The need for affordable and effective transportation is increasingly rising. In the United States, the growth of taxis has increased over the past few decades, becoming a vastly growing business opportunity. As the industry grows due to demand from its customers, technological advancement does not lag. Taxi transportation has now grown to a digital era relying on information systems for its potential customer's location and market predictions. All transactions are made through an integrated app that serves its customers and management. Due to the efficiency and effectiveness of the information technology used in Uber, the business has gained popularity throughout the US and the other countries. The paper investigates the competitive advantage strategies employed by Uber to stay ahead of its competitors through an in-depth analysis of the various industry competitive models.
Porter's Five Forces Analysis on Uber
Industry Rivalry Competitiveness
The increase of large emerging similar companies such as Lift and local taxi located in some major towns such as San Francisco creates a highly competitive environment for the industry. Both local and international transportation is getting diffused with other emerging companies creating a low business expansion room. However, the industry carries out customer data tracking, making it stay ahead of its competitors ("Competitive Forces (Porter's Five Forces)," 2019).
New Entrant's Threat
The company may not enjoy profits for a long period due to emerging new entrance to the market by other competitive companies. Service delivery cost is constantly negatively affected due to the presence of the same services being supplied within the companies. The new emerging companies may pose a threat in terms of service delivery. However, the company enjoys economies of scale hence growing faster compared to emerging companies (Cramer & Krueger, 2016).
Goods and Services Substitute Threat
The stability of the Uber company is constantly affected by the growth of public transportation means causing a constant niche for profitability. The use of public transportation is growing to become a major threat to transport substitution. Unlike companies such as Uber and its competitors, public transportation offers affordable, cheaper transportation means. The availability of local taxi causes a direct threat to the company due to its convenience and affordable service delivery (Grundy, 2006).
Buyers Bargaining Power
There is a discourse in terms of decision making by the key decision-maker in the corporate domain lowering the bargaining power. The number of customers who are loyal to Uber services is considerably low, making it difficult to switch. The presence of tertiary services in the industry by corporates, such as accommodation, has a direct influence on the pricing tags.
Bargaining Power of Suppliers-High Pressure
The major suppliers in the transport network consist of fuel, car dealers, and drivers. The bargaining power of the car dealers is considerably low due to the presence of multiple suppliers for Uber cabs. The fuel suppliers also have low bargaining power due to the presence of multiple sources of fuel in the country.
Uber SWOT Analysis
Large Ride-sharing Technology – over the years, Uber has been branded the largest ride-sharing technology globally. Its scalability in terms of an easy to interact app makes it the best ride-sharing company in the world. The company also has established brand recognition. Uber brand has remained famous across the world, unlike its competitors, who are struggling to sell their brand, making its services to be more trusted by its potential customers. Due to its growing new feature integration, the company value rose to 72 billion dollars in 2018 (Raghuram, 2015).
Significant losses- the company has been making substantial losses despite its increased revenue generation. Since 2009, the company has increasingly been experiencing significant losses. Its emerging competitors, such as Local taxi and Lift, has realized this weakness and constantly increase their service delivery strategies to take the lead. As a result, Uber has been giving discounts and bonuses to its drivers and customers to regain its position. According to 2016 statistics, Uber's net loss hit 2.75 billion dollars (Raghuram, 2015).
Performance and accountability- the customer's taste and preferences make the company get a lead in the market. Customers always look forward to organized cab services to be impressed. The company can significantly improve its services through accountability and performance. The company can also identify its top-performing drivers by tracking down driver's activity. The company can also improve on reportedly cases of driver misconduct reported through strict rules being put in place ("Uber SWOT Analysis 2019 | SWOT analysis of Uber," 2019).
Employee and customer retention – due to the rise of competitors, it can be challenging for Uber Company to retain its employees and customers. There are constants dynamics in the transportation field. The company competitors such as Lift and local taxi may offer a competitive price stealing most of its loyal customers and employees. The company also faces regular lawsuits. There is an increasing number of employees filing lawsuits against Uber for low wage policy claims. ("Uber SWOT Analysis 2019 | SWOT analysis of Uber," 2019).
Uber Company is increasingly gaining competition from its competitors. However, due to the nature of the transportation business, its competitive stand is at the lead. The company's strategic plan through customer data gathering makes it easier to formulate new service delivery means. However, the emergent of new companies in the transport industry has continuously crippled the company's net profit for the last few years. Therefore, it must formulate better competitive ideas to outcompete any threat posed by vast growing competitors, such as the introduction of autonomous vehicles.
Competitive forces (Porter's Five Forces). (2019). Dictionary of Strategy: Strategic Management A-Z. https://doi.org/10.4135/9781452229805.n131
Uber SWOT analysis 2019 | SWOT analysis of Uber. (2019, November 9). Business Strategy Hub. https://bstrategyhub.com/swot-analysis-of-uber-2019-uber-swot-analysis/
Raghuram, G. (2015). Delhi transport department: Case of uber taxi rape. Indian Institute of Management, Ahmedabad. http://sk.sagepub.com/cases/delhi-transport-department-case-of-uber-taxi-rape.
Cramer, J., & Krueger, A. B. (2016). Disruptive change in the taxi business: The case of Uber. American Economic Review, 106(5), 177-182. https://doi.org/10.1257/aer.p20161002
Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic Change, 15(5), 213-229. https://onlinelibrary.wiley.com/doi/abs/10.1002/jsc.764casa_token=CwdPxKZwNW0AAAAA:aKBoEBMt6p2CaSKsDh_L4b9u1_TvttquYt_Gw3K6VwTOIfqDIGxblM-qTWnstceEoDUKCn5mMkFNhAaU
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