Uber - SWOT analysis

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Uber, a high-tech startup founded in 2009 which connects the transportation industry with technology by its ride-sharing app was the highest valued venture-backed company in the world in 2015.

As of 16 December 2014, its service was available in more than 200 cities in 53 countries worldwide including China, South Africa and Indonesia. Uber is valued at more than US$ 40 billion, which makes it more valuable than the entire U.S. taxi and limousine industry and it is expected to have an annual revenue of $10 billion by the end of 2015.

At the same time, the company evokes a range of contrasting emotions. On the one hand, users love it because it provides a more convenient, easier-to-use, and often less expensive way to get from point A to point B. On the other hand, the traditional taxi drivers, local governments and even some Uber drivers are strongly against the practices that the company engages in.

For these reasons, we have decided to create a SWOT analysis for Uber using a CayenneApps SWOT to check how the opportunities and threats that the company is going to face are connected with the strengths and weaknesses that we already are aware of.

Is Uber prepared to rule the transport world in 2016?

Loved by the customers

Turn ground transportation into a seamless service. Basically make car ownership a thing of the past… Travis Kalanick, CEO of Uber.

Uber, with its customer-centric approach gives you the possibility to grab a taxi no matter what your current location is, and shows you how much money you will pay upfront. Additionally, it lets you track the entire route of your ride, and, at the end, allows you to make a cashless payment with your credit card. What is unique about this approach is that all the activities described above can be conveniently engaged in immediately from your smartphone.

The service is based on direct client-to-driver interaction, so there is no need for a dispatcher or, even worse, standing on the sidewalk and waving, hoping that you can hail a taxi. Additionally, the great advantage of Uber is generally lower prices in comparison to regular taxi operators, and, in most cases, a higher quality of cars. Another advantage is the rating system in which people can choose verified and rated drivers before starting the ride.

Uber, with the benefits mentioned above, has efficiently addressed the problem of dissatisfaction with traditional taxi services which often come with high prices and long waiting time. This American company has shown that this approach can work in almost every country. So, as a result, Uber’s approach to taxi services has quickly spread around the globe as the taxi markets exist almost everywhere.

This is why Google Ventures, Ashton Kutcher, and many others have invested over $1.5 billion in the company. This vast amount of invested money has given Uber the strengths and possibilities to wisely take advantage of their idea and therefore, has created a snowball effect that is now hard to stop.

Hated by governments and drivers

But, as with every fast-growing company, Uber also has weaknesses that can prevent it from expanding further. Regular taxi services are under an obligation to operate under the constraints of legislation and regulations, and Uber is famous for skirting regulations it deems unwarranted. This attitude has generated a lot of conflicts with local authorities that have already led to a number of fines being levied against the company (e.g. in Germany, France, Netherlands, India, Thailand, United Kingdom).

This situation has shown that the company is vulnerable to restrictions that might arise from new legislation, and this could be a serious threat to its continued operation, especially due to the fact that these face-offs with officials have already caused a lot of bad publicity for the company.

Uber’s negative press is also connected with the company’s ethically questionable relationships with drivers, who complain about low earnings compared to the high costs of being a driver, and also that the application doesn’t allow tipping. Driver dissatisfaction has already been demonstrated in cities such as New York, San Francisco and Los Angeles, and has attracted much attention from the news media.

The opportunities and threats

At the core of Uber’s business philosophy is to always charge less than the traditional competitors. From the beginning it has encouraged people to try the new app and to continue to use it in place of traditional taxi services. But, in fact, the relationship between the company and drivers, as well as between the company and clients is relatively weak and can be easily replaced by the competition.

So, for Uber to stay in business, it needs to keep both drivers and clients satisfied. The company has recently presented statistics showing that the growing number of Uber drivers will cause a reduction in the ETA (Estimated Time of Arrival), and thereby make Uber service more utilized and, because of the shorter amount of time when a taxi is vacant, make the service more profitable for drivers. This is a classical win-win situation that favors Uber’s position in the market, and one needs to be carefully maintained by the company. Nevertheless, Uber still needs to look for other ways to keep and build new advantages over their competitors.

The idea on which Uber was built, despite its innovative design, can be easily copied. The vast amount of money which has been invested in Uber has demonstrated to the market that there is a demand for these types of services, and many copycats have appeared in the form of Lyft, Curb and Sidecar.

Growing competition can cause prices to decrease, which may discourage drivers from joining Uber in new markets, will cause the loss of some customers to the competition and eventually dilute the company’s revenues. Moreover, the competition has already revealed one of Uber’s weak spots, which is its inability to deal with problematic issues in the public arena. Lyft, Uber’s biggest competitor, has made an accusation that 177 Uber employees have ordered and then canceled about 5,560 rides ordered through Lyft October last year, thereby cutting into Lyft’s profits and driver availability. This was not the first time that the public image of Kalanick’s company has been tarnished, and it has intensified critiques of Uber’s ethically questionable practices.

The analysis

All this have made us wonder what the near future holds in store for Uber? Should they expand further without decreasing the impact of weaknesses that they are already aware, of or will Uber’s expansion be held up by surrounding threats?

To find the answers to these questions, we have entered all the strengths, weaknesses, opportunities and threats listed above into the CayenneApps SWOT and conducted a process of analysis.

The recommended strategy

The entire process of the SWOT analysis provoked open minded discussions which, at the end, resulted in a recommended strategy for Uber which was an AGGRESSIVE one.

The aggressive strategy means that Uber has a lot of strengths, and more importantly these strengths are strongly connected with opportunities existing in its external environment. So, to achieve better performance, Uber should take advantage of its most significant strengths, which you can see in picture below.

According to the results, Uber’s customer-centric approach, convenience for the clients and unique and scalable business model have a significantly bigger impact on utilization of the opportunities, than the low prices and low operational costs. The analysis also shows that the increasing number of drivers, together with growing dissatisfaction with regular taxi services especially in new, exploitable markets are the biggest opportunities for the American company in the near future.

Strategy Radar and the big picture

Even though the predominant aggressive strategy suggests that the company should focus on strengths and opportunities, the Strategy Radar Chart (available as a part of the recommended strategy in CayenneApps SWOT) gives us a wider perspective which covers all available relationships between features.

The chart clearly shows that Uber’s internal weaknesses have a strong relationship with the company’s external environment. Firstly, the weaknesses intensify the surrounding threats almost as much as the strengths allow for the use of opportunities. Secondly, they also limit some of the available opportunities.

Another disturbing fact is the relationship between strengths and threats. A weak connection suggests that even though the strengths have a big impact on opportunities, they do not necessarily allow the company to overcome threats. This is a particularly important issue when the threats are real and may cause the company to lose big sectors of the markets.

A weak connection between threats and strengths compared with the strong connection between weaknesses and strengths shows that addressing threats such as new legal regulations or drivers’ low morale can be one of the biggest challenges for Uber in upcoming quarters. Maybe that is why the CEO of Uber has recently announced his new Europe deal?

How internal features impact the external environment

Looking at the impact rating (also available as a part of the CayenneApps SWOT recommended strategy) can give us even more interesting insights. Impact shows which of the defined internal features affect the opportunities and threats the most.

When we analyzed the strengths only by focusing on their interaction with opportunities we saw that Uber’s application in and of itself was the biggest asset of the company; but when we add the threats to the equation we can see that high valuation and investing capabilities surpasses the technology by more than 10%! This seems natural: on the one hand the technology attracts customers, but no mobile application will ever have the ability to change the law. On the other hand… money has.

The “regulations threat” is also reflected in the impact of weaknesses. The unpredictable business model operating within a highly regulated market is something that exposes Uber to ever-changing and potentially dangerous political influence. The lack of loyalty between Uber and its drivers can only strengthen the previously mentioned weakness, and it is definitely a warning sign for a company with the ambition to dominate the taxi business.

Spending more money to invest directly in local markets and communities may significantly limit the impact of threats, but it might be only the first step towards gaining everyone’s trust.

Summary

Uber was for sure one of the hottest startups in 2014, and there is a reason for that. The number of its contrasting strengths and weaknesses, opportunities and threats is truly incredible. On the one hand, its strengths give them a lot of power to fully take advantage of numerous opportunities, but on the other hand their weaknesses and threats can cause a lot of problems for the company.

We have compiled a lot of information about Uber and presented you with our vision of the American company, but now, it is your turn! Did we miss something? Do you have some interesting thoughts that you would like to share with us — please post them in the comments section. Do not forget to share your findings with us!

Check out our newer article about UBER company