Grab expansion should focus on only ride-hailing related services

A GrabFood delivery man walking past the company logo in the new Grab office at Marina One West Tower on May 28, 2018.
A GrabFood delivery man walking past the company logo in the new Grab office at Marina One West Tower on May 28, 2018.PHOTO: ST FILE

Grab's every movement could have a significant impact on the economy due to the oligopolistic market it operates in.

As Grab holds a relatively large share of the ride-hailing market, it would have the market dominance to influence the economy.

Hence, Grab's plan in diversifying industries allows for a boost in employment rates, as demonstrated by the 1,000 jobs offered in the technology industry (Grab's headcount to hit 3,000 by next year, March 30).

This increase in the labour force could lead to higher productivity in the economy and, thus, greater potential output.

However, if this is significantly larger than actual output, it may result in a recessionary gap.

Without government intervention, the economy would correct itself to restore equilibrium by increasing actual output.

This will lead to prices falling, resulting in deflation.

While Grab's current direction towards offering numerous services is possibly a sign of its success in becoming a "super-app" - an application combining communication, search, navigation, commerce and payment into a single platform - Grab should take caution in diversifying into the various industries unrelated to the ride-hailing market that it aspires to obtain market power from.

With every service introduced, Grab faces new competitors that have both the focus and resources for their respective industries.

This puts it in a disadvantaged position as it lacks specialisation in these fields upon entry.

Diversifying may cause Grab to lose its comparative advantage in the market as the largest ride-hailing provider in Singapore.

Therefore, while the article acknowledges that Grab's initiatives will boost employment, investment and, in turn, lead to a higher economic growth that will benefit the country, the company should focus on a range of services related to the ride-hailing market, furthering the comparative advantage it may be currently lacking in the Singapore scene.

Isabella Loh Xuan Lin

A version of this article appeared in the print edition of The Straits Times on April 18, 2019, with the headline 'Grab expansion should focus on only ride-hailing related services'. Print Edition | Subscribe