Team 2 Taxi Assignment

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Valencia College *

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2013

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Economics

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Apr 3, 2024

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pptx

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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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