Uber

             According to Michael Porter’s five forces of competition analysis (1979), Uber’s specific five forces is shown as follows by plotting a radar chart.

 

Potential new entrants: Low

• Uber is positioning itself in a technology field that provide a channel of linking bridge between ride-demanding customers and spare car providers. This market requires a higher amount of initial capital and this capital requirement has risen up the entry level compares to other markets.

• Since Uber is facing legal issues around several area and has been fined by some government authorities, the market is still under controversies the new entrants would still be very cautious on stepping into the business. Thus, at least for a short time period, the threat from new entrants will stay low.

• As long as the legislation problems been settled down, as an O2O technology-based company, it is not easy for Uber to stop followers’ imitation, which means that it’s easy to be copied and other competitors could operate in the same way as Uber.

 

Threat of substitutions: Medium

• Considering about the service quality that Uber applies, the potential threats coming from the traditional transportation industry (including the public transportations, taxis and private cars, etc.) are low because of its lower-cost and efficiency, as well as user-friendly designing.  The graph below shows that the average coming time of both Uber cars and traditional taxis. More than 94% of the Uber cars will be arrived less than 15 mins while that number of traditional taxis is only 27%.

 

 

 

 

 

 

 

 

• Since there already are some companies provide similar services in this market among different regions, customers might switch to other available services just simply because of the feature of higher price sensitivity.

 

Threat of suppliers: Medium

• One of the main suppliers of the industry including a large number of individual drivers. The concentration of this group of suppliers is not very high, which to some extend, has restricted the bargaining power of suppliers.

• Oil and gas suppliers (and may also extend to hybrid vehicles) is another main supplier. Oil price has been plunged since 2015 and the lowest level has reached less than $30 in January this year. Highly fluctuation of price brings a higher risk to the market because of uncertainty and non-predictability.

 

Threat of buyers: High

• As the market getting bigger, the increasing number of participators bring customers more choice and the switching cost for customers is relatively low.

• Although the number of private cars experiences a huge rise during the past few years, the parking problems have been more serious than ever before and the private car using in the cities is not expanding as fast as before as well.

 

Degree of rivalry: High

• The trend of concentration of the industry is appearing to be higher than previous years, and the existing companies in the market is compete with each other on both suppliers (car drivers) and customers.

• Since the initial capital requirement to enter into this industry is relatively high, the sunk cost during the early stage has raised up the exit barriers.