Strategic Management
UBER
Submitted By- Keertika
Lakshya
Madhav
Madhusudhan
Mahit
Manisha
INTRODUCTION
Founded: 2009 by Garrett Camp and Travis Kalanick.
Headquarters: San Francisco, California, USA.
Business Model: Uber operates a ride-hailing platform that connects riders with drivers via a mobile app.
Services Offered:
Uber Rides: On-demand ride-hailing services.
Uber Eats: Food delivery service.
Uber Freight: Platform for connecting shippers with trucking companies for freight transportation.
Uber for Business: Corporate transportation solutions.
Global Reach: Available in over 60 countries and more than 700 cities worldwide.
Revenue Model: Uber charges a commission from drivers for each trip completed via its platform
(typically 15-30%).
IPO: Uber went public in May 2019 with an initial valuation of around $82 billion.
4P’S OF UBER
PRODUCT PRICE PLACE PROMOTION
• Uber Ride • Upfront pricing strategy - • Presence in 40 • Free rides, coupon
promotional codes and codes to existing users
• Uber Eats countries and 700
offers to get discounts up to
• Uber Freight • Different sizes cabs for plus cities
25% on Uber trips.
every number of
• Launched new
customers and the prices
marketing campaign
are charged accordingly
for its Uber Intercity
https://iide.co/case-studies/marketing-mix-of-uber-4ps/
STRATEGIC APPROACH
Uber's strategic approach has strong connections to the principles of a Blue Ocean Strategy,
particularly in its initial disruptive phase.
• Technology-Driven Platform: The Uber app was core to creating the new market.
• Utilizing Existing Assets: Uber leveraged the existing resource of privately owned vehicles.
• Dynamic Pricing: Surge pricing allowed for balancing supply and demand.
While Uber's initial strategy strongly reflected Blue Ocean principles, it's important to recognize that:
The market has become increasingly competitive, with the emergence of numerous competitors.
Therefore, Uber now operates in both "blue ocean" (in terms of its fundamental disruption) and "red
ocean" (in terms of ongoing competition) environments.
Uber is continually trying to create new blue oceans with things like Uber eats, and Uber freight
https://www.clearpointstrategy.com/blog/blue-ocean-strategy
PRICING STRATEGY OF UBER
Key aspects of Uber's pricing strategy:
Base fare: A fixed starting price for every ride, which varies depending on location.
Distance rate: A charge per mile traveled.
Time rate: A charge per minute of waiting or driving time.
Surge pricing: When demand exceeds available drivers, the price of a ride can significantly increase,
displayed as a "surge multiplier" on the app.
Algorithm-driven calculations: Uber's pricing is calculated by an algorithm that takes into account
various factors like current demand, traffic conditions, and driver availability in a specific area.
Benefits of Uber's dynamic pricing:
Efficient resource allocation: Encourages more drivers to work during peak hours when demand is high.
Maximized revenue: Ability to capture higher prices during high demand periods.
Reliable service: Helps ensure that riders can still get a ride even during busy times.
SWOT ANALYSIS
OPPORTUNIT
STRENGTH WEAKNESS Y THREAT
• Global Brand • Driver Relations • Electric Vehicle • Intense
Recognition • Dependence on growth Competition
• Technological external factors • Focus Premium • Changing
Platform segment Regulations
• Diversified • Economic
Services Downturns
EXAMINING THE UBER IPO
VALUATION
Uber's initial public offering (IPO) in May 2019 was priced at USD 45 per share, giving it an estimated valuation of
USD 82 billion.
Financial Overview:
Revenue Growth: Between 2016 and 2023, Uber's revenue surged nearly tenfold, rising from USD 3.85 billion in
2016 to USD 37.3 billion in 2023. In the most recent year, revenue increased by 20% year-over-year to USD 11.2
billion, or 22% on a constant currency basis.Profitability Concerns: Uber Technologies reported a gross profit of
USD 4.427B for the quarter ending September 30, 2024, reflecting a a 20.76% year-over-year increase.
Market Reception:
Investor Sentiment: Many investors were happy to see Uber's market potential while others were skeptical based
on the company's losses.Stock Performance: Uber's stock closed on its first trading day at USD 41.57 below the
company's IPO price, which set the tone for a market skeptical of the ride hailing firm.
Underwriting Process:
Underwriters: Morgan Stanley and Goldman Sachs as well as major investment banks helped push the IPO through
setting the initial pricing and managing the offering.Pricing Strategy: The IPO was at the lower end of the range of
what was expected and was cautious due to market conditions.
Explosive revenue growth and the rapid rollout of the service into new markets magnified Uber's IPO valuation.
However, massive losses and several market uncertainties only partially tempered it. The investment banking
process determines the offering price, which is considered to be the confluence of interest and financial realities.
https://www.investmentbankingcouncil.org/blog/uber-valuation-was-the-hype-
UBER’S FINANCIALS AND POST-IPO
PERFORMANCE
Revenue Trends: Uber consistently increased its
revenue once it went public, relying on its huge user
base and expanding its platform globally. However, high
operating costs heavily impacted on its profit margins.
Profitability Challenges: By the time Uber became
profitable, the cost of driver incentives, marketing
expenses, and technology investments had kept losses
high. Significant gaps between revenue and expenses
were apparent in the company’s EBITDA (earnings before
interest, taxes, depreciation, and amortization).
Stock Performance: After the IPO, Uber stock went up
and down as investors changed their sentiments and the
markets trended. High initial expectations met with the
lack of performance of its stock gives one pause in the
accuracy of pre-IPO valuation.
Cash Flow Analysis: Cash reserves and external
funding became key elements in Uber’s reliance on
maintaining free cash flow, a figure that’s critical to long-
term sustainability.
Uber’s post-IPO financial trajectory told the tale of a
company that, while ambitious on the growth front, had
also taken on many operational challenges. This led many
to question whether its IPO valuation matched market
reality
https://www.investmentbankingcouncil.org/blog/uber-valuation-was-the-hype-
SHOULD UBER PRIORITIZE PROFITABILITY
OVER EXPANSION, OR CONTINUE
INVESTING IN GLOBAL MARKETS?
A Balanced Approach:
A more pragmatic approach might involve a strategic balance. Uber could
focus on achieving profitability in core, established markets while
selectively investing in high-potential emerging markets.
Uber could also focus on profitable sectors of their business, like Uber
Eats, while restructuring less profitable sectors.
A dual strategy may be the best approach. Uber should focus on
becoming profitable in its core, mature markets while selectively
expanding into emerging markets with lower initial costs and regulatory
complexity. This would allow the company to stabilize its financial position
while positioning itself for future growth.
HOW CAN UBER REDUCE OPERATIONAL
LOSSES AND IMPROVE FINANCIAL
PERFORMANCE?
Reduce Discounts and Incentives: - Implement more targeted and data-driven discount strategies.
Gradually reduce reliance on heavy incentives, focusing on building customer loyalty through service quality.
Optimize Operational Efficiency - Improve route optimization and driver utilization to reduce fuel costs and idle time.
Invest in technology to automate processes and reduce administrative overhead.
Diversify Revenue Streams: Expand into complementary services like freight delivery, package delivery, or transportation partnerships.
Explore new revenue models, such as subscription services or premium offerings.
Address Regulatory and Legal Challenges- Proactively engage with regulatory bodies to find mutually agreeable solutions.
Strengthen legal compliance and risk management practices.
Work to solidify driver classification.
Cost Control: Reduce overhead expenses.
Renegotiate contracts with suppliers.
Increase prices: In areas where Uber has a strong hold on the market, they could increase prices slightly.
Focus on profitable sectors: Increase focus on Uber eats, and other profitable sectors of the business.
Thank You
