A GrabCar driver displays the support information page on the Grab app on a smartphone in an arranged photograph in Singapore, on Monday, Oct. 31, 2016. Grab is riding a Southeast Asian ride-hailing arena with some 620 million people, forecast to grow more than five times to $13 billion by 2025. Photographer: Ore Huiying/Bloomberg via Getty Images

Grabbing Opportunities

 

Featured Image: Fortune

It is one of the region’s largest companies. It has beaten major rivals and tasted massive success. It has an equally massive ambition and has stuck its fingers in a diverse set of businesses in recent years. For this, it has been grabbing attention on an almost daily basis. There is and has been no other company like Grab – a conglomerate of various interests that spans transportation, food delivery, online payments, vehicle rentals and also Fintech.

 

Building an empire

 

In just six years, since its humble beginnings in 2012, Grab managed to rise to the preeminent position in the ride-sharing industry through a policy of ceaseless, aggressive expansion and astute business maneuvers. It opted to work with partners to build its fleet as opposed to Uber which set up a subsidiary that purchased vehicles. It diversified into downstream and downstream activities while still using these enterprises to synergise with its main transportation business.

 

Grab’s main transportation business is represented by GrabCar, GrabTaxi and GrabHitch, with the latter two set up partly in response to regulations and also to capitalise on the existing pool of taxis. Finding willing drivers was not difficult but in places like Singapore where the high costs of vehicle ownership precluded many aspiring Grab drivers, getting one’s’ hands on a car proved to be a challenge. To build up its own fleet quickly, GrabRentals was formed to make affordable rental vehicles available through preferred rental companies that Grab termed fleet partners. Extending its business from transporting people, it was only a small stretch of the imagination to conceive of GrabExpress which is a delivery service operating in Thailand, Vietnam and the Philippines, and GrabFood which was converted from Uber’s own food delivery service, after both companies merged. Similarly geared towards its main business, GrabFinancial was announced in early March this year. Initial product offerings of insurance products were targeted towards Grab drivers only, and were made available through the app. This new platform aims to eventually provide loans and insurance to those left behind by traditional credit rating systems, by using proprietary methods of assessing credit worthiness. Rounding it all off, GrabPay facilitated transactions between parties without the use of cash and was first used within its apps. Now, with a full suite of complementary businesses aimed towards enticing as many drivers under its banner, the Grab empire is finally complete.

 

The true king of ride-sharing

 

RidesharingImage Source: CleanFleetReport

 

While Grab and Uber were fighting for supremacy, especially in the highly competitive Southeast Asian market, another entity was emerging as a dominant player. It does not have a trendy name composed of malapropic spellings like Lyft or Ryde but it has an equally approachable sounding one, Softbank – a formidable Japanese conglomerate that has diverse business interests and considerable financial clout. It holds a 15%1 stake in Uber at an acquisition cost of US$1.25 billion, 60%2 in Grab, 20% in Chinese ride-sharing Didi Chuxing, 30% in Indian transportation network company Ola and a share of Brazil99 which is yet another ride-sharing app based in Brazil.

 

If there is still uncertainty as to who calls the shots, one has to look towards Softbank’s marching orders3 given to Uber’s operations in Southeast Asia. From Softbank’s point of view, this makes perfect sense – why burn resources cannibalising the same market? It makes more sense to segregate them and deploy the assets in the ones that they have the greatest potential. In this case, Uber was sent packing to concentrate on the North American and European markets while Grab consolidated its advantage in Asia. With a stronger position in its strongholds, it is hoped that Uber’s upcoming IPO4 would be met with enthusiasm from the public, relieving some of the financial pressure on Softbank’s coffers.

 

It’s crowded at the top

Image Source: DreamsTime

 

The top spot in the regional ride-sharing industry is an exclusive perch but there is very little room to breathe. Having been thrust into the limelight as reigning champion in its field, many have come sniffing for weak spots. A consequence of the Grab’s premature takeover of Uber is drawing the attention of the Competition & Consumer Commission of Singapore (CCCS), the local anti-monopoly watchdog. Although current laws do not require call for mandatory reporting of any merger and acquisitions, self-regulation is strongly motivated by the powers that it has to order a rollback and impose a fine on any activities found to contravene its policies.

 

With the exit of Uber, Ryde stepped up its game hoping to fill the vacant position. Joining them are new upstarts5 Jugnoo, Go-Jek, Arcade city, Mass Vehicle Ledger (MVL) and SWAT. Though how far they will get remains to be seen, a strategy that could have kept these hopeful startups at bay was if Uber and Grab adopted a united front and split the market amongst themselves instead of chopping off the proverbial serpent’s head only to have several more sprout in its place.

 

Spreading one’s resources too thinly and trying to do to many things at once could leave it master of none. As Grab dilutes its core business by developing ancillary ones originally meant to support it, the company risks going into unfamiliar territory, especially since it intends to diversify it’s core offerings into these new areas. A clear case6 was with Uber’s car rental arm, Lion City Rentals which strayed into vehicle purchasing and rental, instead of focusing on the app. What seemed like a solution to the problem of providing aspiring Uber drivers with a vehicle ended up to be a huge liability when a large part of the fleet was found to be defective7 . Likewise Grab risks taking a misstep with its foray into Fintech in Singapore. Leveraging on the expertise of a company in a related field might be a possible solution as delegation of tasks to the expert is possible and the risks are also shared amongst all partners.

 

Edited (Original Image Source: DreamsTime)

 

The rest of 2018 will be an eventful one for Grab, and as much as its name was omnipresent in 2017, it will continue to be the buzzword for this year.

 


Reference

1 https://qz.com/1187144/softbank-not-uber-is-the-real-king-of-ride-hailing 

2 https://en.wikipedia.org/wiki/SoftBank_Group

3 https://www.ft.com/content/970f5bce-fc76-11e7-9b32-d7d59aace167

4 http://www.businesstimes.com.sg/transport/uber-races-towards-ipo-with-south-east-asian-deal

5 https://mustsharenews.com/ride-sharing-apps/

6 https://qz.com/1046351/buying-its-own-cars-went-disastrously-wrong-for-uber-in-singapore/

https://www.straitstimes.com/singapore/transport/ubers-auto-leasing-draws-added-scrutiny-after-safety-issues

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