Business, irrespective of its size and form, is always a challenging environment, where, in most cases, only the superior survives and prospers. Uber Technologies Inc. is an American international public company from San Francisco, which, through a mobile application, allows consumers to find and pay for taxis or private drivers, package or food delivery, and freight transportation. Throughout its whole activity, the corporation manages to win the loyalty of its clients and drivers, chiefly due to its excellent service and comparatively high wages. Nevertheless, in recent years, because of serious problems inside and outside the company, Uber begins to lose its image among consumers gradually. Thus, this paper aims at examining the main issues associated with Uber and conducting a SWOT analysis and market segmentation.
In the transportation sector, Uber has become one of the largest and most successful companies, demonstrating continuous commercial and technological growth and geographical expansion. However, from the foundation, the company experiences significant concerns primarily related to federal and international regulations, corporate culture, public behavior, and the relationship with drivers and other employees. In different cities, including its hometown San Francisco, states, and countries, Uber was fined and prohibited for various issues such as unreasonable overpricing, anti-competitive tactics, inappropriate drivers’ licensing, vague classification of drivers, among others. For example, Uber’s definition of drivers as independent contractors enables the company to shirk responsibility concerning paying minimum wage, driver payroll taxes, vehicle maintenance costs, and wrong actions or incidents committed by the drivers. Such controversial status prompts the drivers to unionize and sometimes appeal to the local courts to defend their rights as it was when, in 2016, Uber had to pay $100 million.
Besides, Uber is known for its rapid expansion at the expense of neglecting local and federal laws, which often resulted in legal proceedings and claims, as well as criticism from notable politicians and journalists. In this respect, Uber enjoys its broad support from drivers and customers to avoid interference from regulatory agencies. For instance, in New York, the citizens made the mayor reject the idea of limiting the number of Uber drivers in the city. This occurred because Uber created a “de Blasio” tab in its app, indicating the time that clients would have to wait due to the offered cap. Therefore, the primary problem of Uber is its dishonest and disrespectful conduct towards its stakeholders, competitors, local and state governments, and consumers overall.
First, Uber developed a unique business model that significantly differs from conventional taxi services. In particular, the model implies that Uber works as a private limousine service, allowing for evading the costly regulatory regime that suggests purchasing a “medallion” and undergoing strict screening procedures for drivers. Additionally, while traditional taxis deal with customers through casual interactions and scheduled appointments, Uber delivers a ride service to customers via the smartphone app linked to a nearby driver reaching the customer within a minute. This altogether allows the company to offer a lower price and realize a dynamic pricing strategy meaning that the price increase when demand is higher, that is, at night, on holiday nights, and during bad weather. Moreover, by obtaining generous funding from investors, Uber can subsidize fares and draw more drivers to its platform, which promotes generating enormous revenues. Finally, the corporation possesses strong brand recognition and brand value, providing its services in over 60 countries worldwide.
Uber’s drawbacks are principally produced by multiple scandals and lawsuits, public backlash, anti-competitive strategies, and behavior with its drivers and consumers, which undermines its image and close different countries’ markets. Cases such as female discrimination, targeted attacks, and rampant sexual harassment have left an indelible and disadvantageous imprint on the company’s reputation around the world. It even got to the point that Travis Kalanick, the co-founder of Uber, had to resign because of the constantly deteriorating company’s image and his utterances critically received by the public. In addition, despite its increasing revenues, Uber faces a substantial net loss, mainly due to growing competition, discounts to its customers and bonuses to its drivers, and a partially failed campaign in China. The manipulation of prices, called “surge pricing,” also caused a severe public backlash. Finally, its business model can be effortlessly imitated by rivals, which was done by Lyft.
Uber’s opportunities are generally determined in two ways, namely, capacity building in China and increasing investment in autonomous vehicle technology. Uber has already begun operations in Chinese cities, including Guangzhou and Shenzhen, but because of government raids on Uber’s Chinese offices and significant expenditures on drivers, the company eventually incur an appreciable loss. However, the merger with its fierce local competitor Didi Chuxing, as the result of which Uber received a 20 percent equity stake in the Chinese company, can give fresh impetus for further enlargement. Besides, Uber should increase its presence in ride-sharing in India and other countries of the Far East. Since Uber is a technological company, it has the considerable potential to venture into driverless technology. Having driverless vehicle technology is vital for Uber’s success since human drivers are the cost determinant while providing rides. Moreover, self-driving technology is also assumed to be safer for people, which can favorably impact the company’s image.
Uber’s threats are specified by several severe problems both on the local and international scale, including enlarging competition, the tendency to unionize, regulatory issues, and worsening drivers’ and consumers’ perceptions. First, the rivalry for the ride-hailing market is presented by such purposeful and aggressive players as Lyft, backed by General Motors, Zipcar, and international companies such as Ola, Grab, and Didi Chuxing. On the aspect of autonomous vehicle technology, Uber is also under pressure, mainly from the side of GM, Toyota, and Ford. Moreover, in this regard, the company is involved in litigation initiated by Waymo regarding proprietary trade secrets related to the driverless vehicle program. On the ground of regulation, Uber also has substantial problems abroad, especially in France, Germany, Denmark, and Czech, which impede and restrict the Uber’s operations via various ordinances. Different lawsuits and hostile stances from governments have a particularly adverse effect on Uber’s recognition, which deteriorates consumers’ and employees’ retention.
Uber’s ride-hailing service comprises economy everyday vehicles (UberX) and carpools with several riders (UberPOOL), luxury vehicles (UberSelect), sport utility vehicles (UberXL), Uber Rush for a courier service, Uber Eats for a meal delivery service. Geographic segmentation is an elementary but valuable type of market strategy, categorizing customers based on geographic location such as city, state, country, rural and urban regions, or zip code. This segmentation helps to identify consumers’ needs and the characteristics of the area, including population density, climate, or income level. Hence, in North America, Uber should provide the full range of vehicles, while in China and the Southeast Asian countries, the company is recommended to focus on delivering UberX, UberPOOL, Uber Rush, and Uber Eats. Herewith, while in urban conditions, the service by UberX, UberPOOL, and Uber Select should be given first priority, the service for the suburban region is to be delivered mostly through UberXL.
Psychographic segmentation classifies customer audiences by factors connected with their personalities, habits, lifestyles, interests, values, outlooks, and priorities. In this respect, the customer base includes the representatives of the lower class, working or studying class, middle class, and upper class. Thus, since the people belonging to lower, middle, working, studying categories cannot afford expensive cars, they should be served by UberX, UberPOOL, Uber Eats, and Uber Rush that provide safety and flexibility of working hours. Meanwhile, persons of the upper class can be catered via UberSelect, Uber Rush, and even helicopters because they value and prefer quality that meets their status. It is worth adding that individuals who like extreme in their lives can be served by UberXL.
Demographic segmentation is an indispensable tool of market strategy, which uses statistical and factual data about the population. In particular, demographic data encompasses gender, age, ethnicity, family situation, annual income, and education. Hence, individuals aged 18-29 and college graduates should be paid direct attention and serviced with UberX, UberPOOL, Uber Eats since, according to a survey by Pew Research Center, they occupy almost 30 percent of ride-sharing. In addition, the ride-hailing service for employees and professionals can be delivered by means of the same vehicles, along with Uber Rush. Finally, according to the same survey, people with an annual income of over 75.000 comprise 26 percent of the population enjoying Uber and Lyft’s service. Thus, Uber should enhance its presence in this market segment by providing UberSelect, Uber Rush, and UberXL.
While the first three segmentations focus more on factual information about customers, behavioral segmentation examines customer acts related to purchasing and spending habits, and brand loyalty, and user status. The data can be collected through cookies placed on the website or applications, third-party databases, or software such as customer relationship management. Therefore, for customers who prefer cost-efficiency, the service can be delivered by UberX, UberPOOL, Uber Eats, while clients who focus on a sense of achievement and convenience should be served by UberSelect. Additionally, loyal customers and regular users should be catered with attractive discounts and flexible prices. Finally, non-users, first-time users, potential users can be serviced with UberX, UberPOOL, Uber Eats, Uber Rush.
In summary, the paper has explored the main issues associated with Uber, which are principally caused by its dishonest and disrespectful behavior towards its stakeholders, competitors, local and state governments, and consumers overall. The problems are associated with numerous lawsuits and scandals, regulation, anti-competitive strategies, public backlash, discrimination, which undermine its image and close different countries’ markets. Furthermore, the paper has performed a SWOT analysis and market segmentation of Uber. For example, among the strengths, there are unique business models, dynamic pricing strategy, substantial funding from investors, strong brand recognition and brand value, and the presence in over 60 countries. Nevertheless, Uber’s threats stem from enlarging competition, the tendency to unionizing, regulatory and legislative issues, and worsening drivers’ and consumers’ perceptions at local and global levels.
It is firmly recommended for the company to review and correct its public behavior and attitude towards local regulatory rules, drivers, and other stakeholders to improve respect for its brand. In addition, the management should concentrate their attention on enlarging the company’s operations in the markets of the Far East countries, such as China, Singapore, Malaysia, Thailand, Philippines, Vietnam, and Indonesia. Although these states have their local competitors, the vast ride-hailing market is practically free and can be considerably occupied by Uber under a relevant, elaborate strategy.