Question

Uber vs. Lyft, Driver Side a. What are the factors on the driver side of the market that push towards winner- take-all? b. What are the factors on the driver side that push towards multiple competing platforms being able to flourish?

No case study available.

Answer 1

In Uber and Lyft model, the driver side can also be called the supply side of the business. This means that drivers provide the organization with inventory or material that the consumers purchase. The utility of these services or the product of these companies is commute and convenience. This is made possible by the drivers. We need to consider these matters while answering these two questions.

a.

On the driver side, even though the drivers are considered as supply, the way of achieving a healthy level of supply is different. This is because, instead of purchasing the supply and raw material (like in normal manufacturing business), the supply here has to be earned through attractive offerings. Thus the factors on the driver side of the market that push towards winner-take-all are

• Level of opportunities: this means the customer base for the company. For example if Uber has a greater customer base than Lyft then Uber will get the upper hand
• Operational policies: how quickly is the payment processed? Is it technically sound process? is the process cumbersome? Overall, the higher the level of convenience the greater the score in this factor for either of the companies
• Financials: how much commission does Uber of Lyft charge from the drivers? How is the revenue share structure? The more friendly the structure towards the driver, the better it will be.
• Fairness: is the commission process fair? Are there discrepancies on a regular basis? The fairer the process the better is the score.

We could assign different weights to these factors and the combined higher scores will likely take either of the company towards a winner-take-all situation.

b.

As mentioned above, the drivers are the supply side of the business with the notable difference that the supply cannot be purchased or increased discretionally at will. In order to increase supply or capacity, the organization needs to make sure that their policies and practices are attractive for the drivers.

This is why attracting drivers to increase the capacity of the service also requires a similar approach to what is used for customers. The factors on the driver side that push them towards multiple competing platform are:

• Fear of missing out: the drivers want to maximize their opportunity of earning. This means whenever it is advantageous they would like to switch between Uber and Lyft. This is one of the reason for signing up with multiple platforms and these platforms all flourishing.
• Low consumer loyalty: whenever consumers/commuters do not find a cab on Uber they immediately switch to Lyft. This is due to low consumer loyalty because the service is a commodity (transportation). Due to this, the number of users/customers for each of the companies are in flux and thus there is no clear winner. Due to this, the drivers sign up for multiple platforms.
• Industry competition: The competition between Lyft and Uber is fierce and due to this there is constant price war both on customer as well as driver front. This is one of the factors for multiple platforms flourishing for drivers side as well.