Uber’s value chain is different than
conventional competitors in that it is a peer-to-peer business model. Uber used
technology to connect those searching for a ride with drivers who were willing
to give a ride for a fee. Rather than having to call for a taxi or hail one on
the street, Uber allows riders to use an application on their smartphone to
quickly connect with drivers in their area.
In this sense, Uber’s client or customer is
both a driver and a rider. They deliver value for both of these stakeholders.
Also, as a
Technology driven service, Uber allows customers to have enough information
about their drivers (picture, names, etc.), the car model and most importantly
the cost of the ride before the trip takes place.
Considering Porter’s Value
Chain, the advantages Uber enjoys over their competitors are obvious. The value
that is created and captured by retaining ‘private contractors’ rather than traditional employees far exceeds the costs of creating
this value. The competitive advantage allows
Uber to provide customers greater pricing options than their rivals.
What strategy is this
company using to gain a competitive advantage over its traditional competitors?
Uber relies on its application technology to gain a
competitive advantage over its traditional competitors. A ride with Uber is
usually faster and more reliable than a traditional taxi. In addition, no cash
is exchanged and the transaction between the rider and driver is conducted
through the app.
Uber drivers also do not need to maintain a taxi licence
so there are fewer economic regulations than traditional taxi drivers face.
introduced a new service called “UberEATS” into the market in 2014. This
innovative idea extends the company’s services from just providing
transportation to food delivery. This service allows customers to easily order
their meals through the application UberEATS. This sets them apart from competitors
and gives them a competitive advantage.
Moreover, Uber has
also gained a competitive advantage through its branding; Uber services are
designed to attract people in this technology oriented generation such that its
fully automated ordering services (Self Service) are considered “cooler” and
appealing. This sets them apart from the companies employing traditional
overhead – small HR, no maintenance of equipment, small workforce (few
benefits, insurance, inventory, management).
doesn’t demand more from Uber. If a car isn’t available, they get mad at
the local driver, not the brand.
(generally) sets a profit maximizing price.
low barriers to entry for competitors.
Do traditional strategies
apply when disruptive technologies are introduced into an industry?
No, the traditional strategies will no
longer apply when disruptive technologies are introduced into an industry. Companies
which introduce disruptive technologies into a market usually tend to overtake
the existing market eventually. As such, it becomes necessary for companies
utilizing traditional methods to evolve technologically in order to be able to
compete. Consequently, the traditional strategies tend not to be very
applicable in said markets since they ultimately become ineffective in customer
retention and in the provision of their goods and services. The emergence of
Uber in the transportation industry with their technology inclined services
resulted in a shift in customer preference to their application based services
and as such Taxi companies which employed the traditional strategies may lose
customers since their strategies tend not to be very applicable in this
A better question:
will traditional companies survive when these innovative technologies
strategies/models will hold true, but many will not apply. Again, the
challenge is on the competitors to adapt.