Institute of Business Administration

Jahangirnagar University

Assignment on:

Challenges and Opportunities of a Bangladeshi Service Industry

Submitted to:

Ratul Kumar Saha

Lecturer and Course Instructor

Marketing Management (MKT 202)

Submitted by:

Mehedi Khan

ID:1755

Batch: 28

Date of Submission: March 21, 2021

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Table of Contents
Introduction:....................................................................................................................................1

Challenges of the Ride-Sharing Industry in Bangladesh:................................................................1

Opportunities of Ride-Sharing Industry in Bangladesh:.................................................................3

Conclusion:......................................................................................................................................4

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Introduction:
Bangladesh and the world have seen an upheaval of technology-based sharing activities that have
evolved considerably over time. Start-ups using web-based platforms have opened up a brave
new world of sharing-based businesses, blooming into the "sharing economy". Since the
emergence of ride-sharing services in Bangladesh back in 2016, the industry has experienced
surging growth over the last four years with an estimated domestic market value of around $1
billion by 2025, an estimate made before Covid-19. Subsequently, this growing industry, along
with other forms of businesses, took a major hit with the unprecedented arrival of the global
pandemic which struck Bangladesh in earlier 2020. Since then, these services have had to
continuously innovate and adjust to keep up with the changing needs of the market and thereby
adjust to the 'new normal'. A study of the Policy Research Institute says that the ridesharing
industry of Bangladesh is valued at an estimated Tk 2,200 crore and accounts for 23 percent of
the transportation sector. According to data from January 2019, commuters took 6 million rides
each month on average via ridesharing apps. The current figures, however, have exceeded the 6-
million mark and reached 7.5 million rides per month, report industry experts.

Challenges of the Ride-Sharing Industry in Bangladesh:

The ridesharing industry's strength lies in their funds from investors, access to talent relative to
other start-up sectors in Bangladesh and extraordinary publicity, among others. Setbacks include
regulatory scrutiny and scepticism, and unhealthy competition. Globally, share prices of
ridesharing powerhouses have fallen this year, sparking serious introspection about the
sustainability of the business model.

In Bangladesh, Pathao – valued at $100 million – faced massive challenges when investors
started backing out. This stance caused the start-up to downsize through a mass layoff of mid to
top-level employees. Another critical challenge for the platforms is ensuring consumer loyalty.
When it comes to switching between services that cost the least, using multiple apps at the same
time is not at all problematic.

As a countermeasure, platforms resort to offering promo codes to the users to initiate strategies
for customer acquisition and retention. However, to sustain in the market, they need to branch
out into vertical services. But introducing different strategies can also drain investor funds too
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quickly. In Bangladesh, with the increasing motorcycle-based ridesharing services, more and
more people are leaning towards bicycling to commute. The only bicycle-sharing app-based
platform, Jobike, began operations earlier in 2018. Recently, the Dhaka North City Corporation
set-up a 9km-long bike lane for the first time in Bangladesh.

Figure 1: Problems people face while taking ride-sharing services

Since Bangladesh is a developing country, the people are not very much aware and conscious
about the use of latest technologies and technology-based services. Hence, the main challenges
are to make the services well known, raise awareness and reached the major cities of the country.
From the perspective of Bangladesh, the ridesharing companies can be considered as an infant
sector absence of economies of scale, needs more care and support of the government to raise
funds, infrastructure, and management. Furthermore, they face intense competition in market,
having bureaucratic red tape, difficulties in getting license and route permit and lacking logistic
support to start services in new cities or territory. Oppositely, unprofessionalism, inefficiency in
management, failure in compliance handling have made the scenario more complex and
complicated. Moreover, recently imposed a 5% tax on ride-sharing services, has intensified the
challenges.

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Opportunities of Ride-Sharing Industry in Bangladesh:
Over the recent years, Bangladesh has been experiencing strong economic growth (7% plus GDP
growth) with an economy worth USD 250 billion. Pathao, the popular local ride-sharing
company, recently valued over USD 100 million implies that the startup scenario of Bangladesh
is moving at a faster pace than ever. Pathao confirmed TechCrunch that its valuation is over
USD 100 million (approximately BDT 820 crore). In Bangladesh. Ride-sharing has created
employment opportunities for more than 100,000 people, signifying the sector’s impact in terms
of employment generation. Although the latest announcement of 5% VAT on ride-sharing will
make the service a bit costlier, the sector is expected to maintain its exponential growth.

Go Jek first invested as part of Pathao’s Series A investment in 2017, the funding reportedly
standing at USD 2 million. Also, Pathao has announced that it has recently raised a “pre-Series
B” investment. Another ride-sharing and e-ticketing startup, Shohoz managed to raise $15m in a
pre-series B round, which was led by Singapore based capital venture firm Golden Gate
Ventures. The funding round was also participated by Linear VC, 500 Startups and angel
investor Koh Boon Hwee.

App-based ride-share services-Uber, Pathao and Shohoz- are transforming Dhaka’s transport
sector. Although Ride-sharing services have emerged mostly in Bangladesh’s capital, but
services are expanding to other major cities like Chittagong. Bangladesh witnessed a leap in
ridesharing space with the emergence of Pathao, the most popular local ride sharing company
which got off the ground in 2017. Pathao is moving along with a similar vision of Go-Jek, which
offers services like ride sharing, food delivery, logistics and digital wallet etc., with concrete
plans for moving beyond ride sharing, logistics and food delivery.

The existing regulations in Bangladesh do not allow the usage of private vehicles for commercial
purposes. The government has, however, quickly moved to resolve this hurdle by introducing its
ride-sharing service policy. This will address some of the ambiguities within the system. The
policy environment has so far been cordial towards the ride-share subsector -which is dynamic
but also nascent, and thus needs policy support.

Bangladesh’s ride sharing space is growing at a rapid pace, with head room for exponential
growth across the country. Ride sharing has given a boost in sales for the bike industry as well

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and created employment opportunities for thousands of people. A number of ride-hailing apps
have incorporated CNG in their transportation network. Also, availing this service adds up to
saving without compromising with the comfort and provide a faster commute at the same time. If
ride-sharing grows at the current pace in Bangladesh, growth in car sale in Bangladesh may
decrease over time. Also, the rising fleet of two-wheelers is a cause for safety concern, with an
alarming number of young people (and co-riders) vulnerable to road accidents.

Conclusion:
The ride-sharing services have distinct prospects and challenges from the perspective of
Bangladesh. Proper initiatives should be taken from the standpoint of executives as well as the
law-making body to overcome the challenges and threats and utilize the prospects and
opportunities so that this service can be reached to other cities successfully. In order to improve
the quality and services of the ride-sharing organization, the government can render crucial role-
taking appropriate initiatives, i., e providing subsidies to save infant industries, providing
logistics and infrastructural support, making edge on getting license and route permission,
offering loan on easy terms and conditions. In addition, government can reconsider the 5% levied
tax, and offer tax rebates to overcome the challenges they are facing right now. The organization
also required to strengthen the quality of apps and servers by extending and focusing the other
cities within the shortest possible time. They also need to make effort to make awareness and
reach their services to all potential customers by suitable promotion and advertisement in order
to get known, acceptable and make the vendors understood the comparative advantages of taking
this service.