Strategic Solutions for Uber's Growth and Long-term Profitability
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Introduction: Strategic Solutions for Uber's Growth and Long-term Profitability
Due to the poor performance in the market, San Francisco-based transportation network company Uber Technologies has been dealing with serious difficulties lately. Despite having a sizable global presence, the company has struggled to turn a profit as its financial losses have continued to grow. Over the next three to five years, Uber needs to pursue a variety of strategic options in order to meet these challenges. Some of the company's greatest strategic alternatives are described in this executive summary.
Diversify Its Business: Uber needs to think about company diversification if it wants to create new income sources. The business can investigate fresh possibilities in logistics, healthcare, and food delivery. Uber can easily enter these areas by utilising its current infrastructure and developing new business models to spur expansion.
Improve Operational Efficiency: In order to save expenses and increase profitability, Uber should concentrate on improving operational efficiency. The business may do this by utilising its technology and data to streamline its personnel, reduce redundancies, and optimise processes. Uber may free up funds in this way to spend on fresh growth prospects.
Focus on Autonomous Driving: Uber should concentrate on developing autonomous driving technologies in order to lessen its dependency on human drivers. The business may increase its profitability and considerably save costs by doing this. Uber may also enhance its safety record with the use of autonomous driving technology, which has been a major problem for the business lately.
Enhance its Brand Image: Due to a number of recent scandals and controversies, Uber has to concentrate on enhancing its brand image. The business may do this by funding marketing and public relations initiatives that advance its beliefs and objectives. Uber may also seek to strengthen customer service in order to improve its standing among users.
Expand into New areas: In order to create more income streams, Uber must keep growing into new areas. The business can investigate potential in developing regions where there is a high demand for ride-hailing services, such Asia and Africa. Additionally, Uber can consider expanding into new transportation verticals, such as electric bikes and scooters.
Overall, it can be said that in order to deal with its underperformance over the next three to five years, Uber Technologies has to pursue a variety of strategic choices. Uber may also need to increase its financial performance and develop new growth chances by applying the above strategic alternatives, so assuring its long-term success in the market.
Strategic Audit
Uber Technologies, Inc. is a well-known international transportation network provider that provides logistics, food delivery, and ride-sharing services. Since it began operating in 2009, the firm has experienced tremendous growth, extending its services to more than 900 metropolitan regions worldwide. In order to shed light on Uber Technologies' strategic position and prospective future possibilities, this strategic audit examines its financial and business performance during the last three years.
Financial performance of the company
Over the last three years, Uber's financial performance has been inconsistent, with notable fluctuations in revenue and profitability. The firm earned $11.3 billion in revenue in 2018, up 42% from the previous year, according to its financial disclosures (Uber, 2019). However, compared to $0.5 billion in 2017, its net loss for the year increased to $1.8 billion (Uber, 2019). Uber's revenue climbed by 25% to $14.1 billion in 2019, while the company's net loss increased to $8.5 billion (Uber, 2020). The COVID-19 pandemic had a substantial negative impact on the company's financial performance in 2020, with sales falling by 14% to $11.1 billion and a net loss of $6.8 billion (Uber, 2021). Uber's ride-sharing services generated $9.2 billion in revenue in 2018, $12.2 billion in 2019, and $6.8 billion in 2020, making up the bulk of its revenue by segment (Uber, 2019). According to Uber (2019, 2020, and 2021) the company's food delivery business, Uber Eats, produced $1.5 billion in revenue in 2018, $4.8 billion in 2019, and $4.8 billion in 2020.
Business Performance of the company
Despite experiencing a sharp decrease in revenue over the last three years, Uber has additionally encountered a number of operational difficulties too. Its difficulties in generating profitability have been one of the biggest problems. Uber has reported net losses despite its attempts to cut expenses and increase operational effectiveness. Investors and other stakeholders are now concerned about the company's long-term viability as a result of this. Significant regulatory obstacles have also been faced by Uber in a number of nations, including the UK, India, and Australia. The company's capacity to grow its services in some areas has been hampered by these regulatory concerns, which have cost it a large amount in legal fees. Due to a number of high-profile incidents, including claims of sexual harassment, data breaches, and regulatory infractions, Uber has also experienced considerable PR difficulties. The business performance of the Uber Technologies can better be illustrated by showing the inter business environment analysis using SWOT method.
Strengths
Strong brand recognition and global presence
Diversified range of services, including ride-sharing and food delivery
Extensive network of drivers and riders
Investment in autonomous driving technology
Weaknesses
Difficulty in achieving profitability
Regulatory challenges in certain markets
High legal expenses and public relations challenges
Reliance on human drivers for ride-sharing services
Opportunities
Expansion into new markets, such as electric bikes and scooters
Development of new services, such as healthcare and logistics
Investment in autonomous driving technology to reduce costs and improve safety
Partnership with other companies to enhance its services
Threats
Intense competition from other ride-sharing and food delivery companies
Regulatory challenges and legal issues
Economic downturns and other external factors that could impact demand for Uber's services
Technological advancements that could make Uber's services obsolete
Analysis of the strategic Options
In this segment of the study, a brief analysis and justification will be provided on the selected strategic options selected for Uber Technologies to cope up with the performance downfall which they faced in the last 3 years.
Diversify Its Business
Uber Technologies should think about diversifying its company as a strategic move to address its underperformance over the next three to five years. Even if the firm should concentrate on its primary business—ride-sharing services—diversifying its income streams can help it become less dependent on a single service in the long run and lessen risks. Uber might develop new revenue sources by branching out into new industries like electric bikes and scooters, healthcare, and logistics. The global market for electric bikes and scooters is anticipated to expand between 2021 and 2026 at a compound annual growth rate of 8.5% (CAGR) (Research and Markets, 2021). Uber can use its current technology and logistical network to enter this industry and offer a new service that complements its current ride-sharing offerings. Uber may potentially look at business prospects in the healthcare sector, which is anticipated to expand at a CAGR of 5.4% between 2021 and 2028 (Grand View Research, 2021). In 2018, Uber Health, a non-emergency medical transportation service, was introduced to patients, medical facilities, and other healthcare professionals. Uber can reach a new market and generate new income by extending this service. Uber may potentially broaden its logistical offerings by collaborating with merchants and e-commerce businesses. From 2021 to 2028, the worldwide logistics industry is anticipated to expand at a CAGR of 7.5% (Grand View Research, 2021). Uber can deliver a new service that enhances its current ride-sharing services and offers a new income stream by utilising its current technology and logistical infrastructure. However, diversifying its business entails risks, including higher operating costs and compliance issues. Uber must thus carefully consider each new market it plans to enter and make sure it has a workable business model before devoting a large amount of resources to it. Uber must also thoroughly assess each new market it plans to enter and reduce risks before devoting a large amount of resources to it.
Improve Operational Efficiency
Uber Technologies should implement operational efficiency improvements as a strategic move to address its underperformance over the next three to five years. The business has been experiencing difficulties with high operational costs, which has led to large losses in recent years. Uber can eventually cut expenses and boost profits by increasing operational efficiency. Uber's ride-matching algorithms may be optimised as a strategy to increase operational effectiveness. The business may employ data analytics and machine learning to increase the precision of its algorithms and shorten passenger wait times. Uber can increase the number of trips per hour by cutting wait times, which might result in more income and profitability (Lipsman, 2020). Uber may also become less reliant on driver incentives to increase operational efficiency. Uber has been providing incentives to drivers in recent years in an effort to boost the number of drivers using its platform. However, the company has incurred significant losses as a result of these incentives because of their high cost. Instead, Uber should concentrate on improving the working conditions for drivers, such as by providing flexible schedules, benefits, and training opportunities (Cramer, 2021). Additionally, Uber can lower its operating costs by utilising technology. For instance, the business can lessen its reliance on human drivers by using autonomous vehicles. Even though the technology is still in its early stages, driverless vehicles might eventually dramatically lower expenses (Chen & Su, 2021). At last, by cutting administrative costs, Uber can increase operating efficiency. To lessen its reliance on manual procedures, the corporation can automate administrative operations, including payroll, bookkeeping, and human resource management. Uber can cut its administrative costs and boost productivity by automating these operations (Gallaugher & Ransbotham, 2019).
Focus on autonomous driving
Focusing on autonomous driving is another tactical move Uber Technologies might make to address its underperformance over the next three to five years. Uber and other ride-hailing businesses have been working hard to create autonomous driving technologies. Uber may decrease its reliance on human drivers by concentrating on autonomous driving, which might lead to considerable cost savings and improved productivity. One advantage of autonomous driving is that it can cut down on the price of driver incentives, which is one of Uber's biggest outlays. Due to their ability to run continuously, autonomous cars don't require as many rewards to keep their drivers on the road. Furthermore, autonomous vehicles can lessen the need for human intervention, which can result in fewer accidents as well as decrease indemnity expenses. Autonomous driving also has the potential to enhance the number of rides every hour. Autonomous cars can operate for long hours without stopping, unlike human drivers who must take breaks and are unable to drive for longer durations. This increases productivity and profitability. Additionally, autonomous vehicles can shorten passenger wait times, boosting client satisfaction and loyalty (Gelbard, 2020). For many years, Uber has made investments in the field of automated driving, and in 2020, it purchased the self-driving vehicle startup Otto. Uber was able to speed up the development of its autonomous driving technology with this purchase, increasing its prospects of dominating the industry. By launching its autonomous ride-hailing service by 2023, Uber hopes to gain a considerable competitive edge (Kwok, 2020). Uber will have certain difficulties when it implements autonomous driving technology, though. Obtaining regulatory permission is one of the major difficulties. Because the technology for autonomous driving is still in its infancy, regulatory agencies might be hesitant to approve its use on public roads. Uber will also need to overcome some technological obstacles, such as enhancing the accuracy of its sensors and guaranteeing the security of users and bystanders (Hawkins, 2021). Overall, it can be said that Uber will face obstacles in integrating autonomous driving technology, but given the advantages it may bring, the firm should think about it as a strategic move.
Enhance its Brand Image
Enhancing its brand image is another strategic move Uber Technologies might make to address its underperformance over the next three to five years. Uber has encountered a number of issues over the years about driver misbehaviour, passenger safety, and privacy concerns. These issues have damaged Uber's brand and caused its consumers to lose faith in the company. Uber can restore its consumers' confidence and strengthen its standing in the market by improving the image of its brand. Uber can improve its customer service as one approach to boost its brand image. To ensure that its drivers and support employees are receptive and aware of client demands, Uber can engage in customer service training. Uber may also implement a mechanism for gathering consumer feedback and rapidly resolving problems. Uber may increase customer satisfaction and loyalty by putting more of an emphasis on customer service and developing a solid reputation for dependability and professionalism (Shu, 2017). Uber can improve driver working conditions and boost its brand image. Driver protests and strikes have resulted as a result of Uber's numerous labour and wage-related problems. Uber can strengthen its relationship with its drivers and establish a reputation as a respectable employer by investing in driver welfare programmes like health insurance, paid time off, and flexible work schedules. Increased driver satisfaction, loyalty, and retention may follow from this (Kang, 2021). Finally, Uber can boost the perception of its brand by using technology to increase security and safety. Uber may spend money on lane departure warning systems and other cutting-edge safety technologies for its cars. To further assure passenger safety, Uber may use improved security features like face recognition and background checks for drivers. Uber may establish a reputation as a trustworthy and dependable transportation company by placing a high priority on safety and security (Shu, 2017). So, it can be said that the potential rewards in terms of higher customer happiness, loyalty, and profitability make it a strategic move that Uber should pursue, even if it could take time and effort to reach these goals.
Expand into New areas
Expanding into new markets is another strategic move Uber Technologies might make to deal with its underperformance over the next three to five years. Uber has mostly concentrated on providing ride-hailing services, while it has also branched out into other industries including food delivery and freight transportation. Uber can boost its income sources, lessen its reliance on ride-hailing services, and improve its market position by further diversifying its offerings. Uber's potential growth in the healthcare industry is one such area. Uber has already started moving in this direction by introducing Uber Health, a platform that enables medical professionals to book trips for their patients. Uber may capitalise on a developing industry that is anticipated to be worth $319 billion by 2023 by increasing its healthcare offerings (Allied industry Research, 2020). Uber may also lower hospital expenses and enhance patient outcomes by offering transportation services for patients. Uber can also grow by entering the market for electric vehicles (EVs). According to Fortune Business Insights, 2021, the worldwide EV market is anticipated to expand at a compound annual growth rate (CAGR) of 22.6% between 2020 and 2027. By launching its own line of EVs or partnering with established EV manufacturers, Uber can reduce its environmental impact and tap into a growing market. Uber can also lower its operational expenses and increase its profitability by switching to EVs. Uber can also enter the market for autonomous vehicles (AVs). Uber has already taken steps in this approach by starting its own AV development arm, Uber Advanced Technologies Group (ATG), which is likely to disrupt the transportation sector in the upcoming years. Uber can lessen its reliance on human drivers, boost operational effectiveness, and enter a market that is anticipated to be worth $173 billion by 2030 (Grand View Research, 2021) by investing more in AV technology and introducing autonomous ride-hailing services. Uber can finally grow by entering the financial services industry. Uber has previously released Uber Money, a digital wallet that gives drivers access to financial services including loans and insurance as well as rapid payments. Uber can increase its engagement with its drivers and consumers while generating new income sources by expanding its financial services products. Uber may also offer cutting-edge financial services to marginalised people, such as microinsurance and microlending, by utilising its data and technology (Lend Academy, 2019). Even though it might take a lot of money and work to enter these markets, the potential rewards in terms of higher profits, a stronger market position, and more revenue make it a strategic move Uber should think about.
Critical Reflection
I have discovered numerous important lessons while working on the management report for Uber Technologies that any organisation dealing with underperformance or looking to grow its operations may use. The significance of variety is among the most significant lessons I have learnt. Uber may lessen its reliance on a single source of income and strengthen its standing in the market by diversifying its company. Additionally, I now understand how crucial operational effectiveness is. Uber can save expenses, increase profitability, and improve the customer experience by increasing operational efficiency. This may be accomplished through using new technology, simplifying business operations, and making investments in the training and development of employees. Furthermore, it has become obvious to me how important it is to concentrate on autonomous driving. Uber can lead this transformation by investing in AV technology and introducing autonomous ride-hailing services. This technology has the potential to completely transform the transportation sector. This can increase operational effectiveness, decrease the company's reliance on human drivers, and open up new market opportunities. Additionally, I now understand how important improving brand image is. Uber can stand out from its rivals, draw in new clients, and keep its current ones by improving the image of its brand. This may be accomplished through funding marketing initiatives, enhancing customer support, and interacting with customers on social media. Finally, I've learned about the advantages of branching out. Uber can increase its income sources, tap into developing markets, and lessen its reliance on ride-hailing services by entering new businesses, including the healthcare, EV, AV, and financial services sectors. However, doing so necessitates a sizable investment of time and effort, as well as careful analysis of consumer behaviour and market trends. Overall, preparing this management report has taught me that adaptive, creative, and customer-focused businesses are essential for success. They must continuously look for new chances for development and advancement while also employing good risk and challenge management. The knowledge I've received from this report will be useful for my future management profession because it emphasises the significance of strategic analysis, thinking, and decision-making.
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Recommendation and Conclusion
It is advised that Uber Technologies use a multi-pronged approach to rectify its underperformance and seize fresh chances based on the entire study. To do this, the company needs to diversify its operations, increase operational effectiveness, concentrate on autonomous driving, build its brand, and enter new markets. These tactics will allow Uber to become less reliant on ride-hailing services, increase its profitability, take advantage of expanding markets, and set itself apart from its rivals. Uber will need to make significant investments in R&D, technology, marketing, and human resources to achieve these plans. It will also need to engage with its stakeholders, including customers, drivers, workers, regulators, and investors, and embrace a customer-centric strategy. Finally, it will need to take proactive measures to manage risks and difficulties, such as competitiveness, cybersecurity, and regulatory compliance. Some additional practical recommendations that can be suggested to Uber Technologies are listed below:
Uber must include elements like loyalty programmes, subscription services, and package deliveries in the range of goods and services it offers.
Uber must also rethink to access new markets and technology, cultivate strategic alliances and partnerships with businesses in relevant sectors.
It will also be important for Uber to create a strong corporate social responsibility program to aid causes like social justice and sustainability.
Improving its interactions with its drivers is another major step that needs to be taken care of by Uber. This can be done by providing better rewards, more openness, and more assistance.
To safeguard client data and avoid future breaches, Uber Technologies will additionally need to make investments in cybersecurity solutions.
Last but not least, Uber Technologies will also need to implement programs like unconscious bias training and diversity and inclusion task forces to make the workplace more diverse and inclusive.
Thus, Uber Technologies can address its underperformance and build a stronger, more sustainable company that is well-positioned to seize new opportunities and experience long-term success by putting this useful advice into practice.
So, from the overall study, it can be concluded that the COVID-19 epidemic, managerial disputes, and legal issues have all presented substantial difficulties for Uber Technologies in recent years. However, Uber can overcome these difficulties and seize new opportunities by taking a calculated approach and putting the report's suggestions into practice. The business has the opportunity to transform the transportation sector, capitalise on expanding markets, and strengthen its reputation. Although a significant amount of time and money will need to be put into it, the potential rewards are very high. The success of Uber will ultimately rest on its capacity to adjust, develop, and successfully carry out its initiatives while keeping a laser-like focus on its key principles of consumer convenience, dependability, and safety.
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