Introduction
Analysis of competing forces is necessary for evaluating the company’s activities, understanding its dynamics, and outlining ways of improvement and further development. Porter’s Five Forces Model is one of the immaculate frameworks for such an analysis. This model offers a comprehensive study of the leading forces that affect the competitiveness and stability of the company in the market. These include threats of new competitors, supplier and buyer power, threat of substitutes, and competitive rivalry. This paper uses Porter’s Five Forces Model to analyze the ride-sharing industry on the specific example of Uber Technologies Inc. By examining the above company strengths, this essay explores the strengths, development opportunities, challenges Uber faces, and its position in the competitive market.
Threat of New Competitors
Despite its popularity in the modern world, the ride-sharing industry has few entry barriers compared to other areas. Thus, it becomes an attractive business opportunity, and therefore, there is a significant threat of an influx of competitors. Consequently, the company can firmly stand in the leading positions by having a robust and technologically convenient platform and gaining customer trust (Bhappu et al., 2022). Uber, having developed an extensive network of drivers and attracting sufficient resources to its activities, creates competition in the market for other participants in this sector and makes their entry into the industry challenging. In addition, the entry of new competitors may also be limited by certain legal aspects in different countries.
Supplier Power
Speaking of Uber, it is worth noting that drivers providing ride-sharing services are considered suppliers in this context. Thus, the company depends on individual members who provide their labor and transportation. Although drivers are not company employees and theoretically have the opportunity to work on other ride-sharing platforms, the requirements and payment of work in Uber reduce the possibility of this option to a minimum (University of New Mexico). Moreover, the company introduced promotional activities that, to some extent, reduced the bargaining power of suppliers (University of New Mexico). Based on this, drivers have specific bargaining power, but brand recognition and decent pay make Uber a desirable workplace.
Buyer Power
Buyers, who are passengers using ride-sharing services, have relatively high bargaining power due to the availability of various services on the market. Moreover, they can seamlessly compare and switch between platforms according to price and convenience. Contrary to this trend, Uber offers comfort and high-quality service, which gives the company a competitive advantage (Deakin et al., 2020). Thus, even though buyers have specific bargaining power, it is limited to the company’s advantages against competitors’ backgrounds, especially in regions with a dominant presence. It is worth noting that the bargaining power of customers may increase with the further emergence of similar competing platforms that will offer high-quality service and convenient platform use.
Threat of Substitutes
Analyzing the activity of the Uber company, it is worth noting that the threat of substitutes for its services is moderate. On the one hand, traditional taxi services can be considered substitutes for services provided by Uber. However, on the other hand, taxis offer less convenience and pricing flexibility than the easy use of the platform. If it concerns other ride-sharing companies operating on platforms such as Lyft, they pose a significant threat (University of New Mexico). Such platforms offer similar services and are direct competitors of Uber.
The positive aspect of this trend is that competing companies improve their services and pricing policies, giving customers better offers and developing in the market. In addition, the ride-sharing industry’s rapid development can undermine leaders’ authority, increasing competition and the threat of new entrants. Thus, constant competition between businesses in the same industry can be seen as an advantage for consumers but a disadvantage for companies. Although the need to outperform competitors to stay ahead of the market is exhausting, it gives company management insights into possible strengths and weaknesses.
Competitive Rivalry
The threat of substitutes is inextricably linked to the intensity of competitive rivalry, as some indicators affect others. The ride-sharing industry is quite competitive, as many participants compete for the market’s largest share. Thus, Uber’s competitors are taxi and rental car services, trains and buses, and services that operate on the same platforms, such as Lyft, Sidecar, and Curb (University of New Mexico). Competition is based on several factors, including pricing policy, list of services, technological convenience of the platform, availability of drivers, and geographic coverage. Since different representatives of this industry do not significantly differentiate prices, riders can easily replace one with another. However, Uber’s recognition and popularity give the company a lasting advantage in the market.
Conclusion
Applying Porter’s Five Forces Model to analyze Uber’s position among competitors provided significant insights into the challenges and prospects for the company’s development. Thanks to this model, this paper investigated supplier power, buyer power, competitive rivalry, the threat of new entrants, and the threat of substitutes in Uber’s activities. Thus, the ride-sharing industry is highly competitive and rapidly developing, characterized by the emergence of rivals operating on platforms. However, Uber successfully maintains a leading position thanks to brand recognition, the technological convenience of the platform, and a high level of service. By identifying and analyzing the company’s competing forces, Uber can successfully adapt to changes in the market and plan future strategies.
References
Bhappu, A. D., Lempiälä, T., & Yeo, M. L. (2022). Platform service designs: A comparative case analysis of technology features, affordances, and constraints for ridesharing. Digital, 2(2), 320-332. Web.
Deakin, E., Halpern, J., & Parker, M. (2020). Examining the potential for Uber and Lyft to be included in subsidized mobility programs targeted to seniors, low-income adults, and people with disabilities. UC Office of the President: University of California Institute of Transportation Studies. Web.
University of New Mexico. Uber Technologies Inc.: Managing opportunities and challenges [PDF document]. Web.