Competitive Rationalization in the Ridesharing Industry

How competitive rationalization in the ridesharing industry by the combined efforts of Uber and Lyft offer a path to profitability

Casey Botticello

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Source: Casey Botticello of Passion Economy Guide

What is Rationalization in Business?

Rationalization in business is the elimination of waste and inefficiency in the industry by the combined efforts of the industry. Competitive rationalization eliminates cut-throat competition by establishing co-operation between the producers or leaders of an industry.

Why does competitive rationalization in the rideshare industry matter?

Simply put — competitive rationalization is a key step toward dueling rideshare companies working together to achieve profitability.

In the case of Uber and Lyft, competitive rationalization means that Uber and Lyft are less aggressively competing for drivers from a shared pool.

Consequently:

  • Drivers will begin to earn less through decreased financial incentives to sign up;
  • Uber and Lyft are taking steps toward achieving profitability;
  • and ultimately, shares in Uber and Lyft should now begin to rise in price.

This is especially important for Uber, which has dropped 35% in price since going public in May.

What Evidence Exists of Rationalization of the Rideshare Industry?

  1. The elimination of cut-throat competition by establishing co-operation between the producers — As noted by several industry analysts, Uber and Lyft seem to be increasingly less aggressive in competing for the pool of eligible drivers.
  2. Securing maximum labor efficiency with minimum efforts — One of the key overhangs on Uber’s stock is uncertainty regarding labor classifications, including California AB5, which restricts how companies can classify workers as contractors rather than full-time employees who are entitled to benefits. Uber and other rivals have indicated there have been “constructive discussions” with lawmakers and say they are “optimistic” that a middle-ground solution can be reached.

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Casey Botticello

🚀 Founder of BloggingGuide.com | Entrepreneur & Blogger | Join 100,000+ creators & learn how to make money writing online ➜ bloggingguide.substack.com