Team 2 Taxi Assignment
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Industry Analysis Application: NYC Taxi Industry Assignment
Team #: 2
Team Members: Morgan Bruecks, Grace Robin, Zachary Morauske,& Michael Fisk
Post-Uber NYC Taxi PESTEL-G
Macro-environmental trends
+/-
Comments/Affect Political •
NYC limits number of taxi medallions
•
+
Limits competition between taxi companies and increases value of medallions.
Economic
•
Financing for medallions generally available.
+
Steady appreciation of medallion values has supported secured loans. Socio-cultural
•
Many taxi riders have smart phones and use apps regularly. •
NYC attracts many travelers (business and vacationers) -
+
Conditions are supportive of “ride-sharing” companies.
Travelers need taxis.
Technological
Environmental
Legal
Global
What are the 3-5 most critical trends and what impact do they have on the taxi companies
?
Post-Uber NYC Taxi industry structure - BTEs
Factors that affect BTEs
Is this factor increasing BTEs?
Comments
Economies of Scale
No
No evidence provided in articles.
Switching costs
No
Taxi passengers experience no cost or inconvenience if choosing a new entrant.
Capital requirements
Yes
Primarily the $1 million + cost per vehicle for the taxi medallion.
Cost advantages independent of size
No
No evidence provided in articles.
Government policy
Yes
NYC government limits entry by requiring a medallion to operate a cab.
Access to distribution
No
No evidence provided in articles.
Credible threat of retaliation
No
Common forms of retaliation against new entrants (price reductions) are not allowed by government regulation (cab fares are standardized by law).
Post-Uber NYC Taxi industry structure – Threat of Substitutes (Public transportation)
Factors that affect the Threat of Substitutes
Is this factor increasing the threat?
Comments
Relative Pricing
Yes
The price of using a bus or subway is lower than the price of a uber fares
Switching costs
Yes
No direct switching costs for switching between ride share apps or cabs
Relative performance
No
Walking to the bus stop or subway is more inconvenient and has longer wait times than ride share apps or taxis
Post-Uber NYC Taxi industry structure – Supplier Power (NYC – Medallions)
Factors that affect Bargaining Power of Suppliers
Is this factor increasing the force?
Comments
Industry Concentration
Yes
NYC has a monopoly on the sale of medallions (aside from the secondary market). This results in an HHI close to 10,000.
Switching costs
Yes
Since there are relatively no alternative suppliers (other than owners of medallions that want to sell), there are no switching costs.
Differentiated products
No
Again, there is primarily one supplier of a standard medallion – no differentiation supporting supplier power.
Lack of substitutes for what the suppliers sell the industry
Yes
There are no alternative to a taxi medallion that allow a taxi company to legally operate a cab in NYC.
Threat of Forward Integration by suppliers
No NYC government is not interested in operating a taxi cab service.
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a. buyers will go elsewhere.
b. buyers will pay the higher price in the short run.
c. competitors will also raise their prices.
d. firms in the industry will exercise market power
9. If a firm in a competitive market doubles its number of units sold, total revenue for the firm will
a. more than double.
C. increase but by less than double.
d. may increase or decrease depending on the price elasticity of demand.
b. double.
Question 1.
The graph shows the cost structure of a
monopolistic firm. Use the graph to answer the
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