Uber: Driving Global Disruption

Uber: Driving Global Disruption

Monique Youmans

Strategic Management

Dr. Robert Khoury

September 26, 2018

Uber: Driving Global Disruption

Table of Contents

The history, development, and growth of the company over time.................................................3

The identification of the company’s internal strengths and weaknesses.....................................5

The nature of the external environment surrounding the company.............................................5

A SWOT analysis............................................................................................................................6

The kind of corporate-level strategy that the company is pursuing.........................................8

The nature of the company’s business level strategy..................................................................8

The company’s structure and control systems and how they match its strategy.....................9

Recommendations..........................................................................................................................5

The history, development, and growth of the company over time

Uber Technologies Inc is the maker of the transportation ridesharing service based in San Francisco, California.  The company uses a smartphone application to connect passengers with drivers of their own vehicles for hire. Customers use the app to request rides and track their reserved vehicle's location. (Uber, 2018). Based on Uber’s 2017 Uber Revenue and Usage Statistics,  the service was available in 83 countries and more than 674 cities worldwide, and was valued at $20 billion (Dogtiev, 2018).

Upon its inception, Uber only offered full-sized luxury cars for hire, and the "Uber Black" title was adopted for the company's main service (named after the "black cars" private transportation services in New York City. In 2012 the company launched its "UberX" program, which was made available to consumers smaller vehicles. Due to the lower fees that accompanied the program, the service became extremely competitive with traditional taxi services, expanding Uber's appeal to a broader cross-section of the market (Uber, 2018).

        The visionary behind the on-demand app car service is Travis Kalanick, an entrepreneur, with a computer science and math background who has spent nearly 15 years working with various start-ups since dropping out of UCLA (Mangalindan, 2012). Uber is a software company and does not own any of the cars which transport its customers.  Instead, Uber has negotiated contracts with drivers and takes 25 percent of the fare. The initial launch city was San Francisco in 2010 and Kalanick has been busy raising capital ever since.  Kalanick and co-founder Garrett Camp invested $200,000 as seed money, followed by $1.25 million in angel capital by First Round Capital, an $11 million Series A round led by Benchmark Capital, Founder Collective and First Round Capital, and finally $32 million Series B with Menlo Ventures, Jeff Bezos, Goldman Sachs and Benchmark in December 2011 (Faud, 2012). From the outset, the goal was to overcome common frustrations that customers often experience when trying to find a taxi (Hill, Jones, Schilling, 2015).

As of March 2012, Uber service was available in Chicago, New York, Boston, San Francisco, Paris, Seattle and Washington D.C.   The firm was also conducting test services in Los Angeles and Toronto.  Upon a launch, Uber benefits from various means of social media such as Twitter and Facebook, as users share their experiences.  As a result, the firm has experienced rapid user proliferation of 30-40% per month (Mangalindan, 2012).

Uber has three main pricing structures; fixed airport rates, standard fees which include a per mile/minute charge and dynamic pricing.   For example, the fixed airport fee from downtown Chicago to Midway is $65 and $75 to O’Hare, slightly less than two times that of cabs (Uber.com, 2018). This pricing structure does not differ much from other car services but the convenience factor provides it with a competitive edge. The standard Chicago fee is a base fare of $7.00 plus $3.50/mile when over 11mph and $0.85 when under 11 mph, all calculated using GPS (Uber.com, 2018).  Customers who travel short distances are subject to the firm’s $15 minimum fare as well.  The pricing structure is about twice the price of cabs in the city but Uber does not charge extra for additional occupants and the pricing structure is still reasonable enough to achieve scale among traditional cab customers.   Uber’s pricing structure also leads to an all-electronic payment process.  The tip is already included in the final fare and all the customer has to do is keep their credit card information updated with Uber.  This is very convenient for business accounts, which is preferred when entertaining customers.

According to Uber, in 2017 Uber customer number reached 40 million / month and by May of this year Uber’s share of the United States ride hailing market was 77%. The company’s fast rise to success directly correlates with the decrease in traditional taxi usage. Given the fast rise of smartphone adoption globally, Uber’s success doesn’t come as a surprise. But there are many reasons why customers prefer to book Uber versus taxis. Among those are: clear overview of pricing prior to booking, one-tap rides, follow drivers on map, cashless convenience, fare splitting as well as feedback options (Dogtiev, 2018).

The final and most controversial pricing structure is Uber’s use of dynamic pricing for high volume days such as New Year’s or Halloween and also during inclement weather conditions.  Uber notifies customers of the increased pricing structure when ordering a ride in an effort to reduce demand, but because fares are computed after the service is complete, this pricing structure has become very controversial.  (Uber.com, 2018).

The identification of the company’s internal strengths and weaknesses.

An organization needs to examine and make changes as according to the internal and external environmental factors that may affect the company’s performance. SWOT is an organized planning tool which will be used to identify and evaluate issues related to various environments for Uber.

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