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Choosing Between Acquisitions and Alliances

Factor Strategy
Types of Synergies Modular (managing resources independently)
Nature of Resources Mix of hard and soft Resources (sharing of
physical resources)
Extent of Redundant Resources Low (None)
Degree of Market Uncertainty Low Mid (Depends on the degree of response
to the new service provided through the alliance)
Level of competition Low (First mover advantage)

Thus, following the framework suggested by Dyer, Kale and Singh, we arrive at the
conclusion that a Non-Equity Alliance would be the way to go.

Ola and Indigo 5 Elements of Strategy



Target Segment
- Ola will target the customers of Indigo who get the option of booking door-to-
door transport at current prices.
- The taxi aggregator would also provide pick and drop services for the
employees of Indigo.
Geographic Areas
- The geographic areas targeted would be the ones that have Indigo flights
operating at the airports and also Ola aggregator service available in the city.
- The Ola service is available in 75 Indian cities.
- Indigo flies to 34 domestic cities.
- Thus this alliance, which would be an expansion of the Ola Corporate service,
would be available in 34 Indian cities.

- The customers will have an option of including the price of the service as a
part of their ticket price while booking through the Indigo website.
- They may also avail the service and pay for it in cash to the driver of the
booked Ola.
- Booking the Ola service on would allow the customers to book the
ride that otherwise wouldnt be available on payment through cash.

Value creation stage - Marketing

- This would help Ola in its goal of capturing larger market share by bringing
more customers to the service and helping in its marketing.
- Indigo would benefit from the increase in traffic to its website and would save
on the commissions paid to the travel websites such as Makemytrip, etc.
- It would also be a part of its expansion strategy to cater to the conveyance
needs of the Indigo employees.

- Ola and Indigo can enter into this alliance by means of a modular alliance.
- In this arrangement, Ola will share 10% revenue with Indigo.
- The advantage to Ola is the new set of customers it is able to target.
- For Indigo, the advantage lies in bringing more traffic to its website from the
third party travel websites.
- This alliance would also enable Indigo to save on the commissions it pays to
the third party travel booking sites.

Bringing forth a last mile drop will help Ola in capturing the higher end of the market.
Indigo would also benefit by positioning itself as a last mile drop which would add to
its Point of Differentiation.

- The customers would be able to travel hassle free to the last mile without
worrying about booking the taxi pickup and drop and at affordable prices.
- They would have an option to pre-book either of Olas offerings ( Mini,
Premium, etc) as per their requirements.
- Ola would be able to target the corporates if this alliance succeeds.
- Indigo would be able to portray itself as a full travel service provider through
this tie-up and provide the last mile drop to its customers.
- Indigo would also be able to provide to its employees a standard pick up and
- This would help Indigo improve Customer Satisfaction and Employee

Phase 1:
- Ola would start this service in the Tier 1 cities to test the number of responses
it gets through this channel.
- The main target would be the passenger who travels for business. As a result
of this alliance, the hassles in clearing the bill for the road conveyance would
be reduced leading to more transparent travel bill clearances.

Phase 2:
- Ola would expand to the Tier 2 cities having corporate offices.
- It would also target new customer segments in this phase targeting the
students, those travelling on vacations, etc.
- In this phase, Ola would also increase the prices of pick and drop service and
charge a premium for the convenience provided.
Economic Logic

Indian Passenger Traffic 80 Million (as of 2015)

Indigo Market share -35.6% (as of 2015)
No. of Passengers with Indigo 28.48 Million
No. of Passengers on a daily basis with Indigo 78,000 (approx..)
No. of domestic Indigo lights per day 600 (as of September 2015)
Average Passengers per fight 78,000/600 = 130 (approx..)
Estimated bookings per flight 10% of the total passengers
No. of cabs per flight 13 cabs
Minimum expected fare per cab INR 500
Total cab fare per flight 13 * 500 = INR 6500
Total Revenue from cabs per day 6500 * 600 = 3.9 million
Adjustment factor based on flights to tier I & II cities = 0.7
Estimated Revenue per day from cabs = 3.9 * 0.7 = 2.7 million

Estimated percentage share to Indigo annually= 98.55 million

Estimated revenue to OLA annually = 887 million

We expect the number of 10% bookings to pick up significantly over time and
thus the actual numbers would beat the estimates by a fair margin.