Radio Taxi Service

MNBI – Opportunity Presentation

PGPM508_26: Prakash P.MPGPM508_42: Himanshu SaxenaPGPM508_56: Chandra M Verma

The NeedPeople in India face problems when traveling by ordinary taxis:

1. Have to bargain on rates2. Faulty billing (tampered meters)3. Unreliable drivers4. Refusal of service5. Safety concerns

Need: A safe, reliable, hassle-free, easy-to-access and

affordable taxi service

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Our Value PropositionWe will launch a radio taxi service in India with the following features:

1. Availability: Initially in one city and then expand to all Tier 1/2/3 cities

2. Convenience: Book through Website, SMS, Phone-call

3. Price: Rate at par with ordinary taxi rate4. Reliable Billing: Tamper-proof meters which will

provide printed receipts5. Safety & Security: Trained drivers, Safety

devices, Monitoring from base station via GPS6. Enhanced Customer Experience: Delighting the

customer

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Initial Customer/Consumer Segment

• Initial Customer Segment – Middle class and Upper Middle class customers

• Initial Customers – Corporate executives, passengers traveling to airport, railway station, bus station etc.

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Existing Radio Taxis: • Little presence of radio taxis in

tier 2 and 3 cities• After initial year, develop on

differentiation strategies

Comparing with the Competition

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Ordinary Taxis: •More safety and security•Ease of booking•Transparency and uniformity of billing

Car Rental Services: •Less charges than car rental service provider (IT usage in logistics planning)•More safety and security•Faster response time as compared to car rental services•Transparency and uniformity of billing

Market & Industry

• Market: People in India who avail taxi services

• Industry: The Radio Taxi industry which currently is in a nascent stage and has presence in a few of the Tier 1/2 cities in India. The few players are Meru Cabs, Forsche, Mega Cabs, Easy Cabs.

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Market Attractiveness (Macro View)

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Total number of ordinary taxis in India 8 lakhs

Current number of radio taxis in India 7,500

Projected number of radio taxis by 2010 (Source: Entrepreneurial Magazine Dare)

1,74,000

Projected annual revenue of radio taxi industry by 2010 (Source: Entrepreneurial Magazine Dare)

Rs. 7,210 Crore

“Overhaul of taxi services in the next 7-10 years will see 4,50,000 vehicles being retired, mostly taxis and autos. That opens up a $2 billion opportunity.” - Rajiv K. Vij (CEO, Carzonrent)

Market Attractiveness (Micro View)1. Initial Target Segment: Middle class and Upper

Middle class customers.

2. With the economy on the upswing, this segment is increasingly demanding taxi services that are easily available, are hassle-free, have reliable metering and are safe.

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COMPETITIONNew players (approx 5);

consolidation will happen only after

a few years

BUYER POWER

Buyer concentration vis-à-vis industry is

high

THREAT OF SUBSTITUTES

Low switching costs; Ordinary rental taxis and auto-rickshaws available

in large numbers

SUPPLIER POWER

Many suppliers for the fleet

BARRIERS TO ENTRY

High investment;High licensing fees;

High

LowLow

Low

High

Industry Attractiveness (Macro View)

Industry Attractiveness (Micro View)

1. Absence of proprietary elements (ex. patents, trade secrets) – Reduces entry barriers

2. Competitive Advantage – Once the business is somewhat stable, companies could look at developing strategies for differentiation or low-cost:

Add/remove features – modify cost and pricing Optimize operations leveraging technology (ex. use

smart business analytics to reduce unpaid kms) Leasing vehicles Use low-cost vehicles for the fleet Franchisee model Focusing on reducing the response time to the

customer3. Viability of business model – prompt revenue

collection, good cash flows, decent profit margins (10 to 15%), payback-period of 4-5 years

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Primary Research (for # of customers)

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• Services to be launched in Kolkata (Tier 1 city with absence of radio taxi services)

• # of ordinary taxis = 42,000• # of people carried by ordinary taxis each day = 14.57 lakh• Therefore, each taxi carries 35 passengers a day• Average revenue per day per taxi = Rs. 1200• Assuming that there are 2 passengers per trip, each taxi does

= 35/2 = approx. 18 trips• Average revenue/trip = 1200/18 = Rs. 67 (which is for a 5 km

trip)• Hence distance travelled by a taxi/day = 5X18 = 90 km• Assuming an average speed of traffic of 15 km/hour, the travel

time/day/taxi = 90/15 = 6 hours• If each driver operates a taxi for an average of 10 hrs a

day, utilization = (6/10) x 100 = 60%

Primary Research (for # of customers)

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• Middle class segment of the population = 30%• Assuming that of the 30%, the lower middle class is 15%,

then (middle class + upper middle class) = 15%• Target Segment = Taxi Customers in (middle + upper

middle class) = 15% of 14.57 lakh ~ 2.2 lakh• Even if a radio taxi (due to higher utilization) carries

70 passengers a day, there is a market for = 2.2 lakh/70 = 3150 taxis

From the above, there is sufficient demand for the initial fleet

size of 200 taxis.

Revenue Streams, Cost Structure, Pricing

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Key Assumptions:1.Initial year will see a launch in one city with 200 cars.2.Daily billable utilization of 80% and yearly fleet utilization of 90%.

1st Year Annual P&L Sheet

Revenue 12.83 Cr.Expenditure 11.28 Cr.Operating Expenses 7.38 Cr.Marketing Expenses 0.50 Cr.Supporting Infrastructure & HR 1.50 Cr.Depreciation and Amortization 1.90 Cr.

Operating Profit 1.55 Cr.

Critical Success Factors• High utilization rate of the fleet• Ability to increase revenue from taxi services• Ability to increase revenue from advertisements• Ability to drive down operational costs by

leveraging technology• Ability to expand rapidly to Tier 1/2/3 cities

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Risks• State policies for registration of radio cabs could

be a hindrance to expansion plans• Adequate funding is required for expansion plans• Inadequate levels of customer awareness about

radio taxis could hamper demand• Managing the drivers’ attitude/discipline through

training is crucial for growth• Ability to manage legal issues in case of

accidents (damage to property, loss of life etc.) is vital

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Thanks

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