Computer programmer and StumbleUpon co-founder Garrett Camp and Red Swoosh co-founder Travis Kalanick founded Uber as Ubercab in 2009 with the goal of making ride-sharing an affordable transportation option for the public.
The company is known as Uber Technologies. It is in the business of providing mobility-as-a-service solutions and services such as ride-hailing, food delivery, package delivery, and freight transportation via an online-enabled platform.
SWOT Analysis of Uber Technologies: Insights Into Its Strengths, Weaknesses, Opportunties, and Threats
Uber delivers its solutions and services via a mobile application. This is a key strength of its business model. The introduction of its ride-hailing service coincided with the emerging popularity of smartphones beginning in 2010 and perfect timing allowed it to gain the attention of the emerging smartphone natives.
The following are the specific strengths of Uber:
• First-To-Market Advantage: The company disrupted the taxi market and transportation sector when it launched its ride-hailing app. An initial marketing strategy has made it a household name and earned it millions of customers in key regional markets in North America and Europe. The sizeable customer base has enabled it to expand its business as a diversified mobility-as-a-service provider.
• Online-Enabled Business Model: Its business model depends on modern digital communications technology similar to Airbnb. It does not own vehicles nor employ drivers. The business model of Uber rests on its app which serves as a platform that connects drivers or service providers with customers.
• Low Operational Costs: The company has low operational costs because most of its expenses are channeled toward maintaining and improving its online platform, developing and implementing marketing strategies and tactics, and attracting and retaining relevant talents. It can reach different areas without investing in tangible assets such as office spaces. Remember that it does not own and operate vehicles.
• Expanded Service Offerings: Remember that the company provides mobility-as-a-service solutions and services such as ride-hailing, food delivery, package delivery, and freight transportation via an app. Its diverse service offerings have enabled it to maximize its online platform and earnings potential.
• Dynamic Pricing Strategy: Another strength of Uber is its dynamic pricing strategy which centers on determining the prices of its services based on demand and other variables. Note that its ride-hailing service is usually cheaper than taxis. However, during high demands, its price increases. Furthermore, prices are also higher during bad weather or holidays. This gives riders and drivers an incentive to work.
• Rating System and Customer Service: The company also maintains a rating system that allows customers to rate their riders or drivers. It also serves as a mechanism for monitoring the quality of service rendered by its partners. There is also a dedicated customer service to attend to the concerns of its customers.
• Technology and Innovation: Note that Uber is considered a tech company. It is not a transportation company nor a courier. The company develops and implements technological solutions to link providers of transportation-related services and customers. It has teams of engineers, software developers, and IT professionals that maintain and expand its tech assets to include hardware and software.
The company has enjoyed success during its initial years. However, with its rise in popularity comes different issues that reveal the inherent problems attached to its business model and the specific aspects of its operations. Its expansion into different services and markets has also disturbed the dynamics in its leadership and workforce.
The following are the weaknesses of Uber:
• Dependent on Contractors: The company is dependent on independent contracts. It does not employ its thousands of riders and drivers. The problem with this is that it also cannot fully control the individual behaviors of its independent contracts. There have been documented reports about sexual abuse and other forms of harassment experienced by its customers in key markets such as the United States.
• Allegations About Exploitations: Note that the same dependence on independent contractors has raised allegations regarding the exploitative practices of the company. Some have argued that the company is wrong to misclassify its drivers and riders as independent contracts with no employment benefits.
• Replicable Business Model: Another weakness of Uber is its business model itself. The simplicity of its premise increases the level of threat from new entrants and lowers the barriers to competition. Companies or even groups of individuals with enough capital to build and expand relevant tech assets can enter the mobility-as-a-service market and compete against more established industry players.
• Unpredictability and Vulnerabilities: The company has undergone periods of profitability and losses. Its revenues are dependent on different variables arising from the overall economic condition, regulatory climate, or the intensity of competition. Its earning potential is fundamentally unpredictable due to these variables.
Remember that the business model of Uber centers on using an online platform to connect riders and drivers with customers. This creates a potential for expanding its service offerings and diversifying its business, tapping the growing population of technology-dependent customers, and attracting partners to its platform.
The following are the opportunities for Uber:
• Expanding Market Potential: The usage of consumer electronic devices such as smartphones is expected to grow further in several regional markets alongside the deeper penetration of digital communication technologies and the average continuous growth of the global population. These two factors translate to future market potentials for the existing services of the company.
• Growth of the Gig Economy: Note that the gig economy represents the labor market for freelancers or independent contractors. Freelance work is growing in specific geographic markets because due to trends against permanent 9-5 corporate employment and the need for certain individuals to find side hustles to augment their income.
• Diversification of Services: Another opportunity for Uber is the expansion of its service offerings to further maximize the earning potential of its online platform. The company can venture into the delivery of consumer goods similar to its existing food delivery and grocery delivery services. Note that other similar companies are offering services in which they serve as an e-commerce platform for retail stores.
• Expansion of Partnerships: The establishments of new restaurants and stores in different areas present an opportunity for the company to capture more customers and become a one-stop platform for purchasing food and a variety of retail products ranging from grocery items to clothing and apparel.
• Benefits of Ride-Hailing Services: Expanding the reach of ride-hailing services can contribute to the improvement of public transportation. For example, in developing countries with unstructured public transport modes, it can promote a customer-centric mode of transportation while reducing road congestion due to decreased car ownership. It can also reduce the total cost of mobility for businesses.
• Expansion from Investors: Uber has access to capital. It is a publicly traded company that can issue and sell stocks to the public. It can also issue bonds or secure credit from creditors. The company can meet its expansion plans by maintaining and improving further its reputation to attract more investors.
Online-enabled businesses and specific providers of mobility-as-a-service have mushroomed in different regional markets and across different industries and sectors due to the growing dependence on digital communication technologies and related technologies. The changing landscape has also created new challenges for policymakers.
The following are the threats to Uber:
• Retaining Riders and Drivers: The company faces challenges in retaining its network of independent contractors due to three major factors. These include labor market competition from direct competitors such as ride-hailing service provider Lyft and food delivery service provider DoorDash, regulatory issues that limit riders and partners, and internal shortcomings that can deter existing and future partners.
• Government Regulations: Another threat to Uber is the evolving regulations in specific geographic markets. Note that it has faced backlash in certain states in the U.S. because of its labor practices. Other countries have struggled in defining the extent of liabilities of businesses providing ride-hailing services.
• Economic and Market Conditions: The coronavirus pandemic that started in 2020 drastically affected the earnings and profitability of the company. The demand for its services is essentially dependent on the economic business cycle. Even its workforce and its capacity to provide incentives to its contractors and customers can be affected by market downturns or slowdowns in the greater economy.
• Bargaining Power of Customers: Customers can forego using its online platform and shift to other providers of similar services. The existence and further emergence of competitors and the fact that the business model of mobility-as-a-service providers is replicable increases the bargaining power of its customers.
• New Entrants and Competitions: It is important to reiterate the fact that the threat of new entrants remains high. The intensity of competition is also high. The more specific impacts of these two situations include competition for customers, as well as competition for partner riders and drivers. The company needs to keep on developing and implementing tactics to maintain and expand its market share.
• Competition as Regards Pricing: Another threat to Uber is the impact of increased competition in its pricing. The availability of options will further force the company to lower its prices to remain attractive to customers. This can also compel the company to reduce its incentives for its partner riders and drivers.
• Emerging Trends in Transportation: The transportation sector is dynamic. It can be uncertain. Surges in fuel prices affect riders and drivers. The possible transition to electric vehicles and autonomous vehicles will compel Uber and similar businesses to change their business models and the specifics of their operations. Infrastructures for mass transportation also threaten ride-hailing services.