Business Strategy Analysis of Uber: Macro Environment and Planning

This report provides a comprehensive analysis of Uber's business strategy. It begins with an introduction to business strategy and its importance, followed by an examination of the relationship between the macro environment and Uber's strategic planning using PESTEL analysis. The report then delves into the internal environment, employing SWOT analysis to assess Uber's strengths, weaknesses, opportunities, and threats, matching these with its capabilities. Furthermore, it applies Porter's Five Forces model to evaluate Uber's competitive strategies within the transportation industry. Finally, the report explores various strategic planning theories, concepts, and models relevant to Uber, concluding with a summary of findings and recommendations for future strategic development. The analysis covers political, economic, social, technological, environmental, and legal factors, offering insights into Uber's operational challenges and opportunities.

Business Strategy
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Table of Contents
INTRODUCTION...........................................................................................................................3
Task 1...............................................................................................................................................3
P1 Relationship between macro environment and business strategies of company...................3
Task 2...............................................................................................................................................6
P2 Study of internal environmental factor so as to match them with capabilities of Uber.........6
Task 3...............................................................................................................................................8
P3 Application of Porter's five forces model on Uber................................................................8
Task 4.............................................................................................................................................10
P4 Theories, concepts and models of strategic planning..........................................................10
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
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INTRODUCTION
Business strategy can be defined as the roadmap that helps a business to survive in cut
throat competition in industry. It basically acts as the backbone of the company so as to provide a
map through which the organisation can reach to its desired goals and objectives. Under business
strategy, company forms a combination of decisions that management follows to accomplish
goals and also to secure a good position in the market. Business strategy is a master plan that
assist the management of the organisation to secure good market share in the industry and also
helps to reach desired objective and goals. In this report, an in depth study has been performed
on Uber, to understand how strategies can be implemented so as to secure a competitive position
in the market. Uber is a company operating in private sector and it is working in transportation
industry. It is registered in California in 2009. there are various services that are offered by the
company, namely, cab services, food delivery, package delivery, couriers, rental vehicles and
many more. This report explains concepts relating to internal and external macro environmental
analysis that affects operations of business, application of Porter's five forces model so as to
evaluate company's competitive strategies and it last, there is an attempt to determine theories
and models for performing strategic planning in Uber.
Task 1
P1 Relationship between macro environment and business strategies of company
Business strategy is a scheme that is designed by the strategic planners of the company
with careful planning and flexibility and the main purpose behind this is to achieve effectiveness
and optimum utilisation of resources in order to achieve desired goals and objectives (Abu
Amuna, Al Shobaki and Abu-Naser, 2017). It is an universal fact that company operates in an
environment which consists of various factors that impact the process of strategic planning of
organisation. In given case, the chosen company is Uber and there are several macro
environment factors that impact its operations. To study the impact of these factors, technique of
PESTEL analysis is being used. It is a tool that studies six dimensions of external environment,
namely, Political, economical, social, technological, environmental and legal factors.
PESTEL analysis is a framework under which effectiveness of a strategy is being
determined and also the pros and cons of that business strategy (Androsova and Simonenko,
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2016). In this specific part of the report, effect of macro environmental factors on strategic
planning of Uber is being understood:
Political Factors: These basically refers to government policy and actions that are
affecting the economic conditions and other important aspects of business. For instance, tax
policy, trade restrictions, tariffs, bureaucracy, etc. These factors affects the business in both
favourable and adverse ways. In case of Uber, the most prominent factor affecting the business is
the problem that the company is confronting due to unclear business concept of company for
governments around the globe. The business line of company is very new to the market,
therefore, it becomes difficult to accept it and also apply it in the environment. These issues
forces company to shut down their services for specific time period and also they find it difficult
to fix their position as a permanent brand in the market. Government of every country wants to
improve the employment rate, therefore, it becomes important that company offers permanent
employment contracts. But in case of Uber, company is offering jobs on the basis of contracts
and not on the ground of any other driver. Once the contract is completed, company tries to
terminate the employment contract (Ansoff and et.al., 2018). Therefore, this activity also invites
government intervention which is an important political factor to consider.
Economical Factors: These are the aspects that characterizes the economy of the country
and how each factor impacts the operations of business. For example, economic growth rates,
interest rates, inflation, exchange rates, unemployment rates in the country. There are other
significant factors also. Economic factors are of extreme importance for the business as they may
impact the ultimate objective of any business i.e., to earn maximum profits. In case of Uber, the
dynamic pricing model is one of the significant economic factors affecting the company. In times
of high demand in market, issue of fix price has been overcome by this strategy as it means that
prices can differ for the same route at the same time. This policy has been accepted by both
customers and drivers with welcoming hands and has been proved to be very favourable for the
company. In peak times, as it is difficult to get cab service, therefore, customers are ready to pay
higher prices as well. In case of drivers, financial benefits acts as a good motivating technique
for making them work for more hours (Baškarada and Hanlon, 2017).
Social Factors: These factors relates to cultural and demographic dimensions of the
society. These elements are necessary to consider as they play the key driver in determining the
consumer behaviour in market. There are several social factors that impact the operations of a
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business, such as, cultural aspects and perceptions, career attitudes, population growth rates,
health consciousness, age distribution, etc. In case of Uber, the customers are very satisfied with
the type of facilities and services offered to them from company. With just a click, the customer
can enjoy the facility of pick and drop and also their ride. The most important need of today's
customer during the time of travelling relates to safety (Bolland, 2020). Company has clearly
understood this and therefore, is continuously attempting to improve this area in their services.
These efforts are clearly visible in continuously growing market share of the company.
Technological Factors: These relates to innovation that is being adopted by different
companies in the same industry. Adoption of new technology leads to cost efficient processes of
organisation. For instance, latest technology in research and development department,
Technological incentives, automation of operations, rate of changing technology, etc. In Uber,
the main objective is to be technology friendly by making available every thing on just a click.
This is made possible through regular updating mobile application. Customers can book their
rides on just a application and cost is also provided on the screens. This adoption has enabled to
perform cost efficient operations. Company has also enabled customers to ease their payment
structure through different payment gateways on mobile application. Various other service like
tracking the ride or enabled calling to driver has made the company services more attractive.
Company is also focusing on establishing good relations with the customers by using social
media channels and also working towards facilitating the autonomous and self driving cars in
near future.
Environmental Factors: The main concern of this segment of macro environment is the
impact that business operations of company on the ecological balance and surrounding in which
it is operating. For example, weather conditions, climate change, natural disasters, pollution,
temperature, etc. are some of the significant environmental factors affecting the business. In case
of Uber, management of the company is considering the environment and are using only the
required amount of fuel so that they can support the idea of sustainable development. Moreover,
one of the strategy of pool services provided by the company also helps in fuel saving and makes
the company more eco friendly (Dominic and Theuvsen, 2015).
Legal Factors: This is the deciding factor that determines the scope of business, what
they can or cannot do. These are the policies that government introduce and which affects the
business. For example, Industry regulation, intellectual property rights, labor laws, licence
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permits,etc. Uber is facing issues in acquisition of place for operating their business physically.
This is due to unclear understanding of business idea for the government. There are few laws
regulating transportation industry, which creates another hurdle in the path of making their
business functions smoother (Dubey, 2016). Furthermore, management of company needs to
bring their attention to labour laws and employee safety laws as they are the major factors
affecting the business operations of the business. Due to the cut throat competition in the market,
company needs to consider copyright laws and policies in order to protect any innovation that
they are coming up with in the marketplace.
Task 2
P2 Study of internal environmental factor so as to match them with capabilities of Uber
External environmental analysis is important so as to design efficient and effective
strategies and internal environmental analysis is necessary so as to analyse capabilities of
business. This will be useful as if management is not aware about the capabilities than they will
not be able to generate strategies in accordance with them. As the business strategies are the
roadmap through which can achieve success and any fault in designing of this roadmap can lead
to serious hazards for business, even shut down. For analysing internal environment, the most
useful tool is SWOT analysis.
This technique helps in analysing four pillars those forms a base for any organisation.
These four pillars are Strengths, Weaknesses, Opportunities, Threats. Following is an in depth
analysis of internal environment of Uber with the help of SWOT analysis:
Strengths: These are the strong points of the company by which they are ensuring their upper
hand over other competitors in the industry (Frynas and Mellahi, 2015). These strong points in
Uber are as follows:
 Low investment: Company is operating majorly on digital platform. This means that they
require very less amount to invest in physical mode, therefore, this less investment makes
the company more profitable. With the help of this technique, company can grow and
expand its business at a faster rate than other businesses. Efficient pricing strategy: Uber has adopted a very unique pricing strategy under which
they fix prices as per the ratio of demand and supply. This helps the company not only in
generating high profits but also to establish good relations with its customers. For
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instance, during the times when the supply is relatively tough such as night, holidays or
bad weather, etc. company ensures that they raise price levels. This helps them to serve
their customers also and generate good profits too (Kamaludin and Purba, 2015). For
pricing strategy, company is focusing on only one thing i.e. “higher the demand, higher
the price”. This proves beneficial for both drivers and customers as well.
Weaknesses: These are the areas or segments of organisation that requires more attention of
management so as to grow with more sustainability. Weaknesses of Uber are listed as follows: Number of Scandals: Uber has already faced number of scandals and controversies on its
name. Earlier in the time, name was involved in serious contentions like spying, privacy
default, sexual harassments, etc. These all allegations invites negative publicity and also
loss of many customers. The company has often found itself in a tight spot facing attacks
for harassments and abuse that drivers are causing to customers. This whole activity is
painting a poor picture of company culture in market. Dependency on external factors: Uber is heavily dependent on contracted drivers for
carrying out its operations. Also, its usage is based on internet connectivity.
Unpredictable behaviour from drivers and poor internet connections often results in
heavy losses for the company.
Opportunities: These are the external factors that are providing the chances of growth and
expansion to company (Kitsios and Kamariotou, 2016). Following are the opportunities provided
by external environment to Uber: Increased digitalisation: World is becoming technology friendly more and more every
day. It presents digital companies like Uber an opportunity to venture into new markets
as well as it can provide better services in areas where it already operates. New areas of services – Various companies has entered into Uber's core business i.e.
ride-hailing service. It can also enter into new areas of services such as logistics services
like packers and movers, special transportation services like ambulance, etc.
Threats: These are the external factor that poses a threat on operations and processes of the
business. These may slow down or even shut down the business (Menon, 2015). Following are
the threats posed to Uber from external environment:
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 Lawsuits: There are various lawsuits that company faces due to failed services and lack
of settlement from side of driver. Even tough, company is trying to settle most of them
out of the court, but still they poses a serious threat for the organisation.
 Increasing competitors: The model of business is such that it operates in digital space
which requires very less investment and business model can easily be copied by other
members in same industry. Therefore, it can be concluded that company is confronting
fierce competition. New entrants in the industry are offering better incentives to
customers in order to attract them. This is a double blow for Uber as now company not
only losses its customers but also has to make extra efforts and incur extra cost to get
back customers.
BCG matrix is also called growth share matrix. It is framework to evaluate the firms portfolio
and potential. It is classified into four categories based on growth rate of the industry (vertical
axis) and relative market share (horizontal axis). BCG matrix is usually help to understand that at
which brand whether company should invest or which one should not invest.
 Dogs: Dogs are the 1st quadrant which share very low market share as compared to its
competitors. And also operate very slowly in the growth of market. In this type of
industry investors won't invest because they results in loss usually or negative cash
returns. But some of the dogs may earn profits for long term, they may provide synergies
to other brand and act as a defence to solve their competitors moves. Hence, it is very
important to analyse every firm and then make decision whether to invest or not.
 Cash cows: Cash cows are the second quadrant. As these are the most profitable brands
and leads to provide cash as much as possible. Investors gained from cows and invest into
stars for their future growth. Cash cows are the large corporations who has a power to
innovate new products which can later may become stars.
 Stars: Stars contains high market share and high growth. They generate both cash and
cash users. They are considered to be a primary units in which company invest its money
because they generate cash flows and expected to become cash cows.
 Question marks: Question mark are the brands which consumes high market growth and
low market share. They do not always succeed in gaining market share and after large
amount of investments they struggle and sometimes becomes dogs.
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Uber usually comes in stars category because its market share is very much high and also
it is one of the high growing industry.
Task 3
P3 Application of Porter's five forces model on Uber
This model was devised by Michael Porter, in which he has identified 5 forces that are
shaping the industry in which the company is operating. This method assists management to
determine corporate strategy for company (O’Shannassy, 2015). Following is an explanation for
five forces of Porter in relation with Uber. Competitive Rivals: This is a factor that determines the effect that competitors can put
on company's position in the marketplace. Uber is marking their presence all around the
globe. This makes the transportation industry look much more attractive in terms of
profitability. Therefore, it can be concluded that competition rivalry is quite high in
transportation industry. In UK, company is facing intense competition from firms like
Ola, Bolt, Wheely, ViaVan, Doordash, Grubhub, etc. Few of the companies are having
similar business model as Uber is having while remaining differs in business model.
Firms having similar model differs on grounds like customer service, price, reliability,
etc. to encounter competitors successfully, company is regularly updating their policies
and strategies. Competition effects not only the market share but also its industry
supremacy. Potential of new entrants – Market of every industry changes with entry of new players.
This force determines the threat of market disruption by new entrants on the company. In
all the industries Uber operates, it faces significant risk of new entrants that may offer
same services or come up with better offers than company. Company operates through
digital space and thus, has very low power on creating barrier of new entry or using same
business model (Plenkina and et.al., 2018). However, it will take any new company a lot
of time, money and learning to reach at the scale of Uber's operations. New entrants may
be able to inspire reduction of prices or offer better technology for sometime but
company is able to tweak its policies in accordance to the demand of the situation.
 Power of new suppliers: Suppliers are one of the most important aspects of any
organisation as they provide input from which all process goes further. Therefore,
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suppliers are the ones that forms a pressure group those can effect the business in a great
manner. Uber does not have any vehicle that is running on roads under its name. It has
taken up the role of facilitator and intermediary between drivers and customers. Company
basic ground of operation is outsourcing, thus its suppliers have high degree of
bargaining power. Power of customers: This driver is the force that determines the intensity of impact that
customers can have on decision making of company. In the transportation industry, there
are various alternatives available, therefore, it makes the customers very powerful. Thus,
it can be said that there is high bargaining power of customer as they can switch easily to
other firms in the industry. Customers of Uber are highly price sensitive and thus,
company cannot increase its price to increase its profit margins. Uber also had it shares of
scandals which brings negative publicity for the company. This can also force customers
to switch from company to its competitors. Therefore, company has to regularly engage
in image-building.
 Threat of substitute products – This is the threat of those products or services which can
offer to act as substitute of product or service by the company. Uber does not have a
threat only from the direct competitors but also with those which are indirect competitors
such as other mediums of public transport, for both of them serve as substitute to
company.
Justification: according to above discussion, it can be concluded that Uber is using every above
explained strategy in an appropriate manner and through this model, company is able to achieve
competitive advantage in the market.
Task 4
P4 Theories, concepts and models of strategic planning
Strategic management is a roadmap through which the company can reach to its desired
goals and objectives (Proff and Fojcik, 2015). Various experts have devised several models and
theories those can be applied by management of a company in order to developed effective and
efficient strategic plans. Following is an explanation in respect of Uber:
Porters-generic competitive strategies
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This model was developed by Michael Porter. Under this theory, the main motive is to
identify the direction of goals and objectives of company. Michael Porter believes that an
organisation has to choose one out of all four strategies that are explained in this theory. These
strategies help companies to take competitive advantage over other firms in the market. Below is
the explanation if all four strategies:
Illustration 1: Porter generic strategies
 Cost Leadership – The main idea behind this strategy is to offer products and services at
lowest possible price. This strategy will help in attracting customer by positioning
themselves as lowest cost producer in whole industry. Company will target to sell their
goods and services at equal to or at a price lower than average industry prices. To
facilitate this pricing strategy, company will have to shift their production on a larger
scale so as to take benefit of economies of scale (Schilling and Shankar, 2019). Differentiation strategy: According to this strategy, the company will not focus on the
price of the product, rather, it will focus on the quality and features of the product or
services that are offered to targeted audience . Company will tend to use different
innovations, research and development and effective marketing strategies so as to make
product differ from other competitors in the market. This technique will enable company
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to charge premium prices for their products and services as there is no close substitute
available for their products. Cost focus: According to this strategy, company attempts to use lower cost advantage in a
niche market. Under this strategy, company will serve similar products to every other
firm in a mass market but it will keep prices lower than other firms. This will enable the
firm to attract price sensitive customers. Customers those are highly affected by the
pricing of the product will tend to products and services that are offered at lower prices in
the market. Company can form a loyal customer base using this strategy.
 Differentiation Focus: This strategy helps company to target market which has little
degree of competitiveness often termed as niche market. Under this strategy, company
will offer such goods and services which have very unique characteristics that is not
present in other products and services of rivals. This strategy will ensure strong brand
loyalty among customers in the market (Shanley, 2017).
Uber is using a mix of two strategies those are cost leadership and differentiation strategy
using technological advancements in the processes. To illustrate, company is not running any
vehicle on its own name, rather they are acting as intermediary between parties who own a
vehicle and those who want to take them on rent. According to business model of Uber, they are
charging facilitation fees from drivers keeping their margin low. Further they charge rental fees
from customers also. This cost economic model benefits both drivers and customers along with
company. The main source of competitive advantage in Uber is use of latest technology and the
company is basically standing on this success chart due to optimised use of technology in
organisation. Uber app has made hiring taxi and payment so easy and this customer convenience
has proved to be an important differentiating factor. Another differentiation feature is the
offering of cab services in various categories, that is, in accordance of number of persons or
pricing rates.
To formulate efficient strategic planning, Ansoff matrix can also be applied on the operations of
Uber as follows:
Uber is the biggest American ride-service company. As it also offers services like food delivery,
ride services, peer to peer ride sharing with taxis, autos or bikes. It is operating in more than 785
countries across the world. Ans-off matrix is a marketing tool which is essential for every
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company to expand its growth. This matrix suggest many growth strategies to the company, let
discuss about these strategies:
Market penetration: Market penetration is the first strategy suggest by Ans-off matrix.
This strategy motivates company to increase its market share in the industry. This helps the
company in increasing its sales of current product and services in current market. Like- Uber
provide promotional codes to its loyal customers and named them Uber VIP.
Product development : This strategy encourage companies to introduce new product or
services in the current market. Likewise- in Riding services, Uber is providing Uber X, Auto,
Rush, Premium, Moto etc.
Market development: This strategy motivates company to expand its business in new
markets with existing product and services to attract new customers. Uber started its expansion
in geographically.
Diversification: This is the last strategy which is the riskiest one. Because in this strategy
company enters into a new markets with new product or services. For example- Uber diversified
itself in food industry called “Uber Eats”.
Recommendations: In the light of above discussion, it is suggested to the company that they can
exploit every possible dimensions of above mentioned growth strategies so as to achieve
maximum profitability.
Conclusion
From the above report, it can be elucidated that both internal and external factors have
huge impact over operations and processes of the company. Therefore, it becomes utmost
important to that business considers all factors and also investigate them with proper tools and
techniques. The main objective of this inspection is to identify opportunities and threats in order
to overcome all weaknesses and align them with strengths of the firm so as to make their position
more stronger in the market. Business strategies are considered as most important part of the
journey of firm to success. They provide a direction to firm's actions so that they are directed in
right way and they are not wasted. Choice of right business strategy and also is implementation
in business processes determines the success rate of business.
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