Téo Taxi case study PDF

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Summary

case study of teo taxi in week 8 tutorial....

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Téo Taxi Wed 5pm RE42 Tuesday, 18 May 2021 4:12 pm

Téo Taxi & its eco-system Why did Téo Taxi fail? • Unhealthy financial position High operating costs of electric fleet High salary costs • Takes too long to hire well trained drivers • Lack of charging stations + long charging times Long time to charge not efficient for drivers Electric cars not great in cold? • Only Tesla good in cold weather? • Government regulation (Not allowed to increase price) Téo Taxi • Company treats drivers as employee (employee based model) Provides training to employees Téo drivers work less than other drivers • Why did they start Téo in the first place? Want to modernise current taxi industry? Started because long time and resources to train drivers? Because training hours reduced 150 hours to 35 hours • Happened after they started Started with goal to be good corporate citizen • Objective • Improve employee conditions • Electrify transportion / environmentally friendly transportation • Reduce emissions • Contribute to the local economy Wanted to make a difference in the industry by improving service and capture high end market • Tried to modernise because traditional taxi industry has limited potential for development? Wanted to improve industry's reputation by providing more comfortable and safer rides Provide servie in line with core social and environmental values • Didn't use offshore accounts Provide mobility as a service • Provide app Competitive landscape • Competitors Uber Ola Traditional taxi industry Public transport • Trains, metro, busses Private car • Level of competitiveness Overall not that competititve in traditional taxi industry? • Téo can coordinate supply of cars better than traditional taxis • Very hard to enter traditional taxi industry due to regulation Uber is very competitive • Téo taxi advantage: • Téo is local and could earn some customer loyalty • Drivers have better work conditions and keep revenue onshore • Uber found a loophole for entering taxi industry • Uber has more cars available than Téo • Most important competitor: Uber Convenient APP Dynamic pricing Drivers keep 75% of earnings • Easy for Uber to attract drivers compared to Uber • Uber has the highest charge in the industry • Attractive because of large user base? • Can still make money despite high fees to Uber Uber indirectly reason for failure of Téo? Uber has more flexible rules than Téo taxi? • Adapt supply of cars to demand Uber extends its business into other areas such as Uber Eats • Synergies between business units Uber has multiple service models • UberX drivers are freelancers

Strategy

Téo taxi strategic position • High quality consumer service Mobile app • Growth plan: Increase number of drivers (from 300 to 500) and cars Improve tech to improve service • Differentiation Different from other companies • Use electric cars • Offer very good customer service • Uniformed drivers • High-tech cars • Free Wifi • Algorithm allows them to allocate cars more efficiently than traditional taxis • Customer intimacy Establish long-term relationship with customers • Drivers open doors • Cars display greetings • Business model Shift their business model from revenue based to employee based • Reduce driver anxiety by offering salary • Lets company improve customer service • Don't have to rush for next customer Téo Taxi is an operator rather than a taxi • Normal taxi can drive whenever they want • Stakeholders Consider employee working conditions • Salaries, pensions, annual leave etc. • Different from other taxis and Uber • Enables them provide better service

What went wrong strategically? Did not differentiate properly? Téo is differentiated from other taxi's but not sufficiently differentiated to attract customers • Téo has algorithm to locate taxi, but couldn't really deliver • Too long wait times, too many cancelled orders Did not charge premium price? • Too high costs but restricted prices Tried to do too many things simultaniously Good service (expensive) but couldnt charge a higher price Too high cost structure Too expensive to buy the cars (could have leased them instead) Employee based model leads to too high salary costs Electric car business model too expensive • Requires chargers and time to charge • Electric car industry is in too early stage for this • Not enough charges yet, Téo has to invest by themselves No room to increase revenue • Price changes are restricted • Can only • Grow customer groups • Introduce more taxis and drivers • But taxi drivers had too much bargaining power and it takes too long to train them Hard to achieve economies of scale Only focussing on 1 city

Capabilities

Lessons

How important are (poor?) capabilites to the overall failure? • Téo has a grand vision but limited capabilites to carry it out themselves Could have partnered with other players in the industry • Misaligned business model, need to reduce cost to meet revenue • Achieving profit and being environmentally friendly can be at odds Should focus on profit before being environmentally friendly? • Could have used some non-electric cars

Why did they fail? • Téo did not sufficiently consider the macroenvironment Business model was flawed from the start • Too many grand goals with insufficient investment • Téo didn't evaluate business model properly considering government regulation on the industry

Would Téo have succeeded if Uber did not enter the market? • No (would have failed anyways) There is a problem in the electric car business model • Too costly, could have changed gradually towards electric instead of starting as fully electric • Yes: (would have succeeded) Provide better service than traditional taxi • Could charge higher price than traditional taxi • Government would invest in them because they are environmentally friendly Could have replaced normal taxi (Like Uber and Didi) have done in some markets • But would require strong investment • Would not have been possible to do with the electric car based business model

What are the key take-aways from this case / what can this case teach us about success in business? • Environmental scanning is very important for a business to succeed • Most of the creating shared value does not make sense Chasing social responsibilities at cost of profit/company success? • Company not even reaching break-even when stopping business • Could have focussed more on CSR instead • Although the intention is good but should always start with realizable goals • It is important to get sufficient investment and government support prior to starting the business • We need to enhance customer loyalty and improve stakeholder relationships • Could offer coupons, as switching cost for app is quite low • A company should maybe not set the ultimate goal at the beginning, should instead choose smaller goals and develop gradually

Options for solving issues: • Different tiers of services like Uber Charge more for premium options/high value customers? • Change business model to be non-taxi cab? • Pretend note being a taxi company • How does Uber get away with differentiated prices? • Uber charges new types of fees such as cancellation fees • Increase price illegally? • Negotiate price with government? • Ordinary customers don't want to pay too much? • Regulators do not allow Téo to decide prices • Focus on reducing cost Expensive to provide better service Téo could cancel paying for driver´s fuel and maintainance of car? • Could cooperate with non-taxi industry players to increase scale of customers/reduce waiting times Fuel stations Charging stations...