For office use:

Grade

Communication for Managers

Case Assignment No. 1
Case Analysis Report on
Beck Taxi

Submitted by:
Name: Saransh Bagdi
Roll No: 161253
Section: B
Batch: MBA FT (2016-2018)

Institute of Management, Nirma University

Date of Submission: 01/10/2016

Diagnostic Report
Executive Summery
Beck taxi is a family owned company. It was founded in May 1967 by Jim Beck in Toronto. It used
to operate taxies by its own but later it concentrated itself to the brokerage business. It is Torontos
leading brokerage company with market share of 30.4%.
The case is of the time when summer which is a lean season for taxi, was about to arrive. Company
was facing pricing challenge and they were thinking to resort the fee levied for the dispatch and
brokerage services company provide to taxi drivers.
Beck taxi as following pricing options:

Maintain the Status Quo.

Reduce the fixed fee.

Reduce the fixed fee for the radio and charge a fee for each dispatch.

Reduce the fixed fee only for summer.

Options need to be evaluated from the perspective of both company and drivers.

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Situational Analysis
Gail Beck Souter is CEO of Beck taxi and daughter of the founder late Mr. Jim Beck. Beck Taxi was
founded in May 1967. At the beginning company used to operate its own taxi, currently it is leading
taxi brokerage firm with around 30% market share in Toronto. Next competitor, Diamond is with
only 9 % (475) market. It shows that Beck has an edge over other brokers to attract drivers and plate
owners.
Current, Revenue and Expense statement of Beck Taxi given in Exhibit 1 whereas revenue and
expense statement of Drivers with current radio fee have been given in Exhibit - 2.

Toronto cab industry had a total of 4851 cabs. Cab industry here is overcrowded by taxis, for every
500 torontonians there is one cab available whereas in other metropolitan ratio is 1000 to 1.
Toronto has three autonomous players in the cab industry: Municipal Licencing & Standards
(ML&S), brokerages and cab driver.
ML&S is a regulatory body with five major responsibilities: issuing taxi licenses to vehicles, issuing
taxi licenses to drivers, determining and capping the number of taxi licenses, fixing the fare charged
to taxi customers and conducting training classes for drivers. Driving licences need to be renewal
every year. Vehicle licences (commonly known as plates) includes property rights that were
recognized by law which means that they needed to brought once and will remain with owner and
then it can be passed to designated heir. ML&S issues three types of plates: Ambassador (for ownerdriven vehicles), Accessible (for carrying passengers with special needs) and Standards (for
individuals, companies and drivers).
Taxi companies in Toronto are known as Brokerages. There are 35 brokerages which operates a total
of 4851 vehicles. A brokerage firm plays two roles: operating a dispatch service and managing a
number of plates. A brokerage firm usually manage the plates for investors and lease them, in return
brokerage pay a regular fee to plate holder.
Drivers those who had purchased the vehicle but do not have plate, need to sign the ownership over
to the plate holder to comply with ML&S bylaw. Although cab drivers were regulated by government,
they did not have the protection of employment standards legislation, as they were considered selfemployed. A cab driver need to pay a fee for leasing plates and/or dispatch services.

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Summer season is about to begin which lasts for three months, it used to be lean season for taxi
industry. Due to summer season, Beck Taxi is foreseeing a downward trend in revenue and exploring
options to sustain the revenue without affecting drivers earning and other stake holders as its highly
competitive market.
Company has not increased radio fees since last 20 years and till last year. Management is always
looking for better option to sustain revenue and growth option. Hence, this study and report has been
carried out.

Problem Statement
To select a price policy which intern increase the revenue of the company without compromising the
situation of drivers.

Objectives
1. Optimize the utilization of plates.
2. Control the demand in lean season.
3. Attract more drivers.
4. Cut off drivers from bypassing the dispatch services.

Options
1) Reduce the fixed fee.
2) Reduce fixed fee for the radio and charge a fee for each dispatch.
3) Reduce the price in lean season and also ask drivers to reduce the charges.
4) Maintain the status quo.

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Evaluation of Options:
i.

Reducing the fixed cost will attract more drivers. With more number of drivers more number
of plates can be put into use as there are around 576 number of plates are redundant in each
shift. It can help maintaining demand and revenue for the company in lean season.
Suppose if prices are reduced to $375 from $400 per week per shift. Because of the reduction
in cost 100 more drivers joined the fleet. Than company will lose $22500 per week per shift
but it will gain $250000 from the new drivers and company will be in overall profit so as the
drivers (Exhibit 3).

ii.

Reducing the fixed fee for the radio and charge a fee for each dispatch can encourage drivers
to bypass the dispatch services.

iii.

This option will attract customers in lean season and is economically viable for both company
and drivers. This move will encourage more drivers to transfer their allegiance to Beck.

iv.

Maintaining the status quo will not help company neither drivers in any ways.

Decision
From the matrix (exhibit-4) both option 1 and 3 are viable. Both the options will ultimately increase
revenue of company. Although, option 3 will maximize the profit. If option 1 is chosen, it will exert
high pressure on other brokers most of whom are marginal players. Adopting the option 1 will be the
best option over long run. I can say that reducing fixed fee is the best option.

Action Plan
Company should do the survey of drivers for the price feasible to them or they preferred. Also Beck
should collect the data of fee charged by competitors. After analysing these data company need to set
a price which will generate greater returns over long run. Company should extensively advertise about
the new price policy.

Contingency plan
If option 1 doesnt work out, then company should maintain status quo.

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Exhibits
Report Exhibit 1: Daily Revenue and Expense statement of Beck Taxi:
Revenue : (Daily)
1

Charges from Shift Driver for Cab Rent ($65 per shift)

37440

Charges from Long term lease for Rent of plate (900

2

plate)

34500

Charges from all 1476 for Radio fees ($450 / month)

22140

Total Revenue

94080

Expenses : (Daily)
1

Independent owners (576) and rent for their plate

22080

900 Nos. large fleet from single agency

34500

Repair and maintenance cost ($5 per Cab for 576 Cab)

Salary for Staff (150 Nos. avg. $ 2500 / Month)

Other administrative expenses

2880
12500
N.A.

Total Expense

71960

Total Profit (Daily)

22120

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 Report Exhibit 2: Details of Drivers (Shift and Long term lease) earning
with current Radio Fee:

Revenue :
Long

Shift

Term

Driver

Lease

Earning in Shift

175

175 14 fare and 12.5 $ avg. fare

Tip

17.5

17.5 10 % avg.
Assumed that he is giving

50 taxi during night shift and

earning.

Total Revenue

Expenses :

192.5

242.5

Long

Shift

Lease
65 per shift

10

5 Traffic Ticket

5 Repair and maintenance

1.15

1.15

15

15

96.15

74.45

Total Expenses

38.3

1150 per month so divided

by 30 days.

10 Gas Charge

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Driver License charge $

836 Annually.
$ 450 Per Month for Radio
Fees

Total Earning
in Shift
(Revenue -

96.35

168.05

Exp.)

Report Exhibit 3: Plates currently in use and change in revenue

calculation:
Given that beck has 2500-3000 drivers on call out of which 60% as core group of drivers.
No. core drivers = 60*3000/100 = 1800.
No. plates used per day (2 shifts) = 1800.
No. of plates used per shift = 1800/2 = 900.
Total no of plates Beck has = 1476.
No. of unused plates = 1476-900 = 576.

Now,
Dispatch revenue per shift = 900*400 = 360000
Dispatch revenue per shift when cost is $375 = 375*900 = 337500.
Decrease in revenue = 3600000-337500 = 22500.
Revenue from new drivers = 100*375 = 37500.

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 Report Exhibit 4: Object-option matrix (Evaluation of option)

Objectives/Options

Reduce the

Reduce

fixed Reduce

the Maintain the

fixed fee

fee for the radio price in lean status quo.

and fee for each season.
dispatch.

Optimize

the

utilization of plates.

Control the demand in

lean season.

Attract more drivers.

Cut off drivers from

bypassing the dispatch
services.

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UNDERTAKING

To Whom It May Concern:

I, Saransh Bagdi hereby declare that this assignment is my original work and is not copied from
anyone / anywhere. If found similar to other sources, I shall take complete responsibility of the action,
taken thereof by, CFM Team.
Signature :
Name

Saransh Bagdi

Roll No.

161251

Section

Batch

MBA FT (2016-2018)

Date

01.10.2016

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