A discussion of Porter’s Generic and Intensive Strategies used by Uber
Uber is now a well known name in most corners of the world. The fast and sharp rise of the ride sharing services provider is a testimony to the fact that technology has kept disrupting the norms like nothing else. Its growth came at the cost of other taxi service brands. However, that was bound to happen. Businesses that believe their traditional domains are never going to slip from their hands can fall victims to innovation. Uber used an innovative business model based on technology and networking to grab a large market share in a very short period of time. The result has been that the business made billions in a very short period of time. There were several holes in the taxi industry which allowed Uber to jump in and by filling these gaps in service quality and pricing strategy, Uber made it to the top in nearly no time.
This article presents an analysis of the generic and intensive strategies used by Uber to build competitive advantage and find market growth and expand its brands. Michael E Porter has highlighted three key generic strategies that the brands can use to build a source of sustainable competitive advantage. These three strategies are cost leadership, differentiation and focus. The third strategy he has subdivided into two categories which are cost focus and differentiation focus. Apart from these generic strategies there are intensive strategies that brands can use to grow their market share and to expand.
Generic Strategies used by Uber:
The generic strategy used by Uber is a mix of cost leadership and technology based differentiation. Unlike other traditional taxi services, Uber takes a very small cut ranging usually between 5 to 20%. It does not hire full time riders or rides but uses the networking effect to grow its number of drivers. Anyone who owns a vehicle and can drive can become a driver for Uber and earn money working part time. So, this allows cost cutting on infrastructure and maintenance. In turn this benefit can be passed to both drivers and rider which allows Uber to charge lower costs and without incurring any financial loss. The drivers are earning extra money and the riders are getting to pay less and have extra convenience. This is how the cost leadership advantage is working in the favour of Uber and has made its popular, particularly in the metropolitan areas. Cost leadership can be a source of sustainable competitive advantage as proved already in the case of Walmart and Costco. It works to retain the popularity of Uber’s services high because everyone wants to save money. Moreover, by adding convenience to the services, the brand has been able to generate higher level of popularity and a better brand image.
Technology based differentiation is also a primary source of competitive advantage for the brand. Technology is the main enabler of its services and plays a central role in its business model. It is the Uber app that connects the riders with the taxi drivers, allows them to pay for the services and rate their ride and convenience. Before the introduction of Uber, booking a taxi ride was not as easy and people had to pay higher while the waiting time for a taxi could also be longer. Now, a ride can be available .within minutes after booking. You click and the nearest available taxi responds. Customer convenience here becomes an important differentiating factor for the brand. Since the level of convenience is higher, .it adds quality to the service and therefore become s a source of competitive advantage for the business. This is how the brand has used a mix of cost leadership and differentiation to build competitive advantage.
Intensive growth strategies adopted by Uber:
There are four intensive growth strategies that the brands can use to grow their market share and to expand their market presence. These strategies are market penetration, market development, product development and diversification. The intensive strategies that Uber has used to grow its market share are market penetration and market development.
Uber started as a simple ride sharing app to connect the taxi drivers with the customers. The additional convenience the app offered made its popularity grow and its customer base grew fast. Low costs and extra convenience helped it build customer loyalty and grow its share after its initial launch in the US market.
Market development involves introduction of the product/service into new markets or regions. As Uber’s brand grew it kept improving its services and adding variety to the kind of services on offer. Now, it is present in 83 countries and across more than 674 cities. However, the markets that constitute the largest share of its customer base and revenues are US, China, Brazil India and Mexico.
This was how Uber acquired competitive advantage and grew into a global brand using the above discussed generic and intensive strategies. While the brand has used a mix of cost leadership and technology based differentiation to build competitive advantage, it has grown its market and market share using the intensive strategies of market penetration and market development.
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