Case: Uber in 2016: Can It Remain the Dominant Leader of the World’s Fast- Emerging Ridesharing Industry?
1. How would you characterize Uber’s business model and strategy? What are the key elements of its customer value proposition? Its profit formula? Its approach to competing in the marketplace?
Uber’s business model is to offer a technical platform for both riders and drivers to connect with each other. One of the characters of Uber’s business model is “sharing economy”-people share their resources with each other. Another character is that Uber considers itself as a technology firm because it just provides a platform for people to exchange their resources. Also, Uber’s business model is characterized by an aspect that the drivers in Uber would be classified as “independent contractors” instead of its employees because Uber claimed that these drivers did work for themselves.
The key elements of its customer value proposition are to provide riders pickup service with the fastest speeds and map tracking, lower prices compared to traditional cab service, convenient payment, and various selections of types of cars.
As for its profit formula, Uber generates the revenues by charging certain percentages of its drivers’ earning and the surging pricing. As the demand of riders becomes higher and the supple of drivers becomes lower, the prices charged becomes higher.
When Uber competed in the marketplace, it competes for relatively lower operating expenses because Uber claims itself as a technology firm; therefore, it had a lower operation costs by paying no licensing fees, avoiding some taxes and paying no registration fees.
2. How would you describe competition in the ridesharing industry? What leverage do buyers and suppliers have with ridesharing services? What competitive threat is posed by new entrants and substitute services? Prepare a Five Forces Model of Competition to support your answer.
The competition in the ridesharing industry becomes more intense. As the case states, the largest companies in the taxi and limousine services industry in the U.S. generated “less than 3 percent of the industry’s overall projected $16.2 billion revenue in 2016”. This small percentage revenue generated can imply a strength of the competition in the ridesharing industry. Also, the increasing number of the substitutes, such as Lyft, gives riders more options to choose, therefore, the competition in the ridesharing increases in recent years.
The buyers and suppliers have little leverage with ridesharing services. As the case mentions, the suppliers of Uber are classified as “independent contractors” rather than its employees. Thus, Ubers will pay less attention on these drivers. Moreover, Uber uses surging pricing, which means that price it charges is based on supply and demand. Riders’ evaluations largely affect the drivers instead of Uber itself. Therefore, when Uber makes some decisions, riders and drivers have less leverages.
Before we see the competitive threat that is posed by new entrants and substitute services, we can first look at the five forces model of competition:
The Five Forces Model of Competition
3. Does Uber operate as a socially responsible business? Assess the five components of Uber’s corporate social responsibility strategy.
I do not think that Uber operate as a very socially responsible business. The reasons are shown below:
-Actions to ensure the company operates honorably and ethically: Uber is controversial on actions to maintain its operation honorably and ethically. For example, Uber’s recruitment is under fire. When Uber recruits people, it recruits employee of other companies such as Lyft, which is a competitor of Uber. This movement makes Uber be controversial for its strategy of recruiting its rival firms’ employees. Also, when Uber engages with its competitors, Uber will allow its employees to order its rival firms’ pickup services and then cancel these orders. This behavior can damage these competitors’ business. Even though Uber claims that it just does the same thing as its competitors does, Uber still becomes criticized for doing such engagement.
-Actions to promote workforce diversity: In this case, it does not show that Uber actively promote its work force diversity.
-Actions to enhance employee well-being and make the company a great place to work: Uber did not well on the aspects of enhancing employee well-being and making the company a great place to work. Uber considers its drivers just as its contractors instead of employees. Therefore, Uber provide little protection for drivers’ minimum wages, overtime payment, unemployment insurance and discriminations.
-Actions to protect and sustain the environment: In this case, it does not mention anything about how Uber protects and sustains the environment.
-Actions to support philanthropy, participate in community service, and better the quality of life worldwide: Uber did do something that support philanthropy activities. For example, “Ride for a Cause”, which is to “recruit veterans” and collect donations to European refugees.
Therefore, I do not think that Uber operate as a very socially responsible business.
4. Examine Uber’s corporate culture. What are the key features of the company’s corporate culture? Has the culture shifted over the lifespan of the company?
Uber’s corporate culture is . The key features of its corporate culture is . The cutlre has not shifted over the life span of the company.
5.With what strategic issues should Uber management be most concerned in 2016? What are the 4-5 issues that offer the greatest opportunities or that present the greatest threats to its well-being?
I think that Uber management should be the most concerned on these strategic issues:
-First, Uber management should concern on its regulations of app as the case mentioned. Because more competitions come into the ridesharing industry and more regulations comes from the governments of different countries, how to redesign or regulate Uber’s app that could comply with government’s regulations and attract riders’ attention should be concerned by Uber management.
-Second, Uber management should focus on the its technology innovations. Currently, people are more concerning on the lifestyle of “sharing economy”, Uber could see how they can develop its product to retain its position in the ridesharing industry.
The following issues can resent the greatest threats to its well-being:
-its drivers’ treatment: because of its criticized drivers’ treatments, Uber may lose many drivers in the future.
-its concerns on riders’ safety issues: Because Uber doesn’t pay much attention on its customers’ safety, riders will choose to pay for other firms’ services, firms who could guarantee riders’ safety.
-Government regulations: because Uber cannot comply with the regulations of some state, Uber has withdrawn its business from some cities, such as Austin. If Uber does not pay attention to this issue, it will hurt Uber’s business a lot in the future.
-its strategies used outside the United Stated: From the case, we know that Uber does not perform well in the international market. For example, in China, the market is dominated by Lyft or Lyft alliance companies, such as Didi. Therefore, Uber should adjust its strategies outside the U.S. to compete with other firms.