STRENGTH IN STRATEGY
NAVIGATING CHAOS: THE POWER OF STRATEGY IN THE PRIVATE HIRE INDUSTRY
Article by Conor Nolan Boira Consultants
www.boira-consulting.co.uk
Private hire is one of the most fascinating industries to work with. Where else would you find a business having to juggle two competing customers, with unique wants and needs from each other? Passengers wanting fast reliable service for as little as possible, drivers seeking as much freedom as possible for as much as possible, the operator stuck in the middle.
I often reflect on how much simpler the industry must have been when bookings were dispatched by radio, and the status quo was well established and seemingly concrete. I would argue that those times brought more certainty, but nothing remains stationary.
That was then; this is now. Times are changing; customer demands for both drivers and passengers are ever shifting and the number of plates an operator has to spin at any given time appears to be multiplying. Most operators we speak to agree that these are challenging times, chaotic even. Uncertainty with the economy, pressures from competitors, regulatory changes and employment matters only add to the complexities.
There is a product/industry lifecycle whereby the stages of an industry are influenced by supply and demand, amongst a host of other practical factors over time that illustrate the general trend for industry and products alike. These stages are: creation of a new industry/service/product, growth, maturation, decline.
An example of each stage can be outlined as follows:
Creation of new industry/service/product When Uber entered the UK market in 2012, it brought a new product to an established industry that was comparatively inert. By offering the ride-hailing application to passengers and drivers, Uber not only disrupted the status quo of the industry, but created a whole new sub-industry that ultimately became the norm overtime.
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Growth Between Uber’s international brand, convenient appli- cation and marketing strategy, Uber grew its market share, rapidly leveraging its business model and a lack of direct competition. This caused an eventual decline in the number of operators, particularly in London.
Maturation An industry matures when the initial service provider and any close followers who enjoyed the lion’s share of the market in their sector while the rest of the industry works to catch up, evolve their business model, sell out, or fail. The overall level of demand tapers off over time by the availability of numerous businesses offering a service, this often leads to pricing wars that ultimately benefit the consumer.
Think of how many ride hailing applications are now competing in the UK’s largest cities such as London.
Decline I prefer the term consolidation to decline. Here the price wars mean only the fittest survive and cause other businesses to seek to evolve their service offering (thus restarting the lifecycle) or businesses purchase one another. Then over time, it is difficult to estimate for how long, the lifecycle will renew again.
WHERE THE PRIVATE HIRE INDUSTRY STANDS
Well then, were does the private hire industry stand in the industry lifecycle?
In my opinion, the private hire industry finds itself consolidating. It is difficult to tell from the number of licences private hire operators in England reported by the Department of Transport, whether the number of independent firms is reducing. Personally, I am aware that this is becoming all too common. Acquisitions are the name of the game in the present market.
There are a number of larger firms acquiring other firms across the length and breadth of the country. This is to be expected, as the overall number of competitors decreases, the ability to create a profitable service increases, at least in theory.
APRIL 2024 PHTM
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