Uber vs Didi The Race for Chinas Ride hailing Market Case Solution

1. How attractive were the taxi industry before Uber and other ride-hailing players entered the market? (Hint: Use Porter's five force model to answer this question)

The demand for riding hailing was much greater than the supply. The bargaining power for customers was less due to lesser ride-hailing options. There were some competitive rivals in the market. However, none of them were really dominating the market, which means that the barrier to entry for new market players was not high. Substitute products were present, but customers were moving towards the overall ride-hailing concept meaning the use of public transport and other options were not really considered by customers. There were numerous suppliers present for raw materials and other stuff, meaning there was no strong power from them. However, as the concept of this service was new, they were exercising some control. There has been a continuous increase in the number of Uber customers as a result of their high level of satisfaction with the consistent pick-up time as well as their degree of convenience. However, before the arrival of Uber, there had been a fall in the number of prices imposed on taxicab permits as well as medallions in most locations across the world. During this time, taxicabs were required to have a permit in order to avoid concerns connected to overinflating the already overcrowded driver market. This was a method of controlling the market as well as the number of taxis, which improved safety while maintaining a stable demand for drivers. This meant that even those involved in travel services, such as drivers, benefited from their efforts because no other parties from outside could take over their enterprises. The drivers of the independent class of medallions benefited from an extra income for their labor because they used to lease their cabs to some private drivers after they had halted operations. As a result, Taxicabs, in operation at the time, wielded considerable power in the sector, with considerable control over pricing.

However, with the introduction of new entrants, such as Uber taxis, the number of rides delivered by each taxicab decreased. This resulted in a decrease in the overall profitability of taxicab licenses. As a result of the current heightened competition, the influence of some taxicabs has diminished, and the majority of taxicab enterprises have gone out of business after losing consumers to Uber. Due to the danger of new entrants, many clientele, such as tourists, chose the shared option of ride-by cabs rather than the taxi cabs that were available at the time. This was owing to Uber's emphasis on efficiency. As a result, the average compensation for drivers in Los Angeles had dropped to about half of what it was before the operations were improved.