The Strategy Question at the Center of Lyft's IPO case study seeks to answer how Lyft achieved its success.
Harvard Business Review (H04TTW-PDF-ENG)
March 01, 2019
Case questions answered:
- How has Lyft achieved its success?
- Evaluate the company’s growth.
- Discuss the challenges presented by limited marketing strategies.
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The Strategy Question at the Center of Lyft's IPO Case Answers
Summary – Lyft
Successful start-ups optimize and select marketing tools that are the best fit for their unique challenges. Entrepreneurial marketing is the overlapping facets of marketing and entrepreneurship shown by start-ups that strive to develop and establish market ideas. Lyft was established six years ago and is growing at a fast pace.
In 2018, it had over 23 million users and 1.4 million drivers, and the company was worth $15.1 billion. Lyft has assumed the entrepreneurship marketing strategy, aligning its capabilities with resources. The company is an example of a firm that creates a competitive advantage based on quality and value.
Focusing its reputation on kindness, driver-friendly policies, and a customer-experience marketing approach, Lyft has established a good customer identity. Also, resource leveraging has been significant in the company’s success. Its partnerships with other companies, such as Ford and General Motors, have provided information to understand the market and funds to support its operations and marketing.
The company has identified and maximized the market imperfection of competitors such as Uber to identify market opportunities to improve its brand image and reputation. Good marketing and promotion strategies such as referral and storytelling have helped gain a high market share in the domestic market.
Lyft has used riders as brand evangelists; the customers sell the company products/services to each other. Through services such as ridesharing, the company connects riders with other customers and with new prospects in virtual mode to celebrate personal connections, share and learn, and bring riders together and closer to the company.
Entrepreneurial marketing is pushed by opportunities: it is the proactive exploitation and identification of opportunities for retaining and acquiring profitable consumers through innovative strategies of resource leveraging, value creation, and risk management.
To ensure the company’s survival in a competitive industry, Lyft has focused on building customer trust. The company has focused on avoiding Uber’s mistakes. It has provided customers with options to report complaints and share their experiences in all rides.
Limited marketing resources present several challenges to Lyft’s operations. It is unable to conduct extensive market research and fund sufficient and effective marketing activities regularly. Also, it is difficult for the company to attract and retain talented employees and drivers.
With high competition in this sector, it is challenging to establish a competitive advantage and differentiate services/products with limited marketing resources. Some of the action to solve these challenges is embracing an entrepreneurial marketing approach, focusing on digital marketing, and expanding market reach through joint ventures.
Marketing is considered the heart of a company since its key task is to serve and identify a customer’s needs. It spans the boundaries between customers and an organization, delivers services/products to consumers, and takes information about the product offerings to the market. Successful start-ups optimize and select marketing tools that are the best fit for their exclusive challenges.
The concept of entrepreneurial marketing is the overlapping facets of marketing and entrepreneurship shown by start-ups/new ventures that attempt to promote and establish market ideas. According to Stokes (2000), entrepreneurial marketing is more innovation-oriented, employing informed networking instead of intelligence systems and formalized research. Entrepreneurial mindset firms demonstrate commitments to risk-taking, proactivity, and innovation.
The paper’s objective is to critically analyze how Lyft has got to where it is today, the challenges that limited marketing resources present them, and recommendations for possible actions to overcome those problems.
Lyft Inc. is a start-up company operating in the transportation network industry headquartered in California, United States. The company was founded six years ago by Logan Green and John Zimmer, serving only Canada and the United States (Krisher & Liedtke, 2017).
Lyft markets operate and develop mobile apps offering bicycles, car rides, and scooter-sharing systems. These apps match passengers with nearby drivers.
The innovative-oriented company offering ride-sharing services is growing at a high pace. Lyft owns 28% of the United States ride-sharing market (Shokoohyar, 2018). In 2018, the company had over 23 million users and 1.4 million subscribed drivers.
Lyft was valued at $15.1 billion, but it remains an unprofitable business despite growing at a fast pace (Team, 2018). According to the company report, its average gross revenue per ride is about $12.50, and it estimated its revenue to hit $1.5 billion at the end of the 2018 financial year (Team, 2018). The start-up company has a robust growth prospect as it aims to expand to the international markets.
How Lyft Has Achieved Its Growth
Lyft is an entrepreneurial firm that has driven its markets by indirectly and directly shaping and influencing the marketplace by creating new preferences and building on constraints.
The company has a duo focus on entrepreneur-centric and customer-centric at its core (Morrish, 2011). This implies that customers and entrepreneurs have played a key role in influencing its strategy, marketing tactics, and culture. Lyft has assumed the entrepreneurship marketing strategy, aligning its capabilities with resources.
The company is an example of a firm creating its competitive advantage based on quality and value.
A company founded only six years ago is the second-largest in the sector, controlling about one-third of the United States market share. Despite the tough competition and an increasing number of new entrants in the market, Lyft continues to gain market dominance. The company has achieved its growth through mission-based values.
Lyft has adopted the peer-to-peer model focusing on people’s needs rather than cars. Community building innovation has worked for the company in building a worker’s culture that nurtures feel-good experience and human connection.
This model has earned the company the reputation of being community-oriented and personable than competitors (Mainwaring, 2018).
Customer intensity has been critical for Lyft in entrepreneurial marketing. Emphasis on customer intensity is key to…
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