Strategic Management Assignment
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Competition in the business is inevitable, to make a business profitable in the competitive environment, a process is undertaken to set goals, and objectives, this process is termed strategic management (Makadok et. al, 2018). In this assignment, strategic management is discussed with the help of understanding the case study of Uber and Cornershop acquisition. The companies are tech giants dealing with different businesses. The acquisition of Cornershop by Uber is discussed along with the implications of this strategy. The report analyses the internal and external environment of Uber Technologies Inc.
External Environment Analysis.
Uber Technologies is a technology company that aims to connect the physical and digital world to simplify the daily life of people. It is the world’s largest ride-sharing company operating in more than 900 cities worldwide. Uber is a transport network company, a part of the transport industry. The transportation sector has grown enormously with the growing demand for sharing resources by the population in different countries.
Competition in the industry.
The business model in the transport network industry in which Uber operates is easily immutable as it requires high-end technology and little to no heavy investment in resources like human resources or vehicles. Therefore, the industry experiences cut-throat competition where pricing strategy plays an important role (Martins, 2019). The customers are influenced and change preferences with a slight change in the ride fare and duration for the transport and hence, the company deals in a winner-takes-all competition. Some of the growing companies that can compete with Uber in the future are Ola, Grab, Curb, etc. apart from the companies, Local Taxis, and public transport are indirect competition to the transport network companies like Uber.
Challenges in the ride-sharing market.
One of the major challenges faced by the companies in this industry is sustainability; due to the cut-throat competition, the profitability has significantly reduced as every player fight for the market share. In such intense competitive rivalry, it is very difficult to attain profitability and build a sustainable business. Customer loyalty plays important role in such a competitive environment and is equally difficult to maintain high customer loyalty. Another challenge is a high investment to capture the market share. Investment is required for marketing, providing incentives to the customers for using the service repeatedly and driver’s payout.
Uber’s Strategy: Differentiation and Cost leadership.
Uber has adopted a mix of cost leadership and differentiation strategy to achieve competitive advantage. The company started as a ride-sharing service and later introduced the UberEATS which is a food delivery service. Now, the acquisition of Cornershop is another step towards implementing the differentiation strategy in the business. The company can utilize the existing technology, network, and services of Uber with the Cornershop customer base to provide high-end services to the customers (Wakhu and Bett, 2019). The company charges less price than its competitors in the market.
The strategy has helped the company to grow and contribute to the economy. Uber has employed the drivers and increased the employment of drivers by 23%. One in 10 trips of Uber connects the customers with rail or bus, the economic value created by drivers in the US increased by $5.7 billion annually after Uber.
Internal Environment Analysis.
Uber Technologies Inc. is a technology company that deals in the ride-sharing market. The company was established in 2009. The company has grown enormously with its innovation-led strategies. In the year 2014, the company was expressed as “the most noteworthy, esteemed endeavor upheld organization”. Currently, Uber operates in more than 10,000 cities in more than 80 countries (Uber, 2021). The ridesharing market can be divided into different types such as station-based, rental services, car sharing, and micro-mobility. The market is expected to grow at a CAGR of 16.5%. The market is expected to reach 85.8 billion USD in 2021 and 185.1 billion USD by 2026 (Markets and Markets, 2021). The reason behind the growth of the industry is the awareness about the environment which persuades the customers to share rides, the bust lifestyle of people has led them to share the resources.
The ride-sharing market share is occupied by mainly two players, Lyft, and Uber in the US market. Uber holds more than 60% of the market share which fluctuates slightly as the competition with Lyft and other players increases. The market share of Uber in 2017 was 74% which has reduced to 69% in 2021 (Statista, 2021).
Firm’s Resources: The key resources that Uber uses for business includes a network of riders and drivers, the app(platform), talented technology operating human resource, data analysis algorithms, and brand image. Uber is well known for its quality services which provide a competitive edge to the company. The data analysis provides opportunities to enter into new businesses while using the same technology and resources.
Capabilities: Technology is one of the capabilities of Uber as the app is very convenient to the riders as well as drivers, uber innovates the services regularly with data analysis such as Uber pool significantly reduced the cost of riders as well as drivers (Clear, 2017). The company is also contributing to the environment by taking initiatives to reduce carbon footprints.
Core Competencies: Technical innovation is a core competency of Uber as the company regularly innovates the services such as Uber Commute, self-driving, uber pool, etc. Uber provides options to select such as sedan, mini, micro, etc. Uber provides flexible jobs to drivers. The company significantly contributes to reducing population, traffic, and improving the standards of living of people.
Distinctive Competencies: The pricing strategy and differentiation is the distinctive competencies as it provides a competitive edge to the company (Cordina et. al, 2020). The company offers different services such as long trips, short trips, uber pool, Uber Commute, Uber Eats, etc.
SWOT Analysis: Uber.
High standards of service.
Limited or no responsibilities towards the drivers as they are not hired.
High-end technology is used.
The business model is imitable.
The business model is unpredictable.
No direct connection with the customers.
Fewer incentives are given to the drivers.
Low-profit margins of drivers.
Increasing competition due to imitable business model.
The development of self-driving cars.
Growing sub-urban markets.
Investment in cheaper electric cars.
Additional services such as transportation to hospitals, schools.
Learning from the case study.
I have learned various new concepts such as value creation through merger and acquisition, enterprise strategies to understand and evaluate the market to find opportunities. The strategies used by startups for innovation in the business. The role of antitrust issues is also highlighted in the case study which has a major impact on the business environment. Overall, the case study has been useful in understanding the business strategic management theories for innovation and beneficial trade-offs in businesses.
What are the main sources of value creation in Uber Corner shop acquisition?
One of the major sources for value creation is the huge market share of the corner shop in the grocery delivery business. The market size can be easily benefitted by Uber’s transport facility in improving the services. The speed of services will improve thus, creating value for the customers.
Is the network effect relevant for value creation and capture in Uber-Cornershop Operations? If so, then what types of network effects are most relevant? If no, why not?
Yes, the network effect is relevant in this acquisition. The network effect used by the acquisition is direct as the platform of Cornershop and Uber have different user groups such as drivers, customers, and shoppers. The addition of customers adds value to the business, the addition of shoppers and drivers improves the speed of services and hence, the value is created for the consumers.
Is the online delivery market a winner-take-all type of market? What is the relevance of multihoming in Uber’s acquisition of Cornershop?
Yes, the online delivery market is a winner-take-all market as slight differences in price and duration of services can lead to major differences in customer preferences. The multi-homing is related to Uber’s acquisition as the multi-homing will be reduced with the acquisition as the switching cost will increase. Hence, the market concentration is likely to increase (Hofstetter et. al, 2018).
Assuming no regulatory restrictions, as a shareholder of Cornershop, would you like to merge with Walmart? Why or why not?
No, I would not like to merge with Walmart as the companies have perfect complementary business models. The merger can establish a monopoly of the firm, Walmart which can lead to disruption in the economy. The company can control the prices which can harm the customers in the long run. Hence, ethically, the merger would not be beneficial for the economy.
The report has discussed strategic management tools and techniques with reference to the case study of the Uber-Cornershop acquisition. The report discusses the importance of different strategies in the business. The internal and external environment of Uber has been analyzed which highlights the core competencies, resources, strengths, weaknesses, etc. of the company. The report highlights the strategies that can be undertaken for the innovation and management of a firm.
Clear, T., 2017. THINKING ISSUES What's driving uber? values in computing and the'sharing economy'. ACM Inroads, 8(4), pp.38-40.
Cordina, R., Feng, J., Hannah, G. and Power, D.M., 2020. The IPO of Uber-a classroom case. International Journal of Teaching and Case Studies, 11(3), pp.191-207.
Hofstetter, R., Zhang, J.Z. and Herrmann, A., 2018. Successive open innovation contests and incentives: winner?take?all or multiple prizes?. Journal of Product Innovation Management, 35(4), pp.492-517.
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Martins, P.F., 2019. Sharing economy, competition and regulation: the case of Uber in the case-law of the Court of Justice of the European Union. Unio–EU Law Journal, 5(1), pp.54-67.
Statista, 2021. Available at: https://www.statista.com/statistics/910704/market-share-of-rideshare-companies-united-states/ [Accessed on 23 November 23, 2021].
Uber, 2021. Available at: https://www.uber.com/newsroom/10000-cities/ [Accessed on 23 November 23, 2021].
Wakhu, P.O. and Bett, S., 2019. Effect of Competitive Strategies on Performance of Uber Online Taxi Firm in Nairobi, Kenya. International Journal of Current Aspects, 3(IV), pp.80-92.