OLA IN GERMANY

PRESENTED BY-RONAK MUCHHAL 1623539NIHARIKA BOHRA 1623566LINI VARGHESE 1623563

CHRIST UNIVERSITY, BANGALORE

FACTS ABOUT GERMANY

Area 357,021 square kilometresDensity 227Population 82 million approx. (16th)GDP $3.842 trillion (5th)HDI 0.916 (very high 6th)Per capita income $47,023 (20th)Gini 30.7Major Cities Berlin, Frankfurt, Munich,

Dusseldorf and HamburgCurrency EuroGovernment Type Federal parliamentary republic

POLITICAL/LEGAL ANALYSIS

• Germany is a democratic republic. The political system functions under a system called Grundgesetz.

• Government requires commercial licenses.• Political discussion for minimum wage law for taxi industry.• Number of regulations established by government and court which

mostly does not goes in favour of Taxi companies.

ECONOMIC ANALYSIS

• Germany has the 4th largest economy in the world.  It is the 2nd largest exporter and 3rd largest importer.

• Germany has comparatively low raw materials. Germany imports about two-third of its energy. In fact, it is the world’s 3rd largest energy importer.

• The service sector contributes 70% of the GDP. Industry contributes 29.1% while agriculture backs 0.9%

• Most products are in engineering. Automobiles, metals, machinery and chemical goods are some items they are proud of.

• Popular global brands are BMW, Mercedes Benz, Adidas, Porsche, Audi, DHL, Volkswagen, T-Mobile, Lufthansa, Nivea, and SAP.

• Between the years 1991 and 2010, local firms took part in 301 acquisitions and 40 mergers.

SOCIAL ANALYSIS

• Population density in cities is growing.• People follow fast paced lifestyle.•  It as a modern, multicultural country. The society is molded by a variety

of lifestyles.• People of Germany have very high standards in terms of every aspect

and almost every class can afford to travel in cabs.

TECHNOLOGICAL ANALYSIS

• Germany is a global leader in science and technology as its achievements in the fields of science and technology have been significant.

• Use of smartphones for daily activities is increasing• Automobile manufacturers are continuously working on technologies

for more sustainable vehicles.• Customers are becoming more and more aware of the latest

technology and expect the cars to be equipped with latest accessories.

ENVIRONMENTAL ANALYSIS• Trends goes towards environmental and sustainable transportation• Growing demand for electrical and hybrid cars.• It also enforces energy conservation, green technologies, emission

reduction activities, and aims to meet the country's electricity demands using 40% renewable sources by 2020.

•  Germany is committed to the Kyoto protocol and several other treaties promoting biodiversity, low emission standards, water management, and the renewable energy commercialisation.

STRENGHTS

• Multiple rounds of VC investments have made the brand financially strong.• Innovative online application with German and English language.• Cash-less payments and pricing transparency builds trust & safety among

customers and drivers.• Faster communication with drivers and low wait-time.• Offline Bookings• Accessibility to Airport Lounges which are tied up with Ola and other such benefits.

WEAKNESS

• While the demand is huge, amount of cash burning is huge and monetization is very difficult

• Successful foreign business model is restricted in Germany and leads to additional costs as commercial drivers license: €240,- per driver/ every 5 years.

• Privately owned cars are restricted to commercial use. Rental car companies need to provide cars and insurance.

• Union of local cab drivers is very dominant.

OPPORTUNITIES.• Germany is a developed country with a very high standard of living sustained by a skilled and

productive society. Germany has a number of large cities. • There are 11 officially recognised metropolitan regions in Germany. 34 cities have been

identified as regiopolis.• Germany's road network is among the densest in the world.

Germany is the seventh most visited country in the world, with a total of 407 million overnights during 2012. There are 41 UNESCO World Heritage Sites in Germany.

• Tie-up with more and more number of corporate players.

CHALLENGES

• Germany has established a polycentric network of high-speed trains. The InterCityExpress or ICE network of the Deutsche Bahn serves major German cities as well as destinations in same cities with speeds up to 300 km/h (190 mph).

• Germany is committed to the Kyoto protocol and several other treaties promoting biodiversity.

• Taxi industry sees foreign players as a “greymarket service” and tries to file lawsuits that may cause unexpected legal expenditures.

• Possible minimum wage restrictions for the taxi industry and price increases from rental car companies will decrease profit margins.

•  Uber has deep pocket and hence can burn cash heavily• Future is unclear and Customer loyalty is less in this industry

ENTRY STRATEGY

• Berlin is known as venture capitalist hub of Germany, so the idea is to draw a funding of $120 million from Ventelis Capital AG and Axel Springer Venture combined. Rest $50 million will be funded by current investors in proportionate amount.

• Local cab drivers have a strong union and they don’t have intentions to join hands with foreign giant and work with them. So the only option which comes to rescue is that acquiring the cars.

• For a country like Germany, the lowest model of cab which is successful is Mercedes-Benz because people have a very high standard of living.

• The market of Germany is very difficult to crack. So the entry will be carried out in 3 phases. PHASE 1- Entry in Berlin, Hamburg and Frankfurt PHASE-2 Entry in other major cities-  Munich, Cologne Stuttgart and Düsseldorf. (After 1 year) Phase-3  Entry in 10 other cities that have been identified as regiopolis. (Depending upon growth)• So at the initial stage 1500 cabs will be purchased and all will be of same model i.e. Mercedes-

Benz which will cost around $40,000 for each.

PRICING STRATEGYCab service Rate per km Local taxi 2 Euros (average )Uber 1.5 Euros (highly variable)Ola 1.8 Euros

ALLOCATION OF FUNDS

Catergory AmountAcquisition of cabs (1500*$40,000)

$60 million

Maintenance of cars $10 millionDriver Incentives $10 millionMarketing $20 millionHR $10 millionCommercial Office Space $40 millionLegal expenditure $2 millionReserve $18 million

INCENTIVE SCHEME FOR DRIVERSNo. of Rides/day Incentive1 $202 $453 $754 $1105 $1506 $2007 $2258 $2759 $31510 $36011 $42512 $50013 $60014 $750

WHY UBER FAILED IN GERMANY• Uber Technologies Inc. is winning customers around the world by offering cheaper rides in fancier cars.

That strategy isn’t working in Germany, where the taxi fleet is ruled by Mercedes-Benz luxury sedans.• Uber accounted for about 60 percent of German taxis, with the market made up predominantly of the

$51,800 E-Class. They’re new too, with an average age of 3.5 years. By comparison, more than half of Uber’s German fleet consists of Volkswagen AG’s Golf compact or lower vehicle segments, and the cars can be as old as 10 years.

• With regulators in Germany challenging its business model, the country has been among the toughest markets for Uber to crack amid a global expansion underpinning a valuation of the San Francisco-based company of as much as $40 billion. The fact that Germans are used to a higher level of comfort in taxis than elsewhere makes gaining traction all the more difficult.

• A September survey by weekly newspaper Die Zeit found that 73 percent of Germans weren’t interested in a service like Uber even if it was much cheaper.

• Uber has scaled back the basic service in Berlin and Dusseldorf, limiting it largely to weekends after being forced to drop fares to comply with regulation that only licensed drivers may transport passengers for profit.

IS OLA GOING TO GERMANY? NO• The biggest taxi giant around the globe has failed in Germany• Acquiring the luxury sedans needs huge investment to cater to the standard of people but

it does not promises the desirable growth.• There is also a huge maintenance cost including parking and servicing as cabs are

acquired not hired.• The solid rail transport caters to most of the needs of communities like students who do

not possess cars in a very efficient manner.• Local taxi services in their respective cities are very much dominant.• It is impossible for any global giant, be it Uber or Ola to make profits in Germany in long-

run.