Executive Summary
Intorduction
Globalization and technological progress are two main driving forces for businesses to expand their production boundaries and step into following markets around the world. While big traditional companies, like Boro Taxis in NYC, become huge with extensive people-based management systems, digital companies, like Uber, tap into mobile consumer-management with the help of cell phone applications and specific algorithms for paying, interacting, locating, etc. (Jordan 2017). The main advantages of such a contemporary approach to the client management process are operational flexibility and overall agility of the company, which Uber users may describe as non-tradition and client-targeted one.
1.0 Background of Uber
Many people have experienced an inconvenient situation, when there was an urgent need to get somewhere quickly, but traditional cab-driver services would take plenty of time to wait for. This experience led two Uber founders, Travis Kalanick and Garrett Camp, to create an idea of a new cab system with dynamic response from drivers to clients’ requests just in a couple of minutes (O’Connell 2020). This was a year of 2009, when Uber was initially called UberCab and was not expected to become a traditional taxi application, it had to be something that users have never experienced before. Therefore, in 2011, the part Cab was dropped from its original name. The whole timeline of the company development is presented in appendices (see Appendix A).
As Uber has an expanded arsenal of new features now, there are several companies, which provide different possibilities for its users. While the main responsibilities are still giving a ride to its clients, there exist subsidiary companies, such as different Uber lines (UberBlack, UberSUV, UberXL), UberEats, UberPool, Uber Freight, JUMP, and a future project Uber Elevate. The biggest revenue stream comes from rides, given as a primary interest from 2009 with reaching a number of almost 7 billion trips in 2019. Uber also launched its bike-share service in 2013 with a possibility to rent a bike, as well as to use an electric one. Next two units, UberPool and UberEats, were launched in August 2014, being the first to allow users to share a ride with someone heading to the same location, but the second one to partner as a food delivery service with local restaurants. In May 2017, Uber launched its next service, Uber Freight, to let people cooperate regarding shipping and carrying drivers. Company has plans to expand its possibilities and also share air vehicles and eliminate road congestion with its another division called Uber Elevate. The main activities are classified and briefly described in a table in appendices (see Appendix B).
However, there are some minor negative points for being a digital-based company. As Rasalam and Elson claim (Rasalam & Elson 2019), cybersecurity for a company with such a great number of users is necessary for managers to consider in a long-term company life. Companies similar to Uber, e.g. Bolt, have special software to tag vulnerabilities or bugs in the program and effectively manage the damages ante factum.
A digital company’s success is a result of its ability to be financially and operationally flexible. This flexibility is called agility and can be described as a planned set of actions to address changing circumstances of market requirement. The reason Uber is so popular and gains new markets so quickly is because it seeks innovative ways for addressing issues, which people are facing nowadays. Their future plans on expanding the way consumers see vehicle-sharing and trip-planning services is to make it possible for people to do many things faster without adjusting to any circumstances. A number of advantages makes it easier for Uber to find new users and serve them better than traditional cab-service companies.
Requesting a ride with Uber is faster than with a traditional cab driver. The reason behind is the company requests less legal requirements that a driver should accomplish in order to become a cab-company driver (Slavulj et al. 2016). The company presents itself not as a traditional taxi service and its drivers are not taxi drivers, those are all app-tied activities and should be treated as such of similar nature. This way, Uber users can easily contact and engage with riders by having only installed an app onto their cell phone. The ride request is confirmed within some minutes and the user is ready to go.
With faster services there also comes lower price for a ride. When traditional cabs may in average charge from 30$ and more, those alternative ways of riding are far cheaper with an average cost of 15-20$ if personally requested. Such convenience together with fast replay is a way better substitution for old taxi drivers for most. Drivers at Uber are treated as independent contractors and are given more flexibility for working hours (O’Toole & Matherne 2017).
Uber expands its features, beyond people riding, on every single thing that can be possibly transported with a vehicle, e.g. food, luggage, intercity deliveries, etc. For example, its first pivotal experience was to launch UberEats as a strategic move to engage with other businesses, where there were no delivery options or those options were too cost-consuming, in order to satisfy clients’ needs. Such outsourcing offers made Uber one of the most known troubleshooters to do it in a new way together with enlarging its income (Bradford et al. 2016). The other expansion, on luggage and deliveries, was also a step to further positioning the company as a complex service in every situation.
Substitution of many managerial functions by digitization processes was an innovative way to reform the cab-service industry and conquer new markets globally. By expanding to new features and enabling new solutions to old issues Uber together with its subsidiaries happens to be several steps forward than other companies at the market. This also accounts for the organization’s ability of adjusting to always changing environmental, economic, political, legal, and social circumstances so as to provide other ways of proceeding with clients’ needs.
3.0 Opportunities and Threats that Uber faces
Uber has already for better agility, Uber is still influenced by the current external environment and facing some opportunities and threats.
Opportunities:
· Increasing market demand: Ride-sharing platforms have advantage on price, waiting time and payment method rather than taxi. Ride-sharing platforms ease the traffic pressure, promote the use of idle resources and improve service quality according to the online feedback mechanism (Archna, 2018). By 2020, about 685 million individuals are anticipated to utilize ride-sharing services around the world.
· Widely use digitalization: The world is getting to be progressively advanced. More individuals lean toward an interconnected network that is effortlessly accessible on the smartphones (PRC, 2019). Uber should continue to develop the payment method and the online expand business (e.g. Uber Eats, Uber Freight) in order to grow its client base accordingly.
· Improvement of self-driving technology: There are many advantages of self-driving, like decreasing the occurrence of traffic accidents, fewer casualties, reducing economic losses and more free time (Keith, 2019). Self-driving cars are expected to revolutionize the transportation industry. Uber ATG has the potential to wander into driverless innovation and other extraordinary transportation administration.
· Lower inflation rate: The inflation rate of America was 2.44% in 2018, 1.81% in 2019 and predicated 0.62% in 2020 (Erin, 2020). The lower inflation rate means a stable market and lower interest rate loan.
· Coronavirus: While many countries and states mandated people stay at home due to the outbreak of coronavirus. People prefer take-out (Terry, 2020) because it is very unlikely to contract the coronavirus from take-out meals (Samantha, 2020). Uber Eats adjusted EBITA of $313 million and up $148 million quarter-over-quarter in the first quarter 2020 (Uber, 2020).
Threats:
· Highly competitive environment: Uber Rides offering facing competition with personal vehicle ownership and usage, and the latter accounts for the majority of passenger miles. Besides, the traditional transportation services (e.g. public transportation and taxi) and other ridesharing companies (e.g. Lyft, OLA, DiDi). Uber Eats face the menace from restaurants who offer their own delivery and take-away service and from the meal delivery service company (e.g.GrubHub, DoorDash, Deliveroo, Postmates and Delivery Hero). Uber Freight is also in the same situation and competes with freight brokers, such as Total Quality Logistics, XPO Logistics, Convoy, Echo Global Logistics, Coyote, Transfix, DHL, and NEXT Trucking. ATG faces the competition with Waymo, Cruise Automation and Tesla etc. for the development of autonomous vehicle technologies and the sending of autonomous vehicles (Uber, 2020).
· Strict regulation: Many countries and areas implement law or policy, including licensing, insurance, screening and background check requirements to regulate ride-sharing services which limit Uber Rides. For example, ‘pattern of failures’ recognized by Transport for London (Tom, 2019) and regulations mandating minimum wait times posted by Barcelona’s government, all made Uber suspended Rides in these cities (Uber, 2020).
· Negative media coverage: Over the years, a series of scandals about Uber made a difference characterizing the flourishing company’s bequest as one soiled in embarrassment. The scandals refer to data breach, drivers’ strike, passenger safety managers, funding and chief’s discrimination from mangers, employees to customers (Kate and Benjamin, 2017).
· Exchange rate fluctuation: U.S. Dollar Index experienced significant fluctuation in the past half year which means Uber undertook some unnecessary exchange loss because Uber is a global company.
Coronavirus: Rides business has been hit hard by the ongoing pandemic. People cut down travel (Tom, 2020). Uber Rides adjusted EBITDA delivered $581 million in profit and down $161 million quarter-over-quarter (Uber, 2020).
4.1. Strategic recommendations
Uber rides operate in a highly competitive environment with different companies offering the same services. However, the company can still overcome such threats and conquer other global markets based on its agility. Besides, the company enjoys its technological advancement, unlike other companies that face technical hitches, thus acquiring a competitive advantage in the global markets. Nonetheless, the company’s current agility should drive it to overcome market barriers posed by other firms as well as government regulations. Despite the current success of Uber Technologies Inc., the company should expand its operations and reduce vulnerability to its software.
Besides controlling the US markets, Uber needs to step its footprints into the global market. However, the company can gain this by selling its point to Wall Street Investors, who will help the company achieve its expansion goals. Currently Uber operates in 63 countries; however, several markets still exist that have not been exhausted by Uber. Therefore, there is a market gap in some countries that Uber needs to capitalize on. While getting into such markets, Uber should understand the flip side of legal requirements and the political environment in which it intends to operate. International expansion will provide Uber with various opportunities, thus, essential for its future growth (Jordan 7). Besides, Uber should acknowledge the significance of filling its securities in the capital market. However, the company can achieve this by expanding its operations outside the US. Therefore, the overseas market provides a potential ground for overtaking other firms such as Bolt.
Uber should stage war to wage out its close rivals, such as Lyft. However, the company’s success arose from successfully overcoming the US’s regulations regarding its operations. Therefore, the company should use the same strategies to win the global markets. Before getting into other markets, the company should test the agility of the firms presently operating in such markets. However, the majority of upcoming markets lack the technology currently used by Uber; hence, the company should take that advantage and invest in markets such as India, and some parts of the Mideast.Uber’s operation depends on contractual workers and not employees. However, upcoming markets such as Latin America have increasing numbers of emerging middle-class population with the need for the luxury drive. Such markets will perhaps, positively respond to its invasion (Rasalam and Raymond 4). Besides, the company must understand that its operations in such countries are quite different from what they do in the US. Such markets pose various threats, including complexity in responding to technology due to the influence of traditional cubs. Therefore, Uber’s international expansion strategy should adopt the social and cultural environment of newer areas of operation.
Earlier on, Uber had encountered fierce competition once it entered the Chinese market. In 2016, the company was forced to retreat its operations off the Chinese market due to local rivals from companies like DidiChuxing. Therefore, the company suffered massive losses due to forking over-riders. Based on this experience, the company should understand that expanding its operations into a newer market needs more than subsidies to win customers’ hearts (Matherne and Jay 10). Uber should not thump-chest trying to compete with established firms in a market but should conduct business research to understand its targeted market. Having market knowledge is significant in overcoming minor problems, such as government regulations. Besides, it provides the company with an overview of how the market operates and its capacity regarding customers. Therefore, it provides the firm with a rough estimate of the market’s viability.
On the other hand, Uber should consider eliminating vulnerability in its software. Cases of global cybersecurity have increased significantly with hackers targeting third-party vendors, thus posing risks to firms. The current technology that Uber uses is not enough. The company needs to develop a technology capable of informing users whether the driver is drunk or fit for the trip. Such shortage portrays its technology short of safety, which requires the company to address such shortage (Matherne and Jay 6). The company not only operates in an era where technology controls almost all of the economy but also exposes firms to cyber threats. Therefore, Uber should use up to date technology to overcome the current shortages experienced in its software.
Despite the current success of Uber Technologies Inc., the company should expand its operations and reduce vulnerability to its software. Uber Technologies Inc. is a global threat to traditional taxis. However, the company needs more than a domestic operation to become one of the global online transport firms. As the company continues to expand its operations, global expansion is inevitable. However, the company should as well consider reducing vulnerability to its software. Therefore, its expansion strategy should be aligned to new technology.
4.2. Operational recommendations
While Uber has a strong brand awareness worldwide, it has failed to establish competitive advantages over the key competitors such as Lyft and Didi up until now. With the intensified competition, the company has experienced reduced profits and market share over the past few years. According to the resource-based view, sustainable competitive advantage can only be obtained by firms which own resources and capabilities that are not only rare and valuable but are organized and difficult to be imitated by rivals (Nason and Wiklund, 2018). The ride-sharing industry allows easy entrance of new customers. Besides, the switching costs for both the drivers and the customers are low (Cohan, 2019). With many customers in the industry which provide virtually the same service, it could be challenging for Uber to obtain competitive advantages in case that it did not make changes. In addition to competitive fare, competent drivers, and fast services which are important factors to meet the customers’ needs, it is even more important for Uber to pay attention to what the modern stakeholders such as customers and employees care the most. As is argued by Nair and Bhattacharyya (2019), modern stakeholders are becoming more conscious about the social and environmental performance of firms. Key stakeholders such as customers and employees begin to use corporate reputation as an important criterion before choosing the right brand to purchase and the right employers to work for (Tate and Bals, 2018). As has been mentioned above, the negative media coverage on various issues and scandals of Uber has resulted in negative brand image on Uber. Being sensitive to the dynamic environment and the changing stakeholder needs is always important. To become a more agile company requires Uber to embrace its social responsibility by revising its internal culture that has led to discriminatory practices, drivers’ complaints, and customers’ dissatisfaction. In this way, Uber can build a positive brand reputation to attract the potential customers and talented employees.
Given the advantages of self-driving, it is also recommended that Uber can invest more in advanced technologies and establish partnerships with leading players in autonomous driving. Based on the above discussions, self-driving can be considered as an opportunity for Uber to stay competitive in the dynamic business context. With technological development, autonomous driving is expected to be a trend in the near future. However, obtaining competitiveness in autonomous driving is no easy task. It depends on mature and competitive technologies to deal with the potential limitations of autonomous driving. For instance, in poor weather such as snowstorm or heavy rain, the navigation of self-driving cars may hide or distort the painted lines on roads (Shetty, 2020). Consequently, self-driving cars will be perceived to be unsafe to discourage consumers from using the services. In order to obtain competitiveness, it is necessary for Uber to cooperate with competitive players in the field to increase stakeholders’ confidence and trust (Hawkins, 2016). For instance, Tesla is a leading player in electric cars and its self-driving technology is also competitive. By partnering with Tesla, it is expected that Uber can improve its competitiveness over rivals and obtain more trust from key stakeholders. Through partnership, the two companies can benefit from each other and get access to the key know-how and resources of each other to become stronger. More investors may be attracted to invest in Uber and more customers will choose Uber’s service due to the increased confidence towards its technology. In the meanwhile, the mature autonomous cars can also help Uber to significantly reduce the additional costs spent on human labor (drivers) in the long run.
Summary
Reference:
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Figure 1. Uber Company Historical Timeline (O’Connell 2020)
Appendix B: Main Company Activities
Table 1. Main Services from Uber Company (www.uber.com)