The challenges and threats facing Uber self-driving taxis
The idea of the creation of an autonomous vehicle is not exactly new. Companies have been considering it since as far as the 1980s. Nowadays, many major companies are paying attention to this prospective market and are working with IT companies dedicated to the research and development of such vehicles. The partnership between Uber and Volvo is one such example (Uber to Deploy Self-Driving Cars in Pittsburgh 2016).
Are they inventing a blue ocean with their driverless taxi project? Yes and no. “Creating a blue ocean” means developing a new market space rather than trying to claw their way into an established one and face the competitive challenges. They are not the first to come to this idea. Nevertheless, so far, the market for autonomous cars is relatively empty and could still be considered a blue ocean. The reason for that is simple – none of the companies involved in similar projects have yet released a model into the auto market en masse. Many obstacles are still in the way, ranging from prices to safety to the inability of old traffic regulations to adapt to this new reality.
Volvo and Uber will face the same challenges as all other developers of autonomous cars. One of these challenges is the unwillingness of the customers to delegate control to a computer. The idea of letting a machine carry you to your destination is unsettling for many customers right now. It was the same with automatic elevators, years ago. It will take some time to build up such trust, and any major accidents involving autonomous prototypes are going to cause long-term trust issues. Another major issue that most companies are struggling with right now is making the computer understand the nonverbal cues from pedestrians and regulators. Since every person is different, their cues differ one from another. The differences make it difficult for a machine to recognize them since there are too many different patterns to the program. Some autopilots are not even capable of recognizing the pedestrians yet, and could only interact with other vehicles. The computer must be able to navigate on the road just as well as any human can.
Lastly, Volvo and Uber are going to face competition with a high-tech giant named Google, which is also developing its own cars. As it stands, the key to creating a safe and efficient autonomous car lies not in the ability actually to produce high-quality cars, but in developing the appropriate hardware and software, to make the car truly autonomous. Volvo excels in making cars. Google excels in programming and robotics. Uber is a relatively young company and does not have as much experience as Google. However, they certainly made progress in that direction by bringing former Google employees and key figures involved in the project into the field. Other competitors include Tesla and Ford. The latter collaborates with Velodyne to create an autonomous vehicle of their own (Snavely 2016). It remains to see how this competition goes.
An internal analysis of Uber self-driving taxis
The news about the Uber autonomous taxi cabs is relatively fresh, and most of the technical details are hidden from the public. Informed predictions could be made based on what we know about the project and the company. The success of such enterprises relies on several key factors.
The first factor is financial resources. Even Volvo, who had declared several years back that the development of self-driving cars is a waste in the short-term perspective, ended up being Uber’s partner in the endeavor. That means they are interested in a long-term perspective, as revenues from these cars are not likely to come at least for the next several years. It requires time and money to conduct such a project, and Volvo is willing to offer its cars, its engineers, and its money to succeed. This puts Uber on par with other competitors, as far as finances are concerned.
The second factor is professional competence. Uber used to be at a disadvantage here when compared to a massive multi-national corporation such as Google. However, the company managed to even the odds by employing former specialists from Google, Tesla, and Apple, like Anthony Levandowski, Lior Ron, and Claire Delaunay (Markman 2016). This synthesis of specialists from different companies has put Uber on par. If not above, most other competitors vying for this market, as they had the base to start building the project up instead of inventing everything from scratch.
The third factor is speed. The company that would be able to launch the first autonomous vehicle into the masses will claim the dominant seat in the market. Google has been taking its time testing out their cars. However, it did not launch a massive public testing campaign yet. Tesla has been experiencing a negative backlash due to a fatal accident involving their autonomous car in June 2016 (Vlasic 2016). It raised serious concerns regarding the safety of their autopilot system, which means that the introduction of free, autonomous taxicabs in Pittsburgh is going to be the first large public campaign of such a sort, which will no doubt attract a lot of attention (Uber to Deploy Self-Driving Cars in Pittsburgh 2016). Many citizens would likely be interested in taking a ride. Should this campaign be successful, it will propel Uber way ahead of its competitors. However, should an accident like the one with Tesla happen, it may set the company back. Uber’s autonomous cars will not remove the human factor completely. The human will remain as a supervisor and will be able to take control of the vehicle whenever he or she feels it is necessary. Uber’s approach is more catering to the current mentality of the potential customers, who would prefer to remain in control of their vehicle. Uber has every chance to succeed, it seems. It has all the tools to take the lead, and now the success or failure largely depends on how well their vehicles perform in the field.
The modern business world is characterized by a focus on innovation and internalization. The major advantages of this approach include enhancing the visibility of the product, increasing sales, becoming less prone to local trends, and obtaining knowledge and experience that can be used to innovate (Boehe 2016; Narula et al. 2019). Some of the primary challenges linked to internalization are local political and social environments, currency fluctuations, and peculiarities of markets, among others (Verbeke & Kano 2016; Buckley & Casson 2018). Uber can be regarded as an illustration of the failure of a multinational’s entrance into a specific market. This report includes a detailed analysis of the flaws in Uber’s operations in the Chinese market in terms of network/social capital, digital internationalization, and institutional perspectives.
Brief Summary of Uber
The company entered the French market in 2011, and by 2016, Uber operated in 445 cities of over 60 countries across the globe (Wade et al. 2016). With its 750 million residents of urban areas commuting on a daily basis (compared to 150 million American commuters), the Chinese commuter market seemed attractive (Tybout 2017). Ride sourcing was also rather popular in the country, so Uber and similar companies offered services that were appreciated (Nie 2017). Uber entered the Chinese market in 2013 when it started its operations in Shanghai. The company developed partnerships with Baidu (a local GPS and map searching engine) and Alipay (a Chinese mobile payment platform) (Wade et al., 2016). First, the American multinational focused on collaboration with Chinese car rental companies as the most effective way to avoid possible legal risks (Wirtz & Lovelock 2016). Later, individual drivers were involved and encouraged to use the application.
A serious challenge associated with this approach was the Chinese government’s restrictions regarding entities that could conduct road transportation (Wade et al., 2016). The government’s restrictions did not cover private services, so Uber, as well as its Chinese competitors, started operating in a “gray area of Chinese regulation” (Wade et al. 2016, p. 7). Uber also had to rely on subsidies that were instrumental in offering competitive prices as this tool tended to attract drivers and passengers in the majority of cases. However, this choice is associated with certain financial constraints for the company.
It is necessary to note that the company faced serious challenges in the Chinese market as local companies tried to support Chinese-based on-demand-hailing services providers. For instance, WeChat blocked Uber’s promotional campaign, which had an impact on the American company’s expansion (Wade et al., 2016). Furthermore, the top management of Uber made several managerial mistakes, including the use of ineffective communication channels, short-staffing, poor recruiting and training practices.
Role of Network Relationship and Social Capital in Uber’s Expansion to China
One of the pillars of Uber’s entry strategies was its use of networking in the Chinese market. Networking can be referred to as a practice that involves collaboration between individuals and/or organizations in diverse settings (Alon et al., 2016). Companies develop partnerships that help them address various challenges and improve their position in the market (Andersen & Medlin 2016). This strategy is often employed during internalization due to the opportunities it has to offer to organizations of different sizes (Julkunen, Gabrielsson & Raatikainen 2015). Entrepreneurs and multinationals can benefit from networking as it can facilitate their entry into new markets.
Some of the central advantages of networking for companies operating in the international market is their ability to increase their visibility and obtain new valuable contacts. When entering a new market, it is often difficult to locate reliable suppliers and partners in various settings (Alon et al., 2016). Networking ensures sharing contacts that can be instrumental in the organization’s high performance. This approach also ensures effective knowledge and experience sharing, which helps in developing innovative strategies and products. People coming from different cultures can develop effective methods to address emerging challenges. In many ways, networking enables organizations to minimize their risks associated with legal and financial aspects.
At the same time, networking is often related to certain disadvantages and issues that should be considered when making the decision to employ this practice. One of the major challenges of this approach is associated with cultural and other differences of the companies operating in a network (Godart & Claes 2017). People have different perspectives regarding numerous concepts, and, moreover, organizations have different cultures that shape their employees’ behavior. It can be difficult to collaborate with another firm and share information if this enterprise has other values, vision, and goals.
Uber was successful in some areas when implementing its networking strategy. They collaborated with car rentals and local digital companies to provide the services for their new customers (Wade et al., 2016). Nevertheless, the company had financial losses and eventually lost competition due to its inability to create strong relationships based on the principles of social sustainability with local companies (Fan et al., 2019). Chinese companies tend to support local organizations in various areas, including transportation, which placed Uber in rather a difficult position (Makino & Yiu 2014). Uber failed to acknowledge these values and was unable to become a social actor whose operations could be exclusive, innovative, and beneficial for the country.
One of the central components of networking is effective communication that can be implemented via different channels (Zheng et al., 2015; Chang, Shen & Liu 2016). Modern companies make extensive use of social networks that have become an efficient platform for building links and sharing information (Park, Jun & Lee 2015; Pogrebnyakov 2016; Banik & Sengupta 2019). It is noteworthy that such widely utilized instruments as Facebook or Twitter are not sufficiently popular among Chinese users, so it is necessary to develop partnerships with local social media. Uber tried to use some of the most popular communication channels to reach their potential customers in China. However, these efforts were rather unsuccessful as the digital platform that was chosen as a partner made Uber’s marketing initiatives invisibly (Wade et al. 2016). In addition, the use of the communication channel for interactions with customers was ineffective since email was not seen as a convenient tool in China. In simple terms. Uber failed to utilize proper communication channels when building its networks.
Social capital theory can also be applied to identify the reasons for Uber’s failure in China. Social capital can be defined as the input of the relationships of people within (and outside) an organization into its success (Frynas & Mellahi 2015). Uber failed to create the social capital it could benefit from. The training programs provided to drivers are aimed at improving certain professional skills and build organizational culture. However, many drivers did not receive any training as they bought their accounts from a Chinese C2C online platform (Wade et al., 2016). Moreover, staffing in Chinese offices was rather insufficient, which led to people’s low morale, considerable burnout, and high turnover. Employees were not committed to the principles, values, and goals of the organization, so their performance was poor, which led to customer dissatisfaction. Companies tend to benefit from forming links among employees as informal communication and interactions contribute considerably to the development of a strong organizational culture (Alon et al., 2016). Uber could not build the link between office employees and drivers, and the company did not facilitate the development of professional bonds with employees from other countries.
In a nutshell, networking is a common practice facilitating the internalization of companies irrespective of their size or other peculiarities. Organizations can benefit from knowledge and experience sharing within networks as well as developing innovative strategies as they contribute to each other’s success. However, cultural issues can become considerable obstacles to effective networking. The choice of the most appropriate communication channels is critical for the successful implementation of partnerships and networks. Uber failed to create networks and become a part of the Chinese business landscape. The American organization employed inefficient communication channels in China and failed to find reliable and responsible partners to build a sustainable network. Uber did not develop social capital, which also prevented it from becoming competitive. The organization did not facilitate the creation of professional and informal links between its employees in China, so people were not committed to organizational goals and values.
Digital Internalization
It has been acknowledged that technological advances have contributed to companies’ internalization, which is specifically true for the digital sector. Organizations operating in this market often need to pay less attention to resource constraints or geographical issues (Banalieva & Dhanaraj 2019). For instance, such companies as Facebook or YouTube have been capable of entering the global market within a very short period of time. Various Internet-based enterprises do not invest heavily in the development of a supply chain in new markets as manufacturers do (Zeng, Khan & De Silva, 2019). Internet-based services tend to reach consumers within shorter periods of time due to people’s access to the Internet, which is taking place at an unprecedented pace (Li et al., 2019). It is noteworthy that the size or other specifics of the company are irrelevant for the success of the venture as even entrepreneurs achieve high results in the global market with their start-ups.
Researchers are exploring the process of internalization divide organizations into two major groups, while their views on the reasons for these companies’ success and approaches differ (Wittkop, Zulauf & Wagner 2018). The two kinds of enterprises are the so-called International New Ventures (INVs) and Born Global Companies (BGCs). INVs and BGCs are similar in several respects as they are both created in one country but soon enter the international market. The period from the creation to emerging as an international actor is confined to several months (Fan & Phan 2018). The major difference between the two kinds of organizations lies within the scope of their reach as INVs are mainly regional, while BGCs tend to enter markets of several continents (Wittkop, Zulauf & Wagner 2018). The primary advantages of the latter are rather obvious and include a considerable number of customers and products or services visibility (Frynas & Mellahi 2015). In addition, BGCs are characterized by an ability to mitigate risks emerging in certain markets due to the sustainability of operations in other regions.
International new ventures also have their strengths and weaknesses that are mainly linked to geographic and cultural peculiarities. One of the central advantages of INVs is the amount of their profit, as such companies usually cover a considerable number of customers (Andersson & Servais 2018). INVs also manage to establish their business effectively using available resources and addressing social, cultural, economic, and political peculiarities of the countries they operate in (Madsen, Sorensen & Torres-Ortega 2015). However, the major shortcoming of this kind of enterprise is its inability to expand globally as it is unprepared to address the challenges the global market provides (Glowik 2016). INVs often fail to adjust to the peculiarities of certain regions, which makes their successful entrance and further operations impossible. These companies have organizational cultures that may differ substantially from the values of people living in specific countries.
Uber can be regarded as an illustration of INVs’ lack of understanding and ability to adopt certain perspectives and values. Although Uber operates in over 60 countries and can be seen as a BGC, it faced insurmountable obstacles in China, where a different approach to ride-hailing services has reigned (Seifert 2016). Uber tried to address the cultural and institutional peculiarities of the Chinese market, but the company made several mistakes. The organization still focused on the operations it utilized in other countries. The company in question was not prepared to operate in the market with the fierce competition characterized by the considerable support of local businesses that were apparent in different areas. Local authorities, as well as companies, preferred interacting with and helping Didi, a local competitor of Uber, rather than interact with the internationally known enterprise.
All in all, it is necessary to note that companies operating in the international market can be divided into Born Global Companies and International New Ventures. The former organizations operate in more than three continents, while the latter’s operations are confined to certain regions. The advantages of INVs include their significant market share and ability to reach wide audiences. The disadvantages of such companies are their lack of flexibility when entering new markets that are considerably different from the ones they already operate in. Although Uber can be found in many countries on different continents, its expansion strategies failed in China. Some of the reasons for this failure are Ubers’ use of ineffective strategies and their inability to overcome the competition that is supported locally.
Institutional Theory and Global Entrepreneurship
The case under analysis is illustrative in terms of the impact institutional forces can have on the development of a company. According to the institutional theory, the market should develop in a sustainable way to balance the rights, opportunities, and responsibilities of all actors, which is possible through a certain degree of institutional governance (Styhre 2019). The supporters of this paradigm claim that some institutions should make sure all actors’ conduct is appropriate and beneficial for the development of the market (Lepsius 2016). Institutions develop rules and regulations that help all stakeholders behave in a sustainable way.
Institutions can be formal and informal, depending on the degree of formalization. Formal institutions tend to be created by countries’ legislation and are associated with specific rules, standards, contracts, and laws (Wei & Wu 2015). These institutions guarantee the balance in the economic sphere of their country (Buckley & Tian 2017). Informal institutions are often less tangible, but these influences can be even more powerful than formal institutions’ measures (Armstrong et al., 2014). Informal institutions are traditions, norms, and values that have been developed throughout decades and centuries in a certain society (Amaeshi, Adegbite & Rajwani 2014). It has been acknowledged that formal components tend to be more flexible and can be created within a short period of time, while informal institutions need time to emerge and become accepted (Zhao et al., 2016). Both elements of institutions should be properly considered when entering a new market, especially if the new country is considerably different in terms of the political, social, and cultural agendas (Ang, Benischke & Doh 2014; De Villa, Rajwani & Lawton 2015). Uber seems to have missed some aspects of Chinese institutional impact.
China is an Asian country where many western values and perspectives seem irrelevant or even harmful. The country positions itself as a communist-led state, although its economic sector is far from being consistent with the principles of Communism (Elg & Ghauri 2015). One of the major peculiarities of the Chinese market is its strict compliance with numerous regulations and laws. Economic relationships within the country are rigidly regulated, which is manifested in both formal and informal aspects. Apart from the functioning of various authorities that impose rules to be followed, Chinese society imposes certain principles regarding business and collaboration. International companies, especially western organizations, often find it difficult to remain consistent with all the formal and informal standards.
Uber was one of the companies that had to face serious challenges when entering the Chinese market. As mentioned above, the Chinese authorities introduced regulations forbidding the provision of any transportation services without the corresponding license (Wade et al., 2016). Therefore, Uber had to rely on private drivers whose services were not regulated at that moment. However, addressing informal institutional challenges turned out to be much more difficult for the company. Uber had to face local companies’ reluctance to collaborate effectively and fairly. The support of local businesses proved to be essential for local ride-sourcing companies.
Apart from this, Uber did not take into account Chinese people’s attitude towards subsidies as it was expected that people would try the service for free and start using it for a fee (Wade et al., 2016). However, due to the cultural peculiarities of the population, subsidies turned out to be a heavy financial burden for Uber as people used the company’s offerings and skipped to other (mainly local) ride-hailing services providers. Informal institutional forces were not properly managed by Uber, so the company failed to gain a meaningful share in the Chinese market.
To sum up, it is necessary to note that institutional forces played an important role in Uber’s entry into the Chinese market. The company managed to overcome some formal institutional challenges, but it failed to address informal forces. The former obstacles were associated with regulations imposed by local authorities and certain litigations, while the latter involved quite specific practices of local companies (occasionally supported by authorities) (Stone & Chen 2016). The cultural peculiarities of the local population also had an impact on Uber’s competitiveness as many of the organization’s policies were ineffective. The company failed to gain a meaningful market share in China and lost the competition to a local ride-hailing giant, Didi.
Conclusion
In conclusion, it is necessary to note that Uber can be seen as a successful international company having a significant market share in many countries. Its expansion to new markets was dynamic and successful, but the strategies utilized by the company’s management proved to be ineffective in China. The organization under consideration entered the market in 2013, but it had to admit its failure three years later. Uber failed to become a serious player in the Chinese market due to several reasons. First, the company chose diverse communication channels, but some of them proved to be ineffective. Although the management tried to meet the needs of the population, Uber utilized email as the major communication channel with its users. However, this method was not popular in China, which diverted certain populations from using the service.
More importantly, institutional forces had a considerable effect on Uber’s operation in China. The Chinese market is highly regulated, and Uber had to adjust to the legal and political peculiarities of the market. The formal components of institutional impact were addressed, but informal elements became an insurmountable challenge for the organization. Uber chose networking as the primary strategy aimed at facilitating its entrance and further expansion in the Chinese market. Nevertheless, local companies following some cultural standards and norms concentrated on the collaboration with local ride-hailing services providers. Uber was unprepared to develop an effective strategy for operating in such an environment, which led to its failure in China.
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Uber is a successful company in the field of ride-hailing, having businesses on a worldwide scale. It has recently expanded to include food delivery services, which are particularly lucrative during the pandemic. However, despite the strong positions, Uber experiences a number of issues, including incidents with drivers, and faces tough competition from Lyft and the traditional taxi business. One of the potential solutions is introducing a new niche service that would further separate the company from the competitors. This paper will use a SWOT analysis to identify Uber’s internal and external factors and determine the best course of action.
SWOT Analysis
Strengths
The first focal point will be the company’s strong aspects. They include worldwide brand recognition, pricing, market domination, the safety policy, the communication approach, and service satisfaction, and each of them will be discussed in detail below:
Worldwide brand recognition. Uber operates in about 70 countries and covers more than 10,000 cities, with the US and Brazil being the top two clients (Uber, n.d.a). Additionally, it has managed to become synonymous with ridesharing even in such countries as the UK, where taxis are traditionally strong (Skok & Baker, 2018). Although the company had to partially abandon the Asian market at one point, its name remains recognizable, and the demand exists for Uber to reenter some regions (Anwar, 2018).
Pricing. Uber is renowned for its low prices for customers, which are the result of decreased regulations imposed on drivers (Gabel, 2016). On the other hand, the policy of surge pricing during periods of high demand, when certain multiplies increase the fee, benefits the latter (Jiao, 2018).
Market domination. As far as the US, Uber’s biggest market, is concerned, it has a 68% share in rideshare, while the rest is occupied by Lyft (Yeo, 2021, para. 1). The company also dominates in the largest metropolitan areas, with the lowest percentage being 55 in Phoenix (Yeo, 2021, para. 4).
The safety policy. Uber values riders’ and drivers’ safety, which is particularly evident during the COVID-19 pandemic when sanitizing protocols are being vigorously implemented (Uber, n.d.b). Furthermore, guidelines exist regarding a driver’s background, emergency help, privacy, and cleanness (Uber, n.d.b).
The communication approach. The digital nature makes Uber transparent through the rating system and real-time monitoring, enhancing the service and identifying inappropriately-behaving drivers (Liu et al., 2021). Difficult customers are also tracked, and more experienced operators can be assigned to them (Liu et al., 2021). Overall, the constant feedback ensures that both complaints and appreciative messages are heard, and the latter may boost a driver’s morale.
Service satisfaction. Customers appear to be generally satisfied with Uber, with the rating remaining above 4 (Siagian, 2020). Drivers also expressed a relatively high rate of satisfaction in 2018, compared to Lyft, although the situation could have changed (Shokoohyar, 2018).
Weaknesses
Despite Uber’s strong brand and other advantages, the company is plagued by controversies and questionable decision, some of which will be highlighted below:
Continuous scandals. Uber tends to be associated with alarming news concerning its drivers or passengers. The recent ones involve a murdered Uber Eats operator and a dispute with a passenger in the UK (Grimsditch, 2021; O’Kane, 2021). Such reports tarnish the business’s image and make potential customers seek alternatives.
Dependency on drivers. The company’s model makes it highly dependent on its employees, who do not share a common organizational culture, leading to unpredictable situations.
Dependency on the Internet. Uber being application-based may be inconvenient for areas with an unstable connection or during disruptions, which causes fewer orders and increases potential cancelations.
Questionable accessibility. Despite the pricing policy, Uber vehicles are rarely seen in low-income and women-dominated communities, and the minority client base is small (Jin et al., 2019).
Financial losses. In 2020, the company suffered a major decrease in sales due to the pandemic (Yeo, 2021). It may take years for Uber to recover and restore them to the previous level.
Opportunities
The desperate situation did not only lead to negative consequences but introduced several opportunities on which the company can capitalize, and some of its long-term plans are also worth mentioning.
The growth of non-passenger services. Uber Eats met an unexpected success during the pandemic period, and the same is true for Uber Freight, although to a smaller degree (De Silva, 2021). Thus, introducing new services might be beneficial for the company.
Sustainability and unmanned cars. Uber eventually plans to make its vehicles exclusively electric, which will improve the environmental situation and draw the audience who shares the sentiment (Uber, n.d.c). The initiative is likely to be accompanied by automated controls, preventing issues and scandals associated with a driver’s personality.
Further investments. Some countries, seeing Uber’s success and convenience, may choose to invest in the company, which was the case with Japan (Anwar, 2018). It allows for a smoother establishment of local operations and makes the service feel welcome.
Threats
The competition with Lyft and local organizations endangers Uber’s positions, and certain opportunities may be marred by challenges.
Local competitors. The company already had a failed venture in China, and other areas where Uber is barely present or non-existent may also choose to support national services (Anwar, 2018). Countries where taxis have been historically prominent may also be dissatisfied with its increasing share and install certain barriers to protect the established public transit (Skok & Baker, 2018).
The danger of unmanned vehicles. While automated vehicles can remove at least two of the underlined weaknesses, they present questionable accountability in case of accidents. However, by the time of their implementation, the legal ambiguity will probably have been clarified.
Lawsuits. Controversies continue leading to disputes to be settled at court, and they require financial investments, for which the company should be prepared, not to mention reputational losses.
The Suggested New Service
Considering the analysis’s results, it would be prudent for the company to expand its services. One of the potential routes is delivering small and middle-sized non-edibles, which will be a natural evolution and an intermediate stage between Eats and Freights. It can also be used to gain traction in countries with Uber’s minimal presence or intense competition, and the marketing efforts should be focused on the product’s safety. Some people might want to order both food and goods such as utensils, so combining the services seems a reasonable development. While not entirely safe from complaints, the driver-consumer mechanics are different, and external factors will be more prominent. Another aspect worth considering is accessibility, which should be more achievable with deliveries if the pricing policy is altered. Altogether, the company can thrive after introducing non-edible delivery and avoiding the existing pitfalls.
References
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Siagian, V. (2020). Customer expectation and customer satisfaction: Reviewing service quality of Uber. JKBM (JURNAL KONSEP BISNIS DAN MANAJEMEN), 6(2), 209-217. Web.
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Uber stands out as a remarkable company that relies on modern technologies to address people’s transportation needs. With its headquarters in San Francisco, this company has managed to command a market share of over 71 percent. It has developed a unique model that allows it to compete in various segments and countries. Its business model is characterized by unique attributes that make it profitable. This presentation gives a detailed analysis of the unique attributes defining Uber’s business strategy.
Uber in South Africa
Uber is presently operating actively in South Africa. Interested drivers need to meet the outlined requirements before being permitted to have Uber accounts. These drivers need to follow key guidelines if they are to achieve their goals. Proper marketing initiatives have helped the organization attract more customers and achieve its business goals (Scheepers & Bogie, 2020). Despite some of the recorded challenges, Uber has the potential to continue performing optimally and overcoming competition from taxis in the country.
Uber’s International Market
Being the pioneer of ridesharing apps, Uber was able to expand its business operations and invest in different markets. This trend has attracted an increasing number of competitors and challenges. Being a sector facing threats from new entries, Uber should be able to reenergize its efforts and focus on the best strategies to remain profitable. Some of the outstanding challenges include driver concerns, protests over poor working conditions, and rivalry from established taxi industries. A proper strategy would be essential if this company is to continue pursuing its goals.
Factors in Marketing Development: Technological Development
In South Africa and across the globe, Uber is constantly transforming its marketing approaches by embracing the idea of technology. For instance, it has been iterating its app to meet the changing demands of more clients. The company has been focusing on emerging regions and innovations that can meet the demands of more customers, including autonomous vehicles (Scheepers & Bogie, 2020). These measures will maximize its competitiveness and take it closer to its business aims.
Continuation: Trending in the Media
The use of social media is an evidence-based approach that has helped Uber become a trending organization. Followers and contributes present insights that can help improve organizational performance. The company’s topmost leaders allow users to share their experiences and present additional insights for improving the implemented organizational model continuously.
Uber is one of the companies that identify key partners or stakeholders and engage them continuously to ensure that timely results are recorded. The top leadership considers their emerging needs and expectations. It prioritizes their needs and makes proper decisions that can ensure that the company remains competitive and sustainable. The company has adopted a superior model of engaging such partners in decision-making and strategy implementation processes (Henama & Sifolo, 2017). These measures have resulted in a superior business model that resonates with the changing demands and expectations of different customers in different regions.
Competitors
Uber’s key competitors can be subdivided into these two groups: indirect and direct. The direct ones include firms that offer ridesharing apps in different countries. Taxi drivers relying on the traditional model continue to pose a unique challenge to this company. Companies operating in the wider technology sector are also focusing on autonomous cars to meet the demands of future customers. A reinvention is necessary if Uber is to minimize these challenges and eventually remain profitable in different parts of the world.
Conclusion
Uber is presently one of the leading ridesharing companies in the world today. Its business model has delivered timely outcomes in different parts of the world. The strategy to meet the demands of all stakeholders has helped improve organizational performance. A renewed focus aimed at tackling the challenge of the competition is necessary if Uber is to remain profitable in the future.
There are many internal and external agents capable of radically changing the existing market system, and disruptive innovation is one. According to Twin (2021), “disruptive innovation refers to the innovation that transforms expensive or highly sophisticated products or services … to those that are more affordable and accessible to a broader population” (para. 1). Today, market players and consumers are witnessing the Digital Revolution. Huseby and Dombi (2016) note that “recent studies point to digital as the primary force driving the business and societal changes…” (p. 20). One can safely say that all of the market players have experienced the various effects of disruptive innovations associated with the digital field many times over the last decade. Many more are yet to come, and analyzing current products and services widespread and popularized by disruptive innovations may reveal what market changes should be expected in the future. In this work, I will share with the audience what products and services related to these phenomena I use on a daily basis.
Products I Use
Uber
The fast, widely- and easily accessible Internet has spawned new business niches and has dramatically changed existing ones. Among the latter, the private transportation area has experienced the emergence of new business entities, services, and products. One of them was Uber, “the global ride-sharing application, founded in 2009, disrupted modern transportation … and at one point grew to become the highest-valued private startup company in the world” (Blystone, 2021, para. 1). Such global success is driven by a unique business model, ongoing customer communication, rigorous selection of drivers, and high-quality service.
Until 2017, I only used traditional private taxi transport. However, one day I saw Uber in one of the online ads and decided to check what it offers. I read the official description and customer reviews and decided to give it a try. I was satisfied with the price of the trip and the overall quality of the service. The main reason I switched to Uber was their pricing policy. They were significantly cheaper than traditional commercial taxis. It is also worth mentioning that Uber is a pioneer in producing self-driving vehicles (Blystone, 2021). It shows that they understand that digital and technical innovation is what makes them more potent as a market actor.
Spotify
Another business model that has emerged because of the fast development of digital technologies and the online space is music streaming. Spotify is the current leader in the industry; they create new market trends and set an example for its competitors. The digital service emerged in the mid-00s as a response to widespread music piracy that was causing musicians and music producers to lose millions of dollars in potential profits (Robinson, 2021). An innovative music distribution system and subscription model with different plans have allowed the company to forge partner relationships with music giants, solve major market problems, and become one of the most profitable digital applications globally.
As I remember, I have been listening to music almost every day since my childhood. Music is what made me happier in the good times and supported me emotionally during the bad ones. I used to learn about new artists through TV and buy new releases of my favorite bands from record stores in my childhood and pre-teen years. I agree here with Robinson (2021) that trying new artists was expensive back then. In 2013, I found out about Spotify, and since then, it has become one of my favorite apps. Thanks to their recommendation algorithm and friendly pricing policy, I discovered many new major and niche musicians and genres.
Light Emitting Diode Bulbs
Digital Revolution is not the only distinctive feature of the current times; environmentalism is another one. The Light Emitting Diode (LED) bulbs are a shining example of a new approach to the production of ordinary things, where advanced technologies allow making products that are not only of high quality but also safe for the environment. One can say that LED technology is the result of innovation not only in the technical field but also in attitude to nature. Their superiority in durability, efficiency, color and size variability, and environmental friendliness compared have allowed them to push other products out of the market (Team LEDMyplace, 2019). I did not pay attention to what kind of lights I used for a long time, but I started to get more interested in environmentalism as I got older. After reading related educational literature, I realized that LED lights are what I want to light up my room. Currently, I have multicolor LED bulbs in my room, and I can change the lighting according to my mood.
Conclusion
In this work, I describe what products and services related to disruptive innovation I use every day. These include Uber and Spotify online applications, as well as LED bulbs. In each of the three cases, here is an explanation of how each of the three things has become widespread and popularized through disruptive innovation. Moreover, I also share with the readers how I got to know each of the products.
Monopoly organizations refer to firms that are the sole service providers and act as a barrier to new entry, enabling them to control the pricing. Usually, monopolies are blamed for causing inequalities and lack of competition, but they remain desirable for entrepreneurs. At its conception, Uber had the goal of becoming a monopoly in online taxi-sharing business. However, the company failed to sustain its strategy as other companies were able to replicate and join in the fight for market share. Several factors have been attributed to the failure, including the inability to secure customer loyalty, replicable business strategy, high maintenance cost, changing economies, poor management, and increased government regulations for taxi drivers. However, the primary problem is that Uber failed to understand the conditions necessary to remain a monopoly. Thus, despite the plans for achieving sustainability, such as differentiation, it is impossible to achieve its monopolistic endeavors, and may have to work harder to remain afloat.
Introduction
Economists continue to warn governments of the dangers of monopoly corporations which are characterized by being sole sellers without close substitutes. Their negative impact include slow growth and inequality as start-up enterprises cannot compete with those that enjoy high economies of scale (Tepper, 2018). Monopolistic capitalism is predatory when successfully established, as it only benefits a few while killing healthy rivalry in the market. Uber is one of the enterprises that endeavored to become a dominant taxi service provider. However, its vision failed because its business strategy was easily copied by other emerging firms making it impossible to dictate prices. Worse still, taxi regulators and, constant fluctuations of fuel price, boycotts from the taxi owners makes sustainability of Uber challenging. In their respective articles, DeBord (2017), Sargen (2022), and Schwartz (2022) discuss reasons for Uber’s failure in its monopolistic endeavor. Although some economists believe that Uber’s management is to blame for its ever-deteriorating revenues, the truth is that the monopolistic quest has failed, and it was the only bet for remaining afloat.
Literature Review
Monopolies thrive where they have many loyal customers, and the next best competitor is far behind in terms of revenue and size. However, according to DeBord (2017), the massive market share that Uber currently enjoys is volatile. The observation is evident from the analysis that in 2022, Uber’s profit margin dropped by 40% and 57% from its best performance (Schwartz, 2022, para.7). Low revenue can partly be explained by the impact of the COVID 19 pandemic, which derailed the transport sector. However, Sargen (2022) explains that even the taxi drivers are unwilling to resume their former job because of the low wages. Yet, Uber continues to struggle to attract more clients even after internationalization to many countries.
Despite having a great business plan, Uber’s idea of becoming the only ridesharing platform has failed. The number of people using rideshare services increased from 8% to 46% in 2016, indicating that it is smart approach (Sargen, 2022, para.8). The challenge is that the strategy has not eliminated rivals in the industry which have replicated their design (DeBord, 2017). Moreover, the changing economic times have made it difficult for Uber to rely on cheap capital for research and development (Schwartz, 2022). There is a shift characterized by rising interest rates which makes the value of positive cash flows more relevant than growth. The implication is that even if cab sharing may stimulate progress, it is not enough to ensure sustainability within the current market.
Consumer power is often low in monopolies which are not reflected in Uber’s current financial strategy. In the contemporary world, most customers care about minor aspects, such as if their ride will arrive within five minutes (DeBord, 2017). Yet Sargen (2022, para.2) writes that he recently had to wait for 30 minutes for an Uber cab at a “cost $50-$60 before tip.” Such a delay can be an indication that there are few drivers on the Uber Application. The other observation in regard to client behavior is that they tend to pick on taxis that offer the lowest prices (Schwartz, 2022). Moreover, taxi regulations have ensured that there is a flat rate for all riders based on the distance covered (Sargen, 2022). There are even applications that customers can download and install on their smartphones so they can verify the prices. The combination of these factors gives consumers high power because they have a lot of information and options to choose from. Thus, Uber has lost control over the customers and may continue losing some loyal clients unless they discover a unique differentiation strategy.
Uber’s strategy to remain dominant is unsustainable because disastrously expensive. For instance, the company has to figure out how it can stop losing about $1billion quarter annually (DeBord, 2017). The suggestion given is for Uber to start having pricing power by “making users pay more” (DeBord, 2017, para.13). In other words, Uber should start determining its prices at the company level without consideration to the charges that competitors are making. Notably, according to Sargen (2022), Uber is already charging a higher price compared to individual taxis. However, even if Uber manages to secure monopolistic pricing, governments may create more aggressive wage and price controls (Sargen, 2022). Thus, the regulatory risk makes it difficult for the company to decide on its charges and achieve differentiation.
Discussion
A key characteristic of monopolies is that they have absolute market power such that they can decide on the prices of their products. At the time that Uber started the business, it enjoyed being a monopoly for a short duration but failed to sustain the strategy. Noteworthy, the primary reason for the rise and existence of a monopoly is preventing new entries (Tepper, 2018). However, Uber has not been able to prevent new entries from joining the market. Some of the notable competitors in taxi driving with online applications for booking include Lyft and Dash, both of which are now trying to get the most from the market share (Schwartz, 2022). Uber has to share its market with its major rivals, which requires lowering prices since the consumers have higher bargaining power.
There are specific conditions that make it possible for monopoly corporations to exist and remain sustainable. For instance, it can happen when only one company has the necessary raw materials needed to run the business. In the case of Uber, the main thing is drivers willing to earn a living using their car. The implication is that it is not a complex enterprise to set up, and the key resources are easily available. In some cases, monopolies emerge when the government gives exclusive rights to a single company. With Uber, the government has been making regulations that mostly favor the consumer while making it hard for a single enterprise to thrive (Sargen, 2022). There are restrictions on prices per distance and implications for charging fares depending on the customer. Therefore, Uber cannot achieve a monopolistic strategy by relying on government.
The only business approach that may have worked if Uber adopted from the start is becoming a natural monopoly. As explained by Tepper (2018), this is where one firm sufficiently cater to the market demand at a cheaper cost compared to when multiple enterprises provide the same service. When Uber started, it tried attracting many riders to join their platform, which would have enabled the company to have enough service providers for its population. However, most of the taxis are now opting to work alone rather than work on company platforms (Sargen, 2022). Moreover, many taxi drivers are unwilling to continue working in the industry due to low-profit margins. Thus, Uber cannot satisfy the market demand alone and at an economical cost.
Price discrimination is sometimes used by monopolies where they charge differently depending on the customer for the same service or product. Uber can possibly adopt this strategy to maximize its profit margin by placing high prices in affluent neighborhoods or remote areas. The challenge is that the government regulations on pricing make it hard to adopt the strategy without clashing with the low. Furthermore, there is a high chance that not many customers would be willing to pay higher prices.
The minimax game theory can provide insights into Uber’s next move in case the failure of its being a monopoly causes significant losses. According to the model, the firm can make decisions that will make it to either maximize the least revenue or minimize the highest loss (Tepper, 2018). In other words, the company should strategize on ways to ensure that even with competition, it is still able to make a profit. For instance, DeBord (2017) suggests that the management should change because it is using more money, which makes the company unsustainable. In addition, the company can use cost leadership differentiation strategy to gain more profit from premium customers.
Conclusion
Uber started well, but its strategy has failed to withstand the rigor of economic changes, government regulations, and the pandemic. The company, which was once a monopoly, now competes with many entrants causing the consumers to have higher bargaining power. Moreover, in the transport sector, the COVID-19 pandemic had a negative impact on its sustainability. The regulations and sanctions by the government are worsening the business. Therefore, as implied in the minimax game theory, Uber should now focus on maximizing its profits while reducing the risk. Otherwise, it is impossible for it to become a monopoly because the market will continue to be more competitive.
Uber is a multinational taxi-hailing company that operates using a non-conventional business model of matching consumers to cars through mobile apps and does not have its own park of vehicles or formally employed drivers. Since it was founded in 2009 in San Francisco, Uber has managed to disrupt the cab service market using technological innovation and focusing on “selling the taxi service differently by using the whole city as a resource” (Walji & Walji, 2016, p. 27). In UAE, Uber initially started its services in 2013 in Dubai, further expanding those to Abu Dhabi, offering ride-hailing services in both cities and bike rentals in Dubai. However, it experienced issues with expanding operations across MENA because of the well-established presence of its main competitor, Careem, in major cities of the region, as well as faced tenures with transportation authorities of both Dubai and Abu Dhabi because of clashes related to service pricing and availability (Aswad, 2017). The vital milestone in Uber’s history in UAE is its acquisition of Careem at $3.1 billion in 2019, which allowed extending company services to the major markets of Egypt, Jordan, Pakistan, and Saudi Arabia.
While Uber has formally acquired Careem’s mobility, delivery, and payment business components, both will remain operating under independent brands. It is necessary admitting that the Careem acquisition was the largest deal in Uber history and changed the functioning of the UAE market. The given decision had high strategic importance because of the opportunity to create the basis for evolution and offer new services. This deal makes Careem a wholly-owned Uber subsidiary, and its stock will be converted into Uber equity (Al-Omari et al., 2020). However, the brand and its application remained intact, which helped to enter the market gradually, using the loyal clients of the Careem brand and their readiness to continue using it (Al-Omari et al., 2020). The existence of Careem Now, a food delivery service similar to Uber Eats, also simplified the task of entering the given market (Al-Omari et al., 2020). Uber created beneficial conditions for successfully affecting the target population by using the major rival’s services and integrating them into its own structure. Finally, the company will be able to further expand on its existing lines of business of ride-hailing, food delivery, and freight services that were not actively developed in MENA.
At the moment, the brand demonstrates good progress and stable growth. Uber receives more than tens of thousands of requests every week with the constantly growing number of people joining the company (Mansuri, n.d.). In 2016, 3000 drivers across the UAE worked with the brand; however, its number has grown 17 times after the launch, resulting in the growing revenue and the ability to provide services to various locations in the short term (Al-Omari et al., 2020). Moreover, it has become an integral part of the UAE market with the growing loyalty of clients and brand value, meaning that there are new opportunities for Emiratis to earn and enjoy a high comfort level.
Considering the above analysis, the following marketing plan is based on launching a new Uber service in UAE. Briefly, the service extends the idea behind the Uber Eats (currently transited to Careem brand) by introducing trucks that will deliver groceries to homes in remote locations across the UAE. The following goals were identified for the aforementioned objective:
To introduce a competitive grocery delivery service that will allow choosing the needed product both online and visually, targeting to improve customer experiences during 2021;
To address the problem of accessing necessary grocery goods in remote locations of UAE by leveraging the advantages of communication technologies;
To further build on the brand image and reputation of Uber in UAE by extending innovative services to new locations and targeting new customers.
Situation Analysis
Situation analysis is required to evaluate business environments and factors that affect the success of a company initiative. Considering Uber’s objective to extend its operations into innovative delivery services in new locations, it is vital to evaluate specific conditions that might either support or prevent the implementation of a described business idea. Hence, the analysis of environmental factors and SWOT analysis will be further performed to analyze the risks and benefits for Uber in initiating and deploying the project.
Demographic Environment
Currently, Uber does not target specific age groups while delivering its services and maintains age, gender, racial, and cultural diversity. However, with the launch of a new service for delivering groceries at home, it could be considered that the focus might be eventually focused on females actively involved in household activities, babysitting, and shopping. At the same time, the male population can also benefit from the emergence of such services. Hence, the demographic environment for Uber and its new initiative is overall favorable.
Economic Environment
UAE has a prosperous economy with an exceptionally high GDP per capita, a very low unemployment rate, and a very high amount of foreign direct investments, which makes it one of the richest countries in the world. While the economic wealth mostly comes from the oil and oil fossils exports, the nation also diversifies its revenue streams and intensively invests in tourism and construction. Uber follows the low-cost strategy of providing its services; hence, new ventures and existing business lines will only benefit from UAE’s economic environment.
Political and Legal Environment
UAE has its political specifics that should be considered by external businesses expected to expand their operations in the country. Administratively, the country consists of 7 emirates that have their own governmental organizations, which is seen as a flexible solution for managing both internal and cross-country affairs. However, it means that any organization that attempts to do business in one or another emirate is required to adjust its operational principles to individual compliance requirements. Previous analysis shows that Uber already experienced issues with following those when it was temporarily banned from operations in Abu Dhabi. Furthermore, while the political situation inside the UAE is relatively stable, occasional conflicts occur near the country’s border for the land and oil reserves ownership. It is also worth admitting that most businesses in UAE are government-owned, which leaves little space for private sector development. Moreover, Uber might expect new changes based on the business legislation, especially during the post-pandemic times. However, after the acquisition of Careem, Uber has more opportunities to sustain challenges imposed by the government. Hence, the political environment could be assessed as moderate in terms of favorability.
Social Environment
Several factors should be considered in terms of social factors in UAE. First, the bigger part of the UAE population is educated, meaning that they correctly realize the current digitalization trends and can employ various applications for their convenience. Second, the country is highly multicultural and has several ethnic and religious groups. They might have diverse demands for the quality of provided services, which should be considered when planning activities. For the current state of things, it suggests that the social environment is overall favorable.
Technological Environment
Major cities of the UAE are the landmarks of technological advancements, with Dubai itself pursuing its further establishment as the most developed smart city worldwide. The UAE government also makes significant efforts to develop technological solutions for UAE farmers, which allows them to connect directly with food producers and make an arrangement about potential purchases and amounts required per season (Cherrayil, 2019). Additional innovative projects are actively investigated in UAE’s R&D centers, placing high emphasis on innovation. Therefore, the technological environment in UAE is overall favorable.
The key aspect identified through the SWOT analysis are summarized below:
Strengths
Uber can successfully leverage on UAE’s prosperity as an economy and nation, offering existing services in new areas and opening new lines of business and opportunities
From the social perspective, Uber can diversify its service between different population groups and recruit drivers in numerous cities across the UAE
The recent acquisition of Careem allows Uber to expand services to cities other than Dubai and Abu Dhabi, as well as attempt to provide more distant travel to other cities such as Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah, and Fujairah
Uber will be the only company offering Grocery Truck service in the UAE characterized by the convenience and friendly design, meaning that diverse populations can easily use it
Grocery Truck will be available in various areas, including deserted ones, with complicated access to shops, meaning that it will help people to save time and benefit from the availability of fresh products delivered in-time
Weaknesses
For the new initiative, Uber will require to find licensed truck drivers with their own vehicles, which is more challenging than finding a taxi driver in Dubai or Abu Dhabi. Alternatively, Uber will have to rent or buy trucks, while it is a huge risk if the driver will appear being not enough qualified for the job
The product can be imitated by other companies if it becomes successful, meaning that the constant upgrade of the service is needed to preserve the competitive advantage
The service is dependent on technology and its stable functioning; otherwise, the effectiveness reduces
Opportunities
With the help of Careem executives who have better market awareness, Uber might initiate a recruitment campaign and create a community of truck drivers, offering them additional incentives for joining the team
The initiative is new on the market, which means that Uber might experiment with formats without fear of competition
Uber can benefit from operating in areas with complicated access to transportation and food delivery services
Constantly increasing access to the Internet creates a favorable environment for the brand’s rise
With the success of Grocery Truck, additional services presupposing using the same facilities can be offered
Threats
Because of legislative changes or political shocks, the initiative will be banned by the government, either partially or completely
Lack of awareness of the quality of goods will create a negative perception of the initiative by consumers
Differences in internal policies of every city in the UAE might complicate the work of Grocery Truck because of the problematic access to all areas
Different types of corporate societies and supermarkets might complicate finding all types of products in one place and their delivery
Description of the New Service
The new service proposed to expand Uber’s business in UAE conceptually exists between visual and online grocery shopping and is titled Uber Grocery Truck. The idea behind this is that many customers order food deliveries at home, while the packages provided are small and do give sufficient freedom of choice. Specifically, consumers will use the same mobile app that hosts other Uber services and order a truck to arrive during a specific timeframe. As the Truck arrives at the destination point, customers can look through the available goods and select what is most necessary for them. The basic types of products offered by the Uber Grocery Truck will include bread, fresh fruits and vegetables, proteins, and dairy products. The difference is that customers are provided certain freedom of choice without leaving home, which is comfortable for young mothers with kids or elderly consumers. Moreover, the Truck can provide charcoal, firewood, and barbecue materials during camping, which becomes especially important during the winter season. This feature will promote a better brand image among clients and attract them to a new service. The portfolio alignment comes from the fact that the service combines the idea of Uber Eats for food delivery and the use of a new service, Uber Freight, that is expected to be presented with entering a new market and providing the grocery truck.
The rationale behind the idea stems from the following factors. First, grocery truck service is expected to be in demand across the areas that do not have a supermarket nearby and therefore consumes time for travel and purchases. Second, it will be demanded in rural desert areas, where there is a lack of supermarkets, forcing locals to travel to the nearest petrol station for the basic goods. Specifically, the service will be recognized during wintertime, when petrol stations experience shortages in supplies. Consistently, new services will eventually help to customize Uber’s vision statement in MENA to: “transportation as reliable as running water that is resistant to the desert storms, everywhere for everyone,” followed by the revised mission of providing safe, affordable, and reliable services even in the most unexpected places, while also creating new job opportunities for drivers in new markets (). At the same time, each Truck will have the primary product and some extra offerings depending on the area and the most typical requests. It will also help to customize the offered service and meet clients’ demands.
The above assumptions were validated through primary research of 151 participants, seeking to explore their purchasing habits and attitudes toward online shopping. Overall, 68.9% of females and 31.1% of males participated in the research. More than half of the participants indicated that they buy groceries online a few times a month (50.3%), followed by those who make similar purchases two times a week (23.2%). The majority of respondents specified that shopping grocery online saves their time and provides ease of access to all types of products. Furthermore, most respondents stated that their leading concerns about buying groceries online are shipping quality and delays, and the inability to touch the merchandise before it arrives.
The majority of respondents (40.4%) specified that they spent from 16 to 30 minutes purchasing groceries online, followed by the group (33.8%) that took less than 15 minutes. The two advantages of physical grocery shopping include touching and feeling the product and buying fresh food, while the two disadvantages are spending too much time at the cashier desk and spending time and money on travels. Fruits and vegetables, bakery, and pastry were listed as the top grocery products usually purchased by respondents. Apple Pay (41.7%) was specified as the favorite payment method, followed by the credit card (35.8%). Finally, online tracking was viewed as a preferred method to track order status. Combining the survey findings, it is evident that users make grocery purchases online but eventually expect discomfort because of the lack of physical contact and variety of choices and delays with deliveries. Alternatively, they appreciate saving their time and money spent on travel to the supermarket. Hence, the combination of physical presence and online delivery is expected to address their concerns.
Environmental concerns are more acute than ever in the 21st century, when most countries are suffering from deteriorating infrastructure and congested roads. Queries like these force countries to look at how the entire transportation sector operates, including Uber. Experts from the non-profit organization Union of Concerned Scientists found that the widespread use of taxi aggregators increased harmful emissions into the atmosphere by 69% (Akintola, 2020). People have become much less likely to use public transport, walk and ride a bike. Experts say Uber could cut emissions by electrifying its fleet or incentivizing customers to take rides together (Kim & Suh, 2021). Uber has already announced its readiness to reduce emissions into the atmosphere; however, its efforts are not enough yet. Uber plans to introduce cash incentives for EV drivers in the US, but the vast majority of trips on Uber platforms are still made in gas-powered vehicles (Bliss, 2020). Companies have tried to promote ridesharing, but customers do not want to share cabs with strangers.
The principal purpose of this report is to examine the environmental context of Uber’s operations and draw conclusions about its prospects and safety. Pestel’s and Five Forces assessment systems were chosen as the mechanisms due to their comprehensive list of political, social, competitive, environmental, and other factors (Shabanova et al., 2017; Goyal, 2020). Today, environmental protection is not a trend but an urgent need. This Uber report is just a small part of a larger global effort to create renewed sustainable practices.
PESTEL
Political Factor
For a long time, Uber has faced a global debate fueled by virtually every country where the company operates. Most countries are concerned about the joint economy principles and their imperfections. The last political debate that Uber drivers are company employees and not contractors have led to a lawsuit in California (Chowdhury, 2018). Many countries are currently checking the boundaries between the individual enterprise and the degree of state influence.
Economic Factor
Uber and the social sharing economy have provided a large part of the population with stable earnings and public benefits. In addition, Uber is the number one choice among people for a favorable price tag that is much lower than the costs of other taxi companies. It causes reasonable dissatisfaction among competitors; however, it forces them to keep the price tag within acceptable boundaries (Akintola, 2020). Even the conditions of an economic downturn, such as a pandemic, do not prevent Uber from remaining profitable due to this stable pricing strategy.
Social Factor
Uber has a huge loyal customer base due to its exceptional service. The Uber app works without any complications; the customer can track the time and place of the car’s arrival, set special requests to the driver. An attractive price tag and positive brand reviews attract more and more users. The company has the resources to provide quality advertising, but most clients learn about the service through favorable reviews from people they know (Khavarian-Garmsir et al., 2021). The company’s prices have increased lately, but people choose Uber because of its comfort and safety.
Technological Factor
Uber is part of the global transportation system, so this industry sector always needs timely innovation. Uber is one of the de facto pioneers of mobile apps for users. Successful integration of geolocation, and open chat with the driver gives the client a sense of absolute security even in another country (Kim & Suh, 2021). In addition, contactless payment is available in the car, which is convenient in the post-COVID era (Punt et al., 2021). Many Uber cars used a protective screen between the driver and passenger for safety reasons during the pandemic.
Environmental Factor
Sustainability is currently a top global concern, so Uber performs a lot of research and regulation on this issue. At first glance, environmental problems are coherent; it is difficult not to draw a parallel between the increase in traffic density and air pollution. However, numerous studies do not witness significant changes if the taxi service is replaced by public transport (Bliss, 2020). The current urban infrastructure can not withstand such a major shift.
Legal Factor
National governments are actively discussing possible new laws and restrictions on the regulation of the transport system. Such concerns also affect other countries than States, for example, South Africa. Its government recently declared that it has the right to confiscate a car if the Uber driver does not have a special license (Chowdhury, 2018). Another question at the state level is the distribution of salaries in the transport sector; and whether Uber complies with the established rules.
Sustainability Issues Regarding Technological and Environmental Factors
Technological and environmental factors are inextricably linked to sustainable development. The transport sector has a significant impact on the environment. A lot of work is going on to create safer modes of transport that could change the way the service works in the future (Khavarian-Garmsir et al., 2021). Uber company is also looking for solutions and proposes to launch Uber Green with low-emission options based on hybrid or electric vehicles.
Five Forces
The Threat of New Market Players
The transport sector is already fed up with proposals operating on similar mechanisms. The company’s business model is in the public domain and is often used as the foremost booming taxi service example. New companies can easily recreate a similar prototype without additional financial support for external research (Akintola, 2020). Current market leaders such as Uber and Curb are regularly trying to defend their territory and core market power.
The Threat of Substitute Products
The public often talks about the environment and the need to replace taxis with public transport. Also, the constant increase in gasoline prices and increase in the cost of taxis pushes people towards alternative methods (Chowdhury, 2018). However, it is too early to talk about a significant change in the usual transport routine. No infrastructure can withstand the mass transition from personal to exclusively public transport.
Power of Customers
Consumers of any service can be divided into two so-called categories: price-oriented customers and quality-oriented customers. People who care about quality pay special attention to reliability, availability, and security. Price-conscious customers always go where it’s most beneficial (Angrist et al., 2021). Uber is an extremely successful combination of exemplary factors to attract both customer bases (Punt et al., 2021). The organization provides a high level of comfort, a good price range, and unconditional security due to the big name of the brand.
Power of Suppliers
Service providers are taxi drivers who, through a common platform, find customers and profit from it. The influence of the drivers increases significantly, as they often form trade unions, where they jointly defend their interests. However, the state does not want to recognize Uber taxi drivers as contract workers and continues to increase its legal influence (Punt et al., 2021). The bargaining power of suppliers has a huge impact on the business model and activities.
Competitive Rivalry
Uber is present in more than 80 countries and is very successful. Like any organization in the transportation industry, Uber is extremely competitive. Many companies have similar working mechanisms, price ranges, and comfort levels. The Asian market is still a challenge due to a large number of locally competitive services (Khavarian-Garmsir et al., 2021). However, statistics show that Uber is still the top choice among users. A large number of respondents cite Uber as the first choice for hailing a cab.
Sustainability Issues Regarding Competitive Rivalry and New Market Players
These factors have a major impact on the future course of sustainable practices. Demand for the service creates supply and, as a result, more companies are engaged in transportation (Khavarian-Garmsir et al., 2021). More cars, respectively, emit more harmful substances into the air and pose an increased threat to pedestrians. The correct approach would be state regulation of competition in the market to prevent the overloading of the infrastructure and the environment.
Conclusion
The study showed that Uber is a stable company with an established competitive level and public respect. Numerous studies do not see the possibility and necessity of a radical transition from taxis to public transport (Khavarian-Garmsir et al., 2021). However, the expanding transport sector has a direct impact on the environment. The most significant factors of the negative influence of road transport on humans and the environment are the following: air pollution, environmental pollution, noise, vibration, and heat generation (energy dissipation) (Bliss, 2020). Uber wants to solve this concern by switching to hybrid or electric cars. This decision is radically dependent on the level of current technology, but it is a big step towards a more sustainable future.
In this case, it is necessary to pay attention to the threat of new entrants into the sector. The transport services market is extremely attractive and always draws many new competitive organizations. In conditions of heavy traffic congestion, the uncontrolled withdrawal of new vehicles can worsen the environmental situation and, as a result, the quality of life. These issues can be resolved at the administrative level with the introduction of an appropriate restriction (Akintola, 2020). This case is especially sensitive due to the limitation of personal freedom to engage in one’s own business. However, the state of ecology over the past few decades does not tolerate half measures in favor of profit (Bliss, 2020). Society has to pay more attention to environmental protection, and its transformations due to technological progress, environmental pollution, and irrational use of resources.
Angrist, J. D., Caldwell, S., & Hall, J. W. (2021). Uber versus taxi: A driver’s eye view.American Economic Journal: Applied Economics, 13 (3), 272-308.
Khavarian-Garmsir, A. R., Sharifi, A., & Hajian, H. A. (2021). The social, economic, and environmental impacts of ride-sourcing services: A literature review. Future Transportation, 268–289. Web.
Platform business models have become increasingly popular and emerged with the introduction of the internet (Rani and Dhir, 2020). One area that has benefited from this technology is the taxi industry. Over a decade ago, in the early 2010s, platforms such as Uber and Lyft first started providing what is known as a ride-hail service to customers who could book their taxi service via their phone app (Burns, 2018). Since then, such hail-rising apps have become a global industry with perhaps the most well-known, Uber, bringing in a revenue of $18.3 billion in 2021 (Iqbal, 2022). Much like almost every other industry, Uber and its competitors were hard hit during the global coronavirus pandemic and because of the virus, the organisation was unable to function normally – affecting the lives and livelihoods of its many workers across the globe.
Although a lot of research has focused on the working conditions of Uber drivers and other individuals characterised as working in the gig economy (e.g Berger, Frey, Levin, and Danda, 2019), and further studies still have considered the financial impact of the pandemic on the hail riding industry (e.g. Kaur, 2021), very little research has looked at the mental health impacts of the pandemic of those who work for these companies. As such, this dissertation focuses on the individual level, using a qualitative interview study to explore the effects of the pandemic on London based Uber drivers affected by the global emergency. The purpose of the study is to understand the factors affecting the mental health of drivers and how these challenges were experienced.
Background to the study
UBER is an online ride hailing platform which is enabling business in a taxi industry.
Using modern technology and communication devices, users and service providers can connect via digital app, trough communication devices, mainly smart phones.
Company has been found in March 2009 in the San Francisco USA, co-founders were Garett Camp and Travis Kalanick. March 20210 Company launch the first app where riders could book a cab by pressing a button on the phone. Also, ride was cheaper 1.5 time than a regular cab. Soon it become popular, and company expanded across the globe. Today Uber is present in 72 countries and more than 10.00 cities. In London is present since 2012 and it has 40.000 licenced drivers and 76% market share.(trends. Edison. Tech research 2021).
Literature review
Introduction
Beyond physical health, the Covid-19 pandemic has taken its toll on mental health of many individuals. The mental health charity MIND reported that a third of people in the UK had experienced a worsening of their mental health because of the pandemic (MIND, 2021). Naturally, much of the research on pandemic-linked mental health has focused on frontline workers, who have had to directly deal with the consequences of this health emergency (e.g. van ver Goot et al., 2021). For example, Greenberg and Tracy (2020) focused on mental healthcare workers in China and found that nurses may be at higher risk of detrimental health outcomes. Newman, Jeve, and Majumder (2021) focused on British healthcare workers in the NHS and revealed them to have both psychological and behavioural consequences from working through the pandemic affecting their wellbeing. Finally, in other sectors, such as retail, it was found that employees experienced a negative impact on their morale and mental health (e.g. Elnahla and Neilson, 2021). However, a great deal of the existing research has focused on healthcare, since individuals in this sector must come face to face with infected people carrying the virus on a daily basis. Another set of employees that has been relatively neglected in the research literature who also interact with the public for their role are those that work in the taxi service industry. Despite also being on the frontline and drivers needing to work to earn a living, the health and wellbeing of drivers has received little research attention. As such, the current study aims to explore the mental health impacts on individuals working in the taxi sector.
The nature of the sector
The taxi industry provides employment for a large number of people in England. In 2021 there were 343,800 drivers employed in the sector (ONS, 2021). Research on people working in the taxi industry has tended to focus on the working conditions for drivers (e.g. Poó, Ledesma and López, 2018). This research has found that the job can be unstable and precarious (Zwick and Spicer, 2019), dangerous to physical heath because of occupational fatigue and stress (Poó et al., 2018) and lacking the rights that employees of organisations have such as paid leave and pensions (e.g. Harmon and Silberman, 2019). These studies and others like them have focused on the effects of the role on drivers before the pandemic. Yet very little research considers the wellbeing impacts of the pandemic on this industry that was already considered to be tough on the mental health of its employees before the global healthcare emergency. As such, this study aims to explore how the experience of the pandemic affected drivers who were working in the industry during the covid-19 pandemic.
Effects of the pandemic on the taxi industry
Lack of work
During much of 2020 and various periods of time throughout 2021, the UK was subject to multiple government mandated lockdowns (Institute for Government, 2021). As a result of these lockdowns, people were legally obliged to stay at home and not to work. Much of the city of London was empty during this time, as people were required to work from home. As a result of this, there was negligible demand for hail-riding services such as Uber, with trip bookings falling by 75% (BBC, 2020).
Even once they were able to return to work more fully, they were at risk of not being able to work if they contracted the virus themselves.
Exposure to the virus
Following an extended period of low work because of lockdowns, drivers were then faced with the prospect of their physical safety being threatened as they returned to the frontline. Due to nature of work, taxi drivers were at risk of contracting the virus themselves as they came face to face with numerous people daily without the ability to physically distance from them. Mojumder, Ahmed and Sadri’s (2021) study, which analysed data from an online ridesharing forum found that health-related concerns were prominent in the discussion forums during the pandemic.
Isolation
Like much of the rest of the world that suffered with isolation during the pandemic (Kim, Bhullar and Debra, 2020), individuals working in the transportation industry will have been no different. As such, the mental health implications of being alone and unable to spend time with friends and family may have affected these workers.
Summary of chapter
In summary, while literature on employees in the hail-riding industry has considered the working conditions of drivers and their wellbeing, little research has considered how the pandemic has affected them.
In the next chapter, the methods for the qualitative interview study will be described…
Questionnaire design
In order for the results of the study to be the most objective and reliable, it is necessary to use the survey method. A survey is the most common method of collecting primary information, involving a written or oral appeal to respondents. A survey conducted in writing is called a questionnaire – this is the most common method of collecting information about human subjectivity, that is, about people’s thoughts and feelings, their opinions and moods, life plans. Questioning can be individual and group, full-time and correspondence.
Further, it is worth highlighting that the most effective tool is interviewing Uber drivers. Interviewing is a purposeful conversation between a researcher and a respondent, which makes it possible to obtain deeper and more accurate information about the individual characteristics of people’s consciousness. This mechanism is relevant in the study, because it is the most inexpensive method that allows saving on time. The form of the interview is direct and indirect. It is necessary to use both variations in the study, since interaction with respondents can be complicated by distance, the reluctance to come to a certain place. In such cases, remote interviewing, using a phone or online services, is suitable.
When conducting a survey, the interviewer must observe the following rules:
Specific interpretation of the wording of questions is not allowed;
Pressure on the respondent, trying to get the desired answer are not allowed;
One’s own interpretation of questions not allowed;
Questions must be asked in the same sequence as provided by the questionnaire.
At the moment, all the necessary criteria have been established for conducting a full-fledged survey in the form of interviews with drivers. Next comes the compilation of questions that can be answered in detail, while the wording should allow to touch on as many topics as possible in the context of the pandemic. In other words, this interview should be multifaceted, evaluating the situation from several sides and points of view. The interview will consist of six open-ended questions:
How much more complicated or easier was the work of an Uber warrior due to the emergence of a pandemic?
How did the number of stressful or destructive situations increase, and what was their main source?
How much and in what aspects has the behavior of people changed, both clients and superiors and colleagues?
What do you think has changed the most and caused you the most discomfort during the pandemic?
What changes in the general situation, both at work and among society, would you predict for the next year?
Do you think that there has been an increase in the amount of distrust and fear between people caused by rumors and the peculiarities of the coronavirus and the pandemic?
The number of participants is 50 individuals, which is necessary for the presence of pluralism of opinions and to reduce the risk of errors in the interpretation of general sentiments. Mostly, there are three perspectives on the pandemic, namely negative, positive, and neutral. However, each of these relationships is due to unique factors and prerequisites depending on the individual. The number of participants, equal to 50, will allow to identify the most common response to the pandemic, as well as to establish the largest possible number of reasons for such an attitude.
In addition to the above, it is necessary to note the criteria for the selection of participants. There are not so many of them, because the study group is quite extensive. Participants need to either live in or stay in London for a long time since the start of the pandemic. Another most important factor is their work as Uber drivers, and for a long period of time, namely from 2 years. Such criteria will allow participants to have experience of pre-pandemic work, as well as functioning during restrictions and quarantine (Kossowska et al., 2022). This will allow them to implement a comparative analysis of the two stages of work, on the basis of which any deviations will be identified, if any.
According to the results of the survey, there are more negative than positive moods among drivers. The spread of COVID-19 provokes high nervous tension and public panic. The state of stress generates various reactions, the physiological reaction of the stressful state is manifested in changes in the autonomic nervous and endocrine systems. In turn, hypertension and diabetes mellitus are the main risk factors for severe COVID-19 and even death of patients. A stress-induced emotional response is a series of accompanying emotional experiences that put people in a negative emotional state, such as depression, anxiety, panic, frustration, or fear (Kossowska et al., 2022). The main behavioral changes caused by stress include anxiety, inattention, decreased ability to solve problems, slowness of action, frequent anger, excessive disinfection, smoking, alcohol abuse.
Quarantine is an unpleasant experience for those who go through it. Separation from loved ones, loss of freedom, uncertainty about illness status, and boredom can sometimes lead to dramatic consequences. People quarantined as “contacts” reported fear, nervousness, sadness, guilt and confusion. In this regard, the potential benefits of mandatory mass quarantine must be carefully weighed against the possible psychological costs. The expected consequences of the quarantine, and the associated social and physical distancing measures, include increased social isolation and feelings of loneliness, alcohol and substance abuse, gambling, and domestic violence. All this is closely related to anxiety, depression and suicide attempts, not only during the crisis period, but throughout later life.
Finally, it should be noted separately that the respondents note the increased complexity of their own work. First, driving a car is a stressful and languid process that requires concentration and quick reaction. Uber’s salary is in line with most drivers, but is not stable as it depends on the number of orders. As demand fell as a result of the pandemic, and the complexity of work did not change, workers were losing money, which created additional financial problems. The combination of a negative and pessimistic attitude towards the pandemic, falling incomes, people’s fear of illness and the complexity of work greatly increased the chances of a deterioration in psycho-emotional stability (Kossowska et al., 2022). As noted above, many respondents showed an increased interest in alcohol and tobacco, became more tired and aggressive.
Methods of data collection
In order for the study to be most effective and efficient, it is necessary to introduce certain principles of data collection. First of all, it is necessary to record exactly all the information that the respondents express. These data will be the primary source, which will later serve as a foundation for interpretation. Several specialists need to analyze everything said by the respondents and interpret it in such a way that all information is translated into a single number system. It is important to emphasize that the most convenient tool will be to compile a table, where each cell will correspond to a certain criterion that is relevant for the study.
This table should be in a digital version to allow access by several specialists at the same time. It is vital to involve independent experts to assess the objectivity of the interpretations made by employees. After such a check, it can be stated that the database is ready and can serve as a basis for compiling results and recommendations, as well as identifying general trends. Thus, a qualitative method of collecting and analyzing information will be used. The quantitative method is less effective here due to the specifics of the study, since the task is to show not the quantity, but the quality of the consequences of the pandemic.
Conclusion and Recommendation
As a conclusion, it should be noted that the pandemic has a negative impact on Uber drivers in London. This became known thanks to the qualitative collection and analysis of data from a study conducted among 50 respondents through interviews. The main trends were noted, such as a tendency to a depressive state, the relevance of bad habits and feelings of loneliness, an increase in the number of disturbing problems and stress. As recommendations, it should be noted that Uber provides free psychological assistance to its employees who need it based on their pessimistic moods. In addition, it is necessary to further protect employees from potential infection with coronavirus by providing tools to combat the disease. This will significantly reduce the level of fear, which will lead to improved communication and reduced stress.
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This observation will consider the social, economic, cultural, moral, safety and legal significance of the issue that Uber has encountered. In addition, the stakeholders currently involved and those that will be involved in the future will be addressed. Finally, the impact of the issue and its urgency will be also considered.
Economic
According to Billy Gurley, the Board Director at Uber, the company’s unique competitive advantage is its dynamic pricing model (Uber para. 5). According to “Uber, Airbnb and Consequences of the Sharing Economy”, Uber is, first of all, the Hi-Tech company and its main objective is to become the mediator between customers and drivers (4). Therefore, the company unique value and creatively different approach will lose its meaning if it will be enforced to hire drivers as employees and provide with the compensations guaranteed by the law (Law para. 11).
From the point of view of economic issues, the stakeholders are the independent contract drivers, disabled customers, bank companies, competitors, and government. The impact of the issue and its urgency with regards to the above-mentioned stakeholders is the disruption of the current economic model. As a result, all the stakeholders mentioned above experience significant material losses under the influence of Uber commercial activity (Gallivan para. 7).
Social
The social impact of Uber can be evaluated as highly contradictory. On the one side, customers value the pricing alternative the service offers (Brishen para. 8). On the other side, customers as the members of society affected by the economic disruptions due to Uber’ activity suffer the loss.
The urgency of resolving the Uber issue is especially high with regards to the social impact that it has. Since, the wide social masses including the independent contract drivers, bank companies employees, competitors employees, and government are affected, Uber’s activity has created the problem of the national size.
Cultural and moral
Cultural and moral issues concerned by the Uber are closely connected with the social ones and concern the same stakeholders with the same urgency. However, their scope acquires new angles. For instance, Uber activity affects the problem of alcohol overconsumption because people get the safe and cheap way to get home after the night of drinking. Next, discrimination is another concern because the contract drivers are able to deny orders that they would not under the normal policies of the taxi companies (Rose para. 12).
Safety
Safety is another group of serious issues connected with Uber activity for a number of reasons. First of all, drivers do not get the necessary training. Next, they are not duly supervised before going to work and thus their physical preparedness for work is of question. Next, independently contracted drivers may have no skills for working with the disabled customers and this may also create additional safety hazards (Law para. 18).
Legal
Legal issues is the group of issues with as wide and as far-reaching scope as the economics and social concerns. This group is also in the closest connection with the political issues. The cause of this phenomenon is that the government is put into the situation where it is the main judge to regulate the activity of competitors and bring good order into the economy. However, the new model created by Uber does not fit the traditional practices. Therefore, it inevitably breaks the law and thus, it need to be readdressed to harmonize with the fragile economic balance created by the government (Brishen para. 31).
Works Cited
Brishen, Rogers. 2015. The Social Costs of Uber. Web.