Understanding the network of
potential growth and attractiveness in the US Porter ’s five forces analysis.
Uber is a growing transportation firm with a commanding presence in New York
A Threat of Potential Market
Entrants
Uber lacks protection from new
ride-sharing firms that can unfairly charge less for the same distance. At the
time of its establishment, Uber's co-founders parted with a sizeable amount of
capital. On the other hand, upcoming rivals are expected to lesser initial
capital to jumpstart their operations. Uber's policy is to offer their application
software for free to willing customers. The services can be switched at zero
cost. As the need to offset cost becomes imminent, Uber is not immune to
raising rates, hence making it easier for other firms to penetrate the
industry. This is a strong force because it determines the firm's survival in
the sector.
Supplier Bargaining Power
Uber owns no vehicle among its
fleets. As such, the company’s business model is highly dependent on drivers
and partners owning their own rides. In fact, Uber utilizes an outsourcing
strategy for its labor and assets to persons that meet the terms and conditions
for use of their maiden web application. It is also hard to substitute
particular drivers. Car owners are accorded the freedom to choose between the
organization and rivals thus can negotiate for a better attention to the
company’s expense. Therefore, it is undeniable that the suppliers have an upper
hand in impacting Uber’s performance. As compared to other porter’s forces,
Supplier bargaining power is moderate in Uber’s case.
Buyer Bargaining Power
Customers do not necessarily require
Uber services on a regular basis. In fact, only specific circumstances like
lateness for work or a scheduled event make the customers to order its
services. Customers can freely choose between Uber, Lyft, or other emerging
ride-sharing entities. The switching cost is also lower for customers because
Uber’s free application software only demands customer registration. Uber’s
customers are sensitive to price changes given the presence of substitutes and
competitors (Casadesus-Masanell, Makenzie &
Didiomov, 2015). In light of these factors, the buyers’ immense power
can limit the amount of revenue for the company, hence solidifying it as a
strong force.
The threat of Substitutes
A Substitute is a common force in
competitive business environments. Network Transportation Industry is an
umbrella body that numerous member organizations that can substitute Uber. Taxi
services, for instance, is the closest rival and a potential substitute. Taxi
service is traditional to cities with ride-sharing operations like New York
Rivalry with other Competitors
Lyft is one of the major competitors
of Uber. The company has an almost identical business model and operations. Not
only are the two firms competing for market share but also the suppliers. A modern
business environment demands corporations to target a customer base within a
given geographical locations to cut on the operation cost. This is the case for
Lyft and Uber (Casadesus-Masanell, Makenzie &
Didiomov, 2015). Uber has a well-established business network and large
capital investment. In essence, it is a market leader, but insignificant
differentiation strategies limit the firm’s potential. Competition is a weaker
force given Uber’s dominance.
Uber is indeed a dorminant force in
the ride-sharing industry. However, there is a need for advancement of its
innovation strategies to gain a competitive advantage. Transport industry in
the United States
References
Casadesus-Masanell,
R., Makenzie, I. , & Didiomov, D. (2015). Uber
and the Taxi Industry (pp. 1-12). Massachusetts Harvard Business School.Print.
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