EXECUTIVE SUMMARY:
This report aims to provide a feasible study analysis on a company called LeCab- a French start-up business innovating in car transportation established in 2012. The report aims to analyse the market that LeCab is operating in including its competitors, customers, differentiation. From the market analysis it is seen that LeCab is facing tough competition in the UK market due to the fact that it has not established its name in the UK. The biggest competitor of LeCab in the UK market is Black Cab. In term of customers, the major customer group that often use taxis is the 18-29 age group. In addition to this, key concerns of consumers when using cabs are the knowledge of London of the taxi drivers, payment methods and awareness towards the environment. With regard to differentiation, it is seen that key differentiation of LeCab that makes it stands out to customers are elegance, awareness towards the environment and the community, which they use eco-friendly engines, taxi drivers, and comfort offered to customers. In term of its business model, LeCab only targets B2B customers and build direct relationships with customers through various means of communications such as FaceBook or LinkedIn. In order to introduce the service widely to reach target customers, LeCab has also worked in collaboration with a number of organisations across sectors from car providers such as Peugeot to newspapers such as The Times, The Economist, to airways and 4-5 starred hotels. In order to effective manage the cash flows and budget; the report has also produced a cash projection for LeCab. The aim of this projection is to identify key activities that needed to be invested in order to spend and manage the company’s budget effectively. In sum, it can be said that the company is operating in a tough market, where there have been many established competitors that make it difficult for a new firm to surpass. The key here is to successfully identify its target customers and understand their wants and needs in order to design and implement strategies accordingly to satisfy them. Additionally, for a start-up company, effectively spend and manage the budget is crucial to keep the company survive. Thus, a cash projection would enable LeCab to manage its budget more effectively.
TABLE OF CONTENTS Executive summary: 3 Overview: 5 Market Analysis: 6 Competitors: 6 Customers: 7 Differentiation: 7 Business model 8 Customer segments: 8 Revenue Streams: 10 Channels: 10 Key resources: 10 Cost Structure: 12 Marketing Communication: 12 LeCab budget 13 Salary: 14 Annual projection of journeys per quarter and day: 16 Conclusion: 17 References: 18
Overview:
LeCab is a Paris-based startup business innovating in car transportation created in 2012. By creating this idea, Benjamin Cardoso and Edouard Audi wanted to give Paris an alternative to taxis and personal cars.
The French company use rounds to receive investments: called “Serie Preferred Stock”. The first round could raised almost US$ 4.1 millions (in October 2012) in order to buy the fleet of vehicle, form the drivers and create a real relationship with the customers (and firms) by taking on sale managers. The Serie B (in 2013) of investment could bring US$6.1 million with the aim to take over the market.
State of the art technology has aided the French start-up business to join in on new and developing markets. Nowadays, more and more customers are using technology to get from A to B which has inspired LeCab to create their own mobile application. The application is freely available to both android and apple users, a high potential customers. Thanks to mobile technology, it has enabled customers to key information with relevant ease. Customers can pick and choose which transport to use based on several factors for instance; reliability, efficiency, comfort and quickness. LeCab also uses Addison Lee’s technology license which helps attract an array of customers who look for factors such as optimized riders, keeping their customers up to date and finding the nearest drivers (LeCab, 2014). Thus, LeCab has reaped increased sales by having a better understanding of the market which is evidently and heavily reliable on technology.
Thanks to mobile technology, it has helped provide a brand new service via a phone application. The business was solely created on the basis of making it simpler for commuters to travel from one destination to another. Now customers are able to order a cab more easily, more quickly with a lower price. More over they provide a B2B and B2C service, which has helped create more market opportunities. They are the only minicab firm that provides this kind of service to private companies.
LeCab’s customers are able to enjoy a reliable yet comfortable ride at affordable rates. Consequently, their cliental have learnt to adore and appreciate the business for their first class renowned service. Besides, LeCab uses a fixed price for their service different to most competitors by setting a price on distance and not on time. Thus, customers don’t need to stress about having to haggle the price in comparison to their competitors.
Market Analysis:
Competitors:
Currently, the business has several competitors in Uber, black cabs and minicabs. Although LeCab is the cream of the crop in France, they have yet to trade and establish within the United Kingdom. Black Cabs dominate the taxi industry within the UK (Independent, 2009). According to Department for Transport (2012), since 1999 the number of taxis has been increasing by an estimated 27%, as the result, that evidence could be suggested private hire vehicles may have been increasing even more.
Several licensed private hire operators have varied taskforces of taxi and private hire vehicles. Few numbers of the leading operators offer the vehicles themselves, normally by requiring their drivers to rent the vehicles from a related company, however the huge majority of drivers possess their own vehicles. According to Butcher (2014), The largest and leading company of the Great London is the Addison Lee with 9.5% of the UK market share, secondly followed by ComfortDelGro Corporation (which providing Computer Cab in London, Liverpool and Scotland) with 6.4% of market share. An only offering in London taxi company, the Radio Taxis Group, has 2.6%. These large sizes of leading firms have been on the head of introducing technologically progressive systems for record keeping, booking and dispatching. For example, it has been estimated that 11% users of Addison Lee’s total bookings are through smart phone applications. Nevertheless, small operators still primarily occupy the bulk of the market nationwide, with the average company’s employing 7 people.
The taxi and private hire vehicle industry is an important provider to the UK economic activity. According to The Department for Transport (2012), the statistics are indicating that there are approximately 300,000 licensed private hire vehicle and taxi drivers are working in England and Wales. In addition, in those countries, there are 155,000 private hire vehicles and 78,000 taxi vehicles have been running today. Furthermore, this taxi and private hire vehicle industry’s total revenue have been estimated at £1.4 billion a year.
This dynamic trend is mainly due to an advance in mobile technology. Private hire vehicle companies are developing into a larger threat to the black cab drivers. Therefore, this suggests that the market is still at an emerging stage. Customers are changing their tastes based on various factors such as price and availability. The opportunity we propose is calculated and will be highlighted later within this report.
This new industry is increasing thanks to the awareness of the customers and their reluctances from the normal taxis (price, difficult to find one, service…). Thanks to minicabs companies, the customers have a larger choice and more leverage on their service’s purchase.
Customers:
Demographically, the largest number of user ages for taxi services is the 18 to 29 age group whose make an estimated 20 journeys per year as against an yearly average of 11 journeys. Javons and Marshall (2004) claimed people in the lowest 20% of salaries are 40% more possible to use private hire vehicles and taxi than those in the highest 20%. Taxi and private hire point-to-point services are vital for customers with disabilities. For many people, private hire vehicles and taxi provide a vital system of transport enabling them to travel to work and to vital services such as medical facilities and shop as well as leisure activity.
The newspaper London Evening Standard published an article aimed to explain the different services in the London Taxi industry. Thanks to testimonies made by direct customers; from Haio, Uber, Addison Lee and Getaxi; we can understand consumer’s needs and wants. The main factor is the driver’s knowledge of London. Thus, thanks to their expertise, the journey is quicker and so cheaper. Besides, the reliability and avaibility of the drivers are very important. The customers hate to wait outside for their minicab. It is crucial to have a precise time of arrival of the car in order to satisfy clients. Means of payment are also the key. Customers will always prefer to pay, from their application, by their credit card’s account. It is a trustful and easy payment to use. Moreover, the comfort of the journey always the customers, it refers to the driver’s behaviour but also the cars used by the company. Today, Londoners become more aware of global warming. Consumers have changed their way of consuming, with a eco-friendly approach. Every sector is concerned and more specifically our sector: the transport. This is the reason why we have chosen to purchase Hybride cars. The fuel consumption is very low.
Differentiation:
Uber has recently experienced a lot of criticisms, the company encourages drivers “to sign up to subprime Auto loans” according to Maya Kosoff in Business Insider. This is the reason why LeCab, from the beginning, has decided to use and own fleets of countless Peugeot 508 Hybride cars. They do this to help build brand identity and to support other business within France. LeCab has understood that their cliental is looking for elegance and comfort throughout their journeys, hence choosing Peugeot to be their flagship brand identity car will allow the same quality of ride throughout every journey. The cars are chosen based on factors such as the strength and robustness of the vehicles whilst remaining eco-friendly.
Consumers have a lot of concerns towards the driving comfort and fuel consumption. It explains why Lecab has to train its own drivers. Thanks to a formation, they will be able to save almost 40% of petrol consumption. Besides, future customers will enjoy a very pleasant and comfortable ride. Moreover, drivers need to be loyal to the company; otherwise they will work with other minicabs service. For this reason, it is important to involve drivers on a long-term perspective.
Consequently, we aim to offer to drivers some bonuses for each journey they do - in addition to their monthly salary. By creating a sense of belonging and community, the company can trust their drivers. It is seen as a win-win situation for both sides. From now on, the Lecab will be able to build a strong corporate culture.
Lecab’s third key differentiation, from other minicabs companies, is the iPads and newspapers on board. A customer will have the possibility to read, and even to keep, newspapers available on board. Besides, we will provide in each Peugeot 508 an Ipad. Businesses can control the music, the radio and use the tablet as a device in order to work- as few examples.
Business model
Customer segments:
The Company will target only B2B customers. The aim is to provide a minicab service for business executives aged between 25 to 50 years old. This market segment is mainly composed by wealthy people that use to make journeys all around London. They often don’t have time to take public transport or even a taxi.
Customer Relationship:
Thanks to different channels (as the application, the website – explained below), we will have a direct relationship with our customers. Thus, this direct contact will allow us to be more adapted to each of our client by providing a personalized secondary service (newspapers, music…)
We will also have an important client data base. It will be used in order to understand our clients needs and wants such as the driver, newspapers, music he like. The personalized service is the key success of our business. Buiding a strong customer’s relationship will help to develop a better brand loyalty and community. Consequently, our revenue stream will be sustainable with a high potentiality to develop among others businesses.
Value propositions:
Basically, we offer a premium mini-cab service. Our strengths are the avaibility, the reliability of our service. Besides, we will provide also secondary services such as newspapers in the cabs, iPads so businesses can still work, read and gather information.
In addition, our drivers will receive 15h of training, they will learn how to drive safely, with an eco-friendly side. The journey for the businesses will be comfortable and enjoyable.
We will after a few months, thanks to the client database, provide a concierge service in order to personalized at its best the service we offer. This strategy can be risky (cost/revenues) but it also adds a lot of value, it creates a stronger relationship with our customers. The brand loyalty will be very powerful and well established.
The price is also part of our value proposition. Lower than Uber (an average of 26£ per journey) and even black cabs (an average of £22,67 per journey), we will give only fixed price. In other words, customers will know precisely will received an offer with a fixed price for the journey he applied. This strategy is explained by our wish to be price-transparent. The price will be calculated only from the distance of point A to B. There wont be any extra fees for time and traffic.
Our service is reliable, flexible and much more available than regular taxis. It is also easier and quicker than it competitors (mostly thanks to the app).
Revenue Streams:
Our revenue streams is monthly, it is a sustainable and a long-term strategy. The firms will pay every month the amount for the service they used during the past 4 weeks.More over, thanks to the creation of a partnership with PrivateFly.com, the company will have to pay us for the use of our drivers. It would be a fixed price (40£) for each journey to go to the London city Airport.
Channels:
We won’t have a lot of channels. We will mainly use technology in order to be in direct contact with our customers. Thus, our channel will be mainly through our website,, our application and direct calls. In other words, we will be very close from our clients with a direct contact. It will help us to build a strong relationship with our customers. Besides, we will use mainly a marketing communication in social networks, such as Facebook, LinkedIn for example.
Key resources:
We are quite different from Uber on that point. The drivers will be part of our corporate firm; we will train them and provide them the cars they will drive. They are considered as an important key resource because they will be in direct contact with our future customers. Besides, thanks to trainings they will drive safely and comfortably; a key factor for customer’s satisfaction.
The others key resource is the cars. Thanks to a unique fleet of Peugeot 508 Hybride, we will be able to build a brand identity and recognition. Indeed, it is an investment that will help us to differentiate from our competitors.
The third key resource is the application on smart phones and our website. There will be our main channel and relation with our clients. Thus, it is important to have a simple and reliable technology that can be use by any generation.
Key activities:
Firstly, in order to provide the service in London, we will have to find sales manager. They will have as a first step to contact and signed with firms. This point is very strategic. They will need to enter in relation with the decision makers for cab. Those persons are not necessarily from the top hierarchy of firms. These employees are mostly assistants, secretaries. Thus, it is very important to create a trustful relationship with them. In order to convince them to use our service for their superiors, we can for example offer them the same service, free of charge, for a personal use. Besides, sales manager will have to keep contact with firms in order to create a strong relationship with our clients.
Secondly, we need a driver manager. He will be in charge of Lecab drivers. Thus, he will be responsible for hiring the drivers and follow their training. Once it is done, he is going to organize the schedule of each driver in order to maintain the reliability and the avaibility of cars.
By then, we will be able to provide our brand new minicab service to B2B market. It is an alternative to regular taxis. Thanks to the application businesses will be able to travel all around London in a comfortable car. It is a reliable and available service, faster than cab and cheaper than any other minicab service.
Key partners:
Our main partner will be the car’s provider. Peugeot, a French brand, will sell us by leasing a fleet of standardized cars model 508. We will benefit from this partnership as far as it will participate to our brand identity and image: a 100% French company.
Besides, we will provide free business and political newspapers such as The Times, The Economist, The New York Times etc… These newspapers will even become the customer’s property. Thus we will need a large number of newspapers. Thanks to our customer segment and target, publishers will be very pleased to provide us the newspapers free of charge. It is a win-win situation, they give us newspapers, we provide readers and opinion leaders.
Our third partnership is PrivateFly.com, an international Private Jet company. We will provide cars and drivers for their customers in order to go to airports. Clients won’t have to pay for this complementary service. They will only benefit from us, without being stressed to miss the flight for example. In compensation, the company will pay us monthly for each journey made.
Our last partnership will be 4 or 5 stars hotels. They have obviously a lot of businesses as guests or wealthy people. Thus, we both target the same customer segment. The client’s hotel, instead of using traditional cabs, will be driven by LeCab’s cars. Our number of journeys can quickly increase thanks to these partnerships. Customers will pay directly to hotels, which will transfer us the amount monthly. In order to create and build a long term relationship with hotels, we will give them a commission from 5% to 10% for each journey made.
Cost Structure:
In order to provide the service in London, we will need an important amount of investment in order to buy cars for example. Besides, the drivers can also be considered as an investment as far as we will train them. Not to mention the cost of the workforce. Even if we will only start with a small team, monthly salaries represent a high amount of money. The application and the website of our company will also be an important part of our cost structure. Even if there are already launched in France, we will have to adapt them to London’s market. At least, iPads are also expensive as far as we will provide one iPad per each car.
The exact budget and cost structure will be specified and explained in our Budget that you can find below.
Marketing Communication:
Thanks to our market analysis, we have an accurate understanding of our consumer’s needs and wants. Using our data we now can develop the best marketing communication plan to achieve our objectives.
Today, there are over 300 000 French nationals living in London. They are mainly businesses in a high hierarchy (such as banks). They have mainly stayed in contact with France and Paris. . Thus, in order to spread word of mouth in London, we will firstly advertise through our French application and website during 3 months. By then, we will be able to start brand awareness.
Indeed, two months later our social media communications will begin. Firstly, Facebook is known for its ability to target their ads. Almost 90% of their advertisements are well adaptated to its customers. Thus, we will be able to target our potential customers. On the other hand, we will also use LinkdIn. As a professional social media, it fits perfectly with our target. This is the key to our brand awareness. We will have also the opportunity to contact firms, our potential customers. Twitter will also be used because it has this unique characteristic: a brand can reach the tipping point very quickly.
LeCab budget
By the end of the first year, Lecab will have 35 cars. We will purchase them by leasing, in order to pay monthly and not all in once. This means of payment will cost us £400 per month and per car for 5 years.
Thanks to hybrid car, the fuel will represent a low cost. Indeed, hybrid cars only start to consume while 30 mph is exceeded on the contrary to traditional cars. Besides, because of traffic and London’s speed limit, it is very rare to go over 30 mph. Consequently, the fuel on average will be £8 per day per car.
We have also to take into account the insurance of cars. Based on the driver’s age (older than 25 years old) the insurance for each will be around £850 per year.
We will also take purchase Ipads that we will provide to each car, wich costs £299 each.
In order to meet the future demand after a few months, we have strategically decided to purchase new cars every quarter. Indeed, we will firstly have 20 cars available during the first quarter. By then, we will buy 5 cars every quarter; as you can see below.
We have calculated every costs for each quarter on a year basis:
Here is the calculation for the first year only:
177,380 + 44,345 *3/4 + 89,390*2/4 + 133,035*1/4 = 288,592.5
Thus, the costs for one year will reach almost £290,000
Salary:
- Drivers: each driver will be paid 10£ per hour worked. In the 1st Quarter, we aim to employ 20 full time Drivers paid £10 per hour. They will work every week 40 hours. Besides, we aim to have 10 part time drivers with the same salary basis; they will not have any shift and can be contacted at any time. Thus, this type of drivers will work approximately 30 hours per week. By then, we will hire 5 new full time drivers for the 2nd quarter, 10 employees for the third and 15 for the fourth quarter.
Thus, the amount will be £668,000 for the first year.
- Sales Service: We will hire 4 persons, paid £25,000 per year for 40 hours a week. They will firstly prospect potential customers in order to increase our client database. Besides, they will be in direct contact with them, building a strong after-sales service. They will answer to client’s mails and phone calls. This strategy will allow us to build a strong relationship with our customers. There will be a fifth person, the sales manager, a proficient and experienced worker. He will be in charge of the service and thus the team. Because of his responsibilities and expertise, he will earn £30,000 per year.
The Sales Service will cost every year £130,000.
- Marketing Service: In order to set develop our marketing communication plan, we will need two marketing staffs paid £22,500 per year. They will have to use our resources with this objective: spread the brand awareness and recognition all over the social medias. They will work 40 hours per week.
The Marketing Service will represent an investment of £45,000 per year. Staff | Pay | Sales Service Staff | £130,000.00 | Marketing Staff | £45,000.00 | Drivers Staff | £668,000.00 |
The total cost of the staff is £843,000 for the first year.
Our main cost in marketing communication will be our advertisements on social media : LinkedIn - £36,000, Facebook - £24,000, Twitte - £18,000.
Marketing communication Cost: a total of £78,000 per year.
We will also need to improve the website and application:
Design - £3000, Development - £5000, Tests +Improvements - £3000
It represents a total cost of £11,000
Thus, the overall amount for both is £89,000 per year.
Others costs :
Accomodation rental Costs : £7500 per month (£90,000 per year).
Car’s maintenances: £1000 per car per year (£32500, first year)
Desk Fourniture : £100 000.
Other costs reach £222,500.
During the first year, our cost structure will reach around £1,644,500.00
Annual projection of journeys per quarter and day:
We assume that a driver does 2 journeys in one hour. Besides, in average each journey will be charged £18, lower price than Uber and traditional taxis.
1st quarter: 20 drivers, 40 hours per week, 3 months, 2 journeys per hour + 10 drivers, 30 hours, 3 months, 2 journeys per hour = 26 400 journeys during the first quarter.
2nd quarter: 1st quarter + 5 new drivers, 40 H/w, 3 M, 2 journeys per hours = 31 200 journeys in the second one.
In one year, we will be able to make 153 600 journeys at £18 (average cost).
Compared to our cost structure (£ 1,644,500.00), our profit starts when every journey is higher than £10,70. Thus, we have a 50% margin. During the first year we according to our budget and cost structure, we would be able to make a profit of £1,342,800.
However, these projections could be inaccurate. The use of our service will not be the same at every period of the day. Besides, we have to take into account difficulties to find clients at the beginning; we might no be able to provide 2 journeys per hour and per driver.
We also have to be careful with taxes such as salaries, VAT and benefits.
But thanks to budget and cost structure, we can be sure that we will be profitable in the next 2 years at minimum.
Conclusion:
In conclusion, it is seen that LeCab is operating in a tough market and needs to compete with well-established rivals in the market such as Black Cabs in order to survive and develop further. Indeed, the key for success in the UK market for a French company is to successfully identify UK customers’ wants and needs in order to design and implement strategies accordingly to satisfy them. It is important to note that customer satisfaction is key to retain existing customers and attract new ones for the company. According to the market analysis, it is seen that key concerns of UK customers are the knowledge of London of the taxi drivers, payment methods and awareness towards the environment. Thus, in order to satisfy UK customers and compete with other competitors it is important that LeCab takes these into consideration when designing strategies to attract and satisfy its target customers. Another key factor that LeCab needs to take into account is managing its budget. Thus, the report has provided a cash projection analysis for the company to identify key activities that needed to be invested in in order to achieve success, which helps LeCab to spend its budget more effectively.
References:
LeCab. (2014). Our Services. Available: https://en.lecab.fr/our-services/order-taxis-in-paris.html. Last accessed: 05/12/2014.
Independent. (2009). The black cab cabal. Available: http://www.independent.co.uk/news/uk/home-news/the-black-cab-cabal-1744963.html. Last Accessed: 05/12/2014.
L,Butcher. (2014). Taxis and private hire vehicles - Commons Library Standard Note . Available: http://www.parliament.uk/briefing-papers/SN02005/taxis-and-private-hire-vehicles. Last accessed 28/10/2014.
Department for Transport. (2012). Department for Transport business plan 2012. Available: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/3367/dft-2012-business-plan.pdf. Last accessed 31st May 2012.
D, Jevons and N, Marshall. (2004). Consumer preferences in the UK taxi market . Available: http://www.abstracts.aetransport.org/paper/download/id/2024 . Last accessed 28th Oct 2014.
http://uk.businessinsider.com/uber-encourages-drivers-sign-up-subprime-loans-2014-11?r=US
