Uber: Ocean Blue Strategy

Uber: Ocean Blue Strategy

Camille Espaillat 16-0548

Carla Carrante 16-0137

Osnel Lara 16-0655

UNIBE

Uber: Ocean Blue Strategy

With the introduction of technology, the world’s economic growth was boosted. Ideas and inventions from around the world can be shared and change the entire world. In the past decades, we have been able to solve countless issues. Businesses likewise, have benefited from the rise of technology. The times when exporting something across the world seemed impossible have passed. Although this has opened up global business opportunities, it makes industries more competitive and saturated. When the countries’ economies used to be closed, there was little competition. Today, with globalization, these companies are confronted with much better companies. The competition is fierce and the markets have become saturated. Today, in order to thrive, businesses need to innovate beyond the industry that they are in and create a new one. Uber understood this, thus reinvented the taxi industry by using the blue ocean strategy.

Uber stepped away from conventional transportation services. Typically, “taxicab companies lease their vehicles to drivers by the day or the week, and it's up to the driver to meet his expenses and make a living,” but “some taxi companies split fares with the driver, giving the company an interest in how much business is dispatched (Bondigas). These taxi companies usually have a great deal of expenses. They need to buy the vehicles, get insurance, maintain an office, keep a dispatch system, and a place the store all vehicles. Uber got rid of many of these costs, similar to what Cirque du Soleil did. Uber does not provide a car to its drivers; therefore it does not need a dispatch system, or parking spaces for vehicles. As mentioned on their website, “If you choose to drive with Uber, you’ll drive a personal vehicle. That means you’ll at least need to have personal auto insurance that meets your state’s minimum financial responsibility requirements” (UBER). Uber drivers will assume these financial responsibilities, but using Uber will give them more flexibility as they can go on and off-line as they wish. The fact that drivers own their cars avoid tragedy of the commons, where company issued cars tend to be more mistreated than private cars (Staff, 2015). This also encourages them to keep them in good shape and clean, thus enhancing customer satisfaction. Uber was also able to get rid of its car insurance expense, which is a huge cost for taxi companies. Being able to reduce or completely get rid of expenses allows a competitive advantage for the company. Uber has been able to offer low cost than the rest of the taxi market, but truthfully, this isn’t the main reason why it thrives. With its app, Uber has created an uncontested market space, making the competition irrelevant. Uber was the first cab company to offer electronic payments. It also allowed its users to know where the cab was and its estimated time of arrival. It did everything to differentiate itself. This worked since users consider it to be “more convenient and safer than a street taxi,” especially for foreigners who offer get charged more than they should (Chestnut, 2016). Uber’s app has reinforced the company’s value by allowing both the customers and drivers to rate one another. This way, both parties know whom they are dealing with.  As mentioned by Jovani Velazco, a representative from Corad, a Mexico City-based DMC, Uber is “a platform that offers a lot of security for users, providing everything from information like license number, car make and color to the name, photo and phone number of the driver” (Chestnut, 2016). Uber has been using the blue ocean strategy to thrive as a business. It is not only focused on market share percentage and the competition. It’s about opening new market space, such as the delivery of groceries and packets without having to own a vehicle. Uber is all about transporting pretty much anything better, cheaper, and whenever.

One of the business’ goals is the elimination of various transaction costs, which makes it fair and appealing for the customer since the driver won’t be making up prices, they will be already “set”. On the other, there is no cost to reserve the car, while other companies do charge a fee besides the cost of the fare. Uber’s strategy is to place their base fare, the distance and the time, making it noticeable for the customer to see how the numbers added up.
        Another goal would be to have an efficient and user-friendly application, which they have managed and tried hard to make-work. The development of such has been the best strategy they have used. We live in an era where people are very attached to their smartphones and do most activities with it, meaning key transactions are conducted over the mobile device.
        “Technology has been known to be able to break down and get past regulatory entry barriers (another point that governments take issue with) because of the use of the internet. The widespread reach of the internet also meant it was easier for Uber to expand to other cities all around the world.” (Martin, 2016).
        As for the strategy, “Uber took full advantage of the concept of collaborative consumption by coming up with a mobile app that is very easy to use while packed with features that are designed for users’ convenience. For example, the use of GPS technology for matching drivers and their cars with passengers, and tracking or monitoring the trip, cuts down on time, effort, and search costs. Real-time matching also decreases the interval it usually takes between making that call to a taxi company and the taxi arriving at the location you specified to pick you up, because the app matches you with the driver that is closest to your location.” (Martin, 2016).
        The implementation of quality control through a rating system is a great strategy as well to meet the goal of providing a good service. With this rating system, customers can say what they liked and didn’t and what can be improved. If the driver has a lot of negative comments and a low rating, Uber removes them from the system, meaning they will no longer work for the company. Having this encourages the drivers to provide and maintain the high quality of their service and their car as fell, without forgetting to be ethical and “professional” with the passengers.