Uber SWOT Analysis

UBER SWOT Analysis

Uber has seen a lot of growth and also attracted a lot of controversy in a very short period. The brand was founded by Travis Kalanick and Garrett Camp in 2009. In these eight years, it has achieved a lot including financial growth and international expansion. The brand started as a simple app to call taxis and has developed to include many more things including online payments. Uber provides a large variety of riding options in 83 countries and across 674 cities. However, there are especially five countries, where the brand has seen highest action and quicker growth. These nations are US, Brazil, China, Mexico and India. While the financial value of Uber has sharply increased, it has come at the cost of the profits of the traditional taxi services.

Having given rise to controversies and protests in several parts of the world, Uber has also faced significant legal and political tussle. Still, using the power of networking and technological innovation, it has garnered a high level of customer loyalty and financial power. Uber has taken a customer-centric approach and earned its benefits. However, the level of disruption it has caused in the taxi industry has made the situation difficult for existing players. In several areas it has been accused of openly shunning laws and regulations. This is a SWOT analysis discussing the strengths, weaknesses and threats before Uber.

Strengths:

Brand name and brand equity – In a short period of less than ten years, Uber has become a well known brand name. The brand is easily recognizable through its Uber logo and has gained quick popularity based on its innovative taxi services. Brand image and brand equity are important strengths for any business. Its existing brand equity also proves a strong support in hacking new markets. This has been proved in the form of its sharp growth in the Asian markets.
High level of customer loyalty – Uber has adopted a customer focused business model at whose centre are the metropolitan riders mainly. The level of customer convenience that it offers and the competitive pricing strategy it offers, both have worked in the favor of the brand. Its core users are highly brand loyal. Both the pricing strategy and customer convenience are important factors affecting customer loyalty directly. Uber has nailed both these factors right and the result is a high level of popularity and customer loyalty in the key markets globally.
Convenient to use app and services – Uber started with an app that could be used to call taxi services. Since then, the app has been improved a lot to include several more things including one click payment and ratings. The app is very convenient to use and booking a taxi is easier with it. Uber’s services are also easy to use and you do not need to make cash payment to the driver. Just hop in and hop out. So, infact at several points Uber has worked to take customer convenience to the next level.
High service standards – Uber has maintained high service standards whether in terms of rides or in terms of customer service. The drivers are trained to be hospitable and polite and the rides include new and efficient vehicles. It pays the lion’s share to the taxi drivers and keeps only 5 to 20% cut for itself.
Low operational costs – For Uber, the operational costs are low because it does not have to spend on physical infrastructure a lot. It makes use of the networking effect to hire drivers and does not have to spend on buying vehicles or their maintenance. This keeps the operational costs to bare minimum and Uber has to spend only on the core staff. Since the operational costs are very low, it allows for higher profits and savings.
Rating systems to maintain trust between the brand and the customers – Uber has also focused on managing high level of trust between the brand and its customers. It has implemented a rating system that lets the riders rate their drivers and their riding experience.
Fast growth in key markets and strong hold on Asian markets : Uber has seen very fast growth in key markets of the world including the Asian markets. In India and China its popularity and customer base have grown very fast. Apart from these Uber’s brand has also grown very fast in US, Brazil and Mexico. These are five most important markets of Uber where it has seen highest profits and growth.

Weaknesses:

High number of controversies – In these eight years of its existence, Uber has earned both negative and positive publicity. While it has been liked for being a customer friendly taxi service, it has been hated by the existing businesses. The existing taxi services lost a large part of their customer base to Uber. This led to heavy protests and resistance from the competing taxi services in several parts of the world. However, Uber also gave rise to several legal and political controversies based on its style of operation. In several markets, the local authorities accused Uber of shunning laws and regulations openly. Such controversies and pressures act to disturb Uber’s business and profits and increase its operational costs.
Caters mostly to professionals and millenials - Uber is basically an app and not the regular taxi calling service. You only need a smart phone and the app which can be downloaded from Google play. However, it is mainly the millennial generation that is tech savvy and uses internet and internet based services regularly. This is especially the case in the Asian markets. It is why Uber gets to serve the young customers mainly. The elderly generation in the Asian countries is less tech savvy and depends on the traditional taxi services.
Competition – While Uber has created competitive pressure on the traditional taxi companies, they have also upped the standard of services and reduced prices to respond. This is leading to competitive pressure in some areas.

Opportunities:

Widespread growth of internet services in Asian markets – The Asian markets have seen a fast growth in the use of internet based services. A larger part of the population is using the internet to sell and buy services. This kind of technological development has worked in the favor of brands like Uber. Growing popularity of internet has proved highly profitable for Uber.
Growing income of the middle class consumers - The growing income of the middle class consumers globally has also proved profitable for Uber. It is mainly the middle class consumers and the tourists that make use of Uber’s services. Since, their disposable income has increased, they are able to spend more and this has created opportunities for brands like Uber. Rather than taking the other cheaper modes of transport, these customers are going for the more convenient services from Uber.
Partnership with hospitality brands - Uber can partner with hospitality and hotel brands to serve millions of tourists who regularly need taxi services while staying at a hotel. This will benefit both Uber and the partnering brands as well as the tourists who need transport services.
Better option than alternative transport services in Asian cities – In the Asian cities, the alternative transport services are not of as great quality as Uber’s. It is why people are opting for Uber than using the traditional transport system. This means higher profits and revenue for the taxi brand.

Threats:

Growing legal and political pressure – The legal and political pressures upon Uber is growing. Local authorities globally are pressing it for compliance with certain laws which were initially not deemed applicable in the case of Uber. It faced issues related to licensing in South Africa where government started impounding Uber cars for the drivers did not hold taxi permits. There are other areas like HR where legal pressure has increased on Uber. Californian authorities had earlier ruled that it should treat its drivers as employees.
Growing protests from traditional taxi services - Uber’s rise has led to severe losses for the traditional taxi companies and that has resulted in protests from them. At several stages this protests even acquired political colors meaning a threat to Uber’s business.
Low profit margins – Uber takes a very small share of the payment which generally ranges between 5 and 20%. So, unless it keeps selling its services at a very large scale, the profits can diminish.
Competition from Lyft: While Uber has been enjoying superior growth through technological innovation which came at the cost of traditional taxi companies’ business, things seem to have started changing with the emergence of Lyft. Lyft has given more than 236 million rides between 2012 and 2016. Both the brands have their plus points and a number of drivers serve both. This is how things work in the sharing economy. However, both brands are a threat to each others’ business.

[Check out Uber's marketing mix and Pestel analysis]

Conclusion:

Uber’s profit and growth has proved costly for the traditional taxi companies. While Uber has seen its business and popularity grow rapidly, the other taxi brands have seen their profits diminishing fast. In some of the markets including US and the two large Asian markets, India and China, Uber’s business has been flourishing. Growth of technology and rise in the income of the middle class consumers are also positive factors that have favoured the growth of Uber. However, all this growth and popularity has not been free of issues. There have been controversies regarding its employment and HR practices on how the brand has been trying to shun local laws and regulations. In US as well as South Africa pressures related to compliance have grown and in some other markets too. Uber has kept battling these issues and is facing competitive pressure as well- some from the traditional companies and some from the rising Lyft. Still, there are ample opportunities for further growth for the brand and especially the Asian markets seem to be really in love with Uber. The brand has reached a financially strong position and has brought several new kinds of rides for the convenience of the diverse groups of customers. It must focus on penetrating the market deeper in emerging economies around the globe. However, it is mainly the prices and quality of service that have made Uber the millenial’s favourite.

Sources:

https://thefederalist.com/2017/06/23/competition-uber-lyft-shows-free-markets-make-life-better/

https://medium.com/@harrison_seagle/uber-swot-analysis-and-creative-brief-16c8aa752c92