Uber Case

Strengths:

-Larger Market share because they were first on scene

-Convenience, more convenient that shuttles, taxi, Lyft services

-Price, lower price

-Order custom size and elegance of your ride

Weaknesses:

-Drivers are independent contractor 

-Availability, with factors like Covid, weather.

-Revenues have stopped increasing since 2009, and with the new law in California could completely disrupt their business model

Opportunities:

-Dashboard, where uber riders can opt in and get discounts while they’re on their ride for other products and services.

-Driverless cars

-Increase presence in other states

Threats:

-New law passed 2019

-New entrants into the market

-Stay at home orders, causing more people to work from home and not need transportation

Social factors 

-Lifestyle change with the creation of a new driving service that allows people in areas with no taxis to get a ride.

-In areas where Uber is available, alcohol related accidents are reduced by 25%-35%.

Technological 

-There is an app on the app store which allows consumers to get a ride in a quick and convenient way.

Environmental 

-Regulations on cars (smog) and policies within the company mandating certain cleanliness and environmentally friendly rules.

-Carpooling rides which allow multiple users to get a ride through the same driver (saving gas).

Economic 

-Cheaper than taxis, consumer confidence and trust with Uber, efficient

Political 

-Uber now must fully hire employees (rather than independent contracting) which will raise prices for them as they have to now pay drivers themselves. Stability of the company is hinged on this law.

Value 

-Uber had a good business model prior to the new law where they could earn a large profit due to the fact they were not directly paying their drivers.  Since the law has passed and is currently being appealed, Uber’s business model going forward may not be as valuable as it used to be.

Rareness 

-Original business model was rare, but easily duplicated.

Imitability 

-Very easy to imitate, not many have done it successfully.  Uber’s current business model may not be viable moving forward with the new laws.

Organization 

-Having the ability to connect a customer with a driver is where the value lies within their business model.  Their business model is very organized and is one of the main reasons their business succeeds.

Our insights are that Uber’s business model will not be able to sustain itself with the current California law that was passed in September 2019.  Although it may not have high value or be easy to imitate, it’s a service that consumers really want (especially in highly congested areas).  The new law being passed would force Uber to pull out of California.  If not, the costs would b

e so high for drivers that it would be unsustainable.

A major opportunity for Uber is their unintended but positive social changes they make.  In areas where Uber is available, alcohol related accidents are reduced by 25%-35% (safety.com). Additionally, consumers on the west coast found it very hard to find rides anywhere since taxis were few and far between.  Uber and other driving services found their niche for this issue and grew quickly by solving this problem.

Another opportunity for Uber could be self-driving cars.  If self-driving cars become big and widespread, Uber could cut costs by not having to pay employees as well as reduce liability and fear for the rider.

The overarching problem and threat to Uber is the new law that was passed in California.  Like previously mentioned, increasing the cost for drivers in California for Uber would make it unlikely for them to stay in California. In terms of value, there is not much Uber has that can give them a competitive advantage in the long term.  Therefore, Uber’s future is not as secure when, compared to other companies with strong competitive advantages.

As consultants, our recommendation would be to move all available resources to work collaboratively to find innovative solutions to secure value as a business. We should explore the areas we have identified as possible opportunities, and address our biggest threat to remain competitive both short, and long term.

Group Proposal

Our group has chosen Uber as the organization to identify and analyze a current problem.

We are looking for opportunities the company can use to grow moving forward. We specifically

became interested because the threat wasn’t a typical industrial threat that businesses face. Of

course, they face new entrants, increased costs, even federal regulations. However, nothing

prepared them for the legal battle they are currently facing. New legislation was drafted and

subsequently passed in California in September of 2019, called AB 5. If the law stands, it will

force Uber to cancel service to California or rearrange their entire business Model. The new law

replaces the previous common law test used to distinguish whether a worker should be classified

as an employee or independent contractor. The new law would require Uber to reclassify all of

their drivers as employees, pay them accordingly, and offer the same benefits and protections

under all the many federal labor laws.

Uber has established a name for itself over the years, providing individuals with an easy

and inexpensive transportation option. If this problem was to cause Uber to fail, many people

would be affected. Thousands of individuals have come to rely on Uber for rides to work, rides

when intoxicated, rides from the airport, and other various reasons for transportation. If Uber

were to fail as a company, not only would the users suffer, but also the people who drive for

Uber. During the pandemic, Uber has allowed thousands of people who have been laid off to stay

on their feet and earn an income instead of potentially losing everything. If Uber were to fall,

many people would be negatively impacted by this unfortunate occurrence.

If the drivers are considered employees, Ubers costs will increase greatly. The company

has petitioned to be able to continue to run their business as usual until the hearing in mid-

October (Invanova, 2020). The company won this appeal giving them the right to continue to

give rides in California (Feiner, 2020). Uber is spending money for the November ballot to

classify drivers as a separate category of workers. This will give the drivers some benefits but

will not make them a full-time employee of Uber (Invanova, 2020). The lawsuit from the state is

claiming that Uber is “misclassifying” drivers’ position in the company. The law's focus is to add

protections to the drivers that the state felt they were lacking, as well as deciding whether the

driver was an employee of the company or an independent contractor (Feiner, 2020).

The underlying problem for Uber, is the company doesn’t want to classify their drivers as

employees. It is important for Uber to find a solution to this problem as soon as possible. Uber’s

brand image could be damaged by this problem. They risk having to leave a very densely

populated state, or having to classify drivers as employees, increase costs, and hike their rates.

Ultimately, creating dissatisfaction among riders. Whatever their solution is, it is important for

Uber to show they care about their drivers even though they are not considered employees.

Resolving this threat is extremely important because Uber cannot operate without drivers. They

must think about which solutions will bring the best result for the company, the drivers, and the

riders of the state of California.

In the end, Uber currently has two choices, but we would like to find additional

opportunities. They can either follow the new legislation and classify all Uber drivers as

employees (which would cost Uber a considerable amount of money, but also retain millions of

customers) or cancel services in California and save money, but lose California customers as a

whole. It is a tough spot for Uber, California is one of the most populated states in the country

which means many of their customers are also there. If they cancel services in California, other

states might take notice of this and want to follow the president set by California’s new

legislation. If this happened, it would be catastrophic to Uber's business model and shows the

extreme need to find innovative solutions.