Ridesharing: A Solution to Finite Oil Supplies, Rising Gas Prices, Traffic Congestion, and Environmental Concerns

Finite oil supplies, rising gas prices, traffic congestion, and environmental concerns have recently increased the interest in services that allow people to use personal automobiles more wisely. The demand for ride-sharing services, which aim to bring together travelers with similar itineraries and time schedules, has increased sharply in recent years (J.Saranow, 2006) Ride- share providers across the globe are offering online notice boards for potential carpoolers, whether for daily commutes or for one-time trips to festivals, concerts, or sports events. Some online services, such as Nuride, provide incentives like restaurant coupons, gift certificates, or retail sales discounts to participants (Niels Agatz, 2009)

The annual cost of congestion in the US in terms of lost hours and wasted fuel was estimated to be $78 billion in 2007. Private automobile usage is also the dominant transportation mode producing carbon dioxide emissions. Vehicle emissions give rise to problems both on a local and global scale. Locally, the health effects of air pollution represent a serious problem in many of the most densely populated regions worldwide. Globally, carbon dioxide emissions are associated with climate change and global warming. (Niels Agatz, 2009)

Demand of the ridesharing is increased day by day. Just for Uber; as of April, 2016, the service is available in over 60 countries and 404 cities worldwide. By late-2015, Uber was estimated to be worth $62.5 billion. (wikipedia.org/wiki/Uber, 2015) Competitor of Uber, Lyft, In 2014, announced that it had grown ride numbers and revenue by five times (Nagie, 2015).

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A 2010 survey at the University of California, Berkeley found 20% of respondents willing to use real-time ridesharing at least once a week; and real-time ridesharing was more popular among current drive-alone commuters (30%) than transit or non-motorized commuters.The top obstacles to using real-time ridesharing were short trip lengths and the added time of ride logistics (Elizabeth Deakin, 2012).

Porter’s 5 Forces Analysis

Bargaining Power of Suppliers: Since Uber works with individuals, there are many suppliers with limited bargaining power. Low concentration of suppliers positively affects the company. Uber will have a long-term positive impact on the suppliers, which adds to its value. This qualitative factor will lead to a decrease in costs. This statement will lead to an increase in profits for this entity. Bargaining Power of Customers: the company have large numbers of customers, so any customer tends to have bargaining leverage. Limited bargaining leverage helps Uber to create powerful affect among the users. They also have low dependency of distributer as well. On the other hand, customers have limited choices they end up paying more for the choices that are available.

Limited buyer choices are a positive for Uber case. Threat of Substitutes: When products and services are very different, customers are less likely to find comparable product or services that meet their needs. However Taxi, Public Transportation, Subways and other private companies are the ones that can be threat of the operations of Uber. Threat of New Entrance: Regulation is the most important issues for the industry to enter. On the other hand Brand Image and strong distribution network is must for the industry to survive. Since the sector is required economies of scale, we can say that entrance barrier is high. However Uber’s Business Model is easy to copy.

Rivalry Against The Competitors: Lyft is the main competitors of Uber in Us. Both allow you to hail cars from your phone. Prices for the basic service tend to be similar - they fluctuate frequently, but the companies generally try to match each other. As a points of differences Uber is larger and available in more places. Lyft's brand is more about community and friendliness so drivers interact with passengers more, Uber's brand is more about a professional service so drivers interact less. Uber has more upscale options like luxury cars, private town, cars and SUVs. However in Turkey there are Bitaksi and blablacar which can excepted as a threat of substitutes.

Functional Analysis Size, Growth And Profitability

Uber is one of those few tech companies in the world that has been valued over $50 Billion. Uber has already received an equity funding of $8.2 Billion and is present in 60 countries. (wikipedia.org/wiki/Uber, 2015) These facts surely shows the trust of investors in Uber’s business model and make it easy for us to imagine how much revenue will Uber be making once it attains liquidity. What has made Uber so successful is the fact that the revenue model of Uber is as unique as their business model. It can be explained as:

Different cab models to cater to everyone: Uber has not limited itself to a particular segment of cars or to a particular segment of people. There is Uber X, Uber Black for those who love to travel in a black car, Uber Taxi for those looking for cost-efficient solutions and Uber SUV for those who want luxury.

Surge Pricing Technology: Variation in cab fares according to situation is an important aspect of Uber’s business model. Whenever the demand increases, per mile prices are automatically increased.

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