Submitted to: Dr Huma Amir

Assignment no: 1

Group Members

Faraz Afzal 11788

Muhammad Nabeel Akhtar 01315

Osama Ahmed 01464

Tehreem Anwar 12007

 PROBLEM DEFINITION
About Company:
Careem is an on demand peer-to-peer ride-hailing company which started its operation in 2012.
Co-founded by Magnus Olsson and Mudassir Sheikha, initially as a website-based car renting
service for corporate employees, Careem gained quick popularity among people who started using
it for personal use as well. When the demand started to flourish, Magnus and Mudassir decided to
further transition into an on demand peer-to-peer ride-hailing service. Since then Careem has
extended its operation across 100 cities and 14 countries and is now worth more than 1.2 billion
dollar globally. By October 2017, Careem had begun its test run for Pakistan and launched in the
country in March 2016.By the mid of 2018, Careem has more than 975,000 cars operating in the
system and had launched Business, GO, GO+, Mini, Auto and Delivery segments. Major reason
behind Careem’s instant success was the underserviced public transport system in the country.
Management Problem:
In Pakistan, Careem faces stiff competition against Uber, a USA based ride sharing service.
Careem and Uber indulge in frequent price wars by introducing discount codes and free ride offers.
Since incorporation in Pakistan, Careem has been investing in its operations on an annual basis.
However, to make the business sustainable the company needs to achieve sizeable profit margins.
In the existing environment of increasing oil prices and high competition, the management has
reduced captains’ commissions and restricted number of cars in “Go” and “Go+” to increase
turnover. The dynamic pricing structure (peak factor pricing) is a smart strategy to match price
with demand, however the current strategies have not yet achieved sustainable profit margins. The
management does not want to change the dynamic pricing methodology, however they are
pondering whether;
“To increase the base fares by roughly 20% in Careem ‘Go’ segment.”
Steps followed to understand management problem
Purpose of Research:
To increase the declining profit margin.
Relevant Background Information:
To compete with Uber, Careem had offered multiple offers to retain customers. But Careem
lacks the financial strength Uber has and this has led to diminished profit margins.
Identification of Information needed:
Detailed and specific understanding of users’ perspective. The factors that inspire users to opt for
Careem.
Intended use of research:
On basis of research decision maker will decide whether to increase prices or venture to a new
market.
Problem Audit:
 History of the Problem:
Careem is associated with high service quality, low response time and superior app
technology. However, it is believed that price is the primary competitive factor between
Careem and Uber. To compete against competition, Careem has been offering free ride
offers and promotion codes to encourage customers to use their service. This has led to
decline in profit margin. In the past, they have reduced the captains’ commissions and
limited the number of cars in one segment; however the desired profitability was not
achieved by these cost cutting measures. Therefore, to solve this problem, management
wants to increase the prices by twenty percent.
 Alternative Course of Action Available To the Decision Maker:
Alternative course of action available is; instead of increasing base prices DM can invest
in business for a further year to achieve more market penetration (through promotions and
discounts) and delay this decision for another two years.
More ideas may be proposed upon conducting further research.
 Criteria for Evaluating Alternative Courses:
Investing in business, will achieve higher penetration and more business turnover and
revenues. The level of turnover in the coming year, increase of user base due to promotions
may be a parameter to judge success of the alternative strategy.
 Nature of Potential Actions Based On Research:
The potential actions can be to (a) find innovative ways of increasing convenience and
comfort, (b) increase peak factor prices, (c) Increase charges by Rs. 2 per kilometer, or (d)
increase the base fare by 20%.
 Information Needed to Answer Decision Maker’s Question:
 The information needed will be retrieved from detailed analysis of focus group with target
market to find out what factors influences customers to use Careem “Go” and are they
willing to avail the same service at a higher price.
 How Will Each Item of Information be used by the Decision Maker?
Decision maker will use the outcome of the research to understand what factor really
motivates customers’ intention to use Careem or driving factor that leads customers to
choose Careem as a ride hailing service. DM will be able to find out the effect of price “Is
price really the sole motivator behind behavior intention of Careem “Go”?” Final decision
will be taken by management board at Careem.
 Corporate Culture as it relates to Decision Making?
The corporate culture at Careem is healthy. They value feedback and welcome people with
different opinions. The employees on their specific designations are encouraged to share
their opinion. Although final decisions are almost always taken by the management.

Environmental Context of the Problem:

 Past Information and Forecasts:
The articles, blogs reviews, surveys and researches all indicate that Careem is associated
with higher quality but also reveals declined profits.
Organization forecasts increase in profit margin and customer acquisition.
 Resource and Constraints:
Some of the constraints faced by Careem is smaller capital as compared to Uber, its main
competitor in Pakistan. There is little mismanagement with the complaint system.
The main resource is their knowledge about customer needs and providing features to
increase comfort for customers.
 Objectives
The objective of the study is to find out what is the deriving factor which can influence the
behavior intention and eventually increase buyer use of Careem “Go” service.
 Buyer Behavior
It indicates price as the prime motivator to use ride-hailing. Second factor is comfort or
convenience. On the other hand there are customers who are willing to choose comfort
 over cheaper fare. Other factors like social influence, environment and hedonic value may
also be possible factors that can derive purchase behavior of Careem customers.
 Legal Environment
Currently there are no laws regarding ride-hailing industry and no regulations have been
developed for peer-to-peer car renting companies. Recently Careem has faced a legal issue,
due to taxi drivers claiming that police, PTA and Capital’s (Islamabad) transport authorities
are biased towards Careem and Uber and are not giving opportunities to new entrants. They
also claim drivers of Careem and Uber don’t follow rules that Taxi Drivers are required to
follow. Besides in 2016, Careem had also faced litigation issues against Government of
Punjab. However, at this time it is engaged with all the provinces in a consultative process
aimed at developing new laws specific to an online platforms like itself.
 Social and Technological Skills :
Social factor helps in determining the needs of the costumers. They have gained popularity
amongst women customers. They have combined their social and technological skill to
provide customer with quality service. Careem has provided multiple services to help
customers. They have introduced Careem wallet, a 24/7 call service center as per
requirement of customer.
 Marketing Skills:
Careem has an active presence on social media. Their campaigns are effective in attracting
and engaging costumers by introducing concepts such as Bakra on wheels, Qurbani Hides,
Careem Air and Rishta Aunty Service and leave a lasting impact on the minds of the
market.
 Political Factor:
Government is going to support ride-hailing companies due to lack of public transport.
Political parties affiliated with transportation ministry for their personal benefits, will
create hindrance for ride-hailing companies.
Marketing Research Problem:
(a) Broad Statement:
To discern the individual impact of each variable and their influence on consumers’
intention to use Careem “Go”. To look at the influence of price changes on customers and
their buyer intentions with Careem “Go” in present scenario.
Proposed route of action:
We will research the facts that play strong role in buyers’ intention.
(b) Sub Components:
 Who are the Careem “Go and Go+” customers?
 To perform a psychographic analysis of Careems’ “Go” customers.
 What is the relationship between price and purchase decision of Careem customers?
 What are the preferences of Careem “Go” customers?
 What factors play a strong role in the mind of the customers while choosing Careem “Go”.
 Whether multiple categories are working effectively in contrast to other competitors basic
categories.
Research Question:
 What are the factors customer look for in ride-hailing services?
 Do customer prefer price over comfort?
 Would costumer continue to use Careem at a higher price?
 How loyal are Careems’ customer?
 Are customers ready to forego 20% of price in return for “Careem experience” and
convenience?
 How strong are customer feelings towards Careem?
 Is Careem a part of daily life of its customers?
Information needed to find the answers for research questions.
Secondary Data Analysis:
To understand the business of Careem and the services they offer we started with secondary data
analysis. To gather information we started reading peer-reviewed journals, articles, organization’s
website, online customer reviews, news and blogs.
Careem offers six different services Delivery, Bike, Rickshaw, GO, GO+ and Business. The main
revenue generating service for Careem are Go and Go+. Uber on the other hand is offering four
services Moto, Mini, AUTO and Go but at approximately 10% cheaper rate. It seems that the
Careem’ competitive advantage is their better overall service quality and experience.
Exploratory Qualitative Research:
We will conduct focus group with target market to analyze the underlying motivators influencing
costumer behavior.