Written for:
Problem statement: XXX Company needs a strong investment to protect its future position
Purpose statement: To evaluate and recommend a company which XXX can invest in
Evaluating Uber business performance
Executive summary
This paper aimed at evaluating the business performance of Uber and determines whether XXX company’s decisions to invest in Uber is feasible. The paper evaluated Uber performance in terms of business strategies, market analysis, financial standings and business ethics. In terms of business strategies, the Uber value to innovation has been a key to its exemplary growth both domestically and globally. Innovation strategy in Uber can be viewed in terms of its product ( Uber smartphone app) and its pricing strategy dynamic pricing). To conduct the marker analysis of Uber, the paper compared Uber and its key competitor, Lfyt . Uber commands a higher market share in the US operating, at least in 90 cities in US as compared to Lfyt that operated in 70 cities in the same market. Globally, the company market share has also been rising. In 2014, Uber operated in 200 cities in 40 countries around the globe. The company also attracted new customers at a rate of 10 percent as compared to 7 percent of Lyft in 2014. A high market share both domestically and globally has also enabled the company to grow financially. In 2014, the company was valued at 18.2 billion dollars. The leaked Uber financial statement which were confirmed by the CEO Klanick to be true shown that Uber made a gross revenue of $10 billion in 2014. In an interview with the Walls Street Journal, the Uber CEO also confirmed that the company’s revenue was increasing in double n every six months. However, Uber appears to be ethically challenged company . This is evident with numerous lawsuits the company has faced in the recent past. The law suits vary from violation of users’ privacy, data breaching among others. However, by critically analyzing the business performance of Uber, this paper suggests that decision of XXX company to invest in Uber will be feasible.
Brief overview of Uber
Uber is a software company that develop lead in the transport sector. The company’s headquarters are in San Fransico, California (O’neil, E., & Pravhakaran, 2012.2). It is notable that many people tend to Mistake Uber to be a transportation company. However, Uber does not own cabs, does not employ divers nor does it compete with other taxi companies. Instead, the company connects the users and the cab drivers within the cities that it operates in (uber.com, 2015.1). To achieve this, Uber has developed a smart phone application that users install in their smartphones. The smartphone application allows the user to make a request to a TCP holder who is the third party. Uber establishes a contract with a TCP holder who provides the vehicles. The Uber smartphone app is designed to enable the user to detect the nearest driver and sends a request. Since the driver is not an employee of the Uber, he can opt to accept or decline the order. If the request is accepted, the user is notified via Uber smartphone apps. In addition, the user is provided with the driver’s name. Cab license number, the driver rating and a the drivers telephone numbers. The Uber smartphone app is also designed to ensure that the user is able to know the drivers progress towards the pickup destination and the time the driver will take (O’neil, E., & Pravhakaran, 2012.2). On the arrival, the drivers call the user by name which makes them feel comfortable and secure. On arrival, Uber processes the payment using the user’s credit card for the service. The user receives he receipts via email while forwarding the fare to partner after deducting the commission. The user can rate the driver using the App.
Uber business strategies
Since its inception in 2009, Uber has experienced tremendous growth within a short period of time. Currently, Uber is available in 200 cities in forty countries around the globe (uber.com, 2015.1). High growth is based on effective strategy that the company management has adopted. One of the business strategies that has helped Uber to experience high growth within a short time is innovation. First, the Uber smartphone application has changed the traditional ways in which private transport was being conducted on . The app is intergrated with Google maps to enable the user to see how far the cab is from the pickup point. In addition, Uber apps allow the user to rate the driver of the cab (UBER.COM, 2015.1). This plays a crucial role in ensuring that customers receive high quality services as compared to other taxis. Uber innovation strategy is also observable in their pricing (Muhamed, 2014.1). The company has adopted dynamic pricing. For instance during busy times, Uber imposes surcharges during busy times such as Christmas eve, harsh weather conditions among others. However, Uber communicates to the users before sending a request for the cab. When demand is low, the company charges lower prices than the normal. The main aim of Uber dynamic pricing strategy is to match demand and supply both in peak and low durations. Dynamic pricing strategy or a price differentiation have been in numerous industries to regulate demand and counter competition (Muhammed, 2015,1). Effective business strategies formulated and implemented by Uber has enabled the company to experience high growth in a short period of time. As a result, many investors are considering investing in the company due to its high potential. As XXX company seeks to invest in another company, Uber will provide feasible opportunity to venture into.
Market analysis of Uber
One of the Uber’s key rivals in the private transport sector is Lyft. Both companies are US based. However, Uber commands a huge market share as compared to Lfyft. For instance, in the US, Uber operates in more than 90 US cities while Lyft operates only in 70 cities (Griswold, 2014.1). As a result, Uber is able to penetrate more cuties in US more than any other company in private transport sector. A research conducted by the Future Advisor (private research firm) revealed more than 96,000 customers utilized service of Uber and Lyft between 2013 and 2014 paying cab fare of an estimate $28.6 million. However, out of the total users identified in the research, 82,000 users utilized Uber cab services as compared to 14,200 who preferred Lyftn (Griswold, 2015.1). It is also important to note that Uber trips are more expensive as the company offers high quality services as compared to its competitors. While analyzing the capability of Uber to attract new customers, further research was conducted by Future Advisors comparing the two key players in the private transport sector in the US. The research revealed that Uber was attracting new customers at a rate of 10 percent every month (Griswold, 2015.1). This proves that despite the fierce competition , the company’s market share is growing at an attractive rate. On the other hand, the research revealed that Lyft was attracting new customers at a rate of 7 percent. While looked from a global perspective, Uber has gained roots in many big cities in the world. Currently, the company operates in more than 200 cities in the world (uber.com, 2015.1). The company’s ability to adopt a global strategy with also plays a crucial role in gaining more customers. Based, on the market analysis the decision of XXX company to invest in Uber is also feasible .
uber market analysis in 2013 and 2018 projections: wordpress.com,2015
Uber’s financial standings
Uber is one most valued young companies in the United States and around the globe. In 2014, the company was valued at approximately $18.2 billion by investors (Panzarino, 2014.1). This figure shows that the majority of big companies are considering investing in Uber to to its rapid growth both domestically and globally. It is notable that Uber being a private company is not obliged to publish its financial statement for the public. However, in 2014 company’s financial statement were leaked. The financial reports which were later confirmed by Uber CEO Travis Kalanick showed that the company made a gross revenue of $10 billion in 2014 (Musli, 2015.1). Considering the fact that Uber charge a commission of 20 percent and give the rest to the driver, it is fair to conclude that Uber made a net revenue of $2 billion in 2014. Uber being a high tech company has few cost expenses to deduct from its net revenue. As a result, the company’s profit margin will also be higher as compared to other companies in other industries. In 2014, Uber CEO Travis Kalanick was interviewed by the Walls Street Journal. During the interview, the CEO confirmed that Uber revenue was doubling at every six month (Musli, 2015.1). Mr. Kalanick identified the increased number of trips made by the Uber cars to be the main reason for high revenue growth. Operating in more than 200 cities, the company is anticipating increased revenue growth as it continues to expand globally (uber.com,2015.1). Considering the fact that Uber is only five years old, its high growth both in market share and financially proves that it is a viable business opportunity for XXX Company to invest in. With a gross revenue doubling in every six month, the senior management in XXX company considers investing in Uber as compared to other companies.
Uber’s business ethics
Despite its high growth both in revenue and global expansion, Uber is considered to lack business ethics by many people. For instance, its dynamic pricing strategy has been highly criticized by many people across the globe. Many people view Uber’s pricing strategy as exploitative of its customers. However, according to the company CEO Travis Kalanvick, dynamic pricing is adopted with an aim of matching demand and supply especially during peak duration. For instance, during Christmas eve or extreme weather conditions such as snow, majority of cab drivers opt to rest till the situation stabilizes. However, with increased fare, drivers is motivated to provide cab service despite the situation (O’Neil & Pravhakaran, 2012. 12). On the other hand, high fare discourages people from travelling during extreme weather in the cities. The two conditions manage to create an equilibrium in the cab service demand curve. Violation of users ‘ privacy has also been a key challenge in Uber business ethics. Numerous lawsuits have been filed by the customers regarding violation of their privacy. For instance, in 2014 one of the company’s member of senior management was sued for leaking private data of rider (Muhammed, 2015). Uber responded by reviewing its privacy policy hiring an external law firm. Another area where the company has been criticized in terms of business ethics its approach in dealing with Lyft competitive threats. Uber has been accused of using unscrupulous means in recruiting the drivers from Lyft. By analyzing the business ethics of Uber, the company seems to be ethically challenged. However, considering the fact that it is a young company that is still in its early stages, the management of the XXX company should still consider investing in Uber. In addition, the fact that Uber has won majority of lawsuits filed against it in recent past may suggest that some unethical claims may be vague.
Conclusion
In a recap, this paper has evaluated the performance of Uber based on market shares, financial standing, business strategies and business ethics. An innovation strategy adopted by Uber in terms of product and pricing process has enabled the company to grow at a tremendous rate in the recent past. The Uber smartphone application has changed the traditional way of private transport sector. In addition, dynamic pricing has enabled the company to match the demand and supply in the market during low and peak . In terms of market share analysis, Uber has experienced an increasing market share both domestically. For instance, in 2014 the company rate of gaining new customer was at a rate of 10 percent. Increasing market share has also enabled the company to grow financially. In 2014, the company was valued at 18.2 billion . The figure correlated with confirmation by the Uber CEO Travia Klanick that the company’s revenue was doubling at every six months. Despite the fact that Uber has been highly criticized for lack of business ethics, the company provides a feasible business opportunity for XXX Company to invest into.
Reference List
Evelyn, Musli. Uber CEO Travis Kalanick: We’re doubling revenue every six months. 6 June 2014. Web. 27th April 2015: http://blogs.wsj.com/digits/2014/06/06/uber-ceo-travis-kalanick-were-doubling-revenue-every-six-months/
Griswold, Alison. How Uber and Lyft stack up in the United States. 11th September 2014. Web. 27th April 2015: http://www.slate.com/blogs/moneybox/2014/09/11/uber_vs_lyft_futureadvisor_study_compares_revenue_users_growth_at_the_companies.html
Muhammed, Rafi. Uber’s “price gouging” is the future of business. 16th December 2013. Web. 27th April 2015: https://hbr.org/2013/12/ubers-price-gouging-is-the-future-of-business/
Panzarino, Matthew. Leaked Uber numbers, which we’ve confirmed. point to turn over $1 bilion gross, $ 2013 million revenue. 4th December 2014. Web. 27th April 2015: http://techcrunch.com/2013/12/04/leaked-uber-numbers-which-weve-confirmed-point-to-over-1b-gross-revenue-213m-revenue/
O’neil, E., & Pravhakaran, V. Comments of Uber technologies, INC. on order instituting rulemaking. Februalry 2012. Web. 27th April 2015: http://www.taxi-library.org/cpuc-2013/uber.pdf
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