Introduction and problem identification

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Introductionand problem identification

TheUber Technologies Company is a rather recent tech start-up that wasfounded back in 2009. The company is a developer of a car-hailingapplication for smartphones, which are used largely all over theworld. A client can be supplied with a ride-for-hire service at thetouch of their phone screens. People no longer need to wait for longor be standed looking for a cab. Uber has grown and developed tobecome the most preferred form of taxi business around the world.Still, in as much as many appreciate it, many also condemn it,especially those that dominated the business before in cities andcountries around the world.

Themain problem facing the company is that of competition in theride-for- hire market, Taxicab services, and limousine services. Morelimousine and private car owners were attracted by Uber’s model andentered in the ride-for-hire market through Uber’s mobileapplication. Players in the industry question this move since the useof limousine car services requires booking in advance, but Uber’sapp allows for prompt service delivery. Uber’s model also offersthe drivers with a higher salary and flexible working hours. For thecustomers, they prefer to use Uber to call for a car than using thetraditional cab or limousine services. The live map of the carsenables the customer to wait for a car in a comfortable place asopposed to standing on the street. It is hard for the traditionalride-for-hire service providers to accept the changes that Uberbrought to the market, they thought Uber is a disruption of themarket and want to kick Uber out of the market. They have evenquestioned the legitimacy of the Uber services considering thecompany hardly owns licenses for the taxi business in the areas itoperates. From the case, except the cities that Uber was forced toclose its services, there are numerous cease-and-desist orders thatUber is fighting around the world. Therefore, the first problem forUber is how to overcome the regulators to operate its car serviceslegally in the controversial cities, and how to deal with itsrelationship with the traditional taxi services providers andlimousine services providers. The regulatory headwinds will alsoaffect Uber’s expansion plan. Therefore, another strategic problemfor Uber is how to expand under the strict regulators.

Uberis not the only company that provides the mobile car services. Thereare newcomers to this market. Lyft and Sidecar are some of the maincompetitors of the company, also offering the new mobile operatingcar sharing services in the peer-to-peer market. Therefore, how todeal with these new competitions will be another issue for Uber.

SituationAnalysis

ExternalAnalysis

Uberhas found itself striving to deal with political and legal pressuresin all the places it operates. In the United States, for instance,the company has to align itself with regulations of the department oftransport. Undeniably, the legality of the business per se has been asubject under discussion for several years now. On the other hand,the economic factors affecting the company seem to be in its favor.Most clients in the market observe the services of the company asones giving them the enjoyment of a well-maintained private vehicle,as opposed to those of commonplace cab companies.

Uberservices are found in cities, other urban centers, and highlypopulated areas. The nature of the business environment is highlypaced due to convenience and ready use of smartphones. The resultanteffect is that drivers and vehicle owners can make relatively moremoney owing to the surge pricing system of the company. The clients,on the other hand, appreciate not only the speed but also the safetyand economic consciousness of the services. The user-friendlyapplication also allows clients to schedule for rides in advance. The drivers use GPS for navigation of vehicles as a norm, and thisoffers customers some level of assurance with estimated times thatthe Uber application displays.

Inthe market, the company faces constant threats of new entrants byother service providers. What is more is, there are no significantcosts for clients to switch service providers in the market. However,the regulatory headwinds limits some of the new entrants to operatein current market. So, the threats of new entrants is medium to high.The bargaining power of suppliers shows that it has a moderate effecton Uber, because the company does not own any vehicles. Itoutsources its most valuable assets. However, there is no substitutefor individual drivers and car owners even though it turns out thosesuppliers have a capacity of negotiating for a higher price. Sincethe company needs to keep clients happy and satisfied, increasing thecost for suppliers would be at its own expense. Nevertheless, and asan advantage to Uber, the company maintains the power of settingrates and terms for it and suppliers by offering the drivers and carowners higher rate of salary than the market rate.

Thereis threat of substitutes in the market that Uber faces. Uber hasmany substitute, like tranditional taxi. The risk of this threat isvery high for the company and it has the potential of affecting theprofitability of the company in a negative way. In fact, and in manyareas where Uber has established a presence, traditional taxi ownersand drivers are coming up to for rival companies as a countermeasure. Then there is the issue of bargaining power of buyers, whichposes as a moderate to high risk of threat to the company. This isbecause the use of Uber services is not a day-to-day activity formany but an instantaneous thing. And switching cost for the customeris low. However, Uber differenciate itself from other companies inthe market by providing excellent services. The customers no longerneed to wait on the street in the cold winter, it also allowcustomers to rate for the rides.

Ubershows that the company has won over the interest of many clients inthe market. Its smartphone application is user-friendly, and thegeneral operations of the firm have proved to be nothing short ofreliable. Uber rides cost less that commonplace taxi services in allareas that the company has established a presence. Uber’s dataanalytic of surge pricing allows the company made slight pricechanges in times of high demands or rush hours owing to the increasedcosts of operation during those times. Undeniably, the company isstill experiencing rapid growth and has developed the potential ofdiversifying its business model even further. In particular, Uber hasthe opportunity of operating as a logistics company that engages inthe transport of not only people but also other physical goods aswell.

Theexternal environment of Uber has the issue of unwelcoming nature oftraditional taxi companies and operators. According to the case,thousands of taxis demonstrated and protested in the streets ofLondon in 2014 against the establishment of Uber business in thearea. Similar occurrences happened in other areas including but notlimited to Rome, Paris, Berlin and Milan. Those against Uber claimthat it is responsible for disrupting normal job operations (in thetaxi industry), over and above lowering values of cab licenses thatpreexisting practitioners in the business hold. This is a huge threatto Uber.

InternalAnalysis

Theinternal analysis of Uber focuses on its strengths and weaknesses.The strengths and weaknesses take into consideration the internalfactors that offer Uber some advantages and disadvantages inattempting to attain the requirements the market it targets. ForUber, the strengths are its core competencies that offer it anadvantage in the target market. As such, it is important to note thatthe strengths of Uber-Company focus on the market and customers. Thestrengths can only be said to be meaningful if they help the companyto meet the needs of its clients. As strength, Uber is the best atmaintaining a connection with their clients by facilitatingaffordable but excellent service for customers, for the purposes ofvalue creation. It always ensures attractive and reliable features ofservice as well. What’s more, the live location of the car allowsthe passengers to track their rides. Moreover, the customers canreview the information and history of the driver and car even afterparting ways when the journey is over this helps a lot in caseswhere someone lost or forgot something in the vehicle. Additionally,the Uber App has options via which consumers can rate the driversafter being given transportation services. This implores the driversto drive safely and to attend to the customers’ social oremotional, and even physical needs in the course of the journey. Thisstands out as the strength of the company, over and above promotinggood relations between drivers and their customers hence, promoting acustomer loyalty program.

Onthe other hand, Uber has some weaknesses as well. These are thelimitations that it faces while implementing or developing itsstrategies. Nevertheless, Uber faces a troubling challenge in itsinternal environment. There exist no close relationship between taxicar owners or drivers and the management of the company. The carowners and the drivers do not get involved in the decision makingprocess. It appears that the firm has total power over the industry.The drivers also rate passengers Uber can refuse them a ride iftheir ratings are low. This form of feedback is well analyzed byemployees of the firm. In cases where a driver gets low ratings, heor she is suspended from operating under Uber. However, as a weaknessand in my opinion, this rating may be unfair. A driver with a bad daymay think that the customer is arrogant. As a result, he may give apoor rating to some clients, and when the management refuses to offera ride to these customers, the market volume will go down.

VRIOAnalysis can also help to understand the situation of Uber. VRIO isan acronym and V stands for value, R for rareness, I for imitabilityand O stands for Organization. The table below can best describe theVRIO Analysis of Uber.

Resource/ Capability

V

R

I

O

Innovation

x

Customer Experience

x

Renowned Brand

x

Corporate Vision

x

Fromthe table, if can be observed that the company resources are doingrelatively well, but they are not expensive to imitate. It thus meansthat Uber has a competitive advantage that is temporary. Otherbusinesses in the industry can attempt to imitate the company’soperation in future, making it lose its competitive edge.

Strategyanalysis

Thebusiness level strategy of Uber is one of maintaining a connectionwith customers by facilitating affordable but excellent service forthe clients for purposes of value creation. Firstly, and as priceleadership strategy, Uber charges are cheaper than those ofconventional taxis. In fact, Uber offers the lowest competitiveprices in the ride-for-hire market despite having attractive andreliable features of service. As a differentiation strategy, thecustomers do not have to wait for or keep searching for taxis on thestreets as mentioned earlier in this paper. The functional strategyof Uber shows that the company aims to maximize productivity andresource use. On the part of the drivers, for instance, the businessmodel of Uber allows them to enjoy flexible working hours, aconvenient and easy payment system, high revenues during peak timesand an extra source of income. The drivers have some level of controlover their own job schedules this makes them feel like a part in themanagement of the firm’s operations. Unlike the situation in othertaxi companies, Uber drivers have independence and freedom ofdetermining when they get to work, how long they work and wheneverthey end their shifts. The overall effect is that people working withUber get to enjoy job satisfaction or motivation owing to theflexibility of the nature of work. Such strategies have allowed Uberto remain the highest ranked service provider regarding customerpreference in the industry.

Consideringthe overall assessment, it is apparent that market strategies of Uberhave enabled it to remain stable. The company has invested in theresources which include the human resource, the financial resources,as well as technology. The human resource includes the drivers whonever disappoint their clients. Their strategy is to ensure that allthe needs of the customers are met and that the clients arecomfortable and satisfied. The company has also invested intechnology as a strategy to reach all the potential customers ontheir smartphones, regardless of where they are. The application isreliable, and as such, it is the source of all clients. Nonetheless,the company remains under pressure from the competitors in theindustry.

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