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Success in the international marketplace

Introduction

Uber is a transportation service whose demand has grown over the years bringing about a revolution in the world`s taxi industry and has its headquarters based in San Francisco. The transportation company has created a network through a mobile software that connects passengers with drivers for vehicle hiring services. By use of the mobile application, users can reserve a driver and also enables them to keep track of the reserved car regarding its location as it drives to the passenger`s location. Uber`s business model has allowed its clients to enjoy convenient and reliable transport services simply by tapping their smartphone (Cannon & Summers, 2014). The value of Uber has been estimated to be over $50 Billion (Schor, 2016) and its presence is now felt in more than 60 countries worldwide as shown in Appendix 1. This demonstrates the success that the company has had in the international market and is now among the fastest growing startups.

Uber`s success in the international marketplace

There are a number of factors that could have led to the success of Uber in the global market. To start with, the company uses surge pricing technology. This is one of the important aspects of the company`s business model whereby there are fare variations with respect to the situation. In this case, when the demand for their services increases, Uber automatically increases its per mile prices (Rempel, 2014). These new prices are dependent on the number of customer requests made as well as the number of drivers available. Surge pricing has been practiced by Uber during holidays (Rempel, 2014) when many people desire rides and the people willing to provide the services were not enough. The company has gone a step further to apply for a patent in relation to price surge technology in countries such as the US. The use of surge pricing technology as a strategy is supported by Herold, Goldstein, and Clarke (2003) who argue that to succeed in the international marketplace, a business should have a clear strategy that includes a plan of how it will operate. In this regard, surge pricing technology is one of the key strategies in the company`s revenue generation model. Whatsapp Another key contributor to Uber`s success in the international market is the incorporation of other Uber rides into the company`s business model (Isaac, 2014). Uber now offers helicopters, boats and other means of transportation that are on demand. In the recent past, the company has launched motorcycle-pickup services in Paris and delivery services in San Francisco (Cramer & Krueger, 2016). This has an implication that Uber has continued diversifying its services and making them available in more cities worldwide which mean additional revenue to the company. Diversification of Uber services is in line with what is described by Bennett, Aston and Colquhoun (2000) as “empowering customers with choice”, which the author points out as a key strategy to succeeding in the global market. Uber has also invested in marketing through advertisements, both at local and international levels which helps to fetch customers across the world. Herold, Goldstein, and Clarke (2003) state that marketing and advertising in the global marketplace are imperative to taking a business global as it exposes the business to potential customers across the world. The authors add that unless a company`s service or product is distinguished from that of its competitors, then customers will not go for it. In this regard, at the local market, Uber makes use of advertising channels such as newspapers, and FM radio while online advertising, such as with Search Engines, has proved useful at the international level. Consequently, Uber has grown to be a popular name that many people worldwide are waiting for the start of its services in their cities (Rogers, 2015). Further, the company has accelerated expansion and employment globally. The fact that Uber is rapidly expanding even in the developing countries serves as a major factor in the company’s success in the global market. Appendix 2 shows the company`s expansion by city between 2011 and 2015. The company has made new additions in Africa including Nairobi, Kenya; Dar es Salaam, Tanzania; Kampala, Uganda; and Accra, Ghana (Cramer & Krueger, 2016). This depicts the company`s ability to strategise its expansion by being able to locate the best opportunities and areas for development which is in agreement with Young, Dimitratos and Dana`s (2003) statement that success in the international marketplace is dependent on the business ability to strategise both short- and long-term expansion and growth goals. Uber`s ambition to have its presence felt in every corner of the world implies more expansion in the global market and hence more profits for the company. According to Luo (2001), in order to succeed in the global marketplace, it is vital to develop a global mindset that will enable the business to tap into more lucrative opportunities that other local businesses miss. Besides, by creating employment, Uber has been able to acquire a sufficient number of drivers that the company requires to continue succeeding in the international marketplace. With an increased number of available drivers, the company is able to meet the requirements of its ever growing customer network globally.

Positives of Uber`s business model

Uber`s business model has a broad range of advantages mainly for its customers, drivers and the company itself. Due to its business model, the company has become a great solver of riders` problems. It is considered a problem–solver as it provides individuals in need of taxi services with a ride at a reasonable price. There are many people who utilise such services across word`s major cities, and Uber has been able to de-monopolise the taxi cab service (Topham, Hellier & Gani, 2015). Besides, Uber has made efforts to fix up the taxicab industry structure hence making it more reputable by providing clean rides, quality customer experience as well as accepting different payment forms for services offered. Uber`s business model has also made the industry more customer-oriented by allowing customers to track vehicles as they make their way to the client`s location. Other consumer benefits attached to Uber`s business model include convenience and simplicity, safe pickups, several car options, and anonymous feedback (Pick & Dreher, 2015) See Appendix 3 for a comparison between Taxi and Uber services.

Other than the customers, Uber drivers also benefit from its business model. One of the main ways that Uber drivers are benefiting is through job creation (Miglani, 2017), especially for drivers who experience challenges getting clients in the cities. Other Uber`s business model advantages to its drivers include flexible timings, incentives, more money with surge pricing technology, timely payments and driver feedback (Cusumano, 2015) Uber's business model also benefits the company. When customers enjoy fast, high-tech and quality rides (Salnikov et al., 2015), they engage in spreading the news where they may use social media platforms such as Twitter to make their friends aware of the new services in their city. As a result, Uber gains new clients and experiences growth in its business.

Negatives of Uber`s business model

Despite Uber`s business model having many positives, it also has a downside. One of the serious disadvantages is that the model has put the company in legal battles. For instance, in Britain, Uber is in a legal fight with its drivers over various benefits such as sick leave, minimum wage guarantee and holiday pay (Wallsten, 2015). Further, while pricing strategy used by Uber is advantageous to the company, it is a disadvantage to the clients. At times, the pricing doubles the normal price, and some customers have been cited terming the practice unethical and a form of exploitation (Rayle et al., 2014). Further, due to the nature of its business model, Uber has to strain to match their driver supply to the clients` requests

Why Uber should adopt more of a “tiptoe” approach to its approach to market entry

In the recent past, Uber has been associated with the use of notoriously aggressive tactics in its business. The company has been said to regularly operate without acquiring the necessary regulatory approval while in other instances it has overlooked legal concerns. As such, there are enough reasons why the company should adopt more of a tiptoe approach to its approach to market entry. One of the major issues that Uber has been accused of is its aggressive recruitment tactics when it gains entry to a given market. An example of this is where the company has occasionally been accused by a rival company, Lyft, of poaching its drivers. In response, Uber acknowledged attempting to recruit drivers from Lyft. Additionally, in a report released by Lyft, Uber employees were accused of ordering and cancelling thousands of the company`s rides in efforts to undermine Lyft`s business (Anderson, 2014). As alleged in the report, a team had been selected and supplied with iPhones owned by Uber together with credit cards to help in the creation of fake Lyft accounts by the use of disposable phone numbers (Williams, 2017). What followed then was the ordering of rides on Lyft, which against expectations was used to recruit the requested drives. Another company, GetTaxi, made similar accusations which claim that Uber employees had been involved in the cancelation of close to 200 GetTaxi rides (Manjoo, 2015).

If all these allegations made against Uber are right, then it is going against the federal laws that govern business practices that are anti-competitive which justifies why Uber should have a change in its approach to market entry. The false requests that Uber is alleged to have been making are capable of decreasing the availability of the rival company`s drivers. Consequently, with a decline in the opponent`s available drivers, users will be forced to request for Uber services instead. According to Luo (2001), there is a framework within which business is conducted in the international scene. However, the author acknowledges the lack of well-defined and clear global competition law and suggests the implementation of legislation that regulates competition at the international marketplace in order to ensure that the global market provides an equal playing field for all participants.

Protests have been held in various cities across the world by taxi drivers who are against the unfair competition that they have been subjected to be Uber. For instance, in October 2016, taxi drivers in Lisbon, Portugal were reported to have gone on strike protesting against unfair protection from Uber (Williams, 2017). The protesting drivers accused Uber of bypassing tax, licensing rules, and safety (Williams, 2017). While the taxi drivers demand fairness in the industry, Uber insists that its operations are within the Law (Miners, 2017)). An example of an instance where Uber operated without acquiring the necessary regulatory approval is in Portland where the company had begun offering services to the city residents without the approval of city`s authorities (Miners, 2017). As a result, Uber services were later declared illegal. Again, in 2014, Uber operations in Germany were said to be in violation of German law as the company did not have transport licenses (Che, 2017). What followed was a court ban that restricted Uber from operating with drivers without licenses while fines were set for violations of the local transport regulations (Miners, 2017). Based on these instances where Uber has demonstrated business tactics that are notoriously aggressive, it is recommendable that the company views the market entry from a different perspective. By adopting a tiptoe approach to new market entries, Uber can avoid violating laws governing business in its new market. Such an approach is also vital in avoiding the unnecessary conflict that has been experienced by the company`s drivers and those of taxi in various cities worldwide. Through a tiptoe market approach, Uber will follow all the necessary requirements before entering any market. One of the most important aspects of such an approach is that the company will pay attention to learning the rules and regulations that govern business in the new market before gaining entry. Young, Dimitratos and Dana (2003) stated that it is always important for any business to learn and adhere to the provided market requirements even at the international scene as this helps the company to ensure that it has fully complied with its new target market` s rules. AS such, a tiptoe approach offers Uber a better way to conduct its business while enjoying smooth market entry. Additionally, as maintained by Kotabe and Helsen (2010), it is vital for a company to take into account cultural and social factors of the new markets they enter. This is because different regions are different culturally, mainly in terms of conduct. By understanding the behaviour of the new target market, Uber may adopt better marketing strategies in their new markets.

The new markets Uber should consider expanding to and new services Uber could potentially offer to its customers

Despite the rapid growth that Uber has experienced since it was launched, it still needs to expand more to parts of the world where the company’s services are not available. Some of the major regions which Uber should consider expanding to include Africa, Middle East and East Asia where the presence of the company is not very profound. Appendix 4 presents a list of the cities Uber should consider expanding to. These regions form very potential new markets for the company especially in larger cities where Uber services are not yet available. Starting with Africa, there are a number of cities that are business friendly and could turn out to be lucrative markets for Uber. One of these towns is Gaborone, Botswana`s capital. This city is considered as one of the peaceful cities in Africa (Peter Guest, 2017) which is a key factor for business growth and success. The city also has a reasonable population to support Uber`s business as it is estimated to be over 230,000 people (Peter Guest, 2017). Another potential new market for Uber is Libreville, Gabon`s capital. This city is described to have a young population of over one million people. Libreville is on the beach and has a National Park located a few kilometres from the city which translates to a lot of transportation activities from both locals and outsiders. Recently, the city`s stadium host the 2012 AFCON final match demonstrating its rapid growth (Rancker, 2017). Windhoek in Namibia is also another city that Uber can consider introducing its services to. The city`s population is estimated to be over 320,000 (Workman, 2017) people, which is a reasonable number that can support Uber`s business. Other potential markets are Kigali, Rwanda, with a population of over one million inhabitants (Workman, 2017); Tunis, the capital of Tunisia; Addis Ababa, Ethiopia`s capital as well as Abidjan, Ivory Coast (Rancker, 2017). These are African cities that have rapidly grown over the past years and whose population and business environment can be friendly to Uber`s operations which imply that Uber should consider its African expansion.

Further, there are cities in the Middle East that Uber can consider introducing their business to. This is because, like the African cities, some of them have a reasonable population which translates to a market for Uber services. One of these towns is Abu Dhabi, which is ranked among the ten best cities to do business in the Middle East (Davis, 2017). Additionally, the city has been described as a hotspot for investors looking for new markets (Davis, 2017). Cairo is another town in the middle east that is considered a good place to do business due to its economic nature. Other potential cities are Muscat, Oman; Aqaba, Jordan, and Istanbul. Istanbul is said to be the world`s second largest city with an estimated population of 13 million people (Drzeniek-Hanouz, 2017). In East Asia, there are cities that Uber services are still not available despite the fact that they are potential markets. These cities include Guangdong, Shenzhen, Jakarta, and Delhi (Jacobs, 2017). There are also a variety of new services that Uber could potentially offer to its customers. One of these services is parcel delivery for companies, organisations, and individuals. This is because, in the recent past, package delivery has become a central activity in a majority of major cities in the world, most in which Uber`s operations are already available. There is the need to have an active link between companies, suppliers, and customers, which is also a vital aspect of the urban areas development. Further, with regard to the environmental impact that Uber operations can have as a result of increased parcel activities within a city, the company can adopt the use green vehicles such as bikes in parcel delivery. This will serve as an essential step toward minimising emission levels while bikes will also allow package delivery to the last step, due to their less restricted mobility compared to that of vehicles (Herold et al., 2003). The parcel delivery business that Uber could potentially offer to its customers will have a number of opportunities that will be key for its success. One of these opportunities is the demographic and urbanisation growth of the cities it is operating in. Uber can also maximally gain from intermodality possibilities with green vehicles such as bikes. However, one threat that faces such a move is the impact that climate change would have on the green vehicle operations and performance. Nonetheless, by using green vehicles, Uber will be able to overcome mobility restrictions in sections of urban areas where traditional vehicles such as vans are restricted.

Other services that Uber could potentially offer to its customers is the transportation of luxury items such as shoes, Jewelry, wristwatches, and handbags. Under this category, the company could also deliver wine to its customers on request. This is a service that has the potential to pay back as customers going for luxury items will most probably want to receive them within the shortest time possible (Herold et al., 2003). This suggests an opportunity for Uber to bridge the gap between purchase and access through quick delivery. Food delivery, though being a service that has already been introduced in some countries such as Spain- UberEATS and US-UberFresh (Geradin, 2015), has not yet been introduced in many Uber cities. This implies that introducing food delivery in these cities will serve as a new service to Uber customers.

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Conclusion

As demonstrate herein, Uber is a startup that has grown to the international scene and whose influence continues to be felt in the transport industry across the world. Its success in the global marketplace can be attributed to factors like its surge pricing technology, the incorporation of other Uber rides into the company`s business model, advertisements as well as accelerated expansion and employment globally. Also, it has been clear that though Uber`s business model has numerous advantages, it also has a downside. Finally, enough reasons exist as to why Uber should adopt more of a “tiptoe” approach to its approach to market entry while the company has new markets that it should consider expanding to and new services that it could potentially offer to its customers as well.

References

Anderson, D.N. (2014) “Not just a taxi”? For-profit ridesharing, driver strategies, and VMT. Transportation, 41(5), pp.1099-1117.

Bennett, R., Aston, A. and Colquhoun, T. (2000) “Cross-cultural training: A critical step in ensuring the success of international assignments” Human Resource Management, 39(2, 3), p.239.

Cannon, S. and Summers, H. (2014) “How Uber and the sharing economy can win over regulators” Harvard business review, 13, pp.1-4.

Che, J. (2017) 9 Countries That Aren't Giving Uber An Inch, The Huffington Post. Available at: http://www.huffingtonpost.com/entry/uber-countries-governments-taxi-drivers_us_55bfa3a9e4b0d4f33a037a4b (Accessed: 2 April 2017).

Cramer, J. and Krueger, B. (2016) “Disruptive change in the taxi business: The case of Uber”, The American Economic Review, 106(5), pp.177-182.

Cusumano, A. (2015) “How traditional firms must compete in the sharing economy” Communications of the ACM, 58(1), pp.32-34. Davis, M. (2017) 10 Best Middle East Cities To Do Business | IstiZada, IstiZada. Available at: http://istizada.com/blog/10-best-middle-east-cities-to-do-business/ (Accessed: 2 April 2017).

Drzeniek-Hanouz, M. (2017) Top 10 most competitive economies in Middle East, North Africa, World Economic Forum. Available at: https://www.weforum.org/agenda/2014/09/top-10-competitive-economies-middle-east-north-africa/ (Accessed: 2 April 2017).

Geradin, D. (2015) “Should Uber be allowed to compete in Europe? And if so how?” Herold, M., Goldstein, N.C. and Clarke, K.C. (2003) “The spatiotemporal form of urban growth: measurement, analysis and modeling” Remote sensing of Environment, 86(3), pp.286-302.

Isaac, E. (2014) “Disruptive Innovation: Risk-Shifting and Precarity in the Age of Uber” Berkeley Roundtable on the International Economy BRIE Working Paper, 7.

Jacobs, H. (2017) These are all the 'megacities' in east Asia, Business Insider. Available at: http://www.businessinsider.com/these-are-all-the-megacities-in-east-asia-2015-2?IR=T (Accessed: 2 April 2017).

Kotabe, M. and Helsen, K. (2010) Global marketing management JOHN WILEY & SONS, INC.. Luo, Y. (2001) “Dynamic capabilities in international expansion” Journal of World Business, 35(4), pp.355-378.

Manjoo, F. (2015) “Uber’s business model could change your work” New York Times, 28. Miglani, J. (2017). Available at: https://revenuesandprofits.com/how-uber-makes-money-understanding-uber-business-model/-positives (Accessed: 2 April 2017).

Miners, Z. (2017) Are Uber's aggressive recruitment tactics legal?, PC Advisor. Available at: http://www.pcadvisor.co.uk/feature/tech-industry/are-ubers-aggressive-recruitment-tactics-legal-3541726/ (Accessed: 2 April 2017).

Ranker, A. (2017) 10 Best African Countries for Business 2016, Ranking Interesting Facts About Africa. Available at: http://www.africaranking.com/best-african-countries-for-business/ (Accessed: 2 April 2017).


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