Essay Sample on Porter's 5 Forces; SWOT

Uber is an American multinational company that offers various services in the form of ride-service hailing, delivery of food, and peer-to-peer ride-sharing in different parts of the world. The advancement in ethology has played a significant role, for it has facilitated the running of the entity’s operations. The Uber Company has managed to revolutionize the taxi industry, and it has destabilized the market operations through the reliance on an application that is easy to use, and its platform leads to competitive pricing. Understanding the network’s potential and attractiveness of an entity in the market requires the use of Porter’s five forces that consider the threats posed by customers, new entrants, suppliers, substitutes, and the competitive rivalry in the market. The SWOT analysis program can also help to determine the position held by Uber Company in the market.

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Porter’s Five Forces

New Entrants

A company’s position in the market is highly likely to be affected by the ability of other companies to join the industry. Uber seeks to offer a linkage between the transport providers and the clients and the high amount of capital that is needed to join this sector. When the Uber Company started operations, it used a lot of funds, but currently, any entity that wants to join the field is likely to use fewer funds, meaning it is easier to penetrate the taxi industry (Adamkasi, 2017). The organization freely offers its software to clients that want to use it, and the organization is invulnerable to rising expenses, meaning it is easier for other companies to join. Therefore, new entrants pose a severe threat to Uber operations.

Substitute Threats

In the transport sector, there exist different players that can offer similar services to what the company is providing, and the taxi service is the closest system that may rival Uber for the services it is offering its customers. The taxi industry has a low-cost system, it is user-friendly and effective, and it has the potential and ability to lower Uber market share. Therefore, the industry is price sensitive, and Uber cannot manage to increase its prices, and this means that the existence of substitutes in the market is highly likely to affect the operations of the firm.

Bargaining Power of the Suppliers

Suppliers are said to have a high power level if they can raise the prices of the company inputs. Uber does not have its vehicles, and this means that its model is dependent on the drivers that are owning the vehicles. The stringent requirements are high means that the number of workers operating with Uber Company is not high (Bashir & Verma, 2017). The drivers manage to negotiate for better terms lowering Uber’s power. The fluctuations of oil prices in the market raises the level of uncertainty, meaning that the suppliers of the commodity have a high level of bargaining power.

Buyer’s Bargaining Power

The ability of clients to negotiate with the firm can influence its performance. The customers that are working with Uber are price sensitive, for they can manage to access the service of rival companies. The market is on an upward trajectory meaning that the switching cost of the clients is on a downwards trend. Therefore, the clients have a lot of power in the market, and they are likely to dictate prices in the market. People are attracted to the desire to own cars, and this means that there is a possibility of the industry experiencing a decline in the number of people in need of the Uber services. Therefore, the company is at a tight corner, and it has to find ways of remaining relevant in the market.

Competitive Rivalry in the Market

The number of service providers in this industry is on the rise, meaning that the level of rivalry has increased. When Uber Company started its operations, the number of rival business relying on the internet to provide the taxi services was low, and the firm could set the market prices. Clients had a reduced effect on the prices charged by the business. However, in the present world, the market is concentrated, and this has raised the rivalry among the various companies offering transportation services. A significant number of rival entities are competing for market space and suppliers, and this is leading to Uber’s marketability and competitiveness weakening with time.

SWOT (Strengths, Weaknesses, Opportunities, and Threats)

Strengths

Uber Company enjoys various elements of competitiveness that enable it to manage its operations in a better manner in comparison to the rivals. The organization is considered a global brand, and it is clear that every client wants to be associated with a big brand. Therefore, the entity manages to win over some of the clients due to its brand. There is a possibility that all the modern taxi services that are following in the model of this company are referred to as Uber. Additionally, it finds it easier to enter into new markets. The dynamic pricing strategy that the firm uses provides it with a significant opportunity to win over the market. It relies on several elements to determine the charges for a ride, such as raising the prices in an area that has a high demand level (Jeon et al., 2020). The company’s app informs the clients about the surge, and this pricing model enables the Uber drivers to move to the area with high demand. The firm manages to easily adapt to changes in the market, with a notable case being the initiation of Uber Freight (logistics) and Uber Bike. The advancement in technology is making the organization focus on the usage of autonomous and self-driving vehicles, which will significantly lower the operational costs raising the revenue levels.

Weaknesses

Some of the limitations that face this company include the imitation of its business model. There exist allegations that Uber has imitated the Lyft business model though the details are not clear, and they cannot be supported with facts. However, it is crucial to note that the ride-sharing industry is not protected, and this means that companies can copy from each other without infringement of copyrights. The low barriers to entry mean that it is easier for a company to join the sector, and this will lower the ability of the organization to increase its revenue level. Another issue that affects the Uber operations is its reliance on drivers. The company has no direct connection with the drivers though it has to rely on them to run its operations. There are instances that some of the clients claim that Uber drivers are misbehaving while others are driving under the influence of alcohol. There are instances that the company has faced lawsuits when the drivers misbehave, and such incidents show that Uber is not a safe mode of transport, and this is likely to damage the entity’s reputation. The issue of the company’s dependence on the internet means that its operations cannot run in an area that does not have internet coverage. In the developing world, the internet coverage is limited, and this leads to the company not being in a position to running its operations effectively. Controversies have followed the company since its inception. Uber drivers have, in the past, called for strikes globally to demand better payment and an end to the lack of transparency.

Opportunities

The internet savvy world represents a better opportunity for the company to utilize, considering that the organization is a technology company. People do not like walking around, and they spend a significant amount of their time on phones, and the Uber App can be used to motivate people to interact. The firm will be in a position to raise its revenue levels and profitability. The market has different taxi service providers that do follow any guidelines on operations, and this leads to a dissatisfied client base. However, Uber’s rating systems are organized, and they can measure the performance of every driver operating under it. Therefore, the business can improve its rating systems by determining the prices charged and the drivers’ attitudes towards the clients to ensure that the customers are satisfied with the quality of services offered. When the firm starts to run the driver-less technology system, it will lower the operational cost and raise the profitability levels.

Threats

Some of the issues that are likely to adversely affect the Uber operations include the fierce competition that the entity is facing from various players in the industry. DIDI, OLA, and Lyft are some of the organizations that are offering similar services, and they are enjoying a wide market share. Persistent competition can lead to a reduction in industry rates, which will hurt the company’s returns. The operations of the company make others rich at the expense of its workforce, who are the drivers. They have a low low-profit margin despite the efforts by the company to increase the number of rides that they are taking. The data breach is a problem that is facing the company, and it may experience court battles with the clients. The company records its clients’ details, such as the dropping and picking locations and their personal information, which may be misused by the firm.

References

Adamkasi. (2017). Porter’s five forces model of Uber. Porter Analysis. Retrieved from https://www.porteranalysis.com/porters-five-forces-model-of-uber/Bashir, M., & Verma, R. (2017). Why business model innovation is the new competitive advantage. IUP Journal of Business Strategy, 14(1), 7.

Jeon, M. M., Lee, S., & Jeong, M. (2020). Perceived corporate social responsibility and customers’ behaviors in the ridesharing service industry. International Journal of Hospitality Management, 84, 102341.