Case presentation: UBER Specific questions assigned and team analysts Question 1 How would you characterize Uber’s business model and strategy? What are the key elements of its customer value proposition? Its approach to competing in the marketplace? (Christopher Di Cosimo) Question 2 How would you describe competition in the ridesharing industry? What leverage do buyers and suppliers have with ridesharing services? What competitive threat is posed by new entrants and substitute services? Prepare a Five Forces Model of Competition to support your answer. (Noel Edward) Question 5 With what strategic issues should Uber management be most concerned in 2016? What are the 4-5 issues that offer the greatest opportunities or that present the greatest threats to its well-being? (Enrico Romagnoli) Question 3 Does Uber operate as a socially responsible business? Assess the five components of Uber’s corporate social responsibility strategy. (Sai Kowshik Chennupati) QUESTION N.1 How would you characterize Uber’s business model and strategy? What are the key elements of its customer value proposition? Its approach to competing in the marketplace? (Christopher Di Cosimo) Textbook, articles and additional sources Textbook N. Title Topic Chapter Page 1. Crafting Strategy 1 4 and Executing Strategy 1 Scientific articles/books N Title Author Journal Year, number Link . 1. An Analysis of Jonathan Princeto January 22, Link the Labor V. Hall n 2015 Market for and Alan Uber’s Driver- B. Partners in the Kruger United States 2 How Uber and Sarah Harward 22 January Link the Sharing Cannon Business 2015 Economy Can and Review Win Over Lawrence Regulators H. Summers Additional sources (company disclosures, web pages, video etc) N. Title Author Journal Year, number Link 1. What Is the Shannon OneSpace Blog June 21, 2017 Link Sharing Economy? Durio Definition, Examples & Companies 2. What is Uber's Many Quora 2016/2017 Link business model? 3. How Does Uber Yuen Lo How does it make April 1, 2016 Link Make Money? money? 2 ANSWER AND RECOMMENDATIONS N.1 Write your answer and be critical not descriptive The business model of Uber is based on the “sharing economy”. In the article written by Shannon Durio, sharing economy is an economic system in which goods and services are shared among individuals through Internet. Uber enters in this system because the drivers of Uber use their vehicles to carry passengers thanks to the application furnished by Uber itself. This system that is adopted by Uber is strictly connected to its strategy (referred to the definition written in the textbook Crafting and Executing Strategy), that consists in offering high standards at low costs. As said by Yuen Lo, the objectives of the company are different: • Find drivers with access to a car who want to earn money. • Orchestrate them centrally to offer a highly scaled and distributed transport platform. • Allow people who want to make journeys book these drivers via a mobile application. • Create a review system to ensure great service. • Take a 20-30% cut of all bookings. • Leverage the data collected to minimize wait times and maximize drive times. The strength of Uber is the ability to give drivers the best available deal, in fact they are paid more than the competitors do. In fact, in the paper “An Analysis of the Labor Market for Uber’s Driver-Partners in the United States” is written that Uber’s drivers received median net fares of $19 an hour, compared to typical taxi driver earnings around $13. Moreover, as we can see on the description of the business case, the strategy of Uber to make money is initially to offer the service at a low price, so Uber can penetrate the market and achieve a high market share. Achieving a high market share allows Uber to surge the prices. In the end, we can say that Uber tend to monopoly so that Uber can raise the profits that it makes. So, Uber takes 20% of every fare and the driver gets 80%. However, the biggest competitor of Uber are Lyft, Curb and Hailo, but Uber has a better brand recognition and it’s using high driver commissions and low fare prices to make them weaker. There is only one scenario in which Uber’s dominance can be deleted, it’s when a new competitor buys cars with autonomous driving systems. So, Uber should invest in cars without driver too if it wants to survive in the future. What about the value that Uber proposes to its customers and drivers? Customers may prefer Uber instead of other competitors because it offers a quick service, so no need to wait for a taxi for long times; discounted rides from time to time and free rides on certain occasions; Uber offers lesser prices than the normal taxi fares; Uber transfer to the mind of customers higher value because of the Uber’s tag-line “Your personal driver”; in the end, customers know the fare of the trip at the Trip request menu, so only if the customers accept the price then the trip is requested. On the other side, drivers may prefer Uber because it offers Higher payments than the rivals, flexible working hours, it offers quick and easy payment procedure, and Uber pays also just for the availability given by the drivers to be online, even if they don’t get any request. 3 QUESTION N. 2 How would you describe competition in the ridesharing industry? What leverage do buyers and suppliers have with ridesharing services? What competitive threat is posed by new entrants and substitute services? Prepare a Five Forces Model of Competition to support your answer. (Noel Edward) Textbook, articles and additional sources Textbook N. Topic Chapter Page 1. The Five Forces 3 49 Model of Competition: A Key Analytic Tool Scientific articles/books N. Title Author Journa Year, number Link 1. 2. Additional sources (company disclosures, web pages, video etc) N. Title Author Journal Year, number Link 1. Uber Porter’s Five John Research Methodology 2018 Link Forces Analysis Dudovskiy ANSWER AND RECOMMENDATIONS N.2 Write your answer and be critical not descriptive The competition in the ride sharing industry is growing on a rapid scale. There are many coming up like, Sidecar, BlaBlaCar, Carma, Ridejoy, Car2Go and Lyft. Each company comes up with their own promotional offers and unique strategies to stand out amidst the eruption of more ride sharing startups. The leverage buyers gain by the multiple ride sharing platforms are the offers, cost saving and quality of the ride experience. 1. The potential threat of new market entrants: Upcoming rivals are utilizing lesser initial capital to jump start their operations thereby quickly penetrating the market. Hence Uber should be observant of the new entrants and up their game. 2. The threat of substitutions: Rivals come up with strategies involving lower-cost, efficiency and user- friendly designing. A minor rise of Uber rates can result in customer taking on the services of its closest adversaries and alternatives. 3. Supplier Bargaining Power: Suppliers have a major power in the performance of Uber as the company does not own vehicles as the company’s model is based on the driver owning cars. 4. Threat of buyers: High- Buyer Bargaining Power: As the market grows bigger, the number of opponents bringing customers more choice also becomes larger thus makes the switching cost for customers comparatively low. This is because Uber application software is not only free but just requires a client’ registration. Customers can therefore freely choose between Uber, Curb, Lyft, or other emerging ride-sharing entities at no cost. 4 5. Competitive rivalry: Lyft is considered the principal competitor of Uber. As Lyft is constantly focusing on superceding Uber’s model, to survive, it is vital for Uber to lower the cost of operation to avoid raising customer charges. QUESTION N. 5 With what strategic issues should Uber management be most concerned in 2016? What are the 4-5 issues that offer the greatest opportunities or that present the greatest threats to its well-being? (Enrico Romagnoli) Textbook, articles and additional sources Textbook N. Topic Chapter Page 1. Political factors 3 48 2. Strategic group 3 68 3. Low-cost provider strategies 5 118 Scientiftc articles/books N. Title Author Journa Year, number Link 1. How Uber and the Sharing Econom y Sarah Cannon Harvard business review OCTOBER 13, 2014 wpressutexas.ne Can Win Over Regulators t OpenStreetCab: Exploiting Taxi Mobilit y 2. Patterns in New York City to Reduce Cecilia Mascolo Cornell University 10 Mar 2015 arxiv.org Additional sources (company disclosures, web pages, video etc) N. Title Author Journal Year, number Link 1. Uber Architecture Tech Primers 31 lug 2017 youtube.com 2. Uber facciamo chiarezza Marco Montemagno 23 set 2017 youtube.com 3. Una nuova strategia per Uber Francesco Paternò L'automobile 21/02/2018 lautomobile.aci.itxt ANSWER AND RECOMMENDATIONS N. 5 Write your answer and be critical not descriptive 1) The biggest strategic issues would be with how the company is run. They need to revamp their entire company to be ethics focused and not just be chasing a profit. They need to start taking responsibility for the people they hire and really start showing drivers that they are appreciated. 2) The biggest issues that bring opportunities would first be with fingerprinting new hired drives to get a thorough background check, this would make people more confident in using the Uber service. Secondly they could pay employees minimum wage and actually considering them employees instead of independent contractors, this could cost more but you could retain many more drivers and get fewer lawsuits. Another option would be to potentially look into following more taxi related regulations so they can expand more and not give away territories to competition.