Porter’s Five Forces of Uber 

Uber is a freight transport, food delivery service, and ride-sharing service providing US multinational company. Travis Kalanick and Garrett Camp founded the ride-sharing company in 2009. Today, we’ll discuss Porter’s five forces of Uber; which would focus on the bargaining power of suppliers and buyers; the threat of new entrants and substituents; and competitive rivalry.

Porter’s five forces of Uber would focus on the bargaining power of suppliers and buyers; competitive rivalry of other businesses; and threat of new entrants and substituent products and services. Here’s Uber Porter’s five forces analysis as follows;

Porter’s Five Forces of Uber

Let’s discuss Porter’s Five Forces of Uber and they’re as follows;

Bargaining Power of Suppliers of Uber

The bargaining power of suppliers in Uber Porter’s Five Forces analysis is as follows;

I-Drivers our Suppliers

Car drivers and motorbike riders are the suppliers of Uber; they work as partners and earn a specific commission on the completion of every trip. The company charges a particular fee for offering trips on its ride-sharing platform. However, GMB Union is the union of more than 70K Uber drivers; the union has the strength of number and awareness of the laws, and they’re fighting for their rights.

II-Union of Drivers

The union of riders and drivers has requested the company to decrease the platform charges and offer services; like medical insurance and stable income along with other employment benefits. The main objective of the company is to charge lower prices from customers; and charge a specific fee from the drivers to cover up expenses.

III-Training

Uber conducts training programs for its drivers and regularly analyzes their performance. The platform has built a complaint tracking system on the software by allowing users to share their grievances and complaints directly with the company. Uber has also become a big data company by gathering data from its drivers whether they’re transporting people, making food deliveries, or goods.

IV-Low Switching Cost

The drivers have a zero platform switching cost; if they feel like the other platform would offer them better commission and more trips. All they have to do is download the competitor’s app, fill out the form, and they’re ready to go since they have ownership of the platform. Nowadays, many drivers work on multiple platforms and keep the one that offers them a better commission.

Bargaining Power of Buyer of Uber

The bargaining power of buyer in Uber Porter’s Five Forces analysis is as follows;

I-Immediate Impact of Inflation

Uber is operating its business in an industry where oil prices and inflation directly impact the retail prices of customers. A small increase in retail price would push away the customers, and a slight increase in the platform fee would push the drivers. However, Uber needs to maintain a perfect balance between low cost and low platform fees and cover its expenses.

II-Customer Base

Uber is operating its business in more than 72 countries and has established a strong database of customers. However, the company finds it difficult to amplify the price while operating its business in an inflationary environment. However, the company charges competitive pricing with limited differences. The bargaining power of customers is very high because they could easily switch to another platform. In order to retain customers, the company offers them restaurant discounts or reward points for their trips.

Threat of New Entrants to Uber

The threat of new entrants in Uber Porter’s five forces analysis is as follows;

I-Fixed Capital Investment

The software development of the ride-sharing platform doesn’t require a lot of investment; because it doesn’t involve owning cars and vehicles. All the platform has to do is offer a smooth and glitch-free experience to the customers and a network of professional drivers. Uber engages in the acquisition and divestiture of various other businesses and companies; it helps the company take advantage of forward and backward integration. Some of the new investment opportunities the company should consider are as follows;

• Vroom
• Getaround
• Blacklane

II-Easy Business Model

It is a very easy replicable business model; any new investor could develop a new platform and establish a network of drivers and carpool. Some of the key issues that a new developer of a sharing platform would face are as follows;

• An acceptable platform for all users
• Quick conflict resolution between service providers and users
• Low trip cost
• Early discounts
• Free trials

III-Limited R&D Cost

Once the platform starts functioning and running daily operations smoothly on the mobile application and the website; the company needs to maintain operation. The platform doesn’t have to invest a lot of resources in research and development; just provides glitch-free and a smooth experience to the customers.

IV-Low Regulatory Cost

Since the trend of ride-sharing platforms and the tech transport industry is a bit new. There are very few regulations that any platform has to follow, and the overall regulatory and legal cost is low.

Threat of Substituent to Uber

The threat of substituent in Uber Porter’s five forces analysis is as follows;

I-Low Product Switching Cost

There are various ride-sharing platforms offering similar types of transport services; the platform switch cost is zero for drivers and users. They would instantly switch to another platform as soon as they find a better offer. Uber should consider offering discounts and other types of benefits to customers and drivers in order to retain them.

II-Bans & Restrictions

Limited regulations for the ride-sharing industry and platforms like Uber have generated various types of controversies. For instance, many experts believe that online ride-sharing platforms like Uber have an unfair advantage over the local car service business. That’s why Uber is facing bans and restrictions in countries like Australia, Hong Kong, Italy, Bulgaria, Romania, Germany, Canada, Thailand, Hungry, and Denmark.

III-Public Transport

People choose Uber and other online ride-sharing platforms because it offers them ease and convenience. When the country’s economy is going through the recession phase, people become cautious about the small difference in price; they would prefer public transport over Uber.

Competitive Rivalry of Uber

The competitive rivalry of Uber in Porter’s five forces analysis is as follows;

I-High Competition

The ride-sharing industry has become highly competitive. Uber is facing tough competition from various other competitive companies worldwide that offer similar types of services. Some of the top competitors of Uber are as follows;

• Vroom
• Getaround
• Blacklane

II-Differentiation

The differentiating factor of Uber is that the platform maintained its uniqueness and kept expanding its service portfolio in logistics, delivery, and other types of services. As a premium brand, the company has maintained the image of excellent customer experience and satisfaction level.

Conclusion: Uber Porter’s Five Forces Analysis 

After an in-depth study of Porter’s five forces of Uber; we have realized that Uber is the world’s leading ride-sharing company. If you are learning about Uber’s five forces fives analysis; then you should keep in mind the abovementioned elements like; the bargaining power of buyers and suppliers, the threat of new entrants and substitute products, and competitive rivalry.