Uber Sources of Competitive Advantage

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  • Post last modified:December 26, 2018

Sources of competitive advantage for Uber (Ride Hailing Service)

Uber

INTRODUCTION :-

Uber has grown fast as a ride sharing company. However, its fast growth is based upon technology and a great business idea that has proved helpful for millions around the world. Uber was founded in 2009 by Travis Kalanick and Garrett Camp.  Dara Kosrowshahi is the current CEO of Uber. The headquarters of Uber are at San Francisco, California. Major US offices of Uber are located at New York City, Chicago, Washington D.C, Seattle, Los Angeles. Apart from them, it has international offices at London, São Paulo, Mexico City and Amsterdam. As of 2017, the company had more than 16000 employees. It has connected more than 75 million riders with more than 3 million drivers. Its vehicles have completed more than 10 billion trips worldwide.

Uber is present in 65 countries and offers its services across around 600 cities. Everyday Uber vehicles complete around 15 million trips. Uber is leading the growth of the sharing economy. It has proved profitable for both the riders and the drivers. Its business model which is based on a simple ride hiring app has proved profitable for the company. Uber is currently valued at $120 Billions by prominent banks. It could be a $120 billion company if it decided to go public. The popularity of Uber and its fast growth is based upon certain factors including technology, rider convenience and marketing. It is leading the taxi industry and has gained an edge over all its rivals. Here, we will discuss these sources of competitive advantage which have helped Uber grow faster than the others.

Technology:-

Technology is at the core of Uber’s business model which has evolved very fast since the company’s foundation. Uber started as a simple app to connect riders with drivers. The simple app has evolved a lot and included a lot more features to make users’ task simpler. You can rate your ride and leave suggestions for the company. The core technology is also the reason that Uber is able to pay its drivers better. It has allowed the business to manage costs better. Today, the companies serving people across 600 cities in 65 countries but with just 16000 employees. Users can book  ride with a single tap and a lot of trouble that was previously involved in getting a taxi is no more there. No need to bargain for price. You already receive greta deals through your app. Riders can make cashless payments through the app. The app has safety features too to inform your loved ones about your location. Thus, technology has proved to be a source of competitive advantage and is at the core of Uber’s fast growth. While, it has popularised the service by the convenience it offers, it has also created new opportunities for millions of drivers around the globe. Its efficiency is the driver of Uber’s profitable business model. The company is also investing in self driving technology and urban air transport.

Global network:-

Uber’s global network is also a source of competitive advantage for the brand. Its main competitors are Lyft and a few other taxi services. However, Uber has the largest global footprint. It is offering its services across 65 countries and 600 cities. It has major offices in key US cities including New York City, Chicago, Washington D.C, Seattle, Los Angeles and in key international locations including London, São Paulo, Mexico City and Amsterdam. It employs only 16,000 around the globe. However, it has connected more than 75 millions riders globally with more than 3 millions drivers. Everyday, around the globe, its vehicles complete around 15 million trips. These stats show that Uber’s international presence is a significant source of competitive advantage for the ride hailing company.

Marketing:-

Uber has not been able to generate its advantage just by relying on technology and media publicity. It grew famous as ride sharing company soon but it also used marketing to grow its services and reach more and more people. However, some sources also say that t in many major markets it has used aggressive marketing techniques to grab a larger market share. Apart from social media, it used other digital channels like advertising for brand promotions. Events are also a key method of promotion for Uber. The company has also used celebrities and free rides to promote its services. However, its user network also proved a major advantage for the company in terms of marketing. Driver to driver and user to user, its network around the world has grown fast. Its rating system is also a marketing tactic that the company has employed successfully. It’s a review system that lets the company market its rides and drivers to new users. Moreover, it works to create trust in Uber’s services. it has also used several types of publicity stunts and partnerships which have worked well in its case.  Another very effective technique of marketing and customer retention is loyalty program. Uber has used  various loyalty programs to retain its existing users and to make its services look more attractive than others.

Customer service:-

A main reason behind the fast growth of Uber is the level of focus it has placed on customer service. Uber has often been praised for its highly customer friendly approach. This is not just about the prices but extends to the convenience of hailing a ride and being connected with best drivers too. Apart from that it listens to customer complaints and has always tried to improve its services. Customers are a central focus in its business model. In this way, Uber has created a system that places high level focus on the users and tries to create the best benefits for them.

Customer loyalty:-

One other major source of competitive advantage for Uber is the kind customer loyalty it has been able to build over time. Every time it releases a new service or benefit, it leaves millions around the globe excited. It has also used a mix of loyalty programs and other different kinds of rewards to build customer loyalty. However, loyalty depends the most on the kind of trust that the users place in Uber. Uber has an attractive rating and review system in place which allows users to rate the quality of ride and the drivers. It helps retain customers and build loyalty. The level of convenience that  Uber offers is also a reason behind its string customer loyalty. Today when Uber’s competitors are doing their best to grab a larger market share, customer loyalty is a strong source of competitive advantage.

Large service range:-

Uber offers a large service range that addresses the needs of several customer segments including the higher end customers who want luxury rides. Apart from individual riders and users, Uber has also brought attractive services for businesses. Its services are not limited to just taxi rides but extend to other areas too including food delivery, health and logistics. In the taxi services category, it has brought a large rage of services starting from basic rides to luxury rides that are costlier. Throughout more than 600 cities Uber is connecting its riders with more than 500 airports. the large service range is meant to cater to a variety of customer segments including individual riders, groups and families as well as businesses. It is also a reason that Uber’s customer base has grown faster than rivals.

Pricing strategy:-

Uber’s affordable pricing model has proved to be a key driver of demand and growth around the world. In some countries, it experienced an explosion in the number of customers. The main reason was its pricing model and the convenience. Uber provides a large range of affordably priced services for individual users and groups as well as businesses. It takes a smaller cut for itself from the total payment. This allows it to pay its drivers more than the other taxi services and charge its customers less. Its loyalty programs are also meant to make transportation cheaper for the urban masses. Its pricing strategy has driven its popularity high and also made transportation affordable for millions around the globe.

Business model:-

Uber’s business model is attractive, strong as well as profitable. It has adopted a business model that allows it to cut down operational costs while also keep prices low and deliver the best performance. The networking model it used allowed the company to add a large number of drivers as well as grow the number of users. It is managing its global presence well using this business model while employing only 16000 people.

Sources:

https://www.bloomberg.com/news/articles/2018-10-16/uber-valued-at-120-billion-in-an-ipo-maybe

Uber’s Marketing Strategy

https://www.uber.com/in/en/ride/

https://www.uber.com/en-IN/newsroom/company-info/

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.