University of Southeastern Philippines

BA 2004 – MANAGERIAL ECONOMICS

Case 10. Business Model Innovation Matters More Than Ever

Case 11. High Prices and Long Wait Times: What’s Ahead for Uber and Lyft?

Submitted by:
Nesvelle Mae A. Pascua, REE

April 23, 2022

 Case 10. Business Model Innovation Matters More Than Ever

I. Introduction
Business model innovation has become a new form of innovation. It’s best conceived of as
how to do business and how to do business in new ways. It’s centered on the firm’s activity system,
and it represents a new form of value creation.

II. Problem Statement

There are number of moments that have redefined business—the World War II, oil crisis,
development of internet, and coronavirus pandemic to name a few. Each has upended businesses
in a very short period. Each has prompted companies to reimagine and redesign their business
models.

III. Analysis of the case

To further the discussion, SWOT Analysis for the business model innovation will be used.
Strengths
• Has capabilities and resources that it can
leverage to build a sustainable competitive
advantage in the marketplace
• Strong Brand Equity and Brand Awareness
• Provides resources to not only thwart
competitive pressures but also to invest into
research and development
• Can offer a wide array of patents and
copyrights through innovation and buying
those rights from the creators
Opportunities
• Growing Market Size and Evolving
Preferences of Consumers
• E-Commerce and social media-oriented
Business Models
• reduce the number of offerings in the
market and focus the marketing efforts on
only the most successful products
• Opportunities in Adjacent Markets
Weaknesses
• Low return on investment since
it operates in the most reliable
measure of profitability, that is
Return on Invested Capital rather
than one favored by financial
analysts such as – Return on
Equity & Return on Assets
• Not efficiently managing the
inventory and cash cycle
Threats
• Culture of sticky prices in the
industry – inability on part of the
organization to increase prices
that its premium prices deserve
• Increasing costs component for
working in developed market
because of environmental
regulations

IV. Recommendations
To do business model innovation systematically and in a disciplined manner, one must have a
strategy for it, especially if working for a large company. This is not just for start-up entrepreneurs,
but it’s particularly important for established companies who need to reinvent themselves. Clearly,
COVID-19—all other moments in the history—presents us with a rationale for why it’s important
to think about reinventing ourselves. The challenge is great but so are the potential rewards.
 Case 11. High Prices and Long Wait Times: What’s Ahead for Uber and Lyft?

I. Introduction
Like many other service-based companies, Uber and Lyft have said they are struggling to
find enough workers as the economy roars back to life. The loss of supply (drivers) and increase
in demand (rides) has pushed fares and waiting times into the stratosphere.
II. Problem Statement
Soaring prices and longer wait times are frustrating customers of Uber and Lyft as the ride-
hailing companies scramble to meet demand that is slowly returning to pre-pandemic levels.
III. Analysis of the case
To further the discussion, SWOT Analysis will be used.
Strengths Weaknesses
• They have high standard of service, • Many riders have also noticed increased
verified drivers and cars. wait times for rides. The main reason is a
• Operational cost is quite low. As it shortage of drivers.
relies on customer-to-driver • The relationship between Uber/Lyft and
interaction, a dispatcher is not the drivers is ethically questionable. It
needed. lacks the real connection. So, it is
• Very little competition—major expected that loyalty between Uber/Lyft
competitors are Uber and Lyft only
and its drivers is quite low.
• The system is convenient for the
drivers. They can work flexible • Also, company and its customers have no
hours and even choose to be a part- bonding. Incentive to remain with Uber
time employee. Drivers can also is low.
reject unwanted clients. • Costs of operating vehicles are very high.
But the drivers do not earn so much.
Opportunities Threats
• Customers are often dissatisfied • Drivers’ realization that working for a
with traditional cab companies gig platform isn’t all that beneficial
because of high prices and long • Drivers aren’t happy with the low-profit
waiting time. margins. This might lead to bad
• Rise in number of drivers will publicity. This can in turn discourage the
reduce the Estimated Time of new drivers from joining Uber/Lyft.
Arrival. This will make tech- • Self-driving cars, e.g., Google Cars, will
companies more liked. The startup eliminate the need for Uber/Lyft.
will get more revenue and drivers • Increasing competition will ultimately
will be profited as well. decrease prices. This will discourage
• Cheaper electric cars can be used. It drivers from joining the startup in new
will reduce the cost and increase markets. This will result in loss of
the driver’s profit margin. customers. Uber/Lyft’s revenues will
• Additional services like decline.
transporting older patients to • Some new legal regulations in countries
hospital, transporting children to like Germany will ban them from
school, and transporting pets to the operating.
vet can be offered.
 IV. Recommendations
There is no doubt that the customers love Uber and Lyft. They enjoy benefits of the service.
Apart from the fact that it is convenient, they like how Uber/Lyft helps save time and money. But
governments and drivers often hate Uber/Lyft. To main its customer-centric approach, the
company charges a very low price. Therefore, the drivers do not have a high-profit margin.
Uber/Lyft does not have to follow the regulations that traditional drivers must abide by. It
has been fined for skirting regulations many times. Germany, France, India, Thailand, Netherlands,
and United Kingdom are some of the countries that fined Uber. Negative press is something the
startup must work on overcoming.
It is not known what Uber’s or Lyft’s future is. Google Cars are a big threat to its success.
They should maintain its strengths. It should address the weaknesses found in the SWOT. The aim
should be to turn weaknesses into strength. The team must work and exploit the opportunities and
avoid the weaknesses.