Internal And External Environmental Factors Affecting Uber’s Performance: SWOT And Porter’s Five Forces Analysis

Situation Analysis

Write an essay on the internal and external environmental factors.

Started as Uber Cab by Travis Kalanick and Garrett Camp in the year 2009, it is now an American Multinational company working as an online transportation network known as Uber Technologies Inc. It market and operates through a mobile app, customers with their smart phones can submit a trip request and Uber drivers who run their own vehicles gets the information and are routed for the trip.

 The worth of Uber by late 2015 was estimated around $62.5 billion and ranked as 48^th position in the top most American companies. Its business model has been copied by several other companies and formed a trend called Uberification (Yang, Yang and Wong, 2012).

An organization needs to examine and make changes as according to the internal and external environmental factors that may affect company’s performance. SWOT is an organized planning tool which is used here to identify and evaluate issues related to various environments for Uber:-

• Uber is a well-known brand
• Uber has a huge number of vehicles for servicing its customers
• The competition level is very low.
• Dispatcher for services is not required as the whole interaction takes place between the driver and customer which reduces the operational cost
• Dual rating system of Uber enhances safety and trust
• In comparison to traditional taxi, the charges of Uber is quite low (Vanek, Mikolas and Zvakova, 2012).

• The business idea is too easy to get copied by competitors.
• The loyalty of drivers is quite low for Uber due to lack of real communication and connection
• Customer’s loyalty ratio is also low as their no bonding  between the company and the customer
• Uber’s business model is very unpredictable (Belwal, Minhans and Al-Balushi, 2013)

• Traditional taxi companies have high charges and long waiting which dissatisfied the customers.
• New market like India can be exploited as taxi services there are expensive and inconvenient.
• Markets in suburban areas can be targeted where no taxi services are available
• Inexpensive electric vehicles can be used which help in reducing the cost and driver’s profit will increase (Chakravarthy and Coughlan, 2011).

• Low-profit margin makes driver unhappy which gives bad publicity and discourages new drivers to join Uber
• Country like Germany have some new regulations which has banned Uber from operating there
• With the increase new drivers in the new markets, there is an increase of scandals and frauds also
• The coming of new technologies like self-driven cars may eliminate the need for Uber services (Vujic, Vasiljevic-Blagojevic and Peric, 2014)

There is no question about Uber’s popularity amongst its customers. Uber has the customer-centric business approach which leads to a low-margin profit for drivers, and they don’t prefer at all. Uber does not need to follow rules as traditional drivers but they are regularly fined for skirting the regulations. France, Germany, India, United Kingdom and Netherlands are few countries that have fined Uber. Thus, Uber has to work on its weaknesses and exploit opportunities by using its strength and overcome threats against the company (Vanek, Mikolas and Zvakova, 2012).

To analyse performance of Uber in the market and comparison to their competitors The PORTER’S five forces analysis is used here:-

The Threat of new entrants- Getting a patent for various technologies proves to be a limitation for new entrants to enter the market, but low capital investment and easy to follow business model attract them. Hence, threat of new entrants is medium.

The Threat of substitutes- Alternatives or substitutes like public transports, car pool services, and bicycles are easily accessible and less expensive too. Hence, the threat of substitutes is high.

The Power of buyers- Choices are available to customers which can make them switch as according to their need. Hence, the power of buyers is medium (Anderson, 2014)..

The Power of Suppliers- Rental car companies and drivers has a high bargaining power as Uber need them for running its services. Thus, the power of suppliers is high.

Segmentation, Targeting, and Positioning

The Power of competitors- High competitions is there from taxi and limousine services. They are expensive, but they provide a broader range of services. Competitors like Lyft and Wundercar are gaining their market. Therefore, the threat of competitors is quite high. 

The above analysis shows that the competitive level is quite high for Uber. But still Uber has maintained its priority over the other competitors and substitutes with quick, efficient and inexpensive services (Chakravarthy and Coughlan, 2011).

There three processes that a company follows to get the customer and they are segmenting, targeting and positioning. The three process of Uber is discussed below: –

Segmentation means to find out what types of customer exits and for Uber following segment of customer exists:-

• Doesn’t own a car
• Need a drive for a party or function
• Want doorstep cab services which are cost-efficient also
• People who want to move from one place to another for any reason or purpose
• Business professional
• Senior citizens who cannot drive any more
• Children need to pick from school (Belwal, Minhans and Al-Balushi, 2013)

Targeting means to select the ones to which services of Uber can be best served off. “Transportation needs to be reliable as running water for all, in all the parts of the world,” is what Uber’s version for its customer. This makes it clear that for Uber anyone who wants to go from one place to another within the city is the target customer. Initially in the starting, Uber focused only on the customer segment that was wealthy. But now at the present day, Uber served anyone who needs its service and ready to pay for it. This has helped a lot in increasing the number of customers for Uber (Batt, Nohara and Kwon, 2010).

The positioning means implementation of all efforts to achieve the target customer by making its services in accordance to the target market. Uber is trying hard to attract its target customer. It is evolving in the way the world is moving; making areas of the cities more accessible and convenient reach, and helping people and their cities getting closer. Uber is using different Medias to promote its service to its target customers, for example, emails, FM channels, and online advertisements (Chakravarthy and Coughlan, 2011).

The market strategies of Uber are:-

• Early Adopter Advocacy- Uber has marketing tactic word of mouth. Using local strategy to advocate its brand Uber changes its strategy where it goes.
• Referrals- referral credit proved to be a very successful market strategy for Uber. This gives money and get money offer was well approached by people, and they get free rides and credits which they can use anytime they want (Anderson, 2014).
• Reviews- rating system offered by Uber for both the driver and passengers lead to drivers know where they stand, and even customers behave in a better way.
• Stunts- the fun and quirky offers launched by Uber is a great market strategy followed by Uber. This helped in creating fun and friendly image of the company.
• Partnership- Uber is in partnership with many companies, hotels, websites, and other services. People riding an Uber’s taxi may get offers from this various restaurants, or companies like discounts, cash back offers, etc (Schneider, 2015).
• A Loyalty Program- Special offers and discounts are offered to the loyal customers of Uber. This shows the gratitude of the company towards its loyal customers.

The marketing strategies of Uber are a success that is the reason that they are the leaders of privatized taxi service. It holds the maximum share in the market. More offers for first-time riders can be started by the company to initiate them to use the services again. Along with regular reminder through the app can be sent to loyal customers regarding their travel plans for which they always book a ride with Uber. A more user friendly app could be introduced and special instruction for a senior citizen can be included in the app (Rapp, 2007).

Marketing Strategies of Uber

Few recommendations that Uber company may use to improve its working and customer experience are as follows: –

Deregulate fares- Uber has a controversial pricing model according to which it can demand any amount of money at the time of high demand which a customer can always deny, but it leaves a bad taste for the customer regarding the company. Thus, this pricing strategy should be changed.

Cashless transactions- many a time passengers fear that their credit and debit information get leaked if they use them. Thus, option for cash payment should also be there for such customers (Enoch, 2015).

Licensing – all the drivers hired by the company should have proper license and experience before starting the work for the company.

Training- a basic training program should be formed for all the drivers hired by the company about various protocols they need to follow.

Insurance- every vehicle hired by the company should be properly insured and in its best condition. Drivers following rules can be awarded through various measures by the company (Harding, Kandlikar and Gulati, 2016).

Conclusion

Uber is a top most taxi services company giving away its services throughout the world. It has a high rate of competition but still it is has the highest market ratio. Uber needs to exploit all the available opportunities using its strengths and change its weaknesses into strengths. Uber’s business model is very easy to copy by its competitors. Thus, it is necessary for the company to increase its customer loyalty to retain them. Hence, it concludes that Uber has huge competitions coming in future in the form of other companies and alternatives, so it should work hard to maintain its position as the top-most taxi service of the world (Gholami and Mohaymany, 2011). 

References

Anderson, D. (2014). “Not just a taxi”? For-profit ridesharing, driver strategies, and VMT.Transportation, 41(5), pp.1099-1117.

Batt, R., Nohara, H. and Kwon, H. (2010). Employer Strategies and Wages in New Service Activities: A Comparison of Co-ordinated and Liberal Market Economies. British Journal of Industrial Relations, 48(2), pp.400-435.

Belwal, R., Minhans, A. and Al-Balushi, A. (2013). Perception of Taxi Services in Oman–A Cross Examination of Citizens’ and Taxi Drivers’ Perception. Jurnal Teknologi, 65(3).

Chakravarthy, B. and Coughlan, S. (2011). Emerging market strategy: innovating both products and delivery systems. Strategy & Leadership, 40(1), pp.27-32.

Enoch, M. (2015). How a rapid modal convergence into a universal automated taxi service could be the future for local passenger transport. Technology Analysis & Strategic Management, 27(8), pp.910-924.

Gholami, A. and Mohaymany, A. (2011). Analogy of fixed route shared taxi (taxi khattee) and bus services under various demand density and economical conditions. Journal of Advanced Transportation, 46(2), pp.177-187.

Harding, S., Kandlikar, M. and Gulati, S. (2016). Taxi apps, regulation, and the market for taxi journeys. Transportation Research Part A: Policy and Practice, 88, pp.15-25.

Rapp, R. (2007). The Strengths Perspective: Proving “My Strengths” and “It Works”. Social Work, 52(2), pp.185-186.

Schneider, A. (2015). Uber Takes the Passing Lane: Disruptive Competition and Taxi-Livery Service Regulations. Elements, 11(2).

Vanek, M., Mikolas, M. and Zvakova, K. (2012). Evaluation Methods of Swot Analysis / Metody Vyhodnocení Swot Analýzy. GeoScience Engineering, 58(2).

Vujic, N., Vasiljevic-Blagojevic, M. and Peric, N. (2014). Analysis of the characteristics of taxi services as a prerequisite for their improvement. Marketing, 45(3), pp.231-239.

Yang, T., Yang, H. and Wong, S. (2012). Taxi services with search frictions and congestion externalities.Journal of Advanced Transportation, 48(6), pp.575-587.