United States-based Uber Company has faced continuous backlash since its establishment in 2009. The company has been subsequently accused of unhealthy competition, rape cases, lack of confidentiality, and mistreatment of drivers. For instance, its rapid growth by 20013 was pulled back by the cases of drivers filing for recognition as employees, which would mean them being included in employee benefits like medical insurance, motivation, and paid leaves. The ruined reputation led to the organizational change initiated by the executive board members who recommended Dara as the best leader to turn tables around for Uber. The coming of Dara meant that he would tour the cities and issue public apologies on behalf of the company. Also, change meant the removal of the CEO and carrying out a cleansing occasion to wipe out the actual malice in the company. As a result, Dara laid off the current security manager and hired a new one. Dara led the organization towards change in many ways, including identifying underlying threats to corporate growth. The purpose of this paper is to analyze the case study and respond to how effective Dara would be to foster change and growth for the company.
Part 1. Individual Analysis
Porter’s Five Forces
Michael Porter proposes that the success of a business relies on the ability to identifying underlying forces related to competition. Success does not come by luck but by analyzing business challenges and developing strategies for success. Competition rivalry is one of the forces identified by Porter. For Uber, its drivers in London, Madrid, Paris, and Berlin have reported unfair competition in the industry. Uber has been reported to overlook the existing local laws when seeking to establish and grow its business in another country. Importantly, Uber has shown unhealthy competition for Lyft, which is its main rival. Notably, Lyft was existing before Uber and was the only recognized form of taxi transportation in the United States and the surrounding companies. As a result, Uber finds Lyft as its major rival in the industry and creates a secret program known as ‘Hell.’ The primary purpose of ‘Hell’ is to spy over the activities of Lyft and report to Uber executives who use the information to achieve a competitive advantage over the former. Porter explains that it is the strength of such forces that determines the returns in revenue for any company. Therefore, Uber went ahead to send some of its workers to book rides on the Lyft platform. At the last hour, the trips were canceled by the supposed riders making Lyft incur wasted gas, time, and delays for real customers. In the end, Lyft’s potential customers opted for Uber. The rivalry affected Lyft’s profits and customer base, whereas Uber reported a vast customer base in that period.
The supplier power is another of Porter’s five forces that Uber has experienced in the past ten years of operation. Uber’s suppliers are the drivers who are also termed as employees. When the drivers filed a lawsuit against Uber requesting recognition as employees, this implied that they needed a salary increase and attached benefits as recorded in the employer-employee contract. As a result, Uber was forced to hike its service charge per ride, something that ignited mixed reactions from riders. As a result, Consumer power is another force whose power affects the operations of Uber Company. Consumers keep complaining about price surges, and this affects the profitability index of Uber. The higher the prices, the more the possibility of customers leaving Uber for Lyft, their main rival. Therefore, despite having won in the rivalry with Lyft, the reliable buyer and supplier power affects Uber, something that sends its customers to its competitors.
Fundamentally, Uber has had an easy time in entering new markets through the aggressive strategy set up by the former CEO, Kalanick. The CEO refused to bulge despite the ongoing negativity and bad publicity of the company. He was bold enough to overcome the challenges through sufficient technologies that saw the entrance into 600 global cities in 2017. Rivals did not threaten the company in the new towns since it had everything planned out, and soon enough, the business bloomed, recording a $69 billion value in the same year. Lastly, the threat of substitutes has been a critical concern for Uber, especially during its entrance to the Russian market. Uber reported that it strained to gain recognition in Russia following its bad publicity. Fearing its few consumers substituting its services with those of Yandex, the company signed for a merge. As a result, Uber has been operating in Russia under Yandex, and this has given the company some relevance, unlike during its entrance. Below is a summary of Porter’s five forces.
Figure 1. Michael Porter’s Five Forces.
- The threat of New Entrants
- Competitive Rivalry
- Power o Suppliers
- Threat of Substitutes
- Power of Buyers
Part 2. Main Strategic Issues
Uber’s Internal Challenges
In 2013, Uber was accused by its drivers for failure to recognize them as employees. The drivers demanded inclusion in the employment contract, which would offer them other benefits, including insurance and medical cover. Later this year, an Uber driver was involved in an accident that killed a six-year-old girl leaving her mother and brother with serious injuries. As a result, Uber was questioned for how it would treat such damages. The executive members reported to lack any strategies for reimbursement on damages caused by the company or any of its representatives.
Uber reported having poor leadership strategies when the CEO was recorded to undermine women following Kalanick’s troubles with women. The event was an indication that the company at that time was highly patriarchal, and women’s rights were overlooked. Biasness is a vice that a strategic leader should not have. Also, in 2014, two experts TechCrunch and Valleywag, reported that the allegations of unhealthy competition posed by Uber against Gett and Lyft were true. More than 5,000 rides were booked and canceled by Uber workers under the watch of Uber’s executives. The implication here is that Uber was using the wrong competition strategy by spying rather than benchmarking. The company was also criticized for its dynamic prices following high demand for its services and the approach that Uber used to lure its drivers. Lack of a code of ethics is also another strategic issue that Uber lacked. For instance, in this year, an Uber driver in Delhi was accused of raping a female rider, whereas the company kept attacking journalists for unveiling such threats. If employees are guided by a code of ethics which dictates the dos and don’ts while on company service, drivers would keep their morals in check.
Uber also reports a lack of employed hiring or acquisition and retention strategies. Drivers were hired randomly rather than formerly, which whereby were required to show expertise by passing a driving test and providing a driver’s license. There were no formal interviews to ascertain a background check on the company’s employees. For instance, in 2016, an Uber driver was spotted working while legal records showed that he had killed six people in a shooting confrontation in Michigan. Such is a weakness that Uber investors and executives trust Dara to solve. Major strategic defects were experienced in 2017 until the executives forced Kalanick to resign following failed leadership and tainted image of the company.
Survival in competitive markets outside the United States has posed as a significant challenge for Uber Company. The company reported its moral decay in Delhi when one of its employees was accused of rape. The incidence causes a revocation of its operating in Delhi until 2016, whereby other cities continue to threaten Uber’s operation. The aggressive approach by Kalanick to invade the international markets amidst reputation backlash was not a wise one despite the increased valuation of the company. Kalanick should have solved issues within the company before exploring new markets to guarantee survival outside the U.S. The 2015 case of drivers against the company for classification as employees led to the revocation of operation in Alaska and further a fine of $78,000. In the same year, the company faced demographic challenges when the Burglaria government ceased its operations, causing a loss of over 40,000 clients. Other than Delhi in India and Bulgaria, Uber has also faced legal issues from the Australian, Canadian, and Germany governments that have threatened the legality of Uber’s operations. Uber has too faced political issues during its standing with the Trump directive in 2017, which undermined the rights of taxi drivers. Many drivers launched a strike that interfered with Uber’s operations for its political stance.
Part 3. Strategic Solutions for Uber’s Challenges
Hiring Dara as the new executive of Uber is considered as one of the best decisions that the company led by its executives has made in a while. Dara is a selfless leader who is willing to fight for the success of the company with every ounce of himself. As such, Dara made three promises to Uber during his inauguration in 2017. One of his strategies is that he would be transparent in his undertakings. Secrets are some of the weaknesses reported under the leadership of Kalanick. In his explanation, Dara states that the higher individuals ascend in the job cadre, the lesser open they are. He, thus, explains that by being honest with all of Uber’s workers, he shall make them as accessible as possible so that underlying cobwebs to success are mitigated. Dara also promises his full support in the battle to salvage the company’s reputation and encourages all the workers to embrace the same attitude. Dara guarantees success through inclusive participation to solve the problems of Uber Company. In his view, he hopes that through collaboration, every employee’s efforts will be recognized in the company’s success. Also, his leadership strategy is transformational such that all employees are identified with their efforts, and Dara participates in the company activities. He hopes to achieve equality by treating all employees equally regardless of gender, race, or ethnicity.
Moreover, Dara Khosrowshahi hopes to achieve Uber’s success through the eight principles that are compared to the Suitability, Feasibility, and Acceptability scores tool. Living locally whole growing internationally is one of the essential tenets of Dara’s leadership. The initiative hopes to achieve acceptability of 9 on a scale of ten by connecting deeply with the global communities, cities, and customers. Through acceptability, the second principle of consumer obsession is achieved. Gaining consumer’s trust and loyalty implies being accepted in the market through cutting costs, maximizing revenues, and making short-term sacrifices that reflect futuristic devotion. Sustainability is achieved through the third principle of celebrating differences whereby the contribution of every individual count and everyone’s opinion is heard. Doing this ensures that all employees are treated equally, thus guaranteeing their support in futuristic plans of the business. Acting like owners and doing the right thing are two other principles that Dara hopes to apply as problem-solving strategies for corporate growth. The value of ideas over hierarchy and perseverance of success strategies are other principles that backup the sustainability approach. Lastly, the bold and big bets show how feasible the policies are to achieving success and salvaging Uber’s image. Dara admits that boldness has been a failed strategy in the company, which can be rated at four on a scale of ten.
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