Zomato Strategy

Strategic Management II Caselet

Strategy Implementation Challenges of Zomato.Com

Submitted to: Prof Sabyasachi Sinha, IIM Lucknow Submitted by: by: Group E2, Section E

 Tushar  Tushar Gupta #aina $%rawa& 'ansneet (a&ra *asu +ani  ustin ames Mathew Sudheer Tatikonda

Introduction

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In August 2014, Deepinder Goyal, Zomato’s CEO was sipping o!!ee sitting on t"e #alony o! "is  #ungalow$ %e was deeply engrossed in e&aluating t"e long term strategy o! "is ompany Zomato$ '"ile t"e ompany "as #een seeing a strategi s"i!t !rom #eing a domesti to a glo#al player, it "asn’t #een wit"out its due s"are o! osts and "allenges$ Aggressi&e o&erseas e(pansion "as ost a lot o! money already$ )oreo&er, Zomato is growing at an e(ponential rate and ontinuous inno&ation "as ome out as a ma*or "allenge !or t"e ompany$ +unds do not grow on trees, as is t"e ommon saying, and Zomato needs to asertain its priorities soon$

Background '"ile woring wit" -ain and Company, Deepinder Goyal started +oodie#ay$om . a we#site t"at posted "undreds o! restaurant menus, re&iews o! eating *oints and reommendations$ It was o!!iially laun"ed in /uly 200 wit" in!ormation and menu ards o! 1200 restaurants in Del"i$ ana* C"adda" and Gun*an atidar, olleagues o! Deepinder !rom II Del"i, de&eloped t"e data#ase !or t"e system$ 3ater ana* was to #eome t"e COO and Gun*an assumed t"e position o! CO in t"e ompany$ In August 2010, an*ee& -i""andani, t"e !ounder o! 5auri$om and an a&id +oodie-ay user, in&ested 61 million in Zomato as seed !und t"roug" "is ompany In!o Edge India 3td$ "e ompany t"en o!!ered !our additional rounds o!  !unding to Zomato, t"ere#y a7uiring 80$19 stae !or a total o! 628$4 million$ In 5o&em#er 2010, t"e !ounders realised a need gap$ "ey o#ser&ed t"at people in malls "a&e little nowledge a#out t"e restaurants t"ere$ %ene, t"ey deided to de&elop restaurant appliation w"i" an  #e aessed on smart p"ones$ "ey "ange t"e name to Zomato and laun"ed Zomato appliation !or  Google Android$ It "as #een downloaded o&er 1 million times !rom Google lay tore sine t"en$ Zomato now listed 10,800 restaurants in :; ities$ "e in!ormation on restaurants inluded "ig" resolution p"otos, real re&iews and looalie menus$ Zomato rolled out plans to dou#le its rea" !rom 11 ountries to 22 ountries in t"e ne(t two years$ Its main soure o! inome is !rom t"e we#site, despite t"e  popularity o! its mo#ile app$

Zomato’s Current Business Strategy Customer’s Point of View Zomato’s o!!ers to t"e ustomers are< pro&ides t"e data#ases o! &arious restaurants wit" in!ormation lie !ood menu, pries, #udget onstraints, ontat related, woring "ours, loation o! restaurant and more use!ully, t"e re&iews !rom ot"er users$ It also pro&ides t"e option !or mo#ile apps !or almost all mo#ile  plat!orms$ Zomato "as a "uge presene o&er soial media w"i" "as !urt"er ontri#uted to app usage$ Restaurant Owner’s Point of View =estaurants t"roug" t"is route "a&e got aess to a large pool o! ustomers registered on t"e app, w"i" is growing at an e(ponential rate$ Zomato pro&ide restaurant owners a plat!orm !or online &isi#ility$ "is is  partiularly use!ul !or many small restaurants w"i" an’t a!!ord a we#site t"emsel&es or didn’t "a&e mu" #usiness due to loation draw#as$ "e ontats in!ormation on we#sites "as inreased t"e "ome deli&ery orders to near#y plaes$ "e ustomer interation "appens in t"e !orm o! !eed#a and re&iews$ =estaurants an en*oy additional &isi#ility #y Zomato’s dediated mareting ampaigns, #ut t"is omes at a ost$

Zomato’s Point of View

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Zomato sells ad&ertising spaes on we#sites to restaurant owners and mae reommendations to restaurants #ased on "anging trends > sales per!ormane analysis$ Zomato also initiates &arious paid mareting ampaigns !or lients$  Product pricing which is sustainable, offering products with longevity an expanding operations in a calculated but committed manner are the ways through which Zomato  signal their desire for longevity.

HR Turnaround +or any startup a7uiring t"e rig"t talent is t"e most essential part o! t"e strategy$ A startup needs to attrat t"e rig"t minds to tae up leaders"ip positions so t"at saling up operations easy$ +or Zomato, t"e main "allenge was to "ire people in 2 spei!i domains, e"nology and 3eaders"ip$ Zomato ame up wit" inno&ati&e met"ods to "ire people in t"ese positions$ 1

Tria !eek"

o test an engineer’s te"nial sills, not many would agree t"at an "our’s inter&iew is enoug" espeially t"ose t"at "a&e #een looing !or a *o#$ )any ompanies also later reali?e t"at t"e talent t"ey "ired "as not  per!ormed as per e(petations$ )oreoe&er, Culture !it w"i" is an important aspet in a startup annot really #e tested in an inter&iew wit" time onstraints$ "us, Zomato laun"ed t"e rial 'ee program$ In t"is wee, students and engineering graduates are in&ited to wor on li&e pro*ets wit" t"e Zomato e" team$ All appliants stay as guests o! Zomato in Del"i and t"eir e(penses lie tra&el and !ood are also taen are o! #y Zomato$ "is maes t"e program more aessi#le to all t"us, #ringing in t"e rig"t talent !rom all o&er$ It "elps Zomato test t"e a#ility o! appliants to wor on real li!e pro#lems in a !ast paed en&ironment and t"eir !it wit" ulture$ Also, t"e appliants get a "ane to e(periene t"e ulture and li!e !or woring wit" Zomato$ #

$eaders%i& Program"

"is aspet o! t"e strategy aims at "iring people w"o "a&e owned t"eir own startups$ Zomato #elie&es t"at !ailing to grow t"eir #usinesses "as ena#led t"em to understand w"at "allenges a startup !aes$ Entrepreneurs possess a uni7ue sillset, t"ey are solution oriented, "ig"ly adapta#le and are !oussed deision maers$ As any startup !aes ups and downs, w"en woring at Zomato t"ese entrepreneurs an o&erome su" "allenges$ '"en Zomato went to international marets, it needed to ensure t"at its leaders are apa#le o! "andling t"e tass o! setting a #usiness !rom srat"$ Getting o!!ie spae, "iring, legal and regulatory "allenges all "a&e to #e taen are o!$ u" "ig" norms are set w"en "iring entrepreneurs$ "ey need to understand "ow to !it t"e o!!ering into di!!erent ultures and also "a&e t"e !le(i#ility to wor in any situation$ As Zomato is e(panding into new geograp"ies and entering into new maret$ It !aes "allenges o! "iring and managing a team$ Also, it needs to test i! t"e a#o&e two "iring models would wor !or all ountries$

'nowedge (anagement Zomato’s e(isting #usiness model is e(tensi&ely dependent on aggregating nowledge regarding loal restaurants$ 'it" a no$ o! ey restaurant inlusions and international a7uisitions, Zomato is !aing "allenges wit" respet to regular updating o! t"ese menus$ "is re7uires o.ordination$ %owe&er Zomato "as a relati&ely !lat struture due to w"i" t"e sills an #e passed on in an easier !as"ion$ Anot"er ey "allenge w"i" Zomato is e(peted to !ae is t"e inreasing ustomer re7uirement o!  sear"ing !or restaurants ser&ing a partiular dis"$ +or e(ample a ustomer may want to e(plore t"e restaurant options w"ere a dis" o! "is "oie is a&aila#le$ "is is possi#le only #y "a&ing strutured and odi!ied data !or all t"e dis"es ser&ed in a restaurant$ Zomato made an e!!ort to satis!y t"is re7uirement t"roug" manual entry o! !ew t"ousand menu ards in all t"e ities !or w"i" t"ey pro&ided in!ormation on

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t"e we#site$ %owe&er t"e pro#lem o! "ig" "urn rate in t"e restaurant industry reates omple(ities in manual entry mode o! atering to t"e ustomer re7uirements as it re7uires onstant updating and entering o! num#er o! new menu ards$ Zomato is woring upon reation o! intelligent optial "arater  reognition systems @OC= w"i" will supplement t"eir urrent dis" ontology$ %owe&er, t"e *o# #eomes toug"er and ompliated gi&en t"e "ig" !re7ueny o! misspellings in t"e menus and t"ose resulting due to t"e OC= me"anism$ Impediments in in!ormation management are !urt"er ompounded as Zomato aims to o&er all streets in t"e ities w"ere it "as its presene$ o attrat ustomers t"e rele&any and ompre"ensi&e nature o! t"e re7uired in!ormation an’t #e ompromised wit"$ Zomato’s data olletion teams in ea" ity maes daily &isits to ollet !irst "and data$ Zomato’s international e(periene "as #een instrumental in maing it reali?e t"e importane o! own resear" and data olletion$ Also, #e!ore maing a laun" deision Zomato sends out data olleting teams !or souting t"e maret$

Inno)ation at Zomato Zomato operates in a ni"e segment #y o!!ering restaurant data#ase to ustomers along wit" t"e menu, t"e loation and per"aps t"e most important, re&iews$ One an ponder o&er "ow a player operating in a ni"e segment #e so suess!ul t"at t"e segment itsel! "as started gra##ed eye#alls and is #eoming main. stream$ "is "as #een made possi#le #y t"e strategi inno&ations t"e we#site "as arried o&er t"e years o!  operation$ A :;0 degree turnaround strategy was employed in t"e sp"eres o! )areting, Operations and I in!rastruture$ '"ile many o! t"e inno&ations an #e termed as proati&e, Zomato managed to !ind reati&e solutions to some o! t"e ma*or pro#lems pre&alent in t"e segment$ (arketing

-eing a ni"e player, it is &ery important t"at t"e masses are aware a#out we#site and its o!!erings$ 5ot only did Zomato a"ie&ed t"e same, it esta#lis"ed ad&ertising as its ore ompeteny$ "ey employ #ot" -elow t"e 3ine @ad&ertising and B ads to remain at top o! t"e onsumer’s mind$ )ost o! t"eir  ampaigns went &iral due to reati&ity in t"eir ads, #e it print, soial media or tele&ision$ As a result, Zomato "as #eome synonymous wit" t"e term restaurant data#ase’$ )ost o! t"e ot"er players do not "a&e any signi!iant presene online$ Zomato "as a ma*or presene on soial media i$e$ +ae#oo and witter$ There are two kinds of people in the world’  "as #een t"e most suess!ul ampaign so !ar in terms o! ustomer engagement @ee *+%i,it 1$ Zomato #elie&e in Content is t"e ing’$ "ey ne&er  spam t"e wall wit" irrele&ant posts, reate ads around !ood, replies to ea" and e&ery user post and "a&e apps !or all t"e mo#ile plat!orms$ "e re.#randing in 2010 pro&ed to #e a ma*or "allenge$ +oodie#ay #eame Zomato due to i "a&ing t"e term e#ay’ in t"eir name and ii "a&ing reei&ed !unding #y In!oEdge o! w"i" large part was to #e used !or mareting$ "e ompany saw it as t"e rig"t time to adopt a di!!erent identity and lay out a !ormal organi?ational struture and ulture$ "e ompany was growing rapidly and a rule #oo "ad to #e !ollowed$ -ut Zomato lost many loyal ustomers and was a target o! a num#er o! "ate mails due to t"e name "ange$ )oreo&er, t"e sales team wasn’t aware o! t"e reason o! re.#randing and t"ere was widespread on!usion$ "e ompany didn’t do well in t"is regard, none o! t"e employees were in!ormed and t"ere was a !ear t"at t"ey were #eing taen o&er$ "ings "a&e #een mu" #etter lately$ O&erations

Zomato isn’t as in&ol&ed in intensi&e operations as a manu!aturing or +)CG !irm would #e$ "e "allenges #eing !aed #y Zomato are more o! growt" pangs’$ "eir operational strategy is to get t"ings done on priority rat"er t"an reating new proesses !or t"em to #e aomplis"ed$ ine, t"e teams are

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getting #igger and #igger in si?e, ontrolling t"em and in!using order in t"e "aos "as lately #een pro&ing di!!iult$ As t"e ompany is growing, a restriting or some inno&ation in operations di&ision may #e neessary$ )oreo&er, t"e ompany is !ollowing glo#al strategy and will soon #e open !or #usiness in ingapore and Du#ai$ %iring t"e rig"t people "as #een t"e "allenge$ A lingering 7uestion o! w"et"er to "ire Indian !or o&erseas operations or "ire t"e loal personnel w"o may pro&e to #e di!!iult to ontrol, "as always #een at t"e #a o! t"e mind$ )eeting demand !or new !eatures on t"e we#site !rom t"e ustomer "as #een anot"er #ig "allenge$ "e idea may not #e a strategi !it !or t"e ompany #ut t"ey "a&e to t"in "ard on t"e issue i! a ma*or "un o!  ustomer demands t"e same !eature$ One su" o!ten re7uested !eature is aepting orders online on #e"al! o! restaurants’$ '"ile Zomato a!!irms t"at t"ey possess t"e neessary te"nial sills and sales personnel to implement t"e same, operational "allenges su" as ustomi?ation o! !ood as per t"e ustomer and ad"ering to promised deli&ery time are yet to #e wored upon$ IT Infrastructure

Zomato’s we#site is &isited #y 20 million !oodies e&ery mont"$ "e we#site pro&ides t"em inno&ati&e !eatures su" as opportunity to s"are t"eir stories #eing a !oodie and allows t"em to reate and s"are t"eir   personal !ood diary$ "e we#site automatially detets t"e user’s loation and "as a ustomi?ed page !or  e&eryone @see *+%i,it #$ "ere is an ati&e #log updated #y t"e CEO "imsel!$ 5ew !eatures are added almost e&ery wee$ u" large tra!!i "as to #e #aed up #y a ro#ust in!rastruture and Zomato is onstantly woring towards meeting up to t"e "allenges$ As t"e we#site is growing #igger, ustomer re&iews are #eoming all t"e more important$ A re&iew an mae or #rea a restaurant’s #usiness$ 3ately, t"e we#site is seeing a lot o! spam, a lot o! restaurants are  planting !ae re&iews$ Zomato "as to e&ol&e its I system !or "a&ing #asi automated spam !ilters to sop"istiated pattern mat"ing algorit"ms$ All t"is will o! ourse in&ol&e osts$ )ost o! t"e ompanies o! Zomato’s si?e do not e&en are a#out load times o! t"eir we#sites$ -ut Zomato is planning to lay in!rastruture in e&ery ountry w"ere it operates, so t"at load times are !aster and users an get !ood !aster$ Cost is again a ma*or issue$

-inancia turnaround strategy of Zomato "ere are 4 ma*or soures o! =e&enue !or !irms lie ZO)AO