ola/uber: understanding of unregulated blue

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Journal of Management (JOM) Volume 5, Issue 5, September-October 2018, pp. 144–154, Article ID: JOM_05_05_014

Available online at http://www.iaeme.com/JOM/issues.asp?JType=JOM&VType=5&IType=5

ISSN Print: 2347-3940 and ISSN Online: 2347-3959

OLA/UBER: UNDERSTANDING OF

UNREGULATED BLUE OCEAN STRATEGY

Aniket Kulkarni and Gaurav Metha

GSE Red

ABSTRACT

Today there are online taxi services which in modest terms have brought a

revolution in the industry all across the globe. Most prominent from Indian stand

point are Ola and Uber. Both of these taxi services are market leaders in the country.

The way in which people in this country especially the middle class commute daily has

drastically changed. Both of these competitors have shown aggression in expanding

their operations and multiplying their customer base in India, applying their Blue

Ocean Strategy. However against this backdrop what happens to the conventional

modes of transport which were used earlier by people (like auto rickshaws)? This is

the question the article has a goal to answer with a case study in the city of Pune. To

understand the dynamics of the cab market in Pune, impact Ola and Uber have had on

conventional businesses and infer whether the auto rickshaws will be able be survive

in a competitive market or they have to integrate themselves with the cab services are

the core questions to be answered by the study. This article also intends to determine

the reasons for the agitations by different groups against the cab service providers

(Ola/Uber). The study conducted to come to any kind of conclusion needs to be done

from both sides of the aisle (i.e. from customer as well as the driver’s perspective).

Key words: Cab services, Autorickshaws, Ola, Uber, Market dynamics, Blue Ocean

Strategy, Business.

Cite this Article: Aniket Kulkarni and Gaurav Metha, OLA/UBER: Understanding of

Unregulated Blue Ocean Strategy, Journal of Management, 5(5), 2018, pp. 144–154.

http://www.iaeme.com/JOM/issues.asp?JType=JOM&VType=5&IType=5

1. INTRODUCTION

The 2 main players in the intra city transport for Pune apart from buses can be broadly

classified into online cab service providers (Ola cabs & Uber Cabs) and Auto rickshaws.

Following is a brief introduction to these and a survey of where they currently stand in the

market.

Ola, a company based in Bangalore, has been in the forefront of the changes and is

definitely one of the beneficiaries of the ever expanding cab business. Ola cabs as on Dec

2017 has expanded in more than 110 cities across India with more than 500,000 vehicles

currently running under its platform. As for Pune region the number of vehicles under its

platform are more then 5000(includes both cars and auto rickshaws) and is ever increasing.

Ola tested Auto rickshaws for its business on trial bases in Bangalore. After successful trial

period it expanded the Ola Auto in cities like Pune in late 2014.The population of Ola Auto in

the total 6000 vehicles under ola’s platform is more than 1500.

OLA/UBER: Understanding of Unregulated Blue Ocean Strategy


Uber, headquartered in California USA, entered the Indian market through Bangalore in

2013 and gradually expanded its foot print across the country. Uber after making successful

forays in different countries had experience to make it big in India. In Pune Uber has more

than 4000 vehicles running its service. Uber Auto was introduced initially in India in New

Delhi, Coimbatore, Indore and Bhubaneswar. However it stopped its Uber Auto services in

2016 in India claiming that it has paused in order to see how this Auto segment of the

business evolves. Rightly so they have re-entered the Uber auto in India with Pune and

Bangalore in 2018.The number of Rickshaws on Uber Auto is difficult to estimate as it has re-

started in 2018 however it is safe to say the number in less than Ola.

Auto rickshaws are ubiquitous is many of the Indian cities and Pune being one of them.

Not having a local-train system like Mumbai and non-uniform bus timings have made people

shift to other transport like auto rickshaws and private vehicles. For Pune itself the number of

Autorickshaws registered is more than 60000 and is increasing with the issue of new permits

by the RTO. Autos have registered under the Ola and Uber platforms-the number adds around

4000.

2. BUSINESS MODELS

In order to find out differences between the two business models (Auto conventional vs.

Ola/Uber); we need to understand the workings of the two systems separately.

2.1. Ola/Uber (CABS)

The fundamental working of the Ola/Uber cabs and Ola Auto remains same that is both can

be hired through their respective applications by the customers. We have surveyed different

metrics like input costs to drivers and tariffs to customers in which we can compare the

Ola/Uber (cabs & auto) and Autos.

2.1.1. Fares

The tariff depends on type of vehicle you are hiring being 4seater/6seater etc. Hence the mean

of all (both Ola and Uber) these per km are given in table 1. (As the main aim is to compare

this with conventional Autos)

Table.1

Range Ola/Uber Cab (Mini)

0 – 4 60 – 107

4-7 121 – 151

7 – 10 155 – 181

10 – 15 195 – 231

15 – 20 236 – 330*

2.1.2. Driver Incentives

2.1.2.1. Uber

There are a range of incentives that Uber has offered its drivers. More prominently it has 3

days target and incentive structure. This changes from time to time however the basic

structure remains the same.

Table 2

Number of days Number of rides Incentives in INR

3 20 800

3 30 1200-1500

3 40 1600



3 52 1800-2000

Incentives are the money given to a Uber/Ola cab driver in addition to what he makes

while providing rides to the customers. The incentives or a package as it is commonly referred

to, has to be selected at the start of the day by a driver and continues for 3 days. All the above

offers however, are not available throughout the week. Some of them are restricted to

weekdays while others are only for weekends.

2.1.2.2. Ola

For Ola cabs the incentives are in a different form as compared to its rival. There is so called

time slots, we can call them happy hours. These are also the packages that need to be taken by

the driver. The timings are like 5am – 10am; 12 pm – 4pm. In these slots (happy hours) the

driver has to complete certain number of rides for subsequent incentive.

Ola also provides an incentive type under MBG (Minimum Business Guarantee) where it

promises a fixed amount as incentive, provided the driver completes particular no. of rides.

Table 3

Package (MBG INR) Number of rides

6200 19+

5500 17

4900 15

3300 11

1700 8

1400 6

However there are some pre conditions mentioned below:

In addition to the number of rides mentioned above the driver has to accrue a certain minimum

tariff from all the rides he has completed.

Also, the driver has to take at least three bookings in peak booking hours(these are subject to

change).

The actual incentive changes from time to time so cannot be determined. From the drivers

we surveyed the amount of incentive is just a little less than what Uber provides.

2.1.2.3. Commissions

These are the amounts collected by Ola/Uber, from the total fare as a commission against the

customer and service provided by them to the driver and the customer. The amount of

commission or(Ola/Uber fee), is calculated as a percentage of the total fare. For both the Ola

and Uber the commission for the ride varies from 10% to 20% of the total fare. The 10%

commission for the lower fares (nearer distances) and 20% for higher fares (longer

distances).The commission is taken before the amount is paid to the driver.

The miscellaneous things such as toll, paid by the driver during the ride are reimbursed by

the company to the driver after the ride.

2.1.2.4. Final Tariff Calculation

A specific example is taken so as to show the various types of additions done to the final

payment to the driver. Table 4

Type Amount in INR

Fare 134.31 Rs

Waiting time 18.00 Rs

Uber fee (commission) -30.46 Rs



Toll 31.50 Rs

Tax on Fare -8.76 Rs

Total Cash collected 183.81 Rs

Payment made to the driver S

2.2. Ola Auto

2.2.1. Fares

The basic fare incorporated by the Ola Auto is primarily based on the tariffs put forth by the

RTO. The variance in fares for normal autos is governed by the RTO Pune and hence that

served the best reference to set their initial price. In order to penetrate the online auto

booking, Ola Auto has put forth their discounted tariffs for customers than what they usually

pay while riding a normal auto. These discounts were initially substantial that gave the initial

impetus to people to switch to online services.

However, once the customer got acquainted with this service the strategy changed and the

discounts were only available for shorter rides and they spiraled to zero as the ride distance

increased. The fares for Ola Auto as of now are as given below:

Table 5

Distance (Kms) Fare(INR)

0 – 4 30 – 35

4-7 41 - 109

7 – 10 120 – 156

10 – 15 160 – 216

15 – 20 222 – 276

The tariffs for Ola auto depend on the route taken and the waiting time during the travel

and hence the rates mentioned above are in a particular range and not a specific amount.

2.2.2. Incentives

The incentives offered to Ola auto are marginal as compared to the same provided to the Ola

cabs. The incentive structure put in place for Ola cab and Ola auto is almost the same. There

are packages provided to the drivers depending upon the number of rides per day. They are as

follows (vary on day to day basis):

Table 6

Number of rides Min Peak bookings Incentive (INR)

8 – 10 4 70

10 – 12 5 100

12 – 14 6 140

14 – 16 7 180

16 – 18 7 220

There are also other incentives like 6 day booking incentive among others which is driver

specific ex: If a driver does not take more Ola rides then he is presented with an incentive

which will lure him to take more number of rides. Also the MBG scheme provided to Ola

cabs mentioned above is also applicable to the Auto drivers but not all depending upon the

driver’s profile.

Ola’s in-trip insurance program ‘Chalo Befikar’ provides a cover of Rs 500,000 at zero

cost for every Ola auto driver partner. It entails daily benefits in case of hospitalization to

cover business losses, takes care of outstanding auto loans, and education for children.



Initially, the program will be rolled out in Bengaluru and will be expanded to other cities in a

phased manner.

‘Auto Unnati’ is also a tailor-made and performance-based financial benefit program

exclusively for Ola Auto driver partners in Bengaluru which guarantees earnings of Rs 40,000

to all auto drivers. They are planning to initiate such plans in other cities in phased manner.

2.2.3. Commission

The effective commission by Ola Auto is charged only during long ride. Though a

commission is collected on shorter rides the discounts provided by the Ola Auto to the

customer are hefty. As Pune has a predetermined tariff for auto there is certain minimum fare

that needs to be given to the driver which corresponds to the tariff he would have got through

his/her meter.

Hence the commission thus charged is given back to the driver as (it can be called)

incentives to eliminate any loss from low tariffs by Ola Auto for shorter rides. For the longer

rides (approximately more than 7 Kms) the discounts are eliminated in a phased manner.

Hence the commission collected remains with Ola which is in the range of 12 to 16 INR per

ride.

2.2.4. Final Tariff Calculation

The discounts as mentioned are given up to a certain distance. The following data taken

represents every single variable in a fare. Hence it can be inferred that if discounts come into

play for shorter rides the commission will decrease accordingly.

Base Fare = 18(for first 1.5 km) + 12.5 * (remaining distance) + waiting time(1 INR per

minute) Table 7

Base Fare 165

Discount 0

Access Fee 15.58

Amount Charged 181

Tariff by Meter 162.88

Payment to driver 162.07

Commission to Ola 18.93

2.3. Auto-Rickshaw

These are ubiquitous in Pune. Even in the era of Ola and Uber the maximum numbers of autos

running in the city are in the conventional manner. The fare system is regulated by the RTO

Pune. The fare calculated is given as follows:

Fare = 18(for first 1.5 Kms) + 12.65 * (remaining distance) + waiting time (approx. 1.2 INR

per minute)

As opposed to the Ola and Uber (Auto/car) service, the conventional auto business model

needs the customers to approach the auto themselves.

As we have discussed the business models for all the three namely Ola/Uber cabs, Ola

Auto and conventional auto we can further discuss the pros and cons of the above models

using the following parameters

Tariff(fare)

Accessibility



3. PARAMETER COMPARISON

3.1. Fare

Table 8

Range Ola/Uber Cab (Mini) Ola Auto Autorickshaw

0 – 4 60 – 107 30 - 35 18 – 52

4-7 121 – 151 41 - 109 57 – 93

7 – 10 155 – 181 120 - 156 95 – 120

10 – 15 195 – 231 160 - 216 135 – 180

15 – 20 236 – 330* 222 - 276 198 – 252

As we can infer from the above compiled table,

If the distance for the ride is approximately less than 7 km then it is desirable to hire an

Ola auto rather than searching for a conventional auto, provided the user has accessibility to

the app.

If the distance that is to be travelled lies in between 7 – 15 Kms then fetching a

conventional auto would be preferable from monetary standpoint.

Even for the long rides (beyond 15 Kms) the fare for conventional auto is less. But

beyond 15 Kms one can hire an Ola/Uber cab over conventional autos as long distance rides

would be more comfortable in a cab.

Pie-chart.1

As per the survey of customers conducted, it clearly indicates that the customer’s

preferences change with respect to the distance they have to travel given that paying low

tariffs is of prime importance to the customer.

3.2. Accessibility

Excluding the tariff benefits given to the customer by the three aggregators over their

respective ranges the following assessment can be made:



Pie-chart.2

Ola/Uber (Auto/Cab)

Ola/Uber aims to use technology to provide easy and accessible mode of commute which was

earlier dominated by local private services.

Consumers can hire a cab/auto by just logging in, on the app

They provide approximately predetermined tariffs for the ride making it more transparent.

They also provide with the driver profile, ability to track the route and share your live cab/auto

location making cab/auto ride safer.

Also the cabs/auto can be pre booked for a scheduled appointment for a future date.

At night conventional autos rates are not transparent; hence Ola/Uber cabs can be preferred.

If you need to carry some luggage, it is highly inconvenient to locate an auto on the road.

Having to travel to the outskirts of the city is hard in normal autos as they hesitate to go, hence

people normally prefer Ola/Uber for such rides.

Auto Rickshaw

People not comfortable with the use of technology often prefer this method as they find it to

be more accessible.

Even though Ola/Uber reaches your location for a pick it takes time while conventional auto

can be hired in running as well.

If you are in a public place where autos are accessible with ease, it is impractical to book an

Uber/ola rather than going with the conventional autos.

People prefer normal autos when they are travelling in the core city as most of the normal auto

drivers readily provide them such service.

3.3. Comparison of Earnings of Drivers

Table 9

Earning/Exp Ola/Uber Cab Ola Auto Auto Avg. working

hours

Earnings /day 900-1800 400-700 500-1000 9 – 10 hrs

Yearly 312000 120000 180000

Maintenance(old) 25000-35000 10000-15000 10000-15000 -

Maintenance (new) 12000 3000-5000 3000-5000 -



Permit and related exp. 50000 10000 10000 -

Installments(new vehicle) 15000 4000 4000 -

Total earning(new)/month 5800 4800

Total Earning(old)/month 19300 8200 13000

3.4. Customer

Before the advent of Ola and Uber services, people had to use private vehicles or had to rely

on Autorickshaws and Bus. The bus transport in Pune which is the back bone of the Cities

public transport is not readily available at every corner of the city and are only timely

accessible on the main roads of the city. Hence a large number of people in Pune have their

private vehicles with which they commute.

Bar Graph.

According to the survey we conducted almost 60% of the respondents use private vehicles

for their daily commute. This survey is rightly supported by the fact that Pune has seen the

highest number of two wheelers registered than in any other metro city. This leaves the

remaining 40% of the people who would be the potential customers for the transport services

(ola/Uber/Autorickshaws and bus). This was initially divided only in autorickshaw and bus

transport but now in three factions. Thus the revenue would also get divided accordingly.

Pie-chart.3

As we can see that the above graph concurs with the previous graph. As large number of

people own private vehicles they would be expected to use these services rarely. Also we



observed that the considerable chunk of them preferred using auto services as it is more

accessible and technology free for them.

Among the people who would prefer to use OLA/Uber services at some point of time,

they would choose it mainly because of two specific reasons; ease of travel (as people find the

technology convenient to use) and when auto and bus are not accessible (inaccessibility is due

to various reasons which would be explained later). However majority of the respondents i.e.

approximately 40% gave equal weightage to all of the above options considering various

factors involved.

Pie-chart.4

4. CONCLUSIONS

In this paper, we have taken into consideration the point of view of both the driver and the

customer of the business models of various transport services in Pune. This was done along

line the parameters like the fare charged, incentives received and overall operating profit for

the driver. We have also explained how the commission is charged by the Ola/Uber service

providers on various ride types.

Ola and Uber services have provided a great alternative to the conventional modes of

transport previously available and it has taken the market share of the public transport service.

They have provided initial tariff benefits to customers making their services more attractive as

compared to the other conventional services. Ola and Uber services have also made late night

intra-city transport more reliable and safe. This mainly benefited late night workers who faced

major challenges finding a ride home at night as auto drivers charged hefty tariffs. Also

during the day time some auto drivers are reluctant to go to certain places in the city for

various reasons making ola and Uber more preferable service to customers facing such

problems.

However as per the data gathered and analysis done from the driver’s perspective, it was

understood that operating under Ola and Uber has its own sets of drawbacks for the drivers

noted below.

Previously in order to attract drivers into their platforms the drivers were paid higher

incentives which were cut short once they have acquired a considerable market share, thus

reducing the revenue of the drivers.



Once an Ola cab/auto is hired it picks the customer up at his/her location and the service is

being paid by the customer in terms of access fee. However the driver who has to go to the

pick (which is on an average 0.8km away) is not paid (some part of access fee) for that free

roaming he does throughout the day. If the driver refuses to a certain ride for above reason

among others he gets negative points to his account which affects his future business on the

platform.

We also noted that the incentive provided to a particular driver differs depending upon his or

her rides (no. of riders/ride distances) preferences.

In order to compensate for the drawbacks the platforms do provide incentives but those added

up still are not enough to Autos who run their auto on this platform.

4.1. The incentive problem

As seen the average free roaming distance per ride is 0.8km. The incentives provided for

example for ola I 70INR for 10 rides. So he travels 8km without getting paid. He can earn

around 100INR by conventional meter which is 30 INR more than what Ola auto offers.

In case of cabs it was observed that the company gives preference to its own cabs.

4.2. New vs. Old cab/Auto

Considering both pros and cons of the business and observing the driver revenue table it can

be concluded that drivers already owning a cab have potentially more revenue per month as

compared with the ones who have bought a new one and operate on the platform.

This is not observed in case of Autos primarily due to the fact that cabs have not been

running in the city and Ola/Uber is the only platform where they can be hired which is not the

case for Autos.

4.3. Probable Solution to the above Mentioned Problems

In Pune there were no conventional cabs as seen in the city of Mumbai. In Mumbai they have

a regulation for cabs in terms of tariffs. The same for Pune is missing as there were no cabs to

start with. Hence, Ola and Uber cabs essentially haven been given a free reign of the tariffs to

be charged to the customer. These tariffs are not comparable to normal autos which are

regulated by the RTO. Notices by various state governments have been filed but with no

outcome.

Looking at the drawbacks of the system mentioned there could be the following solution

possible

Even in the current market scenario the Ola and Uber could increase the incentives for free

roaming that any drivers do in course of their service. However this in turn would increase the

tariffs for such rides and which goes back to square one.

The regulation for the auto rickshaw could be removed and all the auto rickshaws could be

incorporated in the Ola and Uber and letting the market govern the prices of these services

rather than government doing it right now.

The Ola/Uber services could be brought under the government regulation and tariff (or a

range) of such should be made uniform throughout the market. This will create a healthy

competitive market in the sector.

However auto rickshaws form a major component of the transport system in any of the

major cities in the country and also in remote areas. Removing government regulations on

tariffs could prove counter-productive as the rickshaws not incorporated with Ola and may

charge hefty charges in remote areas. Thus both the options 1st and 2nd look unviable. Thus



regulating the Ola and Uber (in terms of tariffs) in current market seems to be the only viable

alternative both the normal auto and the ola/Uber services.

REFERENCES

[1] Livemint (9th Jan 2018), Uber re-Launces Auto service in India, available at Url:

https://www.livemint.com/Industry/xRYgYwRqvSKgmFBMojxcmN/Uber-relaunches-

Auto-service-in-India.html (accessed 29th July).

[2] Sarang Dastane (23rd March 2017), 4 Lakh vehicles add to on-road clutter this fiscal,

Times of India, available at Url: https://timesofindia.indiatimes.com/city/pune/4-lakh-

vehicles-add-to-on-road-clutter-this-fiscal/articleshow/57781365.cms (accessed 5th Aug).

[3] Digbijay Mishra (18th Sep 2017), Ola, Uber driver pay cut by a third, incentives drop 60%

says report, Times of India available at

Url:https://timesofindia.indiatimes.com/companies/ola-uber-driver-pay-cut-by-a-third-

incentives-drop-60-says-report/articleshow/60725917.cms (accessed 17th Aug).

[4] FE Bureau (16th Feb 2018), Uber push: Ola announces incentives for auto drivers,

Financial Express, available at Url:https://www.financialexpress.com/industry/uber-push-

ola-announces-incentives-for-auto-drivers/1067970/ (accessed 21th Aug).

ola/uber: understanding of unregulated blue

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