BLUE OCEAN STRATEGY / GM 522

THE DEVELOPMENT OF GROUND TRANSPORTATION IN THE WORLD

Transportation is the one of important thing in our life. If there was not transportation,
how would we go somewhere or how would goods be transported? In ancient times, new
places were explored and also nowadays, space is being discovered through transportation. If
nothing moves, nothing happens. Namely, life without transportation can not be thought. Many
things are invented for transportation until now. The wheel was invented in about 3000 BC.
From that time to now, transportation styles and vehicles changed incredibly. Acording to their
places transportation can be divided into three groups which are land, sea and air
transportation.
The development of transport vehicles has had an incredible impact on the expansion
and development of human society. Today more than ever before, people rely on various means
of rapid transportation to accommodate their busy lives. We rely on transport vehicles to run
businesses and obtain raw materials for industry. Also, we have expanded the distances of travel
for worship, work, recreation, and vacationing. The development of public transportation also
growing tremendously in par with the increasing number of population in the world.
On the other hand, people nowadays are tend to use their own private car, which leads
to more cars on the road, heavy traffic jam and air pollution. As of 2002, there were 590 million
passenger cars worldwide, giving roughly one car for every ten people. And of these passenger
cars, 170 million reside in the United States, making roughly one car for every two people. This
phenomenon happened because people are looking for the most convenient way to tranport
from onepoint to another.

INTRODUCTION OF UBER

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Uber the most successful ride-sharing company, threatens to eliminate the taxi
industry’s strong hold on the ground transportation market and possibly the industry itself.
Established in 2009, Uber describes itself as a ride-sharing company that operates by sharing
consumers information with drivers through a mobile app. Co-founders Kalanick and Camp
designed the mobile-app for iPhone and Android smart phones, enabling customers to get an
estimated time of arrival from the driver on their Smartphone with the use of an integrated GPS
system. 2 Consumers liked the Uber app because of its convenience and ease-of-use.
Uber’s data sharing description, disparaged by many as semantics, protects it from the
stringent regulations that govern the taxi industry in other words we can say Uber is a
technology company that offers a free software platform available on a mobile device for those
wishing to request a ride.
At its core, Uber seeks to match passengers to drivers. Uber has expanded its operations
to 58 countries around the world and is valued at around $41 billion. Because its services costs
less than taking a traditional taxi, in the few years it has been in business Uber and similar ride
sharing services have upended the taxi industry. The company has experienced resounding
success and is looking toward expansion both internationally and within the United States.

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What started as an app to request premium black cars in a few metropolitan areas is
now changing the logistical fabric of cities around the world. Whether it’s a ride, a sandwich, or
a package, Uber use technology to give people what they want, when they want it. For the
women and men who drive with Uber, their app represents a flexible new way to earn money.
For cities, they help strengthen local economies, improve access to transportation, and make
streets safer. When you make transportation as reliable as running water, everyone benefits.
Especially when it’s snowing outside.

LAND TRANSPORTATION LANDSCAPE (TAXI, PUBLIC TRANSPORT &

CAR RENT)
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Hiring a taxi service saves a great deal of time and energy. For example, if you choose to
take a public transportation, you’ll have to deal with the hassles like walking to the desired
destination and waiting for the vehicle. And if you opt to drive yourself, there will be stress
about finding a space in the parking area. Hiring a taxi will free you from these hassles and
automatically save your time. The company will send you a taxi just few minutes after you place
them a call.
Taxi companies employ professional and well experienced drivers. These drivers are
familiar with all the routes in the city and are also well familiar about the traffic patterns. Thus
riding in a taxi with an experienced driver will provide you with a sense of safety, reliability and
assurance. In addition, they place primary focus on punctuality.
With regard to the ease and comfort provided by the taxi company, we can say that the
taxi services are the most economic and affordable form of transportation. People have a
misconception of having to pay high price for taxi hire, but if we compare it with the service
available, we realize that what we are paying is very reasonable.
Unlike public transportation, taxi services are very flexible and can be customized
according to your need. It provides you with the flexibility to travel wherever you want and
whenever you want. Similarly, they also do not have to make frequent stops to pick up other
passengers.
These are some of the benefits provided by a taxi service. Apart from these benefits, we
should also know that taxi companies today not only provide general taxi services, but also taxis
for airport transportation, hotel transportation, etc.
The other popular land transportation service is car rental. When we rent a car, most
probably we will reach a determined destinaton faster than taxi or public transportation. The
car rental is a convenient way, contrary to public transport. It is very convenient and the
payments are low, since you're paying for rent, compared to buying a car. It is very personalized
because we can have a car that fit our preferences and needs. Car rental service also will
provide delivery service, no matter where you are, the agency takes the car on your place to
deliver.

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On top of taxi and car rental, most of the people especially in urban area, still choose to
use public transportation because of its low fares among other land transportation.

CUSTOMER EXPERIENCE USING TAXI SERVICE

Taxi/Cab Customer Experience Cycle
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Usually, when we needed to get somewhere, hailing a cab was a nightmare. We either stood
outside—wind, rain, sleet, snow, or shine—waving your hand in the air until you could hail a
cab, or you called a taxi dispatch (if you had their number) and had to wait 20 minutes until a
car arrived.

After the car has arrived, usually we will jump to the taxi/cab immediately without any further
discussion. But in some countries, it is a bit different because they need to bargain before they
use the taxi/cab services. Then, the taxi drivers will drive us to the destination.

Once we arrived at our destination, we fumbled to count out the right amount of cash plus a
tip, negotiate with the driver who never had the right change, or who “forgot” to start their
meter, or whose credit card machine was “broken”.

All told, very few people viewed finding and using taxi service as something enjoyable—it was
simply something that they dealt with due to the lack of an alternative. This poor experience
and a perceived lack of ability to change anything about it created pent up frustration and
demand from consumers who were eager to find anything better.

TAXI/CAB CUSTOMER EXPERIENCE CYCLE

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NON CUSTOMER ANALYSIS – TAXI/CAB CUSTOMERS

The dominant customer of taxi/cab services is “the executive middle class customers”. It is
because taxi/cab giving them comfortability even thou usually taxi/cab will charge higher fares if
compared to other type of land transportation. This group of customers are usually an
employee of private company and lives within the city area.

3 TIERS NON CUSTOMER ANALYSIS

Tier 3
Tier 2

Tier 1
rural
the executive
high class /
public transport users community
middle class customers
dominant customers upper class
OR
customers
low class
customers

1st Tier: public transport users

Buses, trains, and other forms of transport that are available to the public, charge set fares, and

run on fixed routes: in fact, about 40 percent of all public transit trips in the every cities like
London, New York and these cities is the biggest market for public transit in the countries.
Public transport modes include city buses, trolleybuses, trams or light rail and passenger trains.
This group of customers are usually looking for lower fares, that is why they choose public
transport compared to other types of land transportation.

2nd Tier: high class / upper clas customers

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High class / upper class customers are those class who relating to the group that has the
highest status in society. The upper classes of a society may no longer rule the society in which
they are living. Most of the time, this group of customers are travelling using their own cars.
They also usually has their own drivers for safety purpose.

3rd Tier: rural community / low class customers

A rural community comprises a group of inhabitants who live a rustic or country lifestyle.
Rural communities typically have smaller populations and an agricultural setting, but some
areas contain forests. The spending power of this customer group is very low. They would prefer
using their own motorcycle or public transport rather than taxi/cab. They are really concern
about the economical factors in choosing which type of land transportation that they are going
to use.

RECONSTRUCTING INDUSTRY BOUNDARIES - UBER

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Path 1: Look Across Alternative Industry

Here are some benefits of using taxi services:

 More convenient than other modes of public transport when going at a specific
destination

 Higher fees than other modes of public transport

 Fixed price based on base fare, distance, time, peak hours/weekends & public holidays,
advanced booking fees

 Requires a government license to be a taxi driver (good safety)

Path 2: Look Across Strategic Groups Within Industries

Luxury Cars
High end luxury transport
Target segment: Niche segment: luxury
Available for high end car

Path 3: Look Across The Chain Of Buyers

 Tech-Savvy Users
 Smartphone Users
 Users who value time
 People who appreciates having a ride confirmation shortly after the need arises
 Users with (limited) spending power. They are either people who wish to save money
but still get the convenience or they have the power to hail a ride at any price

Path 4: Look Across Complimentary Product And Service Offerings

Complimentary product that can be offer in rickshaw services are:

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1. Before The Ride

 Mobile and Internet Booking Application
2. During The Ride
 GPS Tracking System
3. After The Ride
 Easy Payment System / Credit Card

Path 5: Look Across Functional Or Emotional Appeal To Buyers

With their great booking system, Uber has successfully reduce the price and also increase the
comfortability, safety and security for the customers. Uber creates positive customer experience
and also increasing emotional appeal to customers.

Path 6: Look Across Time

Similar to UberX but using other forms of transport e.g. bicycles or motorbikes. Target segment:
Passengers in developing countries / countries where public transport is not well established

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FOUR ACTION FRAMEWORK BY UBER

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
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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.

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NEW STRATEGY CANVAS – UBER

Uber is completely changing the way getting private transportation is done in several key
ways. First, their smartphone app is integrated with Google maps so that you can see how far
away the nearest cars are, set a meeting point on the screen, and hail a car to meet you there.
You can even see your driver’s information (including ratings) as you watch the car get closer to
your location.

Uber drivers call or text to confirm that they’re on the way, giving you peace of mind
that your order was received. Once your car arrives (usually within a few minutes), the driver
greets you by name and you hop in. The cars are black cars and SUVs. Uber X, a lower cost
version of the service, is made up of a fleet of well-maintained sedans.

Once you arrive at your destination, the app charges your card, and you’re free to go on
about your day. There’s no need to deal with cash, change, tips, or receipts. You just hop out.
Uber has removed the friction from the typical taxi cab transaction, and made it highly
enjoyable in the process.

Bill Gurley sees Uber’s key to growth as a simple one: Uber offers a great product. He
explains, “The product is so good, there is no one spending hundreds of thousands of dollars on
marketing.” While this is certainly the case, it isn’t the only factor driving growth at Uber. First,
let’s go back to the beginning and look at some of Uber’s early tipping points.

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Figure 5: “To Be Strategy Canvas of Rixi”

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