Understanding why it is difficult for new entrants to enter the platform business

Abstract

Platforms have paved the way for businesses for centuries but the rise of internet has brought with it a new wave of platform businesses which have transformed the face of business landscape in an unprecedented way. Hence, it becomes relevant to study how these platforms operate and what makes it difficult for new players to enter into this market. Platform business is enoromous and it was essential to precisely define the scope of our study. The scope of our study is platforms in the online restaurant reservation industry, in particular Opentable. This platform is uniquely placed to generate insights that will benefit their restaurant partners and in turn the platform itself. Such insights will make the platform more lucrative to the restaurants partners and thus increasing the barriers to entry. We have explored what features of the brick and mortar restaurant partners affect the online reservations of the restaurant on OpenTable. The features considered for the study are pricing, dining style, cuisine, ratings, number of menu items, spatial agglomeration and competitive agglomeration. Consumers exhibit some stickiness for cuisine, price range and dining style. The increase in the number of menu items has positive effect on the business of the restaurant. Restaurants with similar price and offerings should not cluster in the same neighbourhood thus reducing the inherent competition