Uber’s value chain is different thanconventional competitors in that it is a peer-to-peer business model.
Uber usedtechnology to connect those searching for a ride with drivers who were willingto give a ride for a fee. Rather than having to call for a taxi or hail one onthe street, Uber allows riders to use an application on their smartphone toquickly connect with drivers in their area. In this sense, Uber’s client or customer isboth a driver and a rider. They deliver value for both of these stakeholders. Also, as aTechnology driven service, Uber allows customers to have enough informationabout their drivers (picture, names, etc.), the car model and most importantlythe cost of the ride before the trip takes place. Considering Porter’s ValueChain, the advantages Uber enjoys over their competitors are obvious. The valuethat is created and captured by retaining ‘private contractors’ rather than traditional employees far exceeds the costs of creatingthis value.
The competitive advantage allowsUber to provide customers greater pricing options than their rivals. What strategy is thiscompany using to gain a competitive advantage over its traditional competitors? Uber relies on its application technology to gain acompetitive advantage over its traditional competitors. A ride with Uber isusually faster and more reliable than a traditional taxi. In addition, no cashis exchanged and the transaction between the rider and driver is conductedthrough the app.
Uber drivers also do not need to maintain a taxi licenceso there are fewer economic regulations than traditional taxi drivers face. Also, Uberintroduced a new service called “UberEATS” into the market in 2014. Thisinnovative idea extends the company’s services from just providingtransportation to food delivery. This service allows customers to easily ordertheir meals through the application UberEATS. This sets them apart from competitorsand gives them a competitive advantage. Moreover, Uber hasalso gained a competitive advantage through its branding; Uber services aredesigned to attract people in this technology oriented generation such that itsfully automated ordering services (Self Service) are considered “cooler” andappealing. This sets them apart from the companies employing traditionalmethods.
No overhead – small HR, no maintenance of equipment, small workforce (few benefits, insurance, inventory, management). Customer doesn’t demand more from Uber. If a car isn’t available, they get mad at the local driver, not the brand. Market (generally) sets a profit maximizing price.
Negative: low barriers to entry for competitors. Do traditional strategiesapply when disruptive technologies are introduced into an industry? No, the traditional strategies will nolonger apply when disruptive technologies are introduced into an industry. Companieswhich introduce disruptive technologies into a market usually tend to overtakethe existing market eventually. As such, it becomes necessary for companiesutilizing traditional methods to evolve technologically in order to be able tocompete. Consequently, the traditional strategies tend not to be veryapplicable in said markets since they ultimately become ineffective in customerretention and in the provision of their goods and services. The emergence ofUber in the transportation industry with their technology inclined servicesresulted in a shift in customer preference to their application based servicesand as such Taxi companies which employed the traditional strategies may losecustomers since their strategies tend not to be very applicable in thistechnology age.
A better question: will traditional companies survive when these innovative technologies arrive? Some strategies/models will hold true, but many will not apply. Again, the challenge is on the competitors to adapt.