Competition Analysis in The Transport Sector of Saudi Arabia

Introduction

Saudi Arabia is the largest nation in the Middle East with an area that covers about 2.2 million square kilometers. The kingdom of Saudi Arabia is considered one of the top countries with the highest GDP in the Middle East. The country has experienced significant growth in most of its sectors where the transport sector is one of the industries that are currently performing well. The country’s investment on roads, railways, walk paths, and other infrastructural systems have facilities growth and development in the transport sector. Consequently, there is some level of efficiency in the use of modes and systems of transport like vehicles, bicycles, and e-scooters and bikes in Saudi Arabia. Therefore, there is the presence of competition in the transport sector in the country. Hence, the electric scooter business will face rivalry to some extent upon its entry to the market.

Primary and Secondary Competitors

Rental bicycles represent one of the primary competitors to the scooter business. In the recent past, people have begun to use bicycles when moving to and from different places. But people use bicycles when moving to short distances because excessive cycling is associated with exhaustion. Business people started offering bicycles for rentals where people pay whenever they want to use them. The use of bicycles is thriving in major towns and cities. In Jeddah, Jeddawish is an example of a business that is renting bicycles to customers for use within the city (Arab News, 2019). The business is also be looking forward to offering its bicycle services to nearly every part of the city as it expands across the nation. Therefore, the electric scooter business will face stiff competition as it competes with such companies in getting clients. Besides, as the Jedadawish and other bicycle businesses expand to other parts of the city identified to be prospective for the scooters like in the beach and near universities the electric scooter business is likely to face a significant rivalry. It is also important to note the fact that bicycle riding is associated with some of exercise there is a high chance that clients might prefer cycling to the use of electric scooters.

Uber and Careem are businesses that will act as secondary competitors to the use of electric scooters in Jeddah, Saudi Arabia. Uber and Careem represent a business that offers taxi services by moving people from one destination to another but covering short distances. They have applications that people utilize to locate available cars at any time of the day. The businesses use many strategies to take up larger market share in the transport sector. Use of low prices is one of the strategies used by rival companies where many people can afford the costs. The businesses also emphasize on the comfort of passengers, and a person can use an Uber or Careem car as an individual without experiencing disturbance from other passengers as in the case of public vehicles. Therefore, the scooter business is likely to face rivalry from the businesses due to lack of comfort and safety as one gets to drive himself or herself in the former. The idea of pricing is also likely to bring the issue of competition, but it will depend on the amount that the electric scooter business will be charging for its services.

Competitive Strength Assessment

I have selected the first method of competitive strength assessment because it considers all the factors by giving them equal weight for analysis. Besides, I have selected all the factors as enlisted in the worksheet since they are also the determinants of growth of firms in a market (Harvard Business Review, (2008). Therefore, they will also apply to the electric scooter business as it starts and grows in the market. As aforementioned, the main competitors for the electric scooter business are Uber/Careem business and bicycles for hire. These businesses seem to possess some level of strength in image reputation which is based on the fact that they have been in business for a long time. Besides, these businesses also have relatively more strength in quality performance since many people have tested them and ascertained their effectiveness. Also, they do not have high manufacturing capabilities or new product innovation strengths. Financial position and relative cash is also low for the competitors because they do not require high running and maintenance capital. But customer service is relatively high for the competing business. The filled worksheet is attached as a different file along with this document.

The electric scooter business will be unique in the sense that it will be associated with new product innovation. After launching the plan, the business will offer new and innovative products in the market, thus showing a high level of product innovation. It is also evident that the business will have high customer service capability. This strength will be demonstrated by the cordial interaction of a client and a business representative when renting a scooter. After that, the client will be expected to just hit the button for moving and stopping the machine with a least balancing skill.

Analysis of Five Forces of Competition

The Threat of New Entrants

The transport sector in Saudi Arabia is highly controlled by various regulations that limit the undesired entry of new firms. Government is one source of regulatory bodies that control the transport sector. The government of Saudi Arabia sets certain regulations such as acceptable codes based on honesty, respect, and integrity and companies that fail to meet the regulations are eliminated from the transport sector. Besides, the country has established the Saudi Public Transport Co. (SAPTCO) that controls nearly the entire sector. SAPTCO develops and enforces regulations on licenses and ensuring that transport firms are operating within their mandates. Therefore, the management of the electric scooter business will most likely not face great threats but it must show its capability in meeting requirements of the controlling bodies in the transport sector.

The Bargaining Power of Suppliers

As mentioned earlier, the business will be getting electric scooters from China. Therefore, China will act as the primary supplier of the products, electric scooters used in the business. However, electric scooters are also produced in countries like the United Kingdom and Germany through A. J. Stevens & Co. Ltd and BMW Motorra companies. However, China is considered as the top manufacturer and supplier of the products globally. Therefore, I think China might have a relatively higher bargaining power that can make them raise prices, thus affecting the business negatively.

Bargaining Power of Buyers

For the electric scooter business, scooter riders will act as the main buyers. However, at this point, I think buyers may not have a higher bargaining power since there is no presence of a well-established firm offering scooters for rentals in Jeddah, Saudi Arabia. However, there are few people riding on personal scooters who are often spotted in the city. For this reason, I believe buyers will not have higher powers to bring the set prices for the business down.

Threat of Substitutes

The transport industry in Saudi Arabia is a sector filled with many modes and means of transport. There is the presence of buses, online and offline taxis, train, and other modes according to personal preferences that act as substitutes (Harvard Business Review, 2008). Therefore, these modes of transport will act as substitutes to electric scooters when seeking transportation.

Competitive Rivalry

Under this factor, there is the presence of rival companies that will present competition in the market (Harvard Business Review, 2008). Businesses offering bicycles for rentals and Uber and Careem will the main competitors to the electric scooter firm. However, their service delivery is different from what the business will be offering. Electric scooters will give a person an opportunity to ride alone while viewing the surrounding without difficulties. Also, the scooters only require a person to stand and balance as battery energy propels the machine. Therefore, the electric scooter business is likely to reap huge benefits in the market for its uniqueness, where many people will prefer its services.

Barriers to Market Entry

Just like any other sector, the transport industry has several barriers and setbacks that affect firms, particularly those entering the market for the first time. Government regulations form an aspect of barriers that firms face when entering into the market. Bodies like SAPTCO and Saudi Arabian Standard Organization (SASO) have been offering controls such as the number of goods that should enter the country for specific businesses. Such controls can act as both a barrier and a challenge, for instance, in the event of limiting the number of scooters to get to Jeddah. Acts of vandalism are also considered as a barrier and challenge to business entry in a market. Besides, vandalism will also act as a barrier to success and growth after the business has commenced. Acts of vandalism happen when a client has rented a scooter and returns it with deformities that are not easily noticed. Failing to return a scooter will also act as a barrier to the success and growth of the business. The acts of failing to return scooters will result in loss of business assets and resources thus derailing its developmental agendas.

Conclusion

To sum up, as seen from this analytical essay, the transport sector in Saudi Arabia has been experiencing considerable competition, especially coming from rival firms and business. Besides, the fact that the sector is growing, many and new firms have entered the market in the recent past. Consequently, competition has been increasing considerably as the firms compete for clients and available resources. Therefore, the electric scooter business is likely to face competition upon its entry into the market in Saudi Arabia. However, I believe competition helps companies to check on their quality and other efficiencies as they contend in the market.

References

1. Arab News, (2019). Now Jeddawis can rent bicycles. Retrieved 19 July 2019, from http://www.arabnews.com/saudi-arabia/news/727101e
2. Harvard Business Review, (2008). The Five Competitive Forces That Shape Strategy. YouTube. Retrieved from https://www.youtube.com/watch?v=mYF2_FBCvXw
3. Podgayetsky, Y. (2019). What’s the Biggest Threat to Scooter Sharing in 2019? - By Yev Podgayetsky. Retrieved 19 July 2019, from https://hackernoon.com/whats-the-biggest-threat-to-scooter-sharing-in-2019-cf0bfefeb9b8