Uber Company’s Strategy: Expansion Opportunity Plan

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Table of Contents

Introduction
Executive summary
Description of the venture
Literature review
Assessment of associated theories
Strategy formation
Financial overview
Timeline
References

Introduction

Unlike other companies, Uber and other similar disruptive business models, like the Spreadshirt business, threaten to dismantle the existing status quo and demand the introduction of new legislation to regulate them. At the same time, effectively regulating such new businesses has been immensely difficult, for the same reasons governments have had trouble regulating the Internet.

This has successfully worked in Uber’s favor around the globe and in its homeland, and it has been said to expand into a city per day, as of 2014 (Huet 2014).

However, the company has run into difficulties in East Asia, particularly in Japan, where the progress has been slow. While the fast-growing multinational company has not lost its enthusiasm to add Japan into its coverage area, it is clear that they would have to rethink their Expansion Opportunity Plan in order to successfully build a competitive advantage in the Land of The Rising Sun.

Executive summary

In Japan, Uber’s attempts to expand within the capital have found little success due to strong resistance from the government, which has taken actions to protect its local businesses from the outside threat, and local service providers, who, by that point, have already begun to integrate some of the innovations introduced by Uber into their own business model. Outside of the capital, expansion was almost immediately halted by government regulations.

Since it is evident that Uber drivers would find it hard to compete with the local services through the quality of service itself, the best course of action would be to win over the populace by finding the gaps in the local taxi service, in order to develop their own competitive advantage. This requires an in-depth study of the strengths and weaknesses of not only Uber’s business model but also of the taxi services in Japan.

However, while the Japanese market is a much-desired target for Uber, it also needs to establish the conditions under which the expansion will be considered a failure, to avoid the problem of commitment escalation. If it continues investments, it would need to carefully weigh its options, in order to satisfy the regulators’ demands.

Description of the venture

In the US and most Western countries, Uber Inc. had a significant advantage over local businesses due to their high quality of drivers an service, simple, intuitive, and comfortable to use the hailing system, and smaller fees. However, in Japan, its expansion outside the country’s capital was quickly halted by the Ministry’s of Transportation decision to ban the business, due to the drivers not possessing a license to transport passengers (Jie 2015).

Additional problems are posed by the taxi services themselves, which who is some of the best in the world, in terms of quality of service, availability, and innovation, exemplified by the integration of an app service very similar to that of Uber’s (Hornyak 2015).

To counter these problems, Uber will need to rethink its expansion opportunity strategy to suit the Japanese population better, and will likely be forced to give up some of its benefits in order to be granted legal right to operate within Japan.

The high quality of Japanese taxis comes at steep costs, which creates opportunities. Also, while there is strict regulation over the transportation, there is no state subsidy for taxis, which means that businesses cut costs by focusing on densely populated areas, with little coverage for the rural areas. (Brasor & Tsubuku 2016). Finally, a very good opportunity for expansion is on the horizon as the 2020 Olympics approach, which would see a major influx of Western tourists into Japan, who would be more familiar with Uber.

Literature review

Since the topic discussed in this paper is very novel and has few precedents, the majority of the materials used in this study are contemporary and provided by well-regarded and high-quality new magazines, such as Forbes Huffington post, and other well-regarded web sources detailing the peculiarities of the relationship between the company and the country in questions.

A majorly important work for this paper is the book “Business Ethics: Japan and the Global Economy”, which provides insights into the approaches taken by the Japanese businesses, the business culture and ethics, and the expectations of the population (Dunfee & Nagayasu 2013).

Finally, “International Expansion: A roadmap to a successful growth for entrepreneurs” is a report by Ernst & Young audit service, which provides a guideline to international expansion and reaffirms the ideas studied in this module (International expansion: A roadmap to a successful growth for entrepreneurs 2015).

Assessment of associated theories

Building a successful Expansion Opportunity Plan requires Uber to consider three relevant associated theories which are vital to the success and profitability of this endeavor.

Competitive advantage

In Japan, Uber will have to rethink its competitive advantage, due to many services and benefits it offers already being part of the local services. However, the business does have several advantages, particularly in terms of pricing, which should emphasize and develop in order to carve itself a niche in the market.

The Uber app has higher functionality, allowing the users to have more control over the choice of their driver, and a better estimation of the waiting times and the final fees. Finally, Uber has a unique opportunity to replace the transportation infrastructure in the “aging” areas of Japan, which can become a strong foothold for future expansion into the city.

Foreign Direct Investment

The nature of Uber’s business model means that the company has successfully avoided the need for high FDI due to mostly being built around an online software platform, and using local drivers. However, to successfully integrate itself into the market and gain more rapport both with the government and the populace, the business will need a stronger local representation, both physical, in terms of Expansion Managers, as well as marketing and public relations managers, who will require such investments.

Corporate Social Responsibility, sustainability, and ethics

Corporate social responsibility, high-quality service, respect, and impeccable manners play a very important part of the Japanese work ethics and are something that Uber will need to work to build better relations with its clients (Dunfee & Nagayasu 2013). Tradition and respect are very important to taxi companies. While many companies fear that introduction of Uber may destroy that part of the business, it can also become a very important tool in its arsenal.

Commitment Escalation

Finally, it is very important to plan out the budgeting for the expansion plan and to be prepared that it may not succeed. Japan is a competitive market, and its taxi services are quick to integrate innovations and new approaches to both better serve the customers and to keep the outsiders away. Uber needs to determine the conditions under which its program will be considered a failure and a success, and be willing to, even temporarily pull out of Japan if it fails to find success.

Strategy formation

The business needs to focus on differentiating itself from the taxis and building better rapport with the government, who are under strong influence from the local transportation industry.

Operations overview

Despite strict regulations from the government, Uber can charge its customers less for their trips, especially during the night. The company needs to emphasize itself as a cheaper alternative, while at the same time working with its drivers to provide the same quality of service and human interaction as is expected from taxi drivers. It also has been allowed to provide services to the aging regions of the cities and the country.

Japan is an aging county, which means that this market will continue to grow, while also giving Uber grounds to slowly take over the market share of taxis and increase their popularity with the citizens through marketing and word of mouth while integrating itself into the infrastructure.

The company should not ignore its cooperation with taxi drivers in Tokyo and other locations. By giving the drivers a viable alternative to their current employment, more flexible schedules, and better payment conditions, Uber has a chance to win over them as new partners, circumventing the issue of lacking registration altogether.

Finally, Uber needs to use the 2020 Olympics as an opportunity to undermine local businesses by drawing Western tourists. A strong marketing campaign will be required.

Financial overview

Uber is facing large expenses if it seeks to continue its efforts to expand into the Japanese market. However, this is somewhat mitigated by the support the company is receiving from a number Chinese and Japanese investors, including Toyota Motor Corporation in Tokyo, which can give it support in negotiations with the regulators Who Are Uber’s Biggest Competitors? 2016).

Timeline

By autumn 2016 – finalize an infrastructure for servicing the elderly in and around Tokyo. Negotiate more freedom from the government to cater to this segment of population.

By 2017 – establish an effective infrastructure to cover the rural areas of the country. Create a benefits package for taxi drivers partnered with Uber.

2019 – begin a marketing campaign aimed at Westerners coming to Japan for the Olympic Games.

References

Brasor, P & Tsubuku, M 2016, ‘Whither the taxi in a withering Japan?’, The Japan Times. Web.

Dunfee, TW & Nagayasu, Y 2013, Business Ethics: Japan and the Global Economy, Berlin: Springer.

Hornyak, T 2015, In Japan, Uber dons white gloves to battle an elegant rival. Web.

Huet, E 2014, ‘Uber’s Global Expansion In Five Seconds‘, Forbes. Web.

International expansion: A roadmap to successful growth for entrepreneurs. 2015. Web.

Jie, M 2015, ‘Uber Ordered to Halt Ride-Sharing Pilot Program in Japan’, Bloomberg Technology. Web.

Who Are Uber’s Biggest Competitors? 2016. Web.

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