Porter’s Five Forces framework is used for evaluation of the competition in the industry, considering various factors that influence it. When applied to a particular company, this analytical method provides an understanding of the firm’s potential, as well as challenges and possible strategies for achieving the best outcomes. In this paper, South Korea’s ride-hailing service Tada will be analyzed using the Five Forces Framework, and the assessment of its position on the market will be made.
The first force within the framework is the competition in the industry that depends on the number of rival companies and their ability to attract consumers. Ride-hailing business is still not well developed in Korea, represented by a few services, major of which are Uber and Tada. Thus, in the case of developing an appropriate strategy, the company has the potential to acquire a unique niche in the industry.
The second force is the potential of new entrants into the industry. In the case of car-hailing services in Korea, this force does not seem to influence the company considerably. The technology base in Korea is a developed sector, which makes applications popular among people. However, in this regard, the demographic factor is crucial, as, at present, an increase in the percentage of the aged population is observed in Korea.1 In light of it, start-ups have less potential as the aged public mostly prefers to maintain their old habits, not embracing technologically advanced alternatives.
The third point of the Five Forces model is the bargaining power of suppliers, which are the drivers. It may be evaluated as comparatively high; the majority of potential suppliers would choose to work with a taxi service, more popular among the consumers. The taxi business is also protected by the government, which, at the same time, criticizes car-hailing companies such as Tada.2 In these circumstances, Tada needs to provide attractive conditions for the drivers.
The fourth aspect of Porter’s model is the bargaining power of customers (riders). As there many alternatives for travel, their power is comparatively high. There is evidence of the growing level of the youth (the age from 15 to 29) unemployment. In the nearest future, it may cause the loss of the customers, unable to pay for the car instead of public transport.3
The fifth force within the framework is the threat of substitute products, and this aspect seems to be the most influential in the case of Tada. For car-hailing service, the substitutes include alternative transport, such as taxi, car and bike renting, and public transport. Taxi is a well-developed industry in Korea, protected by the government by several legislations. Upon the emergence of car-hailing capacity, there were a number of taxi drivers strikes, that cause the government to consider possible actions for banning Tada and Uber or force them to modify their strategies.4 Besides, for the low level of income of young and middle-age citizens who represent the majority of Tada customers, public transport seems to be a cheaper opportunity to travel. This fact may decrease the number of users of the Tada service.
In summary, considering all the forces that influence the Tada service, it could be concluded that the company would encounter considerable challenges for its performance. The main reason for it is a well-developed taxi business, as well as a low average income of the citizens that may prefer public transport over the car-hailing facility. However, considering the low competition in the industry and the low possibility of new entrants into it, the company may achieve success if it develops an appropriate strategy.
Reference List
Lee, A., ‘Why Uber Is Such a Massive Controversy in South Korea’, Youth Are Awesome, 2019.
Min-Geun, S., and Mira, C., ‘OECD Cuts Korea’s Potential Growth Rate to 2.5% for 2020, 2.4% in 2021’, Pulse by Maeil Business News Korea, 2020.
‘Total’, Statistics Korea, 2017.
Thuy, T., ‘Ride-Hailing Company Tada Won in Korean Court’, VCI Legal, 2020. Web.
Footnotes
- S. Min-Geun, and C. Mira, ‘OECD Cuts Korea’s Potential Growth Rate to 2.5% for 2020, 2.4% in 2021’, Pulse by Maeil Business News Korea, 2020. Web.
- T. Thuy, ‘Ride-Hailing Company Tada Won in Korean Court’, VCI Legal, 2020. Web.
- ‘Total’, Statistics Korea, 2017. Web.
- A. Lee, ‘Why Uber Is Such a Massive Controversy in South Korea’, Youth Are Awesome, 2019. Web.