Kavak: the growth just started.

Introduction:

As a member of the FutureFounder Fellowship program, I have developed an in-depth analysis of one of the biggest startups in Latin America. The aim is to understand its growth and the strategic planning involved.

Kavak is an online used car selling market that aspires to revolutionize the car market in Latin America. They want to achieve this by creating an ecosystem around owning and changing cars periodically. Their services range from buying and selling used cars to offering financial aid and car insurance. Although they are relatively new, being founded in 2016 by Carlos Garcia, they have been steadily growing and now have more than 20 dealerships and presence in three countries: Mexico, Argentina, and Brazil.

Conducting a strategic analysis

To understand the success of Kavak in Latin America and to develop a strategy to create more success. We first need to analyze the company and its environment. This can be done by doing a strategic analysis of the company. The strategic analysis is divided into three main elements: the internal factors of the company, the external factors, and the analysis created by merging the two factors (internal + external): the SWOT analysis.

Internal factors:

The internal factors consist of two parts: the organizational history, and the formal organization.

Organizational History:

The idea behind Kavak started when Carlos García moved to Mexico in 2014. He wanted to sell his car and discovered that in Mexico it was very difficult to find a trustworthy buyer. So he found a business opportunity in selling used cars. He started developing the idea with his two co-founders Looreanne Garcia and Roger Laughlin.

In 2016, the company started with the digital sale of one car, a Jetta 2014. After that sale, the company attracted investment from Mountain Nazca, SoftBank, and Kaszek; for the initial growth of the company.

Formal Organization

This section is the most important part of the internal factors because the mission, vision, and organization of the company dictate the course of the company. If these elements are not well described or aligned with the goals of the company they should be reevaluated. The company is described as an e-commerce company; nonetheless, Kavak has physical stores to buy, test, and sell cars. They state the following:

Mission: To offer the best experience when selling and buying used cars in Latin America.

Vision: To revolutionize the car industry in Latin America and make the experience of owning a car a pleasure, not a burden.

The company is composed of approximately 6,700 employees divided into the following areas: Communications and Public Affairs, Customer Journey, Expansion (Launching, Real Estate, Store Development), Finance, Legal, Kavak Capital, Marketing, New Revenues, Operations, People, Product, Strategy & Data, Tech.

External factors:

In this section, we will analyze how Kavak fits into the global environment and in their respective industry, this way you can create strategies that fit into market necessities or market niches.

STEEPLE analysis:

Using the STEEPLE I create an overview of the Kavak environment through different areas:

External Stakeholders:

The stakeholders are very important to have as a benchmark and a comparison so that the strategy can be focused and take advantage of the opportunity areas that arise from analyzing them.

• Competitors: Unorganized car dealerships, new car market, Click Auto, Latam auto, OLX autos, and CarSales,

• Customers: Individuals looking to buy a used car, people looking to sell their car, and people looking to upgrade their current car.

• Investors: Mountain Nazca, SoftBank, and Kaszek

SWOT:

Finally, by combining the previous factors we can develop a SWOT matrix to analyze the strengths, weaknesses, opportunities, and threats relating to Kavak. This analysis is used as a planning tool since it collects the most important information surrounding the company.

Defining a strategy

Using the information above we can identify certain priorities and areas of opportunity. By reviewing the mission and the vision of the company we can identify that their ultimate goal is to be present in all Latin America, but they have only a presence in 3 countries at the moment, so a priority for them is to grow into new markets.

Another strategy worth mentioning is found by analyzing the vision: to create an environment around owning a car. This objective is more difficult to achieve because they need to change the consumer’s behavior to adapt to this trend of buying and selling cars more frequently. For this objective we can create several strategies, each focusing on different areas of the business, from the financial to the marketing area. However, in this project, we are going to focus on the other objective previously mentioned because it is the most important to the CEO of the company, as he stated in an interview with FORBES Mexico.

Defining a strategic roadmap

For this strategy, we must establish a clear and achievable goal and a couple of key results that we can follow to identify if the objective is being met. To make sure that these activities and key results can be achieved we must track their progress and assign the correct resources to be able to make them happen. Metrics are needed to track their progress and it is very important to follow them until the key result is achieved to identify a flaw in the strategy and take corrective actions before it fails.

The metrics and the resources can be reviewed in the next table:

Recommendations

Kavak is in a defining moment to keep growing or to stagnate in its place. It is very important to work on creating the car culture that they need their clients to have because if this is not well developed, the market will not be sustainable enough to see their growth into more cities around the country and far less to new countries where the market is untapped. Another alternative is to grow different parts of the business. They can rely on the following departments as alternative revenue streams:

1. Kavak Capital, to foment different car startups around Latin America,

2. Strategy and data: to identify new trends in the car market and the tech department to keep innovating.

3. New Revenues department: to find other business opportunities in the car ecosystem and get ahead of the decline in revenue that awaits them if the car culture does not develop more.

Key Takeaways

This project as a Future Founder Fellow has been filled with new learnings. Although I had previous experience in strategic planning, creating a new analysis on a company that doesn’t have a lot of information available to the public was an amazing learning experience because I had to research multiple sources as a member of the FutureFounder Fellowship program, I developed an in-depth analysis of one of the biggest startups in Latin America. The aim is to understand its growth and the strategic planning involved.

For my research process, I focused first on the web page of the company and then looked at articles that wrote about interviews with the founders and employees. Then, I researched financial websites, like Crunchbase, to see the correlation between the investment rounds and key actions taken by the company, i.e. the expansion to Argentina and Brazil.

I implemented peer feedback in this project, which helped me, especially in the external analysis as I could incorporate different perspectives on the social, ethical, and environmental aspects and it helped me narrow down my objective and the activities to align not only with the vision of the founder but also with the objective.

I would like to recommend a fellow Founder when developing a strategic analysis to first read a lot about the company and then start developing this plan step by step because every step takes you to the next and it is easier to flow through the different steps of this process if you know the company. I would also recommend always aligning your OKRs with something real in the company or a similar one so that way you can have a benchmark as to what metrics can be followed and achieved.