IIM Kozhikode

Interest Groups
Please provide following details for identification.
Name: Vundavalli Deepika
Email: deepika.35@gmail.com
SR No.: 4205041
Interest Group: Konsult
Assignment No: 1

1. Analyse the Radio Cab Industry in India using Porters Five Forces model with a diagram. Substantiate with
relevant data. (Max 500 words)
The Indian radio taxi market is reported around $8-$10 billion dollars with 95% of the business unorganized run by
local operators1. There is also a good scope of expansion in Tier-2 cities in India in addition to the Tier-1 cities, where
the taxi services are operating mainly now.
The radio taxi market in India is operating under aggregator model (Uber, Ola, Taxi For Sure etc.) and traditional Radio
taxi model (Meru cabs, Easy cabs, Fast track etc.) Traditional radio taxi cabs are also moving into a combination
model, where the fleet is partly owned by the company and partly operated under aggregator model.
Customers include corporate companies, individuals and people travelling for leisure. The suppliers to the industry are
car dealers, technology providers, skilled labor and fuel providers. Cab drivers union held strikes along the years for
leaves, ownership of cabs etc.
The concluded analysis for the Radio cab industry using Porters Five Forces model is that the competitive rivalry in
the industry is high due to increasing VC funding to many players like Meru, Ola, Uber etc. and competitive
promotional categories. The threat of new entry is moderate and the threat of substitutes is high.
Bargaining power of suppliers is moderate with skilled labor having high power. Bargaining power of customers is low
except for corporate firm with huge orders.
The Porters Five Forces model is illustrated in the below page.

High initial investment (vehicles, technology, call centers, telecom

etc.)
Difficult barriers of entry like government regulations, taxi permits
and skilled & reliable labor
Economies of scale is difficult to achieve with low per kilometer
fares
Competitors effect profitability as industry has low brand loyalty
and tends to move towards better & cheaper options.

Threat of New Entry

(Moderate)

Bargaining power of suppliers

(Moderate)

Industry
Rivalry
(High)

Bargaining power of buyers

(Low)

Large number of suppliers for cars and thus

offer companies low price, high end model to
maintain huge orders
Threat of substitutes
(High)
Fuel suppliers have low bargaining power as
the prices are fixed by the government
Skilled drivers have high power as they are
difficult to acquire and unionization is also
increasing
Technology suppliers are huge in numbers
and thus have low bargaining power

Corporate segment customers with

frequent and substantial orders have
moderate bargaining power
Customers that use cabs for personal or
leisure travel have no bargaining power
Many substitutes available and low
switching costs to substitutes

Major substitute is public transport which also offers comfortable

& cheaper options like AC Volvo buses and Metro rail (Delhi,
Bangalore)
Auto rickshaws and Local taxis are also abundant
Large investments are being put together to improve public
infrastructure by the government.

Competition among the industry is

high and expected to rise as the
industry still has huge market to be
captured
Price competition is less as prices are
almost the same.
Customers preferences include
comfort, safety, availability and better
communication
Many other foreign companies are
entering the market like Hertz
Companies with technological

Source:
1. http://economictimes.indiatimes.com/small-biz/startups/partnership-between-vc-funded-start-ups-driver-operatorschanging-taxi-business-in-india/articleshow/45290027.cms
2. Do the SWOT Analysis of one of the companies operating in the same industry. (Max. 500 words)
SWOT Analysis of Meru cabs
Strengths:

One of the first companies to launch metered Radio Cab in India in 2007 and has industry pioneer advantage
Presence across all major cities in India and offers location tacking GPS & 24x7 customer service
Uses Oracle ERP to improve productivity and Siebel CRM to deliver great customer experience
Preferred radio taxi service at Mumbai, Bengaluru, Hyderabad and Delhi airports
Has stringent recruiting policies for driver including address verification, medical fitness tests, testing of
driving skills, ability to manage the on board technology on vehicles, familiarity with operating city and all the
mandatory licensing criteria
Conducts training programs for drivers at Meru training academy
Uses cars with CNG, resulting in reduced pollution
Serves 1.8million customers and won many accolades
Launched Meru Genie Cabs in 2013 offering cheaper cab fares at Rs.10 per km for intra city travel.
Also offers intercity trips from eleven cities

Weaknesses:

High fixed investment as it maintains a large fleet and thus has less investment for promotions
New entrants into the industry leads to lower market share and lower margins
Has many consumer complaints on the internet regarding poor call center support, rude chauffer behavior, last
minute booking cancellations, trips through longer routes etc.
News regarding the company exploiting the drivers and strikes done by the drivers lead to damaged reputation
of the company

Opportunities:

Unorganized sector is huge in India and can capture this through expansion into more Tier-2 cities like
Amritsar, Lucknow, Madurai etc.
Improve marketing tactics and offers promotional pricing
Have partnerships with travel portals like makemytrip, yatra etc. to increase orders
Offer free wi-fi and entertainment services in the cabs

Threats:

Rising competition from Uber, Ola and other taxi operators

Competitors have huge investments and can spend heavily on campaigns
Competitors are also technologically advanced
Very low customer loyalty in the industry