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In the competitive business environment, managers have to review and optimise strengths and weakness of the organisation through which they can formulate strategic management planning to avail maximum benefits from opportunities. Strategy manager plays a significant role in formulating planning, collaborating with internal and external stakeholders and leads with cross-functional teams for developing innovative strategies. The essential purpose of this report is to explore aspects of strategic management which help in leading higher business growth and in accomplishing its objectives.
Strategic management of a company involves the development and execution of a strategic plan which is formulated by considering major organisational goals. The report focuses on the complexity of the organisation and its environment and how strategic thinking and approaches help in developing ideas by reducing the impact of organisational strategic issues. Further, the report covers essential strategic practices in the form of a recovery planfor the selected company which should be used by the strategic manager that improves the functioning of organisational management.
Overview of the company
Uber is an American ride-hailing multinational company that offers ride service hailing and micro-mobility systems with peer to peer ride sharing and electric bikes. Garrett Camp has founded Uber in 2009, headquarter of Uber is in San Francisco, California and it provides services in more than 760 metropolitan areas globally. As per the recent research, it is estimated that Uber had covered more than 65% of the market share of the ride-hailing globally in the early of 2019. In 2015, National Bureau of Economic Research estimated that Uber has accounted for more than $6.7 billion in the form of consumer surplus. The essential motive of the company is to provide better ride service hailing to global consumers and enlarge its market share with the adoption of strategic approaches.
Strategic issues reported in the company
According to research, it is determined that Uber has been criticized for disruption of taxicab business and unfair treatment with drives based on their wages and incentives. In 2019, after becoming a public company, Uber faced a downturn in its shares by 11% in the IPO (Initial Public Offering) in the US. In the first quarter of 2019, the company has accounted a loss of US$1 billion and in the second quarter accounted a loss of US$ 5.2 billion which is one of the biggest loss in the history of Uber (Sherman, 2017). Due to huge loss, the company has laid off around more than 700 employees from production, management and engineering teams.
Poor strategical framework and adoption of poor regulatory policies have developed critical challenges for Uber in the market. It is criticized for the adoption of an aggressive strategy in dealing with regulators, and the company is also facing conflicts with its drivers for incentive purposes (Ansoff, et.al. 2018). In every organisation, it is essential for developing a strategic framework which not only extends business growth but also enhances employee and stakeholder engagement. It is the responsibility of the strategic manager of Uber to frame strategic policies that maximise the satisfaction of their ride-hailing drivers as they are the key stakeholders of the company (Sherman, 2017).
Not only in 2019 but the company also faced a loss of US$3.2 billion in 2017 due to adoption of unethical practices and illegal corporate behaviours, due to such losses co-founder TravisKalanick has resigned from the post of CEO.
Figure: Net revenue and loss faced by Uber, quarterly.
Source: Forbes, 2017
Factors and policies affecting firm performance
Various poor strategic factors reduce the overall performance of Uber in the market and it has faced many failures in providing quality services related to ride-hailing. Currently, the ride-hailing industry remains unprofitable and all the key players have developed their engagement in price wars which is only beneficial for customers. There are some major failures due to which Uber has to face huge losses in the ride-hailing industry:
Poor compensation policies: As compensation strategy for drivers of Uber remained unsatisfied as revenue of Uber is directly proportionate to several trips it can facilitate and maximum trips done by the driver should get more incentives. But, Uber choose to recruit more drivers in the market rather to uplift incentives of current drivers. According to researchin late 2015, it was analysed that in three US metropolitan areas net driver compensation was just $8 -$13 per hour and thus low declining paying and compensation policies of Uber is the major leading cause of poor satisfaction of Uber Drivers (Wilhelm, 2018).
Existing Uber model: Ride-hailing industry works better than the traditional taxi industry where it develops the connection of drivers with customers for supply or demand. Uber business model has created enormous value for its consumer and advance business growth but aggressive strategic pricing policy has failed in generating better revenue in delivering better profit to stakeholders (McBride, 2019). Further, Uber has disrupted the transport ecosystem as evidence can be seen with the recent struggle of Uber in falling its IPO and strong competition with Ola, Bolt and Lyft (Chauhan, 2020). Further, the current business model of Uber shows an unclear path of profitability which has also reduced engagement of investors and its stakeholders.
Low customer loyalty:Uber faced challenges in the ride-hailing industry as more of its customers are not in long term contacts due to its poor connectivity issues. Lacking in network connectivity develop barriers for the driver to optimise the exact location of the customer which takes a longer time for them to arrive (Dockery, 2019). Further, cancellation of the drive without notice has reduced satisfaction level of customers and such issues reduce customer loyalty and they prefer to choose other ride-hailing companies such as Lyft and Ola. Moreover, behavioural issues of drivers with the customer often generate complexity and reduce customer satisfaction (Wilhelm, 2018).
Low driver loyalty: More recruitment of drivers a driver has reduced their demands in the ride-hailing market, and Uber chooses to neutralise the incentive form of drivers which turns to lower their loyalty towards firm. The market will remain more competitive for driver acquisition and driver often seems to work with other companies such as Amazon, Walmartetc, as per their demand (Chauhan, 2020).
From the above aspects, it can be analysed that at the time of framing strategic policies, the manager should consider all the requirements of the company and its stakeholders and should analyse strategies of marker competitors. As the above results showcasing various strategic failure, it can be analysed that Uber has failed in determining consumer requirements which led to lower their loyalty, poor incentive and regulatory policies has reduced driver loyalty and reduce the engagement of stakeholders (Chauhan, 2020).
Developing a strategic recovery plan
It is essential in the competitive business environment to maintain business growth sustainable by making strategic frameworks in the company. Recovering strategies are the best alternatives means to enhance the performance of business operations. Strategic management and its planning help in developing interrelation between an organisation and its environment. Strategy managers of Ubers have to frame strategic management planningand adopt suitable strategic management tools which will maximise overall firm performance by reducing issues and impact of challenges (Wheelen, et.al, 2017).
My advice to Chief Executive Officer of Uber to look forward to overcoming strategic management issues which are faced by the company in the past 3 years. Managers should respond quickly to these strategic challenges by focusing on customer and stakeholders’ requirements. It is essential to develop a strategic recovery plan which will help in the identification of potential threats and help in collecting vulnerable information about business policies through which managers can take effective decisions.
Developing recovery plan develop strong opportunities to bring business performance on track and promote advance strategical framework to recover operational activities of the business. These strategies demonstrating a clear understanding of business objectives and analyse business essential needs to continue managerial and operating functions in an effective manner (Wheelen, et.al, 2017). Managers of Uber have to formulate key objectives that are essentially required to accomplish.
Recovery plan model
Uber is facing some strategic management issues such as lower stakeholder engagement, poor application performance, lower customer loyalty and regulatory issues. The managers must focus on past results and experience which are faced due to the existing business model. The model has reduced the value proposition of business in the market and lower the chances of availing competitive advantages. There are various strategic management tools which can be used in the recovery plan such as balanced scorecard strategy map, porter’s five forces, gap planning, blue ocean strategy and Baldrige framework (Smith, 2017).
Managers of Uber have to implement a strategic thinking process which helps them in visualising business requirements. Strategic thinking process helps in analysing the major gap and conflict between the company and its stakeholders in the form of drivers. For enhancing the strategic framework of the company and for developing a recovery plan, I would like to suggest to adoptbalanced scorecard strategic map to strategy managers of Uber. Use of balanced scorecard strategy map helps in prioritise initial actions and implement well-defined roadmap during tough times in the organisation (Hu, Leopold-Wildburger, and Strohhecker, 2017).
Strategy map will help Uber managers in following ways through which they can frame an effective recovery plan and can avail maximum competitive advantages:
Improves firm performance by visualising essential operations and strategies that matter most for the firm. In the case of Uber, the strategy map builds a roadmap which states difficulties and their effective solutions with suitable strategies (Sharma, 2009).
Align with the work and focus on core aspects of future performance of the business. Managers of Uber can analyse major perspectives growth of the company in the form of vision, mission and strategy through which they can implement innovative strategic framework which will maximise stakeholders’ engagement and profitability in the market (Hu, Leopold-Wildburger, and Strohhecker, 2017).
A strategic map with balanced scorecard will work as a recovery plan for Uber that help it in creating a value proposition for its customers by driving some effective changes with a visual representation to its employees.
Figure: Balanced Scorecard strategy map
Source: Intrafocus, 2016
The above figure showcasing the fundamentals of strategy map which will set an innovative strategic management framework Uber. As this map helps in setting initial objectives by giving direction to managers by linking with key performance indicators. In the recovery plan, essential objectives for Uber are listed below:
Developing innovative strategical changes in the existing business model that help in maximise financial share of the firm in the ride-hailing industry.
Improving compensation, incentives and recruitment policies that will maximise drivers’ satisfaction and enhance their loyalty towards the company.
Implementation of AI techniques to advance network optimisation, that promote quality services to customers.
The essential motive of the company is to look forwards for developing a strategic framework which will maximise its financial performance and can provide high incentives to its drivers.
Figure: Balanced scorecard matrix for Uber as a strategy map
Source: By author
The above figure must be considered by CEO and strategy managers of Uber, as it demonstrates a clear roadmap which will help in availing greater competitive advantage for firm in future. As a strategy map with balanced scorecard has 4 essential perspectives for Uber:
Financial aspects: The recent research showcase that Uberhas faced huge financial loss in the market due to falling of its IPO. The company have to set some marketing policies standards such as pricing and service policies for its customers. Managers should set pricing policies which will meet the demand of stakeholders and satisfy customers too (Hu, Leopold-Wildburger, and Strohhecker, 2017). Pricing policies for ride-hailing services must be set by visualising competitors pricing strategies because competitors are always looking for attacking weakness through which they can get a better competitive advantage.
Some strategic management policies for the financial management of Uber are derived below:
Standardising ride-hailing service plans as per customer requirements will increase service demand and enhance the financial growth of the company.
Setting financial targets for maximising market share by 5% every year will reduce the chances of the financial crisis (Hu, Leopold-Wildburger, and Strohhecker, 2017).
Developing investors’ engagement by showcasing innovative strategic financial policies will enhance growth in the stock market.
Decreasing operating costs on irrelevant business activities will maximise the financial sustainability of the firm.
Customers:Customer is the key aspects of business growth, they are the only sources of maximising profitability, business growth and service demand in the market. The recovery plan as per the strategy map with balanced scorecard states that managers of Uber should primarily focus on building service variances through which they can provide innovative and quality services to their customers (Sharma, 2009). They should focus on attraction customer policies such as providing special offers at special occasions, timely and fast ride-hailing services and develop a high communicational approach to identify their requirements (Hu, Leopold-Wildburger, and Strohhecker, 2017).
The priority of every company is to focus on attracting and engaging more customers. Companies like Nike, Reebok, and Walmart etc. adopt discount policies to attract customers and by making higher customer retention rate these companies gain maximum advantage on launching of their premium products. Therefore, strategic managers of Uber need to focus on network specification which provides the exact location of the customer to the driver through which they can reach on time (Hu, Leopold-Wildburger, and Strohhecker, 2017). Some of the essential strategic framework policies which can be used by Uber for attracting consumers are:
Develop techniques which let customers knowing that Uber is providing better ride-hailing services in the form of price, service quality and on-time delivery as compare to other companies in the industry.
Promote customer loyalty programmes to enhance customer retention rate.
Provide effective training to staff and drivers to handle customer effectively and fulfil their needs.
Generate feedback collection process on every ride through Uber app, so the customer can specify their journey in the form of 'satisfied' and 'not satisfied'. Further, the current rating system should be continued for enhancing its overall performance.
Quality and affordable services will build customer satisfaction and help Uber is leading in the ride-hailing industry.
Internal process: Sudden changes in the business environment develop various barriers for the strategic management team in handling the internal process of the organisation. In such cases, the strategic thinking process will always help in developing various approaches by which managers can adopt strategic theoretical models to deal with the problems (Hu, Leopold-Wildburger, and Strohhecker, 2017). Strategic management theory defines the main objective of business for long term profit maximisation and help in promoting innovative strategies that develop a sustainable competitive advantage over other competitive rivals in the global market (Hill, Jones, and Schilling, 2014).
As per research, it was analysed that greater loss in Uber and develop pressure which led to cut off more than 800 employees which has also downturned the firm performance. A company needs to handle internal process and operations effectively for which managers have to follow some strategic policies as per the recovery plan are:
On-time reporting will help in managing ride-hailing operations effectively.
Technical and functional improvements in Uber riding application will help in operating riding operations more effectively.
Providing effective training to current staff will help in managing the other areas of Uber such as customer feedback collection process, identification of customer and stakeholders’ requirements.
Learning and promotional activities: At the end, managers of Uber should strictly focus on providing better learning approaches to drivers as some of the consumer complaints specify that rude behaviour by drivers has reduced satisfaction level of consumer (Lueg, 2015). Uber has to change some of its regulatory policies such as transportation and tax policies by which it can start its ride-hailing services again in banned metropolitan areas of Russia, Asia and Africa.
Further, managers of Uber have to focus on some promotional approaches:
Provide incentives to the drivers by setting daily and monthly targets. For example, More than 10 trips a day by the driver will get a 10% incentive on the price of each trip.
Getting a higher rating by customers in a year will be rewarded in terms of monetary rewards (Lueg, 2015).
Promoting the salary of drivers by 10% every year will enhance their engagement for their work. Further, all such promotional activities must be applied the same within internal management employees.
Conclusion
From the above findings of the report, it can be concluded that poor strategic frameworks such as regulatory policies, network issues, compensation and promotional policies have reduced profitability of Uber in the market from the past 3 years. Further, poor ride-hailing services have reduced customer satisfaction and stakeholder engagement. For framing sustainable strategic framework, Uber has to implement a strategy map balanced scorecard in the form of a recovery plan which will help in enhancing the financial performance of a firm. Along with this, promotional strategies will reduce conflicts between the company and its drivers and will maximise stakeholder engagement.
Recommendations
I would like to recommend to CEO and strategic managers of Uber, to analyse the current situation of the company in the ride-hailing industry and implement a proposed strategic recovery plan immediately. The way company is dealing with its customers with its pricing policy will hugely affect financial stability negatively, it is essential to develop strategic thinking process which will help in implementing strategic management theory that helps in visualising current situation and define gap analysis between company’s current position and its initial objectives (Hill, Jones, and Schilling, 2014).
The report consists of a strategic management model named a Strategy map with balanced scorecard should be considered by higher management. Along with this, a balanced scorecard matrix is proposed which help in meeting objectives by recovering some business areas by adopting effective strategies. It is the responsibility of the strategic management team to follow all the procedure effectively by developing strategic framework policies and frameworks.
References
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Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management and business policy (p. 55). Boston, MA: Pearson.
Wilhelm, A. 2018.Understanding Why Uber Loses Money. Crunchbase [Online] Available at https://news.crunchbase.com/news/understanding-uber-loses-money/ [Accessed on 29 July 2020]
