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ASSIGNMENT-4

MERU CABS: A SPECTACULAR GROWTH


STORY
GROUP-11
K.SUBRAMANIAN

DM16121

B.VANDHANA

DM16153

V.ADITHYA

DM16154

KESHAV CHANDER

DM16222

INTRODUCTION
Meru Cabs was started as a radio taxi business in 2007 with just 45 taxis. In a limited span of
just 4 years it became the third largest taxi operator in the world and the largest in India. It
operated in four main metro cities in of India namely Bangalore, Delhi, Hyderabad and
Mumbai. Owing to its high quality service, the first contract to airport was given to Meru
Cabs.
The biggest advantage of Meru Cabs is its high tech back-end technology which allowed it to
automate most of its service processes. Of the two fleet-based businesses, Meru operated by
Company owned business. There were totally 15000 cabs but there was still a shortfall of
about 3600-5500 cabs shortage in each city they operated.
SITUATION ANALYSIS
Meru Cabs, which is a 5 year old company, has increased its fleet from 45 to 5500 and has
also become the largest taxi service in India, but the problem here is they have not yet broken
even. According to Full Year 2011 results, Meru has a net loss of 430 million. The
accumulated loss is about 1157 million and the total debt is approximately 1167 million. This
is mainly because of the installation of MDT (mobile data terminal).The case now proceeds
as to how Meru Cabs have to plan their future business in order to retain their competitive
advantage.
COMPETITORS FACED

Meru cabs was the market leader with a share of 37% and a fleet size of
5500 cars
The other major competitors to Meru are Easy cabs , Mega cabs and TAB
cabs each with a market share of 18%, 17% and 8% & operate with a fleet
size of 2700, 2500 and 1200 cabs respectively.
All together these 4 major players contribute to about 80% of the total
radio cab business in India.
Easy cabs has the maximum net sales of 2084 million INR for the financial
year 2011 folllowed by Meru with 1393 million INR net sales and Mega
cabs with a net sales of 261 million INR.
The CAGR is highest for Mega cabs at a rate of 223,3% and lowest for Easy
cabs at 31.3 %.
The Net profit is highest for Easy cabs at 16 million INR whereas it is -430
for Meru due to its massive investments and expansion plans.
The total debt is highest for Easy cabs at 1468 million INR and least for
Mega cabs at 402 million INR.
Other competition includes Limousine companies like Orix

OPPURTUNITIES IN THE MARKET PLACE

Taxi industry has a market share of 14.4 billion and the Meru Cabs was expected to
grow at 30.9% in the next 5 years.
The taxi industry in India witnessed huge demand and high growth.

Total number of cabs was expected to grow at 25% CAGR.


Decline of fleet size of non-radio taxis.
Growth of Indias urban population.
Increase in disposable income.
High traffic on other forms of public transport.
Greater perceived comfort compared to using own vehicle.
Increased airport trips.

PROBLEMS FACED

Though analysts have predicted that there would still be demand after 3 to 4 years,
there would be competition from car aggregators and car rentals.
They need to break even.
In India, taxi drivers increase fare by taking longer routes which cannot be monitored.
A refusal by a driver cannot be known unless a red flag is activated.
The problem of cancellations.
Customer rejection rate has to be reduced.

RECOMMENDATIONS

It should expand to other big metro cities like Chennai, Ahmedabad as the client base
is similar in all these cities.

Merus major strength is its technology and backend service. The fully
automated service system helps customers experience a hassle free
service. But one problem that Meru has not been able to address is the
longer routes taken by drivers to earn extra money. In order to shortest
route algorithm from t6the point of boarding to the destination using a
map based application.
Also the assured Airport service which assured 100% service at Hyderabad
can be expanded to other cities and if possible it can be used as a part of
its business model.
In case of expansion, the current model is applicable only to very large
cities and hence it cannot enter smaller markets using the same strategy.
A more price sensitive model should be adopted for tier 1 and tier 2 cities.
To encourage better customer service a feedback system can be employed
for each ride and the drivers with a good feedback score can be suitably
rewarded.
The utilisation rate for Merus drivers is only 75% hence by reducing the
rejection rate and improving the improving the utilisation rate drivers
earnings can be increased.
In order to prevent failure Meru should always maintain a buffer pool
specifically to handle failure. This would ensure greater reliability and
enhanced customer support.
Merus core competency is its technology. This can be seen in its huge
investments in technology over advertisements. In order to align
technology skills and process the following can be done.
1. Employ educated drivers

2. Try to change the model to a franchise based one


3. Use a unimodular approach