We understand from the above that the barriers to entry are not too high and not too low. They are moderate and may reduce in the long term.
Price elasticity: Metro will be available,CNG becomes expesive,meru can go fr other fuel options.
Porter’s Five Forces Analysis-Radio Cab Service in Mumbai Rajesh Ravindran 44 Sudeep Paranjape 34 Dhanvi Kapadia 19 Prashant Sharma 49 Abha Gupta 14 Anup Pawaskar 39 Rinto John 18 Supriya Panchbhai 32
Agenda• Background• Existing scenario of Taxi Service in Mumbai• Rivalry among existing players• Threat of new entrants• Threat of Substitutes• Bargaining power of suppliers• Bargaining power of customers• SWOT Analysis
Background of Mumbai Traffic• Mumbai has a population of 20 million people.• 88% of commuters in Mumbai use public transport mainly suburban trains as a means of transport• The public transport is overcrowded and does not offer point to point service• Most of Mumbai’s arterial roads are congested• Improvement has been taking place in the train and bus systems through public investment
Taxi Service in Mumbai• Only 20,000 old black and yellow taxis on Greater Mumbai road and 35,000 New taxis like Maruti Alto, Wagon R, Omni, Tata Indica, Santro etc• 5% of the commuters in Mumbai use taxis• There are 54,524 taxi permits• 2,32,002 drivers hold Taxi Driver’s Badge (Billa) which authorizes them to drive a taxi• Issue of new permits for Premier Padmini taxis have been frozen since November 1997
Why go the Radio Cab route?• Radio cabs constitute just about 8% of the four lakh registered taxis in the country.• With a maximum fare difference of Rs5/km with regular taxis, these cars that come equipped with GPS systems offer good value for customers• The next decade will see about 450,000 taxis and auto-rickshaws being replaced in major Indian cities, presenting an over US$2 billion opportunity for the radio cab business• Increased efficiency• The radio cab business has tremendous potential for growth in India as the transport needs of the corporate world and even of middle- class and affluent will be met efficiently• With enormous parking problems, many residents would prefer to call up or SMS
OfferingsCompany Estimated Fleet Value Proposition Size(Mumbai)Meru Cabs 2000 Largest fleet,60 sec. to book, Brand EquityTab Cabs 1600 New,Fresh,Luxury Toyota Etios,InfotainmentEasy Cabs 800 By Hertz,Car Rentals,Corporate LeasingMega Cabs 600 Drivers from reputed institutes like the Institute of Driving and Training Research (IDTR) and Hubert Ebner (HE)Viira Cabs/Forshe - By Women For Women
Factors affecting Competitive rivalry Characteristics (Current) Future TrendDegree of seller Few Expected to riseconcentration?Significant cost differences Not much Not Muchamong firmsDegree of product Firms compete on quality Expected to risedifferentiation among of services offeredsellersBuyers cost of switching Low LowAre prices and terms of Yes Yessales transactionsobservable?
Factors affecting Competitive rivalry Characteristics (Current) Future TrendCan firm adjust prices NA NAquickly?Large and/or infrequent Yes Yessales orderStrength of exit barriers High HighNote:• Few players in the market.• Providing employment options to more than 5000 people.• Presence of strong unions.• Govt. decides on the price
In Short….• Rivalry among players High and will be Rising• Price is not a differentiating factor• Prompt Response, Luxury, Comfort will be key• Innovative schemes• Apart from vehicles, companies spending on Technology, drivers and Call Centers to gain an edge.
Barriers to Entry• Initial Investment• Government Regulations• Taxi Permits• RTO• Skilled drivers• Branding
Factors affecting the threat of entry Characteristics Characterization Future Trend (Current)Significant economies of Only few players As demand grows, it willscale? riseImportance of reputation Yes due to existence of Will definitely increaseor established brand many options to theloyalties in purchase customersdecisions?Entrants’ access to NA NAdistribution channels?Entrants’ access to High Very Hightechnology and know-how?Entrants’ access to High Very Highfavourable locations?
Factors affecting the threat of entry (Cont.)Characteristics Characterization Future Trend (Current)Experiences based High Very Highadvantages ofincumbents?Network externalities: High Highdemand side advantagesto incumbents from largeinstalled base?Perceptions of entrants Low Moderateabout expectedretaliation ofincumbents/reputationof incumbents for“toughness”?
Substitutes• Public bus service (BEST) - 90% of public transport in India• NMMT-Navi Mumbai Municipal Transport operates its Volvo buses• TMT-Thane Municipal Transport operates its buses from Thane to Mulund and Borivali.• Suburban electric trains: local railway lines • Western, Central & Harbour lines • The rail network traverses through the length and breadth of the country, covering 6,909 stations over a total route length of around 63,465km • Transporting over 18 million passengers and more than 2million tonnes of freight daily• Auto rickshaws - 246,458 auto rickshaws in Mumbai MMR as of 2008• Ferry services for Gateway, Elephanta, Manori• Public Taxi (Black&Yellow)• Radio Cabs
Factors affecting Pressure from Substitutes/Complements Characteristics Future Trends (current)Availability of close substitutes? Easily Available Easily AvailablePrice-value characteristics of substitutes? NA NAPrice elasticity of industry demand? Moderately Elastic Highly Elastic (Substitutes) for Substitutes Moderately elastic and (Complements) complimentsAvailability of close complements? Easily Available Easily AvailablePrice-value characteristics of complements? High High
Bargaining power of customers• Moderate• Low switching costs• Multiple modes of travelling• Buying a two-wheeler/car • Private vehicles account for 30% of the total transport demand in urban areas of India • The number of automobiles produced in India rose from 63lakh (6.3 million) in 2002-03 to 1.1 crore (11.2 million) in 2008-09 • India still has a very low rate of car ownership • Low price cars introduced• Airport and Corporate Buyers
Fare StructureCompany Flag-down (Rs) Subsequent km Night/Extra (Rs) (Rs)Meru, Mega, Easy, 24 17 • Waiting:0.5/minGold • 30 + 21.25 • Waiting at night time 0.62 Rs.Cool 20 40% more than 25% on the fare B&YPremier Padminis 17 ~10 Starts at 20, 25% on the fareNew Black & 17 ~10 25% on the fareYellow CabsForshe 200 for 10 kms 15 250 (10 kms)+20Viira 22 17 30+22Priyadarshini 200 for 10 kms 15
Factors affecting Power of Buyers Characteristics (Current) Future TrendBuyer’s industry more NA NAconcentrated thanindustry?Do buyers purchase in No Novolumes? Does a buyer’spurchase volumerepresent large fraction oftypical seller’s salesrevenue?Can buyers find Yes Yessubstitutes?Do firms make Yes Yesrelationship specificinvestments to supporttransactions with specificbuyers?
Factors affecting Power of Buyers Characteristics (Current) Future TrendIs price elasticity of Low Lowdemand of buyer’sproduct high or low?Do buyers pose credible NA NAthreat of backwardintegration?Does product represent NA NAsignificant fraction of costin buyer’s business?Are prices in the market Take-it-or-leave-it Take-it-or-leave-itnegotiated betweenbuyers & sellers on eachtransaction or do sellerspost a ‘take-it-or-leave-it’price that applies to alltransactions?
Major Suppliers 1. Car Dealers4.Technology Providers Suppliers 2. Fuel 3. Skilled drivers
1. Car Dealers Company Cars used Meru Cabs Maruti Suzuki Esteem Mahindra Logan Tata Indigo Tata Indica Toyota Corolla Easy Cabs Maruti Suzuki Esteem Tata Indigo Mahindra Logan Hyundai Accent Ford Ikon Tab Cabs Toyota Etios Maruti Suzuki Sx4* Mega Cabs Tata Indigo Tata Indigo Marina
1. Car Dealers Company No. of dealers in Mumbai & Navi Mumbai Maruti Suzuki 18 Mahindra 3 Tata Motors 8 Hyundai Motors 7 Ford Motors 6 Toyota Motors 9 Source:
1.Car Dealers• Bargaining PowerLow since Many Car dealers -Bulk Ordering -Best Deal -High end Models
2.Fuel Supply• Radio cabs in Mumbai operate on CNG fuel• Rs. 33.10 per kg• Reliance Industries, GAIL (India) & Mahanagar Gas play a big role in the supply grid.• The Government of India, too is keen on promoting use of CNG since it is cleaner and less expensive.• Bargaining Power: Low to Moderate -Petrol Dealers Association of Mumbai -Fuel prices are set by the Ministry of Petroleum and Natural Gas /Government of India -CNG Kits
3. Skilled Drivers• Difficult to find good caliber drivers• Taxi permits are controlled by the government• A deserving driver who has the aptitude and interest will not be able to become a unless he has a taxi badge which is difficult to obtain• Bargaining Power Moderate but Rising -Unionization -Politicization e.g Meru Cab Strike (Swabhimaan Sanghatna)
4. Technology• Tamper proof Electronic Meters• GPS devices for Navigation• GIS devices for Vehicle Tracking• Television behind the head rest of Front Seats• Call centers Services• Bargaining Power Low -Large number of Vendors -ERP vendors
Factors affecting or Reflecting Power ofInput Suppliers Characterization Future Trend (Current)Is supplier Industry more concentrated No No.Unlikelythan industry it sells to?Do firms in Industry purchase relatively No. In fact it’s the No. Newersmall volumes relative to other opposite models maycustomers of suppliers? Is typical firm’s replace olderpurchase volume small relative to sales onesof typical supplier?Few substitutes for supplier’s input? Yes YesDo suppliers pose credible threat of Highly Unlikely Highly Unlikelyforward integration into the productmarket?Are suppliers able to price discriminate Not all Not allamong prospective customersaccording to ability/willingness to payfor input?
Five Forces AnalysisForce Threat to Profit (Present)Internal Rivalry High High. Will riseThreat to Entry Moderate ModerateSubstitutes High HighBuyer Power Moderate ModerateSupplier Power Moderate Moderate
Strengths• India’s largest radio taxi operator -a strong brand equity• Preferred Radio-taxi service at the Mumbai airport• Fleet of around 2000 radio taxis in Mumbai• Location tracking GPS and a 24x7 Customer Service Center- Makes use of Advance Techology• Tie up with Axis Bank –Credit/Debit card payments• Won many Accolades
Weakness• Complaints of booking cancellations, drivers being rude, overcharging about the company are rampant on Internet• News of alleged exploitation of drivers by the firm(Revenue sharing model)• Recent Strike by drivers – Damaged reputation
Opportunities• Expanding into cities like Pune, Ahmedabad, Kochi,Trivandrum• Car rental service• Infotainment services- Real time Flight Schedules• Branding on Social Media• Strategic partnerships with Online Travel Portals like MakeMyTrip.com, Cleartrip.com,Yatra.com and High End Hotels
Threats• Stiff competition from players like Mega cabs, Easy cabs, Tab cabs• Politicization- Drivers Union-Management disputes may rise• Unexpected Government Regulation
Strengths Opportunities Leads The market is Expanding into Largest Radio expected to cities like Pune, double each year Taxi Operator Ahmedabad, for the next two Kochi,Trivandrum years In the next decade Fleet of about 4,50,000 taxis and rickshaws will Car Rental Service around 2000 be replaced in major – Without radio taxis in Indian cities presenting an over chauffer Mumbai $2 billion radio cab business Most preferred Advanced Location service at Mumbai Real time tracking GPS airport, Tie up with Airport/Metro Flight/Metro System, Technology Schedules services to get daily driven taxi service schedule
Strengths Opportunities Leads ‘Book a radio cab Digital marketing in less than 60 manager, Youth being Brand themselves the influencers, seconds-Online’ Respond to customer on Social Media facility available queries and feedback Preferred taxi With every Strategic partnerships with service at domestic flight + Online Travel car booking made Portals like Mumbai on MakeMyTrip.com, Airport Makemytrip.com Cleartrip.com,
StrategiesOffer them…• Cab-Pooling• Female Driving• Target Corporates -Premium Cars+ Airport Hotel Workspace• After Parties