Uber: Lessons on Market Analysis and Unit Economics

Why is Uber able to disrupt the taxi market without owning a single cab?  We will explore why Uber’s success is based on rethinking unit economics that lead to a new skill-sets. This will have implications for our own market analysis.

Remember, a few years ago, when you wanted to go from a place A to a place B, you had only a few choices. You could either go by public transportation, use your car, or take a taxi. In case you didn’t want to use your car, the fastest and most flexible way to go was to use a taxi. Taxi companies operated in a stable environment. Regulation, which shielded them from competition, determined how many taxis could operate in a city. Cab drivers would not get rich, but they could make a solid living.

Today, this market has changed. If you want to go from A to B, you have a large variety of choices. You can use a shared car which is provided by Zipcar, DriveNow and the likes. You might want to rent a public bike. Or you can order your personal driver at relatively low cost. This last kind of service is provided by companies like Lyft and Uber. Uber, which does not own a single car, is valued between $ 5.6 to 17 billion, depending on whom you ask. It has received wide media coverage for a number of reasons. But most importantly, it has been catching a lot of heat because it disrupts the once stable taxi market.

In this article, we will explore why Uber is able to disrupt the taxi market. Understanding this will provide us with valuable lessons that we can apply when conducting a market analysis.

image credits: Corepics VOF /Shutterstock

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