Uber Competing Globally Case Solution

2. Analysis

This report assesses and evaluates the competitiveness and operational compatibility of Uber globally to identify opportunities as well as threats for the company. This is largely done through environmental analysis. 

i. Environmental analysis

The success of a business is dependent on an interplay between its internal strategies and competencies with the factors in the external environment. The external environment plays a critical role in shaping the strategic development and decision-making processes of businesses and companies. Business leaders and managers need to be wary of the changing dynamics in the external environment to be able to identify potential opportunities and threats and strategize accordingly to ensure business growth and survival. 

The PESTEL matrix allows a business to successfully navigate the external environment by focusing on six critical variables. These include political factors economic factors, social factors, technological factors, environmental factors, and legal factors. In addition, companies must also continually evaluate the competitiveness of the industry and the marketplace vies à vis their position in it to be able to establish growth and development. The importance of assessing and evaluating the eternal environment makes it necessary for companies to undertake the PESTEL analysis. 

Political factor

Being a global company, the growth strategy and operations of Uber have directly been influenced and affected by the host countries where it operates. Founded and headquartered in the US, the company’s expansion in Europe, Asia, and Africa led to confrontations and clashes. For example, in the USA in 2015, Mayor Bill de Blasio pushed back Uber drivers claiming them to be ineffective compared to the taxi network in the NY city. Similarly, the mayor also introduced a bill that restricted the entry of Uber cars in the Manhattan area and imposed minimum wages. These actions appeared to be politically guided, where the mayor sought the political support of the vast taxi network and the financial backers of the medallions. 

Similarly, in Bogotá, Colombia, the company faced adverse and mixed repercussions from the government as a reaction to the strikes and sit-ins by the taxi drivers – who were a powerful constituency in the country and the city. Uber faced fines of over $140,000 as well as saw the government seize more than 1200 Uber vehicles, and fined over 47 individual drivers. In Delhi, India, the government intervenes in the ride-hailing service by restricting Uber to only 2500 cars in the city, with an increased fare system as well. 

These instances highlight that Uber’s operations and strategies in different countries have been influenced politically. Places like New York, with a vast and influential taxi and medallion network, have been quick to use their influence to shape political pressure on Uber, and introduce regulations to restrict the company’s operations and growth. Hence, such factors can help understand the impact of political aspects on the operations of Uber as those impacted the profitability of the company to a great extent.  

Economic factor

Backed with substantial funding and investment, Uber had a network of financial and strategic investors. The company was valued at $60 billion in 2015. The increased funding and interest of the investors as well as its IPO with a share price of $41.57per share had allowed the company to expand to other global markets as well easily. In addition, the company continually boasted of strengthening local economies through creating jobs, which built a positive reverse economic cycle for the company as well. This meant an expansion in new regions helped the company create jobs, which strengthened the economy and led to an increased demand for Uber as well.

Uber had found an opportunity with an increase in the number of people using smartphones globally, as well as those facing difficulty in availing local cab services during specific times of the day. The case highlights that more than 1000 people from New York had signed up for the app before the launch which identifies a strong demand for a ride-hailing service. The same was also identified in regions such as Ghana and India, where the population felt safer and viewed Uber to be more hassle-free and quick for commuting – thereby creating a strong demand for the service. At the same time, this also highlights the purchasing power people hold for affording the services of the ride-hailing app Uber.

Apart from this, from an economic point of view, it can be seen that the countries where Uber has its presence tend to record a growth in their economies as is well reflected by the US economy. The growth in the economy can be linked with the higher purchasing power of the people as their standard of living improves and they are in a position to afford a higher number of services. Hence, the economic perspective shows a positive outlook for the Uber company as the consumption of its services is expected to increase.

Social factors

Consumer preference and demand for Uber services encourage the company to continue expansion and providing of services – even in the face of growing challenges and increased litigation. Consumers today look for quicker commute times, fairer fares, and reliable commute options and cars. Uber promises them these benefits and more – where traditional can and taxi services fail to. Most of the consumers globally find it difficult to catch a taxi or a cab during the busier times of the day. Taxi fares also fluctuate depending on the union policies, and taxi network decisions. With the service of Uber, customers can get an approximate fare idea before the ride commences, and can be assured of a ride from anywhere, at any time. The app's success is hinged on its wide accessibility and convenience.

However, the ride-hailing company, Uber, must also be aware of and prepared for different social and cultural factors across the different countries it expands to. For example, in India, the app was banned after a reported incident of a driver raping a passenger woman. This led to widespread fear and apprehension of the use of the service. As a result, Uber had to introduce driver background checks in the country for hiring new employees. Similarly, in India only, Uber also introduced Uber Auto after studying the social dynamics closely. Uber Auto worked with rickshaw drivers – owners/driers of three-wheeled common commute vehicles in India. In the more developed western regions, Uber introduced its services of Uber, UberPool, and Uber Jump, as well as Uber, Eats – keeping in view the evolving customer needs and demands, as well as the social evolution of the transportation landscape.

Uber needs to understand the socio-cultural dynamics of a company concerning its service and develop strategies and measures to accommodate the social and cultural norms to be able to successfully grow in the host country. This accommodation is important for building brand loyalty as well. With new and different car-hailing and ride-hailing apps emerging, Uber needs to garner customers’ brand loyalty through ensuring high quality and safety in the rides.

Lastly, the social trends show that the customers have highly become tech-savvy and that they spend most of their time on their phones. For this reason, Uber’s business model has been quite successful as it was able to provide added convenience to the customers since they were able to order their Uber rides through their phones. Also, the fact that the app is quite easy to use also played an important role in ensuring the success of the Uber company.

Technological factors

During its global growth and expansion, Uber has also been influenced by the technological landscape and infrastructure, and the technological progress of a country. The service and company largely run through an app-based model and depend on google maps for routing. However, technological challenges could lead to bottle-necking the company’s success and expansion as well. For example, the case identifies that in China, Uber was met with technological incompetence. This was not because of a lack of technological infrastructure in the country, but largely because of the incompatibility of Uber with the local technology. 

For example, while Uber mostly used Google maps which were not readily available in China. The company spent around 6 months gaining access to local mapping through forging a partnership with Baidu – the leading search engine in China. Similarly, Uber needed to partner with AliPay since most users used AliPay and WeChat for credit payments. These companies were affiliated with Uber’s competition Didi and Kuaidi – which may have created competitive pressures for the company. This highlights cost in terms of not only finances but also time for Uber – which led to a delay in its launch in Shanghai. Technological competence and compatibility with the local technological dynamics and infrastructure is needed for success – especially for companies that are tech-driven like Uber. 

Apart from this, it can be seen that Uber actively makes use of big data analytics that allows it to determine the peak hours, routes most frequently traveled to according to which it determines most of its strategic decisions aimed at generating a positive value for the business. However, there are a number of challenges that Uber may face because of its business model as mobile networks are not usually as fast as PC, and still have longer session times. Hence, it is very crucial for Uber to ensure that there are no app crashes, or else its customers might switch to the competitors due to extremely low customer loyalty in the market. Lastly, it is expected to continuously make use of innovative technologies to enhance the customer experience so that it is able to lock in its sustainable advantage in the market (David, 2020).