Uber Threats And Challenges In The Indian Market

Introduction

UBER is a multi-national company in the field of cab hailing services based in San Francisco. The company was founded in 2009 by two friends, Travis Kalanick and Garrett Camp. UBER has a smart phone app which provides an on-demand service to its users and connects willing passengers to taxi cab drivers. The idea came to them on a snowy evening when they had difficulty hailing a taxi. The company describes itself as a pick-up service that connects with private drivers. UBER’s app is designed by Google. Customers can order their cab through their smart phone and they can see who their driver will be and can keep a track of driver. As stated in their Vision Statement, “transportation as reliable as running water, everywhere for everyone," it currently has presence in over 50 countries and 200 cities.

UBER entered the Indian market in Bangalore in the year 2013. It is present in more than 22 cities in India. In the current market share figures in the online taxi services, OLA is leading by 80% of the shares.

Threat of Potential Entrants

UBER has its patents to protect their process. They are mainly logos, app icons designs. Any patent lasts for 15 years, UBER will not be able to maintain the protection of the interfaces indefinitely. However, UBER is continually working on patent applications it proves that at the end of the patent year UBER will be with the new design and patent. UBER’s seed capital was $200,000. New entrants will need low level capital. Hence UBER faces low protection against new entrants. UBER offers their app for free, no membership fee and no cost to switch services. The IPR’s give UBER high protection from new entrant. However, with all this UBER faces high threat from potential entrants that limit UBER’s profitability.

Supplier Power

UBER does not own any vehicles. They depend on driver’s vehicles. So UBER essentially outsources individuals who are willing fill application. This would mean that the car owners own everything except the mobile application. Hence the drivers have option of switching from UBER to any other company, Ola even operate as traditional taxi services. OLA has more bargaining power for higher prices. However, more drivers want to join for UBER. Even people with good jobs are giving up their jobs to be part of this movement. This would mean that UBER is not totally powerless. Hence in India UBER still has the power to set high rates as 30% per ride. This much power is moderate power in this industry. Ola boasts of 550000 drivers, UBER has only 250000.

Buyer Power

Customers use UBER as their personal taxi service. Therefore, customer have option to choose UBER or other cab. UBER has many competitors. It could be the traditional black-yellow taxis, Ola, public bus, etc. Hence the people have many options. The customers also do not need any extra costs in switching from cab company to another since the mobile app businesses are free. Customer of this industry are very sensitive to price. Hence buyers power is very high in this industry. This limit the profitability of UBER.

Threat of Substitutes

UBER comes in Network Transportation Industry. The closest substitute to UBER is traditional taxi and the auto rickshaws. UBER substitutes are costlier than UBER. Its substitute is there in all cities and for long time so UBER cannot charge high prices. Still all its substitute strikes for banning all cabs in India. [footnoteRef:17] This is mainly because the company uses Surge pricing and to keep market price at equilibrium. The use of lower prices when demand is less and high prices during high demand. The higher fare will attract more drivers and fill the supply gap. Bringing down the price was overruled and the government of Delhi decided to fix taxi fares.

Market Penetration

It is the safest of all. This strategy involves capturing market share in existing market using existing product. UBER provides drivers program containing hospitality training, health facility and traffic regulation it even goes through routine maintenance program to attract more driver to sign up. However negative brand associations sometimes correlate to reduced UBER usage. Firstly, case was UBER driver rapes of a woman in Delhi in December 2014. This initially led to the ban of UBER in Delhi. UBER started taking a lot of care in screening drivers before appointing them as partners. Pricing and payment- to keep customer loyal to the company, customer can pay UBER through online wallet. Can use credit and debit cards. However now it is allowed for up to 2000. However, the use of surge pricing has come but the Delhi government has banned use of surge pricing. UBER could provide a prepaid card of a specific amount so they don’t have to pay every single time. However, a major problem that UBER faces is that of the brand position which at present is that of a foreign owned company and which is more focused on providing luxury car services to its customers and doesn’t heed to their income status Hence UBER has to work on more as a common man's mode of transport. This can be achieved through increased spending on promotion. Using tag line like "India Moves Forward" has been a great hit. However, the ad fails to make waves throughout India using only one language Hindi. Promotions should target all kind of customer to increase its market share and to attract more it people. It could even celebrate driver association.

Finally, market penetration could be achieved by using a competitive pricing strategy. As in India people are price conscious. With all this UBER, can gain more market share in the existing market. The economies of scale that it already experiences from its worldwide operations could be put to good use in India. With the growing preference for their service, the demand for the service provided could become more price inelastic, when an increase in price will help gain higher revenue. Market development-This growth strategy involves using the same product but in different markets. The amount risk is medium level.

Market expansion

Ola is expanded over 120 cities across India and UBER only in 26 cities across India. As OLA is familiar with Indian market is has advantage, UBER must try to expand into 2 cities and sub urban areas in order to capture more market share. This is important as Ola has targeted 90 such cities in future. The market potential in India is high, with 67% below the age of 35. The population keeps on increasing, more communication will be needed. Moreover, over there is over 67% mobile penetration in India. 78% of India’s internet access is now via mobile.

Conclusion

In a nut shell, Uber has successfully completed more than 5 billion trips worldwide, the place that is accessed Uber app the most is in South Africa, the current CEO of Uber currently is Dara Khosrowshahi, his outstanding leadership got the Uber company become credible by the government, considering that it was once just a small startup. Uber’s latest estimate valuation till Feb 2018, is $72 Billion.