Introduction
As a result of the strict control that the South Korean government has on the public transport system coupled with an organized private taxi sector, for ride-hailing companies like Uber the market has proven both difficult and expensive to enter. If Lyft seeks to expand into the South Korean market it will have adopted a strategy that caters to the high-end market which require the company to use its vehicles since the commercial use of private vehicles is unauthorized. Being Asia`s third-largest economy and lacking strong local competition makes the South Korea market ideal for Lyft to expand into since if successful the company can capture a large percentage of the transport market share.
Ride-sharing in South Korea
Ride-sharing is still not a popular mode of travel for most South Koreans who rely on taxis and public means such as buses. Currently, only two firms Kakao and UberLux have ride-sharing operations in the Korean public transport market which is estimated to be worth an estimated $8.5 billion (Lee, 2018). In a study that was jointly done by the Research and Research organization and the South Korean Startup discovered that only a paltry 20 percent of the population has accessed ride-sharing services (Nolan 2018).
In the same study, it was discovered that 58 percent of those who had used a ride-sharing service were content with the service citing cheaper costs and convenience as the main advantages of the service (Nolan 2018). For the study participants who were not familiar with the concept of ride-sharing, an explanation of the system was provided with their willingness to try such a system being gauged. It was discovered that 70 percent of the respondents showing a willingness to use ridesharing services indicating the largely untapped potential of the market (Nolan 2018). However, expansion into the low-end sector of runs the risk of breaking laws and regulations instituted to protect the country`s established public transport network and those that depend upon it.
Lyft's Expansion Strategy
Therefore, Lyft should expand into the market by initially providing premium transport services; a strategy adopted by Uber after its low-end service was declared illegal by the government (Lee, 2018). Low-end ride-sharing services have also attracted the criticism of the established taxi sector which holds considerable political influence (Lee, 2018). High-end transportation is the best method that the company can use to enter the market while awaiting future changes in policy since it does not disrupt the structure that has already been established.
Lyft should expand into the South Korean market using several strategies that serve the dual purpose of developing relationships with local luxury taxi partners while allowing the company to gain market share with minimal strain on its resources. Lyft should enter the South Korean market through a wholly owned local subsidiary which should then seek to partner with a section of the local taxi market who currently cater to the high-end market such as hotel and airport transfers.
Wholly Owned Local Subsidiary
The restrictiveness of the South Korean government can be interpreted as the government seeking to protect its fledgling ride-sharing industry from more seasoned international companies like Lyft and Uber. Therefore, a wholly owned local subsidiary that largely run by locals and has the goodwill of the established taxi sector will be more successful and cheaper as opposed to entering the market as a foreign company.
Callbus is a local company that would be an ideal choice for a wholly owned local subsidiary. The company which is locally owned can be a valuable acquisition for Lyft since it has already established a ride-hailing service that mainly caters to the high-end market with some degree of success (Lee, 2018). Lyft can, therefore, acquire the company and then inject both capital and professionalism which should be aimed at streamlining and expanding the firm's current transport operations which are mainly centered in the high-end districts of Seoul (Lee, 2018).
Additional capital will be instrumental in securing market share for the company since it will be used to purchase more luxury vehicles such as sprinter vans since the company is allowed to operate its own fleet as well. An expanded fleet means that the company can expand to other districts in Tokyo as well as reducing its dependence on its taxi partners who it receives percentage fees from.
Professionalism will be needed to guide the company during the expansion since that will require a lot of strategies and Lyft being more seasoned in the market is a position to instill that professionalism. Lyft acquiring Callbus is a viable endeavor since it creates value for both parties whereby Lyft possesses the capital and professional management that Callbus needs to expand while it has the market access that Lyft does not have.
Conclusion
Ride-sharing will be an increasingly important service set to revolutionize public transportation since it offers cheaper and more convenient services than the current public transport systems. Therefore, Lyft should venture into new markets such as South Korea and capture market share as the service becomes increasingly popular and rivals have not yet captured a large market share. The restrictiveness of the South Korean market makes entering the market by buying a local subsidiary like Callbus the only option since it would cost less and lead to more gains as opposed to entering the market as a foreign company.
References
Lee, J. (2018). South Korea's Kakao to monetize taxi-hailing app by charging for... Retrieved from https://www.reuters.com/article/us-kakao-southkorea/south-koreas-kakao-to-monetize-taxi-hailing-app-by-charging-for-some-services-idUSKCN1GP11O
Nolan Tara. (2018). South Korea unwelcoming to ride-sharing services. Retrieved from https://www.intelligenttransport.com/transport-news/63977/south-korea-ride-sharing/
Lee, J. (2018). South Korea's Kakao to monetize taxi-hailing app by charging for... Retrieved from https://www.reuters.com/article/us-kakao-southkorea/south-koreas-kakao-to-monetize-taxi-hailing-app-by-charging-for-some-services-idUSKCN1GP11O
