Marco Di Grazia SSBM Geneva 2022

Assignment: Business Strategy

Option 1 – PESTEL Analysis

1. Introduction

Uber Technologies Inc. is a transportation multinational that offers ride-sharing, food

delivery, and other services. Uber was launched in San Francisco in 2009 and has since
expanded its operations to over 900 cities in over 70 countries worldwide. The company is a
prominent player in the sharing economy, a business model in which independent contractors
rent out their unused resources to other consumers, such as vehicles or accommodation. The
company has had tremendous success and is aiming to expand both domestically and globally.
Uber has less limits than taxi cab firms because of their use of technology. One of the main
reasons Uber is so popular is that their app allows users to request a trip from drivers in their
immediate region. Uber's business model, which is centered on independent contractors rather
than workers, uses smartphone technology to connect users with independent drivers as cabs,
but they do not hire drivers or own the vehicles. This business model has aided the growth of
the sharing economy, in which independent contractors, in this case drivers, can earn money
by renting out unused resources. This paper will conduct a thorough external study of the
business and macro environment facing the company Uber through a PESTEL analysis. This
will allow to eventually devising a strategy that can effectively manoeuvre the competition to
maximize Uber’s chances of sustainability and profitability.
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2. PESTEL Analysis

2.1 Why a Pestel Analysis?

POLITICAL

LEGAL ECONOMIC

PESTEL

ENVIRON-
SOCIAL
MENTAL

TECHNOL-
OGICAL

PESTEL is an abbreviation that stands for political, economic, social, technical,

environmental, and legal elements. Uber PESTEL research examines the possible impact of
these external factors on the ride-hailing giant's performance and long-term growth prospects.

In the sharing economy, technology is utilized to connect private proprietors of a commodity

or service with customers directly. This contrasts from typical arrangements in that the firm
providing the goods or service does not own it; instead, it merely facilitates connection
between individuals. Ridesharing services and private residential space rentals to travelers are
currently the segments most identified with the sharing economy.
The ride-hailing industry is significant in today's urban transportation systems, both
economically and in terms of mobility. Cab services have been one of the transportation
sector's game-changing advancements since the introduction of e-hailing taxi software.
Among the primary players are DiDi, Uber, and Lyft.

Adjusting for the impact of COVID-19, the Ride-Hailing Industry is predicted to grow by
more than 50% between 2020 and 2021. In 2021, the market value is anticipated to be over
117 billion US dollars.
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Reduced taxi fares and the simplicity of booking via mobile applications are the key factors
that have driven the online booking segment type to gain a significant part of more than 40%
of the worldwide taxi industry. The popularity of taxis and ride-sharing services among
passengers has grown. To maintain their respective market share in a highly competitive
industry, corporations have enhanced their alternatives and expanded their operations to be
delivered through mobile applications.

The analysis of Political, Economic, Social, Technological, Environmental, and Legal

variables can aid in understanding the possible impact of these external elements on the
performance and long-term prospects of the ride-hailing sector.

2.2 Political Factors

Government stability, bureaucracy, degrees of corruption, the power of home market lobbying
groups, and other variables all have an impact on businesses. There was no other ride-hailing
cab app when Uber began operations in 2009. As a result, there were no laws governing the
regulation of such services.

2.2.1 Lobbying

Uber participates in lobbying actions in order to influence legislation in the United States and
throughout the world to make it more favorable for rail-hauling services in general and Uber
in particular. As seen in Figure 4, the lobbying budget of the world's largest mobility platform
has steadily increased, reaching USD 2,63 million in 2020.

2.2.2 Global taxi service disruption: political consequences

With the introduction of Uber, local governments and authorities were required to several
important questions. For example, in the event of a car accident, who is at fault? Uber or the
driver? Or is it necessary for Uber drivers to obtain taxi licenses? Another major disputed
point is whether it is legal for Uber to classify thousands of its drivers as contractors rather
than employees? Also controversial is whether Uber is required to meet minimum wage
requirements? Dealing with the aforementioned and other similar issues in various countries
and regions has sparked heated political disputes. Furthermore, it might be argued that Uber
has sparked worldwide political debates in ways that few other corporations have.
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2.2.3 Local governments take various positions

While some local governments supported Uber because of its modern business model, others
wanted strict obedience to the rules and regulations, making no distinction between Uber and
other taxi businesses. As a result, Uber has been prohibited in a number of countries,
including Bulgaria, Hong Kong, and Germany, as well as in select cities, including London
and Brno.

2.3 Economic Factors

The most important economic elements affecting firms are the macroeconomic environment,
inflation rate, interest rate, currency exchange rates, and unemployment rates. Furthermore,
economic issues such as labor costs, changes in consumer disposable income, and tax rates
have an impact on firms.

2.3.1 Uber’s Business Model: The Sharing Economy

Uber's business strategy is built on the sharing economy, a notion that has the potential to
transform the status of economies, particularly in industrialized countries. The worldwide
transportation technology company's economic implications are contentious. Uber has created
additional earning options for many people while also displacing local taxi drivers. In both
direct and indirect ways, the ride-hailing giant's long-term growth prospects are influenced by
trends and developments in the sharing economy.

2.3.2 Tax Regime

One of the most significant economic variables affecting ride-hailing services and other
companies is taxation. For example, under a new tax law that went into effect in the United
States in February 2018, "freelancers and other independent contractors will be allowed to
deduct 20% of their earnings from their taxable income before paying the new reduced tax
rates."1 This particular adjustment in an external economic component benefits Uber since it
boosts the financial appeal of being an Uber driver.

1
Zaveri, P. & Bosa, D. (2018) “The new tax law creates a huge boon for Uber and Lyft drivers” CNBC,
Available at: https://www.cnbc.com/2018/02/05/uber-lyft-drivers-and-other-contractors-get-2018-tax-law-
benefit.html
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2.3.3 Exchange rate fluctuations

Outside-of-the-US markets accounted for around 79% of all Trips in 2020.2

As a result, changes in the exchange rate between the USD and local currencies have a direct
and significant impact on Uber revenue and profit. In particular, rising US dollars versus local
currencies reduces the amount of income earned from international markets, whilst weak USD
improves the amount of profit gained from foreign markets.

2.4 Social Factors

Uber is influenced by a variety of societal issues such as changing family values, an aging
population, population growth rates, population health consciousness, consumer education
level, and others. Furthermore, increased global use of the internet and numerous apps for a
variety of personal and professional functions might be classified as variables with favorable
effects for the global transportation technology corporation.

2.4.1 Rates of population growth

The worldwide population growth rate is expected to be 81 million people per year, with
developing countries experiencing the fastest rise.3The population of any region is positively
connected with the demand for ride-hailing and delivery services, which has long-term
ramifications for Uber and its competitors.

2.4.2 Consumer views around sharing are changing

"Awareness and utilization of ride-hailing, car-sharing, and vehicle subscription services - not
to mention self-driving cars - is expanding, and new mobility models will continue to
emerge," it has been stated.4 Factors driving global popularity of ride-hailing and car sharing
include the high expense of car ownership and the growing convenience of options.
2.4.1 Population health consciousness

2
Annual Report (2020) Uber Technologies Inc.
3
https://www.worldometers.info/world-population/
4
Consumer Attitudes Toward Car Ownership Are Changing (2019) Cox Automotive, Available at:
https://www.coxautoinc.com/learning-center/consumer-attitudes-toward-car-ownership-are-changing/
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The health of the population has a huge impact on Uber's bottom line. The COVID-19
pandemic might be used as an example to prove this point. In particular, at the height of the
pandemic in 2020, many individuals around the world avoided travel and chose to remain at
home whenever possible. As a result of this circumstance, Uber had to remove around 6,700
full-time employee positions in order to deal with decreased revenues.

2.5 Technological Factors

Uber, as a worldwide transportation technology firm, is influenced by a variety of

technological elements. In general, notable technological factors influencing Uber include
industry-specific technological advances and breakthroughs, shorter technology life cycle,
changes in energy consumption practices, adjustments in manufacturing maturity and
capacity, and others.

2.5.1 Industry-specific technical advancements

Autonomous self-driving vehicles, sophisticated navigation systems, and associated

technologies are examples of industry-specific technology breakthroughs in the transport
sector. Autonomous self-driving cars are increasingly considered as the future of
transportation, and as a result, significant technology companies are investing in research and
development in this area. Uber invested more than $1 billion in driverless vehicles, but the
initiative did not produce the promised results.5 Uber sold its Advanced Technologies Group
("ATG") division, which specialized in the research and commercialization of autonomous
car technologies, to Aurora Innovation, Inc. in January 2021.

2.5.2 Rate of technological progress

The fastest-changing technology aspect affecting ride-hailing services and other companies is
the ever-increasing rate of changes in technology. Uber's revolutionary app and website, along
with modern technology infrastructure, enabled the company's creators to disrupt taxi services
around the world. Further technical advancements may result in more advanced infrastructure,
disrupting the industry in unpredictable ways.

5
Marshall, A. (2020) “Uber Gives Up on the Self-Driving Dream” Wired, Available at:
https://www.wired.com/story/uber-gives-up-self-driving-dream/
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2.5.3 Increasing IT and internet integration into business processes

Millions of people's professional and personal lives are becoming more intertwined with the
Internet of Things (IoT). The importance of IoT in human mobility is projected to grow as
well. It is critical for global mobility platforms such as Uber to take a proactive rather than a
reactive approach to addressing the significance of IoT to travel and mobility.

2.6 Environmental Factors

As Schor argues, corporations can promote the concept of sustainability' as a value

proposition through the sharing economy by either minimizing new resource acquisition by
fully utilizing existing available resources or reducing carbon emissions, as in the case of
Uber.6 Uber's environmental impact is always evolving. Many people say it raises traffic
issues and fuel use. However, research have found that Uber has not exacerbated traffic
congestion. People may choose Uber over public transit. For a complete review of Uber's
environmental impact, analysts will need to compare Uber fuel usage vs public transportation
versus personal vehicles. The final number might be influenced by a variety of things.

2.6.1 Climate Change

A variety of environmental issues, like global warming, air pollution, ozone layer thickness,
and others, can have an indirect impact on Uber's performance. Furthermore, the impact of
environmental conditions on Uber functioning can be direct in times of natural disasters like
as earthquakes, flooding, tornadoes, and so on.

Indeed, natural disasters may have a detrimental impact on Uber by causing damage to the
important markets in urbanized zones around the world and diminishing client spending
power in several vital market.

2.6.2 Uber’s CSR Policy

Any firm of Uber's size is required by stakeholders in general, the general public, and non-
governmental organizations in particular to act in a socially responsible way and to

6
https://greattransition.org/publication/debating-the-sharing-economy
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demonstrate commitment to addressing a wide variety of environmental challenges. If these

expectations are not met, the brand's image may suffer as a result of bad online and offline
news coverage.

2.7 Legal Factors

Uber works in a very specialized legal and regulatory context. Uber's operations are governed
by a wide range of federal, state, local, and foreign laws, rules, and regulations, including
those governing intellectual property, consumer protection, payments, labor and employment,
transportation network companies, licensing regulations, taxation, competition, transportation
services, internet activities, privacy, cyber security, data protection. These rules and
regulations are continually changing and may be interpreted, implemented, formed, or altered
in ways that are detrimental to company.

Traditional taxi companies must get expensive permits to conduct exclusive street-hail
services, whereas under Uber's new guidelines, its drivers serve as contract workers rather
than employees, posing major risks to both clients and drivers in resolving any disputes if
accidents occur. They do not have the right to the minimum salary, paid vacations, or health
insurance (Petropoulos 2016)7. As a result of fewer overheads (e.g., administrative and
operating costs), the company can offer lower prices. Uber's unique business model is said to
be prohibited in numerous countries (including Belgium, France, Germany, Italy, and Spain). 

3. Discussion

Ride-hailing companies have sparked heated political disputes around the world. Several
countries are concerned about the sharing economy's regulation. While the sharing economy
and transportation sharing offer advantages, they also have disadvantages. The rise of ride-
sharing firms has had a negative impact on the operations of other traditional taxi services.
This has sparked dissent, which has even grown political at times.
Authorities are afraid that new legislation for firms like these will be required. The
government oversight of these services creates significant uncertainty in the industry, as the
businesses were frequently formed intentionally to avoid regulation. This has resulted in
delays in entering markets, being able to compete effectively in some of the markets where it
is present, and, ultimately, jeopardizing the overall business model. For example, in Geneva

7
https://www.bruegel.org/blog-post/uber-and-economic-impact-sharing-economy-platforms
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Uber’s drivers are now considered to be employees. Indeed, after a long legal battle with the
canton of Geneva, Uber lost. In two decisions, the Federal Court confirmed that drivers using
its application must be considered as employees. Pending compliance, Uber will have to stop
its activities on the Geneva territory.8

The business strategy of the ride-sharing company is built on the sharing economy, a notion
that has the potential to revolutionize the state of economies, particularly in developed
countries. The worldwide transportation technology company's economic implications are
contentious. Ride-hailing services have increased earning opportunities for numerous
individuals while displacing local taxi drivers. Ride-sharing services have also had other
advantages, such as lowering the cost of looking for taxis, while traditional taxi services have
been compelled to lower their charges in order to remain competitive.

Several main elements are driving the rapid growth of the ride-sharing market: Consumers,
particularly younger individuals, want to avoid the high overhead costs associated with car
ownership. Ridesharing is projected to be most popular in areas where vehicle ownership is
not only prohibitively expensive but also impractical due to traffic jams and restricted
parking. The industry may struggle to overtake the market in locations where public transit is
well-funded and appealing to use; thus, Europe is the region with the greatest potential for
urban mobility platforms that integrate both private and shared mobility options.

Technology is at the heart of everything big in the twenty-first century, and it is impossible to
envision growth without it. Ridesharing's reach has been facilitated by widespread
smartphone use, and mobility apps are now widely used in major markets like India and
China, implying that mobility services are likely to generate significant revenue in these
countries. Based on superior technology that enabled both easy accessibility and a wonderful
experience for both drivers and riders, ride sharing businesses were able to capture a big
portion of the ride sharing industry. To deliver an exceptional experience, they have added
various additional features within the app.

Most businesses are concerned about sustainability, so ride-sharing companies have

prioritized it. It has been critical to dispel the myth that heavy traffic and fuel usage have
increased: It also needs to promote riding options that are more in keeping with the ecological

8
https://www.letemps.ch/economie/chauffeurs-uber-employes-tranche-tribunal-federal
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tendencies that have evolved in communities, such as electric automobiles and carpooling
possibilities, which are becoming more widely available.

Legal compliance has been a significant challenge, and failure to comply may result in
significant fines for organizations. The emergence of ride-sharing companies has presented
legal authorities with a quandary regarding whether or not standard service laws must apply to
it. Taxes, operations, and human resource issues have all caused legal issues for ride-sharing
companies. All of these legal challenges have the potential to divert the businesses' attention
away from their primary business and harm their brand image, even if they are addressed
through settlements.