A Strategic Situation at Uber Which Needs Resolution
Environmental and Industrial Forces That Drive and Constrain Strategic Options for Businesses
There are external factors that can affect a company’s operations’ success. Whereas they influence organizations differently than internal factors, for example, turnover rate, a manager considers them during planning, leading, organizing, and controlling projects. Some of these factors include technology and politics, for example, laws and policies set by the government (Paker, 2021). The former usually aids businesses in bettering their internal processes. However, technological developments that happen in the general environment also determine how brands operate.
Changes in administrations, as well as regulations, may determine how a business can operate freely. Political factors consist of government influences, for example, alterations in tax policies and trade tariffs that may affect a brand. For instance, a country with a stable government and consistent laws often attracts more foreign business. Those similar corporations may be less likely to do business within countries lacking infrastructure.
There are key elements of strategic advantage for businesses against the demands of the industries they operate. These include basic financial planning as well as externally-oriented planning. Most firms trace a formal planning system’s origins to the yearly budgeting procedure whereby everything is minimized to a fiscal issue. Processes develop to predict revenue, costs, and capital needs to identify limits for expense budgets on an annual basis. Data systems report on functional performance in contrast with budgetary targets. In an environment of many changes, events can result in market predictions being obsolete within a short time. A planner, having continuously experienced similar frustrations, starts to lose his or her faith in foretelling and tries instead to comprehend the basic marketplace phenomena causing change. The outcome is usually a new understanding of the main determinants of business success as well as a new level of planning efficacy.
Uber company’s competencies include its ability to reach potential new markets. This can be achieved when effective strategic positioning strategies are established. This means selecting a marketing mix that is most fitting to the target consumer segment. The business in the discussion uses methods such as multi-segment and top-gap positioning. It utilizes the first tactic to target numerous customer segments with varying levels of service. It provides Uber X, Uber XI as well as Uber Pool for cost-conscious individuals.
Additionally, Uber PREMIUM, comprising a fleet of stylish vehicles, is accessible to customers who are willing to pay more. The stop-gap positioning method involves investing in the currently unprofitable business with anticipations of improvement in the long run. The company applied this tactic to its ATG business unit, which stands for Advanced Technologies Group. It invested hundreds of millions of dollars in autonomous self-driving cars’ development. Nevertheless, the project failed to produce the expected outcomes, and the earlier-mentioned unit was sold to another organization. This led to a loss which means that the firm needed better approaches.
Alternative Strategies Contingent on the Demands of an Organization and Its Industry Context
There are strategies that Uber can apply, for example, social media positioning and convenience-based positioning. The first approach is peculiar due to its focus on various channels instead of a stable stand-alone method. The platform a company chooses to use says more about them than the messaging. The key is in selecting the ones that one’s target market utilizes mostly. For instance, for this business, potential customers can be found on Twitter. Thus, the brand must invest more resources and efforts in the application. The second approach highlights why the organization’s service is more convenient than the rival’s. This briefing note discusses how to solve Uber’s problem, which is failing to attain net profit due to a lack of effective strategic positioning.
Critical Evaluation of the Issue
The firm does not possess any vehicles; rather, it earns a commission from every booking. The fares are quoted to the client earlier but vary using a dynamic pricing approach based on the local demand and supply at booking time. Last year, it reported its 1st quarter on a modified basis since its founding in 2009, with the two most essential segments, that is, restaurant delivery and ride-hailing showing a decline (Paker, 2021). The senior management alleviated the concerns of the investors about a shortage of drivers.
Uber’s executives advised that it was not reasonable to spend money on incentives to attract more drivers since it was a tactic of the past. Nonetheless, a massive drop in the value of its stake in the Chinese ride-hailing firm called Didi drove a two billion and four hundred billion dollars net loss in the 3rd quarter (Paker, 2021). Wall Street saw the company’s 4th quarter prediction as disappointing (Paker, 2021). The firm briefed them that their shares bounced in after-hours trade and that they were up around one percent (Paker, 2021). It also reported changed earnings before taxes, interest, depreciation as well as amortization.
The measure excluded one-time costs, for example, stock-based compensation of eight million dollars for the quarter that was completed on the 30th of September. That contrasted to another loss on a similar basis of six hundred and twenty-five million dollars the previous year (Paker, 2021). Uber predicted an adjusted profit of twenty-five million dollars to seventy-five million dollars for the fourth quarter of 2021 (Panda, 2021, p.4). Analysts anticipated on average one hundred and fourteen million dollars (Panda, 2021, p.4). In spite of the adjustment, the earnings report disappointed after smaller United States competitor Lyft Inc. declared a second consecutive quarterly modified profit at sixty-seven million dollars (Panda, 2021, p.4). It also claimed that it expected EBITDA of between seventy and seventy-five million dollars in the last quarter (Panda, 2021, p.4). The two rivals have not yet become profitable organizations on a net basis.
A decline in value regarding Uber’s holding in Didi, as well as stock-based compensation payments, led to a net loss that more than doubled from 2020. The Chinese company, which went public in June, witnessed its market capitalization go down by billions of dollars after the launch of an anti-trust probe (Coccia, 2021). The total revenue grew seventy-two percent to four billion and eight hundred million dollars in the company’s real-world business, a figure that was above the estimates by four hundred million dollars (Coccia, 2021). The delivery business, which consists of restaurant and food store deliveries, rose during the pandemic. The revenue earned from this increased steadily in the 3rd quarter, indicating that growth in riders did not cost the Uber Eats unit.
The firm’s core restaurant business, which consists of ninety-six percent of gross delivery bookings, was profitable for the first time on a modified EBITDA basis in the 3rd quarter. Customers were traveling in bigger numbers in this quarter, and its driver and courier base had improved by almost six hundred and forty thousand individuals since January. Uber spent more than two hundred and fifty million dollars to convince drivers back after the COVID-19 pandemic (Coccia, 2021). It failed to provide information on the numbers contrasted to the period before the disease.
The executives at the company claimed that Uber wanted to grow its driver base beyond the 2019 levels to meet the demand. The ride bookings in the quarter remained more than twenty percent below 3rd quarter standards in that year. However, the firm stated that ride unit margins had returned similar to pre-pandemic times. An investor desires to see a reasonable recovery in the gross bookings for the ride-hailing service, which is a high-margin business in contrast to Uber Eats. Whereas the organization declared that Halloween weekend exceeded 2019, the demand from riders traveling for fun as well as parties is at around eighty percent of pre-pandemic levels. United States airport trips, among the most profitable routes in the sector, improved in recent weeks and lagged every other ride category, remaining about thirty-three percent below the previous years.
Strategic Positioning As A Tool For Businesses To Attain Net Profit
Companies need a positioning strategy as a tool to routinely communicate as well as promote a peculiar brand to a segment of consumers in the market. Using the proper tools to illustrate an organization’s position is among the most challenging yet essential parts of running a business. Without communication of a firm’s value proposition via a collection of marketing approaches, it becomes challenging to maintain a competitive advantage, grow, innovate or create awareness. Strategic positioning focuses on how organizations set themselves apart from the competition and deliver a benefit to target consumers. Successful startups first focus on how to plan to position in the market. This refers to how potent a brand is in the minds of customers, its message, and its perception of itself.
Strategic Positioning As A Tool to Increase Sales
Selling a great service is not enough to guarantee the success of a company. Most times, inferior organizations sell more due to how they position themselves. Startups need to establish an unconventional positioning approach that impacts the consumers’ minds to select the firm’s service, which can be a solution to their problem. This influences the marketing, pricing as well as sales strategy. To succeed, it needs to be sensitive to various target groups of clients. Unsuccessful methods focus on that they are better than their rivals instead of being different (Visscher et al., 2021, p.625). The company has to narrate a story concerning its uniqueness and find the most efficient ways to share that data with others. It is essential to maintain consistency as well as not deviate from the original narrative, as it is what leads to customer loyalty.
Strategic Positioning As A Tool to Improve Marketing
Successful strategic positioning guarantees marketing methods are oscillating with consumers and prompting them to some type of action. Without communicating a service’s best qualities to a segment, a company cannot experience growth. The more particular the message is to a segment, the higher chance there will be a return on investment. Even when promoting to a similar collection of customers as the rivals, it is important to position one as much different. An attention-seeking positioning message that describes which services offer a solution to people’s problems is the directive that will be most effective.
Sometimes it only requires that an organization creates a statement that is strong and focuses on how customers capture value by utilizing the service. Newer organizations that provide services that are also produced by rivals can apply the strategic positioning messages to attract consumers who still have an issue that has not been solved by a regular establishment brand. By telling the targeted market how valuable the service is and ways of catering to their needs, new startups can accomplish the stability required to sustain their operations.
As mentioned earlier, without routinely reminding the consumers of whom the brand is and the service they offer, it is impossible to get new clients or maintain the ones subscribed to the company already. Using a positioning statement as a tool to tell clients why they are needed to act is among the most consistent requirement of conducting a successful business. With the correct narration and strategic tactics to communicate it, brands can create awareness over time. Loyal consumers tend to suggest a recognized business to family and friends. Before long, a brand is not just established through marketing prowess but via word-of-mouth. Nevertheless, continuing to remind people about one’s value is important to sustain awareness. This is especially true in a changing market with an increasing list of rivals.
Types of Strategic Positioning Strategies
In the case study, it is mentioned that Uber needs to apply other strategic positioning approaches to ensure that they realize the net profit. It appears that the methods they have been using have not worked much as they expected. A convenience-based tactic is one that they should adopt and is one that conveys that the company can help to make life easier for the customers. Whether it is the ease of access, location, or overall usability, convenience is the main factor that sets particular businesses apart. For instance, consumers may be more inclined to purchase a product or service if they understand the brand’s return policy is flexible and easy or that the company offers free shipping. Communicating that one simplifies people’s experiences can result in striking interest from many individuals. This may need collecting responses from the consumers and having more adaptability and flexibility to accommodate their common problems as well as ease of use issues. However, problem-solving expertise could really set the difference between a company and its rivals.
A social media positioning strategy is another tactic that can be used to place a company ahead of others in the marketplace. To accomplish effectiveness, one does not need to register on all platforms. Some business owners are curious to create accounts for their organizations on every network, which is a mistake. Once the company has an online presence, they are expected to publish information there. One’s clients will not follow if the posting is incorrect or there is inconsistency. What many of them do not share is that managing social networks needs much work. Thus, rather than handling multiple accounts poorly, it is better to maintain an online presence on some platforms so that they deal with them appropriately.
Another point is that business owners need to identify the particular platforms the target audience uses on a regular basis. If they are children, it is unnecessary to spend money on an advertisement as well as run during Globo News. Thus, the majority of the firms are unable to see the mistakes when they contract their social media. Nowadays, the youngest people are found on applications such as Instagram and Snapchat. Understanding such information aids the organization thinks about the approaches to convey to their target market so that the investment can lead to outcomes.
The third pointer is that business owners should not underestimate the social media niche. Some social networks for a particular audience, for example, the LGBT community, are meant for a particular. During the period when Barrack Obama served as the President of the United States, his team managed an account that addressed Latin people. Even if such networks do not have similar visibility to Facebook, the company should not ignore them since they offer a narrower dialogue with the public.
The last pointer is that entrepreneurs need to establish a goal for their online presence. Some businesses maintain their social media accounts with the intention of serving their customers and responding to the questions. Others choose to return to their more known brand (Piller et al., 2021, p. 6153). When one has an objective for social media placement, the organization is in the right direction due to its already-reached decision of what professionally is behind the screen, which is essential. If the likelihood and need are there, it is critical that a brand hires professionals who communicate with the market. Online presence prowess in this era can determine how competitive a firm is in contrast to others. People have reached the extent of employing influential people or celebrities as they have a large following. Strategy/Change/Competitive Advantage Theory
Through the five forces, Porter helps to identify the position of power found in a business situation. The forces include competition among rivals, customers’ bargaining power, suppliers’ bargaining power, the threat from substitute products or services as well as the threat of new entrants (Göral, 2021). This theory is useful in comprehending the strength of a company’s current competitive position and that which it may elect to pursue. Uber can succeed if it understands where it stands and the position it would like to find itself.
Many companies during the pandemic experienced losses due to various reasons. For instance, Uber saw a decline as a result of having few drivers. The majority of the people partnering with the company lost motivation as they feared for their lives. Months after the vaccine was produced, individuals are still not comfortable sharing close space with others. The company has used incentives, as mentioned in the study, to bring back most of such people. However, this has not been impactful, as the firm has lost a share of the market and experienced losses despite implementing strategic positioning tactics. Social media and convenience positioning are alternative ways that can turn around the situation of the brand.
Reference List
Coccia, M., 2021. Preparedness of countries to face covid-19 pandemic crisis: Strategic positioning and underlying structural factors to support strategies of prevention of pandemic threats. Environmental Research. Web.
Göral, R., 2021. Competitive analysis of the hotel industry in Konya by using porter’s five forces model. Web.
Paker, N., 2021. Assessing strategic positioning of e-Commerce sites: Analysis of Turkish retail market. Pazarlama ve Organizasyon Perspektifinden Kuramlar ve Tartışmalar. Web.
Panda, D. (2021). Positioning Strategies of Indian nonprofit organizations for grant acquisition. Public Administration Quarterly, 45(4). Web.
Piller, F., Van Dyck, M., Lüttgens, D. and Diener, K., 2021. Positioning strategies in emerging industrial ecosystems for industry 4.0. In Proceedings of the 54th Hawaii International Conference on System Sciences (p. 6153). Web.
Visscher, K., Hahn, K. and Konrad, K., 2021. Innovation ecosystem strategies of industrial firms: A multilayered approach to alignment and strategic positioning. Creativity and Innovation Management, 30(3), pp.619-631. Web.