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Meru Cabs Case Analysis

Group 10

FT1730
43 Jishnu Goswami

FT1730
81 Saptarshi Sinha

FT1730
29 Dinesh Kumar K

FT1730 Amar Karam


11 Chandani

FT1720
47 Mayank Gaur
The Radio Taxis in India, came into existence when there was sufficient mobile
penetration in India, especially the tier 1 cities. The taxi segment was highly
unorganized and lacked standardised service quality before the introduction of
radio taxis. In about five years this industry grew to a size of INR 14.4 billion and
was expected to grow at an amazing rate of 30.9 per cent in the next five years.
The revenue model was going through several refinement by trial and error by
process, by constantly monitoring which model fits best.
Strengths:
i. Greater reach to customer though call service, where anybody can
book a cab sitting at home only
ii. Being a national travel company, Meru could deliver reliable and
standardized service throughout the country
iii. It had a strong Customer Relationship management to acquire new
customer and retain existing customers.
Weakness:
i. Unwillingness of the drivers to join radio cab services as they had to
pay rental even if they took leave.
ii. Operating cost was high as the company had to pay EMI for the
existing fleets and maintain call centres for CRM.
Opportunity:
i. There was a high growth forecast for the radio taxi industry.
ii. The urban population of India with high disposable income looked for
reliable, punctual and consistent service quality.
iii. High traffic on road made it more comfortable to ride than to drive your
own car.
iv. Several organizations reimbursed commutation fare, hence people
opted to ride cabs as it had more perceived comfort.
v. Increased number of tourist meant more business for the radio taxis.
Threat:
i. Varying government rules and regulations hindered growth.
ii. Rise of the online car aggregators might give a stiff competition.
iii. Restriction on fare by government was a significant threat.
iv. To meet demands the company had to scale up operations which
further needed high investments. With high fixed cost it was becoming
more difficult to be profitable.
The key competitors of Meru cab was the existing taxi services in different cities
and the online car aggregators which were new entrants. The existing taxi unions
protested against the introduction of the radio cabs, but they never did anything
to upgrade their service offerings. But these taxis had a larger fleet size and a
bigger customer base. Meru cab was already in a stage where they had to deny
service for want of cab. So, the bottleneck lies within the company itself. On the
other side the online car aggregators were asset light and were app dependent.
They had even higher growth potential and opportunity to make profit.
The newly introduced radio cab service was very convenient for the customers as
they could book them over phone only. These services were perceived to be
more reliable and customer focused. The fare system was transparent and they
provided a standardized service which was the need for the urban population
with high disposable income.
Apart from them similar aggregators and car rental companies are also posing
threat to the company, like some of the companies were providing services
similar to Meru but in addition to that they were also providing inter city services
which in return divert a large customer base towards them. Also other major
players like Easy Cabs, Mega Cabs, TABcab , carpooling services and unorganized
players were the competitors which were having major portion of market.

ISSUES

Meru cab has forayed in the industry with the aim of providing best services to
increase their customer base rather than by just increasing the fleet size. They
included ERP and CRM to improve their services which in the end payed off as
customer started shifting towards them but still their some issues which needs to
be dealt with in order to expand their business in India.
Many drivers who already owned their own cabs or worked for other non-radio
cab operators balked at paying the high daily rental fee to the radio cab
company. Issues like these create the shortage of drivers.
There were certain government regulations which needs to be followed, like the
ceiling on the number of permits that could be held by a radio cab operator,
stringent criteria for qualifying to become a radio cab driver, restrictions on size
of the radio cab and government regulations regarding fares. These rules were
acting as bottleneck for the company.
Another area of concern was the customer rejection rate, which was largely a
result of soaring demand and limited fleet size.

With these issues if Meru wants to become the leader and sustain that for longer
period of time, then it can take certain measures like they should make the
metro cities as their stronghold by reducing the customer cancellation problem
for that they need to have enough fleet size which could cater to the demand,
without this expanding to other cities wont be wise.
Its provision of daily rental payment for drivers should be modified because this
is hindering the supply of more drivers. Apart from that use of technology should
be continued as before because this is the differentiating factor between Meru
and other cab service providers.