Business Analysis of Uber

Abstract

Uber or Uber Technologies Inc. is an American transportation company that was founded in 2009 and is in the Taxi/Automotive Industry. The company’s NAICS code is 485310 and they are in the NYSE market (Primary Industry Codes, 2019). Their stock is currently worth $32 a share and their ticker symbol is: UBER. Their annual revenue is reported to be 2.8 billion (Overview of Uber, 2019). However, last year the company earned 11.3 billion showing a growth rate of 42%. Uber has expanded at rapid pace and currently operates in over 785 metropolitan areas worldwide with over 91 million users and over 36,000 employees (Iqbal, 2019).

Uber

Uber is a San Francisco based transportation company that specializes in offering transportation services through the use of an app. The company was originally named Ubercab and was created in 2009 by two entrepreneurs named Garret Camp and Travis Kalanick. However, it was not utilized by the public until 2010 (The History of Uber and their Logo Design, 2017). This is also the same year that the company changed its name what it is now known as, Uber. Uber has a mission statement that states “Transportation as reliable as running water, everywhere for everyone”. Their vision statement consists of smarter transportation with greater availability and fewer cars. Their vision also includes transportation that is also cheaper, safer and creates more job opportunities with the high incomes available for employees (Skrabanek, 2018). The company also offers a range of services that include UberEats, which is a food delivery service. UberPool is another service where drivers pick up multiple people at a cheaper price. UberX, UberBlack, UberXL, UberPlus are also other services that are offered at a higher price. These are more services that the company offers that gives it an advantage over its main competitor Lyft.  Other major competitors for Uber include Lime bike, Ola cabs, and Taxify (Kolodny, 2019).

Major Issues

However, despite their success, Uber has also faced major conflicts and controversies. One major conflict in 2017 that the company faced involved the status of its employees. Previously in contracts with Uber, drivers were labeled as partners to the company. The company claimed that providing their drivers with business opportunities was substantial. Additionally, since the company views itself as a platform instead of a transportation company it did not view drivers as employees. This meant that drivers were not receiving any employee benefits. Several lawsuits from drivers who claimed that they were in fact employees and were entitled to benefits. The courts agreed and on June 13, 2017, Uber drivers were legally considered employees (Ben-Shahar, 2017). Another major issue Uber is currently facing is the massive debt it has acquired. While it was reported that the company generates billions of dollars a year. The company is still not as profitable as it should be. Uber spends most of the money earned in order to cover its billions of dollars in losses at an alarming rate. Last year the company raised 9 billion dollars and last quarter alone the company spent over 5 billion dollars. One major expense faced by Uber that contributes to their increasing debt is its drivers pay. Uber currently gives its drivers 80% of its earning to the driver. However, in order to increase profits, Uber must either lower its pay or raise its fares but, it is Uber’s best interest not to do either (McBride, 2019).  This is because of Uber’ biggest competitor Lyft and a lack of brand loyalty. Uber has to keep its prices low in order to stay competitive and keep customers. Additionally, cutting pay for its drivers would result in employees switching over to its competitors (McBride, 2019).

SWOT Analysis

A SWOT analysis of Uber provides a further in-dept analysis of the company’s strength, weakness, opportunities, and threats. One strength of uber is that it was the first ride-sharing app and is currently the largest. It was reported that the company has over 400 million active monthly users. The company also has built a strong brand which ultimately led to having an increase in brand recognition. It currently has strong recognition in over 50 countries. Additionally, Uber has very low operational costs which allowed to more easily access other cities. There is also no set infrastructure costs which attribute to how fast the company is able to expand. The costs of Uber services are also lower per ride in comparison to traditional taxis (Overview of Uber, 2019). The weakness for uber include that they have been involved in multiple scandals. There have been numerous sexual harassment scandals. These scandals resulted in a campaign that became known as “#DeleteUber”. This campaign resulted in the loss of over 550k consumers who deleted their apps. Moreover, Uber has faced major loses in revenue. This is partly due to the extra bonuses the company offered to its employers and the many discounts offered to consumers in order to stay competitive. Uber also relies heavily on its unpredictable workers. This has proven to be disadvantageous to the company. Many Uber drivers have been accused of sexual harassment and abuse. Ultimately tarnishing the company’s reputation and resulting in some consumers distrusting the company (Overview of Uber, 2019). Uber also has many opportunities such as driverless technology. Autonomous cars are the future and Uber venturing into this will decrease the effects of human error and prevent future reputation blemishes. Uber also has been able to successfully utilize digitalization through its app-based network and has expanded to other areas such as food delivery. The continued use of digitalization can allow the company to spread into additional markets. Threats for uber include the increase in competition. Uber’s app is not a substantial competitive advantage and companies like Lyft have been able to create a similar network and compete. There is also low levels of customer and employee retention which has caused major issues for the company (Overview of Uber, 2019).

References

• Ben-Shahar, O. (2017, November 15). Are Uber Drivers ? The answer will shape the economy. Retrieved from forbes.com: https://www.forbes.com/sites/omribenshahar/2017/11/15/are-uber-drivers-employees-the-answer-will-shape-the-sharing-economy/#bcc3c145e556
• Kolodny, L. (2019, April 11). Uber lists competitors such as Amazon as Alphabet and Amazon and adresses past scandals in its filing to go public. Retrieved from cnbc.com: https://www.cnbc.com/2019/04/11/uber-s-1-risk-factors-competitors-deleteuber-campaign-reputation.html
• McBride, S. (2019, September 4). Uber's Nightmare Has Just Begun. Retrieved from forbes.com: https://www.forbes.com/sites/stephenmcbride1/2019/09/04/ubers-nightmare-has-just-started/#5bcdcb03b7e0
• Overview of Uber. (2019). Retrieved from bstrategyhub.com: https://bstrategyhub.com/swot-analysis-of-uber-2019-uber-swot-analysis/
• Skrabanek, B. (2018, August 19). Difference between Vision and Mission statements: 25 examples. Retrieved from clearvoice.com: https://www.clearvoice.com/blog/difference-between-mission-vision-statement-examples/
• The History of Uber and their Logo Design. (2017, October 30). Retrieved from logomyway.com: http://blog.logomyway.com/history-of-uber-and-their-logo/