Harvard Case - Droom: An Online Platform for Pre-Owned Automobiles
"Droom: An Online Platform for Pre-Owned Automobiles" Harvard business case study is written by Seema Gupta, Menaka Rao. It deals with the challenges in the field of Entrepreneurship. The case study is 14 page(s) long and it was first published on : Sep 15, 2021
At Fern Fort University, we recommend that Droom focus on a multi-pronged strategy to achieve sustainable growth and profitability. This involves strengthening its core business model, expanding into new markets, and leveraging technology to enhance customer experience and operational efficiency.
2. Background
Droom is an online platform for pre-owned automobiles that aims to revolutionize the fragmented and opaque used car market in India. The company offers a range of services, including vehicle inspection, financing, and insurance, to create a transparent and reliable ecosystem for buyers and sellers. However, Droom faces challenges in achieving profitability, managing operational costs, and competing with established players in the market.
The main protagonists in this case study are:
- Sandeep Aggarwal: Founder and CEO of Droom, a visionary entrepreneur with a strong understanding of the Indian automotive market.
- Droom?s Management Team: A team of experienced professionals responsible for driving the company?s growth and profitability.
- Investors: Providing capital to support Droom?s expansion and innovation.
- Customers: Buyers and sellers of pre-owned automobiles who rely on Droom for a transparent and reliable experience.
3. Analysis of the Case Study
To analyze Droom?s situation, we can utilize the Porter?s Five Forces Framework:
- Threat of New Entrants: The online used car market is attracting new entrants, increasing competition. However, Droom?s established brand and technology infrastructure create a barrier to entry.
- Bargaining Power of Buyers: Buyers have high bargaining power due to the availability of numerous options. Droom must provide competitive pricing and excellent customer service to retain customers.
- Bargaining Power of Suppliers: Suppliers (dealers and individuals selling cars) have moderate bargaining power. Droom can leverage its platform to attract a large pool of suppliers.
- Threat of Substitute Products: Other online platforms and traditional dealerships offer alternative options for buying and selling used cars. Droom needs to differentiate itself through its unique value proposition.
- Competitive Rivalry: The market is highly competitive, with established players like CarDekho and OLX posing significant challenges. Droom needs to differentiate itself through innovation and value-added services.
Financial Analysis:
- Revenue Model: Droom generates revenue through transaction fees, financing, and insurance services.
- Cost Structure: Droom?s major costs include marketing, technology development, and operational expenses.
- Profitability: The company is currently operating at a loss, indicating a need for improved efficiency and revenue generation.
- Capital Structure: Droom relies heavily on external funding, highlighting the need for a sustainable financial strategy.
Operational Analysis:
- Technology Platform: Droom?s technology platform plays a crucial role in facilitating transactions and providing transparency.
- Inspection and Verification: Droom?s inspection process is a key differentiator, ensuring the quality and reliability of vehicles.
- Logistics and Delivery: Efficient logistics and delivery are essential for a seamless customer experience.
- Customer Service: Providing excellent customer service is crucial for building trust and loyalty.
4. Recommendations
1. Enhance Core Business Model:
- Optimize Pricing Strategy: Implement a data-driven pricing model based on vehicle condition, market demand, and competitor analysis.
- Expand Service Offerings: Introduce value-added services like vehicle customization, extended warranties, and vehicle maintenance packages.
- Improve Operational Efficiency: Streamline processes, reduce operational costs, and optimize logistics and delivery.
- Strengthen Customer Relationships: Implement a loyalty program and personalized recommendations to enhance customer experience.
2. Expand into New Markets:
- Target Emerging Markets: Explore opportunities in high-growth emerging markets with a strong demand for pre-owned vehicles.
- Diversify Product Portfolio: Expand into new segments like commercial vehicles, motorcycles, and electric vehicles.
- Strategic Partnerships: Collaborate with local players to leverage their expertise and distribution networks.
3. Leverage Technology for Growth:
- Data Analytics and AI: Utilize data analytics and artificial intelligence to improve pricing, inventory management, and customer segmentation.
- Mobile App Optimization: Enhance the mobile app experience with user-friendly features, personalized recommendations, and seamless payment options.
- Blockchain Technology: Explore the potential of blockchain technology to enhance transparency and security in transactions.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: Droom?s core competencies include its technology platform, inspection process, and customer service. These strengths should be leveraged to drive growth.
- External Customers: Droom?s primary customers are buyers and sellers of pre-owned vehicles. The recommendations aim to enhance their experience and build loyalty.
- Competitors: The recommendations are designed to differentiate Droom from its competitors by offering a superior customer experience and value proposition.
- Attractiveness: The recommendations are expected to improve profitability, increase market share, and enhance shareholder value.
Assumptions:
- The Indian automotive market will continue to grow.
- Droom will be able to successfully implement its technology and operational improvements.
- The company will be able to secure sufficient funding to support its growth initiatives.
6. Conclusion
By implementing these recommendations, Droom can achieve sustainable growth and profitability in the competitive online used car market. The company?s focus on innovation, customer experience, and operational efficiency will enable it to establish a strong market position and capitalize on the growing demand for pre-owned vehicles.
7. Discussion
Alternative Options:
- Merging with a competitor: This could provide access to resources and market share but may involve significant risks and challenges.
- Focusing solely on a niche market: This could provide a competitive advantage but may limit growth potential.
Risks and Key Assumptions:
- Competition: The online used car market is highly competitive, and Droom may face challenges in attracting and retaining customers.
- Technology: Droom?s reliance on technology could expose it to risks related to security breaches, data privacy, and technological obsolescence.
- Regulation: The Indian government?s regulations on the used car market could impact Droom?s operations.
8. Next Steps
Timeline:
- Year 1: Implement pricing optimization, expand service offerings, and enhance customer service.
- Year 2: Launch operations in new markets, explore partnerships, and invest in data analytics and AI.
- Year 3: Expand into new segments, optimize mobile app experience, and consider an IPO.
Key Milestones:
- Achieve profitability within 2 years.
- Increase market share by 20% within 3 years.
- Secure funding for future growth initiatives.
By focusing on these recommendations and executing them effectively, Droom can establish itself as a leading player in the online used car market and achieve its long-term goals.
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Case Description
Droom Technology Private Limited (Droom), a used-automobile marketplace platform based in India, had identified a big-ticket item with an average selling price of ₹200,000-₹600,000 and harnessed its innovative technology to build an online ecosystem. In doing so, it had stayed clear of inventory management by following a marketplace model like that used by Flipkart Internet Private Ltd. and Amazon.com, Inc. in India, bringing all participants-including used-vehicle dealers, individual buyers and sellers, and financiers-into the online marketplace. Subsequently, Droom created functional, monetary, time, and psychic values for its customers through its various automobile inspection, valuation, records search, insurance, and other services. Droom went from having a single revenue source to having six independent revenue sources through its subsidiaries, which each offered a unique combination of values and collectively created a tough barrier for competitors to penetrate. By April 2020, the start-up had enjoyed some success, but looking to increase its growth, it faced some questions: Was it offering too much for too little? Was its pricing justified by the value offered? Were its performance metrics commensurate with the value provided? Finally, what strategy would successfully shift Droom from a hybrid to a completely online model ready for listing on the Nasdaq exchange?
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