Introduction

Effectiveness of the business strategies determines the extent to which the business organizations will be able to have favorable opportunities. In addition, in the recent time, it is also important for the contemporary business firms to determine the market environment only to implement the business strategies accordingly (Mithas, Tafti & Mitchell, 2013). Moreover, in the current era of the international business, marketing environment is also much diverse and challenging and effective determination can only help in operating in different countries seamlessly. Business strategies include the marketing strategy, pricing strategy, market entry strategy and operational strategy. Relevancy of these strategies can be identified in the case of a large scale firm.

Uber is one of the leading companies in the current time with having their operations in different countries across the world. In addition, they are also being credited for changing the entire scenario of cab market. It is reported that Uber is having their presence in more than 750 metropolitan cities and 65 countries across the world and this denotes their huge scale of operation (uber.com, 2019). It is also reported that in the current time, more than 15 million trips are completed by Uber per day. In the market of the United States alone, Uber is holding the market share of more than 70 percent. However, with the increase in competition and rise of the competitors such as Grab and Lyft, Uber is having the need to review their strategic intent.

This report will discuss about the external and internal challenges and opportunities for Uber with the use of strategic models such as PESTLE, Porter’s five forces and value chain. In addition, SWOT analysis will also be discussed to identify the major internal factors. TOWS matrix will also be done to identify three potential actions for the company. Ansoff matrix will be used to identify the strategies for the stated actions and Integration Responsive framework will be used to identify the market responsiveness of Uber outside of the United States. Lastly, market entry strategies followed by Uber in entering in India and China will be identified.

PESTLE analysis

Political factors

Uber is facing diverse political factors due to the fact that they are having their presence in different countries across the world. One of the major political challenges for Uber is the negative approach of the governments of different US states towards their business model. In addition, emergence of the unethical business practices is further causing challenge for Uber in dealing with the political factors (Hall & Krueger, 2018). However, on the other hand, the increasing trend of capitalization and pro business approach in the market, political challenges for Uber are getting lowered.

Economical factors

Emergence of the new competition is the major economical threat for Uber and it is evident in their current financial performance. This coupled with the discounts and being offered is affecting the financial performance of Uber. In addition, the major market for Uber such as the United States is showing less growth and is more getting saturated now. Thus, the potentiality for Uber is also getting reduced (Wirtz & Tang, 2016). On the other hand, markets in the emerging economies are showing good growth and presence of Uber in these markets will also be beneficial for long term sustainability.

Social factors

Social acceptance is favorable towards availing the service of Uber and with the huge brand identity of them across the world; social factors are less challenging for them. However, the emergence of unethical behaviors, ineffective management of drivers, and security breach for the customers is affecting their social environment (Castillo, Knoepfle & Weyl, 2017). With the change in the social trend and preferences, customers are more willing to have convenience in riding cab, which is increasing the opportunities for app based cab services like Uber.

Technological factors

Business model of Uber is heavily reliant on the technological advancements. Services being offered by Uber through their cab are being regarded as the benchmarks for other ride hailing services. However, on the other hand, technological sector is witnessing rapid development and evolution, which is posing challenge for Uber due to the reason that cost is involved with the technological development (Chen & Sheldon, 2016). Moreover, Uber is present in number of countries and not all these countries are superior in terms of technological infrastructure. This is restricting Uber in gaining competitive advantages by developing their technological base.

Legal factors

Government of the United States is coming up with stricter rules and regulations in respect to the online can services like Uber. This is in line to the recent safety issues identified in these services. Adhering to these regulations will cost more for Uber and potentiality will get reduced for them. It should also be noted that these regulations will be different in different countries and Uber will face the challenge to adhere to all of them (Cannon & Summers, 2014). However, on the other hand, Uber is having huge access to the financial resources and they are capable enough to deal with this situation.

Environmental factors

Environmental factors much relevant in the current business scenario and organizations such as Uber are having much relevancy. This is due to the reason that Uber is directly impacting the environment by their vehicular pollution. However, in the recent time, they are also testing and initiating electric mobility for reducing emission. This is also helping Uber to create positive image in the market.

Porter five forces analysis

Bargaining power of the customers

Bargaining power of the customers is more in the United States market. This is due to the reason that customers in the United States are having other options also such as Lyft. Majority of these services are offering similar services at same price points. In addition, switching cost is also low for the customers, which is further increasing the bargaining power for them (Dobbs, 2014).

Bargaining power of the suppliers

Uber is having the upper hand in bargaining with the suppliers such as car manufacturers and drivers as their partners. This is due to the reason that brand value of Uber is huge and car manufacturers are having huge potentiality in tying up with Uber for their bulk sales. Thus bargaining power of the suppliers is low for Uber.

Threat of new entrants

Threat of new entrants is moderate for Uber due to the reason that good number of cab services are operating in the United States. They are offering similar sets of services. On the other hand, Uber is the global leader in this industry and thus enjoying the maximum market penetration in the market. This cannot be matched by the new entrants in the market. In addition, the new entrants will not have the financial capability to match the global business presence of Uber (Porter & Heppelmann, 2014).

Threat of substitutes

Threat of substitute is high for Uber due to the reason that same services are available from other providers also. Customers are having the options to choose any options. Moreover, lack of differentiation is also contributing in increasing the threat of substitutes for Uber.

Value chain analysis

Primary activities
Inbound logistics	Inbound logistics of Uber are entirely based on technology as customers will book a cab from their cab to have it in their doorsteps.
Operations	Operations are centralized for Uber and each of the cabs is connected with the control room.
Outbound logistics	Customers can avail their cab ride to their preferred choice of destination and will pay accordingly. This process is also entirely based on technology.
Marketing and sales	Uber is known for extensive marketing and sales activities. However, huge expenditure on marketing and sales is affecting their profitability.
Services	Customers are given seasonal discounts, loyalty bonus, and helpline numbers in case of an emergency.
Secondary activities
Firm infrastructure	Uber is having minimal assets with them rather relying on independent partners such as drivers. However, access to millions of independent partners is enabling Uber to manage their operation across the world.
Human resources	Uber is facing issues in terms of human resource management as they are accused in past also for mismanagement of employees. This is mainly being amplified as Uber is having less permanent employees.
Technology development	Uber is in the front runner position in terms of technological development. However, the rapid development and evolution of the online cab industry is causing challenge for Uber in coping up with.
Procurement	Uber is operating in cab industry and thus they are not depending on direct procurement. They are majorly having partnerships with the car manufacturers in supplying the inventories.

SWOT analysis

Strengths	Uber is enjoying huge brand value in the global market as well as in the United States. This is further helping them in increasing their revenue.Global reach and high market penetration is also helping Uber in being the true global cab service in the world.Offering different and diverse services in the United States is helping them in catering to different customer segments. Market leadership status of Uber in the United States is helping to mitigate the challenge and threat by the new entrants.
Weaknesses	Emergence of unethical business practices is affecting the brand value of Uber. This will have long term impacts (Greenaway, Chen & Crossler, 2015). Market of the United States is already saturated and over dependence of Uber for United States is limiting their potentialities.Uber is having less control over their drivers as they are not being considered as the fixed time employees. Thus, the service standard is beyond control of them.Lack of differentiation is causing Uber to face more threat of competition from their competitors.
Opportunities	Offering or diversifying different services will help in generating revenue from the market of the United States.Offering electric mobility solutions will help Uber to create new opportunities in the market.Uber is already a front runner in terms of offering latest technology and thus they will find more opportunities in the long term.
Threats	Emergence of new regulations and standards will pose challenge for Uber.Emergence of new competition in the market will affect the profitability of Uber.Changes in the preference pattern of the customers will also reduce the market potentiality for them.

TOWS matrix

Strengths – opportunities	It is recommended that the brand value and identity of Uber should be leveraged in diversifying in different sectors such as online payment systems. This will help Uber in targeting new customer segments by using the branding. In addition, the high market penetration will also help Uber to reach out to larger section with their new offerings.
Strengths – threats	The high level of market penetration will be helpful in mitigating the threat of new entrants as they will not get matched with that of Uber. Moreover, global reach of Uber will also help in dealing with the changes in the preference pattern of a certain customer section.
Weaknesses – opportunities	Diversifying in different sectors will help Uber in enhancing their differentiated approach in the market. In addition, offering more updated technologies will help them in maintaining a certain service quality standard.
Weaknesses – threats	Control over the drivers should be increased in order to face less legal complications for customer safety. Differentiation should be increased for Uber to mitigate the threat of new entrants in the market.

Ansoff matrix

According to the ansoff matrix, there are four approaches that can be followed by the business organizations to enhance their business in the long term. On the basis of the factors identified in the above situational analysis, three recommended strategies will be discussed for Uber based on the Ansoff matrix. It is recommended that Uber should initiate diversification strategy, which states about the use of new products or service to cater to new market segments. As the cab market in the United States is already saturated and Uber already gained the market leadership status, thus they are having low chance of gaining more from it. In this case, initiation of the diversification strategy will help to further gain new customer segments in the United States.

It is also recommended that Uber should also follow the product development strategy due to the reason that it will help them to gain more market share in the United States. In this case, they should increase the differentiation in their services by adding new services such as onboard refreshment facilities to tap the existing market more effectively. Lastly, it is also recommended that Uber should follow market penetration strategy by offering more affordable services. In this case, they can use smaller cars with fewer facilities to tap the tier III cities. This will help Uber in further penetrating in the existing market.

Discussion of integration responsiveness framework

Other than in the United States, Uber is actively operating in the developing countries such as India and China. However, according to the integration responsiveness framework, it is identified that Uber is following transnational strategy in operating in the foreign countries. This is due to the reason that core service approach of providing app based cab services is same and standardized across all the countries they are operating (Meyer & Estrin, 2014). However, the major change for their services in different countries is on the basis of fleets, pricing and service elements. These factors are being adopted according to the local market trends. For instance, car models used in fleet for Uber in the United States are not the same to what are being used in India and China. In addition, high price points charged in the United States will not be applicable in the Indian and Chinese market. Thus, with the help of the transnational strategy, Uber is delivering their core services with changes in the delivering approach in different countries (Qu & Zhang, 2015).

Pressures for business integration

Trends and preference patterns of the global customers are same across the countries. In this case, organizations offer standardized offerings around the world.
Risk of brand image getting diluted also causes business integration. There are brands, which refrains from adopting specific market elements for avoiding dilution of their global image.
Cost reduction is also an important pressure in business integration. In the case of local responsiveness, more cost is being incurred for research and development, which is not applicable if standardized products are being offered in the global market.

Pressures for local responsiveness

Differences in the customer preference patterns. If the taste and preference patterns of the customers are radically different in different countries, then the organizations are forced to be locally responsive in offering their products or services.
Conflicting cultures and social factors between the customers from different countries also forces companies in becoming locally responsive. If the global offering is conflicting with local culture and social trends, then it will be difficult for the companies to offer standardized offerings.
Attaining higher set of market penetration also influences the companies in becoming locally responsive. This is due to the fact that market adoptive offerings will only be able to penetrate in the target market effectively compared to the standardized offerings.

Types of internalization strategy

One of the major types of internationalization strategy is multi-domestic strategy. This refers to the approach of offering same products or services as in the global market but with some subtle changes in line to the local preference patterns (Tulung, 2017). This helps the businesses in continuing with the standardized offerings along with making them acceptable to different preference patterns around the world. On the other hand, transnational strategy is similar to the multi-domestic strategy but in this case, standardization is being maintained in greater extent such as maintaining the same brand name and other elements across the world (Meyer & Su, 2015). Global strategy is the last type of internationalization strategy, which states about the offering of standardized products or services across the countries.

Market entry strategies by Uber in India and China

Uber is driven by the gig economy business model and it is being followed across the countries they are operating. In the case of both China and India, Uber is following the same model of licensing the drivers with having their own vehicles to use the brand of Uber and to adhere to the company rules and standards (Friedman, 2014). This entry strategy followed by Uber is similar in both the countries due to the fact that business model of Uber is centered on this approach. This is helping them to have less responsibility in terms of investments and employee management.

In both China and India, market adaptation strategy is being followed by Uber and the approach of the strategy is different according to the local market trends. For example, the purchasing power of the Chinese customers and Indian customers is different and in accordance to that, fare charts are being designed by Uber in each country. Furthermore, the rate of commission offered to the drivers is different in China and India. All these factors are being decided based on the local market trends of India and China. It is should be noted that market entry strategy of licensing followed by Uber in India and China is relatively easier to initiate. This is due to the reason that online cab market is limited in both these countries and there are no specific regulations in relation to the foreign investments in this sector. Thus, Uber faced fewer difficulties in licensing the drivers for carrying out their online business in both the countries.

Conclusion

This report concludes that Uber is currently facing a good number of challenges and opportunities in operating in the market of the United States. These challenges and opportunities are being identified in the situation analysis done in this report. In addition, with the help of the ansoff matrix, three strategies are being recommended for Uber, which will help in further enhancement of their business. Moreover, internationalization strategy followed by Uber is also being discussed on the basis of integration responsiveness model. This report concluded that Uber is following licensing entry mode for their gig economy business model in India and China and also following market adaptation strategy.

Reference

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