Amber Technologies initially started as a car service to cater the executives of the Silicon Valley and gradually expanded into this business by catering various markets and demographics. Uber Technologies is an app that works as an intermediary between the driver and the passenger which has worked effectively for the company and made the business model attractive for many investors. However, the company is facing serious problems, especiallyin terms of legal regulations and increasing competition, but the major issue is regarding the pricing strategy that does not seem to be attractive for many and is proposing negative outlook for the company.
This portion will analyze the current pricing strategy of the company and will highlight the advantages and disadvantages of this strategy. Furthermore, this portion will present the industry analysis using Porter’s five forces in order to select the right pricing strategy for the company.
Current Pricing Strategy
The pricing strategy used by the company is referred as Surge Pricing which states that the company will increase the prices as per the demand increases. The company practices this strategy at the time of rush or when the demand is high like rush hours and festive season. The idea runs according to the law of economic which says that higher the demand, higher will be the price. However, the company is quite satisfied with this pricing strategy, but a lot of criticism is also in the bucket for the company.
The company leverages its strengths and successfully implements this strategy which, according to them is working efficiently and providing results and claims that it provides the incentive to the customer with quick delivery and rapid service. However, the charges are not reasonable and it is quite understandable that with the high demand it is valid to charge high but in reasonable limits. However, the company is not catering this aspect and charging unreasonably high which is making it difficult for the company to sustain customers and on the contrary providing an opportunity to the competitors.
On the other hand, one reason for the company for charging higher prices is the differentiated offering provided by the company as the entry of the company changed the shape of the industry. Theindustry, which was working like perfect competition has been transformed into a consolidated industry due to disruptive use of technology. So as a whole it can be said that the company is practicing the demand-based pricing as well.
Bargaining Power of Buyers
The buyer in the industry is highly price sensitive and this price sensitivity factor is a major concern for the industry. As many players in the industry practice demand-based pricing which gives less power to the buyer to bargain, but the big players and those having technological efficiency possess the power to decrease or increase the prices. On the other hand, the services offered are similar which gives the power to the buyer, but eventually the big companies are leveraging this strength providing minimal power to the buyers to bargain.
Bargaining Power of Suppliers
Since the industry is becoming consolidated due to the presence of large players who are more comfortable by designing new technologies in-house. This scenario indicates that the supplier’s position in the industry is not very strong and they do not possess any power to bargain. On the other hand, the drivers are also connected with the big firms, but are allowed to perform as an individual as well since they are not obliged to serve for the company only. Still the drivers are not the trend setters and decision makers.
Threat of Substitutes
The traditional taxi service when aligned with technology presented a totally new set of ideas which seems difficult to be replicated or is not in a position to be threatened by any substitute offering at least in the short run. Currently no substitute is present, which clearly indicates that the threat from substitutes is very low.
Threat of New Entrants
The new entrants are likely to enter, but depending on their ability to assimilate technology and come up with a better plan to differentiate itself from the existing players. The e-commerce factor of the industry makes it attractive by high need of technology is a barrier that restricts some of the players. Therefore the threat of new entrants is moderate…………………..
This is just a sample partial work. Please place the order on the website to get your own originally done case solution.