UBER Analysis - Case Study Example

UBER Name Class Unit Q.1 Picking up and summoning a taxi through use of mobile app-the Uber services which were launched in 2010 allows users to request a cab through a click of button in their iPhone and android phones. The user just enters their location on their phone and summons a taxi to get them to their destination. The Uber user can decide the type of car they want for the trip. Though use of Global Positioning System, the app can locate the nearest car to the user and allocate the trip to the driver. The fare is billed to customer credit card directly which is linked to the app (Xu, Wang and Bendle, 2015). Charging market based prices for taxi- Uber utilises surge pricing which has made the service gain a lot of attention. This is through charging based on the current supply demand ration. The app uses an algorithm that is precise. This improves the customers’ experience (Xu, Wang and Bendle, 2015). Peoples Uber- people’s Uber was introduced in 2014 and has led to an extraordinary growth. This is a ride sharing service promoting safer and greener rides. The intention of people Uber service was to engage their customers and make sure that loyal customers are ready for other profit based products by Uber. The project utilised a lot of cash and has slashed prices (Xu, Wang and Bendle, 2015). Customised taxi services-this involves services such as UberGreen which is a green energy taxi that was in operation only in Wuhan. The service was designed to promote eco-friendly travelling. Another customised service in China is Xiaoyou which is an ultra-low price service utilising electronic cars (Xu, Wang and Bendle, 2015). Q.2 Uber has a major competitive advantage compared to the taxi cabs. This is due to fact that the services offered by Uber are convenient and fairly priced. Uber utilises an app that makes it possible for the customer to ask for a taxi at any point and decide on the type of ride they want. The use of private drivers has made the service quality to be high unlike the normal cabs. The use of technology has placed Uber taxi at a better position. The technology is patented and cannot be copied by the competitors. The number of private drivers willing to give rides is infinite. Also Uber has the ability to add value while at the same time reducing the costs. Uber drivers do not have to drive around looking for the customers to hail them. This saves fuel and time. Uber also has fixed costs and can pool risks. This makes it possible for Uber to lower prices without hurting their profits (Xu, Wang and Bendle, 2015). Q.3 Market positioning involves a perpetual location where the product fits in the market. Having an effective positioning puts the business first in the mind of potential customers. Uber market positioning is based on low cost, convenient and luxury cab services. This is attained through ensuring that Uber customers are able to request and pay for the cab services in a convenient way. Customers use the credit card details loaded in their Uber app to pay for the services. Customers are charged at low cost based on the market conditions. The app uses an algorithm to calculate the fare based on the market conditions which ensures that customers are not overcharged. This puts Uber at a better position than the competitors. Customers can request for the cab of their choice. This ensures that customers are able to enjoy the luxury in their ride. Uber cabs are clean and well maintained compared to most of the normal cabs. Through this, it has been possible to position Uber taxi as low cost, convenient and luxury cabs (Xu, Wang and Bendle, 2015). Q.4 Uber is using a multisided marketplace business model. The business model is based on peer to peer and peers to business exchange. The business model allows the company help consumer by giving them an option to rent rather than owning the expensive asset. This is based on the sharing economy where the technology company has made it a profitable business model. The business model enables the company to earn money through a shared profit model (Wurmser, 2015). In China, the business model relies on subsidized services where customers and drivers enjoy low costs and subsidies. Uber has been giving huge subsidies to their drivers which make them earn more than those on regular taxi cabs. Through the people’s Uber program which is a non-profit service for China, Uber has been subsidizing their riders. Uber has been investing a lot in China with a lot of money going into subsidies. This is a strategy aimed at competing for market share and acquiring it. The huge subsidies are a tool used to ensure that loyal customers are attracted more to the for profit services while acquiring new customers and drivers (Xu, Wang and Bendle, 2015). Q.5 Uber relies on e marketing through use of social media and app download. The sharing of the taxi makes it possible for the users to have a shared experience. With the call for efficient use of resources, Uber capitalises on the sharing of the assets through peer to peer model. The customers using Uber services are able to share their experience online which has led to phenomenal growth. Uber is based on a digital marketplace which high level of efficiency. The website used by the company is easy to navigate as a first time user. The website is designed for both mobile phone and computers. Ease of navigating makes is possible. The customer is digitally connected to the company. The technology is creatively used to make marketing highly innovative for Uber (Xu, Wang and Bendle, 2015). Q.6 Uber utilises surge pricing method in determining prices. This is a feature that has made Uber to stand out in the market. The method is based on a patented technology that is built in an algorithm. Through the algorithm, it is possible to use price as a lever for allocating the resources and attain high level of efficiency. In the case supply in a given area does not satisfy the demand for cabs, fare automatically rises to encourage drivers operate in the area. This happens until the supply and demand are in acceptable levels. Surge pricing helps in improving the customer experience while at the same time ensuring all areas are served (Xu, Wang and Bendle, 2015). The rates under the surge pricing ensure that there is high reliability even in cases where demand is high. Customers are notified on the current prices on their apps when there is a surge. The customer has to accept the rates before being connected to the driver. Uber operates with huge fluctuations of demand and variable supply. Drivers are free to work when they want hence requires incentives to work. Due to these conditions, price is used as incentive to riders. The use of supply and demand in pricing is meant for better outcomes for both driver and customer (Xu, Wang and Bendle, 2015). Q.7 Uber is based on the sharing economy. The sharing economy has been on rise due to convenience, ratings and sustainability (Bowman, 2015). Most of the users of Uber are attracted and motivated by the convenience, low prices and sustainability. This implies that users of Uber are able to save time, costs and also contribute to sustainability all which is important for business. The process of calling a taxi through Uber is easy and seamless making it possible to save time needed for business (Xu, Wang and Bendle, 2015). Use of Uber has also affected other business. For example, research shows that some of the Uber users may be holding off buying new cars due to the services offered by Uber. This shows a change in the consumption habits among the user of Uber services. The user may not feel the need to own a car when they have access to Uber services. The customer is able to save the cost of maintaining a car though the motor business loses a customer. Also taxi business is forced to reduce their fare due to competition by Uber (Wurmser, 2015). Through use of Uber, customers are exposed to products that are vintage in the market. Customers can choose the type of car they want to ride in (Xu, Wang and Bendle, 2015). Q.8 The main competitors to Uber in China are Didi and Kuaidi (Yuan, 2015). There are also local apps such as Yidao, AA and Shenzhou which are chauffeur based. Didi and Kaudi started as taxi hailing apps unlike Uber which assigns the car owners with ride seekers automatically. Kaudi users allowed users to enter time and location to book for future ride. Riders could also offer a tip to the chauffeur during peak hours to encourage them to take their order. This is opposed to Uber system where there is no tipping. Unlike Uber which shuts off the driver after taking order, drivers using Kaudi remained active even after taking the order (Xu, Wang and Bendle, 2015). Chauffeur one which was launched by Kuaidi targets online market. Users can choose the event they are riding in and a corporate chauffeur one was introduced in for corporate customers. These are very different features from Uber services. Didi Daijia which provides substitute drivers on special occasions or to drive private cars when drivers are unsafe to drive is also different from Uber services. There are also Yidao Shijia services offered by yidao which are not available on Uber. These differences in services offered have been a differentiating factor between Uber and the competitors. The competitors already dominate the China market with Didi-Kuaidi leading with the largest market share. Didi-Kuaidi also has the largest market share in the region (Xu, Wang and Bendle, 2015). Q.9 With the main competitors spending heavily to buy a greater market share, Uber should look for strategic way to win market. The company must focus on offering greater car services than the competitors and partner with a local firm. Didi and Kuaidi spent heavily on subsidies which are aimed at increasing their market share. The merger of Kuaidi and Didi implies that there will be less price war among the competitors and spending on subsidies will be low (Xu, Wang and Bendle, 2015). Uber should consider merging with other companies such as Yidao Yongche which offers premium car services. Both firms offers the same services hence their merger would strengthen them. A merger with a strong local partner will help Uber to gain a larger market share and increase the ability to challenge the Kuaidi –Didi merger. A strategic alliance by Uber would ensure that the structure of competition in the industry is changed. The firms will be able to create more value than they can on their own (Gnyawali and Madhavan, 2001). If Uber forms an alliance with Yidao, it will be possible to compete with Kuaidi-Didi group without using massive subsidies that hurts the profit (Yuan, 2015). The Chinese market has great growth opportunity for Uber which cannot be achieved without a good strategic alliance. Alliances between companies with similar interests have in most cases brought positive results (Dacin, Oliver and Roy, 2007). Price wars and subsidies to win the market share are common in the competitive markets. The competitors use incentives to cut prices and gain a larger market share. When unchecked, price wars can lead to low prices and eliminate the profits (Heil and Helsen, 2001). Firms which have low resources risk being put out of business by competitors through price war. To avoid such a situation, it is vital for Uber to focus on strategic alliance and continue enhancing their services. All the firms in the industry have similar costs structures hence engaging in price wars implies reducing the profit margins. Uber can differentiate their product offering from the competitors. This is through offering their services in a unique and superior way. This will make it possible for Uber to survive the price wars. It is important to note that healthy competition is good for business. Despite this, aggressive competition will have negative impacts on both consumers and companies. It is thus important for Uber to avoid any instance that may lead to price wars. There will always be a low cost leader in the industry. The firm should respond to the massive subsidies by competitors through strategic alliances, differentiation and offering superior services than the competitors (Rao, Bergen and Davis, 2000). References Bowman, J., 2015. The sharing economy. Research World, 2015(53), pp.26-31 Dacin, M.T., Oliver, C. and Roy, J.P., 2007. The legitimacy of strategic alliances: An institutional perspective. Strategic Management Journal, 28(2), pp.169-187. Gnyawali, D.R. and Madhavan, R., 2001. Cooperative networks and competitive dynamics: A structural embeddedness perspective. Academy of Management review, 26(3), pp.431- 445. Heil, O.P. and Helsen, K., 2001. Toward an understanding of price wars: Their nature and how they erupt. International Journal of Research in Marketing, 18(1), pp.83-98. Rao, A.R., Bergen, M.E. and Davis, S., 2000. How to fight a price war. Harvard Business Review, 78(2), pp.107-120. Wurmser, Y. 2015. The sharing economy: How Uber and Other Upstarts Will Affect Retail. E marketer Inc. Xu, X., Wang, X., and Bendle, N. 2015, Uber: Managing a Ride in China, Ivey Publishing. Yuan, G. 2015, Uber vows to quell Didi Kuaidi challenge, Viewed 15th December 2015, http://europe.chinadaily.com.cn/business/2015-11/26/content_22519258.htm Read More