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Unraveling Uber: A Deep Dive into the Company
Uber technology was an idea incepted in 2009 with the aim of solving an increasing problem: planning personalized transportation, accessing taxi services and reducing the cost of transportation. The smartphone-based app gives its users an opportunity to hail a cab from a tap of a button. Years later, the company is struggling to tackle even more difficult problems: reducing cities congestion by having urban population access various locations on fewer cars and promoting transportation safety. A company that started in San Francisco about five years ago has revolutionized the taxi industry fighting all odds in the industry from regulators to competitors to become a global entity. Uber logistics business continues to grow by venturing into the international market, today the company operates in over 60 countries and generates $2 billion of profits annually. Moreover, the firm estimates to link their drivers and customers daily making up to 70 million trips reported in all their global operations.
PESTEL Analysis
Political
Although Spain suffers from political unrest from December 2015 with different parties not agreeing on the prime minister appointment, the local taxi industry is deemed protected. The introduction of Uber into the sector poses different risks and controversies such as who incurs the insurance in cases of accidents between the Uber driver and the company as well as mode of taxation.
Economic
The firm operates on a sharing economy where the company shares into the intellectual and physical resources by hiring drives to pick and drop customers to their various locations. In turn, the organization earns a 20% commission on the total cost of the trip (DeMasi, 2016). The economy of Spain continues to suffer from the political unrest resulting in a drop in the GDP that translates to low household income. Therefore, the demand for private transportation may be negatively affected leading to losses by Uber.
Social
Madrid has a majority of its population being in the workforce thereby providing a broader market to appeal their services. Uber has successful strategies in different social and cultural set-ups developing unique abilities to operate by encouraging their customers to share their experiences online hence the popularity.
Technology
All the Uber operations are technology dependent. The company users Uber app to link both their subscribed Drivers and customers. Most of the Uber Drivers prefer 4G networks to facilitate their connection to the platform. Therefore, any fault in the app results in losses to the company. Spain is considered 16th among the leaders in technological and research development funding. The government also pledged to spend 2% of the GDP in research and technological advancement thus the company can be assured of the stable technical environment. Additionally, the country has a 65% internet usage among its population representing a broader market (DeMasi, 2016).
Environment
Most people argue that the firm increases fuel usage and traffic congestions in the major cities they operate. However, studies have not found any correlation between increased pollution in the cities with the introduction of Uber. Amazingly, Uber organization argue eludes that the steady aim to reduce pollution in the cities by reducing the number of cars on the road: “more people fewer cars.” This situation would suggest more people deciding to take Uber to work other than their cars.
Legal
The introduction of Uber services caught many states unaware of the statutory provisions and regulations of such services. The in Spain, the law, forbids persons from offering transportation with the intention of making gains in private cars. Therefore, unless the regulations are changed Uber operations will be illegal or forced to only hire drivers in the public transportation operating public service vehicles (Bashir et al. 2016).
Situational Analysis
Uber is a technology firm that offers a platform where persons can link with the nearest available taxi services for transportation to their destination. Therefore, the company solely distribute their services both to the taxi drivers and the public willing to travel their locations in Uber cars (Bashir et al. 2016). Although the company has grown to be world’s largest taxi firm, the company does not own any vehicle. The increasing Technological advancement, particularly in the mobile smartphone applications, will not only result in the improvement of users interaction but also competition from similar forms of the same functionality.
Market Summary
• The number of a taxi in operation has remained stable in Spain for two decades. For example, the state had 72,071 taxis in 1994 in comparison with 70624 operational taxis in 2012, with 15000 being active in Madrid city only.
• Currently, the number of taxis has generally increased due to the city expansion both in geographic and population. Today, Spain has more taxis per 1000 residents access as compared to other European capitals.
• The increasing technological advancement in mobile applications such as Uber and internet penetration will result to increase taxi preference as they promote convenience and safety in future.
Market Demographics and Geographic Analysis
According to the Spanish statistics, Madrid metropolitan has over 3.2 million residents and 6.5 million of people making the Madrid community. The 2017 report suggests a total population of six hundred thousand people living in the city to be aged between 40-44 age range is the largest population. This population is followed by 45-49 individuals and 35-39 respectively by percentage. Therefore, these statistics suggest a large population of a working group who are likely to commute from home to work daily thus providing the company with an opportunity to link them with taxi cabs (Dudley et al. 2017). Additionally, Madrid is in the undulating plateau referred to as the Meseta with an elevation of 646 meters above the sea level and extends to the low lands throughout the city. This situation often contributes to communication problems such as internet penetration. Therefore, the company operations may be affected by accessing certain parts of the town as the activities are internet dependent.
Market Behaviors
Population in the Spanish cities such as Madrid and Barcelona have increased significantly over the decades. Since 1994 there has been a reported decrease in the number of taxis per 1,000 residents. Although different studies cite an increased availability of taxis in the Spain capitals, the benefits have been translated to the consumers who still find it hard to access the services of taxis. Additionally, the economic crisis that has paralyzed public transportation where 15.8 % Spaniards avoiding buses and tubes may be extended to the taxi industry hence reduce profits and increased competition (Dudley et al. 2017).
Market Needs
As the economic crisis continues to cripple the economy resulting in a reduction in disposable income, the population will be actively looking for other cheaper alternatives to reach their destinations. Therefore, the company would gain market share by offering competitive pricing as compared to the traditional taxis.
The existence of companies such as Cabify will intensify the competition in the industry. However, the company can gain market share by offering convenient, fast and reliable services. This need results from reported cars in adverse conditions, and longer waits by clients whenever they require taxi services from the local platform and traditional taxis.
Market Growth
The increasing population in Madrid signifies a growing need for taxi services. The country is experiencing significant economic disruption resulting in low disposable income among members. Therefore, this situation creates an opportunity for the company to exploit the new and growing market by availing cheaper alternative transport systems. Moreover, the company has diversified over the years to serve all the market segment including high-end transportation such as Uber-chopper. Therefore, the firm would integrate its operations and grow by expanding to different market segments.
Swot Analysis
Strengths
• Over the years Uber has grown into a global entity with a current value of $68 million and operated in over 60 countries.
• The low fixed investment makes it easier for the company to expand thus adding more cities to its network leading to rapid expansion of the company.
• Uber is known to be a smart marketer with its ability to adapt to different markets that it establishes the business. This condition is attributed to the business exposure to international markets.
Weaknesses
• Although the company provides strict guidelines of operations their drivers, the business is highly workforce dependent, and the reputation is dependent on the driver behavior to the clients.
• Due to low barriers to entry in the market, Uber experiences high levels of competition from different entrants in the market.
• Despite the regulations, Uber has faced several controversies about the drivers and their behavior which further creates a bad reputation among customers.
Opportunities
• Uber can venture into special transport services such as paid emergency vehicles or ambulances under specified conditions.
• As the economy of Spain improves resulting in increased disposable income, clients will be willing to spend more on convenience
• The unorganized local cabs in the market provide an opportunity for Uber expansion. Moreover, customers elude to rudeness among the drivers due to lack of accountability.
Threats
• Increasing competition makes it difficult to retain customers or drivers as any change in monetary could easily sway them to other competitors. Moreover, the company may face a revolt from local cab drivers.
• Unclear government regulations are likely to affect the company operations as the legal status is undecided to whether the company should be treated like an IT company or current Taxi company.
Competitive Analysis
Cabify is a local competitor that already enjoys the familiarity of the local market as well as the popularity. The company has over 500,000 users of their services in already 14 various cities in Latin America and Spain (Dudley et al. 2017). Although Uber would depend on their international operations experience and reputation to gain market share, the one car out of 30 allowed for VTC-model already enjoyed by Cabify would affect its operations.
Product and Service Offerings
Uber products are differentiated to levels giving the clients and drivers a choice of what they think fits them. The company offers Uber X, Uber pool, Uber XI and Uber Premium. This strategy translates to different charges targeting different income levels. For example, Uber X is the cheapest option aimed at servicing those groups of people working on a tight budget and willing to save more such as students. On the other hand, Uber Premium target high-end individuals who have no problems paying for more such as employers and professionals. In return, they have access to high-end cars as compared to Uber X subscription.
Keys to Success and Critical Issues
Uber is likely to gain market share through the availability of cheaper alternative transport in the city. The entry of the company in the market comes at a time when the country is experiencing economic crisis resulting in the preference of cheaper alternative transport system. Moreover, Uber is known to offer more affordable, safer and reliable transportation internationally and a robust social marketing strategy encouraging their clients to leave comments about their experience with Uber. This strategy could further facilitate the penetration and growth of Uber into the market.
However, the company must first engage the members and unions of the traditional taxi systems to explain their operations and have a MoU to avoid revolt against the firm. Additionally, the organization must strictly adhere to the regulations and laws governing taxi operations in Spain to prevent illegal activities.
Mission
Make transportation affordable, reliable, and safe for everywhere, for everyone
Target Market
The company aim at acquiring a market share through development of differentiation strategy to appeal to various demographic groups. Uber uses a cost-based differentiation enabling the firm to gain a pricing advantage that is transferred to the customers hence access to transportation at relatively lower prices as compared to public and other available modes of transport.
Marketing Objectives
• To provide the customers with safe, reliable and convenient transportation
• To create a platform allowing clients to request and provide physical delivery of services and goods.
Positioning
The organizers aim to be the most preferred and primary transportation service among millennials as well as business people. Therefore, ”more for less” would distinguish the company from its competitors as it expresses the quality of service while associating such class with low expenditure.
Strategies
Convenient, safe, low price transportation system, limited to the City of Madrid and selective promotion to low-cost products.
Market Research
Uber intends to develop a direct market link with the client giving them an opportunity to leave comments and suggestions in the app after successful usage of the company services. This strategy will ensure frequent monitoring of consumer demands as well as offering insights into the trends in the market.
Creative Process
The development of marketing strategy relies in finding the reason behind every customer prefers to the Uber service. For, example, some customers may be influenced by prices while other may be influenced by the company incentives. Keeping the customers happy and satisfied will be core to the development and improvement of the services and operations of the business.
Tagline
”where to?”
Logo,
Advertising
Madrid ride with Uber
Other Promotion
The or4ganization to enroll communication marketing strategy through social media such as Facebook, Twitter and Instagram with attractive photography linking viewers to the app
Table 1.0 Projected Cash Flow Statements
Months
Items
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
Totals
Cash inflows in USD
Beginning cash
B/F
261,000
520,000
823,000
1,136,000
1,364,500
1,657,000
1,719,200
1,873,700
2,155,900
2,406,400
2,717,400
Cash Sales
750,000
850,000
900,000
900,000
850,000
960,000
900,000
800,000
930,000
880,000
980,000
900,000
10,600,000
Collection (debtors)
50,000
84,000
78,000
75,000
60,000
60,000
70,000
55,000
62,000
60,000
60,000
60,000
774,000
Total cash inflows
800,000
1,195,000
1,498,000
1,798000
2,046,000
2,384,500
2,645,000
2,574,200
2,865,700
3,095,900
3,446,400
3,677,400
28,026,100
Cash outflows
Purchase
200,000
300,000
310,000
300,000
320,000
360,000
340,000
340,000
350,000
330,000
370,000
380,000
3,900,000
Salaries & wages
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
1,200,000
Rent
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
120,000
Payment(creditors)
200,000
220,000
210,000
210,000
210,000
210,000
210,000
210,000
210,000
210,000
210,000
210,000
2,520,000
Loan interest
15,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
290,000
Transport
6,000
12,000
12,000
12,000
12,000
12,000
12,000
12,000
12,000
12,000
12,000
12,000
138,000
Advertising
8,000
8,000
8,000
5,000
4,500
4,000
3,800
3,500
2,800
2,500
2,000
1,000
53,100
Trading license
-
-
-
-
-
6,000
--
-
-
-
-
6,000
12,000
Total cash outflow
539,000
675,000
675,000
662,000
681,500
727,500
925,800
700,500
709,800
689500
729,000
744,000
8,458,600
NET CASH
261,000
520,000
823,000
1,136,000
1,364,500
1,657,000
1,719,200
1,873,700
2,155,900
2,406,400
2,717,400
2,933,400
19,567,500
Table 1.2 Pro forma income statement
Item
Year 2019
Year 2020
Year 2021
Sales
Less Cost of goods
Gross profit
Expenses
Wages and Salaries
Transport
Rent
Advertising
Stationery
Depreciation
Loan repayment
Repair and maintenance
Total expense before tax
Net profit before tax
Less Provisional tax 21%
Profit after tax
750,000
350,000
400,000
100,000
50,000
10, 000
15,000
25,000
35,000
80,000
50,000
365,000
35,000
(7350)
27,6500
850,000
350,000
500,000
100,000
50,000
10,000
20,000
30,000
25,000
80,000
35,000
350,000
150,000
(31,500)
118,500
950,000
400,000
550,000
100,000
50,000
10,000
20,000
30,000
20,000
80,000
38,000
248,000
302,000
(63420)
238,580
Category
Monthly budget
Actual amount
Difference
Income
Debtors
50,000
55,000
5000
Sales
750,000
850,000
100,000
Totals
800,000
905,000
105000
Expenses
Wages and Salaries
100,0000
110,000
10,000
Depreciation
35,000
44,000
9,000
Transport
50,000
53,000
3000
Rent
10,000
14,000
4000
Advertising
15,000
20,000
5000
Loan repayment
80,000
80,000
0
Stationery
10,000
18,000
0
Repair and maintenance
500,000
580,000
80,000
Total expenses
800,000
905,000
101,000
References
DeMasi, A. A. (2016). Uber: Europe’s Backseat Driver for the Sharing Economy. Creighton Int’l & Comp. LJ, 7, 73.
Dudley, G., Banister, D., & Schwanen, T. (2017). The rise of Uber and regulating the disruptive innovator. The Political Quarterly, 88(3), 492-499.
Bashir, M., Yousaf, A., & Verma, R. (2016). Disruptive business model innovation: How a tech firm is changing the traditional taxi service industry. Indian Journal of Marketing, 46(4), 49-59.
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