The Current Business Challenge and Its Impact on the Company - Assignment Example

Introduction

Management is an essential part of any business. Without management done properly, no company can function, survive and be successful in a long run. The simplest yet precise definition of management is provided in the Cambridge Dictionary, which states that by the term management should be understood 'the control and organization of something' (Cambridge Dicrionary 2016). According to Koontz, O'Donnell, and Wiehrich, management us 'the establishment of an environment for group effort in such a way that individuals will contribute to group objectives with the least amount of such inputs as money, time, effort, discomfort and materials' (Dale 1993, p. 4). According to the opinion of Dwan, management should be defined as 'planning goals and specifying the purpose of the agency; organizing people, finances, resources, and activities' (Allen and Sawhney 2014). David Boddy, in its turn, points out that the major goal of management is 'to create wealth and well-being' and states that it is one of the most important aspects of the management work apart from planning, orgnising, controling, learning, and leading (Boddy, 2014, p.2). It is mostly important to understand that management is a process, it is aimed to utilize resources efficiently, it is meant to achieve an established goal, and it gets business done with other people or through them.

Since the goal of this paper is to provide a well-though out analysis of the management approach of Uber company, it makes sense to use the Competing Values Framework also known as CVF. It is worth mentioning that the theory received its name due to the fact that criteria among the four management models appears to carry rather conflicting messages. The CVF framework was developed in order to make structural predictions on companies' success or failure. The framework has two major dimensions – the one differentiating an emphasis on the basis of flexibility and the one doing the same thing on the basis of internal and external orientation (Cameron 2011). The major purpose of the Competing Values Framework is to help us to analyze management models of organizations, compare those models, and identify the best management models for different companies in different situations. The CVF has four quadrants including internal process model, open systems model, rational goal model, and human relations model. The first model is based on hierarchy, and the emphasis is on documentation, measurement, and information management. The second model is based on an organic system, and it is focused on readiness, growth, external support and resource acquisition. The third model is based on profit and its emphasis is on rational actions, planning, goal setting, and productivity. The last of the four model, a human relations model, is based on moral and cohesion with an emphasis on training and human resources (Quinn 1988). It needs to be mentioned that the CVF can be easily applied to organizational context and can be easily used as one of the strategic tools to develop management programmes.

The company's profile and management approach

Uber Technologies, Inc. also known as Uber is a US-based media and communications company specialized in the provision of e-commerce service for car rent. The company was founded in 2009, and today the service provided by Uber is available in 404 cities and 60 countries around the world. This company serves customers worldwide and allows people from different corners of the planet to hire cars through a simple mobile application or website procedure (Bloomberg 2016). Due to a user-friendly mobile application, the clients of Uber can submit their trip requests which are immediately routed to the drivers of Uber. Due to a simple yet efficient business model, Uber has become a role model for many other companies and appeared to be on the list of most powerful companies in the United States. The approximate worth of Uber as for the end of 2015 is as much as 62 billion dollars (Uber Technologies, Inc. 2016). The company employs up to 2,000 people, and its estimated annual revenue accounts to 1.5 billion dollars. All the conclusions that can be done from the data mentioned above can be found in the appendix 3.

Uber SWOT Analysis

Strength

Weaknesses

• Uber is a well-recognized brand
• Its operational costs are relatively low
• There is a very little competition in the industry for now
• It uses a cashless system of payment, which makes it easier to calculate income and spendings
• The prices for the service are lower compared to the prices for traditional taxi services
• Convenient system for both drivers and customers
• Dual rating system ensures the truthfulness of ratings.

• The idea of the company is very simple so it can be easily imitated
• It is plagued with insurance and liability issues
• The company is forced to go through lawsuit situations from taxi unions and taxi companies around the world
• There is a lack of connection between the company and the drivers working for it, so the level of loyalty is relatively low
• Uber has an opportunity to record customers orders, so certain privacy concerns are possible
• Drivers earn not much, but the operating costs of vehicles is very high.

Opportunities

Threats

• In the future, it is possible to use cheaper electric cars, and this will reduce the cost and increase the profit of drivers
• There is an opportunity to develop additional services such as transporting children without parents or elderly patients without caregivers, and so forth
• Still there is an opportunitiy to open offices in the developing countries, when there is no well-established system of taxi and car rent services.

• Since the majority of drivers are not satisfied with their payments, it might result in a bad publicity
• There is a threat of fraud scandals when entering new markets
• Certain legal regulations can force the company stop operation of its business in particular locations
• The competition is increasing, which means that prices for the service as well as its profitability are going to drop.

Uber PESTEL Analysis

Political aspects: there are two major concerns regarding the political influence on the company's business. The first concern is employment laws because in the majority of countries it is required to conduct interviews and make background checks of each employee as well as to comply with the specific documents and regulations. The second concern is industry regulations such as the legal means of private transportation.

Economic aspects: there is an issue of a disposable income because a raise of it usually leads to more discretionary spending. Apart from it, there is a threat of economic recession which might make it harder for people in certain countries to afford the cost of Uber service. However, the company seems to do fine in terms of finances (see apendicies 1 and 2).

Sociocultural aspects: since the company is currently operating in more than 40 countries, the differences of mentality and culture should be taken into account because people from different countries might have the different understandings of safety, environmental consciousness, speed, and price.

Technological aspects: there are reasonable grounds to assume that in the nearest future more and more users will switch to electric vehicles, which means that the operational costs of Uber will decrease. Apart from it, more and more people will rely on mobile apps for renting cars instead of doing this offline, which is a significant advantage for Uber.

Environmental aspects: as more and more people get environmentally conscious, there is a chance that more people will prefer to use bicycles instead of cars in the future. However, there is an opportunity for Uber to become the first car rent service working solely with electric vehicles in the future.

Legal aspects: there is huge threat of legal problems related to private licenses for transportation of the drivers from Uber, and there is a general problem with a legal status of Uber in a list of countries like Germany, France, Britain, and some others.

Uber Porter's Five Forces Analysis

Competitive rivalry: in some countries there are many well-established taxi companies, which can be considered as strong competitors of Uber. Apart from it, there is an alternative service called Lyft, which is matching the pricing strategy of Uber and provides the same type of service.

Bargaining power of suppliers: drivers of Uber are private drivers so they use their own cars with licenses and insurances and get as much as 80 percent of payment for each ride. Moreover, signing up for Uber is really simple, which means that virtually anyone can become an employee.

Bargaining power of customers: the newly emerged and rapidly growing companies that offer similar or even the same services increase the power of customers.

Threat of new entrants: although there is a certain level of threat for the new entrants, still Uber is relatively safe in terms of this aspect because the entry barriers are very high in the industry and strong name as well as a significant network distribution are vital for the companies aiming to compete within this industry.

Threat of substitute services or products: although there is a chance that some new start-ups with a unique approach to car rent services will emerge, there are reasonable grounds to assume that they will be of a lower quality than Uber and their performance as well as a scale of operations will be significantly worse.

Uber Management Model

In my opinion, since the moment of its creation, Uber Technologies Inc has been building its business on the principles of rational goal model, and within a framework of this part of the paper, I am going to explain my point of view. As we know, the core aspects of this model are goal-setting, planning, efficiency, and productivity. In my opinion, one of the major contributors to the success of Uber is its smart planning and rational usage of resources the company has. Since the company has already managed to spread its service to as much as 40 countries, there are reasonable grounds to assume that it the internationalization succeeded due to the means of good planning and goal-setting. Since the assumed management model of the company is rational goal model, it means the company has an external focus. Taking into account that we know that Uber is very concerned over its publicity and reputation, this fact can be considered as an additional proof of the rightness of the assumption.

The current business challenge and its impact on the company

When it comes to the discussions about Uber, it is safe to say that one of the greatest concerns and challenges of this company is about legal regulation and competition with local taxi drivers. As we know, in some countries including Germany, Canada, France, Japan, and some others, have gone through the waves of protests organized by taxi companies, private taxis, and car rent services (Che 2015). Since Uber offers the same service for lower prices, it is clear that traditional taxi companies are left with almost no chances to compete with the newly emerged service. Hence, they have no choice but to strike.

Obviously, such a negative trend affects Uber significantly. Not only it affects publicity of the company in a negative way, but it also is damaging from the financial point of view. It is evident that the company needs to respond to strikes publicly through mass media, and it sometimes is forced to deal with requests of drivers asking to raise their payment because the cost of service in Uber is lower compared to the majority of taxi services, which means that drivers could have earned more. Of course, these problems distract the company from achieving its long-term goals.

Recommendations

Under the circumstances, it is possible to suggest that a slight increase of price for its service can help Uber to avoid most of the strikes and negative attitudes from traditional taxi drivers. Apart from it, Uber can also merge with taxi services locally in order to increase its pool of employees and avoid conflicts with competitors. Although this would definitely change the business model of the company slightly, still this change is definitely worth it.

Conclusions

Proceeding from all said above, it is safe to say that Uber can be considered a role model for a successful implementation of simple business model. Due to its orientation on goal-achieving and planning, the company manages to grow quickly and deal with arising challenges and issues relatively quickly and successfully. Although the circumstances might force the company to change its business model slightly, it will never change the core values of the company which make it as special and profitable as it is. Despite the fact that no radical changes of business model are advised for Uber, still it should definitely put more focus into its internal processes in order to regulate legal problems and problems with competitors.

Appendicies

Strength

Weaknesses

• Uber is a well-recognized brand
• Its operational costs are relatively low
• There is a very little competition in the industry for now
• It uses a cashless system of payment, which makes it easier to calculate income and spendings
• The prices for the service are lower compared to the prices for traditional taxi services
• Convenient system for both drivers and customers
• Dual rating system ensures the truthfulness of ratings.

• The idea of the company is very simple so it can be easily imitated
• It is plagued with insurance and liability issues
• The company is forced to go through lawsuit situations from taxi unions and taxi companies around the world
• There is a lack of connection between the company and the drivers working for it, so the level of loyalty is relatively low
• Uber has an opportunity to record customers orders, so certain privacy concerns are possible
• Drivers earn not much, but the operating costs of vehicles is very high.

Opportunities

Threats

• In the future, it is possible to use cheaper electric cars, and this will reduce the cost and increase the profit of drivers
• There is an opportunity to develop additional services such as transporting children without parents or elderly patients without caregivers, and so forth
• Still there is an opportunitiy to open offices in the developing countries, when there is no well-established system of taxi and car rent services.

• Since the majority of drivers are not satisfied with their payments, it might result in a bad publicity
• There is a threat of fraud scandals when entering new markets
• Certain legal regulations can force the company stop operation of its business in particular locations
• The competition is increasing, which means that prices for the service as well as its profitability are going to drop.

Appendix 1. UBER SWOT ANALYSIS

Appendix 2. Financial data: Monthly Net Revenue (retrieved from the Mucker Capital 2015).

Appendix 2. Financial data: Annual Net Revenue (retrieved from the Mucker Capital 2015).

Reference List

Allen, J and Sawhney, R 2014, Administration and management in criminal justice: a service quality approach, Sage Publicatios, New York City.

Cameron, K 2011, An introduction to Competing Values Framework, RCF Group Publications. Available from: < http://www.thercfgroup.com/files/resources/an_introduction_to_the_competing_values_framework.pdf>. [18 April 2016].

Che, G 2015, 9 countries that aren't giving Uber an inch, The Huffington Post. Available from: < http://www.huffingtonpost.com/entry/uber-countries-governments-taxi-drivers_us_55bfa3a9e4b0d4f33a037a4b>. [18 April 2016].

Dale, E 1993, Management: theory and practice, Rex Bookstore, Inc, Quezon City.

NA 2016, Definition: management, Oxford Dictionary. Available from: < http://dictionary.cambridge.org/dictionary/english/management>. [18 April 2016].

NA 2016, Uber Technologies Inc: company profile, Bloomberg. Available from: < http://www.bloomberg.com/profiles/companies/0084207D:US-uber-technologies-inc>. [18 April 2016].

NA 2016, Uber: company profile, The Owler. Available from: < https://www.owler.com/iaApp/100242/uber-company-profile>. [18 April 2016].

NA 2016, Uber: the Uber story, Uber Technologies Inc. Available from: < https://www.uber.com/our-story/>. [18 April 2016].

NA 2015, Reconstructing Uber's Financials, The MuckerBits. Available from: <http://www.muckercapital.com/reconstructing-ubers-uber-financials/>. [4 May 2016].

Quinn, R 1988, Beyond rational management: mastering the paradoxed and competing demands of high performance, Jossey-Bass Publications, San Francisco.

Boddy, D 2014, Management: an introduction, Pearson Press, New York.