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Memo 1

To: Ryan Greenwald


From: Jacob Kim
2/2/16
Re: Yellow Cab

Problem
Yellow Cab needs new outlets to compete with on-demand app-based private transportation networks
and prevent further bankruptcy

Background

Average trips per taxi car in San Francisco declined by 65% within 2 years. Between January
2012 (a year later Uber was introduced to the Bay area) and July 2014, the average number of
trips/car decreased from around 1400 to around 500.
Uber has a $500 million revenue in San Francisco, while the entire taxi market in San
Francisco is estimated to have around $140 million revenue. Uber, as an international
company, has nearly an infinite source of revenue. Ubers revenue in the bay area alone is still
growing at 200% per year. Their ride requests are growing 3x more in San Francisco, 4x more in
New York, and 5x-6x in London every year.
Yellow Cab Taxi in San Fracisco was found liable for an $8 million award to the passenger
who suffered permanent brain damage. The San Francisco Yellow Cab carriess a $1 million
insurance in liability, 1/8 of the payment required for this lawsuit. Not only that, Yellow Cab
Chicago was also found liable for an $26 million award for a passenger in an accident, and filed a
bankruptcy protection in 9 hours after the verdict.

Opportunities and Threats Posed by the Situation


Opportunities Posed by the Situation

Entry into a New Market. Although Yellow Cab is losing customers to independent app based
transportation networks, Yellow Cab itself developed an app like Uber/Lyft for cabs called Yo
Taxi. Also, to compete with the low prices of the mobile apps, it can copy the fluctuating
price system based on the demand of the cabs in a certain mile radius.
Opportunity to Restructure the Company. Due to the rather abrupt bankruptcy, Yellow Cab
has a chance to restructure the company as a whole from getting rid of the traditional image
of an unfriendly yellow-topped medallion taxis, to implementing new/unconventional
marketing tactics, or even changing the management.

Threats Posed by the Situation

Damaged Reputation. Yellow Cab San Francisco already has meagre reviews everywhere
online. It ranges from 1.7 stars on Google from 105 reviews, to 1.5 stars on Yelp from 621
reviews. Meanwhile, services such as Uber, and Lyft boasts of great customer service with
friendly civilians wanting to make a bit of side cash. After the bankruptcy, the perception of
Yellow Cab San Francisco will be met with skepticism together with the reputation it already

carries. Due to the perception of the company, the company will lose its current customer
base.
Extinction of the Taxi Industry. This bankruptcy is not only exclusive to the Yellow Cab
Company, but reflective of the taxi industry as a whole. Some may hail this as a dawn of a
new private transportation system, and render the taxi industry obsolete. All the figures and
data for the past 3 years since the implementation of ride share companies, such as Uber and
Lyft, points that the taxi industry is in a rapid decline, whereas the private companies are
surging (see background information).

Alternatives and Implications

Restructure and Rebuild the Company as a Ride Share Company. If you cant beat them, be
them. Yellow Cab should minimize its current cab service, and instead build a ride share service
with the Yellow Cab brand name, but with a twist. Yellow Cab can use their existing cab services
at a flat, non-fluctuating/surge rates, while offering an on-demand app service with fluctuating
rates that depend on the demand of the cars. If the rate of the on-demand service is more
expensive than the regular cab fare, Yellow Cab can offer their traditional cabs. This would mean
that active cabs wouldnt take that big of a hit, and would be still in use all the while joining in on
the relatively new market. This could also mean expending a lot of resources into building this
application. This could be their last chance to rebuild, as they are already debt-ridden, and filed
for a Chapter 11 bankruptcy.
Rebuilding the Yellow Cab Image. Yellow Cab has bad ratings everywhere online, and the
majority of complaints stem from mistreating the customers, so the company should focus on retraining its current employees on customer interactions, and adding a bonus based on the
customer service reviews. With this incentive, they can reform their image as a leader in customer
service, and build a loyal customer base. However, training and adding incentives all cost a fair
bit of money, so this suggestion too, comes with the risk of sufficient monetary funding.
Start a Drive Safe Campaign. With the devastating accidents ruining the companys image,
starting a simple drive safe campaign partnered with the DMV and the local traffic police can
both better the reputation, and prevent any further disastrous accidents, saving multimillion dollar
lawsuits. This suggestion would show the general public that Yellow Cab genuinely cares about
the safety of others, and potential accidents that would further crush the companys finance. This
alternative also costs money, but not as much as the other two alternatives. This option also runs
the risk of potentially ruining the company image if a cab has another accident, people may say
despite advocating for safe driving, Yellow Cab itself should learn about safe driving. However,
it should be noted that the expenditure should be split prudently, as noted before, it may be the
last chance that this company has.

Suggested Resolution
Yellow Cab should develop a new app to compete with the current competitions, all the while
utilizing its existing cabs on the streets. Primarily focusing on developing new app to compete with its
competitors will cost a lot of money On top of that, adding incentives for the good reviews will only cost
Yellow Cab more money However, if this does succeed, Yellow Cab should be able to stay in the current
market with the innovation, while bettering their reputation and preventing accidents. By focusing on
rebuilding and restructuring, the rebuilding of the company image and starting a drive-safe campaign will
all be under the umbrella of restructuring and rebuilding the company.