Since the turn of the century, we have seen various industries being disrupted. While this can be credited to the brilliant minds behind the companies, there is one constant behind most of these companies’ meteoric rise to the top; technology.
One particular niche that was globally disrupted is the transport industry. Before, taxis enjoyed a lot of freedom and could charge just about any amount. Besides, you had to wait for one and wave them before asking if they could take you to the intended destination.
Uber was born in 2009 , and from that date, things have never been the same again. It leveraged technology to increase transport options for people and make it easy to find one near you.
Today, Uber is a global giant with operations across the globe. However, like all companies, Uber has its fair share of strengths and challenges. This piece will dissect Uber’s SWOT analysis and help you understand the company’s true position today. Read on;
Overview of Uber
Uber started in Paris in 2008 when two friends, Travis Kalanick and Garrett Camp, were serving a conference. They had both previously sold startups for huge amounts of money.
When the pair left the conference, they could not get a cab and initiated the idea,” what if you could order a taxi through your mobile phone?” The idea was for a timeshare limo service, and after some time, Camp followed up with the idea and bought the domain name UberCab.com
He worked on it as a side project and convinced Kalanick to join as a chief incubator. It was tested in New York in 2010 using three cars and eventually launched in San Francisco in May 2010. Ryan Graves was appointed CEO in August 2010, the position Kalanick took over, pushing Graves to become COO.
The idea quickly grew legs, and Uber became a popular startup in San Francisco. Two years later, it was already being used in Paris. Over the years, it received various rounds of seed funding as investors believed in its potential, which helped them expand across the United States and Europe. In 2015, it was the world’s most valuable startup, worth $51 billion.
Over the years, Uber has had its share of controversies, most notably when an expose its company culture forced the CEO, Kalanick, to resign and more than 40 staff members to lose their jobs. Despite these challenges, it remains a formidable company in the global landscape.
Strengths of Uber
First to Market
Uber is the pioneer in the ride-sharing niche, and any other company coming up today can only benchmark its services against them. As a result, customers and other people recognize this and will always hold the firm highly in this niche.
It revolutionized the way people could commute and bring many benefits to drivers and passengers, which was a massive shift in the transport industry. Being first to market gives the company a certain degree of respect that other players cannot get, despite the prices they charge and features they offer to customers.
Uber is globally recognized as the norm for ride-sharing services. It quickly expanded to over 900 cities across the globe . This allows customers worldwide to leverage the ride-sharing services, which makes Uber’s market share huge. It is impressive how it managed to gain such a broad global reach while only being launched in 2011.
One of the main reasons Uber gained a lot of popularity across the globe was how it charged lower prices than what regular cabs would do. This was through a model that allowed customers to have affordable access to transport while also increasing the opportunities to get more customers for the drivers.
Before, one had to wave down a cab, which would take them to their destination, and then get back to their parking lot. The application locates a cab near you with Uber, so the driver does not have to waste fuel going back to their parking lot.
This explains the low-cost transport options, which are calculated through a well-thought algorithm to ensure that all parties go home happy.
Regular taxis had to sign up to Uber to enjoy the benefits, which drove the platform’s popularity tenfold.
Uber is constantly diversifying its portfolio to increase revenue streams and gain more market share. Even with the rise of Uber rides, the company did not become complacent. It leveraged this broad reach to introduce additional services that its bank of loyal customers can use to make their lives easier.
The most notable examples are UberEats and UberFreights . These two introduced the ability to order food and delivery and grew very fast. Today, Uber is making inroads in the autonomous driving niche as it introduces these options to its ride collection.
Localization and Customer Segmentation
Uber has managed to get a lot of love from customers worldwide because they do not employ a one-fits-all solution. They understand that transport options vary from city to city and localizes the rideshare options depending on the target customers.
This has satisfied both the high-end ones, as seen with options like UberX , and the low-end ones who can get motorbike rides and other non-contemporary forms of transport as seen in the Middle East. Such solutions make Uber the desired option for different market segments.
Uber’s business model is designed to improve the customer experience for both drivers and passengers. This is implemented by the rating system that allows you to see the average rating for both parties involved. This way, both entities are encouraged to treat the other with respect, lest they receive a bad review.
For drivers, a bad review means reduced opportunities to get more passengers, and on the flip side, drivers can reject passengers with bad ratings. In addition, Uber is responsive to customer complaints and actively resolves them through various channels.
Low Operation Costs
Uber has managed to remain big while having low operational costs. This is heavily attributed to its business model, which is mainly relevant on the platform it provides. Uber does not own any cars and only connects drivers and people looking for rides.
Drivers sign up with their vehicles, and Uber charges a commission from the total amount obtained for the ride. Its main costs come from the cost of revenue, administrative costs, sales and marketing, and research and development.
While some of these costs have been on the rise in recent years , the rate was not as high as the growth in revenue, which is a good sign for any company.
Uber has been facing a lot of competition from small players in local markets. There are no huge costs to enter the ride-sharing market, as anyone with a platform, payment processing capabilities and some money to market their platform can venture into this space.
Local players understand the local markets better and can tailor their services to address customers’ pain points in those areas better, compared to Uber that localizes while still having a global outlook. Some of these players are eating into Uber’s market share, reducing revenues and opportunities to expand.
There has been growing unrest among drivers across the globe with their earnings. This is because Uber does not regularly adjust their prices to reflect economic changes. In some cases, drivers have only been left with enough to cater to their operating costs.
This is also caused by the cut Uber gets from the total amount billed for every trip. Some of these disgruntled drivers devise ways to beat the Uber system or look at the competition for better rates.
Dependence on Drivers
Uber’s business model leaves the drivers as their dominant representatives on the ground. This is a dangerous way of leaving your reputation to the people who might not be fully committed to the cause taken by the company and there are reasons to be disgruntled as well.
As a result, customers seeking to gain more touch with Uber only have the drivers, who are also another set of customers. Their behavior is not predictable and has been on the headlines for raising various issues against the company.
The company has been at the center of multiple scandals in the past few years. This does not do their brand any good as many customers do not want to associate with companies seen in bad light, mainly if the issue at hand affects them.
A good example is the scandal that forced the CEO to resign, where it was claimed that Uber’s corporate culture was discriminative and sexist. This scandal led to the trend #DeleteUber, where at least 500k customer deleted their accounts.
While every company can offer ride-sharing services, Uber has a financial muscle to venture into driverless technology , a more capital-intensive venture. This will help it sound above the competition and increase its market share. It will also put it ahead of the competition a very few players in the current trade sharing miss can venture into driverless technology.
Performance and Accountability
The entry of multiple ride-sharing services has led to too many unorganized services in the market. This has tarnished the reputation of an impressive service end some customers are even looking for other options. Uber should stamp its authority as the leader in this space by improving services through accountability and performance enhancement.
By tracking drivers’ performance using additional metrics, the company can identify the best and move to address some of the controversial issues raised against its drivers.
Investment in Logistics
Uber has made inroads in the food delivery services, but there is an opportunity to increase the investment here and leverage on the effects of the COVID-19 pandemic. During this time, citizens have become accustomed to various forms of deliveries and go back and diversify within this space to help avail more products to customers at their doorsteps.
The number of players in the ride-sharing needs continues to pose a significant threat to Uber’s existence. While a single platform cannot bring Uber down, the cumulative effect of all these players put together can eat up a considerable chunk of Uber’s market share in no time.
This is particularly in light of how these local players are gaining traction in their markets, leaving Uber with little room to react based on how different those challenges are.
Some global players like Lyft in the USA, Ola in India, Bolt in Europe, and DiDi in China have forced Uber to keep their prices low. More competitors are coming up every day, and Uber needs to address this to avoid a looming decline
Uber is facing a huge fight to retain its top drivers. The effect of the competition has forced Uber to keep its price is low, but this has had a ripple effect on the drivers’ earnings. Local players are taking advantage of this to offer Uber drivers better perks and improved rates, making it hard for them to retain their drivers.
Driver satisfaction rates have been on the decline on Uber, and looking at the reliance on these customers, a huge shift to another platform can prove detrimental.
Different laws govern all the cities that Uber operates in. This makes it hard for Uber to adhere to all these laws, which is often because of multiple lawsuits arising in different parts of the globe.
There is an increased pressure from various local authorities asking Uber to comply with specific laws, failure to which leads to hefty fines and bad publicity. Rapid changes in laws as well as affect the company’s operations in those areas.
A good example is the law change in California requiring ride-sharing companies to treat drivers as employees and not independent contractors.
Negative publicity has been Uber’s Achilles heel from the day it started. While the company might have seemed to get over most of these hurdles, it tends to focus on dealing with their lawsuits and publicity instead of the core business.
Most of these lawsuits affect their employment practices and various issues affecting their drivers and how they treat passengers. Uber might not get away with all these cases, and they need to find a way to deal with them before they weigh the company down.
Frequently Asked Questions
Question: What is Uber’s Market Share?
Answer: Uber is the leading ride-sharing company in the United States by market share. However, this has been declining from 74% in September 2017 to 68% in June 2021. This is partly attributed to the increased number of players in the industry and the negative publicity surrounding the company, pushing some customers to the competition.
Question: What is Uber’s Biggest Market?
Answer: Despite having a global market , Uber processes 22% of all its gross bookings in five cities: Chicago, Los Angeles, New York City, Sao Paulo and London. In 2020 alone, these five markets brought in $5.85 billion in bookings.
Question: Who is Uber’s Biggest Competitor?
Answer: Lyft is Uber’s major competitor in the United States. From its establishment in 2012, it has gained a lot of traction due to the stylish nature of this ride-sharing service and superior customer experience.
It is globally known for its fuzzy pink mustache on the dashboards in front of the car. For the customers, this makes it easy to support the ride, which significantly affects the experience.
Uber Enjoys global recognition, but from the SWOT analysis above, it is evident that this company needs to think through some of its challenges. It is not good to have multiple challenges that threaten your existence while having new companies joining your niche every day.
All these elements combined can have a full effect on Uber’s global status and allow another player to surpass them and become the leading ride-sharing company.
The competition is slowly learning from Uber’s mistakes and shortcomings, making them avoid some of them on their journey. Uber should act fast before it’s too late if it wishes to retain its global superstar status.