Gojek needs to rethink its business model

Nurhadi
Nurhadi
Nov 3 · 3 min read

Its approach to the market is disruptive. The cab and Ojek business in Indonesia is extremely conventional before Jan 2015, before Gojek launched its first apps. The apps quickly transformed the ways mass-transportations are ordered. At first, it seems promising not until they realized that they can’t make any money as long as there are competitions. And grab (their main competitor) is surely not giving up any fight.

But there’s this simple problem, entering its 9th year into the industry they still haven’t figured out the way to make its transportation business profitable. Quoting Nadim in his interview with Reuters “Gojek extremely close to achieving profitability in all its segments, except transportation”. Yup, you heard that right they still haven’t made a single penny out of their transportation business whether it be Go-car or Go-jek itself.

The initial premise of Gojek is quite simple, they’re going to conquer the transportation industry in Indonesia by implementing technology in a very conventional market. So far, it has successfully created an atmosphere to thrive. Thriving does not means profitable. Thriving in a user base company does not necessarily translate into profits. You can have lots of user and still have no profits. And that’s Gojek and its transportation division.

There’s shifting in the company goals in recent years. They’re no longer focusing on their transportation division. Instead, they’re now focusing on other divisions such as go-food, go-daily, go-massage, etc. It seems more promising in those segments. But at the same time, Gojek could never abandon its main core value, transportations. The questions would be how do they make money out of their core business division?

Gojek needs to seriously think about their business model, gojek business model it’s not sustainable for simple reasons. It cannot create a moat it desperately needed in order to be a profitable company. In this ride-hailing business, the moat is extremely difficult to create. The term economic moat, popularized by Warren Buffett, refers to a business’ ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms.

Gojek needs to change its business model into a more capital-intensive business model. In order to create that Gojek needs to invest heavily in the new technology and shift its focus from building better marketing into creating better products. One of the barriers is the drivers, gojek could never be profitable (if they have competitors) in their transportation division as long as they need drivers. In the US, Uber is experimenting with a self-driving car. Once the products are perfected the drivers are no longer needed. Uber is no longer focusing on capital-intensive marketing to beat their competitors. Instead, they’re now focusing on a better business model by creating a self-driving car.

In short, In order to survive and be profitable Gojek needs to fulfill one of two requirements; they need to be able to tackle their competitor and be the only company on those segments or they need to have a better business model and create moats.

If you want to have a discussion feel free to contact me at surelhadi@gmail.com

Nurhadi

Written by

Nurhadi

Writer. Advertising Student. Full-time books lover.

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