Strategic Plan For Uber Inc. In United Kingdom Transportation Industry

Company Overview

The major objective of this report is to prepare a strategic plan for Uber Inc., which can assist the organization in achieving the competitive advantage and its mission and vision in the United Kingdom transportation industry. Uber is an App-based transportation organization, which is expanded rapidly in more than 50 countries. This report draws up a strategic plan for the selected company by the use of some specific analyses and tools. The discussion will look at the internal and external business environment for identifying the issues and challenges, which are faced by the organization in the area of strategic management. So, it will be using PEST framework and Porter’s five forces analysis for analyzing external and industrial business environment. Furthermore, it will conduct the internal analysis by evaluating the resources and capabilities of the organization. Finally, it will include the proposed strategy of the company and its strategic evaluation by using SAF model.

1.1 Company Overview 

Uber Inc. is an organization with high technology services, which was founded in the year 2009. Headquarter of the organization is situated at San Francisco, California in United States. This firm connects transportation industry with the information technology by the use of this app. It provided the services in over 570 cities in 53 countries by year 2014. Company is valued at more than 40$ billion. The data and figures of the company indicate that the value of Uber is more than full taxi industry in United States. The organization creates, promotes and operates the car transportation apps of Uber. In the process of operations at Uber, the drivers use their own cabs and cars; however the drivers can take a car on rent to run with the organization (Harris, 2014). There are so many reasons, why the people love to use the services of Uber, like; it provides very convenient, easier and less expensive rides to arrive at their location. Thus, Uber is continuously searching for the ways to modernize the transportation services and expand its extraordinary range of transportation vehicles. It has achieved a net profit of 2$ billion. The major competitors of Uber are Sidecar and Lyft.

According to Johnson & Scholes (2014), mission statement of an organization provides the employees and internal and external stakeholders clarity regarding the primary purpose of that organization.

The mission of Uber is very simple to offer the transportation services as reliable as running water, for everyone and everywhere. The organization is highly ambitious, which now desires to eliminate the car ownership concept and wishes to control the transportation industry. In pursuit of this mission over past five years, the organization has changed various cities in different countries all over the world (Abraham, 2012). It is trying to create the safest way to get around different cities and creating more than 20,000 job vacancies in a month, reducing the accidents and DUI incidents and enhancing domestic economies.

Mission, Goals and Objectives

Johnson & Scholes (2014) stated that vision statement relates to the future state that is desired by the organization. This statement works as a desire which inspires them, encourages commitment and enhances performance.

The vision statement of Uber is to provide smarter transportation with less cars and greater access.

2.1 SMART Model 

SMART model is a technique, which helps in setting the objectives in today’s business environment (Upton, Teal & Felan, 2010). This SMART stands for Specific, Measurable, Attainable, Reliable and Time-based.

 

Figure 1 SMART Model

2.1.1 Specific 

The mission and vision statement of Uber Inc. are really specific. It was a new and innovative start-up to provide app-based transportation services. The organization focuses on the people, who do not own and want to drive cars (Agarwal, Grassl & Pahl, 2012). It is using different social media strategies to aware the target market, like; Facebook, Twitter, Youtube and Uber app.

2.1.2 Measurable 

The mission of Uber is expanded when the mission statement focuses on the development of innovative services through an app. The mission statement of Uber can be measured by looking at the rides, taken by the people, thus it is measurable.

2.1.3 Attainable 

For Uber, nothing is there in the goals, which cannot be achieved. The organization is hiring experienced drivers to provide safe ride to the customers (Thompson & Martin, 2010). It can achieve this mission by offering various offers and discount promo codes to attract more customers.

2.1.4 Reliable 

The mission and vision statement of Uber Inc. are very relevant to its future strategies and providing services to the people.

2.1.5 Time-based

For completing the mission successfully, Uber should some consider some of the factors, like deciding a  time frame and specific number of the figure, which the organization want to achieve. It should determine the time duration for achieving that target (Nelson & Alkhafaji, 2013).

Aguilar (1967) stated that PEST analysis is a technique of strategic analysis, which creates the macro-environment of the organization, where the operations of business take place. This includes different factors, which may have impact on the growth and condition of organization.

                  

Figure 2 PEST Analysis

3.1 Political Factors 

There are some political factors, which impact the growth of organization in UL taxi industry. These factors include, such as; government rules and regulations, stability and other factors. Uber has faced various political controversies. In the initial phase of development, the organization was not clear with its regulations (Huddleston, 2014). It was very difficult to get insurance lie in the case of accident. There are so many political factors, which affect the transport services in terms of emissions of CO2 and changes of climate. Uber is offering greater services in comparison to other competitors for instance. Uber offers hybrid cars or taxis, which is low in emission of pollutants and makes it easy for the organization to have some benefits, when it is about the political factors. The organization has faced issues regarding security and taxi licenses in UK (Wang, Walker & Redmond, 2006).  

Macro Environmental Analysis (PEST Analysis)

3.2 Economic Factors 

Economic factors, like; recession impacts the budget of customers directly. Therefore, their purchasing power is also influenced by this. On another hand, unpredictable rates of fuel in UK may have large impact on pricing and these prices are quite volatile. The industry, in which Uber operates its business, is the sharing economy. It refers that the economy is based on the sharing intellectual and physical resources. Uber has developed exponentially since its initial introduction. But there are various countries, which have restricted or banned the services of Uber due to putting unfair competition against regular taxis (Kipley & Jewe, 2014). However, the company has grown at a rate that shows that there is an economic potential in the taxi industry.

3.3 Social Factors 

There are some social factors, which impact the growth of Uber, like; changing life style of people and increased use of smartphones. These factors show the needs of customers that brings them to the perspective market. Customers of Uber enjoy the easy availability of the cars. Selecting an appointment and pick-up time is very easy to use the app on phones. It needs no other communication process rather than presses the keys on phone (Macmillan, 2015). The affordable prices are appealing many customers, which have directed the blast to the growth of Uber all over the country. After enjoying the rides, the customers share and post their riding experience on social media sites. Because of ease of use, the consumers prefer to choose Uber.

3.4 Technological Factors

This is the major reason behind the development of Uber in the taxi industry. Developments in technology have large impact on business operations of Uber. Role of internet is enhancing in the life of people, so it is vital for Uber to create innovations. Thus, the business of Uber is spreading through social media. People are sharing their riding experiences on the social media sites and it is encouraging new users to take the ride. People are looking for affordable transportation alternatives. Through an app, people can book their cab and reach to their location. This app is very important to Uber, as it cannot run its operations, if this application suffers any technology issues (Hunt, 2014).

The given diagram shows the five forces, stated by Michael Porter, which shapes the competition in the industry (Warner, 2010). These five forces are; bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitutes and industry rivalry.

                         

Figure 3 Porter’s five forces

4.1 Bargaining Power of Buyers (High)

Uber offers the services, which the customers do not need on regular basis. Mostly, people use these services in some specific conditions, lateness for any scheduled meeting or work. The market of taxi industry in UK is getting larger, so the number of players is increasing and bringing more choices for customers and switching cost of buyers is comparatively low (Pinson, 2008). This is because free application software of Uber only needs customer registration. In terms of these factors, the immense power of the customers can restrict the revenue of company.

4.2 Bargaining Power of suppliers (Medium)

As Uber does not own any cars, its business model relies on drivers with their own taxis or cars and partners. It outsources the assets and labor to people, which fulfill the terms and conditions for utilization of their application. Thus, the main supplier of the industry is large number of drivers. The focus of this group of supplies is not very much high that limited the bargaining power of suppliers (Jones, Hill, Comfort & Hillier, 2008). Other suppliers are oil and gas suppliers. The prices of oil have been jumped later the year 2015. Highly changes in the prices raise higher risk to the company because of unpredictability and uncertainty.

4.3 Threats of New Entrants (Low)

There is a lack of protection at Uber from new riding firms, which may charge unfairly less for similar distance. At the time of its foundation, the co-founders of the Uber separated with an amount of capital (Steiner, 2010). Threat of new entrants is low, as this market needs a higher amount of starting capital and the requirement of capital is increased the entry level as compared to other industries.

                          

Figure 4 Porter’s Five Forces Analysis (Factors)

4.4 Rivalry among Competitors (High)

There are so many competitors in the app based transportation industry, in which Uber is operating its operations. The trend of these services is increasing from past few years. The major competitors of Uber are Sidecar and Lyft. From them, Lyft is the biggest competitor, which has almost similar operations and business model. Both the firms are not only fighting for market share but also for the suppliers. Uber has a bigger business network and it has made a larger capital investment. Although, the company is a market leader, but there are some differentiation strategies limit the potential of the organization (Goetsch and Davis, 2014).

4.5 Threat from Substitutes (Medium)

Substitute is very common force in any competitive business industry. Transportation industry is a market, which have many organizations that can substitute the Uber. One of the closest substitutes to Uber is traditional taxi services. However, the costs of these services are higher than Uber. Its already-established presence restricts the ability of Uber to increase the prices. Public transportation is also a substitute, which poses threat to Uber (Kaplan & Haenlein, 2010). It is impacting the profitability of Uber. The above table shows that the average time of both Uber and traditional Taxi services. Over 94% of Uber taxis are arriving in less than 15 minutes whereas the traditional taxis are only 27%.

                    

5.1 Porter’s Value Chain 

The modern version of value chain was developed by Michael Porter, who discussed a chain of all the activities, which are common to all the businesses and categorized them into two parts, i.e. primary activities and supporting activities (Powers and Hahn, 2015). The below-given diagram shows all the activities;

                               

Figure 5 Primary Activities in Porter’s Value Chain

The below-given table includes the means, by which Uber is creating value chain in the organization and passing to the customers.

Table 1 Porter’s value chain activities

Value Chain activity	How Uber is creating value for their customers	Does this create value
Primary Activities
Inbound Logistics	At Uber, this activity includes management information system that allows for making connection between customers and drivers, like on the basis of GPS.	Yes
Operations	The operations at Uber are obvious, being the operational systems that develop output from inputs. The operations are controlled by application, which track the location of driver and connect the driver with customer (Clemens, 2009).	Yes
Out bound logistics	After reaching at the final destination, information system of Uber enables the rider to sign off on payment and give rating to each other, thus they can be pushed in right grouping (Pratap, 2017).	Yes
Marketing and Sales	Marketing and sales for this company are not only attracting the clients and segmentation of cars but also advertising to those people, who are desired to join the company.	Yes
Services	The services for Uber are that of position of missing things and response, which is provided by the rider after getting service.	Yes

Table 2 Supporting activities of Value Chain

Supporting activities
1. Procurement 2. Technology Development	It includes the means by which company obtains the necessary resources. For Uber Inc., this is their drivers’ fleet, which vary according to the services. As technology based company, Uber requires being on the highest rank of the advanced technology trends, so there is ease to use of interface and customers are very happy with the ease of using services.	Yes Yes
3. Human Resource Management 4. Infrastructure and Management Style	Human resources at Uber include all the people, who tried up with checking of the rides of Uber. It includes all the riders, drivers and other stakeholders of Uber. Uber has some support systems and functions, which helps in operations, like; administration, accounts department and management (Harmer, 2014).	Yes Yes

5.1.1 Strengths and Weakness of Value Chain 

Strengths · Innovative services · Clear pricing · Enter pick up and destination location to estimate the fare · Safe and secure rides · Ease to use

Weaknesses · Not available in small cities · Some of the towns in the country have different taxi services, so there are fewer cars of Uber. · It may cost high, if stuck in the traffic.

Table 3 Strengths and Weaknesses of Value Chain

5.2 VRIO Analysis 

VRIO analysis is used to analyze that which resources and capabilities of the company are functioning as its competitive power. It includes the resources, which have the properties of VRIO, such as; Valuable, Rare, Inimitable and Organization capability.

Table 4 VRIO Analysis

Resource/Capabilities	Valuable	Rare	Inimitable	Organization capability
Inbound Logistics	ü	–	–	ü
Operations	ü	–	ü	ü
Out bound logistics	ü	ü	–	ü
Marketing and Sales	ü	–	–	–
Services	ü	ü	–	ü
Procurement	ü	–	–	–
Technology Development	ü	–	ü	ü
Human Resource Management	ü	–	ü	–
Infrastructure and Management Style	ü	–	ü	–

From the above analyses, it can be said that for Uber, both primary and supporting activities are creating value for the customers. All of these activities are working in unique manner. For example, inbound logistics of Uber includes the information technology system, which connects the driver and customer. It gives them facility to book the taxi online and arrive to their location. Furthermore, other activities like; management style and infrastructure assist the company in make stronger the management (Anderson, Narus & Narayandas, 2009). It has appointed only experienced drivers and looked at their past background. Thus, there are so many things, which help in providing services in better manner. In this way, all these activities create value to the customer and for organization itself. The above table can help in understanding the quality of different activities at Uber.

TOWS MATRIX	Strengths · Brand Equity · Focus on customer satisfaction · Easy availability and ease to use	Weaknesses · Highly dependent on human resources · Privacy issues · No patent to protect itself from competition and imitation
Opportunities · Expansion in new markets · Increasing internet usage · Expansion in logistics business	Market Development	Product Development
Threats · Unclear government regulations · Complaints from drivers about low wages · Customer retention	Market Penetration	Diversification

Table 5 TWOS Matrix

6.1 Matrix:

 

6.2 Market penetration

This strategy can be used by the organization for trying to enter in a new market. Uber should offer a fixed price and different payment modes for day-to-day riders. The organization should train the drivers by developing traffic regulations, training etc. (Johnson et al, 2013). The organization needs to improve its infrastructure and workforce. It should strive for new and skilled team.

6.3 Market Development

To serve the demand of specific market, Uber requires working with a focused approach in the product offerings. There is a need to identify the socio-cultural requirements in different markets and offer better quality services. A great product, a proactive approach and first mover benefit in dealing with the problems helped the Uber being a market leader. It should increase the stakeholder engagement, like government and tax bodies (Casadesus-Masanell, Makenzie & Didiomov, 2015).

6.4 Product Development 

Technology is the heart of Uber’s business operations. So, it should emphasize on resolving the problems of consumers. It should patent its application to protect it from imitation. It can offer discounted coupons and offers on rides by decreasing profit margin of Uber in the duration of low demand.

7.1 Suitability 

In the case of Uber, the proposed strategy of product development and market development achieves the opportunities, which Uber has in the industry. The company has various positive points, so it can attract the customers easily. It is the biggest leader in the industry and services of the company are better than others. With the expansion in big cities, it can offer new coupons and offers to new users. It will help Uber to compete in intense competition. Thus, it can be stated that proposed strategies are suitable.

7.2 Acceptability 

Acceptability of the new services can be analyzed by stakeholder mapping. It can help in analyzing the interest of stakeholders in the organization’s services. From last few years, Uber was under political controversies, so first it should clearly understand the laws and regulations of taxi industry. Customers are very happy with these services, so the proposed strategy should be acceptable for the drivers and customers.

7.3 Feasibility 

The strategies, which are proposed in the above-paragraphs are very practical and can be employed effectively. At Uber, there is need of implementing new strategies to retain the customers and drivers. They can utilize their resources for product development. In the product development, by offering new offers, it can attract more customers. Thus, the feasibility of the strategies is strong.

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