Strategic Analysis Of Uber: Using VRIN Framework And Business Environment Analysis

Assessment of business environment of Uber

Uber, being the leader of car service provider industry has captured the markets of the UK with its continuously innovative and unique technologies and first mover advantage. With the growth of the company, there has also been realised a sudden downfall in the businesses and revenues of the local car rentals and taxi services. The company has gained immense success both in terms of customers as well as recruitment of the drivers. There will be analysed the business environment of the company at varied levels which will help in evaluating the various issues faced by the company. To manage the issues in the day to day business operations there is a need to build strategies which can help in overcoming those challenges and issues (Wallsten, 2015). At the time of strategy building, there is huge impact posed by the external environment as well as the internal processes. It is essential to take use of ten various effective techniques and tools of strategic analysis so that the significance of the strategies can be analysed. The report will use various strategic analysis tools to understand the issues faced by Uber and the ways by which the company can overcome those issues.

Threat of new entrants

In respect with the threat of new entrants in the market, Uber holds a strong position in terms of technology, customer base and market share. There is a need of high capital requirement and highly integrated technology for entering into the market and competing with Uber. There are several legal issues and regulations which the companies have to face while entering into this business. Thus, the threat of the new entrants in the market is very low (Yang, Han and Shaw, 2016).

Bargaining power of the suppliers

The key supplier in the industry comprises of the extensive number of the drivers. The concentration is not high of the group of the suppliers and thus there is restricted or moderate bargaining power of the suppliers. Another major supplier is the gas and oil suppliers. The prices are continuously increasing. The fluctuation in the process is a risk as it increases the level of uncertainty. So, from the overall perspective, there is moderate bargaining power of the suppliers (Davis, 2016).

Bargaining power of the buyers

With the continuously increasing number of buyers, the market is getting bigger and the customers have a number of other choices available for them to choose from. As well as the cost of switching is also very low for the customers. In the UK market, there is increasing number of private cars and taxi services. Therefore, it is easy for the customers to switch to other competitor. Thus, it can be stated that there is high bargaining power of the buyers (Wirtz and Tang, 2016).

Porter 5 Forces

Threat of substitutes

By having a consideration towards the quality of service offered by Uber, there is low threat which can be posed by the traditional transportation industry that comprises of the private cars, taxis and the public vehicles. As Uber offers high efficiency at low cost as well as also provide user-friendly applications and designing. There are few companies that offer similar sort of services in the market and thus the customers can easily switch to other competitors available in the market. Thus, the overall threat of the substitutes is medium (Cohen, Hahn, Hall, Levitt and Metcalfe, 2016).

Industrial Rivalry

The concentration of the transportation industry is high as the present companies have a high competition in terms of the customers and the suppliers i.e. the car drivers. Therefore, from the overall perspectives, there is high industrial rivalry (Feeney, 2015).

Political Factors

With the launch and rapid success of Uber in the markets of UK, there is a high concern for the government in respect with regulations of the shared economy. There are both positive as well as negative political aspects that impact the sustainability of the company. The continuous rise of Uber has negatively affected the traditional taxi and rental car services’ business which had been turned out in political conflicts. The organisation is facing a number of issues in respect with licensing, wages act, taxi permits, etc. the rivalry between the already existing rental car services and Uber have also resulted in political issues which force the Government to ban the services of Uber at some extent (Hein, Schreieck, Wiesche and Krcmar, 2016).

Economic Factors

There is a major role of economic factors in the business operations of Uber. With the initiative of Uber, there has been generated high employment for the residents of the country on a large scale and it has resulted in decreased unemployment rate. It has also resulted in various other economic benefits such as reduced the costs of cabs as well as have made the transportation easier for the people. But on the other hand, the increased competition is a matter of concern for the already existing traditional service providers (Edelman and Geradin, 2015).

Social Factors

The social aspect is also equally important for Uber as from the social perspective; the company has been benefitted as well as faced issues. In respect with the affordable prices offered, there has been gained a social recognition by the company. On the other hand, the controversies in respect with human resources, laws, market competition, security issues and background checks of drivers have left the organisation with a number of social arise questions (Li, Hong and Zhang, 2016).

PESTEL Analysis

Technological Factors

The use of excellent technology by Uber have made the company realised worldwide recognition. With the innovative and outstanding technology of Uber, both the riders as well as the drivers have attained great experiences. The application is full of special features which are according to the technology required in the market. Uber still take the most effective and improved use of technology (Cannon and Summers, 2014).

Environmental Factors

In the present time, there is a vital concern to attain improved environmental sustainability. In respect with the ride sharing aspect of Uber services, there had raised sustainability concerns Uber, 2017). To save the business from several environment related issues, the company has also initiated Uber GREEN services where there can be requested a green ride. In the Uber GREEN, there will be used completely electrically-run vehicles (Wagner, 2017).

Legal Factors

The continuous growth of Uber has become challenging for the legal authorities as whether there must be applicable similar laws and regulations on Uber as applied on the traditional car rental and taxi services. There were several legal issues faced by the company such as licensing related issues, permit issues, tax issues, illegal driving issues, human resource issues, etc. (Gerte, Konduri and Eluru, 2018).

From the overall analysis, the following implications can be drawn for long term survival and success in the future. It has been analysed and evaluated that Uber is required to have its high emphasis upon the safety and security of its customers by adequate identification of the drivers. So that there may not result any crime issue. Secondly, it is also necessary for the company to manage all the legal regulations and laws so that the restrictions from the Government can be managed. As well as it is also necessary that the company must improve its services both from the technological and customers’ perspective so that the switching of the customers may be reduced. Therefore, with all these things it will help in achieving higher level of sustainability of Uber in the UK market (Calo and Rosenblat, 2017).

Technology: The key strategic resource of Uber is its unique and innovative technology. The organisation has gained the first-mover advantage with the help of its technology. Technology of Uber reflects the approach of coherence of varied components of the business strategy and model. The GPS requirement of Uber for instance, offers much predictable response time for its travellers or customers while providing complete information about the driver and the location. Similar to this, the preapproved credit for the rides help in shortening the exit time needed to get out from the vehicle which results in improved experiences of the drivers and the customers (Schneider, 2015). The company take use of unique technology for establishing itself as the best car service provider as well as to avoid the unnecessary regulations and costs, thus decreasing the burden of the customers and the drivers by lowering the costs. The ease of entry is an important feature in offering great employment opportunities for the people to become drivers of Uber from all walks of their life (Cramer and Krueger, 2016).

Implications for survival and success in the future

Application: The Uber “app” is considered as the most essential part or the strategic resource of the business model of the company. It is the platform of the business that automates the logistics as well as also helps in complete integration of the activities. It is a model which develops integration between the customers of the large cities with the hundreds of the drivers. It has also embedded complete market management and fleet management. The application also show that when the customers are required to pay upsurge prices for their booking. A complete set of information is passed on to the customers through the application of Uber (Hall and Krueger, 2015).

Business Model: The business model of Uber is a vital feature or strategic resource of the business that offers the company long term success. The various cities where earlier there were no network for taxis or cars, Uber with its highly integrated business model which had brought the car services to an extended range of customers in an improved and efficient manner. Thus, with all such features, the demand for Uber kept on increasing. Therefore, such an updated, technologically sound and user-friendly business model offers high competitive benefits to Uber (Wirtz and Tang, 2016).

Strategic Capabilities

User-friendly Application: The Uber “app” is regarded as the key capability of the company. It is highly user-friendly that can be easily used by the customers and the users. With the help of the application can book cabs on instant basis, can pre-book, check the prices, see upsurge rates and also pay before the trip; through various payment modes (Laurell and Sandström, 2016).

Word of mouth marketing: Another key strategic capability Uber is its huge word of mouth publicity. The reviews of the customers and the marketing through the experienced users offer huge support in the growth and success of the company. It helps Uber in increasing its market share and customer base in extended regions (Moon, 2015).

The business model canvas of Uber shows that the key partners of the company are the various investors which have invested their capital in it, the drivers that are the suppliers who perform the key activities and the other supporters. There are other partners that include effective technology, insurance companies, effective payment gateway, integration of various platforms and navigation through GPS and maps. The key activities include the analysis of the data, engaging the participants, removal of the frictions at the time of transactions and various other activities. The value proposition derives from the resolution of the various issues, reducing the idle times, offering flexible hours and through revenue generation (Koopman, Mitchell and Thierer, 2014). The customer relationship improves through regular taxation and high level of transparency, social footprint and to offer safe, secure and affordable services to the customers. The customer segments comprises of the customers and the drivers. The key resources comprises of sound brand, integrated application, competent staff, efficient data and analysis and strong networks. The channels for effective promotion and marketing include the application, local campaigns, word of mouth and the social media platforms. The cost structure is formed through cost of customer acquisition, cost of the drivers of Uber pool, legal cost and technology related expense key sources of revenue comprises of total bookings, fees of transaction, employee entitlements and effective revenue model (Glöss, McGregor and Brown, 2016).

(Source: Ng, 2016)

The value chain analysis explains that from the traditional aspect, the customers could hail the taxi on streets or can book one through calling the taxi hotline. But such a traditional approach results in long waiting time as well as a number of missed opportunities at the peak time. The primary activities comprises of the inbound logistics that includes the supply schedules of the drivers, raw materials such as supply of the oil and gas and quality control activities. The operations include the maintenance activities of the cars, quality control of the services and working of the application of Uber (Ng, 2016). The outbound logistics comprises of the safe and secure rides and easy booking of cabs. The sales and the marketing activities comprise of taking bookings from customers, customer management, providing promotions and discounts to the customers so that the sales can be increased. There are also activities included that comprises of market research where it is identified which regions have high demands for the cabs. The last primary activities include servicing where there includes training to the drivers, offering support to the customers. there are support activities such as supply management of the drivers and the oil and gas; product and technology development that includes effective designing of the applications; management of the human resource that comprises of effective management of the employees and the drivers so that operations can take place in an effective manner; and the financial and administrative services that includes the completion of legal formalities (Moon, 2015).

Resource	Valuable	Rare	Costly to Imitate	Exploited by Organisation	Competitive Implications
Service Quality	Yes	Somewhat	Yes	Yes	Competitive Parity
Level of Satisfaction	Yes	Somewhat	Somewhat	Yes	Parity
Higher Customer Loyalty	Yes	Yes	Somewhat	Yes	Parity
Strong Financial Position	Yes	Yes	No	Somewhat	Sustained Advantage
Innovation	Yes	Somewhat	Yes	Yes	Temporary Competitive Advantage

(Koopman, Mitchell and Thierer, 2014).

In the various analysis performed, it has been identified that there are several issues which have been identified such as there are issues related security and safety of the passengers. The other issues comprises of the ineffectiveness of the proper identification of the drivers. The other problems and issues which are required to be managed are the various government regulations and the legal issues faced by the company (Wallsten, 2015).

Following are the strategies which are required to be used to overcome the issues and the problems faced by the company:

Establishing better association with Government

The first most strategy which can help in resolving various issues of Uber is to develop strong and sound relationship with Government. When the company will have improved association, then the laws, rules and the regulations can be met in a more effective manner. And thus, if the company will follow all the legal liabilities then it may result in decrease number of issues to be faced by Uber (Yang, Han and Shaw, 2016).

Reinforce safety systems

The second key strategy to overcome the issues of safety and security is to have a more sound and appropriate safety system. Once there will be reinforcement of a better safety safety, the locations can be tracked in a more effective manner. This will help the riders to have safer rides. There must also be there safety alarms and other security based features which can protect the riders from uncertain and unsafe circumstances..

Invest in Research and Development

It is also essential that a good amount of capital must be invested in the research and development activities. This will help in evaluating the various safety measures and security measures that can be used to complete with the safety and security guidelines required for the attainment of the safer rides.

Focus on Goodwill marketing

Another important strategy is that the company must focus on the goodwill marketing. It is essential that there must be high focus upon increasing the goodwill and reputation of the business. So that there be trust building of the customers (Wirtz and Tang, 2016).

Riders controlling Data

It is also recommended that there must be controlling of the data by the riders. If the riders will control the data, there will be privacy gained by the customers. The higher will be the privacy, the more protected will be the customers.

Identification of the drivers

It also proposed that there must be proper identification of the drivers by checking the police identification and all proofs required for checking their backgrounds. This will help in reducing the overall crime rates (Cohen, Hahn, Hall, Levitt and Metcalfe, 2016).

Resources

The resources needed for the strategic implementation of the strategies suggested are easily available. This shows that the strategy scan be easily implement and results can eb achieved.

Acceptability

It is evaluated that the strategies are also acceptable in nature as the strategies are customer-oriented and thus the customers will feel more secure. From the other stakeholder’s point of view, there will be improved branding and increased returns, so it is also acceptable from their point of view (Hein, Schreieck, Wiesche and Krcmar, 2016).

Consistency

In respect with the culture, there might be a little difficulty in having high level of consistency in integrating the strategies in the culture. So there is a need that the culture must be improved so that proper consistency can be attained.

Effectiveness

It has been evaluated that the strategies are highly effective in nature as these strategies will help in resolution of the issues through the implementation of the strategies.

Sustainability

It has been evaluated that the implementation of the suggested strategies will give Uber long term advantages and higher sustainability. If the strategies will be implementing, there will be more extended range of customers and support from the government (Wagner, 2017).

Conclusion

From this report, it can be concluded that, Uber have gained enormous success in its innovative and unique business operations. But still there are certain issues and challenges which the company has to deal with. To manage those issues analysed through various analytical tools. To manage those issues a strategic proposal was developed with a number of strategies. These strategies and their effective implementation will help in attainment of improved relation with the government, reliable set of customers and increased revenues. Thus, it is concluded that there must be effective analysis of the both internal and the external environmental and adequate strategies must be built on timely basis to have a more secure and sustainable business from future perspectives.

References

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