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QUESTION

Uber Case Study

 

 

Subject Business Pages 3 Style APA

Answer

Uber Technologies Inc., previously Uber Cab, is a multinational firm that offers ride-hailing and sharing services. The company was founded in San Francisco, the USA in 2010. It has since grown significantly and currently operates in 65 countries and 700 cities globally. The growth of Uber in the domestic and international markets is attributed to its new and disruptive business model known as the rideshare model. Under this model, Uber was not obligated to own vehicles or employ drivers, but rather, it only provided a technological platform that connected drivers and riders at a fee (MacKay et al. 2020). The company further exploited the underdeveloped regulations of internet businesses across different countries, to infiltrate the market and displace the traditional taxi operators. As much as Uber was highly successful in the first eight years after its launch, the company has been reporting losses. For instance, after going public in May 2019 with a share price of $41.57, the company’s share prices had fallen to $29 by the end of the year (MacKay et al. 2020). This trend leads to questioning the sustainability of Uber’s competitiveness in the long term and whether its current strategies can guarantee future success and profitability. This paper expresses the view that Uber needs to lean its operations and consistently restructure its competitive advantages to maintain its market leadership position.

As noted in the case study, Uber derives its competitive advantage from its ability to assume the innovator position. This statement is backed by Rodgers innovation diffusion curve. This model classifies innovations into five stages, beginning with the innovators, early adopter, early majority, late majority and laggards (Bikel, 2020). In the case of the ride-sharing industry, Uber is the lead innovator having founded the concept behind ride-hailing and ride-sharing services. However, as the industry transitions into the growth and maturity phases of the industry life cycle, more ride-hailing firms are duplicating Uber’s strategy and thus, stealing its market share. A case in point is DIDI in China, which provides localized rides. Because of its innovative use of a disruptive technology similar to Uber, and the ability to customize its value proposition, the company is liked by the Chinese. These factors made it impossible for Uber to succeed in the market, forcing it to merge with DIDI. Similar trends are bound to emerge across the globe as local ride-hailing services emerge with more customized and localized offers and value propositions (MacKay et al. 2020). The emergence of these firms means a shrinking market share for Uber, which is currently the market leader across most markets around the world. Coupled with its toxic corporate culture, shifting regulatory landscape, and changing consumer behaviour in favour of localized rides, the company is bound to lose its competitive advantage and market share in the foreign markets.

This negative trend has already been manifested in the company’s falling market share, a drop in revenues and a plummeting market capitalization. Given the current recession caused by the COVID-19 global health pandemic, the long term success and profitability for Uber is seriously under threat. In reaction to these challenges, the company must adopt lean thinking. According to Balocco et al. (2019), this thinking approach will enable the company to transition from long term focus to a short term focus where the company changes its value proposition to match customer needs. The process requires the application of three concepts, namely; build, measure, and learn. It is important that the company understands what customers want and assess how the customers respond. The whole process requires Uber to adopt a four-step process that begins with searching for information and executing it in a way that meets the changing customer wants. The process begins with customer discovery then customer validation, customer creation, and fourth, company building. This model of lean thinking will enable Uber to start a continuous cycle of learning (Bikel, 2020). This thinking means that Uber will easily keep evolving its competitive advantage, thus differentiating its value proposition from its rivals. Likewise, the lean thinking strategy together with the continuous cycle of learning will enable the company change its services to suit the specific needs of the customers in each market, thus making it hard for rivals to enter the market.

Likewise, the company needs internal changes to its corporate culture to build a positive reputation. The current reputation makes it easy for rivals to enter the market and cut its market share as customers prefer supporting brands that have a good reputation. Uber could improve its reputation by adhering to regulations and investing in corporate social responsibilities (CSR) such as supporting local municipalities in maintaining public infrastructure, especially road networks. This proposal is made with the realization that Uber has been criticized for its negative environmental impact as a result of its unregulated business model and nature of operation around major cities. By supporting the improvement of legislation and investing in CSR, the firm will create a positive reputation that will attract more high-value customers who will enable it to become profitable. Balocco et al. (2019) further note that Uber should continue using the differentiation focus strategy where it provides diverse services such as Uber X, Uber Black, and Uber POOL among other localized services to attract and retain a large market share globally.

This essay acknowledges that Uber is a market leader in the ride-sharing industry. However, its market leadership position and global dominance is threatening by increasing risks within its environment. This includes a negative reputation, a poor company culture dotted with claims of racial and gender abuse, stricter regulation of internet businesses, and a more enlightened consumer segment. As a result, the firm needs to adopt new strategies to foster its sustainability. It is advisable that the best way to retaining its competitive advantage is through lean thinking which will enable the company to align its values and products/ services with customer needs across its domestic and local markets.

References

Balocco, R., Cavallo, A., Ghezzi, A., & Berbegal-Mirabent, J. (2019). Lean business models change process in digital entrepreneurship. Business Process Management Journal.

Bikel, R. (2020). Lean Thinking. Retrieved from: https://www.youtube.com/watch?v=rFJ_p0ddu7k&feature=emb_logo

MacKay, A. J., Migdal, A., & Masko, J. (2020). Uber: Competing Globally. Retrieved from: https://www.hbs.edu/faculty/Pages/item.aspx?num=58020

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