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Assignment No. 3
A report submitted to
Prof. Abrar Ali
In partial fulfillment of the requirements of the course
Written Analysis and Communication-I
On 23/08/2010 By Nimesh Barot (Roll No. :- 102128) MBA Part Time ± 2010-13
While doing so. Thank you very much for opportunity given to me to study and prepare the business strategy for Beck Taxi. 2009 To Ms. Yours Sincerely. Beck Taxi From Nimesh Barot Consultant Subject: Report on the business strategy for Beck Taxi Dear Ms. CEO. I am submitting the report on plan of action for Beck Taxi to meet the price challenges in summer. Nimesh Barot Consultant 1 . economic considerations have been prioritized above all others. I shall be glad to provide any further clarifications that you seek. I sincerely hope that the analysis satisfies your concerns.Canada Date : 30th May.Beck Taxi Toronto . Gail Beck Souter. Souter. The options to increase or decrease the radio charge have been analysed after taking into consideration various factors and effect on different stake holders.
It would be a critical decision because it will affect many stakeholders and impact on Toronto¶s cab industry. and currently. it is recommended that Beck Taxi should reduce the fix radio fee during summer season and it could be restored once it over. The Beck Taxi has option to increase the fix radio fees. Word Count: 167 2 . decrease the fix radio fee and charge for each radio dispatch or reduce the radio fee only during summer season. As summer is approaching. due to lean season and downward business trend. Each option has been evaluated in terms of the economic gain to Beck Taxi. keeping in view of other stake holders since its highly commoditized market and vulnerable. management is worried for the revenue dip and facing business challenge to decide whether to increase radio fee of continue with same fees. it is Toronto¶s leading taxi brokerage with 30.Executive Summary The Beck Taxi was founded in May 1967 in Toronto with intention that customer should get the cab within 5 min. On basis of this evaluation.4 % market share.
...««««««««««..... 7.....«.. 2..... 5.««««««««««« 7 Action Plan««««««««. 6..5 Options««.««.««««««.. 1... 3..««««««..«««...««.««««««««««« 7 Exhibits ««««««««««««. Content Page No.«....«««.......««««««««.5 Recommendation«««««.... Situational Analysis ««««««... No.«....4 Problem Statement «.5 Evaluation of Options««.«««««««««.«««««. 4...4 Criteria for Evaluation «««.... 8..............Table Of Contents Sr.«««««««««««8 3 .«««««««««««.
Company has not increased radio fees since last 20 years and till last year. as its highly commoditized market. Beck is working with the target to give service in 5 min.3. Municipal Licensing & Standards (ML&S) is municipal government and regulatory body which works with 5 major responsibilities and control the fares.1. Management is always looking for better option to sustain revenue and growth option. working with status quo even in summer also. Diamond is with only 9 % (475) market share so it clearly shows that every 3rd cab in Toronto is Beck Taxi and has an edge over other brokers to attract drivers and plate owners. 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. Revenue and Expense statement of Beck Taxi given in Exhibit ± 2 where as revenue and expense statement of Drivers with current radio fee have been given in Exhibit . this study and report has been carried out. So looking at it. drivers attracted to our company and customers also use repetitive service with best service delivery and human touch by company. Since it¶s over supplied market in the city. 2. Hence. (Exhibit-1) Next competitor. Problem Statement 4 . there is a chance of Current. Due to summer season which would last for three months and its lean season in taxi trade in Toronto. it is very crucial to maintain cab in good condition. Since inception. Situational Analysis Beck Taxi is Toronto¶s leading and renowned brokerage cab company with 30 % (1476 Cab) market share which has been highest in Toronto cab industry.
Decision regarding whether to continue status quo. Options There are 4 options available but following are the alternatives to be considered which are most suitable in current situation compared to 4th one: 1. Reduce Fix Radio Fee and charge for each dispatch 3. 3. Effect on Revenue of Beck Taxi : By increasing the fix radio dispatch fee from $400 to $425. 4. Increase Fix Radio Fee 2. Criteria for Evaluation 1. it would be also possible that drivers would move away to other brokerage which is critical factor. a. Evaluation of Options 1. Reduce the Fixed fee only for the summer 5. Effect on Driver¶s earnings and loyalty: This consideration is crucial in assessing the fulfilment of the objective of the Beck Taxi.4 b. there will be increase of $1230 in daily revenue which is not very high but at the same time. Effect on Earning of Drivers and loyalty: Driver¶s earning would be reduced by $25 in a month and that would be around $1 per day which would not be very 5 . 3. increase the fix radio fee. reduce fix radio fee and charge based on radio dispatch or reduce fix radio fee during summer only. if we increase the Fix Fee for radio dispatch from $400 to $425. Effect on Revenue of Beck Taxi: This is the primary criterion as the current decision is to be made as a part of profitability and revenue improvement initiative. Increase Fix Radio Fee Suppose. Effect on other stake holders. 2. Revenue increment has been show in Exhibit .
Let¶s assume that out of 13. Plate owners etc. 6 . suppose he receives 50% directly from the stand or road but for remaining 50 % which he get through radio. Effect on other stake holders: There are multiple stake holders are attached to Beck Taxi like Vehicle owners. Consumer. Reduce Fix Radio Fee and Charge for each dispatch : Suppose if we reduce monthly fix radio fee from $400 to $350 and charge for each dispatch to $1each time the driver use the dispatch service. But competitor would attract Beck Taxi shift driver and lease driver to move away from Beck Taxi and it could affect the business of Beck Taxi. 2. c. they would not appreciate the rate increment and may oppose it or move away to other brokerage which would be major loss to Beck Taxi. of dispatch sent to each driver and need to collect the amount in every week or fortnightly which would be a major change management. this option could be thought carefully before implementing it and it would be having high impact on business. a.high but since rate was not increased since last 20 years. As per the study. Call centre agents are getting around 22000 calls in a day but due to summer. Profit earning has been given in Exhibit ± 4 and earning of $12760 more can be achieved than option 1. Backend Jobs : So far Beck Taxi is charging fixed fee but now changing the new proposal. Effect on Revenue of Beck Taxi : Each driver receives around 13 fares during day time. if we assume the reduction of 25 % calls so we can also reduce the agents for not getting or reduction of almost 5500 calls from customer. There would not be any significant impact on Consumer because fare has been fixed by ML&S and it will not affect the fare. need to equip agents with new software or system to maintain the nos. Beck taxi will earn $7 in each shift from each driver. ML&S. Hence.
Vehicle owner. Incentive Scheme: We can run the incentive scheme for the drivers and Top 10 dispatch driver will get special bonus. Call centre agents are getting around 22000 calls in a day but due to summer.b. Effect on Earning of Drivers and loyalty : By implementing this option. ii. Beck Taxi¶s revenue will increase. we assume that they must be charging higher than Beck Taxi so with this scheme. Reduction in daily revenue : Though. 7 . Driver¶s fix revenue will increase by $50 and if they will get fewer enquiries then their variable cost would be also low. As per the study. drivers will have following advantage and disadvantage : i. and brokerage firm and their income would reduce and they may move away from Beck Taxi. As the rates have not been increased in last 20 years and competition radio dispatch rate has not been given. 3. we can attract more drivers & brokers to us and help to increase over all revenue. Effect on other stake holder: There would not be any direct financial effect on consumer because fare rates are fixed by Govt. Driver¶s earning details with new plan has been given in Exhibit-5 c. if we assume the reduction of 25 % calls so we can also reduce the agents for not getting or reduction of almost 5500 calls from customer. Reduce the Fixed Fee only for the Summer : Suppose if we reduce monthly fix radio fee from $400 to $375 during only summer and again increase once summer season would over. Effect on Revenue of Beck Taxi : There will be reduction of $1230 daily for 3 months but there would be other initiatives can be taken which would help to recover the revenue dip. a. But it would be having high effect on Driver. Driver¶s revenue will decrease at great extent and it would be a high impact to Beck Taxi if they move away from us due to this proposition which would not be appreciable. iii.
Beck Taxi can do following before implementing the plan. Due to above plan. existing drivers would be more loyal to Beck Taxi which would help to get more revenue in other season also. iii. iv. i. a. Recommendation Keeping in the view of above three options. Beck Taxi should reduce the fix radio fee only for summer. ii. 8 . Driver¶s earning details with new plan has been given in Exhibit-6 c. drivers will have following advantage. Action Plan 1. good service delivery and brand value which would be high in case of Beck Taxi.b. and brokerage firm. But it would be having high effect on Driver. Incentive Scheme: We can run the incentive scheme for the drivers and Top 10 dispatch driver will get special bonus. 7. b. Driver fix revenue will increase by $25. 6. customers also look at the personal touch. Effect on other stake holder: There would not be any effect on ML&S. it looks better business proposition to Beck Taxi without affecting driver¶s income. Vehicle owner. Due to low radio fees. With help of TV commercial create the brand value and attract drivers from other brokers as there is a huge gap with Beck Taxi market share and next competitor. Overall and in long-term. drivers will be attracted and join Beck Taxi which in turn would help to increase revenue of Beck Taxi and meet the Radio cost reduction. There would not be any direct financial effect on consumer because fare rates are fixed by Govt. Effect on Earning of Drivers and loyalty: By implementing this option. Advertisement: We can allocate some fund for advertising and brand building which would help to acquire more cab from competition and increase the dispatch and as we know.
of calls which would help to reduce cost of operation.c. Word Count: 1487 9 . d. During summer. Beck Taxi can do the tie-up with Travel agency to acquire more customers and recover the revenue downfall. of call centre agents if reduction in nos. We can reduce the nos.
Issuing "Taxi Licenses"(Plates) to vehicles Issuing Taxi Licenses to DRIVERS Determining & capping the number of taxi licenses Fixing Fare charges Conducting Taxi Training 8000000 836 Per Year 9898 Nos. 1 2 3 4 5 Total Revenue in Year License Renewal Rate (Drivers) Total Renewals per year Plates Issuing Fee Fares KM 0 to 0. Exhibits Exhibit 1: Function. No. Revenue and Fares details fixed by ML & S: Sr.25 0.8.155 0 to 5 0 to 10 0 to 15 0 to 20 Average Fare / Km Fare in $ 4 12 20 28 36 1. of Drivers 5681 (One Time) TIME 31 Second Per Minute Per Hr Exhibit 2: Daily Revenue and Expense statement of Beck Taxi: 1 2 3 Revenue : (Daily) Charges from Shift Driver for Cab Rent ($65 per shift) Charges from Long term lease for Rent of plate (900 plate) Charges from all 1476 for Radio fees ($450 / month) Total Revenue Expenses : (Daily) Independent owners (576) and rent for their plate 900 Nos.5 29 ML &S Responsibilities. large fleet from single agency 37440 34500 22140 94080 1 2 22080 34500 10 .6 Waiting Time Fares Fare in $ 0.
5 $ avg. Gas Charge Traffic Ticket Repair and maintenance Driver License charge $ 836 Annually.3 10 5 5 1. fare 17.A.05 1150 per month so divided by 30 days.5 0 Total Revenue Expenses : 1 2 3 4 5 6 Total Expenses Total Earning in Shift (Revenue Exp. 71960 22120 Exhibit 3: Details of Driver¶s (Shift and Long term lease) earning with current Radio Fee: Revenue : Shift Driver 1 2 Earning in Shift Tip 175 17.) Shift 65 per shift 10 5 0 1. Exhibit 4: Details of Profit to Beck Taxi (if Radio Fees increased from $400 to $450): Revenue : (Daily) Charges from Shift Driver for Cab Rent ($65 per shift) Charges from Long term lease for Rent of plate (900 plate) 1 2 37440 34500 11 .15 15 74.15 15 96.5 Long Lease 38.5 Long Term Lease 175 14 fare and 12. $ 450 Per Month for Radio Fees Assumed that he is giving taxi during night shift and earning. 50 242.45 168.3 4 5 Repair and maintenance cost ($5 per Cab for 576 Cab) Salary for Staff (150 Nos.35 192. avg.5 10 % avg. $ 2500 / Month) Other administrative expenses Total Expense Total Profit (Daily) 2880 12500 N.15 96.
large fleet from single agency Repair and maintenance cost ($5 per Cab for 576 Cab) Salary for Staff (150 Nos.A. 71960 23350 1230 Exhibit 5: Details of Profit statement of Beck Taxi (if Fix Radio Fees decrease from $400 to $350 and $1 for each radio dispatch): Revenue : (Daily) Charges from Shift Driver for Cab Rent ($65 per shift) Charges from Long term lease for Rent of plate (900 plate) Charges from all 1476 for Radio fees ($400 / month) Charges from per dispatch (1476 *10 in a day ) Total Revenue Expenses : (Daily) Independent owners (576) and rent for their plate 900 Nos. large fleet from single agency Repair and maintenance cost ($5 per Cab for 576 Cab) Salary for Staff (150 Nos. avg. avg.3 Charges from all 1476 for Radio fees ($470 / month) Total Revenue Expenses : (Daily) Independent owners (576) and rent for their plate 900 Nos.A. $ 2500 / Month) Other administrative expenses Cost of incentive scheme Total Expense Total Profit Additional Profit compare to $450 Radio Fee 1 2 3 4 37440 34500 23370 14760 110070 1 2 3 4 5 6 22080 34500 2880 12500 N. 2000 73960 36110 12760 12 . $ 2500 / Month) Other administrative expenses Total Expense Total Profit Additional Profit compare to $450 Radio Fee 23370 95310 1 2 3 4 5 22080 34500 2880 12500 N.
48 91. 10 Gas Charge 5 Traffic Ticket 5 Repair and maintenance 1. 50 242.5 $ avg.5 Long Term Lease 175 14 fare and 12.78 162.5 10 % avg. $ 400 Per Month for Radio Fees 13 . driver license charge Radio fees Paid for Radio Dispatch Total Expenses Total Earning in Shift (Revenue Exp.15 13.5 Assumed that he is giving taxi during night shift and earning. 1 2 3 4 5 6 7 65 per shift 10 5 0 1. fare 17.02 38.33 7 79.15 13.72 Driver License charge $ 836 Annually.33 7 101.) Earning in Shift Tip 175 17.3 1150 per month so divided by 30 days.Exhibit 6: Driver earning by reduction in fix cost and implementation of Variable scheme: Revenue : Shift Driver 1 2 3 Total Revenue Expenses : Cab rent paid to broker Gas Charge traffic ticket Repair and maint.5 0 192.
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