Harvard Case - Snapp: Scaling under Sanctions in Iran (A)
"Snapp: Scaling under Sanctions in Iran (A)" Harvard business case study is written by Meg Rithmire, Gamze Yucaoglu. It deals with the challenges in the field of Business & Government Relations. The case study is 30 page(s) long and it was first published on : Jan 21, 2021
At Fern Fort University, we recommend Snapp pursue a multi-pronged strategy to navigate the challenging environment of sanctions in Iran. This includes focusing on building a robust local ecosystem, leveraging technology for efficiency and innovation, and actively engaging with the Iranian government for policy support.
2. Background
Snapp, a ride-hailing platform operating in Iran, faces the unique challenge of scaling its business under stringent US sanctions. The company has achieved significant success in Iran, becoming a vital part of the local transportation ecosystem. However, sanctions pose considerable hurdles to its growth, including limited access to international capital, restricted technology imports, and potential legal risks.
The main protagonists of the case are:
- Snapp: A fast-growing Iranian ride-hailing platform striving for expansion amidst sanctions.
- Iranian Government: Seeking to foster domestic innovation and economic growth while navigating complex international relations.
- US Government: Imposing sanctions on Iran, aiming to limit its economic activities and influence.
3. Analysis of the Case Study
The case study can be analyzed through the lens of Competitive Strategy and International Business.
Competitive Strategy:
- Porter's Five Forces: Snapp operates in a highly competitive market with numerous players, including traditional taxis and other ride-hailing services. The threat of new entrants is high due to the low barriers to entry in the ride-hailing industry. However, Snapp enjoys a strong brand reputation and a loyal customer base, providing a competitive advantage.
- Competitive Advantage: Snapp's key competitive advantage lies in its technology-driven platform, efficient operations, and user-friendly interface. This allows it to offer competitive pricing and a seamless user experience, attracting a large customer base.
- Strategic Positioning: Snapp aims to position itself as the leading ride-hailing platform in Iran, focusing on providing affordable and reliable transportation solutions for a wide range of users.
International Business:
- Globalization and Trade: Snapp operates in a challenging environment due to US sanctions, which restrict its access to global markets and technology. The company needs to navigate these restrictions strategically to ensure its long-term growth.
- Political Risk: The political landscape in Iran is volatile, with sanctions and potential policy shifts posing significant risks to Snapp's operations. The company needs to actively monitor and adapt to these changes.
- Foreign Investment: Snapp's ability to attract foreign investment is limited due to sanctions. The company needs to explore alternative financing options, such as partnerships with domestic investors, to secure the necessary resources for growth.
4. Recommendations
Snapp should implement the following recommendations to navigate the sanctions and achieve sustainable growth:
Strengthen Local Ecosystem:
- Focus on Domestic Innovation: Invest in research and development to create localized solutions for the Iranian market, minimizing reliance on foreign technology.
- Partner with Local Businesses: Collaborate with domestic companies in areas like logistics, payment processing, and vehicle maintenance, creating a robust local ecosystem.
- Develop a Strong Domestic Supply Chain: Secure local sources for essential components and services to mitigate the impact of sanctions on its operations.
Leverage Technology for Efficiency and Innovation:
- Optimize Platform Efficiency: Invest in advanced analytics and data management systems to improve operational efficiency, optimize pricing, and enhance user experience.
- Develop Innovative Solutions: Explore new technologies like autonomous vehicles, electric vehicle integration, and alternative transportation modes to enhance its service offerings and gain a competitive edge.
- Embrace Digital Payments: Promote cashless transactions through partnerships with local payment gateways, reducing dependence on foreign financial institutions.
Engage with the Iranian Government:
- Advocate for Policy Support: Engage in constructive dialogue with the government to advocate for policies that support the growth of the ride-hailing industry, including tax incentives, regulatory clarity, and access to government-backed funding.
- Collaborate on Infrastructure Development: Partner with the government on initiatives to improve public transportation infrastructure, fostering a more conducive environment for ride-hailing services.
- Promote Corporate Social Responsibility: Engage in initiatives that address social issues like unemployment and environmental sustainability, building positive public perception and strengthening its relationship with the government.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Snapp's core competencies lie in its technology-driven platform and efficient operations. The recommendations align with its mission to provide affordable and reliable transportation solutions while fostering innovation and sustainability.
- External Customers and Internal Clients: The recommendations cater to the needs of Snapp's customers, drivers, and partners by providing a seamless user experience, competitive pricing, and a supportive ecosystem.
- Competitors: Snapp's recommendations aim to differentiate it from competitors by focusing on local innovation, technology-driven solutions, and a strong partnership with the Iranian government.
- Attractiveness: The recommendations are expected to enhance Snapp's profitability and growth potential by improving efficiency, expanding its market reach, and mitigating the impact of sanctions.
6. Conclusion
Snapp faces significant challenges due to US sanctions, but it has the potential to overcome them by embracing a strategic approach that leverages its core strengths, fosters local partnerships, and actively engages with the Iranian government. By focusing on innovation, efficiency, and building a robust local ecosystem, Snapp can navigate the sanctions and achieve sustainable growth in the Iranian market.
7. Discussion
Alternatives not selected:
- Complete withdrawal from Iran: This would be a drastic measure, potentially leading to significant financial losses and reputational damage.
- Ignoring sanctions and operating without compliance: This would expose Snapp to significant legal risks and potential penalties.
Risks and Key Assumptions:
- Political instability: Political shifts in Iran could disrupt Snapp's operations and negatively impact its growth prospects.
- Sanctions enforcement: Increased sanctions enforcement could further restrict Snapp's access to technology and capital.
- Government support: The Iranian government's commitment to supporting the ride-hailing industry might be inconsistent, potentially impacting Snapp's long-term growth.
8. Next Steps
Snapp should implement the following steps to execute its strategy:
- Develop a detailed implementation plan: Define specific actions, timelines, and resources required for each recommendation.
- Establish a dedicated team: Form a team responsible for implementing the strategy and monitoring its progress.
- Build strong relationships with local partners: Engage in active dialogue with potential partners to establish mutually beneficial collaborations.
- Actively engage with the Iranian government: Develop a comprehensive government relations strategy to advocate for policy support and build trust.
- Continuously monitor the political and economic landscape: Stay informed about potential changes in sanctions and government policies to adapt its strategy accordingly.
By taking these steps, Snapp can navigate the challenging environment of sanctions in Iran and position itself for long-term success.
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Case Description
The case opens in November 2019 as Eyad Alkassar and Mahmoud Fouz, co-founders of Iran's first and leading ride-hailing platform, Snapp, find out about Apple's and Google's decisions to remove all Iranian apps from their respective application stores. The case takes us through the founding story of Snapp in 2014 to how the company grew to reach two million daily rides in Iran servicing 30 million customers through its two million registered drivers in 100 cities in Iran. The case then goes into detail about how the removal of all Iran-based apps from application stores limited Snapp's operations and its go-to-market channels. Next, the case chronicles how the co-founders focused on finding operational and technological solutions to minimize Snapp's reliance on U.S. technology following the U.S.' withdrawal from the Joint Comprehensive Plan of Action (JCPOA) in May 2018 and instating the secondary sanctions on Iran. The case highlights the challenges of operating under sanctions and the different ways the co-founders try to find to keep Snapp alive in a market that had been out of reach for Western investors. In 2019, Snapp had become the largest Internet company in the Middle East yet it was increasingly difficult to navigate the operational hurdles. The co-founders could not help but think whether it was now time to reach out to major media outlets and launch a public relations campaign to create awareness around the unexpected decision that had put the very existence of many companies at risk, including Snapp's. Alkassar and Fouz needed to weigh it against Snapp's realities. The case then asks: Should they go public with their story, or would it be better to stay under the radar and focus on efficiency and sustainability of operations?
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