Case Analysis Sheet

Name of Case- Fasten: Challenging Uber and Lyft with a

New Business Model
Date of Submission – .10.2019
Faculty – Dr. Nycil George

Group Details: Group 7, Division - I

Name Roll Number

Pulkit Agrawal I007
Sameer Dhuri I017
Jivesh Kaul I027
Adwait Nadkarni I037
Punit Sethia I046
Siddharth Srivastava I056
A. The Background of the case:
The advent of modern mobile smartphone technology gave users access to infinite
information and services at their fingertips. As a result, the mobile ridesharing industry
emerged. Anyone with a smartphone subscribed to the app could request a ride from
drivers within the network and would be provided with the name, contact information and
car and license plate number of a driver who would arrive for pickup within minutes.

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, started in six months in September 2015, with
$9.1 million in venture capital. The company’s business model, in which drivers were
charged a $0.99 flat fee for each ride they provided, compared to the 20%-30%
commission other ridesharing companies like Uber and Lyft charged their drivers.
Fasten’s leadership felt confident their 17 years of experience in Russia’s car services
industry positioned them well to truly understand their customers and ultimately expand
to other major cities ensure its core IT services could compete, and that its word-of-mouth
approach to attract the essential network. “US market was believed to reach $33 billion in
gross bookings by 2020”

After a $10 million financing round in October 2016, Evdakov Lvov, Chairman of
Fasten and his team had to decide how best to grow. Should they expand more rapidly
into other cities? How should Fasten prepare itself for the arrival of autonomous vehicle
technology?

B. The problems / Key issues:

1. Current operations in only 2 cities of Boston and Austin could make it stagnant if
it does not expand to other cities
2. Does not have the huge amounts of funds as compared to the competition like
Uber and Lyft
3. Retention of drivers to just one platform and avoid poaching from the competition
4. Dealing with opposition from Taxi and Regulatory institutions
5. No previous exposure to US market as they were present in Russia, which is a
different market from US
6. Future competition from emerging technologies like Autonomous vehicles

C. Frameworks / Theories used in Analysis:

 Porter’s five forces
 SWOT
 PESTEL Analysis
 D. Analysis of issues identified:

1.SWOT ANALYSIS-

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

1. The rider 1. No prior 1. Expand into more 1. Taxi and regulatory
awareness was done knowledge of US cities in US by filling opposition
with very less market the void of what 2. Avoid poaching of
investment 2. Had to establish Sidecar has left drivers from
2. Flat pricing; less their technology 2. Increase the share competition
sunk costs center in Russia due of rides in the current 3. Huge investments
3. Provided to high costs in US operating cities by from rivals into new
maximum fare of the 3. Present in only 2 advertising flat fee technologies and
ride to the driver by cities structure marketing campaigns
just taking $0.99 as a 4. Lower financial 3. Gain more funding 4. Evolving offerings
flat fee reserves as compared to compete such as advance
4. Had experience in to the competition 4. Invest into newer booking and pre-
taxi riding of 17 years 5. Stiff competition technologies matching
in Russia from established 5. Expand into more 5. Potential entry of
5. Did not initially brands like Uber and counties globally companies like
employ surge pricing Lyft Google, Apple and
6. Lean model which 6. Estimated arrival others by using
is easy to understand time is higher on an autonomous vehicles
7. Marketing costs are average in Boston for
less as they operate it Fasten as compared
from their Russian to Uber and Lyft
agency
8. Provides flexibility
to the drivers
9. Has experience of
handling high
demand loads
10. Shows the
estimated billing
amount digitally
2. Porter’s Five Forces Analysis:

1. Competitive Rivalry – HIGH

The current competition in US market is quite high among the major players such as
Uber and Lyft and emerging player like Fasten. They are acquiring huge funds from
Series and Seed funding. “Poaching techniques” are being used to acquire the drivers
from the competitors. Huge investments are being made in the new technologies and
marketing campaigns. Each competitor is learning from each other by launching
facilities like price estimation and eliminating terminologies like Surge pricing.
Cutthroat competition for market share in the rideshare sector is evident from these
factors.

2. Threats of New Entry – Medium

It is because the industry is growing at a rapid pace and the technology cost to
develop mobile app is going down, hence it can be relatively not very tough to enter
the industry. Although there would be a lot of competition from the existing brands
like Uber, Lyft and Fasten. The “decline of Sidecar” however, has given opportunities
for new players to fill the void. There are many opportunities in the emerging
countries for such services.
 3. Buyer Power - Medium
The buyer power can be called medium because there are few options available to
choose from in the industry. They are given option such as choose not to travel with a
driver with a lower rating. “The drivers have options to switch between devices of
different companies during a day” and facilities like surge pricing help in choosing
the area of service. Cut-throat competition among the companies provide a lot of
opportunities for drivers and their customers as all the players are trying to get in a lot
of traffic. But, the option of only few brings this power down to medium from high

4. Supplier Power – Medium to High

It is so because few companies are capturing 20%-30% of the fare for each ride while
Fasten has a flat pricing model. There are only few options which increases their
bargaining power which is evident from the options of Surge prices. Since they also
provide services like low interest loans for vehicles which is done post a stringent test
of the credentials of the driver. Also, options like “ratings” of both the customers and
the drivers boosts the bargaining power of the suppliers.

5. Threats of Substitutes - Medium to High

It falls into the mentioned stage because of the fact that there are multiple options
available to the customers like, private vehicles, metros and public bus services,
which pose a threat to the ride-sharing industry. Also, bicycle services pose a huge
threat as it comes with an added advantage of environment safety which is a rising
concern for many. Talking in terms of the drivers, they have an option of operating by
themselves which is being done up-till now. Also, the advent of technology majors
such as Google and Apple into the autonomous vehicle and advanced technologies
can pose a threat to the present industry.

3. PESTEL Analysis for Fasten:

Political:
- Local government agencies has regulatory influence over the operations and can
create a significant threat if voters in the city support them. For ex: Uber has to leave
Austin as local bodies voted in favor of stringent background checks for the drivers.
- Claim of Taxi industry over the lack of regulation in the industry resulting to security
issues for the citizens. This can lead to increased regulation which in turn lead to
difficulty in onboarding riders
- Since Fasten is a company founded by Russian founders with most of its technology
imported from Russia, competitors and regulators in US can question its safety.

Economic:
- Since it is a service based industry, its growth depends on consumer disposable
income which in turn is dependent on inflation, tax rates, employment rates etc.
- Most operators are startups in early growth phase and hence depend on investor
capital. Even though Uber and Lyft has successfully raised funding, the failure of
Sidecar to raise funds and its eventual downfall exposes significant threat.
Social:
- Demographic distribution by age and disposable income is an important parameter for
growth.
- Players should consider the social issues that its consumers are most interested in. For
example, increase in gender diversity among its drivers can help the firms to project a
more progressive image at the same time of addressing the security concerns
associated with the firms.
Technology:
- US is the center of some of the major technology hubs and hence the players have to
be always on the lookout of new technology disruptions that can affect their position
in the market.
- Firms must leverage technology for implementing better security features
- Since it is a service industry using technology to decrease the waiting time and
finding better driver-rider match can improve the riding experience.
- Technology can implement to provide a more transparent pricing. For ex: the digital
meters that Fasten implemented provides rider with pricing transparency and
encourages trust.
Environment:
- Although most firms operate only as aggregators they might be liable to the pollution
causes by the cabs that use their services. In order to avoid any future action by
environment activism and also as a part of corporate social responsibility, firm must
make effort to ensure that the cabs operated by them are compliant to the latest
environment norms.
- Further firms must consider investment in green technologies and providing an option
for electric cars

Legal:
- Fasten must ensure that the markets that they enter provide a significant Information
property protection.
- The firms must ensure that they are in adherence to common law
- Since cab aggregation is a comparatively a new business, firm must ensure that they
are well represented in all the valid forums established to discuss the regulation in the
business.

Conclusion:
1. As Fasten has successfully tested its model in Boston and Austin it should now move
to expand into other cities to quickly fill the void that has been left by SideCar.
Considering its success it has a higher chance of attracting funding from the investor,
which can be used to rapidly expand to newer cities.
2. Currently the strength of Fasten lies with the affordability of its model for both its
riders and drivers, however on an average the waiting time for its cab is significantly
higher than its competitors. Fasten is operating in a service industry and hence it must
 invest in technology to better match the drivers and riders, else it would lose market
share
3. Fasten is in an early stage and hence its primary objective must be to gain market
share. Hence it should be invest its fund in expanding its network and build better
brand relationship. With respect to the threat of autonomous vehicle it can fund
university research groups or tie-up with existing automobile players as done by its
competitors. However, the primary focus of the firm must be to expand its network
and improve its service.
4. Impact of Self-Driving vehicles:
- Companies will have to address the regulatory liability issues in case of a crash
- Additional insurance cost will have to be bored by the firms as the firms will be
responsible for the fleet
- Successful implementation will increase the fixed cost but decrease the variable cost
in future. However, opposition from taxi and driver association over the impact on
employment can be faced by firms.
- Customer acceptability of the self-driving cars has to be tested
5. Impact of Ride-sharing vehicles:
- In case the ride sharing vehicles develop a suitable trust network, the industry could
pose a significant threat to the cab aggregators.
- Considering that most customers are more aware of the cab aggregator firms than the
ride-sharing firm, this exposes a significant opportunity for cab aggregator firms by
launching a ride-sharing offering.
6. Factors responsible for growth of ride-sharing industry:
- The industry which started as a premium black cab service has evolved to serve
almost every segment of the market.
- The industry players rapidly expanded their fleet by onboarding non-professional
drivers by providing them an opportunity to flexibly earn additional income (Avg.
income of a driver in US was $19/hour). In addition firms made it easy for drivers to
lease cars (Ex: Uber Xchange Leasing program).
- Since it is a new business there are lesser regulations which allowed the players to
grow in geography and offerings.
- As it is a high growth business it has attracted significant funding from the investors
with Uber raking in a total of $10,207.45 million and Lyft about $2,012.45 million.
7. Who will be the winner?
Depends
- The industry is at an early stage of growth with increasing competition as new players
are emerging with newer business models.
- As the business is a cab aggregator service, the firm which provides significant
benefit to both the riders and drivers will have competitive advantage.
- Technology will also play an important role by allowing the firms to build decrease
their waiting period, have better insurance plans for their riders etc. With significant
interest shown by firms like Google, Tesla and Apple in the ridesharing market the
current incumbents may even completely lose the market if they don’t evolve