Question

pick an entrepreneurial firm, provide details of its business model. Explain the young venture’s current situation, or its connection to a current entrepreneurship trend.

minimum 1000 words

Answer 1

I will be taking OYO rooms as a venture which I will discuss here, Oyo Rooms, also known as Oyo Homes & Hotels, is an Indian hotel chain. It is the world's third-largest and fastest-growing hospitality chain of leased and franchised hotels, homes and living spaces. Founded in 2013 by Ritesh Agarwal, OYO initially consisted mainly of budget hotels.

BUSINESS MODEL

OYO Business Model used to be a hotel aggregator. The customers used to buy the services from the brand OYO rooms and didn’t care who the partner was. Just like Uber, OYO provided rooms with standardized quality and price.

OYO Rooms have a network of hotels that are currently operating in 5,000 cities in India, Malaysia, UAE, Nepal, China, and Indonesia. OYO started off its operations by building its business model around the aggregator business model.

Previously, the company is in organizing the partner with hotels, lease some rooms, and sell them under its own brand. The main focus of the OYO rooms is to provide quality services to their customers. They make the partners provide services at predetermined standards to maintain the brand image while they make them more visible to their user-base.

OYO uses an aggregator business model. Aggregator business model is a network business model in which the firms collect information about a particular industry that is unorganized, and acquire them as partners and sell their services under OYO’s.

OYO Rooms’ business model is similar to the aggregator business model. OYO has some essence of the franchise business model also. OYO room organizes those hotel rooms under their brand name and OYO partner hotels provided standardized service to customers of those rooms. Bookings of these rooms were made through the OYO’s website and mobile application.

Now the Oyo rooms have performed some changes in their business model. Now OYO doesn’t lease the hotel rooms, OYO asks the hotel partners to operate them as a franchise. OYO boasts a 100% increase in revenue to their partner hotels and they have good brand equity.

OYO Rooms provide quality hotel rooms to visitors who stay at different places around India. They have partnered with hotels and hotels works under their name.

OYO strategies:

Only after 5 years of establishment, OYO has expanded in more than 330 cities. OYO did not achieve success overnight, Oyo works hard to get this success. Here are the 4 strategies that made OYO successful:

1. Assets Light strategy:

OYO implemented is assets light strategy and doesn’t own a hotel but takes them on lease and invest a small amount of money to make it as per the standard of the company. This strategy is popular among startups because the business only has to own few capital compared to the value of its operation. Small hotels were 90% vacant and nobody was going there, OYO partnered with these small hotels instead of building them. Its saves a huge amount of money for the OYO room.

2. Takes full responsibility for Customer experience:

OYO takes the end to end responsibility of customer experience and considers all the requirements that the customer may have. Customers can have requirements such as Searching hotels, booking hotels, easy check-in, easy checkout, and world-class experience. OYO spends a small amount of money to change the look and feel of the hotel for a better customer experience.

3. Focus on Predictability:

OYO realized that data is an important element to gain and satisfy customers. OYO collects the data from the consumer and understand what are consumer likes and dislikes. OYO is focused on making the consumer of the service and create repeatability through predictability in service.

4. Use of technology for Speed and Scale:

OYO is focused on making a user-friendly mobile application. Through the app, the user can book a room in just 3 clicks. The company created an app for customers and for its partners. Oyo wants to minimize the use of human resources through technology. OYO also created a dedicated team of data science and looking forward to investing more money in innovation and Research & Development.

Current Situation

OYO Rooms is having about 1,200 employees at an average of 25,000 Rs. per month per employee. That will make about 3 crores per month approximately.OYO is spending a huge amount on advertising such as online, TV, Radio and other mass media channels and on other marketing campaigns. TV ads can cost between 30 lacs to 3 crores per advertisement and the total ad run budget could have been anywhere between 20 to 100 crore. OYO is spending a large amount of money on online advertising and on Google as well. This will be estimated at around 1-2 crore per month.

OYO rooms have to face the losses even after providing the hotel’s rooms at such a great discount. Actually OYO invests his money in market segments to attract the customers. OYO rooms use both mass media and digital marketing to engage their audience to retain their customers and to attract new. OYO room has a strong social media presence on Facebook, Twitter, and other social media platforms. This helps OYO to keep their audience engaged with new offers and campaigns. The bookings can be easily made through the website and mobile application and in this application customer book rooms at predetermined prices by Oyo.

This business is in good shape.