ADMN 404 Strategic Management COMPLETE Assignment 2- UBER- Driving Global Disruption Strategic Repor

ADMN 404 Strategic Management COMPLETE Assignment 2UBER- Driving Global Disruption Strategic Report Athabasca University

ADMN404: Strategic Management Professor: Michael Mauws

Presentation DIMENSION

COMMENTS

Technique/ Mechanics

5

Clarity Support

5 Make use of visual aids.

4

Appearance

4

Executive Summary DIMENSION Content

18

COMMENTS Note more of the conclusions from all sections of the report.

Succinctness

2

2 Provide more of the conclusions.

2

Introduction DIMENSION Description/ History

8 COMMENTS

POINTS 5

Rationale/ Context

Why does Uber need to consider a new strategy?

Limitations/ Foreshadowing

Note other research and resources.

0 2

Organization

4

Mandate

11

DIMENSION

COMMENTS

Description Analysis

POINTS 2

Independence Impact/ Authority

POINTS

POINTS 5

Primary stakeholders?

4

Use of Concepts

4

Conclusions

4

External Analysis DIMENSION

17 COMMENTS

POINTS

Description

Clearly note, rate and discuss the five forces.

3

Analysis

Do not discuss Uber in the Macro Environment.

3

Use of Concepts

Do not combine concepts or use concepts from other courses.

3

Conclusions

Note some of the substitutes.

3

Internal Analysis DIMENSION

12 POINTS

COMMENTS

Description

5

Analysis

5

Use of Concepts Conclusions

5 Do not discuss competitors.

4

Strategic Options DIMENSION

19 POINTS

Description

COMMENTS Ensure your options are either Corporate or Business level strategies.

Analysis

Expand on the pros and cons.

4

Use of Concepts

Include a Hambrick table for each option.

3

2

Conclusions

3

12

Grade Calculation - Assignment 2 SECTION Presentation Executive Summary Introduction Mandate External Analysis Internal Analysis

POINTS / 10 9.00 4.00 5.50 8.50 6.00 9.50

Strategic Options

WEIGHT

MARK

10%

9.00%

5%

2.00%

5%

2.75%

10%

8.50%

20%

12.00%

20%

19.00%

30%

18.00%

6.00

Overall Mark

71.25%

Executive Summary The purpose of this report is to discuss the strategic position of Uber; a company which has operated in the ridesharing industry since 2009. This report will outline Uber and how they have achieved global success through the introduction of a ridesharing app. Insight into the external environment including political, economic, technological and social aspects that affect Uber will be discussed. An internal analysis of Uber will be conducted focusing on Uber’s strengths. Key weaknesses such as the negative relationships with governing bodies will also be highlighted. Finally, strategic options will be addressed and discussed.

Uber must choose new strategies to remain relevant with the increased competition and to help end the regulatory concerns they are facing. Such strategies include global expansion through differentiation, adhering and lobbying regulations, and introducing a fixed-price strategy.

Introduction/Company Overview The Uber application came about through a joke between the co-founders about how it would be much easier, safer and reliable to be able to call a taxi with just the tap of a button. This simple joke is where the idea of Uber began on a cold wintery night in 2008.

Since being established in 2009 by Travis Klananick and Garrett Camp, Uber has dominated the ride-forhire industry and has pathed the way for other companies. Uber began operations in San Francisco as a private car service application providing premium, reliable and easy to order transportation. During 2010 Uber experienced unanticipated growth throughout the world as demand for more reliable ridefor-hire services increased. The surge pricing strategy that Uber operates under makes them attractive to consumers, thus helping Uber to expand to over 65 countries worldwide, employing over 16,000 team members to become one of the most profitable companies within the service sector.

Uber has not only revolutionized the way consumers hire transportation but has also created a flexible way for people to earn extra income. The small idea between two friends has helped to strengthen many city economies making transportation as “accessible as running water” (Uber, 2017) and creating safer modes of transportation. Uber has brought to light the many downfalls of taxi services including dirty environments, rude drivers, unreliable transportation and sexual exploitation. Through Uber’s use of a vigorous screening process each potential employee is subject to criminal record test and drug testing, Uber also ensures potential drivers are not known sexual offenders to ensure the safety of all customers. Drivers are also required to use their own vehicles and to provide Uber with a copy of their clean driver abstract. Using this approach has enabled Uber to prove to consumers that they have their best interests in mind and only want to provide the best and safest service possible.

The intention of this report is to look at Uber’s mandate, external and internal environment, and to provide an analysis of how Uber has become the leading ride-for-hire company and how they can sustain competitive advantage above others.

Strategically Uber should be focusing on one of differentiation to help them continue to stand out from the competitors they paved the way for within the transportation industry. Through continuous research and development into what customers and employees need they will be able to create sustainable competitive advantage and customer loyalty.

Mandate Uber’s mission statement is to “Ignite opportunity by setting the world in motion” (Uber, n.d). Uber is part of the transportation sector with the main goal is getting their customers from point A to point B safely and quickly. Through their mission, Uber is dedicated to trying to solve big problems faced within the transportation industry from the safety of the riders to ensure drivers are properly compensated. Uber is known for their diversity selecting potential employees of all races, ages, and backgrounds – the

only requirements being a sound criminal record check, reliable transportation, clean drivers abstract and vehicle insurance. The vision is much the same as their mission statement to “ignite an opportunity by setting the world in motion, taking on the big challenges to help all those affected within the transportation industry”. (Uber, n.d.)

The major goal of Uber is to help to overcome the frustrations both customers and drivers face with taxi cab services. The overall experience of cab services can be unpleasant for both the driver and rider with many cabs being dirty, often both riders and drivers being rude, wait times being long especially during peak times such as Christmas and New Year, services often unreliable and fares high.

The core values (see appendix 1) of Uber show that one of the top priorities is customer service and the safety of all riders and drivers. This makes Uber attractive to potential customers as well as potential employees; the team at Uber cares about people more than money. The Uber model is built around technology and how as it evolves it can help us all feel safer and happier, through the dedication of the Uber team the ride-for-hire process is made as stress-free and safe as possible for all users. Uber strives themselves on their belief for reliability, safety, and affordability.

Uber is in the growth phase and is experiencing increasing competition from Lyft and Sidecar who offer similar services. The biggest challenge Uber faces is regulatory concerns in the ride-for-hire industry. Uber has faced a backlash from many governing bodies since penetrating the market in many countries and cities.

The limitations of this report will include a lack of access to financial reports. Uber is a privately-owned company; therefore, financial data is no available for public use. This will stop any assessment of high well Uber is financially doing today. There are many speculations available on the internet of Uber financial situation; however, these are unreliable resources and will not be used for this analysis. The analysis of Uber will be based off factual information that can be backed up appropriately.

Stakeholder Analysis Uber is made up of two key stakeholders; the internal and external employees and their customers.

Uber’s customers are a diverse group and bring some unique challenges with them. With the use of the efficient feedback system within the application Uber is able to bring their customers together with their employees. This robust feedback system is only possible due to the outstanding work from one of Uber's key internal stakeholders' the R&D team, the knowledge, and expertise these employees have has helped to grow Uber into a multimillion-dollar company that is trusted by thousands of people.

The internal team is made up of the R&&D team and human resources. The human resource team is responsible for the hiring of the drivers; they are to ensure that Uber hires the right people for the work they offer. The human resource team is perhaps the most important stakeholder for Uber as they are to ensure all other stakeholders embrace the Uber mandate in order the provide the best services for potential and current customers.

The key external stakeholders of Uber are the team of drivers they employ. The application devised by the Uber team makes it possible for the drivers to be paid fairly, quickly and electronically. The application also enables the drivers to rate the customers they pick up; allowing all drivers to be aware of any potential problem customers. The rates themselves are set by the Uber internal team which could potentially cause some issues if drivers feel they are undervalued and could potentially lose Uber business if the customer or driver does not agree with the set rate of pay.

All of these activities are supported by the company infrastructure, the information system, and logistics. If Uber focuses on bringing all of these together with the use of their key stakeholders, then Uber could potentially position themselves to achieve sustainable competitive advantage.

External Analysis

Uber has become the favorite and for many the first choice in the ride-for-hire industry. Uber is a first mover for the new era of the ride-for-hire industry, but as shown through an external analysis there are many obstacles for Uber and many others to overcome. These are shown along with their strengths and opportunities through a SWOT and PESTLE analysis in the appendices.

Throughout Uber's lifecycle there continues to be endless controversies surrounding the political factors. There are still no clear regulations for companies like Uber to operate throughout the world.

These leave a lot of uncertainty as to what regulations will be enacted and just how bad could these impact ride-for-hire companies. The uncertainty makes it very difficult for Uber to make firm plans for their future operations.

Socially and economically Uber has become acceptable as an alternative for a taxi cab or town car which can often be expensive and unreliable. Uber has created new employment opportunities as drivers do not require tax licenses; just a clean abstract, clear criminal background check and valid driver license.

However, this has created some backlash with many established taxi-cab firms. Through Uber's reliability, they have now established themselves in many of the bigger cities around the world and can focus on creating more customer loyalty in smaller cities and towns to make Uber the preferred transportation choice.

Uber's dedication to safety is the strongest social factor they possess. The goal of Uber is to ensure the safety of all drivers and customers for the most enjoyable experience possible. The company has dedicated themselves to conduction internal safety reviews to ensure all aspects are up to the required standards; focusing on three main aspects: operational, technical and organizational. In conjunction with external safety reviews, this has enabled Uber to keep themselves ahead of the competition and up-todate with all health and safety regulations.

Technologically speaking, our world is everchanging and without a complete, technologically advanced research and development team companies will eventually become irrelevant. Uber's team is exceptional; they saw the need for an application-based system and through lots of research they made the first ride-for-hire application which has given them the competitive advantage. However, a threat does come with this, applications can be easily imitated therefore Uber needs to ensure they are continuously researching and developing ways to stay ahead of any competition.

Portor’s Five Forces model extension is used to assess some of the threats that Uber faces. The threat of rivalry is considered high for Uber. Uber is a first mover in their segment for the ride-for-hire industry; this has left the market open for lots of new competition which also increase the threat of new entrants.

Since operations began Lyft, Hailo and Sidecar have positioned themselves within the market using similar models to Uber. There is also the ongoing rivalry with the current taxicab services. This increases the threat of substitutes for Uber, every country that Uber operates also operates its own taxicab service for the public. Taxicab services may not be the most reliable, but consumers will look to those substitutes should pricing be slightly higher for Uber or should there be no Uber service available. The bargaining power of suppliers indirectly affects Uber as oil and gas prices fluctuating may influence their driver's decisions to operate. As prices increase the supply of drivers will decrease and as price decrease, the supply of drivers will increase; however, the demand for services will not change and therefore this could potentially have a negative impact on the operations of Uber. The bargaining power of buyers is relatively low as the switching costs are minimal. If consumers decide to switch back to tax services or carpooling there are no direct costs associated with doing this switch, just the potential to spend more money on services or perhaps save some money through carpooling.

Industry Analysis - Industry Life-Cycle Model

According to the Industry Life Cycle Model (Appendix 4), Uber is currently in the growth phase. Uber is currently experiencing growth in expanding its services to over 80 countries. The growth succession attracts new entrants to the already competitive market for ride-for-hire companies. Economic growth is expanding which increases customer confidence and business activities. The exact point of the growth phase that Uber is at is undeterminable the company does not publicly share gross revenues for the year. Once Uber reaches the peak then growth will drop to zero and they will enter the next phase of the life-cycle.

Internal Analysis An internal analysis of Uber will highlight the strengths and weaknesses of the company. It will also determine how their core competencies achieve and sustain competitive advantage.

The Uber business model revolves around the application developed for smartphones. The entire premise of Uber is based around technology, and technology changes every year. The research and development team of Uber will continuously commit themselves to ensure Uber stays up to date with the lasts technological trends to ensure the application is always up to date and user-friendly. The executive team at Uber consists of only the best with many holding bachelor's degrees in engineering and computer sciences. The R&D team at Uber is a core strength of the company as through research and innovation Uber has enabled the name to transfer into the food delivery service, freight services, and business services.

The use of licensed drivers who own and operate their own vehicles is an advantage for the Uber model.

Standard licensing for ride-for-hire companies is expensive and often hard to come by. Using driver who already carries their own licenses and vehicles allows Uber to keep the start-up costs relatively low as well as the ongoing operating costs. This helps Uber to enter new markets much quicker and cheaper than the competition. With the use of the user-friendly app to locate the services in conjunction with

the low operational costs and ease of finding licensed drivers Uber is able to gain competitive advantage over the competition.

The commitment to safety is a strength that has helped Uber to grow and dominate the ride-for-hire market. An unfortunate incident with the development of self-driving vehicles set the motion for thorough research into how to make the experience safer for all parties involved and how to decreases the risk for Uber. Through extensive development of the application, there is a built-in emergency assistance button for both riders and drivers to ensure all feel safe and all know if they need help there is always a way to call. Uber has also developed a way to ensure that each trip is covered by insurance for all parties by partnering with leading providers. Uber is continuously ensuring that safety reviews are performed and documented to ensure that all current and potential stakeholders feel confident with their decisions to become part of Uber. The high commitment to safety will ensure Uber achieves competitive advantage over other providers in the industry. While it is important for fair prices, safety is the driving force for decisions to get in a taxi or ride-for-hire service, if neither the rider nor driver feels safe, they will not use the service.

Uber does not serve a particular market segment; they appeal to all consumers looking for a reliable and safe alternative to taxi cabs. Uber has achieved growth in many aspects of the market including the expansion of services offered to luxury consumers by Uber Black (luxury cars and SUV’s). Uber has managed to broaden their scope of operations through having no specific target market; you can find Uber services in many cities around the world as well as in some urban areas. Consumers demand has also enabled Uber to operate in other industries such as freight delivery sectors and food delivery services through special applications designed to make the process easier and more reliable for the sender and end user.

A major weakness of the Uber service is the lack of marketing tools. The company does not invest anything into marketing tools and operations which will not help mitigate any negative reviews and media releases towards Uber. The lack of marketing could be costly to Uber especially with the increased competition from Lyft and Sidecar, should these companies be investing in marketing strategies to promote and mitigate negative issues they can use Uber’s weakness to gain more control of the market segment. Currently, the media portrayal of Uber is very mixed; on one hand, Uber has been proven to be a solution to unreliable, expensive and sometimes unsafe ride-for-hire companies. On the other hand, Uber through the negative relationships with governing bodies has been presented as at times be unethical and challenging to current legislation for the ride-for-hire market sector.

The negative relationship Uber has with the governing bodies has led to some legal controversies in some of the countries and cities that Uber has established themselves. In London, England in September 2017 the London Transport Regulator refused to the renewal of the Uber license, saying it was not "fit and proper to hold one. (Uber’s UK, n.d). Brazil has been looking into legislation to make the Uber services illegal. (At Uber, 2017). Uber has also been sued for the execution of illegal practices within the industry; such as, ignoring the standard contracts that are to be held between a car service provider and the city they are operating in and not fully complying with other laws set for ride-for-hire companies.

These legal issues could make it harder for Uber to expand into more markets and to continue to operate in some countries and cities.

Strategic Options The threats that face Uber can make their future undeterminable. Ignoring threats such as the regulations in countries, new entrants and current competition, and the surge pricing model adopted by Uber could determine whether they survive as a company. There are three strategic options that could be pursued by Uber. Each of these options are outlined and discussed below.

Option 1 – Working with regulators/lobbying for new regulations Since beginning operations, Uber has conflicted with the transportation regulating authorities in many countries and cities worldwide. Uber has been sued multiple times in law courts for being unethical and not adhering to the current regulations. These conflicts begin with the lack of license that is possessed

by Uber that ultimately allows them to provide the ride-for-hire services and extends into insurance for vehicles and for the company to operate within the industry. If Uber was to lobby for new regulations and work with regulators to allow them to continue operations legally, they would keep regulators happy and continue to grow their business around the world.

It would be in Uber's best interest to also collaborate with the local governments to meet the minimum requirements for operations. The Uber team should do some research into each cities rules and regulations to ensure they are meeting the minimum requirements. This research could also help them to work with governments to adopt legislation or create new legislation to enable Uber to continue their operations. Understanding the legislation set for ride-for-hire companies is instrumental for their survival to ensure they adhere to each city and country's rules and regulations. This will also help to alleviate conflicts with the taxicab companies that are lobbying against Uber.

Option 2 – Establishing fixed rates Uber adopted the surge pricing model which means that the rates will vary depending on the demand within the market. The surge pricing has allowed Uber to generate revenues through sharing fares with their contracted drivers and allowing the drivers to serve as many customers as they are able to and would like to each work day. Uber uses data analytics to monitor the fare prices to ensure they remain regulated depending on the market demand.

The drivers’ income is highly dependent on the number of customers they can serve each day. Uber currently charges a much lower fare than many of the existing taxi-cab providers; however, the amount

paid by customers will be higher when the demand for services are higher; i.e. during storms, or on public holidays such as New Year's Eve. The surge pricing model could, in fact, deter customers during periods where the demand for ride-for-hire companies is higher, thus sending them back to using the generic taxi-cab firms.

If Uber was to introduce a fixed rate policy for their services this will enhance customer confidence and satisfaction, especially during peak periods. The fixed rate would also translate over to the drivers, where a minimum wage rate per month could be set. This would ensure that those drivers who are not able to serve as many customers a month are still paid a fare set rate for their services which could increase driver loyalty to Uber. Other benefits, such as health insurance would be provided with set minimum wage rates. Regulating the wages and fares enables Uber to comply with government regulations to ensure drivers and customers are covered by adequate insurances. With the introduction of fixed-rates Uber will be able to increase customer and driver loyalty, thus increasing the quality services offered. This will also enable Uber to increase their market share to compete with all companies in the transportation industry.

Option 3 – Global Expansion As noted, Uber has faced many challenges already throughout their life cycle, especially with venturing into international markets. Nevertheless, Uber has continued to attempt to penetrate the global markets by ignoring the different demands consumers have in other countries. In many countries, Uber has clashed with authorities in order to attempt to succeed in an industry that was primarily dominated by tax-cabs. The strategies that Uber has taken to penetrate the global market have been aggressive by bulldozing the market ignoring the city demands and aggressively recruit drivers offering big bonuses.

This has often had a negative impact on Uber, having the company banned in some countries and creating a lot of tension with the already established ride-for-hire companies.

If Uber was to differentiate themselves from their competitors, they will be able to increase its market share and successfully penetrate the global market. There is a currently a high demand for more reliable modes of transportation and delivery services which opens more opportunities for Uber. By introducing Uber Helicopter and Uber Boat, the Uber brand can serve the needs of even more consumers by offering all modes of transportation efficiently, safely and at a reasonable cost through their robust mobile app.

Uber Eats and Uber Freight will give the often unreliable and costly current companies competition by offering the same mobile app to make the delivery sector more reliable and safer. Offering such services would be a smarter strategy for Uber to dominate the global market while achieving competitive advantage over their rivals.

Appendix I Uber Core Values We build globally, we live locally. We harness the power and scale of our global operations to deeply connect with the cities, communities, drivers, and riders that we serve, every day.

We are customer obsessed. We work tirelessly to earn our customers’ trust and business by solving their problems, maximizing their earnings or lowering their costs. We surprise and delight them. We make short-term sacrifices for a lifetime of loyalty.

We celebrate differences. We stand apart from the average. We ensure people of diverse backgrounds feel welcome. We encourage different opinions and approaches to be heard, and then we come together and build.

We do the right thing. Period.

We act like owners. We seek out problems and we solve them. We help each other and those who matter to us. We have a bias for action and accountability. We finish what we start and we build Uber to last. And when we make mistakes, we’ll own up to them.

We persevere. We believe in the power of grit. We don’t seek the easy path. We look for the toughest challenges and we push. Our collective resilience is our secret weapon.

We value ideas over the hierarchy. We believe that the best ideas can come from anywhere, both inside and outside our company. Our job is to seek out those ideas, to shape and improve them through candid debate, and to take them from concept to action.

We make big bold bets. Sometimes we fail, but failure makes us smarter. We get back up, we make the next bet, and we go!

(Uber’s New Cultural Norms, n.d)

Appendix 2 SWOT Analysis Strengths: •

First mover advantage

•

Strong brand awareness/ brand equity

•

Low fixed investment – no product costs

•

Emphasis on customer satisfaction

•

Application development – a strong commitment to research and development

•

Feedback system for both riders and drivers

•

Dynamic pricing system

•

An unlimited fleet of drivers and vehicles

•

Robust and easy to use application platform with low operational costs.

•

Commitment to safety

Weaknesses: •

Highly dependent on stakeholders – large number involved

•

Highly dependent on internet services

•

Experiences a lot of controversies

•

Easily imitated – a very attractive business model that many companies want to adopt

•

Legal issues – litigation, some issues with legislation/rules

Opportunities: •

Lots of growth potential – in big and small cities/towns

•

Opportunity to go public – could make the company bigger and more profitable

•

Potential to enhance their current price model

Threats: •

Ongoing legal battles

•

Drivers are under no obligation – may not show up, show up late

•

A high rate of potential competition – Uber set the rate for other companies to join the market

•

A possibility of new regulations being imposed on this new branch within the industry

Appendix 3 PESTLE Analysis Political Factors: •

Endless controversies; no clear regulations during initial development, ongoing issues differ from country to country now that Uber is well established (i.e. the Netherlands ruled against Uber not having the appropriate taxicab licenses, France filed charges in relation to Uber's advertising etc.).

•

Minimum wage requirements; discussions as to whether Uber was abiding by the tax industry wage regulations.

Economic Factors: •

New career opportunities; creating jobs around the world for people to earn income, this means more taxes which eventually means more money is put back into the economy.

•

Dynamic pricing model

Social Factors: •

Ease of availability; Application is easy to use and quickly connects drivers and customers to each other.

•

Attention to safety; Uber is very safety conscious for both drivers and riders and is always developing and implementing safety features to make the Uber experience as best as possible.

•

The business model used by Uber has improved conditions for both riders and drivers.

•

Employee diversity

Technological Factors: •

Uber application; the majority of people use smartphones, by using an application Uber is able to connect with many more potential customers.

•

POS system; the ability to pay via debit or credit increases the ease and safety for all, carrying cash is often an inconvenience for people and at times leaves them open to many risks.

•

The application has its pitfalls; needs data or Wi-Fi to connect, could potentially be hacked, and needs ongoing maintenance to ensure there are no glitches.

Legal Factors: •

Uber faces much criticism, potential to be banned; it is imperative they follow all copyright, labor, employee, and safety laws and regulations.

Environmental Factors: •

Pollution control; more people being able to get more driving jobs creates more pollution around the world.

•

Uber could, in fact, create more road congestion, fuel usage and make it less safe on the roads for pedestrians.

(Aggawal, 2018)

Appendix 4

Uber

Introductio n

Growth

Maturity

Decline

References Uber Advanced Technologies Group, A Principled Approach to Safety. (2018). Retrieved November 30, 2018, from https://uber.app.box.com/v/UberATGSafetyReport Aggawal, Tapan. (2018, December). Uber technologies SWOT & PESTLE Analysis. Retrieved from https://www.swotandpestle.com/uber-technologies Hill, C.W., Schilling, M.A., & Jones, G.R. (2015). Strategic management: An integrated approach, Theory and Cases (12th ed.). Boston, MA: Cengage Learning

Price, Rob. (2017, October 3). Uber’s UK Nightmare: All the problems facing the ride-hailing app in Britain right now. Retrieved from https://www.businessinsider.com/uber-uk-probelms-legal-battles-tax-sexual-assault-politics-2017-10

Unknown Author. (2017, October 12). At Uber the limits of the law were something to be tested – now comes the reckoning. Retrieved from https://www.buesiness.financialpost.com/technolgy/at-uber-the-limits-of-the-law-wassomething-to-be-tested-now-comes-the-reckoning Unknown Author (n.d). Uber’s New Cultural Norms. Retrieved from https://www.uber.com/newsroom/uber-new-cultural-norms Unknown Author (n.d). Uber. Retrieved December 21, 2018, from https://www.comparably.com/companies/uber/mission