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Creating Blue Oceans

In: Business and Management

Submitted By kpassey
Words 969
Pages 4
Developing a strategy that creates profitable growth is one of the most important tasks of the management of any organization. In doing so, companies attempt to move away from “red oceans” where competitive forces are at their greatest and actively seek “blue oceans”; uncontested spaces within the competitive market where companies have greatest potential for profit, growth, and market share. Organizations often find “blue oceans” by leveraging disruptive technologies that change the rules of the game within the competitive environment. In presenting a strategic disruptive innovation, I will use the example of Meru Cabs Private Limited (Meru), India’s first radio-cab service introduced in April 2007.
Meru has a an interesting history in the context of competitive strategy in that when its services were first introduced by IVCF, the company that owns Meru, no service of its kind was previously available in India. Over the last four years, several companies have introduced radio-cab services that were essentially identical to that of Meru. While the radio-cab industry in India has become a “red ocean”, where several companies are competing for profits and market share, Meru, by virtue of being the first entrant, has established its brand as a provider of comfortable and trustworthy means of transport within major metro cities.
Prior to Meru Cabs, the only available modes of transport in major Indian metros were public transport (local rail and bus), yellow cabs and auto-rickshaws or private cars. While public transport is comparatively the cheapest mode of transport, local rail and bus lines are overcrowded, carrying almost three times the listed capacity during rush hour times. Yellow cabs and auto rickshaws while providing slightly better comfort, are not air-conditioned and can only be hailed on the street with drivers often refusing undesirable fares. Private cars, on the other hand, provide the best comfort and protection from the forces of nature but are expensive and parking is not easily available in over-crowded metros.
Consumers that wanted to travel in comfort and did not own a car or did not want to use their own car had no option available to them. Meru was the ideal solution for these consumers. Starting with 45 cabs in the city of Mumbai, today, Meru operates over 5000+ cabs in Mumbai, Delhi, Hyderabad and Bengaluru and is the 3rd largest radio-cab company in the world with more than 20,000 trips per day serving more than 1 million passengers per month. While other operators have also entered the radio-cab industry in India, with almost identical business models, Meru remains a leader in the industry and is the only radio-cab operator to recognize the “blue ocean” space of airport users and tie up with the airports of Mumbai, Delhi, Hyderabad and Bengaluru. Meru Cabs was also the first company to use GPS technology to locate and track cabs and push fare information that drivers can accept if they are in the pick-up location. While Meru Cab fares are about 50% more expensive than regular yellow cabs, their service is prompt, door-to-door, and as comfortable as traveling in a private car.
Significant financial reform by the government in India in 1991 saw a distinct paradigm shift from nationalist protectionism to liberal capitalism. This shift heralded the growth of the middle-class that, over the past two decades, has continued to grow along with growth in discretionary spending, creating a consumer base that has the ability to pay a little extra for quality service. Today however, the market space is not as “blue” as it was four years ago with several other competitors entering the market. The upper table below shows the effect that Porter’s five forces have on the radio-cab market, as is it today. With regard to specific disruptive innovations that Meru can adopt in the future, I have three specific suggestions that are each connected to its current business.
Firstly, given India’s vast geographic area, growing middle-class population, and emergence of tier-2 and tier-3 cities, Meru has significant potential for growth given to amount of “blue space” that is available. Cities such as Chennai, Kolkata, Pune, Ahmedabad, and Surat are up-coming cities that lack comfortable public transportation. Radio-cab services in these cities are currently either not available or highly fragmented and unreliable if available. By introducing small fleets in each of these cities, Meru can quickly and cheaply test market-demand for its services.
Secondly, no radio-cab operator has introduced mobile-friendly apps that could facilitate cab-booking, GPS-enabled cab and pick-up location tracking, billing and other related services that are currently conducted over the phone and partially over the Internet. India is one of the biggest markets for smart phones, many users of which are becoming increasingly savvy with mobile apps and prefer to book movie-tickets, find driving directions, make restaurant, hotel and airline reservations via their smart phones. Introducing this technology will certainly widen Meru’s customer base and provide more convenience to Meru’s existing customer base.
Thirdly, Meru should consider hiring female drivers. Currently, all Meru cab drivers are male. In a conservative place like India, single women travellers are often detracted from traveling alone with a male driver, especially late at night, primarily due to security and cultural issues. If Meru were able to provide cabs with female drivers, Meru would be able to service a previously neglected market. The lower table below highlights the specific blue spaces and disruptive technology that Meru can leverage to capture “blue spaces”.
Implementing the above-discussed innovations could see Meru strengthening its position as a market leader in the Indian radio-cab industry and use disruptive technologies to enter blue spaces within the market.

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[ 1 ]. Meru Cabs Private Limited Website

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