City Bike
Question 1:
CityBike is a bike-sharing company based in the west coast in the US. While they are successful within the US, they are not the largest player and are looking for international expansion opportunities. To diverge from their competitors who have focused their expansions to European cities, CityBike is considering launching its services in Tokyo. Tokyo has a population of roughly 14 million and is known for its dense population and extensive public transportation network. CityBike aims to estimate the potential market size for its bike-sharing service in Tokyo, taking into account both the local residents and the influx of 30 million annual tourists. The service is expected to appeal to residents for short commutes and errands, and to tourists for sightseeing purposes. Can you estimate the potential market size for CityBike in Tokyo?
Possible Answers to Question 1:
To estimate the market size for CityBike in Tokyo I would take make the following assumptions
Residents:
City population: 14 million
Estimated percentage of residents using the service: 5%
Potential resident users: 14,000,000 * 5% = 700,000 residents
Tourists:
Annual tourists: 30,000,000
Estimated percentage of tourists using the service: 8%
Potential tourist users: 30,000,000 * 8% = 2,400,000 tourists
Total Market Size:
Potential resident users + Potential tourist users
700,000 residents + 2,400,000 tourists = 3,100,000 users
Therefore, the potential market size for CityBike in Tokyo could be around 3,100,000 users annually, combining both resident and tourist segments.
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Question 2:
If CityBike charges ¥300 per hour for its service, and on average a user rents a bike for 2 hours per rental, what would be the potential annual revenue from this market?
Possible Answers to Question 2:
To estimate potential annual revenue let’s use first calculate the potential revenue per rental.
Average rental duration: 2 hours
Charge per hour: ¥300
Revenue per rental: 2 hours * ¥300/hour = ¥600 per rental
Assuming each of the 3,100,000 users rents a bike at least once a year,
Total potential users: 3,100,000
Revenue per user: ¥600
Total potential annual revenue: 3,100,000 users * ¥600/user = ¥1,860,000,000
Thus, CityBike could potentially generate ¥1,860,000,000 in annual revenue from the Tokyo market.
Question 3:
How many bikes should CityBike initially invest in to ensure operational efficiency, considering a 25% maintenance downtime and each active bike serves approximately 150 rentals per year?
Possible Answer to Question 3:
Determining the required bike fleet size
Annual rentals: 3,100,000
Rentals per bike per year: 150
Bikes needed: 3,100,000 / 150 = 20,667
Accounting for maintenance downtime:
Total fleet size: 20,667 / (1 – 25%) ≈ 27,556 bikes
CityBike should initially invest in approximately 27,556 bikes for Tokyo.
Question 4:
What would be your final recommendation to the client?
Possible Answer to Question 4:
CityBike’s expansion into Tokyo presents a significant opportunity, with an estimated market size of 3,100,000 users and projected annual revenue of ¥1,860,000,000. The success hinges on understanding Tokyo’s unique urban dynamics, efficient fleet management, and effective integration with existing transportation infrastructure.
Recommendation:
Proceed with the expansion, ensuring operational efficiencies and strategic placement of bike stations. Focus on marketing strategies to attract both residents and tourists, and develop strong maintenance and redistribution protocols to meet demand effectively.
Risks:
Challenges include adapting to Tokyo’s dense urban environment, maintaining fleet efficiency, and ensuring harmonious integration with public transportation.