How Online Transportation Service Disrupt The Taxi Business: Case of Indonesia

Abstract

The current high mobility of society requires the presence of reliable, convenient, yet flexible transportation facilities. The existence of online-based transportation services has been considered a breakthrough solution to fulfill people's demands nowadays. The online transportation-sharing service is one of the newest service innovations in mobile commerce (Silalahi). The online-transportation-sharing-service can be referred to as individual transportation services where the internet and GPS technologies are combined to enable passenger calls and tracks for a car or motorcycle, the driver responds and comes to pick up the passenger, and the payment is settled using an online mobile app (Walsten, Shaheen). Traditional industries have been altered by the sharing economy, and many traditional brands will struggle to keep pace with the evolving landscape. Zervas et al (2015) investigate the economic impacts of sharing economy on existing “conventional” firms by studying the case of Airbnb on the hotel industry in Texas, finding more rentals on Airbnb associated with lower hotel revenues and prices. Babar (2018) also finds that on average, ride-hailing services have led to significant reductions in the utilization of city bus services while increasing utilization of commuter rail services. As ride-hailing service rapidly grow in Indonesia, this study will examine how this transportation business innovation disrupts the industry's incumbent leader. The study uses The Blue Bird Company, a dominant conventional taxi provider in Indonesia, as a case study to explore the changes in its financial performance and business value in an environment of growing pressure from ride-hailing services.