Uber Competes In The Taxi Services Market Essay

Question:

Discuss About The Uber Competes In The Taxi Services Market?

Answer:

Introduction

Uber was founded in 2009 and by 2015 was operating in more than 300 cities and 50 countries. The company currently has a valuation of more than $ 60 billion with a total funding of more than $50 billion (Kim 2017). It posted net revenues of more than $6 billion in 2016 and had more than $20 billion in gross bookings. The company provides a cheaper alternative to conventional taxi services and has more than 1 million drivers currently working for the company. The success is seen in the number of user’s which stands at more than 1 million daily globally and 8 million regular users.

Strategy

Market- Uber competes in the taxi services market which is was premised on fixed fares using a meter inside the cab or taxi. This market is big and has not reached saturation as it offers flexibility and convenience. The Uber model is based a ridesharing using apps that allow the client to locate the nearest Uber car near them. The use of cars owned by the driver but operating with apps and software proprietary to Uber eliminated the need to invest resources in buying cars. This gave Uber competitive advantage in market entry and positioning over traditional taxi operators.

Unique value- Uber operates with a unique value proposition on several elements. It solves practical daily problems such as locating a taxi. Its disciplined drivers provide a refreshing experience for the rider when compared to drivers of traditional taxis. Some Uber rides create additional value by giving customers free items such as water and mints. UberKITTENS in the US allows clients to cuddle real kittens during their ride for extra payment (Kim 2017). The proceeds support centers which care for animals. This adds value at the social level.

Cage Framework

Using the CAGE framework, Uber has leveraged its services globally. The use of Uber is not affected by cultural distance in terms of language, religion or social norms as taxi services are universal in nature (Ghemawat 2015). In terms of geography, it requires minimum geographic supervision as it operates with three executives for each city. Administrative distance varies but is generally low with most governments allowing for free market dynamics to operate. The economic distance is low as Uber services are not affected by the size of the country’s economy.

Model of Innovation

The business model is to increase customer value while reducing their cost of using the Uber ride. The customer uses apps to locate the nearest ride available using their smartphone (Borker 2016). The driver using company software is able to identify the shortest route to the customer’s destination using GPS. The customer benefits by lower fares while the driver uses less fuel and time. Value is created mutually for both the customer and the driver and makes the business model innovative and sustainable. It engenders loyalty in the customers and drivers and contributes to its success as ride sharing company.

Microsoft Corporation

Microsoft has been operating for more than forty years and is presently the largest software maker worldwide. Its operating system (OS) for computers accounts for 90% of all installations across the world. In 2016 the company posted a profit margin of 28% on revenues of more than $70 billion (Statista 2017). Its innovative culture has resulted in new versions of its OS such as Windows XP after Windows 98. It has also made major inroads into the home video game sector which contributes significantly to its profits. The X-Box is one major profitable product the company has innovated.

Strategy

Products- The Company competes in four software products categories in which it offers value proposition to its customers over its competitors (Kryscynski 2015). It offers different versions of Windows with updates available which is its flagship product. It also offers Office Suite which is customized for home and office use. In email and communications, Skype offers voice over internet protocols of calling using the internet (Microsoft Corporation 2017). This service is customized for home and business use. Microsoft also offers online and Cloud services customized for office and home use. It therefore offers a one-stop shop for software products for its customers.

Unique Value- The unique value which it offers is through its licensing model which offers costs which are low and affordable to the consumer. This is generated through volume in its OS in partnership with manufacturers of original equipment. The company also develops licenses and provides support for a wide range of customized software for companies of different sizes. Selling and licensing in volume reduces the costs of its products and this gives the company a competitive advantage over its competitors. The cost benefit reaches the customer as products which are affordable when compared to the value they offer.

CAGE framework

Microsoft has been able to overcome the cultural distance and barrier by offering its products in different languages globally. This flexibility allows for all users worldwide to enjoy the same format and standard which is customized to their language. It overcomes the administrative distance and obstacle by developing products for companies in compliance with the rules governing the country. Microsoft is not limited in geographic terms as it works with resellers and distributors of its products across the world. It sets a uniform price for its products which are affordable in order to ensure that economic distance is not a challenge.

Model of Innovation

Microsoft offers a business model innovation based on cost advantages to its consumers (Gassman 2013). While still continuing to sell its products through licensing, the company has embraced a new model based on which offers free products for some of its software. This is propositioned as “freemium” ('Microsoft Corporation Industry Profile 2015). The premise is that once a large pool of free users is established, the revenue will be generated through engagement on volume. An example is Skype which the company seeks to increase volume of usage. This new model is long-term and seeks to generate revenue on volume through increased usage of its products.

References

Borker, R, 2016, Quora Question: Why was Uber so Successful? Newsweek, viewed 25 August 2017, <

Gassman, O, 2013, Business Model Innovation. University of St.Gallen, viewed 25August 2017, <

Ghemawat, P, 2015, CAGE Framework for International Trade-Global Matters, Carlson School of Management, viewed 25 August 2017, <

Kim, L, 2017, 23 Crazy facts about Uber, the $51 Billion Startup, Inc, viewed 25 August 2017, <

Kryscynski, D, 2015, What is Strategy? , viewed 25 August 2017, <

'Microsoft Corporation Industry Profile', 2015, Microsoft Corporation: Change in Direction Under Satya Nadella, pp. 1-31.

'Microsoft Corporation', 2017, pp. 1-51.

Statista, 2017, Microsoft statistics and facts, viewed 25 August 2017, <

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