Assignment No.

3
Dial M for Marina

1. Proposed tariff is mentioned below. The mix of cabs considered

is 75 percent of Indica EV2 and 25% Indigo ECS.

Recommended Tariff Card:

Details
Pick-up & Drop
Service
Minimum Charge (for 4
kms)
Additional Tariff / km
Waiting Charge (per 5
mins)
Short Trips
4 hours and 40 kms
5 hours and 50 kms
6 hours and 60 kms
10 hours and 100 kms
Additional Charge / km

Marina Cabs
Indica
Indigo
EV2
eCS

100

100

17

17

10

650
800
925
1475
14

725
875
1025
1625
15

2. Management Charge - 5000, per vehicle, per month

Charging fixed amount of Rs. 5000, per vehicle, per month, as management
charge is not optimal. Any charge that needs to be applied should have a
basis of allocation, and this fixed amount fails on this parameter. Further
analysis is needed to ensure whether this 5000 if justified or not. There is a
possibility that this is under applied, in which case Marina Cabs may charge
less to a customer and thereby result in a loss.
Another possibility that this is over applied(which is the general view),
resulting in a costlier operations and overcharging of customers which may
lead to losing customers, since the competitors are cheaper. Our analysis, as
can be seen in the attached excel and the snapshot below, reveals the same
in the case where the car will travel an average of 2000 km per month. This
will significantly increase the cost to the customer and they will shift
business and loyalty to competitors.

3. Taking a conservative approach, assuming that a car will do an average of

2000 kms per month, we find that a fleet of minimum 200 vehicles would a
viable option. This fleet can be divided among Indica and Indigo as:
1. 75% Indica cars and 25% Indigo cars This mix is preferred as an
Indica car is lower on EMI and therefore can breakeven sooner. Another
assumption that can also be applied is that people (generally
individuals or groups of 2 3) will be using this primarily for transport
intra-city.
2. Maintaining 50% Indica cars and 50% Indigo cars fleet. This will be a
bit more expensive as Indigo cars charge a higher EMI in comparison
with the Indica cars. Also, there is a possibility that Indigo may be less
in demand from the customers.
Finally, A fleet of over 200, such as 300 or 400, would also be cost-effective
at any stage provided there is an effective and efficient utilization of the
vehicles and a healthy demand in the market.
Charge Spread Across 12 Months

Fixed Charge of Rs. 5000

Fleet

50% Indica, 50%

Fleet

50%

Composition

Indigo

Composition

Indigo

Fleet

Size

(cars)

100

200

300

Fleet

Size

(cars)

100

Indica,

200

300

Total Cost per 17.8 16.7 16.3

Total Cost per 19.2 18.4

km per car

km per car

Fleet

25% Indica, 75%

Fleet

25%

Indica,

Composition

Indigo

Composition

Indigo

50%

18.22

75%

Fleet

Size

(cars)

100

200

300

Fleet

Size

(cars)

100

200

300

Total Cost per 18.2 17.1 16.7

Total Cost per 19.6 18.8

km per car

km per car

Fleet

75% Indica, 25%

Fleet

75%

Indica,

Composition

Indigo

Composition

Indigo

Fleet

Size

(cars)

100

200

300

Fleet
(cars)

Size

100

200

Total Cost per 17.4 16.3 15.9

Total Cost per 18.8 18.0

km per car

km per car

18.64

25%

300

17.81

4. Schemes to promote Driver-Owner:

- Provide work based incentives: Apart from the fixed salary, the company
can include a customer feedback based variable pay, measured on the
parameters of loyalty and time performance.
- Bonus based on profits: Profit sharing with the drivers based on
performance in the times company makes profits.

Cost Calculations
Maintenance Cost

Variable

Total Cost (Cost

*Quantity)

Type

Total Cost /
Km

Oil filter

300

0.03

Lubricants

800

0.08

Coolant &
Brake Fluid

600

0.06

100

0.01

500

0.05

750

0.08

2,000.00

0.2

5,050.00

0.51

Grease
Miscellaneo
us spares
Service
Charge
Other
expenses
Total

Total Cost
(Cost*Quantity)

Fixed
(Monthly)
Total Cost /
Month

500

41.67

Vehicle
Insurance

7,500.00

625

Fitness
Certificate

15,000.00

1,250.00

Tyre
Change

14,800.00

1,233.33

2,500.00

208.33

Maintenance Cost
Type
Green Tax

Clutch
Repair Kit

Brake
Linings
Total

2,500.00

208.33

42,800.00

3,566.67

Capital
Investment:
Investment Head

Total Investment (Rs)

100 Cars

200 Cars

300 Cars

EPABX system with a

capacity of handling
25 extensions

20,000

20,000

20,000

Cost of telephone
instrument

25,000

25,000

25,000

Software cost for

operating EPABX

5,000

5,000

5,000

300,000

300,000

300,000

200,000

200,000

200,000

200,000

200,000

200,000

200,000

200,000

200,000

FURNITURE &
FIXTURE

500,000

500,000

500,000

VEHICLE TRACKING &

COMMUNICATION
SYSTEM

800,000

1,600,000

2,400,000

EPABX SYSTEM

CRM SYSTEM
CRM software
Website development
cost
Hardware costs
Software Integration
& Maintenance

TRAINING EXPENSE
(Defensive driving
skills + Behavioral
training +
Certification)
Total
Opportunity Cost @
12%
Total Investment

100,000

200,000

300,000

2,350,000

3,250,000

4,150,000

282,000

390000

498000

2,632,000

3,640,00
0

4,648,000

Other Expenses:
Other Expenses
Expense Head

Cost / Month

Call center staff

200,000.00

Office overheads

100,000.00

Telephone Rental
Call Tariff

2,500.00
0.25

Total Operating
Expenses

Cost /
Cost /
Cost /
Month /
Month /
Month /
100 Cars
200 Cars
300 Cars
200,000.0
200,000.00 200,000.00
0
100,000.0
100,000.00 100,000.00
0
2,500.00
2,500.00
2,500.00
125
187.5
250
302,625.0
0

302,687.50

302,750.00

2,000

2,500

3,000

Overall Cost :
Expense Head
Vehicle Related (A)
Per Month

Number of
KMs
Driver Salary
Fuel Expense
Maintenance &
Taxes

1,000,000.
00
550,000.0
0

1,000,000.
00

1,000,000.
00

687,500.00

825,000.00

482,916.67

508,166.67

457,666.6
7

EMI
Total (A)

Management Charge
(B) - Per Month

Capital
Investment
Operating
Expense
Total (B)

Total Cost / Month

(A) + (B)

871,800.0
0

219,333.3
3
302,625.0
0
521,958.3
3

219,333.33

219,333.33

302,625.00

302,625.00

521,958.3
3

521,958.3
3

3,401,425. 3,564,175. 3,726,925.

00
00
00
34,014.25

Total Cost per km

per car

17.01

Assumptions:
Driver Salary Rs.
Number of Cars

871,800.00

2,879,466.
3,042,216. 3,204,966.
67
67
67

Total Cost / Month /

Car

Competitions tariff

871,800.00

35,641.75

37,269.25

14.26

12.42

NTL

17

17

17

Fast Track

17

17

17

10000
100