Uber Cooperation

Uber is not officially cooperating with any of its competitors. It has always had a very competitive attitude towards Lyft and Hailo and Uber has done everything possible to remain superior to these competitors. But if there's one way that Uber has cooperated with its competitors, even if unintentionally, it's been in it's effort to invade new markets and squash cab monopolies. Uber and Lyft have generally tried to infiltrate the same markets, at least domestically as Uber has a clear market dominance internationally. When they enter a new market, they are competing with each other but at the same time they are cooperating because they are squeezing out the cab monopolies together. By providing multiple alternatives to taking cabs, both of which are better in just about every way, they are pushing out the cabs completely. Even though this collaborative effort has not been intentional, it has helped both Uber and Lyft. They have made each other stronger by pushing cabs out of the picture.

Uncertainty Surrounding Uber's Recent Vehicle Requirement Changes

It seems that Uber can't stop slashing prices! They recently slashed prices (again) by 20% immediately after changing their vehicle requirements for their drivers. Since its inception, Uber required that its drivers use vehicles less than 10 years old. The thought here was that this would attract a more upscale driver base which would be another reason Uber was superior to cabs. But Uber recently eased up on this requirement and changed it to a 15 year maximum for vehicle age. As Uber could have predicted this attracted a massive wave of new drivers that were previously unable to drive yet were eager to become driving contractors. This increase in driver supply has allowed Uber to decrease its prices again. Meanwhile many of the drivers with nicer, newer cars are fed up and quitting driving. But there is a large unknown here. How will the customer base respond to the changing demographic of Uber drivers? Will they ignore the change in the quality of drivers and their prospective cars and instead focus on the extremely low prices? Or will they shift to other ride sharing services like Lyft which has not lowered its vehicle age requirement? Uncertainties like this can make or break a business. While Uber has put a lot of faith in the thought that their riders care more about prices, there is still some uncertainty to this and they could pay the price if they are wrong.

Uber's Product Differentiation

As a whole, Uber's product is not very different from the alternative (taxi cabs.) The end result is the same which is getting its customers from point A to B, but Uber does make this experience as different as possible and it is this that is the progressive part about Uber that makes its customers choose it over cabs. Even though an Uber customer could accomplish the same feat by hailing a cab, the Uber experience is different for a number of reasons. First the hailing process is much simpler. No waiving at cabs driving by. No haggling over prices. Just opening an app and clicking a button. Second, while the quality of vehicles that Uber drivers can use has decreased from a maximum of 10 years old to a maximum of 15 years old, these vehicles are still by in large nicer than the taxi cab alternative. The clientele that drives for Uber is higher class than taxi cabs and this makes riders feel more comfortable. Finally, the price is a differentiating factor. As has been discussed previously, Uber saves big time when it comes to overhead and they pass this on to their customers as savings which helps to differentiate their service from taxis.

Uber as a Cost Leader

Uber has absolutely chosen a cost leadership strategy. Uber's competitors have extremely high capital compared to their own company. All of the taxi companies have a high amount of overhead associated with their businesses. They own all of the cars that are driven by the drivers. What allows Uber to keep fares so much cheaper than cab fares is the fact that they do not have this overhead. Uber drivers own their own cars. Uber also has much less overhead in terms of employees. There exist only a relative few employees within Uber's business operations. These are a handful of drivers that respond to emails when there are issues regarding a ride, lost/found items, and vetting out new drivers. There isn't even a phone number riders OR employees can call to speak to anyone. A separate strategic plan makes business decisions regarding promotions and entering new markets. This is about IT as far as employees go. Currently, Uber also pays none of the city taxes and fees that cab companies must pay, although this could eventually change if the local governments can figure out a way to force Uber to pay these. Because of all of these factors, Uber is superior when it comes to cost structure. They pass on some of these savings to the drivers to entice them to drive, to the riders to entice them to ride, and the result is a profitable, quickly growing business.