PROJECT ON

STRATEGIC MANAGEMENT

SAINTGITS INSTITUTE OF MANAGEMENT

KOTTAYAM

PROJECT PHASE
2&3

Submitted by:
Sachin Thomas George

Submitted to:
Mr . Subramoniam .k
Asst. Professor, SIM

Submitted on:
24-06-2020
 OYO Rooms
About the company
In 2012, Ritesh Agarwal launched Oravel Stays to enable listing and booking of budget accommodations.
After undertaking months of research and staying in various bed and breakfast homes, guest houses, and
small hotels across India, he pivoted Oravel to OYO in 2013.

OYO partners with hotels to give similar guest experience across cities. Shortly after launching Oravel
Stays, Ritesh Agarwal received a grant of $100,000 as part of the Thiel Fellowship from Peter Thiel.OYO
currently has o nver 17,000 employees globally, of which approximately 8000 are in India and South
Asia. OYO Hotels & Homes now identifies as a full-fledged hotel chain that leases and franchises assets.
The company claims to invest in capex, GMs to oversee operations and customer experience as well as
generating around a million job opportunities in India and South Asia alone. OYO has also set up 26
training institutes for hospitality enthusiasts across India.

Strategic analysis of Oyo Rooms

a. PESTEL FRAMEWORK OF OYO ROOMS

A PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a framework or tool
used to analyse and monitor the macro-environmental factors that may have a profound impact on an
organisation’s performance. This tool is especially useful when starting a new business or entering a
foreign market.

1. Political Factor
The political factors play a huge role in not only investment decision by transnational
corporations but also by companies such as – Oyo Vit. Political environment and other factors not
only impact the cost of doing business but also long term sustainability. Some of the political
factors are – governance system, democracy & institutions, military coup chances, probability of
armed conflict, law and order in market etc.
2. Economical Factor
Economic factors of a country and region have a direct impact on the potential attractiveness of a
given market. Some of the economic factors that Oyo Vit should evaluate both in the present
market and one in which it wants to enter are – inflation rate, GDP growth rate, disposable
income level etc.
 Inflation Rate – The inflation rate can impact the demand of Oyo Vit products. Higher
inflation may require Oyo Vit to continuously increase prices in line of inflation which
could lead to lower levels brand loyalty and constant endeavors to manage costs. Cost
Based Pricing could be a bad strategy under such conditions.

 Inequality Index / Ranking on Gini Index – Gini Index and level of inequality are a great
barometer for harmony and development of a society. If there is huge income inequality
in the society then the likelihood of conflict and crime increases. It can lead to
uncertainty and suppression of consumption in both short term and long term.

 Demand Shifts from Goods Economy to Service Economy – The share of services in the
economy is constantly increasing compare to the share of manufacturing, goods, and
agriculture sector.

 Price Fluctuations in both Local and International Markets – Compare to the level of
quantitative easing in last decade the prices of Oyo Vit products and prices of overall
products have remained sticky in the US market. Oyo Vit should consider the fact that at
deficit levels of United States in an emerging economy can lead to rampant inflation and
serious risks of currency depreciation.

 Employment Rate – If the employment rate is high then it will impact Oyo Vit strategies
in two ways – it will provide enough customers for Oyo Vit products, and secondly it
will make it expensive for Oyo Vit to hire talented & skillful employees.

3. Social factors :

Social factors such as demography trends, power structure in the society, women
participation in workforce etc have immense impact over not only the country's economy
but also on workforce talent availability and level of consumer demand.

 Gender Composition in Labor Market Oyo Vit can use gender composition of labor
market to understand the level of liberal nature of the society, women rights, and
women’s say in matter of societal issues and consumption decisions. The gender
composition of labor market is a good indicator of disposal income of household,
priorities of the households, and related needs.

 Attitude towards Health & Safety – The attitude towards health and safety is often
reflected in the quality of the products and cost structures of manufacturing processes.
Oyo Vit has stringent norms for health and safety norms so in emerging economies it
may have to compete with players who don’t have high cost structures that of Oyo Vit.

 Types of Immigration & Attitude towards Immigrants – Given the latest developments
such as Brexit and Immigrant detention on Southern border of United States. Attitude
towards immigration has come under sharp focus. Oyo Vit should have capabilities to
navigate under this hyper sensitive environment.
 Power Structure in Society – Oyo Vit should carefully analyze both - What is the power
structure in the society? How it impacts the demand in the economy. For example the
power structure in US economy is slowly moving towards the older generation as that
generation has higher disposable income compare to the younger generation.

 Attitude towards Leisure – Oyo Vit should conduct an ethnographic research to

understand both attitude towards leisure activities and choice of leisure activities.
Experience economy is one of the fastest growing segments both among millennials and
among baby-boomers.

 Demographic Trend – The demographic trend is one of the key factors in demand
forecasting of an economy. For example as the population of USA and EU is growing old
the demand for products mostly catering to this segment will grow. Oyo Vit should
consider demographic trends before new product developments and integrate features that
cater to this segment. As population is ageing it will require less tech intensive products.

 Attitude towards Savings – The culture of saving in US and China is totally different
where savings rate in China is around 30% , it is well below 15% in United States. This
culture of consumption and savings impact both type of consumption and magnitude of
consumption.

 Nature of Social Contract between Government & Society – Before entering into a
market Oyo Vit needs to understand the nature of social contract between government
and society. For example it has been extremely difficult for US companies to enter UK
health market as UK health system is a nationalized system and everything goes through
contracts at national level.

4. Technological Factors

Technology is fast disrupting business models across various industries. Some of the technology
trends that are impacting the macro environment are – developments in artificial intelligence, use
of machine learning and big data analytics to predict consumer behavior, growing importance of
platforms over service providers etc.

 Intellectual Property Rights and Patents Protection – Before entering new market Oyo Vit
should focus on the environment for intellectual property rights.

 E-Commerce & Related Infrastructure Development – As E-Commerce is critical for

Oyo Vit business model. It should evaluate the e-commerce infrastructure, technology
infrastructure etc before entering a new market.

 Research and Development Investment Levels – If there is high level of investment in

technology development sector then there are high chances of building a self sustaining
ecosystem that drives innovation. Oyo Vit can leverage such a situation to hire the best
people in business.
 Transparency & Digital Drive – Oyo Vit can use digitalization of various processes to
overcome corruption in the local economy.

 Likelihood of Technology Disruption – If the country is hub of technology companies

then there is a high chance of technology disruption among various industries. Oyo Vit
has to assess whether it can live with the fast pace of technology disruption in its
industry.

5. Environmental Factors

Environmental factors are fast gaining traction not only among consumers but also among
regulators and policy makers. Climate change and changing ecosystem is leading to the extinction
of more than 20% of species on the planet by the turn of this century.

 Corporate Social Responsibilities Culture – Are Oyo Vit present CSR efforts applicable
in the new market or does it needs to have new initiative to cater to the prospective
market.

 Focus & Spending on Renewable Technologies – How much of the budget is spend on
renewable energy sources and how Oyo Vit can make this investment as part of its
competitive strategy.

 Influence and Effectiveness of Environmental Agencies – The role of environment

standards enforcement agencies is critical in safeguarding norms. But often in emerging
countries these agencies delay the process as a tactic to extract bribes. Oyo Vit should be
aware of presence of such practices in a country.

 Per Capita and National Carbon Emission – What is the per capita carbon emission of the
country and what is the overall level of carbon emissions of the country. This will help in
better predicting the environment policy of the country.

 Environmental Regulation Impacting Absolute Cost Advantage Dynamics in the

Industry.

 Environmental Standards and Regulations both at National & Local Levels – Often the
environment policy at national and local level can be different. This can help Oyo Vit in
numerous decisions such as plant location, product development, and pricing strategy.

 Waste Management – What is the policy of waste management in the prospective market
and how Oyo Vit can adhere to the waste management requirements in that market.

6. Legal factors

Legal factors often govern – conditions to enter the market, laws to operate in the market,
and procedure to resolve any dispute with other stakeholders. If the legal system is not
 strong then Oyo Vit can face numerous challenges – from consumer petitions to
shakedowns from authorities.

 Adherence to Common Law – Is the country following common law which is uniform for
all parties – whether domestic or international. If there is arbitrariness in the judicial
process then Oyo Vit can’t be sure of the judgments.

 Data Protection Laws – Oyo Vit needs to assess what are the data laws in the country and
what it needs to do to comply with them. For example most of EU countries now want
the EU citizen data to be saved in EU countries only.

 Independence of Judiciary and Relative Influence of Government – The judiciary

independence often reflect both strength and credibility of the institutions in the country.

 Employment Laws – What are the employment laws in the country and are they
consistent with the business model of Oyo Vit. For example Uber employment system is
not consistent with French laws and it is facing challenges in the country.

 Transparency in Judiciary System & Processes – Transparency is essential for fair and
consistent decision making. If the process is consistent and transparent then Oyo Vit can
plan ahead with greater conviction.

b. PORTER’S FIVE FORCE MODEL OF OYO ROOMS

Oyo Rooms Another Unicorn In The Making Porter five forces reflects the competitive environment of an
industry. It is a strategic tool that is used to avoid or minimize the risk of losing the competitive edge that
the organization has and to ensure the profitability of the products in the long run. The company holds its
vision closely as it allows them to orientate its innovation in terms of choices regarding the investment
and strategies. Within the industry the businesses profitability is dependent upon the following forces:

 Competitive rivalry
 Threats of new entrants
 Threats of substitute
 Bargaining power of suppliers
 Bargaining power of customers

Structure of porter’s five forces analysis

Competitive rivalry
The competition among the firms help in identifying the lucrativeness of an industry where companies are
competing hard in order to maintain their power within the industry. The Oyo Rooms Another Unicorn In The
Making competition is moreover on basis of diversity, the development within the sector and the barriers
related to entrance in the market. The competitive rivalry is the analysis of the brands and the product, its
strengths and weakness along with the strategies, competitors and the share in the market.
Threat of substitute products
The Oyo Rooms Another Unicorn In The Making substitute products are an alternatives that are available in
the market at comparatively better prices. Such products prevail due to the technological and innovative
advancement. Due to which the products being produced by the companies that are already existing in the
market and is using the same technology are than replaced by the other company’s products that are
comparatively better in terms of price and quality and are being produced from sectors with significant profits.
The substitute products are dangerous as the companies are under constant threat of being replaced.

High threat of substitute leads to low profitability as it limits the industry profits by placing a price ceiling due
to the fear of being substituted by other product. Apart from this it also affect the growth potentials of the
industry as a whole but reducing the profitability margins. 

Bargaining power of suppliers 

Powerful suppliers possess more power to capture significant value for themselves by demanding high prices
while limiting the quality and the quantity of the product or services or by transferring the cost on the
participant of the industry. Many condition imposed by the suppliers generally include the increase in price
while compromising the quality and quantity

The Making Bargaining power of customers

The buyers having strong bargaining power can highly influence the profitability of the suppliers operating in
the market by imposing condition that are not much favorable for the suppliers in terms of price, quality or
service. Therefore choosing clients often become crucial for the organizations as to avoid the situation of being
highly depended on the buyers. The level of interest and concentration of buyers toward the product gives
them more or less power.

Powerful buyers could flip the side of the powerful supplies by forcing the prices to move downwards and by
demanding high quality and services by creating a competition between the participants in the industry on the
basis of price and quantity. Oyo Rooms Another Unicorn In The Making Customer are deemed strong if they
contain negotiating leverage specifically if the industry is sensitive to price, the buyers can pressure suppliers
for further price reductions.

The customer are assumed to have strong buying power in case:

If the number of buyer are limited or each of the buyer purchases large quantity relative to the size of the
suppliers.

The products in the industry are standardized or are undifferentiated.

The cost of switching is comparatively low.

C. INTERNAL ANALYSIS USING VRI FRAMEWORK

VRI Framework of oyo rooms
The VRI Framework or VRI analysis is a strategic management tool that is used to analyse a firm’s internal
strengths and resources. It helps identify which one of its internal strengths and resources can be a source of
sustained competitive advantage. The analysis is based on the idea that a firm’s internal resources are a source
of sustained competitive advantage if they are valuable, rare, cannot be imitated by competition, and are
organised to capture value for the organisation. The VRIO analysis requires looking at a firm's resources based
on these 4 factors.
Based on the analysis, each resource can either provide a sustained competitive advantage, has a good
competitive advantage, temporary competitive advantage, competitive parity or competitive disadvantage. A
sustained competitive advantage exists when a resource is valuable, rare, non-imitable and organised. A good
competitive advantage occurs if it is valuable, rare, and non-imitable. A temporary competitive advantage
exists if it is valuable and rare. A competitive parity occurs if it is only valuable. Lastly, the resource is a
competitive disadvantage if it is neither of the The analysis takes place in this order by first assessing whether
a resource is valuable, rare, imitable and organised

d. GENERIC STRATEGIC OF OYO ROOMS

Marketing strategic
Pricing Oyo Room’s strategy is to attract customers with a lower room price in comparison to the base
price of the hotel .The main goal is to offer at an unmatched price and which matches with the budget of
user. Their room price varies from Rs. 999 to Rs. 4000 depending on the location and luxury of
hotel.Overall Oyo rooms are following a very sensible strategy which aims to provide rooms at a
moderate rate with awesome services and generate loyalty from customers.
Place strategy Oyo rooms started from a single hotel in Gurgaon and now has extended its empire in all
the parts of country along with going beyond the seas in Malaysia and Nepal. You can book it online with
a confirmation and then you can avail the services on reaching the booked hotel on specific date.
Promotion strategy It has strong social media presence on Facebook with over 3.65 lakh fans and a
Twitter following of over 26,000 followers. The brand claims to have over 5 million app downloads with
a good number of active users. To fast track its growth, OYO Rooms is organizing several campaigns on
social media platforms such as: #AurKyaChahiye videos on YouTube. Dubsmash Contest ,Father’s Day
Celebration campaign, and IPL Final Verbal Combat.