Read the mini case on Zerodha. Answer the questions at the end of the case, regarding Zerodha's adopted strategies and explain in detail your views on its' sustainable competitive advantage.

Zerodha

ItwasinDecember2015thatNithinKamathwascontemplatingthegrowthplansandfuturestrategyofhiscompany.HerecollectedhowZerodhahadbeeninstrumentalindisruptingtheIndian Brokerage Industry and had been growing rapidly for the past five years. The mostdisruptive thing which got them going was transparency and consistency in the pricing oftheir financial products. Major traditional broking houses had the reputation of opaquenessin the structure of brokerage charged by them. Due to their complex and customizableofferings, their brokerage scheme had become hard for an average retail investor to grasp.Zerodha'sstandardizedanduniformofferingalongwithtransparencyintheformofbrokeragecalculatorallowedinvestorstocalculatebrokerageupfrontandhelpedthemgainmileage in the initial years. Moreover, traditional brokers tried to leverage their advisoryservices.However,therewasadearthofqualifiedspecialistsandgiventhevolatilenatureofthe stock market, blame ofany loss was oftenpushed onto advisory services. Zerodha decidedtoeliminatetheadvisoryservicefacilitywhichalignedwellwiththeiroverallstrategy ofonesizefitsall.Thissignificantlyreducedoperationalcostsforthemaswellashelpedthemavoidanysuchblameandbadreputation.

Zerodhadecidedtooptfortheschemeof zerobrokerageonequitydeliverytrades.Theideabehind this was to get the virality going in the mind of customers. The message they wantedto send across to the customer was that there was no harm in trying something that iscompletely free. It was targeted at those customers who were relatively new to trading andwere apprehensive ofthe trade brokersas wellasfinancialmarkets.

Kamath was at the same time wondering if these competitive advantages were sustainable forfuture growth of the company. He felt that there was a possibility that they might be easilymimicable and replicable. In that case, a new competitor would easily be able to erodeZerodha'smarketshareandprofitsinfuturebycomingupwith similarofferings.

HOW TOMAKE ITSUSTAINABLE?

Kamath started an incubation center by the name of Rainmatter, which was an offshoot ofZerodhaforthepurposeofinvestinginfintechstartups.HedecidedtoinvestinstartupsthatwouldpitchthemideasforgrowingthecapitalmarketinIndia.Zerodhahadalargeandloyalcustomer base and the fintech startups would get access to the Zerodha customers to test theirnew product. One such proposal which was already lying with him was a startup calledsmallcase.Itwasastartupthatplannedtoanalyzetheimpactofanymajorchange(sayGST,abadmonsoon,etc.)oncompaniesandidentifywhichcompanieswouldbenefitfromit.Itwasmeant to create a basket of such stocks whichretail investors could purchase throughZerodha's platform. Such tools would make it easier for an investor to connect to capitalmarkets.

ZerodhaalsocameupwithaplatformcalledCoinwhichallowedpeopletobuyamutualfunddirectly. They didn't earn any brokerage or distributor commission out of it, but their ideawas to get a customer to start investing. Once people started investing in mutual funds, theywould see benefits which would empower them to move towards investing in capital markets.With the objective of making markets accessible to everyone, they also decided to launchZerodha Varsity. It was an educational platform to teach novice investors about basics offinancial markets. The plan was to make the most optimal use of search engine optimizationso that the platform always came on the top in any google search results page related tofinancial markets' basics. This would aid them in promotions by increasing the brand recallwhile at the same time contribute to the expansion of the pool of investors in the Indianmarket.

Finally, after two months of beta testing, Kite - its official version, had been hosted onPlayStore and Appstore a week back. Kamath had high hopes from Kite as it was a highlyintuitiveweb-basedserviceaswellasmobileappwhichtargetedtomaketradingexperiencesimplified(SeeExhibit1).Mobileappsweremuch stickierthanwebsiteandwerethereforeexpected to yield much higher growth for company in coming years. Zerodha by that timehadmultipleplatformseachservingasuitablepurposeandmakingtradingexperienceeasierandmoreintuitive.(SeeExhibit2)

If Indian market had to grow, it was essential to get the masses to invest in stock market. Weretheinitiativesplanned byKamath and histeamgoing tobe successful inmeetingthisobjective? The bigger question was whether they would be able to create a sustainablecompetitive advantage through these initiatives (answer the question in the context of competitive advantage and sustainable competitive advantage)? Was there anything else that they can dowhichwould fit withtheirstrategyas well asaid theirfuturegrowth?

FORWARD TO2018

Theimplementedstrategieshadbornesignificantresultstill2018.Zerodhahadbeensuccessfully able to capture more than 800 thousand clients (see Exhibit 3) which contributedto 8% of daily retail trades. Zerodha varsity (see Exhibit 4) had gained significant traction andCoinhadgotoverINR10trillionassets undermanagement.

EXHIBIT1

SnapshotoftheKiteplatform

Source:Companywebsite.Retrievedfromhttps://kite.zerodha.com/onSeptember18,20174:00PM

Exhibit2

PlatformsofferedbyZerodha

Desktopbasedplatform'PI'	Advancedtradingsoftware withfeaturessuchasadvancedcharting,Algos,strategiesand back testing
Tradingplatform'KITE'	Lightweight,lowbandwidth,multi-language,integrated,easytousetrading platformformobileanddesktop
Quant,algoZ,SPANcalculator	Analyticaltoolsforcarrying outdetailedanalysisofmarket
ZerodhaVarsity	Educationalplatformtoteachmassesaboutbasicsofstockmarketandstock trading
Coin	Mutualfunds exclusiveplatform

Source:Companywebsite.Retrievedfromhttps://zerodha.com/productsonSeptember18,20174:00PM

EXHIBIT3

Leadingbrokersandtheirmarketsharesintermsofnumberofcustomers

Brokers

ICICI SECURITIESHDFC SECURITIESZERODHASHAREKHAN

AXIS SECURITIESKOTAKSECURITIES

ANGEL BROKING PRIVATE MOTILAL OSWAL SECURITIESKARVYSTOCK BROKINGINDIAINFOLINE

SBICAP SECURITIESGEOJITFINANCIALSERVICES

RELIGARE SECURITIESRELIANCE SECURITIESEDELWEISSBROKING

Year2018Customers

7,98,355

6,02,493

5,40,905

5,35,003

4,04,769

3,68,638

3,63,663

3,07,647

2,44,753

2,25,435

2,13,616

1,83,466

1,43,892

1,22,858

1,04,643

Number ofCustomers

2,00,000

4,00,000

6,00,000

8,00,000

EXHIBIT4

ZerodhaVarsity

Averagedailypage-views	45,000+
Numberofqueries	25,000+
Numberofnationalities	121
Overallpageviews	5,000,000+

(dataasofApril6,2018)

Source:ProvidedbyZerodha