In this report, the basic postulates of the business plan of the two companies, Uber Eats and Alibaba.com have been focused upon. The brief outline of the two companies including the major revenue streams, sales channels and other descriptions have been discussed. In the following part, the three major advantages as well as disadvantages of both the business plans have been discussed. Besides, strategic recommendations have also been provided in order to highlight the major approaches that the organisations can pertain to, in order to develop customer service potential.
Brief description of the business plans
Business Plan of Uber Eats
The business plan of Uber Eats can be discussed against 3 reference frames. There are three components to measure the viability of their business model. These are:
Convenience of the customers/ Delivery charges
Fees incurred by the Courier Partners
Revenue sharing with the partner restaurants and amortization of the marketing fees
The courier partners of Uber Eats can be exclusive drivers of Uber registered cars (Car/bicycles and motor cycles). These partners voluntarily register for being a part of the delivery partner network. Depending on the location of the customer and the proximity of the delivery pick up point, the order is allocated (Stonehem, 2016). The company have three principle revenue sources. The first channel of revenue is delivery charges collected from the customers. Another potential channel is revenue sharing with the restaurant partners. Another avenue of collecting is the money collected from the partner restaurants for advertising their brand name before a large customer base.
Whenever the customer order something from the mobile app of Uber Eats, they have to undergo a payment of a minimum flat fees to the company. This payment ranges from $1 to $50 by American standards. However, surge pricing are applicable for Uber Eats also, just as the Uber taxi app charges from the customers (Roberts, Kigotho & Stagg, 2018). The surge pricing are generally applicable during the peak lunch and dinner hours.
Another important channel for revenue sharing against the orders that are being fulfilled by Uber Eats. This charge lies between 15% and 40% depending on the age, size and maturity of the business market. In the USA, Canada and other developed countries, this rate is 40% and in the underdeveloped countries where the business market is lacking ample purchasing power and parity, the rate is ranging from 15 to 20% (DeMasi, 2016).
A unit economic example can be taken in order to explain the microeconomic revenue model. Assuming that Mr X gives an order for food from a restaurant owned by Mrs Z through Uber Eats application and the cost of the order is $50. Again a convenience fee of $5 is also charged from Mr X. Moreover, the order delivery is accomplished by service partner Mr A.
The dynamics of revenue against this order would seem like:
Total value paid by Mr X: $50 + $5 = $55.
Total amount that is received by Mr Z: $50 * 0.7 (equivalent to 30% commission) = $35
Delivery against income for Mr A: the revenue for pick up + delivery charge revenue + Per kilometres/ per miles charge = $4 + $2 + $2 * 3 miles = $4 + $2 + $6 = $12 [This pattern is followed because multiple orders can be accepted from the same restaurant and hence Uber Eats would not give the delivery agent more than once for delivering orders from the restaurant of Mr Z at a single time.
Therefore, net income accomplished by Uber Eats: $55 - $35 -$12 = $8.
The follow up of this business plan is very optimistic for Uber Eats because the company makes money out of this revenue model on per unit basis (Morais Carvalho, 2015). However this is the not the neat gain ratio for Uber as the company also loses out money by dolling out special discounts, even they are losing out money on deliveries and even signing up with big restaurant brands without pay (for endorsement purpose).
Business Plan of Alibaba
Alibaba, staring their business operations in 1999, have currently surpassed Walmart to become the largest retailing corporation in the world having business operations in almost 200 countries. In the course of this report, the business plan that Alibaba follows in its various operations have been outlined. Alibaba endorses itself as a platform for bulk selling and thereby acting as a medium for trading between businesses to business. The suppliers get an opportunity selling their products to small and/or medium sized business firms all over the world. In turn, the purchasing parties sell the purchased products in their own domestic markets. However other sales channels are also operated through the online portal of Alibaba (Lampert & Thomas, 2016). An example can be cited. Taobao portal is for the trading purpose of consumers who are interested in bulk trade whereas the portal of Tmall is mainly for the middle class retail customers in China for retail purchase of branded clothes. Other than these three portals the company also operates 6 subsidiaries including AliExpress, Alibaba Cloud, Cainiao Network, and Ant Financial and so on.
Alibaba.com is however the greatest portal for business operations that the company operates. This portal enables exporters in South Asian countries including China to communicate with B2B clients all over the world. The buyers over this Alibaba portal are mainly trade agencies, whole selling agencies, SMEs as well as manufacturers. Other Exim supply chain related services that are offered by the company are
Value Added Tax refund
Trade financing and
This corporation acts as a virtual marketplace acting as a meeting point between buyers and sellers. Being an intermediary, the company charges commissions from sellers pertaining to China, Taiwan, and other countries. The customer attraction policy of the company is also appealing. They allow the companies to endorse 50 listings at least for free. After that when the client have created a basic clients base they are charged by the company for any further operations.
The Tmall unlike the above portal endorses about 3700 categories of products and caters to about 500 million active customers (Foos et al. 2017). In any way the company have been vending high cash flow towards the shareholders and expanding market share in the core market.
Here it is visible that Alibaba have been running at a consolidated margin of operations of 34%. On the contrary, the margin of other global ventures like Amazon is 3%.
Alibaba applies a hands-off policy in the case of business operations, allowing the retailers service providers and the retailers to take charge of activities like marketing, warehousing and delivery, payment processing as well as providing customer service. In order to financially demonstrate the business plan of the organisation, the demonstration of how the sales of a $100 worth item would flow through their revenue channels can be exhibited.
The business model canvas of the company defines the primary entities and elements of their business plan also including customer relationship, market segmentation, main resources, and structure of cost and revenue stream for Alibaba’s through global business entrepreneurship.
The 5Ps of Marketing Mix of Alibaba
The company follows a policy of permissive pricing and hence the remuneration generated is quite less in order to provide to the entrepreneurs to get their own personal business done. Alibaba have been able to get penetrative fees owing to reduced prices of the China based products.
At present, “Alibaba.com” is being the single website that deals internationally and the other portals of this business group basically concentrate on the domestic Chinese market.
The various products of Alibaba are Taobao, AliExpress, Tmall and AutoNavi and so on. However the primary market product is Alibaba.com. This main portal mainly covers the Business 2 Business market. Other products of this company operates in different Ecommerce markets (Márquez-Ramos & Mourelle, 2018).
The market processing of Alibaba is very simple as the company operates mainly in the online space. The transaction in any platform of Alibaba are mainly done through Alipay and sometimes Western Union and other portals similar to this. The C2C pattern of business makes it easier for the organisation to handle the operations easily.
The internet based promotion al strategy is adapted by Alibaba since the online platforms are cost effective and according to Tan, Pan & Liu, (2016), Internet is considered to be the fastest promotional tool in the context of the Exim market. The presence of the company in the upper quarters of the popular search engines like Yahoo, Bing and so on, have helped in creating a brand awareness among the potential customers of Alibaba. The availability of active internet banners makes the customers directly revert to the parent site and directly avail the services of Alibaba from any of their advertisement portal. Media advertising and combination of catchy taglines like “Find it/ Make it/ Sell it” helps the company to easily promote their products and/or services (Tan et al. 2015). New market entrants are enticed by such taglines and majority of the customers of Alibaba are active internet and social media user and that is why the media promotions are the most feasible media of promotions for the company. Event sponsoring have also been a popular promotional pattern for the company. Sponsoring of events like Australia-China business week have provided a big exposure to the brand across two continents. This business event being the first sponsoring of any event of Australia, helped a lot in gaining market entry to the Oceania based countries.
Evaluation of three strongest components of each of the plans
Development of meaningful partnerships
The way Uber Eats have established a diligent and significant relationship with the restaurant partners they have been working with, have helped the brand to differentiate them from other food delivery brands operating in the market. Prior to the launch of the official Uber Eats app, the company conducted a survey of the operational and marketing ventures in each cities of the locations where they launched their service. The restaurant made it a top priority to interact with the core management of the most popular food joints of every cities after an elaborate customer survey. The list included the most popular café joints, food trucks (or street side stalls) as well as the best eateries in the city. They have collected demographic information subtly, in order to identify the selective dishes from chosen restaurants that the major population of the city can associate with. Hence, after the launch of their service they could project the same dishes so that they could generate value to the customers. At first the customers got an innovative way to reach out to their favourite restaurants and the selection of their favourite dishes from most popular eateries on the Uber eats menu made them feel that the company have a subtle knowledge of the culture and heritage of the city and this automatically placed them in favourable position of competitive advantage. This is how the company prioritised relationship-building as its primary strategic objective even before its launch in the potential market. After their launch, they gradually started boarding the new and emerging food joints and gradually shifted to the policy of competitive pricing.
The company, however, do not grows potential relationships with the customers, they are mindful of the restaurant partners also. The instant delivery options and cross promotional facilities made the brand an automatic choice for many restaurants also. Again, the delivery strategy is also a part of the favourable partnership building of Uber Eats. The advisors from the restaurants work with the executives of Uber Eats in order to make the food deliveries from those restaurants more delivery friendly. Besides, the company only operates on the selected delivery range from the restaurant’s end and that is why the products listed on the menu of Uber Eats are always available and reaches the customers fastest (Powell et al. 2013). Besides, the company also have a Food grade and quality expert and the restaurants under contract have to abide by the advisories of the Quality control experts of Uber Eats.
The best part of the operational plan of Uber Eats is that they are creating subsidiary economies in the restaurant and hospitality industry. The family owned restaurants are in vogue nowadays for their homely food and cosy ambience. However, such restaurants lack the marketing skills and budget required to reach out to the potential customers. The exposure by the Uber Eats app provides them with a unique opportunity to introduce their cuisines before the potential market and acquire same market size as the biggest restaurants’ chains in the city.
Mapping customer satisfaction
The company highly prioritises the customer’s feedback. In potential countries like USA, Canada, UK and so on, private cab service partner Uber had adapted to the strategy of valuing customer feedback and capitalising major changes based on customer feeds (Guo et al. 2006). The same policy is also adapted by food delivery sub-brand Uber Eats to gain market control. Customers do not rate the delivery and the food based on star rating, rather there are only two options: “Good” or “Bad”. According to the words of the CRM of Uber, either the food was delivered in time and the taste was good or it was not. There cannot be other alternatives.
Another competitive part of their business plan is that they know how to acknowledge mistakes. An instance can be provided. In case if the delivery executive is 15 to 20 minutes delayed in reaching out to a customer, the themselves takes the initiative to critique their service through an email and also sends discount vouchers worth $5 to $7 to be available for the next order. By this strategy they ensure two things. The first is that they successfully prevent negative publicity from the unsatisfied customer and secondly the customer have to come back again in order to encash the free voucher, thus ensuring successful customer retention.
Devouring market competition to become market exponent
According to the findings of Ter Chian Felix Tan & Pan, (2016), Uber Eats’ strategy to launch 500 cities together after developing the framework of service for 1 and ½ years in all major cities, have helped the company to achieve revenue generation rate of 230.1% in 2018, as compared to the consumer market of the company y in 2016. The two innovative strategies of revenue sharing and brand endorsement and publicity have led the company on the verge of becoming market leaders in USA and Asia. The other few famous food delivery companies like Doordash, Seamless and Postmates have been able to achieve an approximate revenue turnover rate of 106.3%. The continued valuation of consumer feedbacks have placed the company in such comprehensive positions that in USA and Europe, that of the new users of food delivery services, more than 30% are adapting to Uber Eats and this is the major reason for revenue increment of Uber Eats.
The company designates the persons who have used Uber Eats in the latest 12 months as “Uber Eats buyers” and the survey conducted by the company shows that the 77.7% of the new customers have reused the Uber Eats application in the same 12 months after their first usage.
Value proposition towards the Chinese customers
Alibaba helps the Chinese sub-brands operating under them (Tmall) to understand the demographic trends and capture the increasingly diverse base of customers. It is forecasted that within 2021, the consumption valuation of China would rise from USD $1.89 Trillion up to USD $6.1 Trillion (Nabhani & Shokri, 2009). The company also generates value towards their customers through high tech analytical tools. Technological adaptations such as big data, augmented as well as virtual reality so that the small sub-brands can endorse their products to the customers s in a better way. The VR Buy+ channel was introduced by the company in order to help the companies to specify their products to their customers. Alibaba franchises like Tmall allows customers to communicate directly with the organisations by leveraging the media assets of Alibaba (Bhaskaran, 2006). Alibaba is the only brand in the genre that hosts customer appraisal festivals like Singles’ Days, Super Brand celebration Day for the happy Tmall customers and offers lucrative discounts on those days including hosting of many mini games and giving away of awards.
Innovative launch of Alipay
The launch of AliTrip have placed the customers at the receiving end of various benefits. The travel choices of Alibaba are numerous and diverse. One major innovation of the business model of AliTrip is that the customers can pertain to mix and match in order to determine a service platform that suits their personal needs. The portal allows the customers to avail hotel bookings and paperwork confirmation through mobile phones only. The payment processes are also simplified through portals of online payments that are accepted by the hospitality agencies through the use of Alipay which enables the payment of charges and their acceptance without incurring tariff. In case if the customers cancels a confirmed order, the company offers the refund within one hour. The customers are also able to choose their flight seats by means of AliTrip (Hsu, Hung & Li, 2007). The choice of the travellers including their destination choices and even flight seats choice s are analysed by their software and recorded. This system leaves the chance of automatic recommendation whenever the company accepts subsequent booking from any potential customer. However the most enticing factor of the business plan of AliTrip is that by using various service portals of Alibaba this sub brand enables the customers to make last minute payments through Yu’e Bao account in case if they are running short of cash at the moment. They can also take small e-loans through the “Just Spend” portals of Alibaba and book flight tickets. However the loans do not incur interest if they are paid back within 1 week. In this case, Ubereats.com (2018), opines that the Theory of Scarcity and Interest applies. About 68% of the customers who book flights through these media, lacks sufficient cash and hence assume they are not eligible for a flight booking at that moment. However in that moment of despair when they receive the n opportunity of booking the flight for free they seems to grab the opportunity without much pondering over the future consequences. Among such customers 34% are unable to pay the whole money at once within the determined period and as an impact the company earns extra revenue from the payback of the ticket prices at 125% extra price.
Alibaba is the biggest e-commerce organisation in the context of the global gross volume of merchandise output that comprises of about 80% of the market. The channels like AliTrip and Tmall automatically attracts small and medium enterprises who gets a chance to project t their goods through these native sub brands of Alibaba only. One unique feature of the business plan of Alibaba is that they have been able to provide their customers the facility to execute all transactions through mobiles and this saves a lot of IT cost of the services users of Alibaba.
Evaluation of the three weakest components of each plan
Unfair contract terms
Uber Eats have allegedly biased between companies in order to favour some potential organisations. The business strategy of Uber Eats consuming 35% of the revenue generated over online orders and on the other hand making the restaurant endure 50% of the refund amounts. This is one dominant part of their revenue generation. Due to the lack of expertise and infrastructural set up, the company is not able to offer the premium services to the restaurants with which they have set up contractual terms (Alibabagroup.com, 2018). In countries like Australia, Japan, Taiwan, Singapore and so on where restaurant industry is flourishing, there are many small enterprises who wants market exposure and hence signs up with Uber Eats. Howebver if they endure issues, they can cause rapid word of mouth negative publicity which might impact the local business of Uber Eats.
The unwillingness to accept liabilities
Uber Eats accepts minimum liabilities in the case of failures to supply orders and puts blame on the restaurant. In case if a restaurant gets an order of $50 from Uber Eats customer, this already implies that the restaurant have to bear a value of $17.5 for publicity and delivery. Again, if the order fails, the restaurant have to pay extra 50% that is an additional $25. As an impact, the restaurant bears more than the SP of the food item. Nevertheless, the entire liability of the order failure rest on the restaurant. This in turn affects the customer base of restaurants which in the long run would affect the delivery partner Uber Eats itself as the their own restaurant partners would lose business and as an impact their revenue share would depreciate also.
No control over processes
In spite of the quality control experts supervising food quality, during the rush hours, it is impossible to check quality as no permanent restaurant executives are employed by Uber Eats. As an impact, the food qualities often fluctuate and this directly impacts the business growth of the company.
Owners are for namesake only
Investors cannot have direct investment shares into Alibaba owing the Chinese laws that forbids foreigners to own internet companies of China. Rather the agencies invest in a holding of Cayman Islands with same name, and with rights to share profits with this Chines organisations. The unnecessary taxes and hassles demotivates many organisation ns and potential investors from investing with Alibaba
Accounting oversight might prove to be difficult for the company. The US entity entitled to oversee the operations of public companies in America cannot make inspection without the Chinese government’s intervention. As an outcome, the US government puts many restrictions over the operations of Alibaba.
The peer US reputation of the company would affect the US operations. Hence the upper management should have an alternative expansion plan which seems lacking at the moment. The F rating that AliExpress and Alibaba have received would impact the revenue shares and the company’s shares in the Index 500 and Index 1500 would be affected as an impact.
Recommendations for Case 1
Uber Eats should introduce an optimised customer’s online query submission process whereby they would be able to provide immediate solutions to the customers.
The company should reduce the revenue share process in the cities of developing countries where food is still a micro industry. As an impact, the company’s business relations would not be affected for service faults
The company have to m operate under a delivery timeframe where the delivery under a certain time limit, that is say 30 minutes or so should only be entertained. Again, items should be distributed over online menu based on popularity and availability,
Recommendations for Case 2
Alibaba should optimise business channels through subsidiary firms where foreign agencies would have larger shares. This would help them to operate over larger and more dominant markets without paying excess taxes.
The company should move towards Strong Buy stock holding policy. This would help them to make up for the stock values that they lose out due to the Chinese regulations.
In the light of the undertaken research, it can be opined that the revenue channels of both the companies are highly prospective. Nevertheless, Alibaba is in a better position as the operational activities of the company are more pronounced. The capital investments and the infrastructure of Alibaba are more developed. Uber Eats is a recent innovation and have started business operations over a large market. However this innovative business model of the company would have to emerge in many potential markets to justify its credibility.
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