This is the detailed Porter’s five forces mode of Uber which has been operating in Transport industry. It’s operating in more than 600 cities and having employees strength of 1200 around the globe.
Uber is a company that is headquartered in the United States and has its operations worldwide. It deals with developing, marketing and operating car transportation service and other than that they have their own food delivery apps as well. However, their main domain is the car transportation service that operates through an app designed to locate any person’s location and then connect them to their cars that can take them to any place they want. Another important aspect is that Uber is cheaper than other transport services in most of the countries, which gives it a competitive edge.
Applying the Porter’s five forces model, we will see how these external forces act on Uber and define its position and competitiveness in the market.
Industry Rivalry
Uber operates in many countries worldwide and their competitors might be different in different countries. But generally we can see intense competition in most of the markets and in most of the major markets for Uber, including the United States, Uber faces competition with services like Lyft, whose business model is almost the same as Uber and gives a tough competition to Uber in terms of market share. Other competitors include Curb, Didi Chuxing, Grab, Ola and much more. However, in markets like the Middle East and Asia, Uber faces a direct and fierce competition with Careem, which operates on the same business model and is very popular in these regions. These competitors compete on different aspects like customer service, price, convenience, comfort, and reliability. So if we see the overall competition that Uber is facing in its industry, the industry rivalry is very high.
Threat of New Entrants
The kind of business model on which Uber is operating at the moment does not take a lot of effort or cost to build. This kind of business operates on the concept that people, who want to work as their drivers can just bring their own cars, get it registered and work for Uber at flexible hours. So if any new company wants to enter the industry with a similar business model, the costs and barriers to entry are low. Also, people are now looking for convenient ways of traveling which makes this market attractive. Thus, there is a high threat of new entrants into this industry.
Threat of Substitutes
The substitutes for Uber are not only those in that are in direct competition with it; companies that are based on the same business model and provides same convenience and price to the customers, but also those companies that are in indirect competition with Uber. Other taxi companies that provide convenient transport are also in indirect competition with Uber and can be considered its substitutes. Along with these companies, other kinds of public transport are also considered substitutes for Uber and are a threat to its sales and market share. These substitutes are a big threat to Uber’s operations throughout the world as the other local services can be used by customers which can eventually drive sales away from Uber.
Bargaining Power of Suppliers
Since Uber does not own any of the vehicles operating in its name, it is dependent on its supplier i.e drivers for their cars. Uber outsources their cars and the driver’s services which give the suppliers an upper hand on Uber. Thus the suppliers in case of Uber have a high bargaining power. Moreover, Uber has also had to take care of the suppliers that it is outsourcing because if anything bad happens, it directly affects Uber’s name and brand image of Uber.
Bargaining power of Buyers
The buyers of Uber are not permanent unless they become very loyal to the company because of their services or any other reason. With so many options available in the industry to choose from, customers have an upper hand as they can shift from one service to another. The shifting cost in the market is also low, thus giving the customers the freedom to shift easily to another service because of any reason. Moreover, most of the customers of Uber are price sensitive, thus leaving Uber and other services at a disadvantage as they have to compete on the basis of price. We can conclude that the buyers in case of Uber have a high bargaining power.
References
How Uber Works: Insights into Business & Revenue Model. (2016, April 19). Retrieved July 15, 2017, from http://nextjuggernaut.com/blog/how-uber-works-business-model-revenue-uber-insights/
Johnson, M. (2017, July 15). Who Are Uber’s Biggest Competitors? Retrieved July 15, 2017, from https://www.zacks.com/stock/news/263249/who-are-ubers-biggest-competitors
Khanna, D. (1970, January 1). Strategy Development. Retrieved July 15, 2017, from http://strategyatheinz.blogspot.com/2015/03/the-competitive-environment-of.html