What is the business model of Uber and Ola cabs?

By | December 12, 2016
(Last Updated On: August 11, 2017)

What is the business model of Uber and Ola cabs?

Hey, friends, you may listen to the somewhere the name of Uber and Ola, both these companies are Start-up companies of online transportation Network Company.

uber and ola bussiness model

 

Uber is an American start-up based company and founded by Travis Kalanick Garrett Camp in the year of March 2009. Where, Ola is an Indian start-up company founded by Bhavish Agarwal  and Ankit Bhat in the year of December 2010.

 

If you have got a ride through an Uber or Ola cab, you may question, how these companies earn money? What is their business model? What is their earning? Right!!

So, continue reading if you want to know their business model.

The accuracy is in India these two fellowships are not arriving at any money, in fact, they are huge losses. They received funding from their respective investor’s and currently they are extending their line with fresh groundbreaking thoughts.

If you talk about Ola and uber, they are sticking with the same business model and providing same identical service, but the outcome they are getting reasonably different. Both these companies are innovating ideas to seize market share and consumer care.

Uber and Ola charge even less than an auto rickshaw, then how these companies are making money.

Uber was started in 2009 whereas Ola was started in 2010 but Ola claims that they simply take the idea and started the transportation network business, as I feel the idea of Ola is hollow.

Ola has funded 123 billion $ till so far and they spent huge. Uber has funded 11.46 billion $ till so far, which is world-wide  operations. And there is no difference in both companies and they are following the same business model.

So I will only share here about Ola cab, and it is an Indian company, so you can connect easily.

The commercial enterprise model of Ola and Uber is simple, get the drivers and get more clients, tear the huge price from clients and pay less amount of drivers. But this strategy is not working in India.

The current scheme of these cabs is more EXTRAVAGANT.

Their strategy is to capture the market by providing low-cost service, it means, disburse it now and earn it later. What they are doing right now is paying a decent amount to drivers and charge the minimal cost for customers. It means “prepare to field access”.

We all recognize the Indian consumer behavior, Indian consumer gets the service only when they get discounts, rebate and they ready to compensate when the monetary value is minimum.

And same goes to Indian drivers, they fix to give service only when they get paid a decent sum of money.

Simply consider an instance.

On an average in Delhi a driver drive, 20 rides  a car and he earns 5000 for his work and Ola charge 20% of 5000 as commission and  finally the driver earns net amount 4900₹. If we talk about revenue, per ride may vary to 100 to 200 ₹, including surge pricing (above the toll charge, when there is a shortage of drivers) so I assume here 200 ₹ maximum price charge to clients. Thus, the number of rides X price of per ride, which is 200 x 20 = 4000₹.

Thus the loss from 1 cab, which is 900₹ (4900-4000).

On an estimate in Delhi, more than 40000 cabs are registered with Ola cabs. If 80 per cents of drivers forced the car daily on a daily basis than 32000 cabs are working daily on Delhi streets.

If the loss of 900 rose from one cab, then the loss from 32000 cabs is ₹28, 800,000 (2.88Cr)  (32000 X 900). On an average, the daily loss of Ola cab is (₹2. 88cr)

Other expenses of ola and uber cabs.

Administration expenses.

Marketing expenses.

Technology

Other expenses.

For further classification, you can visit Wikipedia,

According to Ola financial report 2014-2015, their revenue is ₹418. 25 Cr. and their profit is
₹ (-754.87) Cr. It means the estimated loss is more than 55.1%. The same goes with Uber also.

 

Ola Cabs is currently not earning any profits, but the business model of Ola Cabs is currently exercising on the strategy of capturing the market and tapping the potential of a lot of Indian commuters by providing different services like local transfers, outstation travel and full day/half day rentals thereby catering to the variegated demands of the clients. Currently, Ola Cabs is working to acquire market share while trying to provide an enjoyable experience to the customers and thereby earn their confidence.

There is utterly no difference between the business models of Uber and Ola.

There is a beautiful lesson to be learned from the tale of Uber and Ola.

It goes to establish how different executions of the same idea can result in such different end products. 

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