ROMA, JOANNE P.

MGT 105 – Strategic Business Analysis

EXTERNAL ANALYSIS FOR UBER COMPANY

INTRODUCTION
Uber is an American multinational transportation service providing and ride-
sharing company. Garrett Camp and Travis Kalanick are the founders of Uber and they
established the company in March 2009. The headquarters of the company is situated
in San Francisco, California. Some of the major products and services of the brand are
UberXL, Postmates, UberPlus, UberSUV, motorized scooter, UberPool, Electric bicycle,
UberBlack, Freight Transportation, UberSelect, Courier, UberX, Package Delivery, and
Uber Eats.
According to a financial analysis by MactroTrends, Uber's yearly income would
be $8.913 billion by the end of 2020, a 31.71 percent decrease. The brand's net income
was -5.800 billion US dollars, representing a 30.1 percent reduction.
According to estimates, Uber provides transportation and ride-sharing services in
69 countries and over 900 major cities throughout the world. At the start of 2020, around
78 million people were active Uber users. The ride-sharing and transportation company
has a roughly 67 percent market share in the United States.
Uber has employed 26900 employees to look after various operations of the
company worldwide. Some of the prominent competitors of Uber are Curd, Ola Cabs,
Grab, Lyft, and Didi Chuxing. Careem, Postmates, Uber Eats, and Zomato are the
subsidiaries and sub-brands of Uber.

PESTLE ANALYSIS
Here we’ll focus on the macro-environmental factors that impact the transportation
business of Uber.
 POLITICAL FACTORS IMPACTING UBER

 CONCERNS ON SHARING ECONOMY

Many government officials and lawmakers are concerned about the
ride-sharing industry and, more broadly, the shared economy. The
increasing popularity of Uber jeopardizes the function and economics of
traditional taxi services. As a result, they are opposed to the rise of the
ride-sharing industry for a variety of reasons.
  PERMIT REGULATION CONTROVERSY
The rules and regulations of Uber aren’t clear. That’s why it
has many controversies in different political circles. For instance, if
any Uber vehicle has an accident, then who would you blame and
claim the insurance? The driver or the company, it isn’t clear
whether the drivers are the partners or the employees of the
company.
Many political think tanks and legislators, want to introduce
separate regulations for the ride-sharing companies.

 GOVERNMENT SCRUTINY
The unclear position of the drivers has brought the lawsuit in
California and other countries as well. For instance, the South
African government confiscated the cars of Uber for not having a
taxi permit. The same thing happened in Netherland and Portland.
The French government filed a lawsuit against Uber for its
advertisement campaign.

 WAGE LAWS
Many politicians are considering introducing wage laws in the ride-
sharing industry. The goal is to bring Uber under the government
regulations because following the wage laws is the weak area of the
brand. In other words, the officials want Uber to acquire commercial from
the government.

 ECONOMICAL FACTORS AFFECTING UBER

 SHARING ECONOMY
Uber adheres to the sharing economy notion of pooling intellectual
and physical resources. Many career chances for drivers have been
supplied by the company. Its popularity has grown over time. In the
beginning, Uber was subjected to a slew of bans and restrictions.
The argument over Uber's cab service is still ongoing. It's because
the brand has reduced demand for traditional cabs. It has become critical
to determine if the sharing economy is destroying or creating jobs.
 ECONOMICAL PRICES
The reason for Uber's appeal is its speedy service and low costs.
As a result, traditional taxi drivers have decreased their charges in order to
 remain competitive. It has become quite difficult for regular taxi drivers to
offer a lower price and better service.
 ECONOMIC RECESSION
The global economy is experiencing a downturn as a result of the
covid-19 pandemic. Because of the lockdown, social alienation, and
commercial shutdown, the entire year of 2020 was exceedingly awful for
the transportation industry. As a result, Uber's yearly revenue and net
income have decreased by 31.71 percent and 30.1 percent, respectively,
in 2020.

 EXPENSIVE LIVING COST

For middle-income households in the United States and around the
world, the cost of living has risen. Because of the rising cost of living, they
have had to cut back on their spending, particularly in terms of getting rid
of personal vehicles. It has increased the popularity of Uber and the ride-
sharing trend.
The company has given average middle-class folks an alternative
economical approach. In other words, Uber has a greater possibility for
expansion.

 SOCIAL FACTORS AFFECTING UBER

 POPULAR RIDE
In recent years, there has been an increase in smartphone usage.
People prefer to hire a cab online rather than wait on the road since it is
more comfortable and convenient. That is how Uber's popularity has
grown. Most significantly, individuals are at ease with the brand's
transportation ride-sharing service.
Uber's smartphone application allows consumers to select their
destination without having to explain the location to the drivers. Uber's
prices are lower than those of traditional taxis.

 SOCIAL MEDIA CAMPAIGNS

Along with referral and word-of-mouth marketing, Uber also uses
adverts on various social media platforms such as Facebook, Instagram,
and others. It assists the brand in connecting with customers and
increasing user engagement. Uber is quite active on social media and
responds quickly to consumer complaints.

 INCREASING PRICES IN CITIES

Uber has raised its fares in cities. It has pleased many drivers, but it
is not beneficial to customers. They were dissatisfied with the rising prices.
 The organization has the advantage of offering swift service and being
available. As a result, many clients prefer to employ Uber's services.

 AGING POPULATION
According to a study, the aged population has been increasing for
the past few years. It would continue to increase by 2030 and 2035. One
in every five Americans would be above the age of 65 in 2030. The
growing age population gives the possibility of a bright future for Uber. It’s
because they would a transportation service to move.

 TECHNOLOGICAL FACTORS IMPACTING UBER

 TECH INNOVATION
Uber has a strong technological foundation. The company's whole
ride-sharing operation is dependent on technological innovation. In the
twenty-first century, no firm can flourish or grow without the use of cutting-
edge technology. The company has effectively integrated technology into
the ride-sharing service, providing clients with a one-of-a-kind experience.

 ADVANCED FEATURES
Uber offers various advanced services to its customers. For
example, they can estimate the cost of the entire ride using the mobile
application, and they can pay for it using cash or the application. The
driver can also choose whether or not to accept the trip.
Their application offers some intriguing features as well. Such are
pop-up messaging, geo-location, and tracking the entire voyage over the
internet. Uber's functionality is heavily reliant on reliable internet access.

 SELF-DRIVING TECHNOLOGY
Apple and Google, two of the world's largest technology giants,
have invested billions of dollars in self-driving vehicles. They have
introduced self-driving vehicles and are providing transportation services
in several places. Automakers such as Tesla and BMW have also
included self-driving capabilities in their vehicles.
Uber isn't lagging behind in terms of autonomous technology; the
company has also launched driverless vehicles and is offering
transportation services. The client market is also amenable to the concept
of self-driving vehicles.

 LEGAL FACTORS IMPACTING UBER

  MINIMUM WAGE LAWSUIT
Uber is a multinational corporation that conducts business all over
the world. As a result, the transportation brand must adhere to various
country-specific rules and regulations. The company is legally obligated to
pay the minimum wage. Over 300,000 people have filed a lawsuit against
Uber, alleging that they are paid less than the minimum wage. The band
reached an agreement.

 PRIVACY ISSUES
Uber had a data breach in its customer database in 2014 and 2016.
More than 20 million American consumers' personal cell phone numbers
and email addresses were stolen as a result of the data breach. Uber was
fined $1.17 million by the European Union for a data breach that affected
57 million users globally. The brand must exercise extreme caution when
it comes to the data of its customers.

 DRIVERS AS EMPLOYEES
The controllers of the state of California ordered Uber to consider
its drivers as employees of the company in 2015. The French courts
imposed heavy fines on Uber for unlawfully driving with no proper grants.

 ENVIRONMENTAL FACTORS AFFECTING UBER

 FUEL CONSUMPTION
Uber is a transportation company. Uber's automobiles and vehicles
use gasoline, emit carbon, and damage the air. It contradicts the
company's environmental stance and commitment. There have been no
substantial studies that link Uber cabs to pollution.

 UBER GREEN
Uber has recently launched a new service called Uber Green. It's a
huge step forward for the organization in terms of environmental
sustainability. It would allow consumers to enjoy a ride without negatively
impacting the environment.

 INCREASING TRAFFIC
According to a study by Hill in 2018 that Uber is monopolizing the
ride-sharing market by putting more vehicles on the road. They’re
increasing the traffic and carbon emission rate.

 CONCLUSION
 After conducting an in-depth examination of Uber's pestle analysis, I
discovered that the company is having major legal concerns. The corporation
should make it obvious to drivers that they are both employees and partners.
Uber should also introduce more Green cabs in order to capitalize on an
environmentally sustainable trend.
 Uber Porter’s Five Forces Analysis

Uber Porter’s Five Forces analytical framework analyses five individual forces
that shape an overall extent of competition in the industry.
 Potential new entrants: Low
Uber is positioning itself in a technology field that provide a channel of
linking bridge between ride-demanding customers and spare car providers. This
market requires a higher amount of initial capital and this capital requirement has
risen up the entry level compares to other markets.
Since Uber is facing legal issues around several area and has been fined
by some government authorities, the market is still under controversies the new
entrants would still be very cautious on stepping into the business. Thus, at least
for a short time period, the threat from new entrants will stay low.
As long as the legislation problems been settled down, as an O2O
technology-based company, it is not easy for Uber to stop followers’ imitation,
which means that it’s easy to be copied and other competitors could operate in
the same way as Uber.

 Threat of substitutions: Medium

Considering about the service quality that Uber applies, the potential
threats coming from the traditional transportation industry (including the public
transportations, taxis and private cars, etc.) are low because of its lower-cost and
efficiency, as well as user-friendly designing. The graph below shows that the
average coming time of both Uber cars and traditional taxis. More than 94% of
the Uber cars will be arrived less than 15 mins while that number of traditional
taxis is only 27%.
Since there already are some companies provide similar services in this
market among different regions, customers might switch to other available
services just simply because of the feature of higher price sensitivity.

 Threat of suppliers: Medium

One of the main suppliers of the industry including a large number of

individual drivers. The concentration of this group of suppliers is not very high,
which to some extent, has restricted the bargaining power of suppliers.
Oil and gas suppliers (and may also extend to hybrid vehicles) is another
main supplier. Oil price has been plunged since 2015 and the lowest level has
reached less than $30 in January this year. Highly fluctuation of price brings a
higher risk to the market because of uncertainty and non-predictability.
 Threat of buyers: High

As the market getting bigger, the increasing number of participators bring

customers more choice and the switching cost for customers is relatively low.
Although the number of private cars experiences a huge rise during the
past few years, the parking problems have been more serious than ever before
and the private car using in the cities is not expanding as fast as before as well.

 Degree of rivalry: High

The trend of concentration of the industry is appearing to be higher than

previous years, and the existing companies in the market is compete with each
other on both suppliers (car drivers) and customers.
Since the initial capital requirement to enter into this industry is relatively
high, the sunk cost during the early stage has raised up the exit barriers.