Marketing Analysis Of OYO Group

TASK

Overview of the company

OYO group is a hospitality company that was founded in the year of 2013 by Ritesh Agarwal. The main objective of this organization is to provide budget hotels for families and individuals who want better services at an average cost. Through average cost strategy, the OYO group has grown with over an estimated 8500 hotels in around 230 cities in numerous countries (Oyo, 2018). Now the organization is planning to expand its business operations. For this, Oyo Group is expanding its business by opening a hotel along with restaurant services in South Africa on the grounds of Durban. For this expansion, a firm needs to make a strategic planning in order to establish their business in  Durban, South Africa.

Macro environmental analysis

PESTLE analysis is a part of the macro environment which is helpful in analyzing the market on the basis of a few factors that have influence over business (Zalengera, 2014). In the context of the Oyo group, the company is expanding its business by opening Oyo hotels with value-added service that is a restaurant facility in Durban, South Africa. With the help of PESTLE analysis, Oyo group can evaluate relevant understanding of their new business in South Africa. Therefore, a PESTLE analysis of South Africa has been conducted in order to evaluate the relevancy of the Oyo group in this country. All of these factors are described below:

Political factor: This factor is normally related to government stability, legislative bills, health and safety laws, and many more legislation that are related to the political condition of the operating country. The government of South Africa is liberal which is beneficial for alien companies to get permission from the government to establish their business in South Africa in less period of time.  which allows organizations to take approval of licenses in order to establish their business legally. Apart from this, South Africa is a highly corrupt country as its citizens are using bribes to convert decisions of the government in their favor. As Oyo group expands its business in Durban(South Africa) with new services for restaurants, opportunities and threats of this factor are described below:

Opportunity: Oyo group can take the liberation of government as an opportunity as they can make their business license within 2 months only. This will save time for the company as they are not required to wait to perform their business activities in South Africa. As a result, they will get more time to persuade the interest of customer by conducting interest activities to grab their attention. This will help in increasing the profitability of restaurant services as customers are aware of the Oyo group and its services. It will increase the profitability of the company.

Threat: Excessive involvement of corruption is itself a threat for the Oyo group. As the way through which this company has grabbed governmental support, then there are many more companies available in the marketplace that might adopt the same pattern. As a result, it will create huge competition for the Oyo group in the future. In order to overcome this threat, Oyo Group should update its services on a regular basis which will give a genuine reason to customers remain loyal to the company for a long period of time.

Economic factor: This factor includes inflation rate, taxes, and recession. In context to South Africa, the country is ranked in 4th position in 47 countries of the Sub-Saharan Africa region. The economic condition of this country is not so good as its increasing instability of  political conditions is reducing the growth of the company within the country.

Opportunity: 4rth positioning among 47 countries of the Sub-Saharan Africa region is considered an opportunity for Oyo Group if Oyo Group establishes its hotels with a restaurant facility in Durban, then they can easily grab the attention of a maximum number of customers with the popularity of country. This will result in the maximization of the profitability of the Oyo group in South Africa. It will help organisations in sustaining a better position in the marketplace.

Threats: The instability of the political condition is a major threat for the Oyo group, as the country will not be able to convince investors to invest in their business in South Africa. Because, this country is not stable and there are probable chances that rules and policies related to taxation policies might change, as a result, investors will not invest in the company. This will create problems for the company in maintaining its flow of capital for operational activities at the workplace. This will impact negatively on the growth of the company. In order to overcome this threat, Oyo Group can make a contract with the financial institutions available in Durban if in case Oyo Group does not get any investors in the future, then these financial institutions will provide them desired amount which is mentioned in the contract. In return for this, Oyo Group will give them interest to the financial institution with which they have entered into the contract.

Social factor:  This factor involves social status, demographic areas(location), trends, frequent needs, ethnic background, etc. The unemployment rate of this country is high which results in an increasing poverty ratio. In addition to this, the social culture of South Africa is highly active towards the food which is based on non-vegetarian dishes. Citizen of the country prefers barbecues and restaurants while celebrating functions and other get-togethers.    

Opportunity: A high rate of unemployment is an opportunity for Oyo group as they can hire required staff in less amount. This will directly reduce the operational cost of the company as they are not required to spend much money on employee's salaries. This will increase the profitability ratio of a company.

Threat: Culture and trends in South Africa are changing rapidly. It is a major threat for the Oyo group, as they are already new in the market and it will consume time to adapt it and perform their business activities according to the culture of South Africa only. And if in any case, the recent trend of the country will change then it will take time to adapt it. Therefore, there are problem chances that Oyo group may not be able to upgrade their working practices according to the changing market condition. As a result, negative conditions might develop the demand for shut down of companies in Durban (Rastogi and Trivedi, 2016).

Technological factor: Advancement in technology refers to the major factor which have a high influence on the growth of a business. South Africa is still not developed properly in terms of technology as its organization and government are not investing money in research related to technology. However, it has been identified that this country is improving its command over technology by expanding its number of internet service providers.  

Opportunity: More number of internet providers ensures that the people of South Africa can use the internet everywhere. It is an opportunity for Oyo Group that if the company is availing its mobile application then customers can access knowledge of restaurant services. This helps customers that in actuality what this company is offering and what its products range along with prices. This will attract customers by connecting with them through mobile applications. As a result, it will increase the popularity of the company with the usage of the application. This leads increase in the profitability and sales ratio of the Oyo group.

Threat: South Africa is a low-developed country in terms of technology. As it is a threat for Oyo Group, because if they are using the latest technology in their restaurant services then they will definitely need some technical resources and expertise like skilled employees who can manage the work of the restaurant effectively.  (Kolios and Read, 2013). These resources may not be available at that place then it will reduce the productivity of the restaurant services offered by Oyo Group. So, in order to overcome this OYO can use their existing technical staff that can provide training to newly hired employees to develop a better team in the new country. These skilled employees will be able to provide high-class services to the customers of a restaurant by maintaining the dignity of the Oyo group. As a result, it will increase the number of loyal customers for the company in South Africa.

Legal factor: This factor is relatively related to the political factor but it includes recent trends in legal laws too. South Africa imposed different taxes and duties like customs, skill and development tax, capital gains tax, and many more. South Africa is a liberal country where rules and regulations are very less. The country is not taking any tariff for customers as well as operating companies. But, the norms of the country are not lenient in every sector. The government of South Africa has applied restrictions on the quantity of imports/exports.

Opportunity: OYO can easily conduct its business activities because the legal sector of South Africa is much more relaxed and helps organizations to establish their business in effective manner. In this country, tariff barriers are negligible for the investor company.  In the context of the Oyo group, it is considered as an opportunity for the company as they are not required to pay taxes. This saves money for the company which can be further used in other business operational activities.

A Sample of Global Marketing Management

Threat: Restriction in the quantity of export and import of products are the major threat for Oyo Group as it will interrupt the organization in bringing their some special product from the native country. This legal law might affect the company in serving their best food items along with the room services. In order to overcome the same threat, it is important for organisation to represent the requirement of food ingredients in front of the government so that they will not be able to deny and give approval for the same.  

Environmental factor: The environmental factor is mainly based on the relevancy of industry in relation to the environment (Kolios and Read, 2013). It simply means how environmental changes impact the business and its growth. South Africa owns many natural resources which are helpful for the country as well as new businesses.

Opportunity: A high rate of natural resources is an opportunity as the new restaurant will not face any problems related to the availability of fresh vegetables, fruits, and other things that are required by the restaurant during its processing. As a result, Oyo Group can provide high-quality food products to its customers along with room services.

Threat: The main threat may arise for Oyo group with the thought of high dependency on natural resources. The company is giving more preference to using organic food ingredients for restaurant services. This will directly increase the prices of food items which are offered in the restaurant. It may impact negatively on the purchasing power of the customer they might not be able to afford this expensive food. It may reduce sales of Oyo group and also minimize its profitability ratio.  In order to overcome this threat the company can avail both kinds of food to the customers that is prepared with pure organic as well as normal food ingredients. As a result, it will reduce the prices of offered services as products are going to be available to customers on the basis of their requirements. With the help of this, customer can order the food which is preferred by them according to their purchasing power.

Modes of market entry

Oyo Group is expanding its business in South Africa by introducing room facilities along with the service of restaurants. It is considered as a value-added service for Oyo group which they are expanding in South Africa to increase its command in new country. Presently, the company offers hospitality services to its customers in India, as well as other countries. However, opening a restaurant is a completely new area for this organization. Thus, it creates a need for the organization to adopt one suitable market entry option which will help them in establishing their own business in South Africa. It can be evaluated that, market entry options helps organisations to enter into a new country in order to expand their business with less chance of loss. Some of the best suitable market entry options are described below:

Direct Investment: It is an investment made by an individual or firm in one country with the interest of investing in businesses which are located in another country. It is differentiated from the concept of foreign portfolio investment with the notation of direct control of the business activities (Blonigen and Piger, 2014). For example: if OYO group is expanding their business operations in South Africa and they are directly investing into their new restaurant services which will be offered to the residents of South Africa. Market entry is beneficial for Oyo Group as by opting for this option company will have full control over its financial and other operational decisions. Through this option company is individually arranging its own infrastructure and other required resources at its own. So, they don't have to involve another person in the decision-making process. On the other hand, a major drawback of this entry mode is that it might be riskier if the planned strategy does not work then the company can lose its invested money.

Strategic Alliance: In this, two organizations bind in a contract in order to work together by using their resources, assets, etc. for mutual benefits. A strategic alliance is best suitable option for Oyo Group, as the company can tie up with already existing restaurants in South Africa. The main advantage of Strategic Alliance for the mentioned company is that the organization can easily access to skilled employees (Shi, Sun, and Prescott, 2012). Both companies can take advantage of each other's resources to perform their business activities. For example: Oyo group can hire some of the management staff from a strategic partner's company. This will save the time of recruitment of Oyo group as at the time of expansion they will definitely require good staff who can manage their operational activities.  The major drawback of this market entry strategy is that it creates chances of losing confidentiality as both partners are using their asset resources and many trade secrets too.

Joint Venture: It is a business agreement between two or more companies in order to formulate one new company. In relation to Oyo group, the company can tie up with another company for the purpose of establishing their business in Durban, South Africa. In this, both companies share profits, losses, expenses, etc. on the basis of their sharing ratio which was agreed by them in the starting. The joint venture is a short-term commitment which does not bind participants for a longer duration (Chang, Chung, and Moon, 2013). In the context of the Oyo group, the company can take advantage of being part of a Joint Venture as it will help in accessing new markets with specialized human resources, finance, technology, etc. It is simpler as partners entered into a joint venture can use resources of each other for performing business activities in effective manner.  This entry mode shares risk as well as cost among respective partners.

As per the above-mentioned mode of market entry, it has been identified that Joint Venture is the best suitable entry option for Oyo restaurant while expanding its business in Durban, South Africa. It can be said that Oyo Group can tie up with Malis Indian Restaurant as this food provider already belongs to India. This will be helpful Oyo group as they will get the support of a business that is familiar with the city as well as similar kinds of businesses. As a result, Oyo Group can establish a new restaurant with the stated Indian restaurant.

Concept of market segmentation, targeting

Market segmentation is termed as the activity through which the whole market or customers are divided into some parts or subgroups. This division is totally based on the characteristics of the overall market (Weinstein, 2013). In context to Oyo group, the company is expanding its business in South Africa for which they are segmenting their whole market. The main suitable type of market segmentation is described below:

Demographic: This segmentation divides the market on the basis of age, income, race, nationality, family, gender, education, and so on. It can be said that while expanding businesses organizations often target their customers among the stated segments of the market.  In relation to the Oyo group, the company can segment its customers on the basis of this segmentation. Demographics are helpful in segmenting the market in order to target its customers according to their needs and requirements.

As per the above-mentioned market segmentation, it can be said that while expanding business in South Africa, Oyo Group can segment its customers on the basis of Demographic segmentation. This can further target income zones in demographics (Hassan and Craft, 2012). According to the overall analysis, the company is mainly targeting middle-class and below-middle-class people. Because middle-class people of South Africa is not give preference in buying expensive products and services. For this, Oyo Group is providing reasonable room services along with restaurant facilities in order to attract middle-class people. This influences the interest of people in visiting Oyo restaurants as they are availing services at reasonable prices. So, it can be said that opening a restaurant with high-quality services will definitely influence the interest of targeted customers. As they will be able to experience good services in their budget only.  

Porter's generic strategy

Porter's Generic strategies roam around four major sections that help in expanding business at a large level. 

Cost leadership strategy

The cost leadership strategy mainly emphasizes targeting large marketplaces with the lowest price. The main focus of the company is on increasing its number of customers by availing them of best best-class services at the lowest prices. In relation to Oyo Group, the company influences the interest of its customers by offering low-cost restaurant services without compromising the quality in South Africa. This strategy will not only attract people belonging to the middle class and lower middle-class people but, it will be beneficial in persuading customers of the higher class. The company is not compromising on the quality of food products and other services which are offered in the restaurant (Tansey, Spillane, and Meng, 2014).

Differentiation strategy

This strategy is mainly associated with driving strategies for the OYO group to make diversified strategies and plans according to the restaurant scale and scope of business. Potential dealers are requiring finding out for determining the strategies and plans and categorizing the product lines and scopes. The restaurant's dealers are required to consolidate as per the scope and criteria of their organizational scale and offer different offers to enhance profitability with different strategies. Durability and support systems to expand the business in African regions is a challenging task that expands the business scale and reduces the predictability of business.

Cost Focus

As OYO Group is planning to expand its business in Durban, South Africa, it is essential that company analyses the dynamics of the market and the unique needs and preferences of customers. It is imperative that OYO group develops a strategy to deal with the competitors present in the hotel industry. Thus, they use cost focus strategy to provide the products and services of the company at uniquely low-cost prices when compared to the rivals within the same industry (Teeratansirikool and et. al., 2013). OYO group along with providing hotel services are opening up restaurants in Durban with a unique marketing and cost strategy so that they can deliver quality services to the customer at lower prices than rival companies and tend to create a strong brand loyalty among people in South Africa.

Differentiation focus

It concentrates on fulfilling the demands of narrow markets. Durban International Film Festival is one of the most renowned festivals of the world. Moreover, people visit from all over the world to attend this festival for the love of films and film-making. OYO can use this as an advantage by providing free tickets to the customers visiting them during the time of this festival. This unique strategy would allow the hotel to increase its customer base rapidly (Harding, 2017). Moreover, it would help the hotel to associate itself with various creative fields that would definitely contribute towards enhancing the firm's reputation. In addition to this, the firm would also be encouraged to enhance its creativity to attract more customers in Durban.

As per the above-stated different strategies of Porter generic model, it has been found that the Cost leadership strategy is the best suitable option for Oyo Group while expanding its business in South Africa. The stated strategy is adopted as it provides products and services to the customer at a lower cost. It can be said that cost leadership is beneficial for Oyo Group as it will help the organization attract customers from new countries due to its low pricing strategy. This strategy is beneficial for new restaurants, launched by the Oyo group as Durban is growing very frequently and its citizens are giving more preference towards attaining better experiences. This will attract localize as well as visitor of chosen city of South Africa adapt to food services within their budget.

CONCLUSION

From the above-mentioned report, it has been concluded that strategic marketing helps organizations differentiate themselves from existing competitors in terms of capital and services. Macro factors are included in order to analyze impacts that can hamper business activities and they consist of elements like political, social, economic, technological, legal, and environmental. Other than this, among different modes of market entry Joint venture is best suitable option for a new company who are thinking of expanding its business in a new country. It has been observed that segmentation of the market can be done on the basis of demographic type of segmentation in which customers are targeted on an income basis. It has been identified that cost leadership is an effective strategy for gaining a competitive advantage while expanding business new country or area.

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REFERENCES

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Zalengera, C., 2014. Overview of the Malawi energy situation and A PESTLE analysis for sustainable development of renewable energy. Renewable and Sustainable Energy Reviews. 38. pp.335-347.

Pestle, W. J., Crowley, B. E. and Weirauch, M. T., 2014. Quantifying inter-laboratory variability in stable isotope analysis of ancient skeletal remains. 9(7). pp 102844.

Rastogi, N. I. T. A. N. K. and Trivedi, M. K., 2016. PESTLE technique-a tool to identify external risks in construction projects. International Research Journal of Engineering and Technology (IRJET). 3(1), pp.384-388.

Kolios, A. and Read, G., 2013. A political, economic, social, technology, legal, and environmental (PESTLE) approach for risk identification of the tidal industry in the United Kingdom. Energies. 6(10). pp.5023-5045.

Blonigen, B. A. and Piger, J., 2014. Determinants of foreign direct investment. Canadian Journal of Economics/Revue canadienne d'économique. 47(3). pp.775-812.

Shi, W., Sun, J. and Prescott, J. E., 2012. A temporal perspective of merger and acquisition and strategic alliance initiatives: Review and future direction. Journal of Management. 38(1). pp.164-209.

Chang, S. J., Chung, J. and Moon, J. J., 2013. When do wholly-owned subsidiaries perform better than joint ventures? Strategic Management Journal. 34(3). pp.317-337.

Tansey, P., Spillane, J. P. and Meng, X., 2014. Linking response strategies adopted by construction firms during the 2007 economic recession to Porter's generic strategies. Construction management and economics. 32(7-8). pp.705-724.

Teeratansirikool, L., and et. al., 2013. Competitive strategies and firm performance: the mediating role of performance measurement. International Journal of Productivity and Performance Management. 62(2). pp.168-184

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