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Uber is feeling the heat from competitors and regulators worldwide….
Uber is feeling the heat from competitors and regulators worldwide.
Uber, originally known as “UberCab”, was started by Travis Kalanick and Garrett Camp in 2009 to solve their problems with taxi services. They grew the company rapidly and by 2015 were providing carpooling services in 300 major cities in 58 countries around the world.
Uber began as a mix of taxicab and carpooling services that used GPS to connect people looking for rides with private contractors driving their own cars.
Uber was launched in New York City in early 2010 with three cars. It quickly expanded across the United States, made its international debut in Paris at the end of 2011, and expanded all over the world in the next couple of years. Uber raised $1.25 million from First Round Capital, $11 million from Benchmark Capital, $37 million from Goldman Sachs and $1.2 billion from Baidu. It was operating worldwide in 2015.
Uber conceived of its mission as making transportation “as reliable as running water” and wanted to move things, not just people, in five minutes. It wanted to remain cheap, fast, and efficient so that using Uber was cheaper than owning a car.
Uber’s biggest downside was the many legal hurdles it faced from regulators, as it came up against taxi laws written before the concept of Uber even existed.
UberBlack was a professional service that catered to wealthy individuals including celebrities, executives, and those using it for a special occasion.
Uber for Business is used by companies to offer Uber services to employees, customers, and anyone else interacting with the company for a discounted rate.
Uber jumped into several short term services to suit the market including Uber ice-cream, Uberboat, and UberHealth, which offered wellness packs with the option of free flu shots by a registered nurse for up to ten people for a small fee.
Uber was a new take on an old industry using state of the art technology, but faced serious competition from other ride sharing apps and city taxi services. Despite this, Uber dominated the market, leading in all 132 U.S. cities it entered.
Uber’s millennial users preferred its app interface to ordering traditional taxi services by phone call or waiting till a cab happened to drive by.
Low barriers to entry made it difficult for existing companies to maintain or grow market share, making it crucial for them to differentiate their services.
While Uber had the advantage of being the first mover in the market, its competitors quickly copied its ride sharing app.
Uber filed patents on more than a dozen aspects of its services, including surge pricing, its star rating system for drivers, and its system for calculating tolls.
Uber cultivated relationships with local governments, as they had the power to regulate how and when Uber operated within their domains, rendering them crucial to Uber’s success or failure. Uber’s continued expansion in and beyond the 58 countries it operated in as of 2015 multiplied the complex political and legal scenarios it faced.
Political unrest and high insurance costs were threats to Uber’s operations in some countries, and drivers had to consider whether driving for Uber really was an attractive proposition yielding sufficient income.
Uber targeted specific demographics by tailoring services offered to particular constituencies and types of vehicle and technology platform, and by offering low cost UberX, quick delivery UberRUSH bicycle delivery, and on-demand food delivery UberEATS.
Uber’s app-based, global platform gave it the latitude to test different pilot programs in different markets, and refine those pilot programs to offer more competitive prices and services.
Uber’s ownership of deCarta mapping could be a business opportunity, as it could sell the service to its competitors, and enhance its app by providing more information to both riders and drivers.
Uber invested in driverless car R & D to counter the threat of self-driving cars, and launched a strategic partnership with Carnegie Mellon University to work proactively with experts in the autonomous vehicle industry.
Uber’s worldwide operations created many opportunities for expansion. The company’s global infrastructure positioned Uber to leverage future gains and adapt to new markets.
The company expanded to all markets to offset subsidies and to foster further growth.
As of 2015, Uber had completed 13 rounds of funding from 53 investors, including Google, Fidelity, and Baidu (China). This funding provided Uber with the financial strength to expand product offerings and enter new markets, including China in 2015.
Uber’s revenues were tied to how well it leveraged its product offerings in the various markets it operated in. As the number of rides used within a market tripled each year, Uber’s revenues grew significantly.
Gawker reported a 69.6% growth in revenues from early 2012 through mid-2013, which would seem to suggest the reported growth rate was valid.
While Uber posted revenue growth that allowed it to return to the venture capital markets, it was not a profitable company because it had to spend heavily to attract both drivers and customers.
Uber created three different pricing strategies for the marketplace: standard fee, airport rates, and surge pricing. The standard fee was comparable to a standard taxi ride, and was the most widely used.
Uber’s third pricing strategy, surge pricing, was a dynamic pricing model that hinged on the concept of supply and demand. It affected less than 10% of rides, usually around holidays, bad weather, or on weekend nights.
Uber’s prices and fees varied significantly from city to city and especially from country to country. The company also developed the UberTaxi service.
Uber’s promotional efforts focused on increasing customer base and market share by using standard promotional strategies at all locations and city specific programs to more directly provide services to a particular geographic location.
Referrals were the second broadly used promotional strategy, focused on networking and providing $30 (at the most) to an Uber user who referred another individual. Word of mouth was often the most effective strategy.
Uber used promotions in new cities and established markets to increase brand awareness and generate market share. For instance, the UberKITTENs helped foster adoptions and raised over $40,000 for participating shelters.
Uber’s New York City office hosted “The Next Generation of Woman Engineers” and the UberMILITARY program, and the Uber back-to-school program brought together parent drivers, their kids, community organizations, and local officials to hear about parents’ experience.
Uber developed a very decentralized marketing strategy that gave local community operations managers the autonomy to launch campaigns relevant to their particular city. These campaigns included visible social media accounts, responses to customer inquiries, and partnerships with local organizations to promote Uber services. Uber’s aggressive behavior in bending legislative regulations and attitude towards competitors such as Lyft and Sidecar garnered bad press and negative publicity, and made Uber look like a company that fought dirty and sanctioned disreputable practices to gain advantage over competitors.
Uber recognized that it needed to focus more on branding to increase customer loyalty, and created UberVIP to encourage riders to stick with Uber rather than switching back and forth between Uber and its competitors.
Uber started its ride-sharing operations in San Francisco in 2010 and operated in 59 countries and 300 cities by early 2016.
Uber built one of the largest and most successful lobbying groups in the United States, and aggressively challenged outdated regulations.
Uber’s mobile app allowed riders to order a car with just two clicks, use GPS to see the physical location of the car, and know the exact price ahead of time.
Uber introduced a dual rating system where drivers and passengers rated each other after every ride. This created accountability on both sides and encouraged a positive rider and driver experience.
Uber’s data privacy policies were criticized for violating customers’ privacy rights, and Uber recently revised its privacy policy for tracking passengers even when they disabled the GPS features on the Uber app.
Uber recently redesigned its driver app to help drivers maximize their income and improve their experience with Uber.
Uber’s core competency was its ability to develop a technology platform that connected people who needed a ride with drivers who could help them. However, Uber’s competitive advantages derived from four areas of strength: low cost, being first-to-market, product diversity, and fundraising.
Uber’s competitive advantage was that it offered rides at a much lower cost than traditional taxis, and considered drivers contractors, not employees, thus eliminating the need for dispatchers.
Uber was the first U.S. ride-sharing company to operate outside the United States and had a strong brand image worldwide.
Uber’s differentiation strategy enhanced its competitive edge by offering a wide variety of cars and car services.
Uber’s ability to raise capital was a competitive advantage because it allowed it to invest in growth, research, and development.
Uber’s competitive advantage was that it offered rides at a much lower cost than traditional taxis, and considered drivers contractors, not employees, so drivers were not eligible for costly benefits.
Uber was the first-to-market in the ride-sharing industry and had a strong presence in international markets, helping to develop a strong brand image.
Uber’s differentiation strategy enhanced its competitive edge by offering a wide variety of cars and car services.
Uber’s ability to raise capital helped the company innovate and secure a strong foothold in populated countries such as India and China.
Uber’s primary weakness was a class-action lawsuit challenging its business strategy of classifying its drivers as independent contractors. If the lawsuit were to succeed, Uber would have to classify its drivers as employees and pay them employee benefits.
Uber was also facing challenges in the political realm, as it was an unregulated market competing with taxis, limos, and other livery services, and its whole business-model was seen as relying on customers to download its app, thereby limiting its potential customer base to smartphone users.
Uber had to deal with regulatory issues, competitive pressures, and profitability in order to expand.
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