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Economic Factors Social Factors Business

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Question:

Discuss About The Economic Factors And Social Factors On The Business?

 

Answer:

Introducation

Uber is an innovative organization which has disrupted the transportation business all across the globe. Currently, the company has established a substantial market share in several developing and developed economies. The current report will analyze the strategic management of the organization and various strategies employed by it to achieve its current market position. The current report analyzes the internal and the external factors which an organization should examine while implementing new strategies (ABC News. 2016). The company has made substantial growth by integrating innovation and creativity in its basic business functioning. The report undertakes PESTEL, SWOT and ration analysis to evaluate the internal and the external factors which may impact the innovation and the creativity of the organization (Crunchbase. 2017).

 

Products and Services of Business

Uber is a technology company which deals with the public transportation. It has headquarters in San Francisco, USA and has operations all across the globe. In the recent years, it has intruded various developing or emerging markets in Asia and Europe. With its innovative technology, it has been successful to create a substantial market share in these countries. The business model of the company is based on shared economy concept (Glowik, 2009.). Accordingly, car or taxi owners can give their cars on rental to the drivers or drive the taxis themselves. The mobile application connects the drivers with the potential customers and eases the process of customer finding. The customer can find a ride in a hassle-free manner and discounted rates. Similarly, drivers can also find the more travellers at a fixed rate. Recently, the company has also opened up several subsidiaries such as UBEREATS, OTTO and other companies (Kenny, 2009). The company has not targeted any consumer segment and use generalized marketing tactics for all the customers. It offers discounts and personalized services to increase the market share (Kunkle, 2016). It has been successful in making the transportation services easy and convenient. With the success of the company, several competitors like taxi for sure and ola have emerged in the recent years.

Evaluation of Strategy

The company has employed several innovative strategies to increase its market share in the global arena. The founders of the company came up with an innovative idea which made the taxi ride booking easy and then utilized a number of strategies to publicize the mobile application. It is similar to an online business portal wherein the customers and the writers both have to install a dashboard (Mulley and Ison, 2016). The customers can easily find ride with the mobile application and the same applies to the drivers as well. In the current section, the business analysis of the company will be conducted with the help of various tools and methods.

                                                                Figure: Business Model of Uber

                                                                    (Source: Oakley, 2016)

SWOT analysis

The SWOT analysis is one of the most popular tools which can be used for the strategic analysis of the company. It identifies the internal strengths, weaknesses and the external opportunities and threats. This tool can be utilized for identifying the strengths of the company and employing them for exploiting the external opportunities. It is the fundamental step on the strategic management of the organization. In the current section, SWOT analysis of Uber is conducted.

Strengths:

In the recent years, the company has carved itself a brand image and attracts a large number of customers. The customers perceive that Uber is a reliable organization and trust it with the safety of the passengers. Currently, the company is holding majority of its market share in several markets including the USA. It is one of the fastest growing companies in the international arena and has attracted the eye of several venture capitalists. As such, the company has sound financial backing. Its services are reliable and steady (Pahl and Richter, 2009).  Its mobile application provides reliable services and justified fare. The customers can avoid all the hassle and a taxi car can come to receive them at their doorstep. It is also very simple to use.

 

Weaknesses:

In the recent years, the company has faced several penalties and legal actions due to a number of reasons. In India, the taxi services are avoided as the people are concerned about their safety and the bran is not considered as a safe one (Price, 2015). In other countries also, it has faced legal actions as the government has found that the company does not conduct thorough background check up of the drives which increases safety incidents. Moreover, although the company is making huge profits from the services of the drivers, it does not hire them as employee but as independent contractors. As a result, it does not give employment rights to these drivers. It has been a controversial issue with a several governments (Scheele, 2014).

Opportunities

The company has immense opportunities in developing and developed markets. Currently, the company is operational in a few select countries and metropolitan cities. However, it can also expand its operations in smaller cities. It can also provide additional services such as transportation of grocery items or food products to expand its customer base (Shontell, 2016). In addition to it, it can also offer discount or share basis ride like public transportation to attract price sensitive customers.

Whenever, a new business idea becomes successful, several competitors pop up suddenly to exploit new opportunity. Similarly, several competitors have also emerged who have adopted the same business model. The barriers to entry to the online transportation business are low as the investment cost is comparatively low. Therefore, the company will face the constant threat of new business entry (Wingard, 2015). The changes in government regulations can also create hurdles in the business model of the organization.

PESTLE analysis

PESTLE analysis is a macro-environmental analysis framework which examines the impact of external factors on the business operations of the organization. PESTLE is an acronym used for political, economic, social, technological, legal and environmental analysis.

 

Political Factors

Initially, the government of various countries disapproved the business operations of the organization as it disrupted the taxi business (Uber., 2017). Moreover, the company also does not provide employment protection to all its employees. In addition to it, the political stability of the government, its policies towards business and innovation may also impact on the organization’s business.

Economic Factors

The economy of a country is directly associated with the growth and prosperity of a business organization (Scheele, 2014). When the customers will have a high disposable income, they will spend freely on the transportation.

The perception of the consumers impacts on the sales and the preference to the customers. The consumers of Australia believe to avail the best quality irrespective of the price of the product. Therefore, the company should try to provide the best services to the customers.

Today, most of the consumers are concerned about the environmental degradation. They avoid product or services which may have a negative impact on the environment. Uber should recruit only ecofriendly cars in its services which make minimal pollution (Scheele, 2014).

In different countries, there are different regulations related to transportation companies. The company has to abide by these laws to operate successfully at different locations. It also needs to conduct different activities related to corporate social responsibilities.

The technology plays a successful role in the business development. Currently, the company is operational in only large and metropolitan cities. In these cities, the company has access to bet communication and infrastructure which is important for the organization. Internet connection is prerequisite to the operations of the company(Mulley and Ison, 2016).

Ratio Analysis

The ration analysis is a financial analysis method which examines the financial position and the financial growth of the company. It can be used to depict the financial position of the company in the market. In the last five years, the company has increased its profitability ratio by 55%. According to the analysis of the debt to equity capital, the company has reduced its overall capital by 40% in the last five years. It has been successful to achieve this number by issuing more capital in the market (Mulley and Ison, 2016). The profit of the company has not increased from the last two years, as the company is focused in reinventing the capital earned for the growth of the business.

 

Summary of the Key Points

Uber is a pioneer organization which is using the shared economy concept to offer transportation services to the customers at a cheaper cost. The car owners can use their cars to earn an extra income. In the current paper, the internal and the external analysis of the company is conducted to identify its potential strengths and weaknesses. The biggest strength of the company is its brand image which is developed as it is the most innovative organization. In addition, it is the first organization which ventured into the transportation business. It has a strong financial backing due to support by several venture capitalists. I the recent years, it has also increased the flexibility and the security of the services to attain a competitive advantage. However, the business idea of the company is easily imitable as it requires the development of a mobile application. As the initial cost of investment is low, the competition will increase in the industry in the near future. It can provide additional services such as food delivery or ride on a shared basis to increase its profitability. It can also create a dynamic pricing model to increase the profitability to the organization. According to this model, the standard rates can be changed according to the bus hours. It can also follow direct entry mode to enter several unexploited market in Asia and Europe. In order to increase the success rate in these countries, the company can change its operations according to the local culture and the community.

The major threat to the company is counterfeit organizations which are copying the business model of the company. The organization can only fight this issue by increasing its competitive advantage.

 

References

ABC News. 2016. These are the states and territories where Uber is (and isn't) legal. [Online]. Available at: https://www.abc.net.au/news/2016-08-11/where-is-uber-legal-in-australia/7719822 [Accessed on: 2 March 2017].

Crunchbase. 2017. Competitors. [Online]. Available at:  https://www.crunchbase.com/organization/uber/competitors [Accessed on: 2 March 2017].

Glowik, M. 2009. Market Entry Strategies: Internationalization Theories, Network Concepts and Cases of Asian firms: LG Electronics, Panasonic, Samsung, Sharp, Sony and TCL China. Walter de Gruyter.

Kenny, G. 2009. Diversification Strategy: How to Grow a Business by Diversifying Successfully. Kogan Page Publishers.

Kunkle, F. 2016. Is Uber reducing drunk driving? New study says no. The Washington Post. [Online]. Available at: https://www.washingtonpost.com/news/tripping/wp/2016/07/27/is-uber-reducing-drunk-driving-new-study-says-no/ [Accessed on: 2 March 2017].

McIvor, R. 2005. The Outsourcing Process: Strategies for Evaluation and Management. Cambridge University Press.

Mulley, C. and Ison, J.D. 2016. Paratransit: Shaping the Flexible Transport Future. Emerald Group Publishing.

 Oakley, D. (2016). The Uber Business Model Canvas. The Business Model Guru. [Online]. Available at: https://businessmodel.guru/the-uber-business-model-canvas/ [Accessed on: 2 March 2017].

Pahl, N. and Richter, A. 2009. Swot Analysis - Idea, Methodology and a Practical Approach. GRIN Verlag.

Price, C. 2015. Digital technology drives Uber to global success. The Telegraph. [Online]. Available at: https://www.telegraph.co.uk/sponsored/technology/4g-mobile/engaging-customers/11366554/digital-technology-uber.html [Accessed on: 2 March 2017].

Scheele, D. 2014. The trade-off between cost leadership and differentiation. GRIN Verlag.

Shontell, A. 2016. Here's are the biggest threats to Uber according to Morgan Stanley, the bank that's helping the $62 billion startup raise its next round. Business Insider. [Online]. Available at:  https://www.businessinsider.com/Heres-are-the-biggest-threats-to-Uber-according-to-Morgan-Stanley-the-bank-thats-helping-the-62-billion-startup-raise-its-next-round/articleshow/50583413.cms [Accessed on: 2 March 2017].

Uber. 2017. Our trip history. [Online]. Available at: https://www.uber.com/en-IN/our-story/ [Accessed on: 2 March 2017].

Wingard, J. 2015. What Uber is getting right that other startups aren’t. Fortune. [Online]. Available at:  https://fortune.com/2015/09/19/uber-google-skills-gap/ [Accessed on: 2 March 2017].

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