Two inventions lie at the center of Uber's early achievement. The first involves superior consumer experience, facilitated by a smartphone app. Customers order a taxi and settle the charges smoothly through their smartphones. Ordering a cab through a smartphone creates a powerful experience (Shtal et al., 2018). The second novelty involves a grading system for taxi drivers. Consumers rate the services from the drivers in Uber's app, and car drivers with a rank below a specific level get removed from the system. The rating system ensures quality assurance on a level that initially missed in the regular taxi business.
While these improvements gave Uber a market advantage, they can get replicated and deny the company a competitive advantage (Shtal et al., 2018). Uber faces competition from other companies, such as Gett, Lyft, mytaxi, and Didi Chuxing, to local firms like Didi Austin in Austin, Texas. From emerging companies like Singapore-based Grab in the industry, Uber faces a myriad of challenges in ensuring its business remains sustainable in the future. The purpose of this paper involves an examination of Uber's competitive advantage using two competitive analysis tools and assessing two of its competitors.
Uber's Use of Information Systems
Uber uses advanced information systems in its business model, which has progressed rapidly since its inception. Uber began as a simple app that connected passengers with taxi drivers (Ojo, 2017). The simple app has advanced a lot and incorporated more features to enable users' undertaking simpler. Consumers can rate their experiences of the ride and give feedback for the firm. The essential technology allows the company to offer better payment to its drivers. The information systems that the company employs ensures better cost management. Passengers can book a taxi with a single tap on their smartphones, enabling them to solve the trouble of having to search for a cab manually (Ojo, 2017). Besides, the technology allows users to make cashless payments. The app consists of safety features that inform relatives and friends of passengers about their location.
Therefore, the information system deployed by Uber acts as a source of competitive advantage and remains an essential aspect of Uber's success. While the information system has enhanced the company's services through the opportuneness it gives, it has generated new prospects for millions of motorists around the world. The system's effectiveness makes the company remain productive in its commercial model (Ojo, 2017). The firm has commenced investment in urban air transport and self-driving technology. Uber has substantial data of its drivers; therefore, immediately a passenger orders a taxi, Uber's algorithm identifies a driver within 15 seconds. It then matches the closest driver to the passenger. The information system stores data about every ride taken plus when the driver has n passenger. This information gets kept and weighted to envisage prices and supply and demand. Besides, the report helps the company analyze how transportation gets managed in various cities. It makes the company regulate traffic jams and other primary challenges (Ojo, 2017). Also, the technology collects data on its drivers, their vehicle, and location. The firm also screens the speed and acceleration of drivers' cars.
Porter's Five Forces Analysis on Uber
Uber operates in several nations across the globe, and its competitors may differ in various countries. There exists stiff competition in many and significant markets, such as the United States, where the company faces competition from providers like Lyft (Dawes, 2016). The business strategy for Lyft seems almost similar to that of Uber regarding technology. Other competitors include Didi Chuxing, Curb, Ola, and Grab, and much more. However, in markets, such as the Middle East and Asia, Uber encounters a direct and aggressive competition with Careem, which runs its operations in a similar business approach to Uber employing the same information system (Dawes, 2016). Besides, the company remains widespread in the region. These challengers compete on varied factors, such as price, customer contentment, reliability, and comfort. The industry rivalry for Uber remains relatively high.
The Threat of New Entrants
The business strategy employed by Uber remains economical and easy to implement. The model relies on the idea that individuals who desire to work for Uber as taxi drivers take their cars, have the vehicle registered, and begin working for the firm at flexible hours. In case a new company wishes to move in the industry with the same business approach, the expenses and hurdles to entry remain relatively low (Teo et al., 2018). Moreover, people have the desire for suitable ways of transportation, which ensures the market remains attractive. The technology used by Uber can also get imitated easily, posing a high threat of new entrants into the taxi sector.
Threat of Substitutes
The substitutes for the firm do not remain only as those in direct competition with it and can use the same app and those in indirect competition. Other taxi companies that offer other forms of technology remain indirect competitors of Uber and can get categorized as substitutes (Teo et al., 2018). Different types of public transport employing the same or various technology to Uber can also get classified as its substitutes and remain a threat to the company's commercial deals and market share. These substitutes remain a significant threat to Uber's commercial dealings globally as the other domestic providers can get used by passengers and reduce Uber's revenues.
Bargaining Power of Suppliers
Uber does not possess any of the cars doing business in its name; it relies on its suppliers, the drivers for their vehicles. The company outsources its cabs and the services of drivers giving the suppliers an added advantage. Therefore, the suppliers of Uber have higher bargaining power. Companies making apps for transport companies continue to grow, making supplying companies to have the power of bargaining due to the quality of their apps (Teo et al., 2018). Also, Uber has to handle the suppliers that it outsources since, in case of unprecedented occurrences, it directly impacts the company's brand name and image.
Bargaining Power of Buyers
Consumers of services offered by Uber remain seasonal unless they become highly trustworthy to the firm because of their quality services or any other factors. With alternatives available within the sector, customers have an extra advantage as they can choose from various available options (Teo et al., 2018). The shifting expense in the market environs remains low, enabling passengers the autonomy to select other alternatives. Besides, Uber customers remain intensely sensitive to prices, thus lowering the company's bargaining power and other transport providers. Regarding information system, there exist several apps that buyers can choose from, making the Uber app to remain disadvantaged (Teo et al., 2018). The buyers, therefore, have high bargaining power.
PESTLE Analysis of Uber
Federal and state governments across the globe have no clear understanding of the Uber model, hence making it unable to regulate its operations. The Transportation Network Companies (TNCs) regulations remain unclear and hence get flouted severally (Wyman, 2017). In urban areas that oppose the company's activities, it always resorts to local lobby groups to advocate for an amendment to the regulations. There remains a necessity to reconsider the TNC's regulatory requirements to align with the emerging business models and predetermined structures.
Besides, security breaches associated with government policies remain a challenge for Uber since the drivers remain non-employees of Uber, only having a contract with the company (Alemi et al., 2019). The contract strategy makes the company unable to control such drivers. Uber, therefore, bypasses specific government laws due to the contract nature it has with its drivers. The European Court of Justice gave a verdict that Uber remains a transport company and not an information technology service provider. The rivalry between Uber, Lift, and other providers has attracted political heat in the transport industry.
Uber has a dynamic pricing model that entailed different costs for the same ride, depending on various aspects like peak hours and car drivers' availability. The pricing model remains economically sustainable as it has more advantages over the fixed price (Wyman, 2017). The new pricing model enables the drivers to offer flexible services to passengers in peak and unfavorable times. Uber has created an immense competition that concerns the customary transport providers and its immediate rivals like Lyft and Grab (Alemi et al., 2019). Uber has witnessed rapid growth in the face of extreme competition founded on low prices and increased customer satisfaction.
The business model of Uber allows for workforce diversity as drivers remains freelancers. Uber also provides multinational operations with economical prices and reliable services (Wyman, 2017). Besides, the company offers flexible services during a crisis and work ethics. However, the company has encountered several controversies linked to competition, human resources, laws, and background checks of its drivers. Its social image and brand have enabled it to outsmart its significant competitors like Lyft and Grab.
The advancement of internet technology penetration and growing smartphone users have enhanced the Uber business model. The introduction of self-driving vehicles and independent cars in the future will enhance Uber's trade (Wyman, 2017). Uber has increased its sales through customer engagement via social media platforms. Uber increased its market share due to its excellent apps that offer both seamless access and appropriate experience for both riders and drivers.
Uber Company has had to battle numerous lawsuits in various countries worldwide concerning its operations like taxes and human resource issues. Uber faced legal issues concerning minimum wages from its two drivers. In 2015, California state transport regulators ordered that Uber incorporate its drivers as staff and not contractors (Alemi et al., 2019). France also charged Uber with unlawful driving without proper licenses. Besides, Uber fought legal battles with other firms.
Uber pool provides environmentally friendly programs in different countries across the globe. Sustainability issues have grown about ride-sharing provisions like Uber, Lyft, and Grab (Wyman, 2017). Uber initiated a pilot program named Uber Green, where passengers can order a green drive.
Comparison between Uber, Grab, Lyft, and Local Taxis
Ridesharing apps like Uber, Lyft, and Grab enhance the rider's experience than local taxis because they continue to remain easy to use, offer upfront pricing, and gives a detailed GPS direction. Moreover, they provide trust and safety of travel, includes accessibility alternatives, and remain highly reliable than local taxis (Wyman, 2017). The ride-sharing apps like Uber, Lyft, and Grab remain cheaper for passengers traveling to the airport, longer trips, and fares over $35, and regional services out of city centers. Also, UberPool and UberX remain considerably cheaper than the prices of GrabBike, LyftLine, and local taxis. UberPool and LiftLine help riders split the cost of driving from their carpooling options when traveling to airports. UberX helps consumers evade high pricing on luxury or gigantic cars.
From the analysis models used in this paper, Porter's Five Forces gave a precise modern competitive posture of Uber. It...
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