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Competitive advantage in transport

Jul 05,2018 - Last updated at Jul 05,2018

I was listening to the radio the other day and listeners came on the radio station and stated that app-based transportation should be abolished or that yellow cabs need to be equipped with apps in order to be relevant and properly compete in today’s market. A common misconception that many businesses have is that if a competitor is attracting customers based on a service or product that is providing them with a competitive advantage, then they must be mimicked as that is the only way to achieve success.

To obtain an advantage over your competition does not mean mimicking what they have doing for them, but simply finding ways that you can service the market where they cannot. 

In business school, they teach what is called a price/quality grid. What that means is that when businesses come up with an innovative idea, they must match themselves within the price/quality grid. Do they want to provide a product or service with low quality and low cost, high quality and high cost, low quality and high cost or high quality and low cost. Many people ideally shift towards wanting to provide a high quality and low cost product, however, each of the four quadrants serves a particular customer base. Say you want to purchase a cheap shoe that you can wear once to a muddy hike then discard of, in that case you would be a customer looking for a low cost, low quality shoe.

Yellow cabs first need to make a determination which quadrant they wish to serve, then realise what they can offer as a competitive advantage to that target audience that app-based transportation cannot.

Let us move on to the other request those individuals had which is abolishing app-based transportation. To that I say that competition is what makes for a healthy business environment and rather than destroying it, you must capitalise on it. What do I mean by that? Competition between businesses allows businesses to increase their quality to stay relevant and try to lower their price, which benefits the customer base. 

Let us say four sandwich shops opened next to each other and all provided the exact same sandwich and ingredients; all four sandwich shops would not reach to their optimum level of customers as each store has three others right next to it that offer the exact same sandwich. But let us say four sandwich shops opened right next to each other, but each of these sandwich shops offered different ingredients, these sandwich shops could benefit from each other’s customers and reach a higher level of customer attractiveness. Let us say I was a customer at store A and usually eat there, one day I feel like a change so I got to shop B. And one day, a shop B customer feels like trying something different, therefore, tries the shop C. In this way, all four shops would have reached a higher level of customers, as well as benefited the shops around them.

How would this apply to yellow cab? Well, what does a yellow cab offer that app-based transportation does not? That would be a competitive price and ease of accessibility. In the price/quality quadrant, it would compete on price and, therefore, would attract and monopolise a certain demographic. But in order to do so, they need to listen to the claims preventing them from doing so. App-based transportation never refuses you a ride. If yellow cabs can capitalise on that, as well as increase their customer service and cleanliness of vehicles, they can compete with app-based transportation and monopolise the low price demographic.

Also, prices of some app-based transportation fluctuate during rush hour, yellow cabs do not. Fixed pricing could be an area of focus for them to also capitalise on the low price quadrant. 

One thing either can do is search for a demographic that neither advertises that they strongly serve. Example would be people with disabilities. If one can market that they can get a physically challenged person from point A to B safely without the need for an escort, they have also gained that demographic as a customer base.

The point of this article is that competition makes for a healthy economy and raises the bar. Rather than focusing on blindly mimicking others, we should study our target audience, match it to the quadrant we wish to serve, and study and implement areas of improvement. There is room for all to grow!



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