Competitive Strategy Developed Business Innovation

Question: Describe about the Competitive Strategy for Developed Business Innovation. Answer: Introduction Uber is a ride for hire service that was founded in the year 2009 at San Francisco by Garrett Camp and Travis and Kalanick. The taxi service was an innovation for hire service where the taxi is hired using a mobile application developed by Uber technologies. The aim of development of Uber taxi was to give a comfort of finding taxis and eradicate the frustrations that the passengers face in trying to find a taxi. Since its development, the company has expanded its services to many other countries and cities. With the invention of Uber, travelling has become more convenient and easy. The case study analyzes the market condition of United States and other countries where Uber has expanded, the business models and strategies used by Uber, the competitive strategy, the services provided by Uber and the expansion strategy provided by Uber taxis. Uber was valued at 18.2 billion dollars that was held as the most valued privately owned company (Gabel, 2016). Traditionally there were two ride hiring services that were taxicab services and limousine services. The taxicab services were operated regulated at municipal level while limousine services were operated at a state level. Both the services operated with different rules while the regulations were almost same from jurisdiction to jurisdiction. The differences between the two rides were that the limousine services were only available on Prebooking while taxicabs could be hired from streets. The paper analyzes the services provided by Uber and the strategies used. Different countries had different rules and limitations. Other cab providers used the business model developed by Uber as well (Dobbs et al., 2015). Problem identification Uber faced many difficulties while entering the market because there were already many taxicabs and services operating. The services of Uber were created by grabbing the opportunity of customers frustration of not finding the taxis for travelling. A Smartphone application was developed to help the customers find the cabs easily and conveniently. The application developed by Uber helps the customer books cab from its nearby location as it traces the location of the customers. The customers are given the choice of either paying the money or the fare through cash or through credit card. Traditionally the drivers did not provide the option of cash to the customers to avoid inconvenience of carrying huge amounts of cash. The strategy that Uber adopted was that it did not own its cars but instead relied on the operators and private personality that were ready to rent their cars for Uber service. The Uber service uses various tools and strategies to effectively provide the service. It great ly relies on data analytics to determine the best waiting place to pick up the customers (Anderson, 2014). This is done to reduce the delivery time and improve customer satisfaction. The entire Uber service relies on the data gathered, as it will help in making the optimal utilization of vehicles. The customer satisfaction level is measured by allowing the customers to rate the drivers on the basis of their experience. This is essential for the company to understand the response of customers in market and alter the strategies if the customers are not happy with the service. Rating is a vice versa phenomenon where even the drivers are given opportunity to rate the clients in order to avoid troublesome customers (Cannon Summers, 2014). The company has faced many difficulties and problems. The cost of the Uber taxis is less compared to other cab services due to which many issues and concerns were raised against Uber. The main issue identified was raised regarding the operations of the company. The problems faced by Uber is given as follows. Uber had faced various criticisms as the other taxi operators were not being able to absorb the success of the company the controversies were raised to achieve competitive advantage. The concerns were as follows: Uber operates its taxis and cabs but without proper licenses. The taxis in Uber do not have insurance. Uber is considered juts as a way of making living (Rauch Schleicher, 2015). Due to the concerns, raised the company was charged a penalty. Despite of the penalty the company continued its operations. One of the major criticisms faced by Uber service was a charge of a girl being raped in India by Uber driver. The entire app based taxi services banned in India unless and until the services are registered with the local transportation body. Thailand and Vietnam also claimed for the Uber service being illegal. Uber faced many challenges while expanding globally. Establishment of the service required huge amount of capital investment (Kanter, 2015). The regulators of USA and Europe where the main regulatory body were governments and the traditional transport operators raised the issues. The main questions that were raised against Uber related to the safety of the consumers, and drivers. Situation analysis The case study is based on both the quantitative methodology and qualitative analysis. Porters five forces Porters five forces are used to evaluate the competitive strength of the company. It helps in identifying the level of competition within the industry that is helpful for the development of business. The threat of new entrants: The market earning high profitable return on investment and profit has the fear of competition due to threat of new entrants. Though Uber is the leading company in this market sector its has constant threat from new entrants. Uber had high return on investments during its start of $1.25 million. Seeing the high return on investment, many new firms had entered the market that gave high competition to Uber. One of the major competitors of Uber is Lyft which is a privately owned company based in San Francisco. Logan and John launched the company in the year 2012. The company initially provided the service of ride sharing for the long distance travelling. Just like Uber, the cabs of Lyft can be booked through the mobile-based application. The difference between Uber and Lyft is that Lyft uses normal citizens as drivers that have their own cars. The second differences between the two are the logo that it sets to display its brand. The third difference is the pricing strategy where Lyft ch arges a fixed twenty-five percent sure pricing during peak demand. Lyft has faced more regulatory obligations compared to Uber (Mitchell, 2015). The criticism was due to the use of personal cars and drivers for the service. The issue was to use commercial drivers and cars for the safety purpose. The company was ready to pay huge amount of money to the drivers for the expansion of its services to New York (Edelman, 2015). The other competitor of the Uber service is Sidecar, which was a smaller service that began in 2012 in San Francisco. The different between sidecar and other service is that the drivers are allowed to set their own prices and the customers are allowed to choose from the vehicle model and prices. Uber reacted to these competitors by extending its products and cutting the prices of the services this was done to achieve competitive advantage over other services (Wallsten, 2015). Threat of substitutes: Uber has high threat from substitutes, as there are many alternatives that the consumers can switch. The development of Lyft in 2012 from the same region was the major threat to Uber. Transportation service is a competitive business as the consumers has larger choice to choose from. With the rise in technology and increase in use of internet more innovative services juts like Uber are likely to come in future that will give a strong competition to Uber. During the time of surge pricing customer, opt for other cab services that can harm the profit of the company. Various means of transportation such as bus, and railways acts as substitutes to Uber giving strong competition (Wirtz Tang, 2016). Bargaining power of buyers: Buyers here are the customers. Customers have high bargaining power because of presence various other operators providing the similar service to the customers. Uber is no longer a unique product due to development of many other cab services such as Lyft, and Sidecars. Customer determines the consumption of particular based on price charged by the company. Transportation sector is a price sensitive industry. Higher the price lower is the demand for Uber. Customer is given choice of giving feedback after using the particular service. Hence, the customers have high bargaining power because of various factors such as price sensitivity, quality of service and presence of competitors. Bargaining power of suppliers: Suppliers are the providers of inputs. In case of Uber, the suppliers are the people who rent their cars for the service such as Limousine. The suppliers of Uber also include the drivers. Uber does not have any private cars and is dependent on the suppliers. It is essential for the company to maintain a high standard in order to attract good suppliers. In some cases, the drivers and organizations can review and negotiate the terms and conditions seeking better considerations, which might be at the companys expense. The performance of the company depends on its suppliers that are the drivers and hence the suppliers hold a strong bargaining power (Cramer Krueger, 2016). Industry rivalry Uber reacted to its competitors by extending its products and cutting the prices. In 2012 when new services juts as Lyft and Sidecars emerged, Uber also altered its strategy. Traditionally the company used only black limousines but in 2012, a new category of cars was introduced name Uber X that allowed the drivers to use other cars such as Toyota, SUVs or Honda. The prices of Uber were decreased by thirty five percent. This was done to attract more of consumers and achieve competitive advantage. The introduction of Uber X was the competitive strategy used by the company to achieve competitive advantage over Lyft and emerge as a low cost provider of car service. The prices of Uber differed location to location. However, the company cited that the prices of the service were eighteen to thirty seven percent lower than other taxi service providers that largely relied on the location. The Uber X was socially established in the cities where Lyft was providing its services such as Indianapo lis and St. Paul. The company often gave an option of free ride in the cities where Lyft was operating. This was simply done for promotion and attraction of customers to use the service (Drahokoupil Fabo, 2016). The price was further reduced in 2014, which was claimed to exist for a limited period. The services of Uber is said to be cheaper than any other taxi service provider. In spite of cut in price, the drivers of Uber earned the same revenue. The concentration of the company was on meeting the needs and requirements of the customers and increasing their satisfaction level. It also aimed at achieving competitive advantage by using various strategies such as price cut and product extension (Isaac, 2014). Macro-environment analysis SWOT analysis Strengths: Uber is the first cab service to develop mobile-based application through which the customers can book the cars by using the GPS location. The company ensures that they provide high service to its customer by providing an option of rating the drivers. The returns of investment are high due to low operational cost. The conditions that the drivers work at are nice and hence the company has no difficulty in connecting with its suppliers (Anderson, 2014). The valuation of the company is high. The company gives an option of credit card payment that reduces the risk of robbery. Weaknesses: High competition in the market of San Francisco. The prices of the cars are high during peak demand and season. Other companies can easily use the business model developed by the company. The cabs cannot be booked if the customer has no internet connection (Cramer Krueger, 2016). Threats: Uber has high threat from its competitors such as Lyft and Sidecars. Uber has threat of creditability due to challenges from investors. Uber is not allowed in some places due to limitations in the legal provisions. Opportunities: Uber has an opportunity to expand in many international countries. It has an opportunity to attract larger customers that are loyal and make high profit. The demand for Uber is likely to grow in future because of the preferences of luxury and convenience by the customers (Cannon Summers, 2014). Internal analysis Value chain analysis Value chain analysis is a process or a technique through which the company adds value to its production and marketing. Uber creates values for the drives by proving them a good working condition and payment while the value for customers is created by satisfying their needs. Value is created by giving free rides to attendees. The company relies on word of mouth and social networks for its promotion and advertisement. The Uber service uses various tools and strategies to effectively provide the service. The customer satisfaction level is measured by allowing the customers to rate the drivers based on their experience. This is essential for the company to understand the response of customers in market and alter the strategies if the customers are not happy with the service. Rating is a vice versa phenomenon where even the drivers are given opportunity to rate the clients in order to avoid troublesome customers. Uber creates value by connecting the drivers to customers through a mobile-b ased application. It opens more access to the drivers and rider. The service creates an opportunity for businesses to develop (Laurell Sandstrm, 2016). Strategy analysis Business tools of Uber service The benefits of the strategies adopted by Uber are as follows: The demand for the taxis ha increased as the rise has now become more convenient and easy. The revenue of the drivers increase and the vehicles are utilized more optimally. The revenues of the owners also increase due to the method of surge pricing The safety of drivers and company increases due to credit payment mode (Jonas, 2016). The services allow the flexibility of working due to which the drivers or the employees are happy working with the company. The Uber operates through a mobile-based application where the customers can book a cab that is nearest to its location (Gassmann et al., 2016). Option analysis Uber uses various strategies to overcome with its problems. The strategies used by Uber are as follows: Pricing strategy The service of Uber was started in the year 2010. At the start of its company, the process differences between Uber and other cab services such as Taxicab was high. The price charged by Uber was higher than the other cab services with over the time declined. The fare for the car service is based on the distance and time of travelling as determined by the GPS application. Traditionally the fare was split between the driver and the company where the company kept twenty percent of the profit while the driver kept eighty percent of the profit. The prices depend on the time and distance (Wirtz Tang, 2016). The prices charged by the service are not fixed. It varies on the basis of the state of demand. This strategy is known as surge pricing where the prices of services with the increase in the demand for cars. During peak seasons and time such as during festivals or any unforeseen events the prices charged by Uber rises. There have been instances of prices rising by seven times than the n ormal prices during peak times (Walton, 2014). According to the operators of Uber, this is done to provide more cars during the peak season. When the prices increases the number of Uber cars increases on roads and ultimately prices drop. This is done to provide the cars even during the time of peak season. However, the customers do not agree with this strategy and argues that the drop in prices should be fast. The revenue of drivers of Uber is higher than the drivers of other taxi cabs (Posen, 2015). Expansion strategy Uber started its service in 2010 in San Francisco known as Ubercab. Since then the company has been expanding its services to other cities and countries as well. By 2012, the service was seen in seven cities of United States. After two years, the services of Uber had expanded to hundred and thirty cities in thirty-six countries. The expansion of the services was a fast process. The company used various services to expand its services. It targeted high tech sponsorships for capital investment. Free rides were given to attendees. This was done to attract larger customers. The company relied on word of mouth and social networks for its promotion and advertisement. The amount of money spent by the company on marketing and promotion is almost negligible, as it believes that the information about its services will automatically spread through word of mouth. The services have an operational team in each city that works with drivers and clients to improve its business (Cramer Krueger, 2016) . Uber established its services that had accelerants and in places that had nightlife, restaurants, holiday, events, weather and sports perceiving that, people in such places would use the service. Hence, the main success for the expansion of the services largely depends on the strategies deployed by the company. The choice of cities was good for expansion that added advantage for the company. The services are launched in cities that have very less taxi facilities so that the demand and use of the Uber service is high. The drivers are attracted to work with Uber due to the financial and safety security that the company provides (Laurell Sandstrm, 2016). Recommendation It is recommended to Uber to be more flexible with its price. During peak season or odd time, the company should not increase the price of the service, as it is very inconvenient for the customers. This also leads Uber to lose its valuable customers. The company should expand its operation in not only developed countries but also developing countries. The communication process should be strengthened in order to build a direct relation with the suppliers. Uber Company has emerged as one of the successful company due to its strategies and rate of expansion. It now operates in thirty six countries and hundred and nineteen cities. The business tool and strategies used by Uber is considered as efficient and good for running the service. The revenue of the company doubles every six months. The strategies of price cut, surge pricing, product extension is proved successful for the company. The company should not only extend its services to developed countries but also developing countries to provide comfortable travelling to the passengers. Uber is a private company and one of the fastest growing services. Today the company provides a large amount of services to its customers. The company has introduced the facility of Uber sharing known as Uber pool where the passengers can share the ride. This will help the passengers travel in half the price. The company has also introduced different varieties of cars that are luxury cars with wifi and without wifi. The travelling has become much easier with the invention of Uber service. The financial reports of the company are a guarded secret and are not openly available. The funds raised by Uber were used for strategic investments. The motive of the company was to fight over its competitors such as Lyft and attain competitive advantage. The customers claim to be happy with the Uber service. The prices of the services differ in different countries based on the standard of living. References Anderson, D. N. (2014). Not just a taxi? 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