Business Environment of China

Group 1

The shortage of Taxis in Luo Hu, Shenzhen•Long Queues•Tempting to take the “Black Car” -> Unsafe

Opportunity:•There are people who are willing to pay more to avoid lines

The Challenge Reviewed

A Luxury Taxi

Solution?

The Business Model

Taxi Companies

Per Unit Fee

Tax Fee

Luxury Taxi

The Business Model

Taxi Companies

Per Unit Fee

Tax Fee

Luxury Taxi

•Provide the Service of Upgrading Taxis

•Economies of Scale

•Marketing

•Market Targeting

•Etc.

How Do we “Add Value”

•Introduce in places where the shortage problem is especially serious, e.g. Border spots / Airports

•Only operate in these places (Destinations are not fixed)

•Coordinate the flows using monitoring system

How to implement this?

Suppose we have n taxis at Luo Hu at initially.

Now within the n taxis, some (l1) will be upgraded to be luxury taxis.

If this is the only thing, total supply will remain unchanged.

However, it is very likely that taxis from other regions will join the upgrading process (l2).

Thus total supply effects would be:

New supply = n-l1 + l1 + l2 = n + l2

Taxi supply at Luo Hu will increase.

Total Supply Effects

•An alternative to waiting in the long line

•Minimize total cost (= money cost + time cost)

•Safe

•Comfortable

•Convenient

To Consumers

•As a trial of method to alleviate the taxi shortage problem

•The targeted places are usually active spots of black cars, and thus the business can help contain black car activities.

•If this succeeds, luxury taxi supply can be further increased.

•Approach service differentiation to serve various kinds of customers.

To the Government

•Demand is constantly high in the targeted places.

•Numerous potential customers who want to waste no time

•Able to pay higher prices

Long Term Benefits / Sustainable?