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SYMBIOSIS INSTITUTE OF BUSINESS MANAGEMENT, BENGALURU

PROJECT SUBMISSION ON:


STRATEGIC MANAGEMENT ANALYSIS OF UBER

SUBMITTED BY:
ARGHYADEEP BASU (19020841109)
C. CHAITANYA (19020841114)
KAHNI KASHIPAREKH (19020841127)
NEAL VAKANI (19020841153)
SHIVANI JOGLEKAR (19020841145)

TO:
PROF. D. SUBRAMANIAM
TABLE OF CONTENTS

Sl.no Content Pages


1. Objective of the Report

2. Industry Information

3. Vision and Mission of the Company

4. Annual Report

5. Business Level Strategy

6. Corporate Level Strategy

7. Analysis- PESTEL, Porter, SWOT

8. Functional Level Strategy

9. Operations Management

10. Conclusion

11. Bibliography
Objective
In this report, we briefly touch upon the Transportation Network and Cab Aggregator
Industry, and aim to derive a complete breakdown and analysis of one of it’s leading
players, Uber, in terms of the workings of the company, with respect to the various
strategies they have implemented in their business.

Our main objective is to relate the learnings from our course on Strategic Management,
with the Uber and its business, and use them to analyze the same.

Industry Information

Cab Aggregation through digital apps has made intracity, and to a certain extent, intercity
transportation affordable.

The business models of the key players, such as Uber and Ola, mainly focused on
matching the demand and supply in the transportation sector by connecting customers
with drivers.

Cab Aggregators mainly address the major open problems, such as the availability of
cabs at the required time, security in terms of tracking the vehicles using technology, etc.

In India, the market is broken down into two segments -


The organized sector, which primarily comes with a brand name attached with the service
provider, and,
The unorganized sector, which constitutes of small travel agencies, individual vehicle
owners licensed with commercial purposes, small car agencies, etc.
The following are the key players in the organized Indian taxi market:-

1. Uber
2. Ola
3. Meru Cabs
4. TaxiForSure

Fig. 1.1 Indian Market Size

Source - TechSci Research

Fig 1.2 Global Comparison of Revenues in the Taxi Industry


Source - Statista
Fig 1.3 Global Comparison of User Penetration
Source - Statista

The cab aggregation industry stood at is a rapidly expanding and has seen a tremendous growth
in the past few years, with about 2400 crore rupees of venture capital having been pumped into
the various firms in the industry.

The Indian taxi market, is estimated to be worth $9 billion and is growing at a rate of 17-20
percent per annum.
The market is projected to balloon to a valuation of $25 billion by 2025.

Challenges
● The organized taxi sector is only about 6% of the total market in India, as against the 70-
80% in foreign markets.
● Standardizing and improving the quality of user experience is a difficult task, due to the
crunch of skilled drivers.
● Customers across cities might have different needs depending upon the conditions in that
particular city.

Trends
● Expansion into new territories/countries
● Consolidation and Acquisitions as competition intensifies.
● Customer Loyalty Programs or Membership Programs
● Expansion into other local markets on a regional basis
Mission and Vision of Uber

At the heart of its business, Uber is all about treating its customers to memorable services, and its
mission statement captures this in a brief and precise way - “Transportation as reliable as
running water, everywhere for everyone.”
The following components can be associated with this statement -
1. Improvement of lives - the company attempts to leave its mark, while promoting
the correct application of technology along with good partnership, to foster an
environment that promotes both individual and communal thriving. It does this by
its global citizenship programs, and support for cities, etc.
2. Exceeding Expectations - Uber goes above and beyond its business of just
providing a means of transport to its customers. It undertakes other activities to
provide services of convenience and care such as Uber Eats, a food delivery
system. (which recently got acquired by Zomato)

The vision statement reads, “We ignite opportunity by setting the world in motion.”
The components involved in this statement are -
1. Igniting Opportunities - Uber’s activities connect people with each other and with their
destinations so that they can grab opportunities. Uber also provides opportunities for its
employees to easily manage and set their own rides.
2. Setting the world in motion - Uber has made sure that one term is always associated with
their brand - reliability. It offers a wide range of services to suit its customer’s diverse
needs, that satisfy the capability of the company to set the world in motion. Essentially,
there is no destination that the customers cannot reach.
Annual Report
Balance Sheet
Business Level Strategy

● High User Convenience


Uber offers multiple levels of user convenience. It eliminates the intricacies and steps involved
in hiring a traditional taxi service. Riders can book a cab from their app and have their driver
arrive in few minutes even in densely populated locations.
Uber has redefined the payment structure. It eliminates various transaction costs and the payment
is automatically charged on the rider’s card or preferred mode of payment. Uber has also made
customer service easy by allowing riders to file a complaint from within the app for their specific
rides. It also removes the hassle of waiting times on a telephonic conversation.

● Variety in Service
Uber’s focus on the range of services offered is an attempt to broaden their market share.
Depending on the budget, comfort, need and requirement, riders can choose from UberGO,
UberPOOL, UberXL or the Uber Helicopter in select regions.
Uber has recently started a food delivery service (UberEATS) which now focuses on delivering
food to people at their place of convenience which further widens their market range allowing
them to allow focus on consumers other than just traditional riders.

● Quality Control Through Rating System


The company’s dual business model offers drivers to rate riders and riders to rate consumers or a
varied range of factors. This allows Uber to collect data than helps them maintain a high level of
quality control.

● Sustainability in the Long Term


Uber’s motto has been “more rides in more places”. The company has expanded as quickly as
possible by eliminating the competition by focusing on pricing even if it meant running the
service at a loss. This has enabled Uber to form a huge rider base based on their popularity in the
market rather than valuing its business strategies around profitability. Uber has been constantly
aggressive on its pricing which has led to a market situation where if Uber decreases its pricing,
the demand becomes too high for it to be “banned” if someone tries to power their way through.
The company is aware that it has radicalized an argument among its huge rider base that elected
officials may now hesitate to restrict its services. This comes into the argument as Uber is
constantly challenged by lawmakers, unions and regulators as Taxi Unions have constantly tried
to run the company down.

● Network Effect
Uber’s ecosystem places a major barrier for new entrants and has formed a massive competitive
advantage. To avoid the threat of commoditization, like in the Airlines Industry, and to keep
itself away from price wars with competitors like Lyft they have invested heavily on R&D,
Machine Learning and auto-driving cars to maintain their leadership in the market. Dara
Khosrowshahi, Uber’s CEO has proclaimed that he wishes for Uber to be the “Amazon of
Services and Transportation” by penetrating into all services of logistics and transportation.
Corporate Level Strategy

“Pay the bills” while calling the “big shots”: Uber is committed to instill financial discipline
ahead of the much-awaited IPO. Uber’s strategies in every market and research like AV are
subject to revision.

Constantly rethink on global strategy: Uber's strategy to attack-on-all-fronts and


indiscriminate spending in its earlier years, is currently shifting to proper planning in distribution
of funds. Uber is still exploring while hiring manpower in countries such as India, Brazil and
Mexico. However, with a concrete vision of taking Uber public within the next three years, Uber
CEO Dara Khosrowshahi wishes to narrow down concentration curbing money-losing strategies.
One of the issues which Uber has always been facing is coemployment i.e whether independent
drivers should be considered as employees and hence receive the same benefits as its other
permanent employees. To combat this, Uber has been aggressively positioning themselves as a
tech company, rather than a taxi company. Drivers aren’t the central theme of a tech company, so
it’s in Uber’s best interest to push the envelope that they are a tech company.

Make good deals: Uber has recently backed off from China and Eastern Europe, while retained
a significant stake indirectly there. It has recently completed its tenth major transaction as an
investor with the acquisition of social app Swipe Labs, a deal which came less than a week after
Uber’s deal with competitor Yandex Taxi. Following this deal, Uber ceded its operations in
Russia to Yandex in exchange for a 36.6% stake in a new joint venture.

Uber has a minority stake in Xchange Leasing India in Q3’15, with the intention to boost driver
participation. Collaborating with Xchange gives Uber a way to offer affordable leases and plans
to the drivers.

Since launching Uber in China in 2014, it was involved in a fierce price war against Didi Dache
and Kuaidi Dache. After two years of its operations, Uber sold Uber China to Didi Chuxing
under the pretext that it allowed Uber to retain a 17.7% stake in the merged entity with a 5.98%
voting power and $1B investment in Uber from Didi.

Uber’s constant troughs with home grown rivals. in India i.e Ola and in Southeast Asia i.e. Grab
and Go-Jek have been well talked. Added to that, these companies are also drawing multiple
billions in funding. As a reciprocation, Uber has developed in itself a well established network of
funding companies.

Such has been the effect of such a robust network that Ola’s valuation was slashed from $5B to
$3.5B amid competitive pressure that Uber is exerting.

SoftBank has participated in multiple rounding of financings to Uber’s three largest Asian rivals,
which includes Didi Chuxing. It has also backed Uber’s Brazilian rival 99. However, now
SoftBank has aims to strike a deal with Uber. Didi, which mutually took up stakes with SoftBank
in all of its major investments, in addition to its own investments in Lyft and Middle East's
Careem Networks, is reportedly forming “anti-Uber” bloc. Reports suggests that coalition is
doomed to fail considering the robust network which Uber has established.

Research: A late entrant to develop Autonomous Vehicles, Uber has turned to Mergers and
Acquisitions to bridge the gap in competencies such as mapping and artificial intelligence. Its
deal with Otto, a self-driving truck startup headed by Google Self-Driving Car Division called
Waymo was supposed to pave its foray into AV, instead it led to a lawsuit with Waymo. Despite
such hiccups, Uber is still hiring actively for its autonomous vehicle development group called
Advanced Technologies Group or ATG.Since mapping has always been an area to focus, Uber
acquied deCarta . This deal bolstered Uber’s mapping and navigation functionality. Also, it kept
deCarta’s patents out of the hands of Google, Apple, and other tech giants.Following deCarta
acquisition, Uber purchased Microsoft’s Mapping Unit. This deal brought 100 of Microsoft’s
engineers. Additionally, its data center and licensed intellectual property to Uber.

Diversify to other ventures: Outside of its core business, the company has retrenched in its
once-hyped UberRUSH courier service, instead focusing on meal delivery platform UberEATS.
Uber has also recently launched its own Freight service targeting the trucking market. However,
Uber's Indian venture of Uber Eats was recently sold to the dominant player Zomato.
ANALYSIS

PESTEL

Political factors: Endless controversies

Uber has always been amidst a cloud of controversy. In its initial development, Uber didn’t have
clear regulations. In case of accidents, whether the contractor or Uber is the party involved, has
always been a source of confusion. France have previously filed charges against Uber on
advertising, the Netherlands ruled against Uber as cases of multiple drivers not having taxi
licenses. Countless reports of traditional taxis, going on strike has always been the source of
headlines.

Economic factors: Unfair Competition Instigator

The industry that Uber operates is the sharing economy, that this their revenue is based on
sharing resources. Countries have banned or restricted its services as Uber promotes unfair
competition against regular taxis.

Uber 's growth as witnessed by governments has been alarming and as Uber grows larger, other
competitive platforms fight to stay relevant.

Social factors: Easy availability

Uber is famous, because it is easy to use and cheap. It requires no verbal or physical
communication but few presses of a button. The cheaper price is enticing to many, which has led
to the explosion of Uber’s. The more accessibility and penetration to tier 2 or 3 cities Uber
provides; the more people will use its service ditching taxis or even public transport.

Technological factors:

Uber tapped on the pain point of customers searching for cheaper transportation options.

Consumers are happy to make appointments through the app or web. Features like an estimate
for the ride cost, ETA, safety buttons make the customer feel empowered. The app is most
important resource to Uber and with the influx of high-speed internet, Uber is using it to its best.
Legal factors: Bans

Uber has faced much criticism, momentary bans and sanctions at locations worldwide.

Environmental factors: Questionable responses

Uber, like all other modes of transportation is often credited to contribute to traffic congestion
and fuel usage which propagates pollution. Uber in its front as not come up officially to promote
e-vehicles to combat pollution as a company.
PORTER FIVE FORCES

In order to have a thorough understanding of Uber’s potential for growth we need to study
Porter’s Five Forces Analysis. These five forces will help us in mapping the different
competitive forces that can possibly or does, hinder Uber’s growth.

The threat of New Market Entrants

A company like Uber attracts competition. But it also instigates new competitors. New entrants
will come with new supply capacity to the industry which result in the reduction of prices. It can
be assumed that new entrants will find hard to raise startup capital when there are players like
Uber. This makes the market hard to penetrate.

However, issues such as:

● Legal issues concerning government authorities in Germany, India, UK, Thailand,


France, Netherlands, and negative press had diminished value of Uber, thus new players
have a playground now.
● Uber is a tech-based company, it in any form cannot stop any form of imitations by new
entrants of the industry.

The Threat of Substitutes

In transport industry, several firms can easily provide an instant alternative to Uber. Even the
slightest increase in prices by Uber will lead to customers taking up the services of its
competitors. A regular threat of substitutes is always a weak force in the case of Uber.

Negotiating Power of Suppliers

The threat of suppliers to Uber is in the following ways.

● Availability of drivers: Since Uber does not own cars among its fleet, it is dependent on
drivers and contractors for service. Uber does use a subcontracting policy for its
employment process but it is quite difficult to substitute individual drivers. This gives the
driver bargaining power for better attention at the company’s expense.
● Switching cost: Drivers are not loyal to just one taxi app. They regularly toggle between
different apps as per their will. This significantly increases the switching cost for drivers

Threats of Buyers

Threat of the buyers may be influenced by the following:

● Negotiation powers of customers: The bargaining power of Uber customers is relatively


high due to the strong-hailing competition.
● Switching barriers for the demand side are generally low because customers, like drivers,
are also toggling between different apps.
● Value proposition for customers: Due to lower transactions and search costs, shorter
waiting times and lower costs, the value proposition for customers is important.

The Threat of Industry Rivalry

● Similar size of companies in the industry leads to prolonged competition with most of the
innovations being used by the consumers.
● The slow aggregate industry growth can lead to nil-sum game where company struggles
to get market share.
● High fixed costs for instance where idle capacities come at a high cost leads to pressure
to sell at low margins in order to generate revenue contribution to the cost base thus
leading to highly competitive.
SWOT ANALYSIS
FUNCTIONAL LEVEL STRATEGY

Uber has successfully aligned its business model with innovative operating business model to
maximize the profits and optimize the experience of both the passenger and driver.

● Human capital:
Uber’s twin business model provides fee to each driver and passenger alike by catering to
each organization’s specific incentives in constructing a symbiosis among the two.
Thinking of drivers as the “other customers” and now not simply an aid deployed in
offering a provider to the end consumer has enabled Uber to domesticate a higher-
pleasant body of workers, ensuring lower employee turnover and increased customer
pleasure. Uber drivers’ hourly wages not only exceed those of taxi drivers, but Uber’s
employees are saved from the downtime and inconvenience related to purchasing a
hackney carriage license and renting a car from a cab corporation. From a fiduciary point
of view, paying drivers an eighty percent fee on their fares in preference to an hourly
wage, more accurately ties revenues to local market proportion and unlocks an increased
analytical functionality. Furthermore, having drivers use their personal motors lets Uber
to reinforce bottom line earnings by way of saving both the capital expenditure required
to invest in a fleet of company-owned motors as well as the running expenses related to
insurance and repair expenses. These operational selections are without delay in keeping
with Uber’s enterprise model aimed toward converting driving force satisfaction to
patron pride through industry-competitive worker incentives and revolutionary
commercial enterprise practices.

● Tech Focus:
Uber’s heavy investment in the development and iteration of its mobile app displays an
underlying commitment and competitiveness to a persevered boom and overall
performance. Connecting drivers with passengers through their smartphones gets rid of
the want for Uber to set up a brick and mortar presence in every new city to which they
increase operations, making this an enormously scalable approach with constrained
obstacles to future growth. This scalability also unlocks the capability for Uber to expand
into contiguous service segments including food delivery without making any certain
changes to the original operating business model. Optimizing ease of use, efficiency and
ease of access in the app’s interface layout has won client loyalty and mitigated
competitive pressure as passengers are less probable to replace providers if doing so calls
for them to learn and adapt to a brand new application.

● Pricing:
The Surge Pricing set of rules is a cornerstone of Uber’s business model that has furnished the
organization with an advantage in capitalizing the dynamic relationship between supply and call
for and willingness to pay. When there are more passengers than drivers in a given area, the
algorithm increases costs with the intention to equate this discrepancy. The first advantage of this
version is that it draws drivers to areas supplying higher prices, thus increasing their numbers in
regions of high demand. Second, it narrows the preliminary pool of potential passengers based
on how a good deal they price a ride for, allowing Uber to more accurately segment their
customer base and fulfill those customers who need their service the maximum. This creates a
strong brand image because clients will associate Uber as a brand which can be trusted with
convenience of where they want to go within the destined time. Thus the Surge Pricing model
serves the very best viable profit margins for the organisation whilst organizing a targeted base
of customers and a fantastic brand perception.

● Increased service range:


Uber offers extensive range of cab services to cater for the needs of the great amount of
customers. It serves as a great competitive advantage as customers can choose among Uber X,
Uber XL, Uber Pool, UberGo, Uber AUTO, Uber Access, Uber MOTO, Uber Premium or Uber
Rush depending on their budget, purpose of the ride and the occasion.
OPERATIONS MANAGEMENT

Operations Objectives:
The quality of the design and service is focused upon by Uber and improved by them so that they
are able to ensure more customers are attracted to Uber.

Uber also focuses upon improvement in flexibility of its operations which helps to improve its
operations by being flexible with the changing demand in the market.

Uber customizes its operations in some countries according to demography. This helps them in
satisfying the demands of the customers in a particular country.

Uber also focuses on regular customers and increases the dependability of the services. They do
it by providing them with options to rate their trip. If the reviews are low and comments are
negative, they focus on those weak areas to improve the dependability of the customers on Uber.

Reduction of the cost or expenditure of the company can also help Uber by providing them with
lower prices and also provide them with discounts and hence increase customer satisfaction.

Uber’s operations

1. Product development and design

a) Explicit Services: Tangible aspects of the service being provided such as the
application of time, expertise, skill and effort.

b) Product features: -

● UberX, UberTaxi, UberBlack: Altogether this targets the mass market, making
it easier to gain a larger customer base. This feature focuses on consumer
preferences.
● Cashless Transactions: Fares are automatically charged to the rider’s card hence
creating effeciency.

2. Outsourcing: Uber outsources its payment system to a company named BrainTree. This
was needed as Uber expanded internationally and the need for simple & efficient process
payment grew.
3. Technology: Uber uses a combination of established and leading-edge technology in the
functioning of the company. Each driver is given a phone from Uber for a more efficient
system. If drivers use their own phones, they might not have compatible operating
systems.

They also use BrainTree technology to allow for cashless transaction.

4. Quality Management: Uber user quality management and focuses on continuous


improvement. This is shown in their commitment to the anonymous mandatory feedback
system.

Hindrances in the achievement of operations objectives:


The external and the internal environment of Uber is full of threats. They hinder Uber to meet its
objectives.

● There is price rise in some economies where Uber operates. This causes the petrol prices
to rise and thus the drivers and the car owners might not be satisfied with the money
earned.
● Uber faces complaints that drivers force up the surge pricing which makes the customers
pay more. This is the negative side of the business.
● Uber’s rivals in some countries in order to increase competition with Uber offer much
lower prices to the customers. This shifts the demand of the customers form Uber
towards other companies.

Conclusion

While it is noteworthy what Uber has achieved in a decade of its inception, it is point to ponder
what will be the way ahead for a company which shifted its base from Taxi Aggregator to Tech
Based Startup, from Taxi based work to diversification and others. It has made giant leaps in
order to stay relevant through timely Mergers and Acquisitions, Resource Planning and Research
and Development. However, reports such as the failure of UberEats should certainly draw in
attention of Uber and its investors to re-think on their certain strategies for future endeavors.

Bibliography
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_A_Strategic_Analysis?auto=download
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5) https://research-methodology.net/uber-business-strategy-user-convenience-
technological-innovation/
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10) https://pestleanalysis.com/pestle-analysis-uber/
11) https://www.porteranalysis.com/porters-five-forces-model-of-uber/

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