Uber’s Competitive Advantage

vis-à-vis Porter’s Generic Strategies

Gareth Hales* and Carolan Mclarney**

Michael Porter’s ‘generic strategies’ are considered as one of the definitive guides
on how to establish and maintain a competitive advantage. Porter’s prominent
research establishes that competitive strategy is critical to an organization’s
profitability and long-term survival. According to Porter, companies can establish
competitive advantage based on cost, differentiation or focus. Organizations that
do not make clear strategic choices are ‘stuck in the middle’. Further, Porter
stated that these companies typically lose to companies who have established
superior differentiation or cost advantages in the long-run. Is this still true? Or,
can a hybrid strategy be successful in today’s unpredictable operating
environment? Is competitive advantage derived through Porter’s generic
strategies or has the paradigm shifted towards a platform strategy or value
innovation? The goal of this paper is to answer these questions using a comparison
and contrast of generic strategies relative to hybrid strategies, value innovation,
and platform based strategies applied to Uber’s competitive positioning.

Introduction
Organizations that do not make clear strategic choices are ‘stuck in the middle’.
According to Porter certain companies typically lose to other companies who have
established superior differentiation or cost advantages in the long-run.

Porter’s Generic Strategies

In the book Competitive Advantage: Creating and Sustaining Superior Performance
(1985), Michael Porter introduced the concept of three mutually exclusive generic
strategies, cost leadership, differentiation and focus that can be leveraged by an
organization to establish and maintain a competitive advantage. Porter asserts
that competitive advantage rests upon how well the executed strategy generates
value.

Competitive advantage grows out of value a firm is able to create for its
buyers that exceeds the firm’s cost of creating it. Value is what buyers
are willing to pay, and superior value stems from offering lower prices
than competitors for equivalent benefits or providing unique benefits that

* Faculty, Management, Dalhousie University, 6100 University Avenue, Halifax, Nova

Scotia, Canada, B3H. E-mail: r910180@dal.ca
** Faculty, Management, Dalhousie University, 6100 University Avenue, Halifax, Nova
Scotia, Canada, B3H; and is the corresponding author. E-mail: mclarney@dal.ca

Uber’s
© 2017Competitive Advantage
IUP. All Rights vis-à-vis Porter’s Generic Strategies
Reserved. 7
 more than offset a higher price. There are two basic types of competitive
advantage: cost leadership and differentiation (Porter, 1985, p. 3).

Figure 1 outlines three approaches to generic strategy that an organization

can follow, defined by two axes, competitive advantage (lower cost versus
differentiation) and competitive scope (broad target versus narrow target).

Figure 1: Generic Strategic Approaches

According to Porter, the three generic strategies to choose between are as

follows:

1. Cost Leadership: A position where an organization seeks to be the lowest

cost provider to a broad spectrum of customers. If a firm can achieve the
industry’s lowest costs and still charge average prices, it can outperform
the competition.

2. Differentiation: A position where an organization seeks to distinguish

itself from the competition by offering unique products or services that
deliver superior value to a broad spectrum of customers. If a firm can
differentiate itself, then it should be able to charge higher prices and
earn higher returns to outperform the competition.

3. Focus: A position where an organization targets specific groups of

customers or industry segments (narrow scope). A focus strategy works
best when a group of buyers have specific (individualistic) requirements
and when the competition is not serving the segment’s needs.

A. Cost Focus: A position of defining a narrow buyer segment and

providing the targeted customers with a desired product or service at
a lower cost relative to the competition.

B. Differentiation Focus: A position of defining a narrow buyer segment

and providing the targeted customers with a unique product or service
that delivers superior value relative to the competition.

8 The IUP Journal of Management Research, Vol. XVI, No. 4, 2017

 Porter believes that strategy is the creation of a unique and valuable position
in the market. Competitive strategy is about being different. “The essence of
strategic positioning is to choose activities that are different from rivals and a
strategic position is not sustainable unless there are trade-offs with other positions”
(Porter, 1996, p. 68). In other words, a trade-off means that “more of one thing
necessitates less of another” (Porter, 1996, p. 68). Porter believes that a firm
becomes ‘stuck in the middle’ when they fail to select and stick with a particular
strategy, a position he describes as the “inherent contractions of different strategies”
(Porter, 1996, p. 67). According to Porter, firms that are ‘stuck in the middle’ generally
lose to firms with cost advantages or superior differentiation. An organization can
become stuck in the middle if they pursue, but fail to realize one of the generic
business strategies or if they try to pursue more than one generic strategy
simultaneously. In the case of Uber, it appears that their business strategy contains
both elements of cost leadership and differentiation.

As outlined in Table 1, Uber’s strategy contains elements of Cost Leadership

and Differentiation. This leads to the question, is Uber ‘stuck in the middle’ without
a coherent strategy? Or, is it possible for a company to effectively deploy a hybrid
strategy to establish and maintain a competitive advantage?

Hybrid Strategies
While Porter contends that cost leadership and differentiation are incompatible,
other strategists argue that organizations who successfully combine low costs
and differentiation “create synergies that overcome any trade-offs associated with
the combination” (Parnell, 2006, p. 1141). As seen in Figure 2, “The era in which
combining competitive strategies was synonymous with stuck-in-the-middle
alternatives has been left behind” (Salavou, 2015, p. 80). In this scenario, a single
strategic focus or a position of strategic purity may also lead to some challenges
as follows (Miller, 1992; Beal and Yasai-Ardekani, 2000; and Salavou, 2015):

• Companies focusing on one pure strategy may be less responsive to

market changes and maintain lower agility and flexibility in offering products
that focus both on costs and on specific product features.

• Strategic specialization may leave serious gaps or weaknesses in product

offerings and ignore important customer needs that could be detrimental
to companies.

• Pure strategies are easy to imitate, and companies adopting them may
be at a disadvantage compared to those that combine them in a creative
way and benefit from multiple sources of advantage.

Additional research supports the notion that “the more complex and
multidimensional the profile of a hybrid strategy, the more balanced and defensible

Uber’s Competitive Advantage vis-à-vis Porter’s Generic Strategies 9

 Table 1: Uber’s Strategy: The Simultaneous Pursuit
of Low Cost and Differentiation
Uber – Cost Leadership Elements
Reduced Capital Expenditures:
• Uber’s capital expenditures a re
significantly lower tha n their
competition. A traditional taxi company
has “a central dispatching office, own a
fleet of vehicles, fuel tanks, pumps and
may operate a maintenance/repair shop
(First Research, 2016, p. 1).
• Uber has access to a large fleet of
vehicles, but they do not own any of
the vehicles as assets. As a result, Uber
does not have to “purchase, maintain
or depreciate vehicles as capital
expenditures, making the company
more agile” (Chan, 2014, p. 3). As a
result, Uber can successfully scale their
business (up or down) at a pace that
traditional competitors cannot match.
Low Cost Structure:
• Uber’s operating costs are lower than
the competition. “Uber has fixed costs
and employs technology to achieve
economies of scale” (Chan, 2014, p. 3).
• Uber’s Application Program Interface
(API) brings together drivers and riders
more efficiently and effectively than the
traditional taxi dispatch system. This
provides Uber with an asymmetric
informa tion advanta ge over its
competitors and enables them to
significantly reduce their cost structure.
• Uber’s mapping interface technology
provides some significant advantages
relative to their competition. Uber
drivers do not have to “drive around
looking for customers” (Chan, 2014,
p. 3) which saves fuel and time.
• Uber’s low cost structure enables them
the “luxury of reducing prices without
hurting its bottom line” (Chan, 2014,
p. 4). As a result, Uber can provide
lower prices compared to traditional taxi
operators.
Reduced HR Expenditures:
• Uber drivers sign on to the platform as
independent contractors. As a result,
they are not direct employees of Uber
10 The IUP Journal of Management Research, Vol. XVI, No. 4, 2017
Uber – Differentiation Elements
Uber Application Program Interface
(API):
• The Uber application has created a new
platform that brings together drivers
and riders more effectively a nd
efficiently than the traditional taxi
business dispatch system. This new
business model is perceived to provide
superior value by customers.
Flexible Employment:
• Uber provides flexible full-time and
part-time employment opportunities,
reaching a new market of potential
drivers enabling them to work flexible
hours and earn additional income.
• Uber provides higher income for drivers
relative to traditional taxis. “Even with
Uber’s 20% cut, drivers make more than
they do from the status quo” (Chan,
2014, p. 2).
What did Uber Solve? (Client
Experience):
Uber focused directly on the needs of
customers and solved many sources of
irritation that existed within the traditional
taxi model as follows:
• Uber provides convenience, comfort
and cost savings for business and leisure
travelers away from home relative to
the highly fragmented taxi market. For
example, Uber leverages smartphones,
real time processing and built in GPS,
reducing the need of customers to book
in advance.
• Uber solves the difficulty encountered
hailing a cab on street. They route a
car directly to the customer and they
provide the customer with information
about the driver who is picking them
up (including name, vehicle make,
model and license plate number).
• Uber has reduced the hassle and
complexity associated with paying the
driver, ensuring a safe and secure
financial transaction for both parties.
Their application provides an upfront
fare estimate based on distance, car
 Table 1 (Cont.)

and this significantly reduces Uber’s type and demand period. It outlines the
variable cost structure. route and provides an estimated time
of arrival (ETA). This is a big win for
customers, noting a tendency of cab
drivers to screen their fares for intended
destinations a nd to even reject
electronic sources of payment.
• With Uber, tip is included and riders have
the ability to split or share a fare (as both
features are built into the application).
• Uber ensures quality assurance which
is delivered through their dual rating
system, enabling riders and drivers to
provide anonymous feedback regarding
their experience.
• Uber offers a high standard of service
and a choice of platform, from Uber X
(low cost, environmentally friendly
hybrid cars) to Uber Black (luxury). In
addition, Uber drivers are required to
keep their car clean and offer simple
services such as placing or removing
luggage from the trunk.
• Overall, Uber has been successful in
delivering a superior client experience
and elements that are perceived as
luxury to the mass market. As a result,
they have significantly enhanced
customer loyalty.

Figure 2: Hybrid or Stuck in the Middle

its strategic position will be” (Salavou, 2015, p. 90). Using this logic, Salavou argues
that the combination of three generic strategies is better than the combination of
two, which is better than a single, distinctive strategy. Research by Pertusa-Ortega
et al. (2009) and Claver-Cortés et al. (2012) agree with this position, outlining the
following arguments:

Uber’s Competitive Advantage vis-à-vis Porter’s Generic Strategies 11

 • Achieving a strong position in one generic strategy can also lead to
improvements in the position of another generic strategy.

• Operational efficiency gains achieved through the implementation of best

practices and quality management make it possible to improve more than
one position.

• Hybrid strategies “avoid strategic specialization, which can be dangerous

if it leaves weaknesses in product offerings and ignores important
customer needs” (Salavou, 2015, p. 90).

• Hybrid strategies may “help a company secure several sources of

advantage and thus become more balanced” (Salavou, 2015, p. 90).

• Hybrid strategies provide organizations with greater flexibility. As a result,

firms who deploy hybrid strategies may be able to respond faster to
changes in the environment, including customer needs and preferences.

• Hybrid strategies that combine competitive advantages based on low

cost and differentiation are more difficult to pinpoint, imitate and replicate.

Combination strategists, Cliff Bowman and David Faulkner elaborate on Porter’s

generic strategies, arguing that buyers examine both price (low cost) and perceived
quality (differentiation) in making purchasing decisions which are a function of both
attributes. Sustainable competitive advantage is achieved by offering products or
services that are perceived by customers to be (Bowman and Faulkner, 1997):

• Better than those of the competition regardless of price;

• Equal to the competition but at a lower price; or

• Better and cheaper.

Bowman’s Strategy Clock (Figure 3) provides eight potential strategies, in four

different quadrants defined by price and perceived value. John Parnell positions
the model as follows:

A business can select any point along the continuum, and multiple value
propositions may be possible for the same point. Within this context, the
key to a successful competitive strategy is not low costs, differentiation,
or focus per se, but how various strategic components are integrated
into an effective overall value proposition. As such, the concept of value
subsumes the notions of low cost, differentiation, and focus, and there is
no mutual exclusivity involved. Ceritus perabus, organizations with more
attractive value propositions are more likely to be successful than those
with less attractive value propositions (Parnell, 2006, p. 1144).

12 The IUP Journal of Management Research, Vol. XVI, No. 4, 2017

 Figure 3: Bowman’s Strategy Clock

The Strategy Clock: Bowman’s Strategic Options

Differentiation
High

4
Hybrid
3 Focused
5
Differentiation
Perceived Added Value

Low Price
2 6
Low

1 7
Low Price, Strategies Destined for
Low Added Value Ultimate Failure
8
Low Price High

Source: marketingteacher.com

In order to gain market share, the perceived value from the consumer is the
key success factor. Uber’s value proposition appears to place them in the enviable
positions of hybrid (#3, denoted by low price and high perceived value for Uber X)
and differentiation (#4, denoted by medium price and high perceived value for
Uber Black). It is important to note, that areas 6, 7 and 8 represent the so-called
‘swamp’ (Bowman and Faulkner, 1997). These strategies are destined for failure
as consumers pay a high price, but perceive a low value. One may argue that this
is the area that the traditional taxi model occupies, noting that Uber’s value
proposition of lower prices and higher perceived value have placed the traditional
taxi business model under intense competitive pressure.

Uber has successfully established their organization as a cost leader and they
have differentiated their value proposition in the eyes of their customers. As a
result, one can argue that Uber is not ‘stuck in the middle’ and the failure to choose
a single (distinct) strategy has not resulted in inferior performance. In fact, Uber’s
hybrid business strategy appears to have resulted in superior performance, noting
an economic valuation of $68 bn (Chen, 2015). “In 2016, equity markets placed

Uber’s Competitive Advantage vis-à-vis Porter’s Generic Strategies 13

the value of Uber, founded in 2009, above that of GM, founded in 1908” (Van
Alstyne et al., 2016, p. 62). According to Morgan Stanley, Uber have “between 84%
and 87% of the US ride-share market” and they provided in excess of 168,000
trips per day in April, 2016 (Hartmans, 2016). While Porter’s generic strategy
framework is still applicable, the facts in this case lead us to conclude that the
concept of being ‘stuck in the middle’ does not apply to Uber. In fact, it appears
that a hybrid strategy has helped Uber to establish a competitive advantage, placing
intense pressure on the traditional business model of competitors in a mature Taxi
and Limousine industry.

Blue Ocean Strategy and Value Innovation

If a hybrid strategy or the simultaneous pursuit of low cost and differentiation
enables an organization to realize superior performance, why did not taxi originate
Uber’s value proposition and business model? Chan Kim and Renee Mauborgne
argue that many established competitors allow the existing industry structure to
dictate their strategies and that these organizations typically do not challenge the
status quo (Figure 4).

Figure 4: Blue Ocean Strategy Versus Red Ocean Strategy

Source: Digital CIO (2011)

Red oceans represent all the industries in existence today. This is the
known market space. Blue oceans denote all the industries not in existence
today. This is the unknown market space. In the red oceans, industry
boundaries are defined and accepted, and the competitive rules of the
game are known. Here, companies try to outperform their rivals to grab a
greater share of existing demand. As the market space gets more crowded,
prospects for profits and growth are reduced. Products become
commodities, and cut-throat competition turns the red ocean bloody. Blue
oceans, in contrast, are defined by untapped market space, demand
creation, and the opportunity for highly profitable growth. Although some
blue oceans are created well beyond existing industry boundaries, most

14 The IUP Journal of Management Research, Vol. XVI, No. 4, 2017

 are created from within red oceans by expanding industry boundaries. In
blue oceans, competition is irrelevant because the rules of the game are
waiting to be set (Kim and Mauborgne, 2005, p. 25).

Kim and Mauborgne (2005) believe that ‘red ocean firms’ deplete their resources
trying to secure a larger proportion of the existing customer demand. In contrast,
‘blue ocean firms’ or market creating companies deploy effective strategies to shape
their business environment, generating new demand and expanding their industry
as a whole. Where a ‘red ocean firm’ assumes a trade-off between low cost and
differentiation (as per Porter’s model), a ‘blue ocean firm’ seeks to achieve both
strategies simultaneously in order to create additional demand in a manner that is
difficult for competitors to imitate and replicate.

In this case, the rise of Uber appears to be a textbook case of blue ocean
strategy and value innovation. Uber has been successful in driving down costs
and simultaneously driving up value for customers, reconstructing the market
boundaries in the mature Taxi and Limousine industry. Instead of focusing on the
existing industry and competition, Uber focused on the needs of customers, creating
a leap in value for buyers which has enabled them to capture a new market space,
with a significant leap in demand.

Once again, this evidence re-enforces that Porter’s concept of being ‘stuck in
the middle’ (value-cost trade-off) does not apply to Uber and that the simultaneous
pursuit of low cost and differentiation (a hybrid strategy) has enabled Uber to
establish a competitive advantage. This also leads us to pose the question, has
the competitive environment fundamentally changed and has the relevance of
Porter’s generic strategy framework diminished in the digital age?

Forces of Change
According to Fabian Dalken, the forces of change including ‘globalization,
deregulation and digitization’ (Dalken, 2014) have fundamentally changed the way
we do business. In today’s competitive landscape, organizations have to integrate
their strategies into a global environment. Globalization extends markets and has
enabled new start-up companies (like Uber) to enter new markets faster than
ever before. Bang and Markeset (2012) identified five predominant drivers of
globalization:

Drivers and Effects of Globalization

Figure 5 shows the five drivers (lower trade barriers, lower transportation costs,
lower communication costs, information communication technology and the spread
of technology) result in three distinct globalization effects.

1. Size Effects: The size effects include a larger potential market which
creates a larger number of potential clients and a larger group of potential

Uber’s Competitive Advantage vis-à-vis Porter’s Generic Strategies 15

 Figure 5: Drivers of Globalization

Source: Bang and Markeset (2012)

competitors on a global stage. This also means that an organization can

draw on a larger number of potential suppliers and partners, extending
the reach of their global supply chain.

2. Location Effects: The location effects include more complex supply chains,
fragmented value chains, outsourcing and offshoring opportunities.

3. Pressure Effects: The pressure effects consist of the additional challenges

that arise as a result of globalization. These include, cost and price
pressure, a higher rate of change, more diverse markets, lower start-up
barriers and lower visibility.

Kim and Mauborgne (2005) agree that globalization reduced trade barriers and
advances in technology have reshaped the competitive landscape:

Traditional competition focuses on dividing up territory by competing

against one another. There’s been a winner and a loser, but our research
shows it’s not a zero sum gain. Some industries die, some persist, but
new industries are constantly being created. There are several rising forces
behind a rising imperative to create blue oceans. Accelerated technological
advances have substantially improved industrial productivity and have
allowed suppliers to produce an unprecedented array of products and
services. As trade barriers between nations and regions are dismantled
and as information on products and prices become instantly and globally
available, niche markets and havens for monopoly continue to disappear.
This has resulted in the accelerated commoditization of products and
services, increasing price wars and shrinking profit margins. In
overcrowded industries, differentiating brands becomes harder. All this

16 The IUP Journal of Management Research, Vol. XVI, No. 4, 2017

 suggests that the business environment in which most strategy and
management approaches of the twentieth century evolved is increasingly
disappearing. This is why the future belongs to companies that can create
and execute a blue ocean strategy (Kim and Mauborgne, 2005, p. 27).

In addition to globalization, digitization, the spread of the internet and

technological innovation has also had a profound impact on the pace of change in
the environment. “The internet allows firms to overcome physical boundaries,
distance and it allows them to serve larger audiences more efficiently” (Kim et al.,
2004).

Advances in Customer Relationship Management (CRM) systems now enable

organizations (like Uber) to gather significant amounts of information (Big Data)
on customers, enabling them to target specific customer segments with tailored
individual offerings (mass customization). Uber has also demonstrated that the
power of mobile internet technology makes their business rapidly scalable.
“Scalability and market scope flexibility, the ability to service both broad and niche
markets simultaneously (or in quick succession) are hallmarks of internet
technologies” (Kim et al., 2004).

According to Sanjay Mohapatra, information technology has changed the rules

of competition in three ways (Mohapatra, 2012):

1. New technology impacts existing business models:

• The emergence of new technology has a profound impact on existing

business models and has the propensity to change industry
characteristics. The internet disassembles traditional value chains
leading to new competitive imperatives that require new strategies.

• The internet’s universality and its ability to reduce information

asymmetries and transaction costs have created opportunities to
rewrite the rules of strategy (Kim et al., 2004, p. 579).

• This is certainly the case with Uber versus Taxi, noting that Uber’s
Application Program Interface (API) brings together drivers and riders
more efficiently and effectively than the traditional taxi dispatch system.
This technology has provided Uber with an asymmetric information
advantage over its competitors and enables them to significantly reduce
their cost structure.

2. New strategies are formulated due to the use of IT:

• Companies can benefit from an early adoption of new technologies

(first mover advantage). In addition, it is important to ensure that
new ventures account for the needs of an organization’s stakeholders.
Uber’s dynamic new platform engages their customers and employees

Uber’s Competitive Advantage vis-à-vis Porter’s Generic Strategies 17

 (drivers) to create value in a dynamic new way via the shared economy.
However, their approach to dealing with local municipalities and
regulators may pose a threat to the growth of their business model.

3. New technology leads to the invention of new business models:

• Uber’s dynamic new platform enabled them to break the value-cost

trade-off, to create and capture demand in a new, uncontested
marketplace (blue ocean strategy and value innovation).

• In addition, the scalability of their mobile internet application has

enabled them to simultaneously pursue both narrow and broad
customer segments. As a result, Porter’s focus strategy is also much
less viable as a standalone strategic option.

As noted above, the emergence of innovative new technology has led to the
formation of new strategies and the creation of new business models that have
successfully disrupted traditional lines of business. Does this mean that technology
has created a platform to support and potentially replace existing business practices,
precipitating a paradigm shift?

Platforms and the New Rules of Strategy

Marshall Van Alstyne, Geoffrey Parker and Sangree Choudary believe that the focus
of strategy has shifted from controlling to orchestrating resources in order to
maximize the value of a firm’s ecosystem. The authors note that back in 2007, five
major mobile phone companies controlled 90% of the industry’s profits (Nokia,
Samsung, Motorola, Sony Ericsson and LG). “That year Apple’s iPhone burst onto
the scene and began gobbling up market share. By 2015, the iPhone singlehandedly
generated 92% of global profits, while all but one of the former incumbents made
not profit at all” (Van Alstyne et al., 2016, p. 4). The authors state that the key to
Apple’s success is that the iPhone is a platform product or a conduit for services
that “connects participants in two-sided markets, app developers on one side and
app users on the other, generating value for both groups” (Van Alstyne et al.,
2016, p. 4). Apple outperformed their competition by exploiting the power of
platforms and leveraging the ‘new rules of strategy’ (Van Alstyne et al., 2016).

Platform businesses (like Uber) bring together producers and consumers in high-
value exchanges. “The chief assets are information and interactions, which together
are also the source of the value they create and their competitive advantage”
(Van Alstyne et al., 2016, p. 4). The authors state that the driving force behind the
internet economy is ‘demand-side economies of scale’, also known as network
effects. (Van Alstyne et al., 2016). For a business like Uber, the larger the network,
the better the potential match between supply (drivers) and demand (riders),
enabling the organization to harness spillover effects.

18 The IUP Journal of Management Research, Vol. XVI, No. 4, 2017

 Consider ride sharing. By itself, an individual ride on Uber is high value for
the rider and driver—a desirable core interaction. As the number of
platform participants increases, so does the value Uber delivers to both
sides of the market; it becomes easier for consumers to get rides and for
drivers to find fares. Spillover effects further enhance the value of Uber to
participants: Data from riders’ interactions with drivers—ratings of drivers
and riders—improves the value of the platform to other users. Similarly,
data on how well a given ride matched a rider’s needs helps determine
optimal pricing across the platform—another important spillover effect (Van
Alstyne et al., 2016, p. 8).

Based on this, one of the greatest challenges for a platform business is attracting
a critical mass of customers. “If you don’t have customers, there is nothing to
scale” (Blanding, 2016). In Uber’s case the company started out with black cars
driven by professional drivers. Doing this ensured that “customers would have a
great experience virtually every time they used the service – and they could then
rely on customers to spread the news of that experience by word of mouth”
(Blanding, 2016). This is a key insight to a platform business. According to Michael
Blanding, platform businesses like Uber and Airbnb resolved the issue of supply
side first. In this model, “if you get the right suppliers, the customers will experience
their high quality service and then do the marketing for you” (Blanding, 2016).

While Van Alstyne et al. (2016) have made a compelling case for platform
businesses and the new rules of strategy, one question still remains—which strategy
is the most relevant today? If nothing else, our review of Porter’s generic strategies,
hybrid strategies, blue ocean strategy (value innovation) and platform strategies
has demonstrated that each model has its own merits. In addition, each model
helps us to understand a complex business environment and that establishing and
maintaining a competitive advantage in an ever changing world is not a simple task.
According to Rita Gunther McGrath, “neither theory nor the practice of strategy
has kept pace with the realities of today’s boundary less and barrier free markets”
(McGrath, 2014, p. 1). As a result, McGrath believes that the traditional approach
of building a business around a competitive advantage no longer makes sense.
Disruptions are coming closer and closer together and the competitive
environment is in perpetual motion. Globalization has caused many of
the barriers to entry that once protected companies and sectors to fall.
Your competition isn’t just the company down the street any longer; it’s
companies from anywhere in the world. We’ve seen the fall of regulation
in many industries. We’ve seen the rise of digitization, which has created
instantaneous information flows and incredibly fast investment markets.
There are a number of forces that have converged to make attractive
opportunities more visible to more players, and the resources needed to
go after them are more available, too. All these dynamics make it very

Uber’s Competitive Advantage vis-à-vis Porter’s Generic Strategies 19

 hard to hang on to competitive advantage for any long period of time. In
this environment, organizations exploit temporary competitive
advantages, not sustainable ones” (McGrath, 2014, p. 4).

Conclusion
In a rapidly evolving business world fueled by continuous innovation, it appears
that most strategies do become less relevant over time as the external environment
changes. While these strategies help us to make sense of a complex world, in
reality most strategies are helpful for academics and practitioners to understand
what happened, looking backwards in retrospect, relative to providing forward
looking insights.

In the case of Porter’s generic strategies, the concepts of cost leadership,

differentiation and focus are still relevant today. However, “the era in which
combining competitive strategies was synonymous with stuck-in-the-middle
alternatives has been left behind” (Salavou, 2015, p. 80). Uber appears to be a
textbook case of blue ocean strategy and value innovation (hybrid strategy). Uber
have been successful in driving down costs and simultaneously driving up value
for customers, reconstructing the market boundaries in the mature Taxi and
Limousine industry. Instead of focusing on the existing industry and competition,
Uber focused on the needs of customers, creating a leap in value for buyers which
has enabled them to capture a new market space, with a significant leap in demand.
Furthermore, the success of Apple, Google, Airbnb and Uber are serving as evidence
that platform businesses are transforming the competitive landscape.

To conclude, we suggest that each of the theories reviewed has relevance in a

complex and multi-faceted world. In this case, the strategic models appear to have
more similarities than differences. The challenge for strategists and practitioners
(like the authors), is to weave these theories together holistically into a body of
knowledge that can be leveraged to position you and your organization to
outperform the competition.@

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20 The IUP Journal of Management Research, Vol. XVI, No. 4, 2017

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22 The IUP Journal of Management Research, Vol. XVI, No. 4, 2017

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