Here's how Uber--a taxi company that came into India just a year ago--is successfully challenging local market leaders to lower their prices through astute tech play.
Three months ago, The Association of Radio Taxis, that includes local market leaders like Meru cabs, Easy Cabs and Mega Cabs had joined hands to file a complaint against Uber in the Supreme Court of India for FEMA violations. The San Francisco-based company announced last week it has been granted a month-long extension by RBI to migrate to a new payment method to comply with Indian tax laws.
From a non-descript start-up five years ago to a phenomenal rise into global leadership, Uber's success is hailed in some quarters and despised in others. But the fact remains that its disruptive business model has forced both Indian cab service operators and consumers to sit up and take notice of it.
Where Uber Has Nailed It
Uber's core competency is it allows customers to quickly hail cabs via its mobile app and pay with a credit card, taking seedy fare haggling with cabbies out of the picture. The app binds the user's device with a geography and successfully displays point-to-point directions to the driver, making real-time cab tracking and seamless demand servicing a reality.
Apart from the credit card payment bit, Uber sounds uncannily similar to any other taxi service. Yet, Uber has been dramatically lowering its taxi fares sending the Indian cab market into a frenzy. Here's why: Uber is a platform.
A platform is a business model that creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers. In Uber's case, it connects drivers with people who need a ride.
"Uber's disruption is brilliant in its simplicity," says Manu Rekhi, director at Inventus Capital Partners that has invested in and works closely with a number of early stage companies in the eCommerce and transportation industries, like RedBus and Savaari. "Uber is leveraging technology to connect riders with people who have an underutilized asset--cars. Its effectiveness comes from connecting both supply and demand seamlessly."
Less Risky - "A platform business is structured differently than Uber's indigenous counterparts. What Ola and Meru Cabs operate on are basically once-dominant linear businesses of the 20th century," says Nick Johnson, an expert from Applico, a company that helps platform businesses on strategy, design, and development. "Compared to a linear business, a platform faces much less risk of exposure - as defined by total fixed and quasi-fixed costs like payroll. A trait Uber proudly displays by allowing its drivers to partner with other cab operators if they want to.""
Lean Staff Strength- While Uber has about 25 employees in 10 cities, Ola has 11,000 cabs and 550 employees, and TaxiForSure has about 550 employees that service 5,000 cabs. Uber's general expansion strategy includes hiring a three-member team comprising of a general manager, a community marketing manager, and a head of operations in every new city.
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