Uber is a high-tech cab service that connects with taxi users through a mobile application. By the year 2015, the estimate of Uber's worth was at around $40 billion, making it the most valuable venture-backed company in the world. Today, the company operates in more than 210 cities in at least 54 countries around the world. However, in as much as Uber boasts of popularity among users today, the company also manifests a range of conflicting emotions. For instance, to some users, Uber offers a more convenient and reliable mode of transportation compared to the traditional taxis. At the same time, it faces criticism from parties like the local authorities, conventional taxi drivers as well as skepticism from its operators and users. In that line, the primary purpose of this paper is to conduct a SWOT analysis on Uber to understand some of the controversies regarding their practices or business model. The article begins with a brief highlight of the situation analysis of Uber.
Situation Analysis of Uber
Since its launch in 2009, Uber has helped to connect many city residents with their families, friends and even jobs. Still, most passengers do not have clear impression of the mission and vision of Uber. For instance, some users think Uber services are more expensive than taxis'. Others even consider it a premium service transport provider. Therefore, this section of the paper attempts to understand the company's capabilities, users, and business environment by analyzing a few factors like the competitors, service characteristics, service classification, brand image, and implication, as well as the range of services Uber offers.
Currently, Uber's primary competitors include the local taxi companies, Pedicabs, rental cars, and the passenger service vehicles. As you can see, most of Uber's competition share it similar business models. Uber services are also not convenient in areas of low population and less integrated transport infrastructure. Comparatively, Uber is cheaper than traditional taxis. Likewise to rental cars. Only the passenger service vehicles are more affordable compared to Uber. Another unique thing about Uber is that the customer has the luxury of choosing from a variety. For instance, Uber can adapt the services of limousines and Sports Utility Vehicles. Apart from competition, another element of Uber's situation analysis is its service features. In that line, Uber service prices range depending on the time of service. The daytime charges differ from night charges.
Another significant feature is the service classification of Uber. The company is classified as a budget transport network for city residents (Cramer, & Krueger, 2016). The statement implies that Uber users can plan and control their transport expenditures to fit with their budget. Apart from service classification, another element of Uber business is its unique brand image and implication. For example, today when people hear the name Uber, they immediately picture a brand image that resembles the model of having affordable/budget transportation. Thus, a first time user would quickly associate with Uber services.
Strengths and Weakness of Uber
Strengths and weaknesses are internal factors. That is to imply that Uber as a business has control over them. Therefore, this part of the essay will attempt to identify some of these inside dynamics that influence Uber operation. We begin by discussing the strengths of Uber. Firstly, the firm is a well-organized brand. That is to imply that its service performance is exemplary. Apart from that, Uber also provides its users with quality service through the hiring of skilled and licensed drivers and the usage of road-worthy cars. Another advantage Uber has over its competitors is its unlimited convoy of vehicles.
Also, because of its uniqueness, Uber experiences very little competition, mostly from the Lyf Company. Apart from that, Uber operational cost is lower compared to traditional taxis, and this is because Uber services primarily depend on the interaction between the user and the operator. No need for a correspondent. Also, many people today value Uber services and are ready to invest in it. Lastly, the dual rating system of Uber ensures the maintenance of safety and trust of the passenger.
Uber as a business has some weaknesses. For instance, Uber faces competition from imitators like the Lyf Company. Therefore, users can easily choose another alternative apart from Uber. Also, research indicates that the relationship between Uber and the drivers is in jeopardy as it is void of real connection. As a result, we can assume that the loyalty between the service and its operators is low. Apart from little loyalty, Uber also has no connection with its users, and as a result, the motivation to continue using Uber is low.
That said, another weakness of Uber is that its business model is unpredictable hence it is difficult to predict the profits. Besides, the cost of operating Uber is expensive whereas the wages earned by the drivers are considerably low. To add, Uber also pose privacy concerns among its users. For example, the service records the where the user boards the vehicle as well as his or her destination, and because of that, some customers feel their privacy is under threat.
Opportunities and Threats
Opportunities and threats are external factors. Thus, Uber has no control over them. However, Uber should exploit the available opportunities in its locale to attract more investors and customers.
Uber has some opportunities that it can exploit. For example, most passengers today do not have satisfaction in traditional taxi services, and this is because of their high transport fee and the inconveniences that accompany their services like lateness. Also, the firm can exploit business opportunities in countries that are highly populated like China where taxi services are inconvenient and costly. Besides, Uber can also take advantage of the growing markets in the suburbs where traditional taxis are unavailable (Horpedahl, 2015).
Also, an increase in the number of Uber vehicles will ensure a reduction in the time of arrival thereby increasing the customer loyalty. Similarly, an increase in the number of Uber cars will also result in the firm making huge profits. Uber services can also incorporate affordable electric vehicles thus reducing the operation cost while the drivers get a rise in their pay. Uber also offers additional services like transporting children to and from school and sending packages.
Because of low pay, there is growing discontent among the Uber drivers hence this can tarnish the public image of the company. Also, legal regulations in some countries may not favor Uber activities thus negatively affect ting their operations. Uber operators also may have some problems with the local governments which can, in turn, lead to the payment of hefty fines or revoking of the license of operation. Stiff competition will also lead to the Uber prices. Low prices mean low earnings, therefore, the business may cease to function.
Some people also pose as fake Uber operators with the intention of conning customers. Thus, these frauds can damage the reputation of Uber. That said, autonomous vehicles like those of Tesla Company will eliminate the need for Uber. Lastly, the overvaluation of Uber can lead to overinvestment in non-potential markets.
A summary of SWOT Analysis on Uber
Strengths (Internal Elements) Weaknesses (Internal Elements)
Well recognized brand
High standard of service
Limitless number of cars
Very little competition The mobile application idea used in Uber is susceptible to imitation
Low loyalty between the company and its drivers
No connection with the customers
Opportunities (External Elements) Threats (External Elements)
Customer dissatisfaction by traditional taxi vehicles offer a market gap to exploit
Uber services can prevail easily in highly populated areas
Uber can exploit the growing market in the suburbs Drivers are discontented with the low-profit margins thus discouraging them from joining Uber
Increasing competition will lead to a reduction in the earnings thus jeopardizing the business
Problems with local governments threatens the existence of Uber
If given $1000 to bet for or against Uber succeeding in the next two years, I would bet for Uber succeeding. The reason for my stand is because Uber services are cheaper compared to those of traditional taxis. Also, today, Uber faces no stiff competition as it is unique. Lastly, Uber is becoming popular among the new generation who consider it trendy and cool. Therefore, it is likely that this generation will continue to embrace the services of Uber for the next two years or so.
Cramer, J., & Krueger, A. B. (2016). Disruptive change in the taxi business: The case of Uber. American Economic Review, 106(5), 177-82.
Horpedahl, J. (2015). Ideology Uber Alles? Economics Bloggers on Uber, Lyft, and Other Transportation Network Companies. Econ Journal Watch, 12(3).
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