Blue Ocean Strategy – Uber (Ridesharing Service) - Disruptive Cab Booking Service

Uber is a ridesharing service that connect passengers with taxi drivers through its own smartphone application and Uber App also allows customers not only to request or book rides but also track their reserved vehicle's location. Uber is headquartered in San Francisco, California, United States and its services are available in 42 countries and more than 200 cities worldwide. Uber's business model and innovative pricing looks pretty much similar to metered taxis, but unlike the regular cab companies all hiring and payment is handled exclusively by Uber through its website or smartphone App and if it is individual drivers they also receive the booking and payments from Uber nothing from customers not even tips are needed. Innovative Billing where in the customers are charged on distance basis only if the Uber car is travelling at a speed greater than 11 mph (18 km/h) or else the price is calculated on a time basis and the customers are charged to their credit card a complete fare that includes distance basis and time basis at the end of a ride. Uber has said its high prices are the premium that the customers pay for a cab service that is not only reliable, but also punctual and comfortable.

Uber’s Blue Ocean Strategy can be analyzed using the ERRC Grid where in the company eliminated the hassles of booking taxi, paying the driver exactly or change problems, tipping issues, arguments & denial of services, reduced the problems of drivers too along with customers by matching the rides and Uber just takes 20% or less from total fare and rest goes to drivers, drastically raised the customer service levels and comfort levels and created a new market by using the latest technologies and devices . Even though the services are premium customers were so satisfied and happy the company clocked revenues of US$ 750 million in 2013 and expected to cross $1 billion in revenues in 2014. Uber created a new market which in initial stages was uncontested market space but in the growth stage competitors flooded the market but most of the competitors are irrelevant to Uber as the company is not only dominating the market but also fast expanding across the globe. In India the company has expanded into 10 cities with its flagship line Uber Blacks, premium cab service and priced 25-40% lower than Uber Blacks, UberX claims to be cheaper than even a radio cab with a base fare of Rs 50 and per km charges in the Rs 14-15 range. UberX is already present in Bangalore, Delhi and Hyderabad with future launch in Chennai, Mumbai and Pune.

Ryan Graves, head of global operations at Uber, in an interview with Times of India said that UberX was growing "incredibly faster" compared to the more expensive Black service across cities where both options were present. "UberX is accessible to a much larger population because it's affordable," he said. Graves said when Uber makes a price cut, that means drivers are making more money as more trips are done. "It helps the health of the market as riders are happier, there are more drivers on the system and we become a dependable alternative versus being used on special occasions. Uber is classical Blue Ocean Strategy example where in the company tried to differentiate itself from the regular cab companies and in turn developed low cost business model that generates good revenues for drivers and company. Founded in 2009 in San Francisco by Travis Kalanick and Garrett Camp with a seed capital of $200,000 and company received funding of US$258 million from Google Ventures in 2013 and US$ 50 million in funding from other small investors.

Uber does not project itself as luxury car service but as reliable car service and the company is facing not only facing tough competition from its competitors like Lyft, Hailo, etc. globally and even in India also from local App based cab booking services like Ola Cabs, Taxi For Sure, etc. but also facing many regulatory hurdles in different countries and complaints from the local cab service and taxi players. In India it is facing problems in terms of RBI regulations related to payment mechanisms like in India there has to be payment verification process which is a multi-step process. Uber payment process is credit card based and single click without verification process. Despite all these the company is valued at close to US$ 3.5 billion dollars and is expected to continue its growth globally. Uber is one of the best recent Blue Ocean Strategy examples I have found.

Source of Business Model Picture: Contributed by Aswath Damodaran, Professor Stern School of Business, New York University to Forbes.com

Blue Ocean Strategy – Toyota Prius Hybrid environmental friendly Car success

Toyota, the Japanese auto maker reputed for its process innovation, as it developed the Lean Manufacturing and Just in Time manufacturing philosophies. Toyota is also reputed for Toyota Way, collective managerial values and business methods the company pioneered over years and the company is reputed for its quality manufacturing and production. In the Book Blue Ocean Strategy authored by W. Chan Kim and Renee Mauborgne, the authors quote Toyota Motors by referring to the company’s famous car Toyota Lexus, which was launched in the United States in the year 1989 at the price of the lower end Cadillac and Lincoln models but the car had features and quality of the high-end BMW and Mercedes and the motto Toyota Lexus was “Relentless Pursuit of Perfection”. The car was launched at a price of less than US$ 40,000 where as both BMW and Mercedes were priced far higher at above US$ 55,000 and US$63,000 respectively. The car became big hit for the company and it made a mark in the United States market as the company was a Japanese company facing tough competition from US auto giants General Motors and Ford Motors. Toyota created a new space of affordable luxury car market and it dominated this uncontested market and steadily built market share in tough US car market.

Toyota pursuit of Blue Ocean strategy resulted in the launch of Toyota Prius in 1997 which is a full hybrid electric mid-size hatchback, the first mass produced hybrid car and the car is rated as the cleanest car sold in the United States, which was launched in US in 2001. The company sold close to 4 million units till date and more than half of the sales come from the US market. The word Prius in Latin means "before" and the reason why Toyota choose this name was to highlight the fact that the company is more focused on  environmental awareness and protection even before the whole auto industry started to focus on the environmental pollution caused by cars through the emissions. Toyota pioneered the concept of environmental friendly cars and also alternative fuel cars as the worldwide fossil fuel reserves like crude oil are exhausted and the cars need to have alternative fuel for running them. Toyota management had encouraged the development hybrid concept car that works on both gasoline and electricity and the current models also include the full electric car. Toyota Prius series created a new market segment of consumers who are highly environmental conscious and also gave an opportunity to all those consumers who want to focus on  saving the environment as global warming due to carbon fuel emissions had become a major concern worldwide.

Product innovation focussed on environmental protection, quality, reliable brand image all resulted in building a highly loyal customer base that has been buying the Prius cars and made a top selling car in the hybrid segment particularly in United States. In terms of ERRC grid, Prius eliminated the harmful CO2 emissions, reduced the dependency on gasoline, raise the quality standard of hybrid cars in terms speed, design, performance and created a new market segment of hybrid and electric cars which all the major auto makers are now aggressively targeting. Toyota is focussing on making Prius even more effective and the company is constantly upgrading and launching new variants. Toyota Prius created a blue ocean market in highly contested red ocean of US Car market and is a classic example of Blue Ocean Strategy.