason to visit again and even suggest others to visit the store.
2. Brand Identity
In such a competitive environment, is it very important to stand out or be unique and creative to survive? You have to build your brand in such a way that customers prefer you over other companies.IKEA is very strongly working with this. Its goal is to become the leader of every home.
IKEA focuses more on the product and the customers which a lot of companies fail to do. If you create what your customers want then you can build a good brand identity. Your every action should be a signal of your brand.IKEA uses this technique in its advertising. If you have been following IKEA for a while then you will not have to think a lot you can recognise directly that this is an IKEA ad.
3. Content Marketing
With the growing digital environment, the content has become an important element of the digital industry. Content is used by most of the companies to promote their product digitally. From a picture art to a long written blog anything can be used as content in digital marketing.
One of the best strategies you can use in this digital era is to interact with your customers directly.IKEA uses all types of contents to reach out to their customers. From images, videos to textual content IKEA has it all. To reach your customers digitally, it is very important to identify your potential audience, basically defining who your customers are. Then the most important step is defining how your potential customers can find you?IS is through your social media handles or is it through your website or a combination of all these. And then you need to target them both organically and by paid promotion techniques.
4. Social Media
Social media is something which cannot be avoided. Everyone nowadays uses social media, thanks to the internet revolution and jio revolution in India. Your presence on every social media platform is must, it doesn’t matter if you are an old company or a new one. Social media allows you to be in constant touch with your customers. You can use various strategies across your social media platforms that can help you create trust and a good brand image in front of your customers and also develop new customers.
There are a few strategies which you can follow.
If you follow a consistent posting schedule, then you can have a good content interaction as regular posts can make your customers think about you.
You can also use promotional strategies provided by social media companies to reach a new audience and attract them by telling them about your new products and offers.
Another important feature of social media that you can use is to understand your audience. Understanding your audience is important because they are the ultimate consumers and having clarity about the consumers makes it possible for a brand to plan its products and marketing accordingly.
5. Innovation
IKEA is very famous for new designs and products. It keeps on constantly adding a new design or a new to product to its collection. This allows customers to visit the store even if they do not want to buy anything so that they can check the latest trends and products. If you check their social media handles, you will find a lot of different types of content that displays new and innovative products. This is a very good strategy as your customers stay updated with your products. Even if they do not add the products to their cark at the moment, they still add it to their wishlist. Which indirectly gets converted into sales. Thus, innovation in products and making innovation reach your customers is very important.
6. Creative Marketing Campaigns
IKEA is very creative when it comes to marketing. Their posts are so engaging that you want to click on it and see them that what is there. The example given below demonstrates how one will swipe right to see what they have for you. Isn’t it creative? If you observe, they have made good use of the present condition in a creative way. Similarly, a humorous and creative content strategy can help you get more engagements.
7. Amazing Use of Technology
Living in the 21st century, you can make amazing use of technology to provide a great experience to your customers. Augmented reality and virtual reality are some great examples of technology can you can use especially in such industries.IKEA makes use of both these augmented realities and the virtual reality
What is Augmented Reality?
This is the most amazing use of technology that IKEA could have done. With this, you can use your mobile phone to see how a piece of particular furniture would look at your home. You can also use this to decide at which corner of the house that particular furniture would look good. This is like a trial technology where you can try the products virtually at the comfort of your home without actually buying it. It is similar to something used by Lenskart.
What is Virtual Reality?
Yet another amazing use of technology. Where most of the people are busy using virtual reality for gaming purposes, IKEA has its smart use. Through virtual reality technology, IKEA allows its customers to feel the look of the furniture. For example, say you want to buy a modular kitchen, you can try the kitchen before actually buying it in a virtual reality headset. The most amazing part is that you can try cooking and get real experience.
8. Payments Methods
Consumers have become a lot more advanced than before. Customers need comfort. Since the evolution of the digital era, there are a lot of different methods of payment. Every consumer has different payment options. It becomes important to have all the options available so that the customers get a hustle free shopping experience. As already, IKEA is a price dominant company, best price with all modes of payments is like a cherry on the cake.
Unknown Facts About IKEA
Ikea is the third-largest wood consumer on the planet. Being the leading furniture company it should not be shocking.
IKEA is claimed to print more copies of its annual catalogue each year than the bible.
IKEA has very good food sales. Being known for its furniture has a very good taste when it comes to their restaurant. This can be a great contribution to their revenue as they have an approximate sale of 2 billion annually.
As in 2014, they have 716 million visitors to their store. This is a very huge number.
The first IKEA restaurant was launched in 1956 to feed its customers that would feel hungry after spending the whole day shopping.
SWOT Analysis of IKEA
STRENGTH
* Its vision – ‘to create a better everyday life for many people’
* Economies of scale
* Lowest Price
* Countless designs
WEAKNESS
* Bad press
* Low quality
* Difficulty to control standards across locations.
OPPORTUNITY
* Solutions for a sustainable life at home
* Developing social responsibility
THREATS
* The recession slows down consumer spending
* More competitors entering the low price household and furnishings
markets
IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943.
IKEA is a globally renowned furniture retailer that sells ready-to-assemble furniture, kitchenware and home accessories.
The company started with selling pens, wallets, jewellery with the concept of meeting consumers demands at the most affordable prices.
After five years into the business, IKEA brought in the furniture. Since then furniture has been the mainstream for the business.
IKEA furniture is now a well-known multinational brand.
IKEA KEY VALUES
They are very strict about their values.
They firmly believe that every individual has something valuable to
offer.
Let’s look at some of there core values –
1. Cost – Consciousness
Their first priority is to make their product affordable to as many
people as possible. They challenge themselves constantly to make
the product more affordable without compromising on quality.
2. Renew and Improve
They always challenge themselves to try something new and to find a
a better way out.
3. Caring for People and Planet
They believe in caring for people as well as for the environment.
They act as a force for a positive change.
IKEA IN INDIA
In 2006, Ikea first displayed an interest in the Indian market but back then
the Indian laws allowed only 51 per cent foreign ownership.
With the government of India relaxing the norms for foreign direct
investment (FDI) in single-brand retail, IKEA announced in October
their intention to open stores in India.
IKEA opened its first store in India on Aug 9, 2018.
It took IKEA 12 long years to enter the Indian market.
The first store in India was opened in Hyderabad.
Hyderabad, the southern Indian city gave it a roaring welcome.
So far, more than 3 million customers have visited IKEA Hyderabad
store and about 8 million have visited IKEA’s India website
In the year 2016, Ikea purchased land in Mumbai and said that it planned
to open stores in Bengaluru and Delhi too.
After Hyderabad, in 2019 IKEA has launched its first online store in
Mumbai is offering more than 7,500 products.
It will provide delivery to most of the locations in Mumbai and will have
a delivery time of four to seven days, subject to availability and distance.
In India, IKEA currently has more than 55+ suppliers.
Also, have more than 45,000 direct employees and 400,000 people in the
extended supply chain.
Now, the company plans to have more than 25 stores in India by 2025.
FAQ’s
What is IKEA Business Model?
They follow Price-leadership model. Low prices are the main concern stone of the IKEA vision, business idea and concept.
Shocked by the News that Founder of CCD has committed Suicide. Cafe coffee day(CCD) was the first-ever coffee chain opened in India.VG Siddhartha was the man behind making coffee popular in a nation of tea-lovers. Also, CCD owned Asia’s single largest coffee estate and India’s best coffee brand. The first CCD outlet was set up on July 11, 1996, at Brigade Road, Bangalore, Karnataka. V.G. Siddhartha opened the first CCD outlet with an initial investment of ₹ 1.5 crores. the major challenge faced by the cafe coffee chain was to make a revolutionary change in the Indian culture where the majority of the population prefer drinking tea rather than coffee. To stand up against the competition, CCD has built its retail strategy and named it 3As strategies like Affordability, Accessibility, and acceptability. CCD founder V.G. Siddhartha who feared of achieving a target of 500 tonnes, ends up selling 6,500-7,000 tonnes of branded coffee, exports about 28,000 tonnes of coffee and sells another 2,000 tonnes locally each year and has a curing capacity of 75,000 tonnes (largest in the country). Additionally, his cafes attract at least 40,000 to 50,000 visitors per week and presently operating 1,740 CCD stores in around 250 cities. Full detail in the blog.
I was shocked by the News that Founder of CCD has committed Suicide.
What was the reason behind it?
According to resources, He was under pressure from a private equity partner and other lenders.
This ultimate blog is dedicated to India’s best coffee brand “CCD” and it’s owner Mr VG Siddhartha.
I have curated all the information about CCD(Cafe Coffee Day).
Cafe coffee day(CCD) was the first-ever coffee chain opened in India.VG Siddhartha was the man behind making coffee popular in a nation of tea-lovers.
Also, CCD owned Asia’s single largest coffee estate and India’s best coffee brand.
It was the one with the tag line ‘A lot can happen over coffee’, Café Coffee Day was the one who touched the hearts of millions of Indian youth, assuring them that all they need is a cup of coffee and a peaceful place to talk it all out!
And so it happened.
India was strictly a tea-loving country. Let me tell you everything from pin to plane about the brand who successfully made coffee popular in a country full of tea lovers.
We will be talking about –
HOW CAFE COFFEE DAY(CCD) STARTED
I am sure you have visited CCD now and then but do you know the history of the cafe coffee brand who brought the coffee culture to India.
During my college years when I started visiting the cafe coffee day, I had no idea about the success story of India’s largest Cafe Coffee chain.
V G Siddhartha from Chikmagalur district of Karnataka was the man behind changing the beverages culture of India with a variety of drinks and side dishes hard to resist.
Coffee Day Global which is the parent of the Cafe Coffee Day chain was incorporated in 1993.
The first CCD outlet was set up on July 11, 1996, at Brigade Road, Bangalore, Karnataka. V.G. Siddhartha opened the first CCD outlet with an initial investment of ₹ 1.5 crores.
Siddhartha happened come across a German business owner, who was interested in buying coffee beans from him for his “leading coffee brand in Germany – Tchibo”.
During that brief discussion with the German businessman, he told his story of how his band had started in a small 10 ft. shop in Hamburg. This inspiring tale of the Tchibo gave Siddhartha an outlook of a different world altogether & opened his eyes and it also gave him a wonderful idea.
Challenges Faced By CCD
Having done with the initial foundation, the major challenge faced by the cafe coffee chain was to make a revolutionary change in the Indian culture where the majority of the population prefer drinking tea rather than coffee.
After the initial struggle, the homegrown cafe chain came a long way, credited with the start of coffee shop culture in India but then it finds itself facing tough competition not just from the international chains such as Costa Coffee, Starbucks or Barista but also from various domestic players and concept cafés.
How CCD Overcome Challenges
To stand up against the competition, CCD has built its retail strategy and named it 3As strategy :
Affordability What worked best for the Indian cafe coffee chain was its combination of aspiration and affordability.
Even as it gave coffee an attractive makeover, CCD’s prices stayed well below its rivals.
Ensuring that it remained the favourite hangout choice for school and college students or young adults on meagre paychecks from their first jobs.
Accessibility It wasn’t just restricted to the metro cities. If there’s one singular claim that Coffee Day can makeover all of its rivals, it is that it took coffee to cities and towns across the country, and offered the same experience everywhere.
They always believe in serving an experience along with the coffee.
They have ensured that the cafes are at an arm’s reach. Acceptability Today, coffee is not just seen as a beverage but a social glue that brings people together to relax and unwind.
“Let’s catch up at CCD,” is probably one line most Indians have said or heard at one point or the other over the last two decades.
Marketing and advertising strategies of CCD
As we have discussed above, CCD’s strategic approach was based on the 3 A’s i.e. Affordability, Accessibility, and Acceptability. 3A’s are the significant factors contributing to the growth of the brand.
Secondly, Digital Marketing has become an integral part of Café Coffee Day’s marketing plan. CCD’s fan base is overwhelmed with over 5 million fans on its social media pages and consistently engaging customers on Facebook, Instagram, Twitter, Youtube, etc.
The youth was the key target and early adopters of trends, they also evolved their strategy and became more digital-centric as they engaged with the new age world.
CCD marketing also constantly ensures the continuous active engagements of the consumers, like they conducted the ‘Latte Art Festival’ – where customers were served coffee topped with creative latte art designs.
As CCD goes digital, it is also looking at innovation in user experiences by adopting new technologies to enhance customer service.
STRENGTHS * Products of extremely good quality and taste * Highest no. Of stores * High brand equity among the youth * Vertical integration
WEAKNESSES * High pricing * Wrong-site selection * Lacks strength to maintain the brand
OPPORTUNITIES * Coffee cafe industry is one of the fastest-growing industry in Asia * Enter and attract international markets * Rising income of people
THREATS * Growing competition from global and local coffee chains * Growing attrition rate
BUSINESS EXPANSION AND GROWTH
CCD founder V.G. Siddhartha who feared of achieving a target of 500 tonnes, ends up selling 6,500-7,000 tonnes of branded coffee, exports about 28,000 tonnes of coffee and sells another 2,000 tonnes locally each year and has a curing capacity of 75,000 tonnes (largest in the country). Additionally, his cafes attract at least 40,000 to 50,000 visitors per week.
The company, opened its first store in 1996 in Bengaluru, is presently operating 1,740 CCD stores in around 250 cities.
As of 2015; CCD makes revenues worth $450 Million approx., employees 5000+ people, and has 1530 outlets across India, Austria, Czech Republic, Dubai & Karachi.
Other Businesses of CCD
COFFEE DAY EXPORTS
Coffee Day Exports is all about growing, trading, retailing and exporting world-class coffee. It has a heritage of over 130 years.
One of the largest exporters of green coffee in India, since 1999. We also export to the Middle East, Europe and Japan.
Coffee Day Exports has invested in research and development and applied the learning successfully to improve the promotion of various coffee blends and augment its exports.
1. Café Coffee Day won the “Times Food Award” under the category of “Best Coffee Bar” in 2007
2. Café Coffee Day won the Burrper’s Choice Award by users of burrp.com in 2008.
3. Coffee Day Global won an award for “Retailer of the Year” by Asia Retail Congress 2009
4. Café Coffee Day won the Indian Hospitality Excellence Award in 2010”
5. Café Coffee Day was ranked as 26th Most Trusted Service Brand in India and by Brand Equity (Economic Times) in 2012
6. Café Coffee Day won the Best Coffee Bar Award in 2012
7. Café Coffee Day was awarded “The NCPEDP – Shell Helen Keller Award 2013” by National Centre for Promotion of Employment for Disabled People.
8. Coffee Day Global got awarded for “Best Customer Service in Café Restaurant” by Star Retailer Awards 2013
9. Café Coffee Day won the Brand Excellence Award in the retail sector in 2013
10. Coffee Day Global was awarded the bronze prize by the Coffee Board of India for being the third-best exporter of green coffee in 2012
11. Coffee Day Global was awarded as “Retailer of the Year” for the retail excellence by ABP News in 2014
12. Café Coffee Day was ranked as 22nd Most Trusted Service Brand in India, as 27th Most Exciting Brand in India under the category of “Food Services” in Indian 2014
13. The Promoter, Mr V G Siddhartha was awarded ‘ET Retail Hall of Fame’ for his contribution to the growth in the retail sector in 2014
TOP MANAGEMENT OF CCD:
R Ram Mohan CFO, Coffee Day & Chairman, SICAL
Jayraj C Hubli Director, CFO & CIO Coffee Day Global
A Venu Madhav Director, Coffee Day Global & CEO – Café Coffee Day
Sadananda Poojary Company Secretary & Legal Head, Coffee Day
Balachandar Natarajan Group Head, Human Resources, Coffee Day
Shankar Narayan President, Vending Division, Coffee Day Global
Shankar Venkataraman Director, Tanglin
Venkatesh M Director, Coffee Day Hotels & Resorts
Nitin Bagamane Chairman, Tanglin
Shashi Bhushan CEO, Way2Wealth
Ketan Sheth Director of Research, Way2Wealth
Rajeev Gupta President, Exports Division, Coffee Day Global
Sanjiv Mediratta Group Advisor, Food & Beverages, Coffee Day
C J Jayanth President, Fresh & Ground Division, Coffee Day Global
Dr Pradeep Kenjige Vice President, R & D Division, Coffee Day Global
Late M D Mallya Ex-Independent Director
MAN BEHIND CAFE COFFEE CHAINS
V.G. SIDDHARTHA – Was the man whose mind was behind the successful coffee chains in India. He was a man less famous by his name but his hard work speaks it all.
He could have easily survived with the 350 acres of the estate his family-owned, but instead, he was too ambitious and decided to start something that appealed to him, something created by him, something on his own.
His full name was Veerappa Gangaiah Siddhartha Hegde, started his career as a trainee trading in Indian stock market at JM Financial under the tutelage of Mahendra Kampani in 1983, after completing his masters’ degree in Mangalore University.
He bought Sivan Securities in 1984 and turned it into a highly successful investment banking and stockbroking company. It was renamed Way2Wealth Securities in 2000.
In 1992, Siddhartha started his coffee business – Amalgamated Bean Company Trading, an integrated coffee business which ranges from procuring, processing and roasting coffee beans to retailing of coffee products. The company’s revenue stands at Rs 2,016 crore for FY18.
After the success of the coffee venture, Siddhartha launched India’s first coffee café — Café Coffee Day — on Brigade Road, Bengaluru in 1996. Internationally, CCD outlets are present in Vienna, Czech Republic, Nepal, and Egypt.
He also served on the board of directors of Mindtree, GTV, Liquid Krystal, Way2wealth Brokers, Coffee Day Natural Resources, and Way2wealth Securities.
Cafe Coffee day Owner Death:
On Tuesday 30th July 2019, Cafe chain Coffee Day Enterprises has confirmed that its Managing Director VG Siddhartha has been missing since Monday 29th July and that the company with the help of concerned authorities are tracing him.
On, 29th July 2019 Siddhartha had told his driver that he was going for a walk near the bridge and asked him to wait at a distance. Meanwhile, a fisherman had claimed that he saw someone jumping off the bridge. When he did not return even after two hours, the driver approached the police and lodged a missing complaint. And from their a seed of vg siddhartha death is hoped.
Shares of Coffee Day Enterprises dropped 20 per cent and hit the lower circuit limit as well as 52-week low of Rs 154.05 as a piece on BSE after news surfaced that its founder has gone missing.
On Wednesday, 31st July 2019 his body was found at the Hodge Bazaar beach by local fishermen who informed the police. The body had washed ashore near Ullal and was fished out by local fishermen.
VG Siddhartha left a letter allegedly wrote to Coffee Day Enterprises board, he says that he “failed to create the profitable business model despite my best efforts.”
He goes on to say: “I would never cheat or mislead anybody intentionally, I have failed as an entrepreneur.”
News reports say the man who made coffee popular in a nation of tea-lovers referred to three main issues in his letter to the board: “pressure from private equity partners forcing him to buy back shares”, “harassment from the previous DG income tax ”, and “tremendous pressure from other lenders”.
All the issues centre on the liquidity and debt that Siddhartha and Coffee Day Enterprises were facing, and which ultimately culminated in the entrepreneur selling his stake in Mindtree earlier this year.
The downfall of Cafe Coffee Day
I personally like the business model of CCD, but it has a lot of drawbacks.
Let’s discuss major reasons for the DOWNFALL of CCD
BSR associates were their main auditor who used to audit their outlets. The auditor wrote a letter to the shareholders of CCD that they have not audited 40 subsidiaries of Cafe coffee day.
This was the reason the shareholders backed off and denied to provide further funds.
Meanwhile, the Income Tax (IT) department raided on Cafe Coffee Day (CCD) retail chains and found about Rs 362 crore concealed income.
VG Siddhartha in his letter mentioned that Income tax department was attaching their shares on two separate occasions to block their Mindtree deal and then taking the position of their Coffee Day shares, although the revised returns have been filed by them.
Because they were in such a heavy debt, they started taking short term loans in the form of debentures with high-interest rates to pay off their long term debt. This resulted in a more heavy debt burden.
COCA-COLA BUYING CCD?
(NEWS) The US beverage giant COCA-COLA is eyeing a significant foothold in the cafe business space in India.
Soft drinks maker Coca-Cola has initiated pre- talks with Cafe Coffee Day (CCD) before the death of the founder V.G. Sidhartha to acquire a substantial stake in India’s largest coffee chain. If the deal is initiated, it would be Coca Cola’s second major investment.
Now, the promoters of the company plan to restart the pending talks with COCA-COLA for selling off their significant stake in Cafe Coffee Day(CCD). A spokesperson for Coca-Cola has refused to comment on this news.
And calls it what he termed “speculative news”.
Latest Updates:
As you know, Cafe coffee day chain is all over debt and also being pressurized by the lenders.
Coffee Day Enterprises is the parent company of Sical Logistics, has decided to sell the entire stake in the company to ensure the debt removal of the company.
The report says Coffee Day Enterprises has also hired ICICI Securities as an adviser for the potential transaction.
As soon this news spread over the internet, the share price of sical logistics and also share price of coffee day enterprise jumped to the highest and locked upon the upper circuit of the day.
Cafe Coffee Day is funded by 2 investors. Brand Capital and Sequoia Capital India are the most recent investors.
I hope I have shared everything in this article. If I missed out anything, do share your views in the comment section below.
FAQ’s
What is CCD Business Model?
The company, opened its first store in 1996 in Bengaluru, is presently operating 1,740 CCD stores in around 250 cities. As of 2015; CCD makes revenues worth $450 Million approx., employees 5000+ people, and has 1530 outlets across India, Austria, Czech Republic, Dubai & Karachi.
Case Study on CCD
we have provided a video on this you can check it out . https://www.youtube.com/watch?v=RDPXrcYAYVg
What is CCD Case?
On Tuesday 30th July 2019, Cafe chain Coffee Day Enterprises has confirmed that its Managing Director VG Siddhartha has been missing since Monday 29th July and that the company with the help of concerned authorities are tracing him. On, 29th July 2019 Siddhartha had told his driver that he was going for a walk near the bridge and asked him to wait at a distance. Meanwhile, a fisherman had claimed that he saw someone jumping off the bridge. When he did not return even after two hours, the driver approached the police and lodged a missing complaint.
Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores, headquartered in Bentonville, Arkansas. It was founded by Sam Walton and Started in 1962. Walmart has 11,368 stores and clubs in 27 countries, operating under 55 different names. In 1978, they introduced their IPO in the market and now they have acquired more than 14 companies and still counting. Walmart core Business Model is Cost Leadership. It has 3 Verticles Walmart U.S., Walmart International, and Sam’s Club Segment(Online). They have high sales volume through which they have high earnings. The net revenue of Walmart grew from $500.3 billion in 2018 to $514.4 billion in 2019. Walmart has started a premium subscription service called Jetblack. This was developed last year by Marc Lore, who joined Walmart when WMT acquired Jet.com in 2016. Walmart has acquired Flipkart for $16 billion which is considered as the world’s largest e-commerce deal. Full detail in Blog.
BIG NEWS!! Walmart has acquired Flipkart for $16 billion which is considered as the world’s largest e-commerce deal.
But What does Walmart(WMT) does?
According to Wikipedia, Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores, headquartered in Bentonville, Arkansas
Did you know that Walmart has 11,368 stores and clubs in 27 countries, operating under 55 different names? ( as of April 2017)
After reading this detailed Walmart case study, you’ll get to know everything from the Business Model of Walmart to its Marketing Strategy.
What’s in it for me?
1. Walmart Business Model
Started in 1962, Headquartered in the U.S., Walmart began its business as a retail store with its USP of providing products at a cheaper rate than what is available in the market to the Consumers.
It was founded by Sam Walton. In 1978, they introduced their IPO in the market and now they have acquired more than 14 companies and still counting.
Walmart started its new vertical of providing services such as groceries, food items, Healthcare services and Medical Services as well.
They work on a business model which eliminates the Middle Man from all the Distribution Channels in business, also provides benefits to the ultimate consumers by providing them products and services with the lowest prices.
Walmart has the main motive to enter every segment in the market and dominate them by offering the lowest prices to the consumers.
Everyday low cost (EDLC) is Walmart’s motto to manage overheads.
Walmart has three core verticals:
a) Walmart U.S.,
Walmart U.S. segment operated in the United States. It provides customers with products and services that are not present in the physical stores at low prices and services online through its e-commerce website and Mobile Applications.
The Ecommerce website includes a special feature that allows the third party to sell products on Walmart.com.
It does business across various Store formats such as supercenters, discount stores, neighbourhood markets and Walmart.com.
b) Walmart International
Walmart International segment includes three categories which are retail, wholesale and other.
These categories have various formats such as supercenters, hypermarkets, Warehouse club, home improvement, speciality electronics, apparel stores and drug stores as well as digital retail.
c) Sam’s Club Segment
With its online portal “samsclub.com”, Sam Club provides various benefits to its customers in the form of a variety of Merchandises, which are not found in its club and services online at samclub.com, and by its Mobile Application.
It also provides services such as Club Pickup.
2. How Walmart Earns?
Walmart follows the principle of buying the whole lot in a single go. In this manner, the company gets a quantity discount from the Manufacturer and sells in small quantities to the ultimate consumers at a low price.
They have high sales volume through which they have high earnings.
By following the principle of Everyday low prices, they penetrate the market with their Business Strategy.
Customers always focus on three aspects: Convenience, Product Quality and Low Prices.
These aspects are kept in mind by the company when they sell a particular product to the potential consumer.
The Bargaining power of Walmart makes it an unbeatable player in the market.
Revenue Generation of Walmart
Walmart generates its revenue from selling its products and services directly to the consumers and Business. It has two Sources of Revenue Generation:
A) Product Revenue:
Walmart deals in Grocery, Health and Fitness, Hardlines, Apparel, Entertainment and Home Products.
Grocery Consists of a bakery, deli, dairy, frozen foods, floral, produce and consumables such as health and beauty aids, baby products, household chemicals, paper goods and pet supplies.
Health and wellness include Pharmacy, Optical services, clinical services.
Entertainment contains electronics, toys, cameras and supplies, photo processing services, cellular phones, cellular service plan, movies, music, video games and books.
Hardlines consist of Stationary, Automative, hardware and paint, sporting goods, fabrics and crafts and seasonal merchandise.
Apparel Includes apparel for women, girls, men, boys and infants as well as shoes, jewellery and accessories.
Home Includes Home Furnishings, houseware and small appliances, bedding, home décor, outdoor living and horticulture.
B) Service Revenues:
Walmart generates revenue from services as well:
Financial Services and related products:
It includes services like money order, prepaid cards, wire transfers, money transfers and Bill payments.
VUDU Movie Streaming Service: This includes subscription revenues for renting, buying, and watching movies, and TV shows on demand.
Clinical Services: Clinical Services of Walmart includes Primary Care, Illness and Injuries, Management of Ongoing Conditions, Physical and Wellness Checks, Lab tests and Immunizations.
Health Insurance Services: They accept the following Insurance Plans:
3. Marketing Strategy
Marketing is the core aspect of any business whether its scale is small or large. It is important to make an effective marketing strategy for long term growth and development.
Walmart follows the principle of Market Penetration which involves capturing the whole market by offering lower prices or competitive prices to the consumers.
Cost Leadership is a concept that helps the company to make a huge impact on the market.
As consumers are Price sensitive, they want the product at a low price with maximum satisfaction.
The consumer is treated as the king of the market and that is what captured by the Walmart to maintain its customer relationship.
According to Walmart, four factors drive a customer’s choice of retailer. These are Price, access, assortment & experience.
4. Success Story of Walmart
Walmart has a large customer base and scale of operations. It has been possible due to its core objective which is providing good and services to consumers at a low price.
Four important factors drive the success story of Walmart.
Large Sales Volume: Walmart core agenda is to make goods and services available to the consumers at a low price. This drives their sales many folds and hence increase their sales volume.
Walmart understands the needs and wants of consumers and help them make their buying decisions quickly by offering a monopoly price for a particular product or service.
The net revenue of Walmart grew from $500.3 billion in 2018 to $514.4 billion in 2019.
Supply Chain Management System: Walmart’s distribution system is the largest in the world. It focuses on three aspects Lower Cost for Inventory Storage, reduced transportation costs and products spend less time in transit.
Introduction to BARCODE: To manage huge inventory efficiently and effectively, Walmart introduced the concept of “BARCODE” which is a process of collecting and representing the data in a Computer-readable format.
This helped Walmart to manage its huge and diversified inventory into a systemized format and create a system of STOCK IN and STOCK OUT.
Barcode Scanner scans the barcode labelled on the product and save that detail in the computer so that in future if that particular product is out for sale, then it can be easily identified using that special code.
Low Operational Costs: Walmart always prefer to use standard and less number of parts.
It manages to keep its operational cost low because it always manufactures the goods in those countries where the labour cost is cheap.
This helps him to gain a competitive advantage in his domain. It controls production costs, advertising costs.
5. 12 Amazing Facts About Walmart
Walmart averages a profit of $1.8 Million Every Hour( Data May vary).
37 Million People Shop at Walmart every day; that’s more than the population of Canada. ( Data may vary)
Walmart’s $288 U.S retail sales exceed those of Kroger, Target, Costco combined.
The Average Walmart Supercenter sells 140,000 items. (data may vary).
Walmart’s top-selling item in 2014 was the Banana.
90% of Americans live within 15 minutes of a Walmart.
If Walmart were a country, it would be the 28th largest economy in the world.
Walmart has 2.2 Million employees, that’s more than the population of Houston.
Now, in this Walmart Case Study, let’s have a look at some of the interesting initiatives of Walmart.
Walmart has started a premium subscription service called Jetblack.
Jetblack offers customers a personal shopper-like experience and costs its subscribers around $600 per year.
This was developed last year by Marc Lore, who joined Walmart when WMT acquired Jet.com in 2016.
Walmart(WMT) is also focusing on its online-advertising business(Digital Marketing). It is hoping that it can replicate Amazon’s success in advertising.
While Walmart(WMT) has been trying to catch up with AMZN in this area for a few quarters, it is now making some bold moves.
Walmart App: Store Assistant
In 2016, Walmart set a new goal to reduce emissions in our supply chain by 1 gigaton (1 billion metric tons) by 2030.
To achieve this goal, Walmart is launching Project Gigaton – an opportunity for suppliers to join Walmart in reducing greenhouse gas (GHG) emissions in the global value chain.
Deepti Chauhan is one of the thousands of farmers across the world overcoming the challenges of a traditional market.
With resources that educate and empower her business, she can take care of her family in a better way.
What if learning a job was as easy as downloading an app?
Walmart New Gaming App, designed to teach key management skills from the backroom to the sales floor. Coming soon to Walmart Academies nationwide.
Optimizing tasks like scanning shelves for inventory means Walmart associates can spend more time with customers on the sales floor.
Bossa Nova Robotics increases efficiency and support associates in 50 stores.
In 2005, Walmart partnered with the National Fish and Wildlife Foundation to create Acres for America, with a commitment to conserve one acre of wildlife habitat for every acre of land Walmart developed.
The original commitment of $35 million over 10 years was recommitted in 2015.
How is Walmart using innovation and GPS technology to assist customers in finding their favourite items?
Implementing Visual Light Communication to assist associates and customers alike.
The list is long……..
7. SWOT Analysis
STRENGTHS
Thin Business Model
Easily Copied Business Model
Competitive Disadvantage against high-end speciality sellers
WEAKNESSES
Global Organizational Size
Global Supply Chain
High Efficiency of Supply Chain
OPPORTUNITIES
Expansion in Developing Countries.
Improvement in Quality Standards.
Improvement in human resource practices to develop competitiveness in the labour market
THREATS
Healthy Lifestyle Trend.
Aggressive Competition
Online retailers of Various Sizes
8. Walmart-Flipkart Acquisition
In 2018, US retail giant Walmart Inc. picked up 77% stake in India’s largest online retailer Flipkart for $16 billion marking world’s biggest purchase of an e-commerce company.
Flipkart is an e-commerce company headquartered in Bengaluru primarily into the sale of consumer electronics, fashion and lifestyle products is leading Indian Ecommerce Brand.
On a call with analysts on May 9, Walmart CEO Doug McMillon and COO Judith McKenna stated three main reasons for acquisition:
Flipkart’s leadership in some lucrative segments, its payment platform and the company’s Talent Pool
9. Financial Statistics
Number of Employees: 10001+
Established in year: 1962
Number of Acquisitions: 21
Number of Investments: 6
Number of Lead Investments: 5
Founder: Sam Walton
Founded Date: Jan 2, 1962
Operating Status: Active
Legal Name: Walmart Inc
IPO Status: Public
Stock Symbol: NYSE: WMT
Company Type: For Profit
Web Traffic by SimilarWeb: Ranked 102 globally with 343,839,241 monthly web visitors
Patents and Trademarks: The intellectual property of Walmart includes 58 registered patents primarily in the ‘Computing; Calculating’ category.
Additionally, Walmart has registered 93 trademarks with the most popular class being ‘Advertising; business’.
Number of Exits: 1
IPO Date: Jan 13, 1978
Competitors by Owler: Target, Costco and Amazon.
IT spend: This year Walmart is projected to spend $8.5 B
on IT.
Number of Current Team Members: 142
Number of Board Members/Advisors: 20
Number of Sub-Orgs: 14
Number of Events: 12
Number of Articles: 24321
Company Tech Stack by Siftery: Walmart uses 220 technology products and services including Google Analytics, Word Press, and Vimeo.
Mobile App Metrics:
Downloads Last 30 Days: 3,450,283
Monthly Download Growth: 3.65%
App Name
App Store
Monthly Downloads
Walmart-Save Time and Money
Google Play, Itunes Connect
2,347,381
Walmart Grocery
Google Pay
534,767
Walmart Grocery Shopping
Itunes Connect
404,265
My Walmart Schedule
Itunes Connect
80,185
My Walmart Schedule
Itunes Connect
43,398
Spark City
Google Pay
20,487
Spark City
Itunes Connect
9,489
Walmart Perk Pick up
Itunes Connect
4,416
WMT Events
Itunes Connect
2,361
Website Tech Stack by Builtwith:
Walmart is actively using 148 technologies for its website. These include Viewport Meta, IPhone / Mobile Compatible, and SSL by Default.
If you are a traveller then you must have listened to the name of Airbnb. Started Brain Cheskey and Joe Gebbia in 2008. Airbnb has revolutionized the way people travel by focusing on building a community and not just a mere distribution platform. Airbnb is a marketplace where travellers get to stay at the property listed on the site by the local hosts. Airbnb is a community built on sharing. It was started by two friends when they faced difficulty in paying the massive rent and had a spare living kind of a room. Airbnb is based on an aggregator business model. Airbnb take-offs flat 10% commission from hosts for every booking done through the platform. Usually, the payment processing fees are 2% that here is 3. So, an additional 1% is also levied that the host pays. Airbnb charges an amount up to 20% of the booking total that is set as a service fee by Airbnb for travellers for every confirmed booking. This fee is non-refundable. Airbnb business model also includes business ready homes that fulfil certain requirements for home type, amenities, check-in, reviews, responsiveness, and host commitment. Airbnb also provides services like for which it charges a flat 20% commission from the person who provides it.
Are you a traveller or have a spare room?
Then you must have heard of Airbnb and how you can rent a room at an affordable price.
Have you ever wondered how Airbnb Business Model works?
Why is Airbnb so successful? How much revenue does Airbnb make?
Started byBrian Chesky and Joe Gebbia in 2008, Airbnb has taken the hospitality industry by storm.
Airbnb has revolutionized the way people travel by focusing on building a community and not just a mere distribution platform. After reading this article you’ll get to know everything about Airbnb’s business model.
What’s in it for me?
What is Airbnb?
Airbnb is a marketplace where travellers get to stay at the property listed on the site by the local hosts. A person who has a spare room can list his property on the website and the person who is travelling to that particular location can book it and get to have a unique experience offered by the host.
Airbnb is a community built on sharing. It was started by two friends when they faced difficulty in paying the massive rent and had a spare living kind of a room. They got a mattress and started marketing it offline as a space for rent. Later they started offering breakfast with that as well.
They got 800 cereal boxes which they sold for around 40$ each during the presidential campaign. They earned so much money and reinvested back into the business.
Airbnb is now operational in more than 190 countries and has a presence in 34000 plus cities.
It has turned into a huge business now with 150 million-plus users and 1.9 million-plus listings that the user can book at any given time.
Airbnb business model
Airbnb is based on an aggregator business model. Aggregator Business Model is a network model where the company collects the data about a specific good/service providers, make the providers their partners, and sell their services under its brand.
Since the aggregator is a brand, it has to provide services which have uniform quality and price. This is done by signing up a contract with the partners. You can understand it as an asset-light model where you earn a commission for the services you provide without owning any inventory.
If we talk about the conventional model where you had to purchase a hotel to get started with bookings, they have turned the game around and connected the demand and supply. This is one of the reasons for its rapid growth.
People having vacant space at their home and willing to earn some extra money can list their rooms on the website and earn some extra bucks. Also, the key differentiator is they sell experience and not just space.
Many travellers wanna feel like home once they go out to travel and explore different countries. The travellers get a local like feel and also feels light on the pocket as compared to hotels.
Airbnb also has personal profiles and rating/reviewing systems that help the travellers make an informed decision about the hosts and what is on offer. Hosts too can decide and have a choice about whom they have to rent out their space. These help to build trust and reputation in the community.
Besides the travellers and hosts, the Airbnb business model also includes a huge network of freelance photographers in all major cities of the world. They visit a property and get high-definition photographs of the property.
These high-definition photographs improve the click-rate and help in getting more responses. Airbnb pays these photographers directly.
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Airbnb Distribution Strategy
Airbnb has changed the way users searching for accommodations online. It is the largest experience host in the world. The most important thing about the distribution strategy of Airbnb is that it keeps the cost as low as possible by avoiding to outsource their work.
Airbnb helps to create the brand value of its hosts so that the guests can find them easily if they want to visit again. The company took many strategic decisions to spread its distribution network all over the world. Let’s look upon the events to know how Airbnb used the distribution strategy to become the largest accommodation provider.
The company started Bed and Breakfast services for the travellers in the US in 2008 through its website airbedandbreakfast.com which became airbnb.com in the next year.
The headquarter of Airbnb was in San Francisco, California. To list more properties and expand the chain of hosts, the company opened its first international office in London in 2011.
In May 2011, Airbnb established its first European office in Hamburg, Germany by acquiring its equivalent rival Accoleo. This was the indication that the company is up for global expansion and creating a distribution network.
In October 2011, the company opened its second international office in London and till 2012, Airbnb had eight international offices including Paris, Milan, Barcelona, Moscow, Sao Paulo, and Copenhagen.
In the same year, the founder and CEO of Airbnb, Brian Chesky announced that he will focus to expand his distribution network in Australia and opened an office in Sydney as he saw an opportunity of rapid growth there.
With this distribution strategy, the company completed 10 million bookings on its platform and in 2013, it successfully listed 250,000 properties.
In 2014, the company partnered with home-cleansing services Homejoy and Handybook for the Airbnb hosts to clean their homes at discounted prices. This move brought exponential growth in the listing of new hosts on the platform and the guests also got standardised and well-managed homes.
In 2015, the company announced “Business Travel Ready” badge for business customers. It attracted over 250 businesses including Google, Salesforce, SoundCloud and Vox Media to use the platform.
In February 2018, the company announced its new service Airbnb Plus which offers verified homes with value-added amenities. This allowed people to list their premium properties and provide a comfortable experience to the visitors who look for a luxury rental property.
Airbnb partnered with SiteMinder as a third-party distribution partner. With this partnership, the company officially allowed to list the hotels and other accommodation properties in the portfolio of Siteminder as Airbnb host. Its channel manager displays the real-time report of the booking trends and room rates for a better user experience.
Airbnb offers a lower commission for the boutique hotels to make its distribution channel stronger and getting an edge over its competitors. The other platforms charge around 10-15% as commission whereas Airbnb takes only 3-5% from the hosts.
The company has a large number of software partners to make the host and customer experience better. As of 2019, the company made its website available in 62 languages to make it relevant to a large number of users.
Airbnb made many acquisitions over the journey to expand its network of listed properties in the different cities of various countries and improve the host and guest experience. The company hired many photographers to capture and upload high-quality attractive photos and inspection members to ensure the quality of the properties listing on the platform.
Apart from homes and apartments on rent, now the company also lists boutique hotels, heritage hotels, lodges, resorts, etc. It has crossed over 5.6 million listings worldwide till the end of 2020. Also, the company served over 800 million guests on its platform.
How Airbnb Works?
Airbnb is a platform that connects travellers to the localhost. If you have a spare room in your house, you can list that on Airbnb’s property and earn for every booking.
It is a kind of opportunity for both the travellers and the host as travellers to get live cheaply as compared to hotels and also get a feeling of the homestay. On the other hand, hosts earn money for the property they provide.
The host can provide additional services like breakfast, tour guide, pet-friendly environment, etc for which they can decide the amount they want to rent.
The rating and review system builds trust and if you read the reviews for some properties, travellers make a long term connection with the host.
Airbnb vs Uber vs Oyo Rooms:
Airbnb, Uber and Oyo Rooms all work on the aggregator based model. Oyo Rooms has still shifted significantly and have started to operate the full buildings independently. Also, they have expanded to co-living and co-working spaces.
Uber has simplified travelling from one place to another. Its business model is such that it acts as a middleman between the drivers and the riders guaranteeing a standardized level of service.
However, this is different from the Airbnb business model that thrives on discoverability. The level of service is not consistent. The travellers are free to choose from the listings that are there on Airbnb’s website after going through its reviews.
Uber too has ratings and reviews for both riders and drivers. It doesn’t give the facility to the user to choose a driver they want to ride with. Also, the reviews on Uber, if you would see are not as elaborate as those on Airbnb.
The most Uber can do is suspend a driver or rider if his/her ratings are too low. Uber pays its driver partners through a fixed rate of commission for every ride.
Oyo Rooms business model is based on quality control or standardization where they ensure a certain level of uniformity in their services. The case with Oyo Rooms is that a person books the room with the brand and not the individual hotel.
With Airbnb, the case is opposite, a room is booked through the website with the host providing it. Just like Uber, Oyo ensures a certain level of service. As I told above, Oyo has now started to lease out the full property and run the entire building under its brand name which gives it the access of day to day operations.
Airbnb has no such control over the quality of the homestay. The difference is also, Airbnb earns through commissions mainly.
How Airbnb Earns?
As we talked about Airbnb being run on an aggregator based model, its main income comes from the commission on every booking made. The property owner can list their properties for free.
The booking and monetary transactions are carried out on the Airbnb platform. The company mainly earns from these transactions in the following ways-
From the hosts/owner of the property
Airbnb take-offs flat 10% commission from hosts for every booking done through the platform. Usually, the payment processing fees are 2% that here is 3. So, an additional 1% is also levied that the host pays.
2. From the Travelers/Guests
Airbnb charges an amount up to 20% of the booking total that is set as a service fee by Airbnb for travellers for every confirmed booking. This fee is non-refundable
3.Airbnbmag
Airbnbmag is a magazine product that the company has added. The thinking behind it is to make the travellers feel that they belong to the place they visit. This 15 dollar magazine is a result of the partnership between Airbnb and Hearst. The motive is also to help the traveller discover the place through the locals’ eye.
4. Business Travel
Airbnb business model also includes business ready homes that fulfil certain requirements for home type, amenities, check-in, reviews, responsiveness, and host commitment. This feature is designed especially for travel managers of the companies to provide better transparency and more accurate reporting for their company.
5. Airbnb Services
Airbnb also provides services like for which it charges a flat 20% commission from the person who provides it.
Marketing Strategy of Airbnb
Marketing is an essential part of any business and below we have discussed some strategies adopted by Airbnb to get their product out there to more and more people.
Influencer Marketing
Influencer marketing means promoting your product/service through social media influencers who have the audience. It could be YouTubers, Social Media celebrities, bloggers and even movies stars.
In 2015, Airbnb hosted a ‘floating house’ publicity stunt on the Thames River in London with a variety of related events including a #FloatingHouseParty where attendees were encouraged to live stream, take pictures and splash the night all over social media.
The resultant coverage turned out to be massive. 340 press pieces in the UK alone, which translated into over 70,000-page hits, 10,000 new users, and more than 200 million social impressions! Airbnb also leverages the impact of celebrity stays.
https://www.youtube.com/watch?v=vvQtUH03bHQ
Since then, Airbnb has partnered with several celebrities – picking up the tab for their stay in return for some social media love.
Airbnb understands the importance of high-quality images and that’s why they offer all of their hosts’ free professional photography to maintain consistency across their media. They even spend more money on production than promotion because they understand that better quality content will always get more engagement. Travel lovers use Airbnb because they feel inspired by what they see in the beautiful pictures on the Airbnb website.
3. Community building
Airbnb knows the value of community building and hence focuses on building trust through regular communication, detailed profiles and strong reviews. That makes the engagement phenomenal. Another advantage is booking a room with Airbnb is just a matter of a few clicks if we compare it with the conventional hotels that include a longer process. This is one of the reasons customer keep coming back to the website.
It is also the authenticity of the experience that makes Airbnb such a successful community. Hosts go out of their way to make their home their guests’ home with detailed local knowledge of the best eateries, transport links and hidden gems.
4. Brand partnerships
Airbnb has shown us n number of times that collaborating can provide some serious exposure and generate a lot of buzzes. Successful Airbnb partnerships include KLM Royal Dutch Airlines, UK bookstore chain Waterstones and even the French government.
Think what customers of each brand would love and find something that appeals to both. The brand crossover has to offer something unique, something you can only offer together. For example, with KLM a contest was created where the winners could spend a free night in a luxury ‘Airplane Apartment’.
With the French government, it was a night in the Paris Catacombs at Halloween, which helped raise the profile of a lesser-appreciated French tourist spot.
Airbnb India
Airbnb has huge expectation in the Indian market and said their co-founder said that Millenials will drive its growth in the country. It is active in most of the tourist places like Goa, Delhi, Mumbai, Rishikesh, etc. Recently it has invested in Oyo Rooms also around an amount of $200 million. More than one million Indians have travelled on Airbnb globally.
With over 30,000 listings in the country, Airbnb listings in India have grown by 115% over the past year. There has been almost 2x growth in the number of nights booked on Airbnb in India since 2016. We have witnessed over 100% YoY growth in inbound guests from around the world (2017-2018)
Airbnb statistics
Airbnb has 31 offices across the world.
Around 400 million guests have been hosted since the company’s launch.
Over 150 million users are on the platform.
Airbnb has more than 5 million listings worldwide
53% of travellers use Airbnb because of price
Airbnb has a total of 21 acquisitions to date related to its business. They are constantly improving their product for the good of both hosts and guests.
Airbnb has raised a total funding of around 4.4$ billion till date in 15 funding rounds.
Millennials account for roughly 60% of all guests who have ever booked on Airbnb.
There’s million-dollar insurance coverage for an Airbnb host
Airbnb users can book 1.9 million listings at any given time
Airbnb has a total of 1000-5000 employees.
The website has monthly traffic of around 86,570,491 with a monthly visit growth of around 3.99%.
Cost of renting an average home on Airbnb is cheaper than a single hotel room.
Airbnb has spent $23.5 million and counting on advertisement in the U.S
Airbnb has a total of 21 acquisitions to date related to its business. They are constantly improving their product for the good of both hosts and guests.
Airbnb has raised a total funding of around 4.4$ billion till date in 15 funding rounds.
The company had a profit of around $93 million in the year 2017 and has reported a profit in the year 2018 as well.
With the rapidly growing online business, the market that is gaining momentum now is Food. A cloud kitchen is a virtual restaurant. You cannot physically go there and order food. You have to order online and the food will be delivered to your home. There is no need for dining and no need to take an exclusive place. It saves a lot of investment. According to a recent survey, 67% of the restaurant owners would want to open a cloud kitchen as their next outlet. Faasos was launched in 2011 by Jaydeep Burman and Kallol Banerjee in Pune. Due to Online players, The rent-to-sales ratio dropped from 15% to 4% over the next 2 years. Today, Faasos has 160+ kitchens that produce delivery meals for four distinct brands. This include, Faasos, Behrouz, Oven Story – a pizza brand, and Firangi Bake. Their main focus is on UAE, Indonesia, Thailand, and Vietnam. Rebel Foods has raised a total of $124.6 M in funding over 10 rounds. There most recent investors are Sequoia Capital and Go Ventures.
Cloud Kitchen Business Model
In this digital age, everything is becoming digitized and technologically advanced.
The internet has become a faster source of earning revenue.
From clothes and shoes to gadgets and cosmetics, everything is available for sale online.
With the rapidly growing online business, the market that is gaining momentum now is Food.
The online food business has now gradually transformed itself from traditional outlets to cloud kitchens.
But what exactly is a cloud kitchen?
What is cloud kitchen, business model?
If you are a foodie or a food entrepreneur, this blog is a must-read for you!
What’s in it for you?
WHAT IS A CLOUD KITCHEN?
A cloud kitchen is a virtual restaurant.
You cannot physically go there and order food.
You have to order online and the food will be delivered to your home.
There is no need for dining and no need to take an exclusive place.
Cloud Kitchen owners can take place anywhere and deliver food at your doorstep.
This means you can also deliver food even by cooking at your home.
It saves a lot of investment.
There is no need for proper setup or an exclusive furnishing and interiors.
This reduces your operational costs.
All you need is chefs to cook food.
PROS
CONS
Streamlined order process
No personal touch to build a customer relation
Low operational cost
Limited Audience
Easy Expansion
Limited brand presence compared to traditional outlets.
According to a recent survey, 67% of the restaurant owners would want to open a cloud kitchen as their next outlet.
One of the best examples of Cloud Kitchen in India is Rebel Foods.
Rebel Foods owns numerous companies including Faasos, Oven Story, etc.
ABOUT REBEL FOODS (Faasos)
Rebel Foods cloud kitchen was launched in 2011 by Jaydeep Burman and Kallol Banerjee in Pune.
At that time the concept of cloud kitchen was new and only a few people knew about it.
Jaydeep Barman didn’t set out to create a new food tech category.
He was just tired of burgers and pizza.
He was craving a more Indian take on fast food.
Jaydeep and his friend Kallol Banerjee set up Faasos, an Indian wraps chain.
They had built Faasos as a tech-friendly brand and was an early adopter of online ordering platforms.
This gave them a front-row view on how technology was reshaping the food services industry.
The shift from a traditional fast food format to a cloud kitchen business model changed the economics of the entire venture.
The rent-to-sales ratio dropped from 15% to 4% over the next 2 years
It took away the need to solve the #1 problem of retail – finding great locations!
Today, Faasos has 160+ kitchens that produce delivery meals for four distinct brands.
This include, Faasos, Behrouz, Oven Story – a pizza brand, and Firangi Bake.
This cloud kitchen business model is clever because it showcases their separate brands as individually established.
BRAND
TYPE OF SERVICE
FAASOS
Wraps and Rolls
Behrouz
Biryani
Oven Story
Pizza
Firangi Bake
Italian Cuisine
Mandarin Oak
Chinese Cuisine
Sweet Truth
Sweets and Confectionary
Nav Saram
South Indian Food
The Good Bowl
Bowls like Rajma-Rice
Slay Everyday
Coffee & related items much like a Café Coffee Day
Lunch Box
Tiffin Service
The same customer can order a wrap for lunch and a biryani dinner, or something different for every member of the family.
The team is always experimenting, fielding a few new concepts at any given time.
TEAM
Rebel Foods has 4 current team members, including Co-Founder & CEO Jaydeep Barman.
Jaydeep Barman – Co-Founder & CEO
Kallol Banerjee – Co-Founder
Sagar Kochhar – Chief Marketing Officer
Soumyadeep Barman – Chief Technology Officer
EXPANSION
Rebel Foods is expanding its presence within the country and in overseas markets.
Their main focus is on UAE, Indonesia, Thailand, and Vietnam.
They also have taken a bigger kitchen and have opened multiple kitchens within it to suit multiple brands.
In one restaurant, various speciality restaurants are functioning.
They are working under one management which reduces its cost.
MARKETING STRATEGY OF FAASOS
Faasos has an amazing marketing strategy.
Faasos launched its mobile app in 2014.
It is one of the first companies that took orders on Twitter.
People had to just tag Faasos and they could order anything.
Barman shares that the strategy fetched good social media presence and new customers to the brand. Faasos is spending around Rs 400 – 500 for acquiring new customers.
Another special feature of Rebel Foods is their amazing packaging.
The type of packaging of all the verticals of Rebel Foods is special and there is a special vision behind it.
FINANCIAL STATISTICS
Rebel Foods has raised a total of $124.6 M in funding over 10 rounds.
There most recent investors are Sequoia Capital and Go Ventures.
GO Ventures
Yes
Series D – Rebel Foods
—
Sequoia Capital India
Yes
Series D – Rebel Foods
—
Lightbox
Yes
Series D – Rebel Foods
—
Evolve India Fund
—
Series D – Rebel Foods
—
Lightbox
—
Debt Financing – Rebel Foods
—
Alteria Capital
Yes
Debt Financing – Rebel Foods
—
Sequoia Capital India
—
Debt Financing – Rebel Foods
—
Sistema Asia Fund
Yes
Series C – Rebel Foods
Kirill Kozhevnikov
Lightbox
—
Series C – Rebel Foods
—
Evolve India Fund
—
Series C – Rebel Foods
—
COMPETITION
Their main competition is Fresh Menu which works in similar services.
Fresh Menu provides offline and online services.
You can go to a restaurant or order food online.
Currently, OYO Rooms is looking to acquire Fresh Menu.
The reason is that they are thinking of launching their cloud kitchen.
With Fresh Menu they are getting a readymade platform to deliver food.
Disadvantages Of Cloud Kitchen
Nothing is perfect in this world, everything has its pros and cons is a very popular quote. This also happens to be true in the case of cloud kitchen. There are a lot of drawbacks that you may face if you are planning to start a cloud kitchen. Various disadvantages of a cloud kitchen that one may come across are discussed below in detail.
Very High Competition
Restaurant or the food industry has always been very competitive. Talking specially about the cloud kitchen, there are no entry barriers in the business. Anyone who has a little amount of investment and some knowledge and skills can enter into this business. The new entrepreneurs who wish to start a cloud kitchen must be ready to face the competition.
Dependence
There are two modes of launching a cloud kitchen business. One is through your platform, it may be either a website or an app or through the other mode that is depending on the food aggregators. The first option may not be a good one because it will require a lot of initial investment and marketing which may not be a good idea in such a competitive industry.
With the other option that is depending on different food aggregator platforms, there comes a lot of restrictions. Unless and until you don’t have any issue with the terms and conditions provided by the food aggregator, you can stick with the second option.
No Direct Customer Relation
In a cloud kitchen business, except for the delivery of food, there is no direct relation with the customer. This may act as a disadvantage because you cannot directly know the taste and preference of your customer. And if you are working with a food aggregator, then you might not even know the basic details of your customer.
Only Online Presence
Whatever sales a cloud kitchen generates is all through the online medium. Since the concept of cloud kitchen does not involve any physical presence, it becomes a little difficult for the customers to develop trust in the brand, and any business whether online or offline needs to gain the trust of its customers.
Dependence On Technology
A cloud kitchen or ghost kitchen business is one hundred percent dependent on technology. Any small hurdle can disturb the business. This is a very big disadvantage as all the sales of a cloud kitchen depends on the technological environment.
Marketing Cost
Many newcomers into the cloud kitchen business start with a very low investment. This is one of the reasons they do not spend a lot or barely any minimum amount on marketing. But the ultimate growth hack in this business to beat the high competition is a good marketing strategy. Marketing comes with a cost.
These are a few disadvantages that you may face in the business. However the list is not finite, you may face various challenges that may come as a disadvantage. Like any other business, if you overcome these challenges there are a lot of scopes associated with the business.
HOW TO START A CLOUD KITCHEN?
I am sure that you have started thinking about how you can start a cloud kitchen.
Following are some things that you will have to keep in mind before starting a business.
#1 Location
First, you need a place, a location where you will set up your internet restaurant.
Suppose you rent a place at a monthly expense of Rs. 10,000.
It is also assumed that the company would not achieve breakeven until five months.
So you need at least Rs. 50,000 to pay the rent.
#2 Kitchen and Equipment’s
Rs. 2,50,000 is required for all the kitchen equipment like utensils, gas stove, etc.
The cost also includes Power costs, Water bills and machinery costs.
#3 Licenses
You would need four licenses to start your business.
This include-:
FSSAI
This is a food security license that is compulsory for every business.
GST
GST is Goods and Services Tax which is levied on online companies as well.
Online businesses need to register themselves under GST as part of the law.
The people will be paying you online.
FIRE SAFETY
A fire safety license is compulsory to acquire for every business.
TRADE LICENSE
This license permits you to trade goods or services in the city.
The cost of taking all the licenses can range from 15,000- 20,000.
#4 Staff
Suppose you are employing 2 staff members as chefs at a salary of Rest. 20,000 each.
After multiplying with 5 you will know how much you need to pay for the next 5 months.
A cloud kitchen needs to have good chefs who cook delicious food.
This is because food is the only thing that will build your reputation and bring the customers back.
#5 Inventory Management Software
The point of sale software will cost you around Rs. 15000.
Convenient software is required for easy calculations and printing bills.
#6 Working Capital
Initially, I assume that you would require Rs. 50,000.
Working capital will keep your business running when the company hasn’t received payments.
#7 Marketing
In my opinion Rs. 1, 00,000 should be invested for marketing as it is the only thing that will help in growing the business.
It includes costs like:
Online Customer Acquisition
Cost – Rs.40,000-Rs.1,55,000
In the beginning, it is important to acquire online customers through advertisements and offers.
Social Media
Cost – Rs.20,000-Rs.40,000
Social Media has become a force where you can promote your brand widely at a lower cost.
Today in the age of Facebook and Instagram it has become important for a brand to have a great social media presence.
Do share your ideas and queries regarding cloud kitchen business model in the comment section.
Also you can go for some cloud kitchen franchise Model available in Market.
FAQ’s
What is Faasos Business model?
Faasos was launched in 2011 by Jaydeep Burman and Kallol Banerjee in Pune. Faasos has 160+ kitchens that produce delivery meals for four distinct brands. This include, Faasos, Behrouz, Oven Story – a pizza brand, and Firangi Bake.
What is the Cloud kitchen Marketing Strategy?
Barman shares that the strategy fetched good social media presence and new customers to the brand. Faasos is spending around Rs 400 – 500 for acquiring new customers.
Patanjali Case study & Detailed Analysis (Business Model)
2 Minute Summary
Today, Everyone Knowns Patanjali as It is the fastest growing FMCG company in India. It was started by Baba Ramdev And Aacharya Balkrishna in January 2006. It’s Manufacturing Unit and headquarters located in Haridwar. Its also has a manufacturing unit in Nepal. Patanjali declared its annual turnover of the year 2016-17 to be estimated 10,2186 crores. It was listed 13th in the list of India’s most trusted brand as of 2018 and ranked first in FMCG category. Patanjali’s consumers mostly came from its great Yoga and Patanjali ayurveda network. Patanjali Yog Samiti has 1Lakh branches and 5 lakh teachers. The company doubled its sales targets each year and set its sights on total domination over the Indian consumers. It operates on Low Pricing and Cost dynamics. There are many Patanjali distribution Strategies like they used ADS(Alternative Patanjali Distribution System) to create new demand. Also, they are playing on Low Prices, Swadeshi Manufacturing, Part of the profits going to charity, Gaining Massive Popularity from Yog Guru Ramdev Baba, Natural & Ayurvedic Products and much more.
As Baba Ramdev is famous for Yoga and Ayurveda.
In this blog, You will get to know the entrepreneurial side of Ramkrishna Yadav.
How a Desi Company replaces Colgate?
How a Yoga Guru created an approx Rs 10,216 crore?
Have you ever think about the Patanjali business model?
How Patanjali is producing so many types of products?
We have got all covered for you.
Started by Baba Ramdev And Aacharya Balkrishnain January 2006, Patanjali is an Indian consumer goods company Manufacturing Unit and headquarters located in Haridwar. Its also has a manufacturing unit in Nepal.
According to CLSA and HSBC, Patanjali is the fastest growing Indian FMCG. Patanjali declared its annual turnover of the year 2016-17 to be estimated 10,2186 crores. It was listed 13th in the list of India’s most trusted brand as of 2018 and ranked first in FMCG category.
What’s in it for me?
Patanjali Business Model
Patanjali’s consumers mostly came from its great Yoga and Patanjali Ayurveda network. Patanjali Yog Samiti has 1Lakh branches and 5 lakh teachers.
There are 10,000 Patanjali Chikitshalya and Arogya Kendras.
The people who come to their yoga camps are ready to market to the company. Added to that all kind of Swadeshi branding of Baba Ramdev.
Its integrated mega-facilities is Haridwar, their firm churned out as much as its customers demand.
Patanjali Into Swadeshi Pitch.
After pramotic swadeshi to consumers Baba Ramdev building a business empire by targeted traders community on the swadeshi plank.
You saw in its ad in social and print media, Patanjali Ayurved is appealing to shopkeepers “to give prominence to Patanjali product on shelves” because it “will help in fulfilling the dream of Mahatma Gandhi to promote Swadeshi”.
“The country needs Swadeshi Products; now we are telling shopkeepers to help in this movement.
Ultimately, Swadeshi product should reach the consumer,” Patanjali spokesperson SK Tijarawala said.
Baba Ramdev followed the same strategy with organised retailers such as the Future Group, Reliance Retail and Shoppers’ Stop-promoted HyperCITY.
While Reliance Retail has created ‘Patanjali Destinations’ at its out.
Speaking at a Conclave, Patanjali CEO, Acharya Balkrishna questioned why the food processing sector in India was not generating enough revenue.
He went on to city figure from Thailand, Which indicated that India’s all food processing is only 6 % to Thailand’s 30%.
Best sales and distribution methods:
Patanjali’s combination of low prices,’ natural and pure’ proposition and ‘swadeshi’ positioning are widely acknowledged to be the reasons behind success, what is not that well known is the critical role played by Patanjali’s path-breaking sales and Patanjali distribution strategy in driving this exceptional growth trajectory.
A perfect Strategy for sales and distribution of patanjali was a key factor behind Patanjali’s meteoric Growth. Patanjali’s low-cost distribution system was remarkably efficient in getting the acceptance of its products against far heftier rivals.
The company doubled its sales and distribution of patanjali targets each year and set its sights on total domination over the Indian consumers. It developed a piece of hunger for new distributors and new channels for trade.
Low Pricing and Cost dynamics
Patanjali products are made available at an exclusive discount as compared to their companies. The company’s raw material comes directly from farmers.
It has lower marketing spends and overhead cost compared to its peer and as such can produce at a much cheaper price.
A large proportion of the India population, especially the middle class, is extremely price-sensitive and looks for quality products at a reasonable price.
Patanjali has understood and developed a strategy to take advantages of the aforesaid mindset capturing market share from share established players.
A Baba as Brand Ambassador
The other big factor in Patanjali’s favour is the image of Baba Ramdev. He is a recognized face all over India and beyond.
Patanjali can create a brand perception of health and wellness among the Indian masses, primarily because of Ramdev’s association with the brand who is considered to be a veteran of yoga and a firm believer of Ayurveda.
In India market where personalities outshine products, it’s imperative to have a brand of your own.
How Patanjali challenged The FMCG Protocol
Now the days Indian market is witnessing a tussle between FMCG brand to be on top of the game, especially in becoming the “desi-est brand”, which Has been occupied by Yoga Guru turned industrialist Baba Ramdev’s Patanjali Ayurved Ltd.
Since the international players started venturing into the market of India, they had only focused on eliminating the traditional and age-old methods and introducing modern techniques.
Patanjali made the “deshi” segment alive when other FMCG brand was still selling the chemically loaded herbal products.
Slowly other companies too started to look into space they had avoided looking in all these years, which is why other FMCG products to have started venturing their products in “desi” space.
Is Baba Ramdev’s Patanjali a non-profitable company?
As you all know Patanjali Ayurved Limited is an FMCG company. It gains profit by selling their Varieties of like herbal products. But another important thing is the profit earned by them goes to charity.
It can be proved by the following points:
1- He is an unpaid Brand Ambassador
2- Managing Director takes 0 salary
3- Gurukulam and Vansprastha Aashram (For Samaj Seva)
Patanjali Marketing Strategy
The 12 years old FMCG sector Company Patanjali has emerged as a prominent FMCG player in the market with a large number of products and deep assortments. Its manufacturing unit is located in Haridwar and outside India i.e.
Nepal under the trademark of Nepal Gramodyog.It is primarily in the business of minerals and herbals.
Like other FMCG Company, it uses the mass of demographic and psychographic segmentation strategies to make its offerings appropriate/relevant to the particular set of customer groups.
It uses undifferentiated targeting strategy, as the main objective Patanjali is to offer healthy Products to all people.
Patanjali Distribution Strategy
Patanjali used ADS(Alternative Patanjali distribution System) to create new demand.
Patanjali centred to general trade once a sizable consumer base was generated.
It also reduces cost by using another Patanjali distribution strategy: Primarily distribution. By setting up its stores, eliminating wholesalers. It eliminated wholesalers in the retail space too.
Low Prices
Swadeshi Manufacturing
Part of the profits going to charity
Gaining Massive Popularity from Yog Guru Ramdev Baba
Natural & Ayurvedic Products
Man Behind Empire of Patanjali Business Model:
Yoga guru Baba Ramdev-led company’s revenue makes it the second-largest pure-play FMCG sector giant aftermarket leader Hindustan Unilever(HUL), which had a turnover of Rs 30,783 crore in the last fiscal.
If Patanjali can double its turnover, even HUL will come within its biting distance. There is a man who knows how it can be done Acharya Balkrishna, the CEO.
A confidant of Baba Ramdev, Balkrishna holds a 94% stake in Patanjali Ayurved, but he doesn’t take home a salary. Yet, he works for 15 hours a day, even on Sundays and other holidays during the year.
He claims he hasn’t taken a single day’s leave.”I work daily from 7 am to 10 pm. While a normal person would work for 8 hours a day, I work for 15 hours through the week. I am doing the job of five people,” he says.
Challenges From Multinationals
To counter attack Patanjali Dominance in Herbal Category, Colgate launched Cibaca Vedshakti herbal toothpaste and many more products like Active salt, Active salt neem, Sensitive Clove etc.
They also brought down the prices of their products and providing promotions in the top end multifunction toothpaste segment. Colgate India is spending aggressively on advertising. As per the Market report, Colgate India spent about 12% of its revenue on marketing compared to 9% globally.
In December 2015, Unilever acquired Indulekha Brand for INR 330 crore to step up its presence in the new and emerging categories. They relaunched Ayush Brand with a wide range of products including toothpaste, soap, handwash, shampoo and face wash in five South Indian States.
How Patanjali is planning its future:
Patanjali kickstarted the new year by foraying into the e-commerce platform and its founder Baba Ramdev has now decided to throw down the gauntlet to the firm’s strongest competitor-Hindustan Unilever Limited (HUL)
A report in The Economic Time says that Patanjali is eyeing to overtake HUL’s existing market presence.
“We have created the capacity of Rs 50,000 crore and w are racing ahead now. Our target is to beat HUL by next year,” Ramdev told the paper.
Practo is an app for Online booking appointment with a Doctor. It aims to Make your clinic visits cashless, paperless and painless. It was founded by Abhinav Lal (CTO) and Shashank ND (CEO) in 2008. Both are born in Bengaluru and studied at B.Tech, computer engineering at National Institute of Technology, Karnataka. Both are born in Bengaluru and studied at B.Tech, computer engineering at National Institute of Technology, Karnataka. It has over 4 million monthly users and 120,000 appointments booked every month, with traffic growing at 24 per cent per month. For Doctors facing practice management software they offered two price points, Rs. 999 and Rs. 1999 per month. The premium plan also includes a cloud telephony-based IVR system for doctors. A@Also, They are Promoting them through Doctors and Digital Marketing. Practo is funded by 11 investors. Trifecta Capital Advisors and Tencent Holdings are the most recent investors. It has acquired 5 organizations. Full Detail in Blog.
Detailed Case Study on Practo Business model:-
Making your clinic visits cashless, paperless and painless ~ Motive of Practo Business Model
Have you ever searched for an online doctor?
If you have ever booked an online appointment with a doctor, you must have heard about Practo.
But have you ever wondered how Practo Business Model earns works?
We have got all covered for you.
After reading this blog, you’ll get the detailed information regarding the Business Model of Practo and all the online Medicine Business Models.
Healthcare is one sector which has always lacked the full-fledged of IT.
Online doctor is a term that came during the 2000s, used by both the media and academics.
Keep reading and learn how a twenty-year-old NIT Graduate dared to take a different path.
Business Model of Practo with their website has taken it to a different level.
It has the facility of being delivered to Doctors appointments system, now chat with top doctors, Tests & health checkups and Medicine and more.
What’s in it for me?
Online Medicine Business
In recent years in India, startup growth level is increasing very fastly in all the field and making India digital and most of the people go through online.
Online medicine business is also a new way to become digital and people search for an online doctor appointment for their treatment.
When we go to buy medicine in the market, we only getting 10% or 15% discount on worth RS-100 or 200, but when we go through online we get 20% or 30% discount in Medicine.
That’s why many people in India go to buy online medicine to get more and more discount.
Founder
Abhinav Lal (CTO) and Shashank ND (CEO) behind this Successful leading business in Medicine in the health industry.
Both are born in Bengaluru and studied at B.Tech, computer engineering at National Institute of Technology, Karnataka.
Story of Practo:
The founders Abhinav Lal and Shashank ND launched in the year 2010.
Shashank ND was frantically getting together his father’s medical record and scanning them.
He wanted to get a second from the American physician, for an operation that his father was about to undertake.
If that does not bed enough, he was also unable to access enough information about the doctor.
To make an informed decision before putting his father’s life in his doctor’s hands.
This incident urged Shashank and his classmate, Abhinav Lal, to set up Practo Technologies Pvt. Ltd.
The Duo founded the company in Bengaluru, in 2008, when they were still college students in their final year of engineering (B. Tech, computer engineering) at National Institute of Technology, Karnataka.
Though numerous players have come into the practice management space since began, Shashank believes that razor focus on product quality and support has enabled it to maintain a steady lead.
Practo growth Members
Practo.com has over 1,20,000 doctors listed from over 310 Town and Cities in India with comprehensive service in metros of Bangalore, Delhi, Mumbai, Hyderabad, Chennai.
It has over 4 million monthly users and 120,000 appointments booked every month, with traffic growing at 24 per cent per month.
How Practo earns
Practo has two distinct products, with their revenue models:
-Healthcare Provider/ Doctor facing practice management software, sold as a subscription-based SaaS product.
-Practo Ray is offered at two price points, Rs. 999 and Rs. 1999 per month. The premium plan also includes a cloud telephony-based IVR system for doctors.
-While this is a free product for both patients and doctors, Practo.com allows contextual advertisements from hospitals and clinics in the demarcated section of the website.
Marketing Strategy
Practo is an online platform where a customer can search and book appointments with a doctor conveniently.
It has shown it’s the witty and engaging approach in its marketing campaigns.
Its popular digital campaigns “If you could sing to your doctor” even encouraged a sequel campaign named “If your doctor could sing to you”.
How often do you see that happening?
It has a success mantra to superbly executed campaigns. Their core idea is to create engaging and witty content for users and bring a smile on their faces using humour.
Promotion through Digital Media:
It has majorly been promoted through digital media with an active presence on social media platform such as Facebook, Twitter, LinkedIn, Youtube.
It is currently promoting itself by positioning as ‘your home for health’
The main aim is signifying simplicity which has been offered by the platform to the consumers and other stakeholders.
They promote itself to the B2B segment through social media, TV adverts and offers free profile creation of doctors and provides free- trials of its software for the B2B customers.
Practo Marketing Campaign:
Find the right Lab for Liver Function tests:
Marketing Campaign:
Find the Right Psychologist:
Problem Faced by Early Stages
The only pervasive problem would be the inability of some of the old school doctors and patients to convert as they would be too well adapted to the prevalent system and would not be changed.
The reputation of these doctors over the years would give them a cushion and would not necessitate them to adapt to changing technologies.
Challenge faced:
Targeting these doctors or clinics would be a challenging task but they would have a large enough market even if it does not focus on the members of the old school healthcare system.
Funding (CrunchBase)
Categories
Fitness, HealthCare, Marketplace, SaaS, Wellness
Headquarters Regions
Asia-Pacific (APAC)
Founded Date
2008
Founders
Abhinav Lal, Shashank ND
Funding Status Late Stage
Venture
Last Funding Type
Series E
Number of Employees
5001-10000
Practo Investors
Number of Lead Investors
3
Number of Investors
11
Practo is funded by 11 investors.
Trifecta Capital Advisors and Tencent Holdings are the most recent investors
Investor Name
Lead Investor
Funding Round
Partners
Trifecta Capital Advisors
Yes
Series E –
—
Tencent Holdings
Yes
Series D –
—
RTP Global
No
Series D –
—
Matrix Partners
No
Series D –
—
Altimeter Capital
No
Series D –
—
RSI Fund
—
Series D –
—
CapitalG
No
Series D –
—
Sofina
No
Series D –
—
Sequoia Capital India
No
Series D –
Shailendra Singh
Thrive Capital
No
Series D –
—
Mobile App Metrics by Apptopia
Downloads(30 Days)
16,667
Monthly Download Growth
-1.6%
It has 16,667 monthly app downloads. The most popular apps downloaded are – Doctors and Medicines, Practo Pro – For Doctors, and Consult & Profile Management.
App Name
App Store
Monthly Downloads
Practo – Doctors and Medicines
Itunes Connect
Practo Pro – For Doctors
Itunes Connect
Consult & Profile Management
Google Play
—
Practo Synapse
Google Play, Itunes Connect
—
Competitors :
Netmeds
Netmeds is an online store which sells Medicine in a wide range of prescription medicine and other health product conveniently available all across India.
1mg Business Model:
1mg is a digital healthcare platform that makes healthcare accessible. They provide consult with qualified and registered doctors on chat for free.
Acquisition:
Number of Acquisitions 5
It has acquired 5 organizations.
Their most recent acquisition was Enlightiks on Dec 16, 2016.
Acquired Organization Name
Announced Date
Price
Transaction Name
Enlightiks
Dec 16, 2016
—
Enlightiks acquired by Practo
Insta Health
Sep 14, 2015
$12M
Insta Health acquired by Practo
Qikwell Technologies
Sep 2, 2015
—
Qikwell Technologies acquired by Practo
Genii Technologies
Jul 9, 2015
—
Genii Technologies acquired by Practo
Filho
Apr 23, 2015
—
Fitho acquired by Practo
what is Practo history?
Practo is a Bangalore-based healthcare startup founded in 2008 by Shashank ND and his classmate Abhinav Lal. They completed their graduation from National Institute of Technology, Suratkal (Karnataka). In 2008, Shashank’s father had to undergo knee surgery. He wanted to consult with another doctor before that but, he couldn’t easily find the old medical records to show him. He addressed this as a huge problem that many patients might be facing. It could be a critical issue in urgent medical cases. So, he got an idea and discussed it with Abhinav to develop a digital solution for people to maintain their health records online and get medical consultations from anywhere.
What is Practo Business model?
Practo has two distinct products, with their revenue models: -Healthcare Provider/ Doctor facing practice management software, sold as a subscription-based SaaS product. -Practo Ray is offered at two price points, Rs. 999 and Rs. 1999 per month. The premium plan also includes a cloud telephony-based IVR system for doctors.
ITC Case Study | Business Model (ITC Marketing Strategy)
2 Minute Summary
ITC Limited is an Indian multinational conglomerate company headquartered in Kolkata, West Bengal. ITC was started on 24 August 1910. The name of the company was the Imperial Tobacco Company.ITC business model was to sell cigarettes and tobacco And Expanded in Nepal in 1985. In 1974 they abbreviated their name to I.T.C Limited. ITC is one of the major players in the hotel sectors. The journey of their hotel industry started in 1975. And today they have 100+ hotel chain. Also, They started a couple of business under the ITC Group(Full Detail in Blog). ITC has more than 40 Lakhs farmers associated with them in their E-Choupal concept. The man behind ITC is YC Deveshwar joined in 1968. Also, He recognized with many awards. Also, there is much more detailed information in the Blog.
Have you ever wondered how the Indian Tobacco Company (ITC) became a leading FMCG Company in the market?
Yes, you got it right ITC was started as a tobacco company.
Here’s an ITC case study to cater to all your doubts!
Now, ITC stands out to be a key player in the FMCG industry.
Be it the sun feast in the biscuits & Ashirvaad aata in the flour category, all have a separate place in our hearts!
Let’s find out the journey of the tobacco company and their transformation into an FMCG company.
This ITC Case Study will help us in learning their business model, history, strategic management & much more.
What’s in it for me?
Let’s take an insight into what this ITC case study is all about
Sivakumar Surampudi: Divisional Chief Executive of the Agri-Business Division
Sanjiv Puri: President of FMCG Businesses
Rajiv Tandon: CFO
Yogesh Deveshwar: CEO
Anand Nayak: Head of Human Resource Development
Initial Years
ITC Limited is an Indian multinational conglomerate company headquartered in Kolkata, West Bengal. ~Wikipedia
Let us start this ITC case study & see how everything started:
ITC was started on 24 August 1910 in Calcutta (now Kolkata).
The name of the company was the Imperial Tobacco Company.
ITC business model was to sell cigarettes and tobacco. They ran their business in a rented building.
ITC manufactured their products and hired services from outsiders for packaging & printing of their products.
Gradually the demand for their products started rising.
In 1925 they established their own factory in which they started their own printing and packaging of the products.
This can be said Strategic Backward Integration.
It means ITC started producing segments internally of its supply chain.
In 1926 they bought a building in Chowringhee (Now J.L. Road) for Rs.3, 10,000.
The building in Chowringhee is now called ‘Virginia House’- Headquarters of ITC.
In 1970 the name of the company changed from Imperial Tobacco Company to India Tobacco Company.
In 1974 they abbreviated their name to I.T.C Limited.
ITC is one of the major players in the hotel sectors. The journey of their hotel industry started in 1975.
In 1975 ITC acquired a hotel in Chennai which was rechristened ‘ITC- Welcome group Hotel Chola’ (now renamed My Fortune, Chennai).
Today, ITC has more than 100 hotel chains which are further divided into 4 sectors-
Luxury Collection
Welcome Hotels
Fortune Hotels
Welcome Heritage
ITC is also expanding globally. There are various projects of ITC that are running in countries like Sri Lanka, Dubai, etc.
ITC diversification strategy
Now, ITC was a big brand. In 1979 they diversified their business & started with the business of manufacturing paper boards.
They created a separate company for the paperboard business namely ‘Bhadrachalam Paperboards Ltd.’
They were performing well in India and it was now time to expand overseas.
In 1985 they started their cigarette and tobacco business in Nepal.
Later on, in 2002 it became the subsidiary of ITC Limited and was named as Surya Nepal Private Limited.
In 1990 ITC acquired Tribeni Tissues Limited (TTL). It was the same company which manufactured paper for their cigarette business.
Earlier they outsourced paper and now they started in house production of the same.
In 2002 ITC merged Bhadrachalam & TTL and made it a single group.
In 2004 they acquired another paperboard industry BIPCO. It was done to reduce their lead time due to the increased demand for their products.
strategy of itc enhanced its customer service.
They also entered into the business of exporting the garments.
AGRICULTURAL ENTRANCE OF ITC: E-Choupal
E-Choupal business model is of very great significance.
In 1990, ITC stepped into the agricultural sector. They had an advantage of excellent sourcing capacity.
They started with the concept of E-Choupal.
It enabled the farmers to sell their product with the help of internet.
It helped ITC to maintain an inventory with them which helped them in making one of the largest global exporters.
Today, ITC has more than 40 Lakhs farmers associated with them.
E-Choupal started from Madhya Pradesh where ITC partnered with soya bean farmers.
This initiative by ITC totally revolutionised the agricultural sector.
The farmers had easy access to mandi prices, good farming practices, and order placement for agricultural inputs, etc.
There are approx. 6100 e-Choupal that are currently functioning in more than 35000 villages in 10 states.
E-Choupal eliminated the middleman who exploited the farmers with their discriminatory practices.
ITC ENTRANCE INTO STATIONARY: ITC Classmate
Before, entering the stationary sector ITC made some changes in their names.
Indian Tobacco Company (I.T.C) was renamed to ITC.
The dots were removed i.e. the abbreviation was now the name of the company.
This was done to eliminate tobacco from their name as they wanted to enter into the stationary market.
In 2003 ITC started with Classmate.
ITC Classmate grew very rapidly. Many students started purchasing classmate’s notebooks and registers.
Today, the classmate is one of the premium brands in the notebooks.
In 2007-09 classmate came up with Practical Books, Drawing Books, Geometry Boxes, Pens, and pencils.
ITC ENTRANCE INTO CLOTHING: WILLS
In 2002, ITC entered into the clothing world also.
In India, they launched their trial run for the brand during the late ’90s.
Officially, ITC came up with their own brand in 2002. The name of the brand is Wills.
Today, Wills is a very premium brand with a variety of clothing.
ITC started wills which included only the sportswear. But gradually it became a very recognized brand & it offers a variety of clothing.
Wills also sponsors many fashion weeks.
Wills Lifestyle Fashion Week has gained recognition from buyers and retailers as the single largest B-2-B platform for the Fashion Design Industry.
OTHER BUSINESSES
ITC Business Model is not only limited to its cigarette & tobacco industry. There is much more to it:
-Branded Packaged Foods– In 2001 ITC launched their packaged food products. The packed food was launched in the name of Kitchen of India.
-Other foods– In 2002 ITC launched their candies like Candyman and Mentos. They also launched Ashirvaad aata in 2002.
In 2003 ITC also launched Sunfeast which marks a great presence in the FMCG sector.
In 2007 ITC came up with Bingo. We must have had Bingo mad angles once.
In 2010 ITC launched Yippee in competition with its rival Maggie by nestle.
In 2014 ITC came up with chewing gums and juices.
In 2015 ITC also launched their ghee in the name of Ashirvaad Ghee.
In 2016 they launched chocolates, coffee beans, and Master Chef Masalas range.
The master chef masala range were not ordinary spices. They were of premium quality with high essential oils content.
This was all done through E-Choupal. They used e-Choupal very strategically. They exported and manufactured the products from E-Choupal
In November 2017 ITC launched their vegetable stores in the name of farm line potatoes.
ITC started its food division in 2001. Today they have totally transformed this food division sector with their strategic diversification of business.
-Aggarbattis & Safety Matches-In 2002 ITC launched its Aggarbattis and safety matches. Mangaldeep Aggarbattis is of ITC.
-Personal Care Products– In 2005 ITC entered the personal care segment. You must have heard of Fiama Di Wills, Vivel Soaps, Supriya are all part of ITC.
In 2013 ITC came up with Engage Bodysprays
In 2015 ITC acquired the Savlon Company, an alternative of Dettol.
In 2017 they also acquired Charmis Face cream company.
MAN BEHIND THE ITC EMPIRE
By now, a question must have stuck on your mind that who is the person behind such success of ITC.
His name is YC Deveshwar. Mr Deveshwar joined ITC in 1968. He joined ITC straight out of his college.
YC Deveshwar was one of those rare examples who transformed the business of ITC, making it a huge success.
The endless list of rewards is evident in his hard work and mindful thinking-
-Was awarded Padma Bhushan
-Was awarded top India’s CEO by Forbes.
-Ranked 7th on world’s best CEO’s
-Served for the longest period (23 YEARS) as CEO in India for ITC
Mr Deveshwar who joined ITC in 1968, became the director in 1968.
Later, he became the CEO and Chairman in 1996.
In just sixteen years, he joined the Board of Directors.
These achievements show the role Mr Deveshwar played in nurturing ITC, making it a huge success.
Mr Deveshwar served Air India during 1991-94. This is the reason behind ITC’s slow growth during the above mentioned years.
ITC and YC Deveshwar were very synonymous, indeed he was a legend.
Sadly, Mr Deveshwar died on May 11, 2019. It was under his leadership that the company transformed from a cigarette major to an FMCG giant.
PM Modi also tweeted,” Shri YC Deveshwar made a strong contribution to Indian industry. His efforts helped ITC become a professionally-run Indian company with a global footprint. Saddened by his demise. My thoughts are with his family, friends and the ITC group in this hour of grief.”
GOLD FLAKE VS GODFREY PHILIPS ISSUE
In the absence of Mr YC Deveshwar, when he was serving for Air India during 1991-94, a new cigarette brand emerged with the name of Godfrey Philips.
It was trying to enter into the territory of Gold Flake which was an already established market.
The prices of Godfrey Philips were strategically kept low, to grab the market share of Gold Flake.
To stop this intruder, ITC launched a similar variant of Gold Flake which was cheaper than the original name.
They divided it into two categories Gold Flake Filter and Gold Flake King.
The former was cheaper than the latter one.
This not only helped ITC in diversifying their product line but also helped in retaining their market share.
ITC TIMELINE
1910
ITCL(Imperial) established in Kolkata
1925
ITC’s Packaging and printing business was set
1953
Imperial converted into a public limited company
1971
It set up a marine product export division.
1974
The company changed its name to ITC Ltd.
1975
ILTC became a part of ITC
1975
Launched Hotel Business
1986
Established ITC Hotels as a separate division.
1990
ITC set up the Agri-Business Division
1994
Commissioned Mc. Kinsey to study their business
2000
e-Choupal initiative in Bhopal with Soya farmers
2000
ITC launched ‘Expressions’
2000
ITC launched ‘Lifestyle’
2000
ITC InfoTech
2001
ITC formed the food division
2002
ITC entered the safety match business
2005
ITC entered Essenza Di Wills
ITC ANALYSIS (HOW ITC BECAME A HUGE SUCCESS)
Let us make a conclusion of this ITC case study.
According to me following are the factors that helped ITC in gaining such market capitalization & immense success.
A) Sourcing Capability– ITC has strong sourcing capabilities. With the help of various sources, ITC was able to extend its business in different sectors.
They entered into FMCG after establishing a strong base in the agricultural sector.
The wheat from the agricultural sector held in establishing a market for the Ashirvaad aata. Similarly, ITC used its various sources very effectively and efficiently.
B) Effective Brand Utilisation-After getting recognized in the agricultural & FMCG sector, ITC used its established brand name for entering into the stationary market.
They introduced classmate by ITC which helped them in grabbing a good market share.
ITC business model was to sell cigarettes and tobacco. They ran their business in a rented building. ITC manufactured their products and hired services from outsiders for packaging & printing of their products.
What is strategic analysis of itc
strategic analysis of itc(How it become huge) A) Sourcing Capability B) Effective Brand Utilisation C) Related Businesses D) Role of Management E) Focus on Sustainability F) Meeting Corporate Social Responsibility (CSR)
Linkedin is the world’s biggest professional network. It has both Free and Payment models. In May 2003 it received Searies-A Funding form Sequia Capital and the list goes on. In 2011 they launched their IPO nad then in 2016 Microsoft acquired it. It helps us to build connections that Might help us in our professional life.More than 65% of the revenue is generated by Talent Unit which helps companies to recruit employees. Also they provide Ads service on their platform but the rate of it is high as compared to other social media platforms as it’s conversion rate is also high. Data Management Softwares are provided and also have premium Subscription which provides additional services. It Financials are also incuded in the blog and much more.
Are you a professional?
Have you ever searched for jobs on LinkedIn?
If yes then have you wondered how the Business Model of LinkedIn works?
Do you want to know?
We have got all covered for you!
What’s in it for you?
WHAT IS LINKEDIN?
Linkedin is the world’s biggest professional network.
As we use Facebook to search for our friends, their activities etc.
On LinkedIn, we look upon the professional lives of our friends, colleagues etc.
It includes their education, job positions, experience, and the companies they are working in.
LinkedIn works on a freemium business model.
It gives some services for free and some for a payment.
In my opinion, anyone who wants to grow in professional life should have a LinkedIn profile.
ABOUT LINKEDIN
Business Model of LinkedIn was founded by Reid Hoffman and founding team members from PayPal and Socialnet.com.
The idea was to create a network where people could meet professionally.
Timeline of Events
May 2003 – LinkedIn received Series-A funding from Sequoia Capital.
August 2004 – It had a user base of 1 million.
March 2006- LinkedIn’s First month of profitability.
April 2007- The user base increased to 10 million users.
February 2008 LinkedIn’s mobile version was launched.
2011 The IPO of LinkedIn was launched in New York Stock Exchange.
2016 Microsoft acquired LinkedIn
HOW LINKEDIN WORKS?
Create a LinkedIn Profile
Firstly, you need to register and create a profile page.
They would ask for basic personal information during registration.
It includes your name, E-Mail ID, location, current employer and education.
Then you’ll be prompted to fill out more detailed information on your profile page.
LinkedIn Contacts
The second step is to search out and connect with other members of the site.
LinkedIn provides several methods for searching out contacts:
Upload your e-mail contacts
Colleague search
Classmate search
Name search
Advanced search
LinkedIn Connections
You should gain access to your connections’ connections.
The people who are part of your network are called your “connections.”
Connections imply that you know the person well.
It also implies that they’re a trusted business contact.
To turn a contact into a connection you need to invite that person to join your network.
After this, your LinkedIn profile gets ready.
You can optimize your profile by adding your experiences and expanding connections.
Content can be published and shared on LinkedIn
These things increase your visibility.
SUCCESS STORY OF LINKEDIN
LinkedIn gained traction by focusing first on the Silicon Valley tech scene.
Upon launch, the founders invited the professional connections.
They were from their previous work, in and around Silicon Valley.
Hoffman says, “We started slowly in the first few days because we wanted to make sure the systems worked.”
More and more members of the tech community joined LinkedIn.
The network effect took hold and the site became the place to connect and access resources.
It also made it easier to stay in touch with established connections.
LinkedIn Business Model made it a must-have network for Valley employees.
From there it spread outward through the connections of the people on the platform.
MARKETING STRATEGY OF LINKEDIN
LinkedIn’s growth story is an instructive one.
It is willing to experiment with a variety of growth strategies.
They are focussed to find what makes the platform valuable.
LinkedIn has continued to evolve.
It has also kept the primary value of the experience intact.
This is not an easy task.
They tested everything.
LinkedIn Business Model dabbled in the concept of contact importing.
When people signed up for LinkedIn, they were asked about their current company and title.
Over 90% of people answered this question.
This information was used to engineer the Reconnect Flow.
Once new users signed up, they were presented with the people at their current company.
They are the ones who are already on LinkedIn.
This helps to establish connections with them.
After some time, LinkedIn added another question into the new user flow.
It asks them about where they used to work.
Again, they presented the new users with a list of potential connections.
Advantage -:
It allows users to connect with contacts and built out the new user’s profile.
These efforts combined to increase LinkedIn’s virality in a big way.
Pageviews increased by 41%,
searches increased by 33%,
38% more positions listed on profiles.
Virality was not arrived at by accident.
It was actively tweaked, tested, and encouraged.
This is also known as a Double Viral Loop.
New users invite more new users and also engage old users.
This brilliant technique made two viral loops happening at once.
Double viral looping converts the customer into a business representative.
He helps the company in spreading the content.
He also becomes the consumer of the product or service.
Viral marketing is one of the efficient methods to spread the product across the world.
It uses the customers as the marketing agents within the social networking channels.
Viral marketing can be used to reach a wide customer base.
Virality re-engages inactive users.
It is a cheap and effective method of marketing.
So this was a smart move on LinkedIn’s part!
LINKEDIN BUSINESS MODEL
Talent Solution
As the name suggests, talent solutions help companies to recruit employees.
This unit helps recruiters to search for good talent.
It fills up the vacant job positions effectively.
More than 65% of the revenue of LinkedIn comes from this unit.
Marketing solution
This unit of LinkedIn helps companies to market their product on the website.
The main component of marketing solutions is LinkedIn ads.
LinkedIn ads are costly but have many benefits.
We know that the users of LinkedIn are professionals or businessmen.
The companies who want to target a specific audience use LinkedIn Ads.
Benefit- the conversion rate on LinkedIn ads is very high.
Sales Solutions
LinkedIn provides advanced software’s to manage data related to sales of the business.
It works on the premise of CRM
For example -:
You have a database of approximately 10,000 people.
The sales’ employees will call them and pitch the product of the companies.
This software helps the companies to effectively manage their sales data.
Suppose there are 4 employees under a sales manager.
With the help of this software, the manager can check upon them.
He/ She will check their conversion rates, amount of sales made and products sold by them.
Premium Subscription
Premium Subscription offers premium features at a certain cost.
It helps recruiters, job seekers, businesses and sales professionals.
There are 4 components of Premium Subscription-:
Premium career Subscription
This unit gives personal guidance to job seekers.
It provides resume builder to those who do not how to build it themselves.
A premium user can chat with recruiters directly.
You can see who is visiting your LinkedIn Profile.
This feature directs you to open roles where you would be a great fit.
It is based on your skills, experience, salary requirements and education.
Lynda is a learning platform where you have to pay some amount.
After payment, you can learn anything you want.
You get a certificate when you complete a certain course.
Slideshare
Slideshare was acquired in 2013.
Ideas are given to make a PowerPoint presentation.
It also gives the option of publishing self-made presentations and gain followers.
INVESTMENTS
LinkedIn has made 5 investments.
Their most recent investment was on Apr 3, 2018.
They invested $50M in SalesLoft.
Apr 3, 2018
SalesLoft
—
Series C – SalesLoft
$50M
Nov 8, 2017
Cornerstone OnDemand
—
Post-IPO Equity – Cornerstone OnDemand
$300M
May 23, 2017
G2 Crowd
No
Series B – G2 Crowd
$30M
Jun 25, 2015
STAND Technologies
—
Seed Round – STAND Technologies
$2.3M
Nov 6, 2014
Confluent
—
Series A – Confluent
$6.9M
FASCINATING FACTS ABOUT LINKEDIN
LinkedIn had 610 million registered members in 200 countries in March 2019.
The total monthly active users are 260 million.
61 million users are senior-level influencers.
40 million are in decision making positions.
56% male users and 44% female users.
After the US, India, Brazil, Great Britain and Canada have the highest number of LinkedIn users.
It is considered the best in B2B.
LinkedIn has 87 million millennial (15-34 yrs. old).
11 million millennials are in decision making positions.
LinkedIn makes up more than 50% of all social traffic to B2B blogs and websites.
91% of marketing executives list LinkedIn as the top place to find quality content.
1 million users have published their articles on LinkedIn.
About 45% of LinkedIn readers are in upper-level positions.
41% of millionaires use LinkedIn.
An average user spends around 16-17 minutes on LinkedIn.
90% recruiters daily track candidates on LinkedIn.
70 million users on Slide share.
26 million companies are on LinkedIn.
Approximately 16 million job posts are still available.
FAQ’s
What is FAQ?
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What is FAQ?
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.
Business Model of Linkedin?
Linkedin makes money by Talent Solution, Marketing solution, Sales Solution, Premium Subscription.
