In 2015, technological developments allow people to move around cities without much hassle and without the necessity of owning a car through car-sharing services or new ride-sharing services. Uber likewise provides such convenience by allowing its users to place an order for private rides through a mobile app. Halfway through 2015, Uber had reached a pre-IPO market valuation of $50 billion, with operations in more than 300 cities in 58 countries. However, Uber still faces a lot of controversies amidst such wide operation and success. It also faces some resistance from stakeholders-regulators, competitors, drivers, and even its customers and partners. This case study analysis discusses the scenario of whether Uber could continue its operation.
Rosabeth Moss Kanter; Daniel Fox
Harvard Business Review (315139-HCC-ENG)
June 22, 2015
Case questions answered:
Given that most of the stakeholders in the value chain are unsatisfied with its unethical business practices, what should Uber do to improve its perception of the aforementioned?
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Uber and Stakeholders: Managing a New Way of Riding Case Answers
Case Synopsis – Uber and Stakeholders: Managing a New Way of Riding
Uber Inc., a transportation network company (TNC), was founded by Travis Kalanick and Garrett Camp in 2009, and by 2015, it had reached a pre-IPO evaluation worth $50 billion. The disruptive technology firm Uber disrupted the taxi market.
Despite high resistance from the government, competitors, municipalities, and even customers in some cases, it is currently operating in 311 cities in around 58 countries in the world. Uber provides a ride-sharing application that links technology with the transport industry.
As the name suggests, Uber is a supreme example of a firm that followed unethical practices to reach its current position. Avoiding government regulations, providing services during the ban, sabotaging competitors, and breaching passenger information are just among the long list of unethical practices that the firm has been following to date.
Thus, given that most of the stakeholders in the value chain are unsatisfied with its unethical business practices, what should Uber do to improve its perception of the aforementioned?
Uber identified itself as a TNC, a line of business that has no hard-coded government regulations yet. Thus, at a systemic level, Uber, which was started under the name UBERcab, dropped “cab” from its name to avoid being regulated. Also, it is still operating in those cities where its operation has been banned by the government.
At the organizational level, the CEO, Travis, encouraged unethical practices within the company to continue attaining a high IPO valuation. Ethical standards were never embedded into business strategy. The firm lobbied higher government officials to make favorable regulations.
To win over its competitors, Uber encouraged its drivers to accept rides from its competitors and then cancel them, leading to customer frustration.
The firm’s current strategy is Cost Leadership, where it plans to beat its competitors by meeting customer ride demands at lower costs.
The firm’s objectives include becoming the largest and preferred transport company, providing convenient and safe transportation, and working towards having a high profit margin and IPO valuation.
To attain all the aforesaid, a compromise had to be made on the ethical factors. Thus, to inculcate changes within the firm, major reforms will have to be performed.
Industry Structure and Trends
The taxi industry currently has 3 categories: taxicabs, limousines, and Total Network Companies (TNC). The industry has reached a mature stage and is one of the highly regulated industries.
To count a few Government regulations: Some cities sold costly medallions as the right to operate a taxi, few required taxi drivers to undergo special training, and some performed extensive background checks.
However, TNCs are newcomers in the industry and are shaping the industry, as the government cannot classify them and has no set regulations.
Thus, other players in the industry are either suing the TNCs or improving their services to compete against the new leaders.
Economically, disposable income worldwide is rising, and thus, more people are opting for cab services to reach their destinations. On the Social front, customers were frustrated with the taxi service’s quality, courtesy, and safety. Racism and poor feedback mechanisms added to the frustration.
Technologically, mobile applications have made travel convenient, better, and reliable for customers. Continuous innovations are occurring in the travel industry, which is becoming a threat to the existing competitors. For example, Google was working on its own ride-hailing service.
Environmentally, to reduce pollution and to avoid traffic congestion, people are preferring carpooling. The value chain for Uber and the other TNCs that shape the industry can be seen in Exhibit 1.
EXHIBIT 1: Value Chain
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