Uber Case Study: Online Technology Development

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Introduction

Uber is an online technology-based company that was established in San Francisco, in 2009, with a view to assisting people who needed taxi services. Since then, the business has crossed transnational borders creating many jobs and helping the movement of people in both small and big towns at affordable prices. Currently, Uber links drivers and commuters in over 400 cities globally. It has also diversified into the food delivery industry, allowing customers to order meals from the comfort of their homes.

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Current Situation and Challenges facing the Company

The taxi industry has recently grown, increasing competition among rivals. According to Mahapatra and Telukoti (2018), Uber lacks a sustainable competitive advantage because the industry features many players who offer similar services. For instance, Lyft, a rival taxi company in the US, seized a large market in 2017 when Uber faced enormous public criticism. A campaign that was started to delete the Uber app from smartphones made the company lose a large number of customers (Hoffman & Gold, 2016). The company also adopts a workplace culture and a forward-leaning approach that have created considerable operational problems in the past. This situation may harm the company’s business prospects and financial situation.

Driver dissatisfaction is a common issue in the company. Uber treats them as independent contractors, which means they are ineligible for minimum wages, staff insurance, and overtime compensations, among other benefits. This challenge has resulted in a series of class-action lawsuits against the company’s business strategy. Mahapatra and Telukoti (2018) unveil that Uber was required to consider its drivers as employees rather than independent workers. However, the company avoided making this decision as it would bring additional expenses such as employee benefits, health insurance, and reimbursement for various business expenses. The company also faces regulation problems due to varying government policies in different geographical locations (Hoffman & Gold, 2016). Authorities occasionally arrest Uber drivers due to non-compliance with taxes. They face enormous risks when working in countries where car-sharing apps are deemed illegal.

Managers and Board: Decisions and Actions by the Board and/or Managers that have led to the Problems confronting the Company

Decisions and actions by the company’s managers and board have often resulted in poor management practices, causing major hurdles to its development. As a result, Uber has created an incredulous list of issues over the past few years (Hoffman & Gold, 2016). The company lost the hearts of many riders due to the disengagement of drivers across the globe and ruined workplace culture. This problem arose from a failure to receive and analyze feedback from drivers and commuters.

The Natural and Societal Environmental Factors That Can Have a Positive Impact on the Company (Opportunities)

Natural factors that create opportunities for Uber include dissatisfaction with long waiting times and exorbitant prices among local taxi companies. The firm can take advantage of the rising markets especially in suburban areas where ordinary cabs do not provide online-based services to connect commuters with drivers. On the other hand, Uber can focus on raising valuations, a strategy that could draw the attention of more investors to help in the further development of the company (Mahapatra & Telukoti, 2018). For instance, Uber can provide additional services such as transportation of children to and from school or ferrying pets to veterinary centers. Furthermore, the firm can win more customers by ensuring a sharp organization, responsibility, and performance. Consumers have no taste for old-fashioned and shambolic taxi companies (Hoffman & Gold, 2016). Uber should take this gap as an opportunity to earn a great score through accountability and performance. This objective can be achieved by creating a powerful and robust reward system to recognize top Uber drivers.

The Negative Factors from the above Environmental Areas That Will Have a Negative Impact on the Company’s Operations

Nevertheless, Uber suffers from various threats from the external business environment. Although there’s an opportunity to recognize Uber drivers through a reward system, many of them are disgruntled by low payments. This state of affairs elicits bad publicity for the firm, discouraging new drivers from joining as partners (Mahapatra & Telukoti, 2018). Failure to absorb them as employees is also another threat that has resulted in adverse consequences in countries such as Germany, which have banned Uber from conducting operations.

Industry Characteristics: Porter’s Five Forces Model

To have a better knowledge of Uber’s potential growth in the taxi industry needs analysis using Porter’s Five Forces model. The breakdown will assist in mapping the various competitive forces that frustrate the growth of the firm. Uber’s value proposition varies markedly from other forms of transport but assumes a similar strategy to other online-based taxi companies such as Lyft.

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The threat of new market entrants

Uber’s lucrative business has attracted other technology-based companies who wish to share the market. Hoffman and Gold (2016) reveal that the firm has made tremendous profits in the past few years but may encounter the risk of new companies that may offer cheaper and better services. This tendency can potentially limit the achievement of projected profits (Mahapatra & Telukoti, 2018). In most cases, new entrants may lower prices with a view of luring customers from established companies. Being a technology-based firm, Uber can hardly prevent any form of replication software by entrants to the industry.

Threat of Substitutions

The threat of alternative products or services is a renowned fear among businesses that operate in competitive environments. The transport industry has numerous firms that can offer substitutes for Uber services. The existing taxi companies and other commuter means may provide more quality services, rendering low business for the firm.

Negotiation power of riders

The bargaining power of riders (buyers) is sensibly high because of the prevailing competition from rival companies that provide alternative means of transport and taxi services. Both drivers and customers have an opportunity to choose cabs from platforms with low prices and shorter waiting times.

Negotiation power of suppliers (drivers)

The availability of drivers in the transport industry is a measure of the power of suppliers in the Uber business. However, due to the company’s subcontracting policy, the hiring of drivers with cars is based on various requirements such as experience and terms of use of the Uber application.

The threat of industry rivalry

Competitors vary in different parts of the world since the company operates in many countries. Nevertheless, it is evident that Uber encounters stiff competition from other established companies such as Lyft, Curb, Ola, Grab, and Didi Chuxing, among others (Mahapatra & Telukoti, 2018). The level of competition depends on the country within which the firm conducts its operations and the number of powerful companies involved in the same industry.

Industry Factors causing a Challenge for the Company

The company is grappling with challenges to ensure better commissions for drivers against staggering fuel prices. This factor has often resulted in the consideration of small cars that consume less fuel per kilometer (Mahapatra & Telukoti, 2018). As a result, some luxury cars have been left out of the question as they proved unprofitable for the company. This situation has raised many reactions among riders as they have been left a limited choice of cars.

Characteristics of the Industry That can be an Opportunity for the Company

The development of electric cars is a great opportunity for Uber. The company should start embracing engineless technology as soon as possible to maximize profitability, increase driver commissions, and reduce cost per kilometer even further. Electric cars should be the future of Uber’s business if the company aims at better returns on investment (Hoffman & Gold, 2016). Uber should also encourage more drivers to acquire personal vehicles to evade expensive taxi rental services through a lease. This strategy will increase profits for drivers.

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Internal Environment: Strengths and Weaknesses Within the Company

Uber boasts of owning the largest market share in the online-based taxi industry. It has a powerful brand recognition that stretches to over 50 countries worldwide. However, the internal environment is also characterized by a demoralized workforce and poor organizational culture (Hoffman & Gold, 2016). This situation has posed adverse effects on the firm. The current CEO, Dara Khosrowshahi, is focusing on building a collaborative culture based on an employee-centered model. Hoffman and Gold (2016) attest that the company is planning to incorporate more fuel-efficient automobiles in a strategic move to boost its financial standing in the industry.

Analysis of Strategic Factors (SWOT)

Based on the external and internal factors that you’ve determined for this company, which ones are key to the company’s success?

Uber’s key strengths include strong brand recognition, low fixed investment, and a dynamic pricing strategy that creates a high demand for its services. The business is also adaptive in nature, which has made it to gain enormous international exposure. Its low price strategy benefits many customers as they enjoy affordable rates throughout the season (Mahapatra & Telukoti, 2018). Nevertheless, various weaknesses including multiple scandals, substantial losses, overdependence on the workforce, and public backlash have contributed to the company’s retarded growth.

Based on the issues/problems that you’ve determined, are the current mission and objectives still appropriate? Should the mission and objectives be changed? If so, how? If they are changed, what will be the effects on the firm?

The current mission and objectives of the firm are still appropriate but there is a need for strict adherence to the policies that govern its organizational culture. There is a significant unpredictability in the delivery of affordable and convenient transportation when considering factors such as competitive pricing and waiting time.

Recommended Strategy (Based on Business or Corporate Strategy concepts)

The involvement of the new CEO in Uber’s business is a great move for the company. Nonetheless, several strategic decisions should be implemented to revive its business cycle. The most significant recommendation for the company is the integration of Autonomous Vehicles (AVs) into business.

Implementation

What step would you recommend for management to do in order to implement your recommendations?

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The first steps towards implementation of the above recommendation are getting a proper timing of the investments and allocating the appropriate resources to boost the business.

Is your recommendation financially feasible? Why?

My recommendation is financially feasible because the company has the capacity to encourage drivers to adopt AVs by offering them bank guarantees for car loans.

Lay out the steps you would take to implement

First, Uber will need to conduct a detailed market analysis to establish the feasibility of AV technology. The second step would involve a move to prepare drivers for the new transportation design and traffic management systems. Sketching a plan featuring a long-term vision will help the company to match driver capabilities with consumer needs, the last step that will facilitate the change smoothly.

References

Hoffman, A. & Gold, N. (2016). Uber: Feeling the heat from competitors and regulators worldwide. RSM Case Development.

Mahapatra, S., & Telukoti, P. (2018). Challenges faced by Uber drivers and consumer satisfaction in Pune city. Global Journal for Research Analysis, 7(2), 358-360.

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BusinessEssay. 2022. "Uber Case Study: Online Technology Development." January 6, 2022. https://business-essay.com/uber-case-study-online-technology-development/.

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