FASTEN: CHALLENGING UBER AND LYFT WITH A NEW BUSINESS MODEL

DATE OF SUBMISSION: 09/10/2019

INDUSTRY AND COMPETITIVE LANDSCAPE ANALYSIS

FACULTY IN CHARGE: Dr. Srinivas Ainavolu

GROUP 1

NAME SAP ID ROLL NO.

Nitika. 80101190004 E001
Rohan Bhatia 80101190126 E011
Saurabh Dubey 80101190210 E021
Shaily Kasaundhan 80101190353 E031
Siddharth Mishra 80101190452 E041
Pankaj Rungta 80101190591 E051
Tanmay Tiwari 80101190744 E061
Context/ Background of the Case
The case discusses the newly emerging ridesharing market and the major players in it. Uber, Lyft
and Sidecar (now dissolved) are the biggest companies in the US ridesharing market. The case
talks about how these companies came about, the market they fulfilled and how they fulfilled it.
We also learn about the ruthless and cut throat marketing as well as poaching practices prevalent
in this industry. The case then moves on to discuss Fasten, an upcoming ridesharing company
launched in a few cities in the USA and how it’s taking on the established market players with its
new and innovative business model.
The key issues in the case
The key issues highlighted in the case can be broadly divided into the following categories:
 Issues faced by the drivers: The major issue faced by the drivers is the increasing
commission that the ridesharing companies like Uber and Lyft are charging then in order
to increase valuations and become profitable. Uber charges 25-30% commission whereas
Lyft charges a 25% commission. The major flaw in this model is that the ridesharing
companies charge a variable margin to the drivers when there is no variable cost on their
part.
Owning vehicles makes you a car business. It stops being the service software type of
business. It becomes a taxi company
 Issues faced by the customers: The major issue faced by the customers using Uber and
Lyft is dynamic pricing which is implemented in a completely opaque manner. Dynamic
pricing drastically inflates fares at certain times and locations. For Uber the fares can
jump from 1.5 to 7 times while for Lyft they can jump from 1.5-2 times. These fares are
determined by complex and undisclosed algorithms.
 Fasten: a ridesharing company that provided the mobile platform to connect drivers in
their own personal vehicles with people looking for a fast, convenient ride around Boston
with a single swipe on their smartphones
 Company’s business model: drivers were charged a $0.99 flat fee for each ride they
provided, compared to 20%-30% commission other ridesharing companies charged their
drivers
 Rapid decline and exit of Sidecar: intense competition, cutthroat poaching practices,
fast-paced experimentation with new pricing and service offerings, and ongoing legal and
regulatory battles marred the industry
 In Austin, Texas, Fasten immediately entered to fill the void and within 4 months of
operating in its second city, became the first rideshare company to return a profit
 Uber and Lyft: offer pooling services that would require more advanced data analytics
and matching capabilities

Frameworks / theories used for analysis

Porter’s five forces model was used to understand the existing competition and power of the
buyers. PESTEL analysis was used to analyze the impact of various political and technological
factors such as opposition of the taxi drivers, legislative challenges and development of
autonomous vehicles.
Analysis of Issues identified
Fasten developed a unique business model that countered both the key issues highlighted in the
case. They implemented a system by which a customer could opt to pay boot price (increased
fare) in case the number of drivers were low in their area or they could opt to wait longer. This
made for a transparent system. They also decide to charge a flat fee of $0.99 on each ride instead
of a percentage margin so that the drivers could benefit more.

Sidecar Struggles
 In 2015, Sidecar announced it would shift focus away from rides to predominantly offer
delivery services to other businesses.
 Later, the company announced it would discontinue offering rides altogether
 For Fasten, the number-three spot is now open, and it is an opportunity
Other entrants
 Uber responded to these entrants as well by partnering with licensed taxi companies in
select cities to offer UberTaxi, which allowed riders to hail a standard taxi through the
app
Taxi opposition
 The most glaring resistance facing new ridesharing apps came from the incumbent taxi
services within cities that feared the new models would encroach on their business
 Proponents of the taxi industry maintained their claims of its superior safety because the
industry had been regulated since its onset
Regulatory opposition
 Mobile-based ridesharing companies were confronted with regulatory obstacles from
their inception
 For Fasten, Uber have done a really good job in progressing the legal field. They had
fought as stepping-stones for their own entry
Driver employment
 Fasten believed that drivers valued the flexibility that had in working fore more than one
company
Autonomous vehicles
 Advanced software and electrical systems had paved the way for innovative car
technology capabilities
 Uber and Lyft began investing heavily in autonomous vehicle technologies
 Owning vehicles makes you a car business. It stops being the service software type of
business. It becomes a taxi company
 You don’t get a lot of margin in either
Evolving offerings
 Uber and Lyft continued competition on price and services
 Updated eliminated Surge pricing terminology
 Pre-matching

Conclusion and Recommendations

Fasten should try to replicate their Austin model in other cities as well. As the marketing costs
the company incurs are low and it has a great conversion rate of both new riders and drivers due
to its innovative business model which puts customers and drivers at the forefront, scaling will
be relatively cheaper as compared to rivals such as Uber and Lyft. Fasten also has stringent
background checks, a competitive advantage that may prove crucial as more and more cities look
to legislate how ridesharing companies operate.