Uber Opportunities and Challenges - Case Study Example

Uber Student’s Name Student No Unit Name Word Count Uber Introduction Uber is a transport network company, founded in March 2009. It became famous through its mobile app in 2009. The app alerts customers where the nearest taxi is, and from there, they can summon the particular Uber vehicle of their choice. Within a few minutes, the selected car arrives at the client's location and takes them to their place of choice. The payment is 100% paperless since the technology used connects to the customer's credit card. The company has adopted the motto “Available locally, expanding globally” to describe the opportunities it sees in global expansion. Uber assumes that consumers from other countries would love the low cost, flexibility, and convenience that its app services provide. Though faced with some teething problems, the enterprise is growing very fast and is categorized as one of the world’s most valuable private companies. Uber needs to safeguard its future by addressing some of the challenges in its marketing strategy. Opportunities The company has several opportunities that it can tap into. The main advantage of Uber is that it does not have many challenges as the normal taxicabs. Its business model utilizes smartphone technology that connects them with independent drivers. Currently, it operates in 581 cities and 81 countries (Uberestimator.com 2017). Its most active countries include the United States, Brazil, China, Mexico, and India. Although this is a significant growth, it still has an enormous potential to expand geographically into new cities and countries. Currently, China is Uber’s main market and accounts for more than a third of its business (Hook 2017). Yang (2017) say that Uber should concentrate on conquering smaller cities since doing business in big cities have proved to be challenging. Similarly, it should also ensure that it sticks to its mission of providing cheap rides to consumers. Notably, there have been increased concerns from its customers over “surge pricing” that increases charges during popular times. Most customers being forced to part with more cash during such times. Uber has a great potential of increasing its customers base. So far, its growth can be attributed to the enhanced customer experience (Schneider, 2017, p. 36). The Uber app is very straightforward and convenient for customers since all they do is placing a call and they are picked up from their location. They are also charged less compared to the standard taxis, and thus they can save significant amounts of money. Besides that, they are assured of safety since all Uber cars are inspected, and background checks are done on all drivers. Equally, drivers also benefit since they can work during their flexible hours. This means that it can be a part time job for most people who would wish to work for the company. Within the transport industry, the company can diverse its services to accommodate all types of passengers. Moreover, they are implementing this plan since their technology-based products are available under various brands that include Uber, UberBLACK, UberSUV, UberTAXI, UberX, UberTAXI, and other logistics-request brands known as UberEATS, UberRUSH, and UberFRESH (Uber Technologies Inc.: Managing Opportunities and Challenges n.d.).. The most used service is UberX, which also provides the lowest budget option for its customers. UberTAXI is an app that links taxi drivers to passengers. It also has brands that target the rich. For example, the UberBLACK targets individuals who wish to have driven by their personal drivers in a high-end sedan. UberSUV connects clients with SUVs, while UberLUX is the most costly service with luxury cars (Uber Technologies Inc.: Managing Opportunities and Challenges n.d.). Other low-cost options available for users include UberPool that allows them to share rides and split costs and UberPOP that uses non-professional drivers and smaller cars. UberFRESH and UberEATS are apps that are used to order for meals from local restaurants to consumers. The process takes at least 10 minutes. The business has the opportunity of venturing into other forms of transportation such as air and cargo transport. Already the company has introduced Uber Choppers in most of the countries that it operates in. The Uber chopper allows users to request for a flight time between 9 am and 6 pm daily (Reed 2016). The company has been able to achieve this through collaborating with businesses that provide chopper services. It is also planning to launch a flying taxi service that would lift up to four people straight from say a building and take them anywhere they want to go in a matter of minutes. Reed (2016) says that the company has plans of using a vertical lift, multi-rotor vehicles to move people quickly, cheaply, and safely in big cities. The flying taxi service would work just the same way that the Uber car works. Users will be required to summon the flying machines in the same manner that they do on the Uber app. Uber would disrupt the transport industry with this kind of technology. Challenges One of the common challenges facing Uber is lobbying. The company has faced difficult times, especially while trying to roll out their services in some countries and cities (McGregor, Brown, and Glöss 2015). For example, it faces resistance from conventional cabs owners and drivers who view it as a killer to their businesses. This has often forced it to use other unconventional methods to gain entry into new markets. In New York, for instance, it offered free rides to people who like Uber to protest the decision of the city’s authorities who were restricting its access to the market (Janda et al., 2013, p. 275). However, the authors note that the main limitation to picketing is that policymaking has long-term gains, whereas the former is short-lived. It is also hard to control a rioting crowd. The other major challenge is about regulations that differ from one country to another. It has to occasionally deal with taxi drivers who take the company to court and force them to comply with laws that favor the former. In France, for example, the taxi drivers lobbied city officials to impose a 15-minute wait on Uber drivers so that they have an upper advantage of picking passengers. The country has charged two Uber executives with deceptive commercial practices. In the U.S., the Department of Labor are pushing to have the company’s drivers labeled as employees, something that would increase its costs due to benefits and wage taxes. Furthermore, some cities have been resistant to Uber infiltration and have required cab licensing or restricted Uber to rides within the city and not the airport. Earlier this year, the company received a $7.3 million penalty for not proving data to California authorities. It continues to face more protests from taxi drivers in Cambridge and other U.S. cities. Things are not turning out as expected for Uber almost in every corner of the world. The company has been banned in some cities around the world. For example, In Sao Paulo and Brasilia, authorities have enacted different projects to band Uber. However, it has made inroads in Canada, at least two the company’s drivers have been charged for violating laws that require them to have professional licenses to carry passengers for money. The Canada Taxi Association took Uber to court where they sought $400 million in compensation for lost revenue. They were also asking that the courts shut down the service permanently. In China, there have been intensified conflicts between the police and its drivers. Increased competition could limit its projected growth. Specially, different taxi services have sprung up in several countries that operate using the same technology as Uber. In Japan, Uber faces stiff competition from Nihon Kotsu that launched a partnership with local telecommunications company (Che 2017). In 2014, the Tokyo Hire-Taxi Association launched a new app that enables users to link with around 6,500 Taxis in central areas of Tokyo. Likewise, the Japanese e-commerce giant Rakuten entered into the ride-sharing industry by acquiring an 11.9% stake in Lyft in the same year. The same scenario was replicated in Korea where a number of startups successfully built a similar service. Daum kakao, which is the second biggest Internet Company in Korea, created its on-demand taxi service called kakao Taxi. Equally, Uber-inspired taxi-raiding apps such as Ola that is present in 100 cities in India. Uber should come up with a better pricing strategy. Whereas the low prices favor the company, the drivers who mostly were riding taxis feel that their returns are low and their businesses not sustainable. Earlier this year in India, Uber drivers protested the low prices that the company charges its customers (Pillai 2017). They claimed that they were in slave businesses where they work more for less. Currently, the company charges 20% of the revenues generated by the drivers and any attempt to increase the amount would likely be highly contested. Besides, it should have work on having a set number of drivers as more could lead to reduced profits in the industry. In addition, driver satisfaction is key for the success of the business. Currently, its rideshare rating system allows riders to rate their experience with a motorist. It is important to note that the passengers may sometimes lack objectivity when reviewing the drivers (Rogers, 2015, p. 5). Particularly, Uber’s policy that its drivers always maintain a five star may work against the latter. It is also the company policy that drivers with low scores take refresher lessons where they are taught about safe driving techniques and driver etiquette. Drivers that fail to maintain the recommended ratings are suspended or permanently demoted. Arguably, this is unfair to the drivers since it places them at the mercy of consumers who have different views of what makes up quality. There are also disagreements between the drivers and the company on their contract terms. Most of the drivers signed an independent contract with the business yet they are forced to comply with strict rules that limit their independence (Uber Technologies Inc.: Managing Opportunities and Challenges n.d.). For example, it requires that its drivers have specific types of cars and solicit for business in a given manner. Notably, this has often led to friction between the company and its drivers that have often resulted in protests and lawsuits. The company would be required to compensate the drivers based on their employee status or loosen some of the driver’s requirements. The company has also set strict conditions for its drivers so that they become eligible for the $26 per hour (Uber Technologies Inc.: Managing Opportunities and Challenges n.d.). The drivers are required to accept 90 percent of the ride requests, do one ride per hour, and be online 50 out of 60 minutes. Basically, this is meant to prevent drivers from working for competitors, yet they are supposed to be independent. The company has bad reputation owing to irresponsible driver behaviors. Uber has been accused of not following the required safety standards because its drivers were allegedly involved in three rapes in Boston, Delhi, and Chicago. In San Fransico, the company a lawsuit was filed against the company after one its drivers killed a 6-year-old girl after he was distracted by its app (Uber Technologies Inc.: Managing Opportunities and Challenges n.d.). However, Uber denied that the driver was their agent and said that he was not on duty at the time when the accident occurred. To market itself as a safe company, it has introduced a “safe ride checklist” to its app, which allows customers to verify the vehicle registration numbers, the driver's name, and appearance before boarding the vehicle (Uber Technologies Inc.: Managing Opportunities and Challenges n.d.). In addition, they have introduced a team of safety and fraud experts to verify drivers and a dedicated disaster-response team to address some of the challenges it faces in India. Concerning insurance problems, the company claims that it is offering up to $1 million insurance plan for its motorists. Lessons From the analysis, international business managers can learn a lot about the issues that may crop up when setting up businesses in other countries. First, they need to realize that they meet hostility from local companies who may leverage on their lobbying powers to pass laws that favor them. Secondly, it is important that they comply with all the regulations before setting up their operations. Most importantly, this could save them a lot of money due to limited court cases. Thirdly, security should be a priority in their formative strategies (Uber Technologies Inc.: Managing Opportunities and Challenges n.d.). Security guarantee for its staff would make them work with less stress. They should always work on ensuring that their foreign offices are located in secure areas that are well guarded. This could reduce cases of attacks on their property and staff. Fourthly, they should always work on providing the best products and services. People only purchase goods and services from international companies if they meet the required standards. Lastly, culture plays a major role in determining the success of a multinational corporation. They should always strive to acquaint themselves with the ways of doing business in different countries before setting up their bases. Critical Areas That Uber Should Manage Well 1. Drivers: The Company should have a way of ensuring that its drivers are satisfied with their contracts. As earlier stated, the number of unsatisfied could increase if it makes a wrong move of increasing its profit share (McGregor, Brown, and Glöss 2015). It should also look at ways of ensuring that its drivers comply with healthcare insurance and other requirements. Uber should also ensure that its drivers are trained to minimize liability on insurance costs: 2. Competitors: The same technology used by the company can be found with their business rivals such as Lyft. They should brace themselves for intensified competition in the future since more rivals may crop up. 3. Customer base: The number of customers using the services will only increase if it assures the public of the safety and work on costs that will favor both drivers and passengers (Yang 2017). It also ought to diversify its products to beat unpredictable demand, which could be a future risk. Currently, the company has embarked on expanding into other areas such as cargo transportation and chopper rides. 4. Technology: since it is a technology firm, the company could be subject to attack by hackers who may steal their customer’s personal details. More so, some of their clients fear downloading apps due to the threat posed by cyber-insecurity. Therefore, it needs to continually upgrade its database security to minimize financial or personal account information risks. 5. Regulation: Jennings (2017, p. 20) proposes that the company should work with regulators to establish a relationship with regulators to prevent such kinds of restrictions that it has experienced at the local, state, and federal levels. In Munich, for example, the company has been working with city officials to obtain permission to operate under the existing laws there. However, it hopes to maintain its core objective of providing low-cost transportation in a system that is riddled with cartels that charge high rates. Conclusion Uber needs to address some of the challenges that threaten its existence through its marketing strategies. Some of these include bad reputation, competition, business restrictions, and lawsuits. Also, one of the biggest threats arises from its drivers who frequently down their tools to demand better working conditions and pay. On the other hand, it has the opportunity of introducing its services in smaller cities and towns. It can also diversify its services to tap into new markets within the transport industry. Reference List Che, J., 2017. 9 Countries That Aren't Giving Uber An Inch. [online] The Huffington Post. Available at: http://www.huffingtonpost.com/entry/uber-countries-governments-taxi-drivers_us_55bfa3a9e4b0d4f33a037a4b [Accessed 26 Mar. 2017]. Hook, L., 2017. Uber’s battle for China. [online] Ig.ft.com. Available at: https://ig.ft.com/sites/uber-in-china/ [Accessed 26 Mar. 2017]. Janda, K., Berry, J., Goldman, J. and Hula, K., 2013. The Challenge of Democracy American Government in Global Politics. Australia: Wadsworth Cengage Learning. Jennings, M., 2017. Business: Its Legal, Ethical, and Global Environment. Boston: Cengage Learning. Pillai, S., 2017. Ola, Uber drivers protest low fares. [online] The Hindu. Available at: http://www.thehindu.com/news/cities/Delhi/Ola-Uber-drivers-protest-low-fares/article17285227.ece [Accessed 26 Mar. 2017]. McGregor, M., Brown, B. and Glöss, M., 2015. Disrupting The Cab: Uber, Ridesharing And The Taxi Industry. Journal of Peer Production, [online] (6). Available at: http://peerproduction.net/issues/issue-6-disruption-and-the-law/essays/disrupting-the-cab-uber-ridesharing-and-the-taxi-industry/ [Accessed 27 Mar. 2017]. Reed, D., 2016. Uber Air: A Fantastic Vision Of An Amazing New Consumer Technology Or Just Pre-IPO Hype?. [online] Forbes.com. Available at: https://www.forbes.com/sites/danielreed/2016/11/10/uber-air-a-fantastic-vision-of-an-amazing-new-consumer-technology-or-just-pre-ipo-hype/#3bf963a8120b [Accessed 26 Mar. 2017]. Rogers, B., 2015. The Social Costs of Uber. SSRN Electronic Journal, 1(2), pp.1-15. Schneider, H., 2017. Uber: Innovation In Society. London: Springer. Uberestimator.com., 2017. Uber Cities. [online] Available at: http://uberestimator.com/cities [Accessed 26 Mar. 2017]. Uber Technologies Inc.: Managing Opportunities and Challenges. (n.d.). [ebook] University of New Mexico. Available at: https://danielsethics.mgt.unm.edu/pdf/uber.pdf [Accessed 27 Mar. 2017]. Yang, M., 2017. Exploring Uber's Risks and Opportunities. [online] Mack Institute for Innovation Management. Available at: https://mackinstitute.wharton.upenn.edu/2014/uber/ [Accessed 26 Mar. 2017]. Read More