Uber Porters Five Forces Analysis
Understanding Uber’s network and potential growth demands for a Porters five forces analysis. Uber is extending its operations to various cities in the world. This ensures a massive expansion and better ride sharing services that enhance customer loyalty. However, Uber faces huge competition from competitors like Lyft and SideCar (Adamkasi, 2017).
The threat of potential market entrants
Uber does not have protection from new ride sharing companies that unfairly charge a lesser price for a similar distance. Besides, Uber gives its application software to customers freely, and the services can be switched at zero cost. Furthermore, Uber is not immune to increasing rates, making it easier for other companies to penetrate the sector. This is a strong force that determines Ubers survival in the sector.
Bargaining Power of suppliers
Uber does not own cars. Instead, its model depends on the drivers and partners who own cars. Uber uses an outsourcing strategy for its labour and assets to people who meet its terms and conditions. this makes it hard for Uber to substitute drivers. Therefore, car owners can choose between the company and its competitors and negotiate for better rates (Ng, 2016). Therefore, suppliers significantly influence Uber’s performance. This makes the bargaining power for Uber moderate.
Bargaining power of Buyers
Customers don’t necessarily require Uber services regularly. They only need the services during specific situations like a scheduled event, lateness for work, and emergencies. Besides, customers can freely choose between Uber, Lyft, and other competitors (Adamkasi, 2017). Therefore, the switching cost is low since Uber’s free app only requires customer registration. Also, Uber’s customers aver very sensitive to price changes due to the presence of cheaper competitors. Therefore, buyer power limits the amount of revenue for the firm making it a strong force.
The threat of substitutes
Various companies can substitute Uber. Taxi services the closest potential substitute. The traditional service also provides ride-sharing operations in cities like New York. These substitutes are enough to restrict Uber from increasing their service rates. Therefore, any slight increase in the rates will lead to the customers going for close rivals. Besides, public transport provides similar services at a cheaper rate (Adamkasi, 2017). This threatens Uber’s existence and operations. Therefore a continuous threat of substitutes is a weak force for Uber.
Rivalry with other Competitors
The transport industry has a lot of competing entities. Lyft is one of the closest Uber competitors. Lyft has a business model and operations that are close to Uber’s. The two companies compete for both suppliers and market share. However, Uber has a wee established network with higher capital investment. Being a market leader, Uber is a dominant force in the industry (Ng, 2016). However, there are insignificant differentiation strategies that limit the company’s potential. Given Uber’s dominance, competition is a weaker force. To survive competition, Uber needs to lower its operating cost and avoid increasing consumer charges.
References
Adamkasi. (2017). Porter’s Five Forces Model of Uber. Retrieved from https://www.porteranalysis.com/porters-five-forces-model-of-uber/
Ng, S. (2016). Uber Technologies Inc. as a Disruptive Innovation.