Abstract
The present paper analyses the strategic management at Uber, the most successful ridesharing company at present. The paper dwells on such important aspects as the company’s purpose, situation analysis, strategies, and strategy implementation. Uber’s vision, mission, and values are analysed as elements of the organisation’s purpose. In the situation analysis part, the external and internal environments of Uber are scrutinised, along with strategic objectives pursued by Uber. A focus is made on the PESTLE analysis of the company’s environment since this framework is highly useful in singling out the aspects promoting companies’ success and issues presenting obstacles or challenges. Disruptive and aggressive strategies of Uber are discussed as the most prominent approaches utilised by the company to maintain its leading place in the market.
Introduction
Uber has grown exponential success in only about a decade of its operating in the ridesharing market. The company has drawn the attention of competitors and analytics alike due to its unique strategic management approaches. Whereas some of Uber’s methods are criticised, it is generally agreed that the methods utilised by the company are highly successful and lead to unprecedented customer loyalty and profitability. The paper aims at analysing Uber’s strategic management, including the mission, vision, and goals pursued by the organisation, its major strategies, and the ways of implementing them. The objective statement of the paper is singling out the main strategic approaches utilised by Uber and analysing their benefits and limitations, as well as performing the situation analysis of the company’s activity, including the PESTLE framework for presenting the external environment of the organisation.
Purpose
Strategic management is the process of operating the organisation’s mechanisms in such a way that would allow gaining its long-term goals. The main components of strategic management are the purpose, situation analysis, strategy, and implementation (Witcher, 2020). The purpose serves as the major rationale for any company’s existence, and Uber is not an exception in this relation. The ones responsible for formulating the purpose are top-level managers. Further, the purpose is disseminated to all employees and customers via the vision and mission statements, as well as through values.
The company’s vision statement is making transportation services acceptable to everyone in all parts of the world. To pursue its vision, Uber focuses on consumers’ tendency to utilise smartphone applications. Namely, the company became famous for its “there’s an app for that” economy five years ago (Matherne & O’Toole, 2017). Since the application introduced by Uber was easy to use and improved continuously, more and more people preferred the company’s’ services. With the increased number of clients, the geographic scope of Uber’s activity also grew (Matherne & O’Toole, 2017). As a result, the vision statement, which concentrates on the future, helps Uber’s managers to boost its potential and become more successful and profitable.
Meanwhile, the mission statement focuses on the present and on the actions taken by the organisation to achieve short-term goals. Uber’s mission statement has been altered recently, and now it sounds like “We ignite opportunity by setting the world in motion” (Kundu, 2018, para. 1). By formulating such a mission, Uber strives to open new opportunities to people every day, making small but significant steps forward.
Finally, the third essential element of Uber’s strategic purpose is presented with its values. The company’s CEO, Dara Khosrowshahi, announced a new set of values in 2017 and expressed his hope that each employee would pursue these norms in their work. The first value is building globally and living locally, which means that Uber strives to connect with its drivers, customers, communities, and cities on a daily basis (Khosrowshahi, 2017). Other values include the obsession with customers, promoting diversification, acting like owners, being persevering, valuing ideas more than hierarchy, and taking risks (Khosrowshahi, 2017). Uber works hard to earn clients’ loyalty and trust, welcomes individuals from diverse backgrounds into the team, and seeks solutions to the problems that have been identified. The company is not afraid to acknowledge its mistakes and does not look for the simplest solutions, preferring to overcome difficulties that arise on the way to success (Khosrowshahi, 2017). Uber values the opinions of its employees and does its best to promote the values throughout all of the working processes. The components of the organisation’s purpose help the management team to gain the best results.
Situation Analysis
The External Environment: The PESTLE Framework
Situation analysis includes the external and internal environments of an organisation’s activities and its strategic objectives. The external environment incorporates the conditions affecting the company and the industry in which it operates, the level of competition being the most important aspect of these circumstances (Witcher, 2020). One of the best approaches to analysing the external environment is the PESTEL framework, which allows assessing the political, economic, social, technological, environmental, and legal aspects of an organisation’s work.
The political and legal environments of Uber are rather controversial due to the lack of clear regulations at the beginning stage of its operating. It has caused much debate whether the company or its driver is to blame in case of an accident (Greenwood & Wattal, 2017). The problem is that Uber drivers are freelancers with a high level of autonomy, including such aspects as working hours, vacations, and areas of work (Möhlmann & Zalmanson, 2017). Furthermore, some countries’ legislation demands a taxi licence from every taxi driver, whereas Uber does not require one. Another problem is that with its disruptive innovation approach, Uber tends to enter markets of different countries first and only then starts thinking about legal issues (Edelman, 2015; Nowag, 2016). Hence, the political and legal aspects of Uber’s work frequently pose threats to the organisation.
The economic environment is concerned with the company’s choice of economic relations. In Uber’s case, the operations are carried out in the conditions of the sharing economy (Lee, Chan, Balaji, & Chong, 2018). This approach presupposes that intellectual and physical resources are shared within the organisation. Specifically, the number of drivers hired by Uber depends on consumer demand. Also, the location selection is based on the needs of people in Uber’s services. Therefore, the sharing economy enables the company to control the demand and meet its fluctuations promptly. The sharing economy has seized being regarded as a niche market and has become a profitable trend attracting many users and large investments (Möhlmann, 2015). At the same time, it is crucial to admit that Uber’s choice of the economic environment has led to the dissatisfaction of its competitors who claim the company’s strategies to be unfair.
The social environment of Uber is highly favourable since the company’s clients enjoy the simplicity of accessing the platform. The selection of an appointment and the pick-up time is easily arranged and, what is highly important to many clients, the process does not require any person-to-person communication. Furthermore, users share their feedback on social websites, which increases the success of Uber’s social activity. Still, one cannot but note that with the growth of customer satisfaction, prices for Uber’s services in some major cities have increased as well. Hence, while the social environment is highly favourable for the company, it sometimes harms the customers.
The technological factors impacting the organisation’s popularity are closely associated with social ones. The whole process of connecting the company and its clients is arranged by means of technologies. With the help of the application, users can estimate the cost of their ride depending on such aspects as the weather, distance, and location. As Tamberino (2015) remarks, Uber’s focus on technological development allows the company to save costs on arranging the brick-and-mortar presence in every city where its services are available. Due to technology, the organisation not only expands its driving services but also fills in other segments, such as food delivery. Uber has gained a high level of customer loyalty due to the simplicity of its technological environment. However, the dependence on technology can sometimes serve as a negative factor. For instance, when the application is out of order, many drivers and clients suffer due to the impossibility to maintain a connection.
Finally, the environmental constituent of the company’s activity should be analysed. As any transportation organisation, Uber is criticised for contributing to traffic congestion and excessive fuel usage in comparison to public transportation. Even though the rate of vehicle miles travelled in large city’s metropolitan areas is not high, Uber is responsible for a considerable amount of congestion in cities’ core counties (Hawkins, 2019). Further investigation of Uber’s environmental impact is needed to make exhaustive conclusions on this matter.
Overall, the external environment if Uber is highly promising despite some difficulties. The company faces challenges in the legal and political dimensions and is in a dubious state concerning the environmental effects. However, its social, technological, and economic environments are favourable for the organisation’s further development. If Uber takes care of its legal issues and takes effort to minimise its environmental footprint, it is likely to remain the most successful company in the sphere of vehicle rental.
The Internal Environment
The internal environment of Uber incorporates such aspects as the company’s capabilities, strategic resources, and core competencies. The capabilities of the organisation are high due to the practical client interface. Also, Uber takes care of each customer and makes sure that all of their needs are met. Uber’s drivers are skilled and polite, and they are always on time. Customers can trace the car with the help of their application, and they know how much they need to wait and how long their ride will take. The key resources available to the company are network effects utilised by Uber. The app, its algorithms, and data are the elements of resources that make the system work productively. It is crucial for the organisation to nurture positive relationships between its employees and clients in order to gain the best results. Apart from the mentioned constituents, skilled engineering services, technologies, and local staff members are also crucial as resources. As for the core competencies of Uber, they are mainly focused on the use of the application. Customers’ gadgets help them to arrange rides effectively and efficiently without any delays and difficulties.
There are some issues that can undermine the organisation’s internal environment’s success. These include negative relationships between employees and clients and the dissatisfaction of the former with working conditions. Although the company does everything possible to minimise such risks, they still occur sometimes. For instance, the algorithmic management model favoured by Uber frequently frustrates drivers (Möhlmann & Henfridsson, 2019). The three areas in which drivers express most concerns are being under constant surveillance, having little transparency, and feeling dehumanised. Being supervised all the time can lead to decreased productivity and increased dissatisfaction, which can have a negative impact on the relationships with customers (Möhlmann & Henfridsson, 2019). The next problem refers to transparency: drivers are dissatisfied with the fact that whereas the application has access to all of their information, they do not own data about their ratings, job allocation, and payment structure of payments. Finally, the dehumanisation issue is associated with drivers’ feelings of isolation and loneliness and the lack of socialisation with colleagues (Möhlmann & Henfridsson, 2019). To mitigate these problems, Uber should enable information sharing and increase opportunities for human contact.
Strategic Objectives
In order to continue its successful development, Uber sets strategic objectives and works hard on reaching them. The key focus of the organisation is the provision of reliable transportation services, and the major strategic goal related to this focus is continuous global expansion and the arrangement of high-quality connections between customers and drivers. Uber is frequently criticised for its disruptive innovation strategy, which leads to legal compliance issues in different countries (Nowag, 2016). However, at the same time, no one can compete with Uber’s success in the market. Hence, the strategic goal of expanding its services has been pursued successfully.
Another strategic objective of the company is the establishment of strategic partnerships. Specifically, Uber has initiated partnerships with other businesses utilising apps, such as Trulia, Virgin America, and Spotify (“Strategic partnerships fuel,” n.d.). Such partnerships help to increase recognition and brand awareness for both parties. The collaboration with Spotify enables Uber users to stream their favourite tunes while riding in the company’s car (“Strategic partnerships fuel,” n.d.). As a result, more personal connections with clients are built, and a competitive advantage over other taxi companies is gained.
One more strategic objective of Uber is the optimisation of social media. Being active of Instagram, Twitter, Facebook, and other social platforms allows the company to share news, find followers, and increase the awareness of its services throughout the world (Pratap, 2018). With the same goal, Uber adopts digital marketing approaches instead of traditional commercials, which leads to successful information dissemination. Overall, Uber’s strategic objectives are related to the increase of its brand awareness and the growth of client base. By pursuing the set goals, the organisation is becoming more and more successful.
Strategies
Disruptive Strategy
Uber’s strategy is most frequently referred to as aggressive and disruptive. Uber has “rethought” the whole transportation process by simplifying the connection between the user and the company (Schneider, 2015, p. 12). Being a disruptive innovator, the organisation practices entering the market first, and only then meeting legal compliance challenges (Nowag, 2016). Whereas traditional transportation companies are based on the oligopoly approach, Uber prefers minimal investment, restricted oversight, and no need to pay upfront for the right to operate in the market (Schneider, 2015). Furthermore, such a strategy is not always beneficial for municipalities who have always relied on the revenue from transportation business.
One of the core problems with Uber’s disruptive innovation strategy is that it contradicts the traditional arrangements within the transportation services industry. Commonly, taxi drivers need to obtain an occupational license to work with passengers. Furthermore, such drivers are not allowed to pick up clients outside of their license’s jurisdiction. Also, the number of such drivers is frequently restricted, and the prices for their services are regulated by municipality bodies (Cramer & Krueger, 2016). Whereas such an approach is aimed at raising people’s safety, it can also lead to the reduction in the economy’s efficiency and to resources’ misallocation.
The use of innovative ridesharing services, such as Uber, has led to an unprecedented level of competition in the taxi industry. Instead of regulating legal issues typical for traditional taxi companies, Uber utilises Internet-based mobile technology to connect its customers with drivers, which leads to a higher capacity utilisation (Cramer & Krueger, 2016). There are several factors contributing to the success of the company’s strategy. Firstly, Uber has a more efficient technology of matching drivers and passengers than traditional taxi services. Secondly, Uber operates at a larger scale, which allows for faster matches. Next, taxi regulations are inefficient, which allows Uber to avoid many of them. Finally, Uber has a flexible labour supply model promoting the connection between demand and supply (Cramer & Krueger, 2016). Therefore, although Uber’s strategic approach may be harmful to competitors and municipalities, it is highly effective for the company itself, its drivers, and passengers.
Aggressive Strategy
Another distinct strategic approach utilised by Uber is the aggressive one. This strategy is used to hire talented employees and gain a high level of employee retention. Recently, the company has acquired the tactic of poaching Google’s top experts in “mapping and geospatial solutions” (Wingard, 2015, para. 1). With the help of this method, Uber has gained a considerable competitive advantage as talented engineers and executives expressed their desire to work for the company with a progressive corporate culture. The opportunity for professional growth is embedded in Uber’s commitment to its employees (Wingard, 2015). Although the organisation has been reprimanded for not offering its drivers such benefits as health insurance, its commitment to employees results in high engagement and performance levels. As well as any other business, Uber strives to gain financial success. However, the company’s major interest is retaining talent and investing in it.
The aggressive strategy of Uber is promoted in four directions. The first one is understanding the dynamics of the talent war (Wingard, 2015). Previous generations of employees used to seek security, compensation, and opportunity from their workplace. Meanwhile, millennials, who constitute the major part of the workforce nowadays, are interested in organisations that tend to invest in career development and employees’ growth (Wingard, 2015). Prospective employees value the opportunity to obtain skills and competencies that they will be able to utilise both at present and in the future. Hence, they choose Uber as the organisation providing such possibilities.
Another point of Uber’s aggressive strategy is generating a culture with a passion for learning. The role of culture in professional development may be twofold: on the one hand, it can serve as an obstacle to one’s successful integrating into a company’s processes, and on the other hand, it can generate competitive advantage (Wingard, 2015). When the culture promotes continuous learning, it allows creating conditions for support and adaptability. Employees in such organisations are not merely interested in performing their duties but also feel empowered. As a result, Uber’s drivers come up with innovative concepts and ideas, and in exchange, the company supports those who are willing to obtain new skills and develop their talent.
The third aspect of Uber’s aggressive strategy is the enhancement of effective management. Whereas previously, it was enough for businesses to respond to market demands promptly, at present, this is not sufficient. Thus, Uber’s managers are trained in the abilities to communicate with colleagues affect subordinates. Continuous learning helps to promote the strategies of growth and to create competitive advantage (Wingard, 2015). Carefully selected managerial techniques enable the organisation to arrange positive relationships with investors and other stakeholders.
Finally, Uber’s aggressive strategy also includes persistent promotion of the brand. Talented employees, who receive an opportunity for continuous learning, become the organisation’s ambassadors who embody the brand and promote its values both to new drivers and to potential partners. In modern market conditions, talent is considered as “the newest form of currency” for start-up companies (Wingard, 2015, para.9). Uber’s strategy of recognising and retaining talent makes it possible to develop the company proactively.
Strategy Implementation
The final stage of strategic management analysis involves reviewing the ways of strategy implementation. This process incorporates such factors as strategy, structure, systems, style, staff, skills, and shared values (Witcher, 2020). The combination of these elements allows Uber to set strategic goals effectively and work toward meeting them. Recently, the company has shifted the focus of its strategic development to building trust with the key stakeholders, and the implementation of this practice has led to significant positive outcomes (Bariso, 2019). The three groups of stakeholders with which the company shares values and for which it accommodates its style are consumers, regulators, and potential investors.
The strategic approach to consumers is concerned with Uber’s ability to provide people with reliable, convenient, and cost-efficient transportation services. After experiencing several high-profile safety incidents, the company changed its procedure of drivers’ background checks to provide passengers with a deeper sense of security (Bariso, 2019). The result of this approach was manifested in boosted loyalty and trust from clients. The second stakeholder group the relationships with which directly and significantly affect Uber’s strategic management is represented by regulators. The organisation’s CEO takes care of ensuring a smooth approach toward cooperation with regulators. The company strives to build strong relationships with cities and governments as major regulators of the business niche in which it operates. Finally, Uber pays due attention to collaboration with potential investors. The company realises the need to address the issue of autonomous driving (Bariso, 2019). However, Uber arranges this process in a balanced way so as to present a picture of potential growth to those the partnership with whom is probable. Uber includes not only the need for growth in its strategy implementation but also the need to build trust.
The company’s strategic management has led to considerable positive outcomes. In comparison to its major competitor, Lyft, Uber boasts more downloads and a larger user base (Sonders, 2016). Uber’s users are more loyal to the brand than those of other similar companies. The success of Uber starts with the number of app downloads, which signifies customer’s interest in services and the likelihood to use them. Further, the monthly activity of app use is rather high, which adds to the organisation’s competitiveness. There are several potential reasons for Uber’s app being selected by people most often: awareness, pricing, availability, and brand perception (Sonders, 2016). Due to thoughtful strategic management and implementation, Uber was able to become the leader in the ridesharing business, and it continues to grow its success and profitability.
Conclusion
Due to its disruptive and aggressive strategies, Uber was able to gain unprecedented success in the field of ridesharing. Despite some legal- and political-related issues faced in different countries, Uber has managed to become and remain the leader in the selected business industry. High levels of customer loyalty and employee retention signify that the strategic management of the organisation is overall successful and has the potential for improvement. Uber is interested in promoting its employees’ learning and retaining talent within the company. At the same time, Uber takes care of keeping each client satisfied with the services provided and continually works on the enhancement of the options provided by the application. The company’s external and internal environments are favourable for the growth and development of its services. If Uber’s CEO and managers maintain cooperation with employees, customers, and investors at the same level, they are likely to gain even more benefits for each stakeholder.
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