How Ola And Uber Are Competing ‘Differently’ Than eCommerce Players

st_cabaggregators

In India, the competitive game is being played differently in cab aggregation business than in eCommerce business.

The key difference being: Strategy.

Conceptually, Strategy is different from a Business Model.

A Business model answers the following 3 questions:

  1. How does this business idea create value?
  2. How will this business deliver the above?
  3. How will the business capture a part of the above-created-and-delivered value?

Strategy answers the following basic question: How to deal sustainably with the competition?

The 2 leading cab-aggregators (i.e. Uber and Ola) have a pretty much similar business model. But may have different strategies.

Due to the value-creation and value-delivery potential of Technology, the previous few years have been an era of Business Models. Strategy has taken a back seat.

When market spaces are new and emerging, competition is not a pressing concern. So, strategy may not be even needed at all.

But, as competition intensifies–which is the case now with both eCommerce and cab aggregation businesses–Strategy needs to come in picture.

In this context, we see the 3 main eCommerce players (FlipKart, Snapdeal, Amazon) competing similarly–i.e. without any noticeable differentiation.

This means that they do not have a unique Strategic Positioning (the concept has been described quite well by Michael Porter, and is also captured later in this post).

And this is where I find Ola vs. Uber to be a different story.

 Below are some aspects where these 2 players differ:

  1. Uber is present in only 26 Indian cities. Ola offers services in 102 cities. 
  2. Uber prefers to go deeper in the cities in which it is present, according to a spokeswoman. Ola wants to expand to more cities. 
  3. Uber has hundreds of employees in India. Ola has thousands
  4. Uber advises its drivers to wait for passengers for max. 5 minutes, during the trip. Ola drivers can wait longer than 5 minutes.
  5. Uber does not have a ride later option. Ola has.
  6. Uber is a bit cheaper in India than Ola.

 Note that these differences are not co-incidental. Rather, these differences indicate that both companies want to compete differently

This is good news.

But, unfortunately, the good news ends here.

You cannot win the competition just by competing differently. You need to have acoherent Strategy.

And this is where there seem to be problems.

As per Michael Porter, there are 3 generic strategic positions a players can take in a competitive market:

  1. A low-cost player playing on volumes/market share (e.g. Samsung mobiles can be considered here)
  2. A differentiated player playing on high margins (e.g. Apple)
  3. A niche player serving a specific niche of the market (e.g. an Indian mobile handset player catering to rural market with only feature phones)

 Let us now come back to Uber and Ola.

I am again listing down the differences below:

  1. Uber is present in only 26 Indian cities. Ola offers services in 102 cities. 
  2. Uber prefers to go deeper in the cities in which it is present, according to a spokeswoman. Ola wants to expand to more cities. 
  3. Uber has hundreds of employees in India. Ola has thousands
  4. Uber advises its drivers to wait for passengers for max. 5 minutes, during the trip. Ola drivers can wait longer than 5 minutes.
  5. Uber does not have a ride later option. Ola has.
  6. Uber is a bit cheaper in India than Ola.

From the differences #1, #2, #3 listed above, it would seem that Uber is trying to be a niche player, while Ola is trying to be a low-cost player.

From the difference #4, #5, #6 listed above, it would seem that Uber is trying to be a low-cost player, while Ola is trying to be a differentiated player.

Bottom line: Their business choices are not coherent in a strategic sense.

If I have to choose a winner between the two, I would pick Uber.

This is because of the following rationale:

From the above data, Uber seems to be a niche as well as a low-cost player. Now, while the low-cost choice gives lower margins to Uber, the niche (i.e. 26 cities only) choice keeps the burn-rate under control. Hence, Uber will be able to sustain itself longer in its chosen niche (i.e. select 20-30 Indian cities). Slowly it will build better customer-base as well as driver loyalty in its niche.

Ola on the other hand is spreading itself too thin. It is going after volumes as well as differentiation. And that too with limited pockets. At some point soon it is likely to hit a funding crunch.

Who of these 2 wins, only time will tell. But, what is heartening to note is that different choices are being made by both the players. Instead of just aping each other. 

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