External and Internal Analysis of Uber: Challenges and Strategic Options

This report analyzes the external and internal factors affecting Uber's business, including competition, political factors, and technological environment. It also provides strategic options for Uber's long-term viability.

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Executive summary
The aim of this report is to discuss about the external and internal business factors relevant for
Uber in terms of their global business operation. In doing so, this report discussed about the
current business approach of Uber, which identified that Uber is following gig economy business
model along with leveraging on the customer convenience to gain competitiveness. External
business factor analysis was also being done in this report and it is identified that there are
number of challenges being faced by Uber including the diverse political factors and increase in
the competition. It is also evaluated that Uber is facing number of challenges in terms of
competitive forces due to the reason that buyers are having higher bargaining power with the
availability of number of alternatives. On the other hand, this report also discussed about the
internal effectiveness and limitations of Uber by evaluating their different internal business
management processes. It is identified that lack of control over the internal stakeholders is one of
the major limitations for Uber while their higher and global brand value is one of their key
strengths. This report recommended that Uber should follow service development process in
gaining long term viability in the business.

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Table of Contents
Introduction......................................................................................................................................3
Mandate...........................................................................................................................................3
External analysis..............................................................................................................................5
Determination of the competitive forces.....................................................................................5
Determination of the general environment......................................................................................6
Internal analysis...............................................................................................................................8
Strategic options............................................................................................................................10
Service diversification...............................................................................................................10
Service development..................................................................................................................12
Market development..................................................................................................................13
Recommendations and implementation.........................................................................................14
Reference.......................................................................................................................................16

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Introduction
In the current business scenario, it is important for the contemporary business
organizations to review their external and internal business environmental factors in order to
have the idea about the market situations. The importance of analyzing the current market
situations is more in the current time due to the reason that market trend and preference pattern is
changing and evolving at a rapid pace and it is important for the business entities in coping up
with these changes (Gupta, 2013). Taxi hailing services are one of most competitive segments in
the recent time with the emergence of new concepts such as app based services. Uber is the
current global leader in the taxi hailing services and changed the existing trend of doing business
in this sector. Uber is founded in 2009 and since then they changed the concept of waiting for
taxi rather getting it at the doorstep by online booking (uber.com, 2019). Currently, Uber is
having more than 110 million users across the world and is quite a success by leveraging on the
gig economy business model.
However, with the success in the business model of Uber, more entrants such as Grab and
Ola are competing in the segment. Thus, the intensity of completion for Uber is increasing along
with affecting their average profitability. In this case, this report will discuss about the internal
and external analysis of Uber and the major influencing factors will also be identified. Based on
the identified factors, a few strategic options will be discussed and recommended.
Mandate
It is identified that Uber is not having any specific and stated mission and vision
statement in terms of their business. However, as per their official statements and practices, it is
identified that their mission is to provide the most reliable taxi services along with the enhanced

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conveniences for the customers. It is stated that the mission statement of Uber also convey the
process of offering reliable services as running water. This denotes their preferences and
approaches towards the customer services also denoting the customer centricity being followed
by Uber. On the other hand, their vision statement states about becoming the market leader not
only in terms of market share and global presence but also in terms of customer services and
satisfaction. The vision statement of Uber denotes two of their major objectives in terms of
becoming the global leader (uber.com, 2019). Moreover, it is also identified that aiming to
enhance the customer satisfaction will be one of the major differentiating factors for Uber
compared to their competitors. The following section will discuss about the major objectives of
Uber.
 One of the major objectives of Uber is to provide the higher service availability for the
customers. Thus, the waiting time for the customers after booking cab will be reduced.
 Another major goal of Uber is to tap the every corner across the globe and cater to the
larger target segments. This is in line of their approach of empowering more drivers
along with offering convenience and reliable services to the customers.
 They also target the reduction in the private car ownership by offering the same level of
services to the customers in more affordable rates.
Thus from the above identification of the objectives of Uber, it can be concluded that
growth strategy is the most evident in the business operation of Uber. This is due to the reason
each of their objectives is based on gaining global market share. It is also identified that guiding
principle of the business operation of Uber is based on the empowerment of the stakeholders.
This is due to the reason that Uber is following the gig economy concept of business model by
which they do not own any assets and employees. The drivers are the respective licensed owners

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of their cars and are responsible for their welfare and profits. Thus, the most important principle
of Uber is to empower their drivers and by providing them more income opportunities. It can be
also being concluded that the drivers and the customers are tow most important stakeholders for
Uber.
External analysis
It is important to initiate the external analysis due to the reason that it will help to identify
the major external factors that are influencing the business effectiveness of Uber. Porter 5 forces
and PEST analysis will be used. The following sections will discuss about the external factors on
the basis of these two strategic tools.
Determination of the competitive forces
According to the porter 5 forces model, the first element is the bargaining power of the
buyers. In the case of Uber, the bargaining power of the buyers is high. This is due to the reason
that in the recent time, Uber is facing growing number of competitors such as Lyft and Curb in
the United States. Thus, with the increase in competition, buyers are having more options or
alternatives to Uber, which is increasing their bargaining power. It should be noted that price
based bargaining is the major focus point for the customers as premium pricing of Uber will
motivate the customers towards their competitors. In addition, all these services are based on the
mobile apps and majority of the customers are having multiple cab hailing apps in their mobiles
(Flemmig & Beikler, 2013). This denotes that the brand loyalty is also low in this segment. In
terms of the bargaining power of the suppliers, Uber is having the advantage due to the reason
that intensity and impact of the suppliers in their business operation is low. They are following
gig economy business model and have no requirement or provision for sourcing from the

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external suppliers. However, it should also be noted that drivers and the car owners are the most
important partners for Uber and they are having influence in the business. For example, the
availability of the fleet will ensure the service availability of Uber.
As per the threat of substitutes, Uber is facing high intensity due to the reason that there
are number of similar taxi hailing app services are present in the market of the United States. On
the other hand, number of other competitors is posing challenges for Uber in different regions.
For instance, Grab from the South East Asian region, DIDI from China and Ola from India.
Hence, the threat of substitutes for Uber is high across the world. In this case, it should also be
noted that the point of differences of Uber with their competitors are low, which is further
enhancing the threat of substitutes in the market. In terms of the threat of new entrants, the
intensity is moderate for Uber. This is due to the reason that it is difficult for the new entrants to
match the worldwide presence of Uber but local region based threat is low. There is numerous
small taxi hailing services operating across the world, which are posing challenges to Uber at the
local market level. Uber is also facing higher level of competitive rivalry in their global
operation. This is due to the fact that each of the competing brands in the market is offering
discounts and other benefits to attract the customers even with marginal profits. Uber is also
offering promo codes for their customers in retaining them. Thus, it can be concluded that Uber
is facing higher competitive rivalry in the market.
Determination of the general environment
It is also important for Uber to have the proper understanding about the general
environments. The most important environmental factor is the political factor. In terms of the
political factors, Uber is facing fewer challenges with one being the diverse political

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environment in different countries. The business model of Uber is based on the capitalist
approach and thus it is difficult for them to get adhered to communist countries. Uber already
failed in their Chinese operations, which further reflects the difficulties in adhering to the diverse
sets of political situations. In addition, the political turbulence in different countries is also
posing challenges for Uber due to the reason that it is affecting their business viability. For
instance, the war like situation in the Middle Eastern regions is reducing the probability of
positive return from the investments. There are number of countries where the foreign
investment is limited to a certain extent. In this case, they are bound to partner with a local firm,
which further creates complexities for Uber (Dobbs, 2014). Furthermore, in terms of the
economical factors, the major advantage for Uber is the growth in the economy especially in the
developing countries such as India. This is due to the reason that after the closure of their
operation in China, India is the most important market for Uber. The continuous growth of
economy in these countries is ensuring that Uber will have favorable outcome in the coming
years.
However, on the other hand, emergence of the economic recession is threat for Uber
because it will reduce the purchasing power of the average customers and the cab services will
be less preferred. In this case, it should be noted that pricing of the cab services of Uber is
premium when compared to other modes of transport. Hence, in the case of economic recession,
Uber will be badly affected. Increase in the competition will also pose economic challenges for
Uber in managing their profitability. In terms of the social factors, Uber is facing positive trends
due to the preferences of the customers towards more comfortable mode of transportation. In the
highly populated developing countries, difficulties in terms of owning a car are promoting the
users in the availing the services of the taxi hailing services. Lastly, in terms of the technological

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environment, Uber is having market leadership. This is due to the reason that Uber is one of
earliest brands in developing the taxi hailing apps. With the constant development and
improvement, the app of Uber is offering all the required services in terms of the customer
convenience. However, it should be noted that technological development of Uber is depended
on the infrastructure available in the market. For instance, if the target region does not have
enough smartphone subscribers, then it will be not a viable option for Uber in doing business
there.
Internal analysis
It is identified that Uber is following cost leadership strategy in gaining competitive
advantages. This refers to the fact that they are trying to increase the market share by offering
services at competitive price points. It is also identified that Uber is leveraging on the cost
leadership approach on the basis of their economies of scale. The global business operation of
Uber is helping in having lower average cost of operation. Thus, it can be considered as one of
the major strengths. In addition, the innovative business process of Uber is also their source of
gaining competitive advantages (Namada, 2018). This is due to the reason that Uber is one of
very first entities, which have successfully implemented the concept of gig economy. This is
enabling them in having reduced responsibilities and liabilities in terms of managing the
employees. The innovative business approach of Uber is also helping in offering the maximum
value proposition to the customers and ultimately contributing in business growth for Uber.
However, on the other hand, it is also identified that the growth and business expansion
strategy of Uber is also causing issues for them. This is due to the reason that rapid expansion
and growth strategy of Uber lead to the entry in the foreign countries with determining their

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business factors. For example, Uber got failed in their business in China and the South East
Asian countries due to not being able to adhere to the local market trends. Thus, it is identified
that the business strategy of Uber is their weakness. Due to their existing business growth
strategy, Uber is gaining footprint in the new markets while losing some of their existing
markets. In addition, their business model can also be considered as their weakness. This is due
to the reason that gig economy involves lack of involvement of the permanent employees and
thus lack of control in the management. There are number of instances being identified across the
world where the drivers of Uber are engaged in unethical activities. These activities affected the
brand value of Uber but they are not having direct control over their internal stakeholders due to
gig economy concept. Thus, it is their limitation that Uber is not being able to have control over
their internal management. Moreover, Uber is not being able to manage the standardized service
quality for the customers. Another weakness of Uber is their underperforming business in
different countries. For instance, Indian operation of Uber even though is one of the biggest
markets for them; still it is not profitable for them. Aggressive pricing strategies being followed
by Uber is taking the toll on their profitability. Thus, while Uber is having global operations, the
average profitability is low for them. In this case, it can also be concluded that the cost
leadership strategy of Uber is not helping in gaining profit margins.
Even though the current and existing business situation of Uber is not favorable, there are
number of opportunities evident for them. One of the major opportunities for Uber is the increase
in the average global economy. According to the data from the World Bank, the global economy
is steadily enhancing, which will pose more opportunities for Uber. This is due to the reason that
the more will be the economic development, the more will be the purchasing power of the
customers in availing the cab hailing services. Another opportunity for Uber will be the

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restrictions in use of private vehicles in different countries. These countries are restricting the use
of private vehicles in controlling the traffic woes. This will also provide better opportunities for
Uber because restrictions in the private vehicles will encourage the users in taking up the cabs.
The existing cost leadership strategy of Uber will be beneficial in taping the market of the lower
economy countries. Customers from these countries can be catered by offering the cost
effectiveness and in addition to that, the investment requirement will also be low in these
countries. Thus, the chance of gaining profitability by lower investment will help Uber in tapping
this opportunity.
Lastly, the emergence of the competition in the market will pose a major threat for Uber
as they are following standardized service process across the world. The emergence of the new
competitors at the local level will reduce the viability of Uber in different markets. In addition,
ineffective management of Uber will also be a major threat because the unethical practices in the
customer service delivery process will reduce the customer acceptances towards Uber. Hence,
from the internal analysis, this can be concluded that the existing business strategy of Uber
should be changed is one of their major negative factors. On the other hand, they should leverage
on their innovation expertise to gain competitive advantages over their rivals.
Strategic options
Based on the internal and external analysis, there are three major strategic options are
being identified including service diversification, service development and market development.
The following section will discuss and analyze each of these strategies to determine the
suitability for Uber.
Service diversification

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Arenas Diversifying in different service segment in different market region
Vehicles By initiating market entry strategy similar to their existing strategy
Differentiators Differentiating in the forms of service quality and elements
Staging Goal is to establish the new business in the new market within the next 2
years
Economic logic Entering in the new business segment will help Uber in reducing their
dependency from the cab hailing services
Pros Service diversification can help Uber in the gaining larger market share and
presence apart from their existing target segments. It will also help Uber in
extending their brand value and identity across the world. Business risks will
be low as Uber will not depend on the revenue from a single sector.
Cons Involve huge cost for entering in new market and new business sector. Thus,
the more will be the risks; the lower will be the probability of positive returns
from the investment. Business complexities for Uber will also get increased
due to the service diversification.
It is recommended that Uber should follow service diversification due to the reason that it
will help them to leverage on their brand identity and gaining profits from different business
segments. However, it should also be noted that the service diversification strategy should be
initiated in the related business segment to the existing operation. In the case of Uber, it is
recommended that they should enter in the car reselling business. This option is recommended
because Uber is already related with the automobiles and this recall value should be leveraged on
car reselling business. Car reselling business is booming especially in the developing countries

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and it will provide huge opportunities for Uber in entering in this sector. In this case, Uber
should target the countries where the car reselling business is showing good growth. Tapping
these countries will help them in establishing their brand name in the new segment.
In terms of the differentiation, it is recommended that Uber should differentiate in terms
of the service elements such as self checkout systems for the customers from the stores. In
addition, the differentiation strategy should also include the flexible payment system for the
customers. Thus, the customers will be able to have EMI systems and other flexible options in
paying for the cars. This will help Uber in creating distinctive positioning in the car reselling
business. Uber will also have economical viability in terms of this strategy due to the reason that
entering in the new business sector will increase the target customer segments for Uber and more
target customers refer to the higher revenue generation (Pan & Nguyen, 2015). Uber will be able
to expand their brand identity across different segments. However, on the other hand, it is also
identified that Uber will have to incur huge cost in entering in new business segment in a new
market. This is due to the reason that starting a new business in a new market will cost huge for
them and this denotes that the involved risks for them will also be more.
Service development
Arenas Penetrate more in the existing market by offering more varied services to the
customers and cater to larger customer sections
Vehicles By developing the existing service portfolio of Uber
Differentiators Existing differentiating elements of Uber to be used in the same business
segment
Staging Increase the service portfolio within the next 1 year in the existing market

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Economic logic The more will be the market penetration, the more will be the target
customers and the more will be the business revenue
Pros The major advantage that will be gained from initiating service development
strategy for Uber is the increase in sales revenue and volumes. In addition,
the risks will also get reduced if the target customer segments are more
scattered.
Cons Major limitation will include the risk of dilution of the brand value and risks
of non acceptances in the market.
Initiation of the service development process will help Uber in further penetrating in the
target market. It is recommended that Uber should extend their service portfolio towards the
more mass market customers as well as towards the premium customers. For example, they
should introduce tow wheeler services under the same brand name. This will help them to offer
the hailing services in more affordable cost (Edvardsson et al., 2013). On the other hand,
limousine services can also be introduced for the premium customers at higher cost. Thus, the
target segment for Uber will get increased along with the market share and revenue. This strategy
will also involve lower cost and risks compared to the service diversification process.
Market development
Arenas Targeting the customers from new geographical areas will help to increase
the target customer segments
Vehicles Entering in the new markets by the same process as their existing ones
Differentiators Same differentiating factors for Uber as their existing business

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Staging Should enter in minimum three new markets within the next 1 year
Economic logic Entering in the new geographical areas will help Uber in increasing their
sales revenue by tapping the new customer segments
Pros The major advantage will be the provision of offering standardized services
across their global operations along with maintaining the same positioning in
the market. Thus, the chances of gaining economies of scale will be higher.
Cons Risks involved in entering in new geographical areas is evident and
uncertainties in relation to the success in the new regions.
Introduction of the market development strategy will help Uber in catering to larger
customer segments. There are still number of regions where Uber is still not having presence.
Thus, it is recommended that potential countries and regions should be analyzed prior to the
entry in the market (Urde, Baumgarth & Merrilees, 2013). However, it should also be noted that
prior to the entry in the new markets, Uber should downsize their business from the unprofitable
markets. Thus, the global business operation will be more agile for Uber.
Recommendations and implementation
Based on the above identified strategic choices, it is recommended that Uber should
initiate the service development strategy. This is due to the reason that initiation of the service
development strategy will involve low cost for Uber. Also, Uber is having their presence in all
the major economies across the world and thus there are no needs for entering in new markets
rather there are enough potentiality left with their existing markets. The target customer
segments for Uber will also get increased with the initiation of the service development process.

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Service diversity for Uber can also be enhanced with the help of this strategy. Uber is currently
witnessing negative financial returns from their business and the investment involved in entering
new markets will not a viable option. In this case, they should take more organic and sustainable
route by developing their services in their existing market.
In terms of the implementation, it is recommended that Uber should first initiate the
market research process in identifying the expectations and requirements of the target customers.
Based on this feedback, the service should be further developed. In addition, the strategy should
be implemented on pilot project basis due to the reason that potential limitations can be
identified and amended. This will further ensure that Uber will have higher probability of
gaining positive return from the market. This report concludes that considering the present
market situations of Uber, it will be more viable for them to generate more revenues from their
existing markets. In view to this situation, this report recommended that Uber should follow
service development strategy.

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