MISUMI RICHARD ODOLLA1.

PRESBYTERIAN UNIVERSITY OF EAST AFRICA

PROF. NEMWEL BOSIRE2.

PRESBYTERIAN UNIVERSITY OF EAST AFRICA

CITATION: : Odolla R. M. & Bosire N. (November, 2018). An assessment of the challenges affecting the competitiveness of the taxi industry in Nairobi: A case study of UBER East Africa limited. International Journal of Economics and Finance (IJEF) Issue No XI, Volume 4, pp 136-152.

ABSTRACT

The taxi firms operating in Nairobi do not only experience stiffer competition but also have to contend with the threat of new entrants, the bargaining power of driver-partners, and more informed and powerful customers who enjoyed numerous choices from competitors and also in the form of substitute modes of transport. The fundamental question that would concern every manager in the industry would be to understand the prominent forces driving competition in the industry because these pressures define the industry structure and profitability. These contending but interlinked forces in effect determined prices, costs and ultimate return on investments of the industry and the firms within it. The aim of this study was to find out how influential these industry forces were in contention within the taxi industry in Nairobi city, taking Uber Technologies as a case study. Understanding the prominence of these forces was key in shaping coping strategies that would enable the firm to steer towards the its goals. The study adopted Porter’s five forces framework of industry analysis to carry out the study. The coping strategies or responses were informed by theories of strategy that have evolved over time and include the bargaining power approach, the game theory, resource-based theory and the dynamic capability theory. A case study method was chosen due to its suitability in providing depth in studying the environmental changes and the responses. The researcher used both primary and secondary data sources. Primary data was collected through interviews of managers and support staff. An interview guide was used to ensure reasonable uniformity and to also ensure that salient points in the study were captured. Secondary data was collected from books, journals, newspapers, magazines, websites and other online sources for analysis and evaluation. The prominence of all the five forces was found to be considerable in the industry, even though they acted at varying intensities. Customers were particularly powerful in that they were well informed of market offerings. They also had many choices as well as substitute transport modes that they could use, making the threat of substitutes also prominent in the industry. Most of the competitors were imitating each other, operating on a similar business model and were competing on price, leading to price wars. This increased the intensity of rivalry in the industry. Driver-partners who had organized themselves into associations, were also found to be powerful, frequently agitating for better rates since Uber East Africa Limited and the other operators did not own the taxis. This gave the Driver-partners substantial bargaining power. The company used its strong brand name as a deterrent against the threat of entrants. The study indicated that the main strategic adopted by Uber East Africa Limited was overall cost leadership by leveraging on information technology to gain competitive advantage in the industry.

Keywords: :bargaining power, bargaining power, transport modes and Uber Technologies.
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