MNG3701/201/1/2017

Tutorial Letter 201/2/2017

Strategic Planning
MNG3701

Semester 2

Department of Business Management

IMPORTANT INFORMATION
This tutorial letter contains important information
about your module.
 CONTENTS
Page
1 INTRODUCTION …………………………………..…………………………………………………3
2 FEEDBACK ON ASSIGNMENT 01 ………..……………...……………………………………… 3
3 CONCLUDING REMARKS ……………………………………………………..…………………12

2
 MNG3701/201/2017
Dear Student

1. INTRODUCTION
The purpose of this tutorial letter is to provide feedback on Assignment 01. Please read the
feedback very carefully because it gives you guidance on what was expected of you in Assignment
01.

You had to present your answer in essay format, using the prescribed assignment guidelines
provided in section 6.5.2 of Tutorial Letter 101. The feedback on Assignment 01 is based on the
assignment evaluation sheet (rubric) provided in section 1.4 of Tutorial Letter 101 (Addendum D).
The assignment evaluation sheet is a useful tool that will guide you on how marks were allocated
and help you to identify areas that need improvement.

We strongly recommend that you submit your assignments for this module online via myUnisa.
The assignments must be in PDF format in order to facilitate the process of marking and providing
feedback.

If you submitted your assignment online, you will receive your marked assignment, together with
the marker’s assessment, in your myLife e-mail account immediately after marking has been
completed. If you submitted your assignment by post, you will receive your marked assignment,
together with the marker’s comments and the assignment evaluation sheet, by post or courier.

2. FEEDBACK ON ASSIGNMENT 01

Assignment 01 was based on the case study of Uber Technologies Inc. (Uber), an American
multinational online transportation network company, based in San Francisco, USA. The
outcomes in learning units 1, 2, 3 and 4 were assessed in this assignment. You had to identify
the strengths and weaknesses of Uber by evaluating their resources, capabilities and core
competencies. You also had to make at least 4 recommendations to Uber with regards to how
they can ensure their competitive advantage in the online transportation network industry.

NB:

 In order to evaluate the resources, capabilities and core competencies of Uber you first
had to EXPLAIN what these terms entail.
 Then you had to EVALUATE the resources, capabilities and core competencies of Uber
to establish its STRENGTHS and WEAKNESSES.
 Lastly, you had to make RECOMMENDATIONS on what Uber can do in order to take
advantage of their strengths and improve their weaknesses so that their competitive
advantage remains sustainable.

You also had to fulfil the correct technical requirements by structuring your essay according to the
guidelines provided in section 6.5.2 of Tutorial Letter 101; in other words, your essay had to consist
of an introduction, a main body of discussion and a conclusion. You also had to number the
pages and the headings. A table of contents should have been provided on the first page of the
assignment and a list of references (according to the Harvard referencing method) should
have been included at the end of the assignment. Up to five marks were deducted if your essay
3
did not meet the technical requirements. The body of your assignment should not have exceeded
10 pages, excluding the cover page, introduction, conclusion and list of references.
A detailed model answer cannot be provided as students’ answers differed and were therefore
assessed individually. Marks were allocated based on the strength of students’ arguments and
practical application of theory. Some guidelines are provided below on how marks were allocated.

Many students did not complete and attach the declaration provided in Tutorial Letter 101
(Addendum F). Please ensure that you submit the declaration in Assignment 02. If you forget to
submit the declaration, please do not submit it separately since this will then be regarded as a
duplicate assignment/resubmission.

An essay assignment must start with an INTRODUCTION. The aim of the introduction is to
introduce key concepts and issues that will be dealt with in the essay. It is also important that
you introduce the reader to the company on which the assignment is based – in this case, Uber
Technologies Inc. – in the introduction.

2.1 INTRODUCTION

In order to do effective strategic planning it is crucial that top management analyses the internal
environment of the organisation. The specific factors that are of importance in this process are the
resources, capabilities and core competencies of the organisation.

The purpose of analysing the resources, capabilities and core competencies is to determine the
strengths and weakness of the organisation. Strengths are those resources and capabilities in the
organisation that can be utilised to gain and maintain a competitive advantage in a particular industry.
However, weaknesses are those resources and capabilities that have to be improved in order to
combat the threats of other organisations and to achieve a competitive advantage.

In this essay, the terms resources, capabilities and core competencies will be discussed.
Thereafter the resources, capabilities and competencies of Uber will be analysed in order to
determine the strengths and weaknesses of Uber. In closing, recommendations will be made to
Uber on actions they can take to maintain/improve their competitive advantage in the
online transportation network industry.

The introduction is followed by the body of the assignment, which, in this case, consists of
differentiating between resources, capabilities and competencies. After this, the Resource-
based View (RBV) will be used to analyse the internal environment of Uber and to determine its
strengths and weaknesses. The body of the assignment is concluded with recommendations of
the actions that Uber can take in order to sustain/improve their competitive advantage in the
online transportation network industry.

It is important that you use PARAGRAPHS and SUBPARAGRAPHS to structure your essay.
These paragraphs must have meaningful headings and subheadings that are numbered – avoid
using bullet points since this is an essay.

4
 MNG3701/201/2017
2.2 DEFINING RESOURCES, CAPABILITIES AND COMPETENCIES

According to Jones and Hill (2013:83), an organisation has a competitive advantage over its rivals
when its profitability is greater than the average of all the organisations in its industry. It has a
sustainable competitive advantage when it is able to maintain this above-average profitability over a
number of years. Internal analysis therefore aims at identifying the sources of an organisation’s
competitive advantage that should enable it to build a sustainable competitive advantage.

The resources, capabilities and competencies of an organisation are linked, and need to be fully
understood in the context of internal analysis. According to Jones and Hill (2013:84–85) a
competitive advantage is based on core competencies which they describe as follows: ‘‘Firm-specific
strengths that allow a company to differentiate its products from those offered by rivals, and/or
achieve substantially lower costs than its rivals’’. According to these authors, core competencies
arise from two complementary sources: the resources and capabilities of an organisation. In the
sections that follow we discuss resources, capabilities and core competencies in more detail.

2.2.1 Resources

Resources are the productive assets owned by an organisation and can be grouped into five
categories, namely financial capital resources, physical capital resources, human capital resources,
organisational capital resources and technological capital resources. Organisational resources are
further classified into tangible and intangible resources which are discussed below.

Tangible resources are the organisation’s physical resources that include physical infrastructure,
land, plant, vehicles, manufacturing equipment, computer hardware, physical inventory and money.
Intangible resources, on the other hand, are the resources that “cannot be touched”, namely the
knowledge and know-how of managers and employees gained through experience; the intellectual
property of the organisation including patents, trademarks and copyrights; software; human capital;
brand names; and the reputation of the organisation.

The purpose of internal analysis is to determine which of the organisation’s resources are strengths
and then to deploy them in order to gain or maintain the competitive advantage of the organisation
in a particular industry. Weaknesses, on the other hand, have to be improved in order to decrease
the vulnerability of the organisation to competitor activities and strategies.

2.2.2 Capabilities
Individual resources often have limited value, but a combination of resources can become
exceptionally valuable. A company’s capabilities are the product of its organisational structure,
processes, control systems and hiring systems. Capabilities also involve leadership attributes, the
way decisions are made and how effectively the internal processes are managed in the organisation
in order to achieve its objectives. Most importantly, capabilities are intangible and do not reside in
individuals, but in the way individuals interact, cooperate and make decisions in an organisation. There
are various processes and tools that an organisation can use in order to increase the value of their
resources. Technology is for instance, a valuable tool that can be used to combine resources in
order to provide a superior product. A streamlined production process can lead to economies of
scale which will enable the organisation to compete with regards to price.

5
 Resources and capabilities lead to core competencies. As discussed above, capabilities, unlike
resources generally, represent complex combinations of assets, people and processes that are used to
create value by transforming inputs into outputs.

2.2.3 Core Competencies

Core competencies distinguish an organisation from others in the industry. These competencies are
difficult to imitate by competitors and therefore they form the basis of an organisation’s sustainable
competitive advantage. Figure 1 below illustrates the relationship between resources, capabilities
and core competencies.

Figure 1: The relationship between resources, capabilities and core competencies

2.3 THE PURPOSE OF INTERNAL ENVIRONMENT ANALYSIS

According to Jones and Hill (2013:83), an organisation has a competitive advantage over its rivals
when its profitability is greater than the average of all the organisations in its industry. It has a
sustainable competitive advantage when it is able to maintain this above-average profitability over a
number of years. Note that internal analysis therefore aims at identifying the sources of an
organisation’s competitive advantage that should enable it to build a sustainable competitive
advantage.
In order to perform effective strategic planning it is important that the organisation analyse its
resources, capabilities and core competencies to identify their strong points (strengths) and weak
points (weaknesses). The strengths of the organisation are those resources, capabilities and core
competencies that the organisation uses to create, maintain or increase its competitive advantage
in its particular industry. The weaknesses of the organisation are those resources and capabilities
that make the organisation vulnerable to “attacks” from competitors and therefore, has to be
addressed in order to combat these threats.

6
 MNG3701/201/2017

2.4 ANALYSIS OF UBER’S INTERNAL ENVIRONMENT

The resources, capabilities and core competencies of Uber can be analysed by using the
Resource-based View (RBV).
The RBV is a model for analysing the internal strengths and weaknesses of an organisation in
terms of its resources and linking them to opportunities in the external environment. It determines
where the organisation can build competitive advantage, superior performance and customer
value.
An assessment of the organisation starts with a general internal evaluation to determine its
strengths, specifically as related to the industry in which it operates. Important aspects for
assessment are the strategic direction as conveyed in the vision, mission, purpose and values of
the organisation; the key internal stakeholders, including managers, their experience, strengths,
weaknesses and management style; the owner(s) of the organisation; operational issues such as
sales, assets and location; and the type of level of employees and the culture of the organisation.

Resources and capabilities are determined by value chain activities of the organisation, including
supply-chain and operational management, financial management, research and development,
people management, marketing management, as well as the intangible resources such as
reputation, patents, brand names and networks.

This unique combination of resources, capabilities and core competencies is used to develop a
strategy to address the need of customers and also contribute to competitive advantage.

2.5 THE STRENGTHS AND WEAKNESSES OF UBER

Upon the analysis of Uber’s internal environment the following strengths and weaknesses were
identified.

STRENGHTS WEAKNESSES
Uber was established in 2008, which means that it has Uber only accepts credit cards, while competitors
an advantage over competitors due to its 9 years of accept cards and cash.
experience.

Taxify, SnappCab and Ryda are currently only available

in Johannesburg. Unicab is only available in Cape
Town.

Uber has excellent quality control when it comes to their

cars and drivers.

They do a thorough inspection of the drivers’ vehicles

to determine whether they meet the requirements set
by Uber, for instance, it must be below a certain
mileage. Divers are carefully verified. They must have
no criminal record, pass an eye test and have a
license.

Uber also has a quality-based competitive advantage

in terms of cleanliness and customer service
standards, including a rating system for drivers. The
7
current system entails that the driver’s details are sent
to the customer upon ordering an Uber taxi, which
provides some degree of passenger security

Uber also requires drivers to submit their licenses,

liability insurance- and roadworthy certificates annually
in order to ensure that drivers and cars are always up
to standard.

Passengers rate their drivers after using their service.

Drivers with poor ratings are first warned, trained,
warned again, trained again and only then, if they
cannot get good ratings, they are kicked off the
system. This usually relates to drinking while on the job
or reckless driving.

All hiring and payment are handled exclusively through

Uber and not by the driver personally.

At the end of a ride, the complete fare is automatically

billed to the customer's credit card.

Uber’s pricing is very competitive. It charges a Some customers have complained about the fact that
minimum fare of R20 and about R7 per/km (with Uber Uber uses surge pricing, which is introduced when
X). there is a shortage of cars on the road and demand is
high (especially during the festive season).
Metered taxi drivers can also join the Uber platform and
switch it on when they are not busy. Most metered taxi
drivers have done this already.

Uber is also diversifying. They recently launched

UberEats to deliver food to customers.

It is estimated that, in South Africa, Uber has been able

to create more than 4 000 jobs.

This puts Uber in good stead with government.

Uber is at the forefront of technological development

and innovation in the online transportation network.

Uber appears to have identified a gap in the taxi market

and uses innovation to gain a competitive edge over
incumbent traditional metered taxis. Incumbent
operators have been forced to search for new solutions
in order to respond to new forms of competition driven
by technological developments.

Price is one of the major competitive advantages that

Uber has over metered taxis. However, there are also
other competitive factors driving the growth of Uber
services.

Uber has an additional convenience-based competitive

advantage which allows the service to tap into a whole
new market of unmet demand for convenient, fast, and
flexible point-to-point urban transportation.

8
 MNG3701/201/2017
Uber is attractive for its consistent shorter waiting and
travel times, rendering the service more reliable than
that of traditional taxis. Customers know exactly the
approximated time of travel to their destinations using
the dedicated driver-passenger application which tracks
the entire journey. Uber also has a quality-based
competitive advantage in terms of cleanliness and
customer service standards, including a rating system
for drivers. The current system entails that the driver’s
details are sent to the customer upon ordering an Uber
taxi, which provides some degree of passenger security.

Uber is attractive for its consistent shorter waiting and

travel times, rendering the service more reliable than
that of traditional taxis. Customers know exactly the
approximated time of travel to their destinations using
the dedicated driver-passenger application which tracks
the entire journey.

Uber’s ease of payment means that customers are not

required to carry cash for the purposes of paying for
the trip as the application deducts the cost of the trip
directly from the customer’s bank account. In a context
like South Africa with a high crime rate, security of
payment is essential, as carrying cash is dangerous.

Uber has also become involved in directional selling by

companies such as Discovery and Hilton Hotels, which
channel customers towards using Uber services.

2.5 RECOMMENDATIONS
Following the analysis of Uber’s internal environment, it is recommended that Uber:

 investigate the option of accepting cash and not only cards.

 add additional services to its offering to ensure that it stays ahead of its competition in the
transport industry. It could, for example, establish a grocery delivery service (like the one
that Wallmart is currently testing in America).

 investigate additional services similar to “Cabs for Women” and “Take Me Home” that are
offered by Ryda.

 stay at the forefront of technological development to ensure that Uber remains competitive.

 use its innovative resources to remain ahead of the other transportation network
companies.

 ensure that they implement and maintain effective management information systems to
keep a close eye on its competitors and potential competitors in the transportation network
market. This means that it should continuously monitor the activities of these organisations
to establish and to combat the threats that they may pose to it or, alternatively, to exploit
the opportunities that the activities of these organisations may present to it.

9
2.6 CONCLUSION
Organisations must constantly scan and monitor their internal environment as their
competitiveness and profitability depends on how effectively they manage the resources they
have at their disposal. It is therefore critical that Uber identifies both strengths and weaknesses
that are elated to their internal environment.

In order to stay competitive in the online transportation industry, Uber has to use their strengths
to increase their market share and outperform their competitors. At the same time, Uber has to
investigate the resources identified as weaknesses. The objective is to devise
programmes/strategies that could be implemented to convert these weaknesses into strengths.
This will enable Uber to combat potentially harmful strategic maneuvers from competitors to obtain
a bigger market share in the online transportation network industry.

The internal analysis of Uber’s internal environment indicated that Uber have a myriad of strengths
and few weaknesses. Their future strategies should focus on eliminating their weaknesses or
converting these into strengths to protect the company from onslaughts from competitors.
Strengths have to be strengthened even more in order to obtain a bigger market share in the
online transportation network industry.

This essay concludes with recommendations as to actions that Uber can take in order to protect
or improve their market share and profitability in the online transportation network industry.

2.7 REFERENCES
Alfreds, D. 2016. Tshwane launces city-wide crime safety app. [Online] Available from:
http://www.fin24.com/Tech/News/tshwane-launches-city-wide-crime-safety-app-20160421 [accessed:
V14 July 2016].

Anon. 2016. Shots fired at Sandton Gautrain station. [Online] Available from:
https://www.enca.com/south-africa/shots-fired-at-sandton-gautrain-station [accessed: 13 July 2016].

Anon. 2016. Meter taxi drivers take on Uber drivers at CT airport. [Online] Available from:
http://www.news24.com/SouthAfrica/News/meter-taxi-drivers-take-on-uber-drivers-at-ct-airport-
20160603 [accessed: 13 July 2016].

Anon. 2016. Furious Uber drivers invade Cape Town office. [Online] Available from:
http://ewn.co.za/Media/2016/04/06/Uber-drivers-invade-Cape-Town-office [accessed: 14 July 2016].

Anon. 2016. Uber launches two-wheeler foray in Bangkok. [Online] Available from:
http://www.wheels24.co.za/News/uber-launches-two-wheeler-foray-in-bangkok-20160224 [accessed:
12 July 2016].

Anon. 2016. Toyota will invest in Uber, team up on auto-leasing program. [Online] Available from:
http://www.moneyweb.co.za/news-fast-news/toyota-will-invest-uber-team-auto-leasing-program/#
[accessed: 12 July 2016].

Anon. 2016. Johannesburg first city in Africa to get revolutionary cab service. [Online] Available from:
http://www.bdlive.co.za/business/transport/2013/08/22/johannesburg-first-city-in-africa-to-get-
revolutionary-cab-service [accessed: 13 July 2016].

Anon. 2016. Uber rushes to calm concerned drivers, fearful riders amid strike. [Online] Available from:
http://ewn.co.za/2016/04/08/Uber-rushes-to-calm-concerned-drivers-fearful-riders-amid-strike
[accessed: 14 July 2016].

10
 MNG3701/201/2017
Anon. 2015. How to get around this festive: Uber, Taxify, Ryda, SnappCab or Unicab. [Online] Available
from: http://www.techreport.co.za/how-to-get-around-this-festive-uber-taxify-ryda-snappcab-or-unicab/
[accessed: 19 July 2016].

Fin24. 2016. SA consumer confidence wanes as economy is hammered. [Online] Available from:
http://www.fin24.com/Economy/sa-consumer-confidence-wanes-as-economy-is-hammered-20160705
[accessed: 11 July 2016].

Fin24. 2016. SA shed 15 000 jobs in first three months of 2016 – Stats SA. [Online] Available from:
http://www.fin24.com/Economy/sa-shed-15-000-jobs-in-first-three-months-of-2016-stats-sa-20160704
[accessed: 11 July 2016].

Hsu, T. 10 things you probably don’t know about Uber. 2016. [Online] Available from:
http://traveller24.news24.com/TravelPlanning/10-things-you-probably-dont-know-about-Uber-20150813
[accessed: 11 July 2015].
Phakathi, B. 2016. Uber changes gear, moves into restaurant business. [Online] Available from:
http://www.bdlive.co.za/business/transport/2016/07/11/uber-changes-gear-moves-into-restaurant-
business [accessed: 13 July 2016].

Presence, C. 2015. Law to be amended to regulate Uber. [Online] Available from:

http://www.iol.co.za/business/news/law-to-be-amended-to-regulate-uber-1909024 [accessed: 19 July
2016].

Turner, N & Pettypiece, S. 2016. Walmart to test grocery delivery through Uber. [Online] Available from:
http://www.fin24.com/Companies/Retail/walmart-to-test-grocery-delivery-through-uber-20160603
[accessed: 13 July 2016].

Van Zyl, G. 2016. Uber welcomes ‘tough’ SA transport law. [Online] Available from:
http://www.fin24.com/Tech/News/uber-welcomes-tough-sa-transport-law-20160307 [accessed: 21 July
2016].

Van Zyl, G. 2015. Uber: a game-changer in passenger transport in South Africa? [Online] Available from:
http://www.competition.org.za/review/2015/11/22/uber-a-game-changer-in-passenger-transport-in-
south-africa [accessed: 20 July 2016].

Venter, P, Jansen van Rensburg, M, Davis, A, Nieuwenhuysen, C, Van Zyl, J, Singh, C & Brevis, T.
2014. Practising strategy: a Southern African perspective. Cape Town: Juta.

3. CONCLUDING REMARKS
All tutorial letters for this module, including this one, are available on myUnisa. We encourage you
to actively use myUnisa, especially the discussion forum and the additional resources, to keep up
to date with developments in the course and to interact with fellow students.

You are welcome to contact us if you have any queries. We trust that the information in this tutorial
letter has given you a better understanding of how to balance strategic management theory and
application.

We wish you success with Assignment 02.

Mrs M Labuschagne
Mr B Motswiane

Department of Business Management

Unisa
11