Strategic move of Uber Technologies Incorporation

Thi Thanh Nga Do

14-218-556
University of Fribourg

Uber is an international transportation network company, first established in 2009 by

Travis Kalanik in San Francisco but not until June 2010 did the company officially
launched its services. Since then, the company has significantly expanded its presence in
63 countries with more than 300 cities and experienced a strong growth. As a result of its
huge potential, Uber has so far received attention and investments from several big
investors, Lowercase capital, First round, Goldman Sachs, Menlo, Benchmark and
especially $258 million from Google venture (Tsotsis & Alexia, 2013). Those impressive
figures and facts are results of the excellent strategy of the company. This short report
will begin with the description and analysis of strategic move of Uber and then the
comparison between Uber and its competitors. In the third part, the presentation of
business results and social values that the company has delivered so far will be given and
lastly personal opinions and recommendations will put an end to the whole report.
Strategic move of Uber
Long before the company established, cabs had been likely to dominate the
private transport market in the USA. During that time, American riders had long suffered
from poor cab infrastructure with old, slow cars, poor service of lateness, unfriendly
drivers, and lastly poor customer experience when after each ride, they had to count every
penny and negotiate a change with drivers or sometimes drivers just forgot to start their
meters and so on. All combined, customers at that time were frustrated and seeking for an
alternative. The founders of Uber were quick to realize and prompt to get off to tap into
the hidden but strongly potential need. However, unlike other companies in various
industries that realized and only uncovered one aspect of the problem, Uber made a bold
move in an attempt to tackle the whole experience of riders and as a consequence, disrupt
the long-seated monopoly of the taxi transportation. More importantly, the critical goal of
the company is to change the way people think about transportation, less of purchasing
their own cars but more of buying rides just like buying electricity or water in their daily
lives. In short, as can be seen, a good strategy should always begin with a good goal and
direction at the very beginning.
The company has implemented a multi-sided marketplace among many disparate
and entrenched interests. Or in other words, after defining the key strategy to disrupt the
whole cab transportation sector and create a new mindset of purchasing rides for clients,
the company then set a series of tactics to win in every aspect.
To begin with, client segmentation is as well placed a special emphasis and
carefully conducted at Uber. Unlike in the cab transportation sector with only one type of
customer the riders, Uber is an orchestrator who connects passengers and drivers,
managing networks of drivers and riders through mobile application. It has attached equal
importance and attention to those two types of clients in terms of respecting their safety
with provision of two-way information and anonymous feedback. Take the case of riders

for example, before ordering a ride, they can get easy access to the personal data of
drivers to have a quick overview and choose a suitable one. More importantly, the service
offered by the company is well tailored to suit the interests and demands of clients in
each different location not only to better satisfy their needs but also to solve problems of
differences in politics, regulations, typology of distinct market. With its strategy of local
adaptation, the company has significantly obtained deep understanding of suppliers and
special interests in various markets, from which it can build a strong base of loyal clients
and embed itself well in the area. Furthermore, in each market, the company has as well a
wide range of different types of cars dedicated to diverse needs of clients, for example,
Black car, UberX, and so on. Additionally, on the side of drivers, one thing worth
mentioning is the diverse background of Ubers drivers. With its flexible recruitment
policies and newly set-up partnership with AARPs Life Reimagined to provide jobs in
the US, Uber has helped people in many locations to have extra income and then to have
a better life. Those divers have their full flexibility in their schedule and balance their
work and family at the same time.
In the second place, in terms of pricing strategy, right from the start, Uber has
applied the undercutting price to undersell traditional taxis, which has contributed to its
significantly quick expansion. For example, in 2014, Uber did simultaneously cut price in
several cities in the USA, for example, 25 percent decrease in san Francisco Bay Area, a
drop in Los Angeles UberX price, and then a fare reduction of 20 percent in New York
city, which made Ubers cheapest service cheaper than a regular yellow cab. (Wohlen,
2014). However, the decrease of fare price did not mean a decline of payment for drivers
who still got 80 percent of what the fare would have been before the discount (Wohlen,
2014). As can be seen, the company ended up with loss from both the compensation for
drivers and reduction of fare, but according to Uber CEO Travis Kalanick, it would be of
more importance for the company now is to expand as quickly as it can to build a vast
base of clients, and then turnover will be made up by the quantity.
In terms of marketing, Uber had a good timing of kick-off and right initial target
clients. To be clearer, the place to kick off its first project is of utmost importance for
almost tech-startups like Uber. This is the reason why the company, at the beginning, did
not immediately launch its application and service when founded but instead took one
year to gradually conduct and get deeper into its desired market. Additionally, the first
launch was decided to be in San Francisco, a well-reputed technology community with
open people who are continually looking for new tools, services and dare to try out
radical things. With its strategy of sponsoring for tech events and offering free rides for
attendants, the company was quickly recognized by the users and gained huge interests in
a fast manner as well. Also, for other clients, they are given first ride credits of $20 with
an intent to removing any barriers or hesitancy new riders may have on the outset. In
addition to free offering, Uber has as well focused on high quality from the start. After
the considerable success in the initial market, the company has then simultaneously
brought it business in several other cities not only in the USA but also various countries.
Furthermore, word of mouth is the strategy that Uber has utilized considerably so far. By
providing free and high-quality rides for tech event attendees in San Francisco to first-try
credit offer, after successfully grab interest and raise awareness among clients, Uber has
been easy to spread out thanks to the references of old users via their experience sharing
with friends, tech press and social audiences. It was stated that at the beginning, Uber

spent almost nothing on marketing but word of mouth and there was a fact that up to 95%
of riders were heard from their friends and for every seven rides, one new ride would be
generated via the big mouth of the old users (Wohlen, 2014).
Moreover, Uber has also built several partnerships with other tech firms,
universities, Safetipin map based mobile saty application, university of Marryland to
support student generated innovations, Carnegie Mellon University to support a new
robotics faculty chair and Bharti Airtel the largest wireless carrier in India and third
worldwide, to name some. These cooperation has not only helped the company expand
their influence, have a stronger link with the locals to fuel more business but also ensure
an innovative reserve for the future. Not only transportation but also other types of
service has the company tapped and gained success so far. Some prime examples are ondemand Uber ice cream, on-demand roses for Valentines day, and so on, which are the
attempt of the company to optimize its clients needs and experience.
Uber has though gained a huge support and attention from audience in quite a few
countries, it has been confronted several legal issues ignited by the opposition of old cab
drivers whose business have been strongly threaten by the disruptive innovation by Uber.
In order to overcome the problem, Uber, on one hand, hires powered lobbyist to push
back the protest and court claims, and on the other hand, it facilitates expansion to obtain
more customer base which then cultivate constituents and put pressure on politicians to
protect Ubers business. It can be briefly explained that it is the tactic of tailoring to each
city and rapid expansion of Uber that has made its service as a daily life part of citizens in
countries of its presence and any ban on Ubers operation would definitely cause
troublesome for people. Thus, it is easy to see that Uber has been doing so well on
fueling the support to fight back any court claims.
Competitor comparison
As can be seen from the analysis above, with the thorough combination of
different tactics, Uber has, to a certain extent, achieved its objective of solving the
complete problem for customers and then changing their mindset about transportation.
The following text will give an insight into the differences between Uber and its
competitors to, once again, underline the successful strategy that Uber has implemented
thus far. In this text, two competitors of Uber are traditional taxi and Lyft, with ten
aspects taken into account. The summary table is as follow

Source: Own analysis and calculation

In comparison to traditional taxi sector, Uber has performed significantly well in
shorter waiting time, better user friendliness by hiring via application, more excellent
user experience with cashless payment, driver flexibility and ability to rate and feedback
after each ride. Thus, it can be seen that Uber has delivered a completely different
package of values to its customer. Furthermore, compared to Lyft, which is also an
America transportation network company, with its own mobile application, Uber
competes on cheaper price and the more diverse of car types and additional services.
Combined, both difference and improvement strategy has brought advantage to Uber over
those two competitors.
Results of the strategy
Thanks to the consistent innovation and improvement along applying the strategy,
business results and social values delivered by Uber are strongly impressive. The
company has though operated for only nearly five years, but people can realize that it is a
brilliantly successful start for a start-up with its total revenue of $415 million after second
quarter in 2015, total active drivers in the US only of nearly 160 million at the end of
2014 rising from a base of near zero in late 2012, presence in more than 300 countries
(Newcomer & Cao, 2015) (Hall & Krueger, An Analysis of the Labor Market for Ubers
Driver-Partners in the United States, 2015), (Shontell, 2013).
Not only generating positive business results, the company has also created values
for the society. To be clearer, from the foundation, it has provided jobs to thounsands of
people and contributed to build better lives for people by reducing traffic congestion,
waiting time in urban areas and declining travelling costs for poor people. As can be seen
from the table below, the service of Uber is affordable and reliable across the whole of a
city, not only in the city centre. 35 percent all Ubers pickups happening outside the
centre of Manhattan compared to only 6% of traditional cabs is a prime example for the
wide coverage of Ubers service (Hall, 2015).

Source: Newsroom Uber

Moreover, according to a research conducted by Professor Brad N. Greenwood

and Sunil Wattal at Temple University, since Ubers entrance into markets in California,
there is an approximately five percent drop of alcohol-related driving fatalities (Zara,
2015). Or in other words, the company has partially contributed to the improved traffic
quality of cities it is present in. Additionally, with its newly launched UberPOOL a car
pooling option, people on the same route can share their rides which then helps reduce
the traffic congestion especially in big cities like San Francisco. With a trending moving
to purchase rides instead of purchasing cars, demand for private cars in cities decreases
and so does for parking space whose funding will be then used for other necessary public
services or infrastructure.
The success of Uber today cannot miss the key role of CEO Travis Kalanik who
has not only created the disruptive idea to capture uncovered potential need of clients at
the beginning but also initiated several partnerships to get Uber more engaged in the
society and as a consequence have a stronger foot print.
In a nutshell, Uber has, to a certain point, adopted an excellent multi-faced
strategy, including marketing, customer segmentation, pricing, partnership and legal
fighting. However, there remains problems within Uber, one of which is the safety of
ride, privacy of riders, labor standards and monopoly. It would be recommended that the
company has to improved it quality of drivers, as an example, by continuous review
rating and feedbacks of riders to see which drivers are not performing well and then have
an immediate response to it.

References

Bibliography
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