Management Accounting Systems Analysis Of Grab Taxi Holdings Pte. Ltd

Analysis, Pages 9 (2013 words)

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Introduction

The main aim of the research report is to discuss the Grab’s Management Accounting Systems (MAS) which are present in the company. The findings of this report would help in the development of understanding regarding the strategy that is adopted by Grab and the manner in which the decentralised organisation structure helps Grab to function as an autonomous organisation, ensuring that all the operations of the company are successful in generating the maximum profits for its shareholders. The strategic framework of Grab also includes their approach related to profit centres and performance management system & rewards.

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This report would also highlight the environmental responsibilities and the different issues that have an impact on the business operations of Grab.

Background

Grab Taxi Holdings Pte. Ltd, which is also known as Grab is ride-hailing, ride sharing and logistics service providing company that is based in Singapore. Grab mainly uses an in-house developed transportation app which helps in connecting the customers who need the different transportation services with the suitable driver.

The organisation initially started in the year 2012 by Anthony Tan and Tan Hooi Ling. The company at present is operating in several Southeast Asian nations like Malaysia, Indonesia, Philippines, Vietnam, Thailand, Myanmar, and Cambodia. In March 2018 Grab acquired the Uber’s Southeast Asian operations which made it the only ride-sharing service provider in the region. As of 2018, the annual revenue if Grab is more than $1 billion and there are close to 3000 employees who are employed by the company.

Industry

Grab mainly operates in the ride-sharing and ride-hailing segment.

In this segment, several passengers share a car to reach their destination. By increasing the number of people using a single vehicle, it helps in bringing down the travel cost of each passenger apart from that it is also an environmentally friendly and sustainable travel way. Although Singapore is a highly developed nation and its requirements are quite similar to the other countries like that of Europe and America, but there are only 149 cars for every 1000 inhabitants in Singapore against 900 in the US and almost 500 in most of the European Nations. This makes the ride-hailing and ride-sharing services of the profitable business proposition in the country. It is expected that the revenue from the ride-sharing segment would almost reach $133 million in the year 2018 in Singapore. Apart from that in Singapore, the revenue is expected to grow at an annual rate of 7.6 % which would increase the market volume of the ride-sharing industry to $178 million by the year 2022. In the year 2018, the user registration is around ten percent, and it is expected that by the year 2022 it would make it 12%.

Competitors

After Grab successfully acquired the Uber’s Southeast Asian operations, there are no significant competitors left in the ride-sharing segment which can compete with Grab. In the case of Singapore, Grab thoroughly enjoys a Monopoly over the ride-hailing and ride-sharing segment. However, five new companies, “Go-Jek, Dacsee, Jugnoo, Ryde, and MVL”, are likely to enter into the ride-hailing sector in Singapore in order to end the monopoly of Grab. There are also some local and regional players who are competing against Grab for market share. For example in Indonesia, Grab is facing fierce competition from Go-jek which is also planning to expand its operations in the Philippines and Singapore. In Vietnam Grab is facing competition from local taxi company Mai Linh which has also recently launched their ride-hailing app. Apart from that, the company is facing competition from PICKnGO, a taxi-hailing app in Malaysia.

Strategy

Four critical strategies are adopted by Grab in order to provide maximum returns to its shareholders, pertaining to them being a differentiator in running their operations. The first approach is to provide top quality consumer services. Grabtaxi has been successful in establishing its reputation as a quality service provider since its core philosophy is, “providing speed, safety and certainty” to the customers. Grabtaxi ensures maximum comfort for the passengers and for ensuring complete transparency, the details of the driver along with the rate is made available to the passenger. It also has a rating system whereby the passengers can rate the driver over the social media platforms. This helps in increasing the accountability of the drivers and ensuring that the company gets the regular feedbacks in order to improve the experience of both the drivers and passengers. Apart from that, Grabtaxi also offers flexible payment options and allows both cash and credit card payments. All these factors help in improving the passenger comfort and safety which enables building up loyal customer base. Grab has also adopted a strategy to tap into the large customer base. Grabtaxi has an advantage over its competitors regarding successfully tapping into the vast pool of consumers with almost 3.8 million downloads and average users of 620,000 per month with a presence in 6 major Southeast Asian countries. For maximising its current customer base, Grabtaxi has also integrated Grabcar with its existing application.

The third strategy adopted by Grab is to cater to the individual needs. That provides a wide range of services like that of provisioning different category of vehicles to the passengers for satisfying their requirements. Grab offers premium segment cars to budget-conscious passenger cars as an option for its customers which help it to satisfy the demands of a large customer base. The fourth and the most critical strategy of Grab is to develop a better understanding of the market. Due to the unique position of Grab in the Southeast Asian region, it has a much deeper understanding regarding the strategies and the services that could work in the region. This has enabled it to attract significant investment organisations like that of Softbank corporation among others to invest almost $250 million. Due to the extensive knowledge of the Southeast Asian market, Grab has been successful in launching effective marketing campaigns and has also established a partnership with several other consumer brands to offer a wide range of services. The ability of Grab to understand and interpret the Southeast Asian market has allowed the company to hire local talent who are successful in understanding the nuances of the market.

Organizational Structure

The organisational structure could be explained as a hierarchical arrangement within the organisation that provides an outline of the “authority, responsibilities and roles apart from their coordination, control and information flow.” The organisational structure of Grab adopts a Framework which helps in developing an environment where there is sufficient degree of autonomy, accountability and also innovation. In the decentralised organisational structure adopted by Grab the power of making a decision is distributed across different management segments instead of remaining with the owners.

Due to the nature of the organisation and its operations in multiple countries, Grab has mainly adopted the decentralised organisational structure. In specific, the company has gone a step further by developing a decentralised autonomous organisation. In the decentralised autonomous organisations there is a vast number of systems which adapts itself to the needs of the consumers, monitors the spending and the preference of the consumers and also "disperses the profit without needing establishing a centralised oversight". For active operations of the organisational structure Grab mainly relies upon block chain technology that enables all its systems to function smoothly and independently without having centralised management. This system has adopted a mechanism that can develop feedback loops regarding the preferences of the users which enables it to adapt its products, services and also make changes in the system rules as per their needs. By adopting such technologies, it is possible for the organisation also to ensure the privacy of the users since no centralised authority required to have their information. These technologies help the organisation to adapt and maintain an electronic record of the customer data and transactions that do not require centralised accounting procedures. It also helps your organisation to distribute the prophets to the users through the network instead of a centralised hub.

Responsibility Centers

The management accounting system provides support for the creation of an efficient decentralised approach in the development of responsibility centres. The responsibility centres generally function as the decentralised units whereby management are accountable and also have the responsibilities for particular operations. In the case of Grab, the profit centres are mainly utilised for the effective management of the organisation is to provide the responsibility for the cost and the revenue generated from the work units. For example Tarin Thaniyavarn has been made the country head of Thailand operations, similarly Adelene Foo has been made the head of the Grab Express, there are also other senior managers and executives who are provided with the responsibility to head their portfolios and are responsible for the costs and the revenues that are generated from those platforms and activities.

Environmental Responsibility

According to Schaper (2002), the organisations aim to become environmentally friendly by decreasing their emission levels or by reducing the damage that is caused to the environment from their operations. Further Ballantyne & Gerber (1994), highlighted that environmental responsibility is a collective responsibility that requires an upload from the society, the organisation and the government.

According to Das (2006), for implementing the environmental responsibility initiatives among the organisations the first by the size of the organisation, the organisational culture and the industry in which the organisation is operating. Although there is a perception that using the ride-sharing applications leads to rising in the number of people using cars and reduces the number of cars, it helps in decongesting the roads and hence less pollution is created in the environment. However, in reality, due to the advent of smartphone applications and the development of ride-sharing apps, getting a car ride has become so convenient and cheap that in several cities number of people are travelling more frequently in cars and there are a fewer number of people using public transport. Hence this increases congestion on roads and raises the pollution levels. Hence ride-sharing companies like that of Grab are investing in buying carbon offsets for all its rides. The carbon offsets are an essential method for reducing the emission that can otherwise become an economic or impractical and good. I also reach the point of impossibility. The money which is spent on the carbon offsets are utilised for various renewable energy projects like that of establishing biomass plant or wind farms, or it could also be used for regrowing forests.

Performance Measurement System and Rewards

Measuring the performance of the executives and employees is one of the most critical factors for effective organisation management. The general business organisation measures the performance of the employees by assessing the contribution that the employee is making towards the growth of a firm and thus affecting the executives remunerations accordingly based on that. Due to the hypercompetitive culture of Grab taxi, the company has adopted an incentive system whereby drivers would get a bonus monetary amount for completing a target number of trips.

Recommendations

The performance measurement system adopted by Grab mainly influence the achievement of financial and nonfinancial targets, and there is a necessity to update into also take into consideration the environmental responsibility targets. This is due to the fact that Grab has acknowledge the importance of sustainable business operations thereby business organizations have the responsibility to develop a sustainable future since the environmental responsibilities are also related to cost Savings and provides a competitive edge, establishing target for the management can also help in improving the performance of Grab while also minimizing any damage to the environment.

Conclusion

It can be concluded that the MAS enables Grab to gather and also dissipate the critical and necessary information that can help in the implementation of the strategic framework of Grab in order to achieve its objectives of maximising the returns to its shareholders. With the help of decentralised and autonomous organisational structure, the organisation can successfully manage its different operations in multiple countries which have a high degree of autonomy and responsibility and makes it easier to monitor and flexible enough quickly adapt to the consumer needs. The flexibility of the organisational structure and due to its free data collection and analysis helps it to become “hyperlocal” in its service offerings.