NSAB511B32 Business Strategy

Learning Outcomes

By the end of this unit a student will be able to:

Analyse the impact and influence which the macro environment has on an organisation and its business strategies.

Applying appropriate frameworks analyse the impact and influence of the macro environment on a given organisation and its strategies

Critically analyse the macro environment to determine and inform strategic management decisions.  

Assess an organisation’s internal environment and capabilities.

Analyse the internal environment and capabilities of a given organisation using appropriate frameworks.

Critically evaluate the internal environment to assess strengths and weaknesses of an organisation’s internal capabilities, structure and skill set.

Threats of New Entrants

A new entrant in travel and leisure brings the innovation in the industry which will be an advantage to the consumers. UBER is offering the services at a low price to the consumer and is covering the large market share. The company has no fear of the new entrants because of the loyalty among in the customer to the Uber brand. to have the competitive edge among the competitors, company has to manage all the difficulties  and have to build all the barriers effectively (Dobbs, 2014).

(Source: Research Methodology, 2018)

Bargaining power of Suppliers

All corporations in travel and leisure purchase their resources from many suppliers. Suppliers can dominate the market and can decrease the margin for the company. Uber Company should develop those suppliers’ chains whose business depends on them only. The overall impact of the bargaining power of the supplier is that it drops the overall productivity of the business (Porter. and Heppelmann, 2014).

Bargaining power of Buyers

Buyers are the person for whom the business is made. Buyers are regularly a demanding a lot nowadays. Consumers want to buy the best services by paying the lowest price for same. This put pressure on the Uber and company try to achieve the level where they can give the maximum offering at a low price. For this company tries to innovate new products in which discounts and vouchers are offered to the customer (Yunna and Yisheng, 2014).

Threat from substitutes

When a new product or service are meet a related customer wants and requirements in unlike ways, industry effectiveness suffers. Uber can tackle the threat of substitute’s services by considerate the core needs of the buyer. Uber can increase the switching cost for the customer by bringing the cost-effectiveness of the services and product (Gerpott and May, 2016).

Rivalry among the existing players

To maintain the overall profitability in the business, rivalry with the existing player in the industry should be intense so that new innovations in the market will be there. It will able to bring down the prices which make profitable situation for the buyers. Uber can tackle the rivalry by developing the sustainable differentiation in the products and services offered. The company can make use of the economies of scale to compete better in the market. Due to the increasing popularity of the sharing economy and low entry barriers into cab services, the extent of rivalry within the industry is going to increase the medium and long term perspectives (Van, Parker and Choudary, 2016).

Stakeholders Analysis

Stakeholders are those peoples which are affected by the decision taken by the company. These stakeholders include the shareholders, suppliers, customers, government, investors, community etc. The analysis of the stakeholder can be done by using the power/influence Matrix. This matrix shows the relationship will depend on the governance structure under which the company is operating and stance taken on the corporate responsibility.

Power/Influence Matrix

(Source: Master of project Academy, 2017)

Minimal effort

In a minimal effort, the power given to the stakeholders are less and interest shown by the stakeholders in the business activities is also less. In this quadrant, the stakeholder’s investment is found to be low (Schwaab, 2012).

Keep informed

In this type, the stakeholders have high interest in the workings of the company. Stakeholders want to know information about the company working, investments etc. but the stakeholders do not have the power of getting information. It is up to the company whether the information is provided to the stakeholders or not (Master of project Academy, 2017). They are also called the defenders.  

Keep satisfied

When the stakeholders have the high power and authority in the business decision making and operation, they are said to be satisfied. But with power, these people are fine with less interest in the workings of the business (Research Methodology, 2018).

Key Players

The stakeholders get the satisfaction in the when they have the power to affect the decision in the business. The power also creates the interest in the workings of the business. In this quadrant, the stakeholders have the power as well as the interest in the company.

Ansoff matrix 

Ansoff matrix is also known as the product or market expansion grid. In Uber, Ansoff Matrix is a marketing plan model that helps the ride-hailing giant to determine the product and market strategy. Ansoff matrix has four components which include the market penetration, market development, product development, and diversification.

Market penetration

In market penetration strategy, the company is trying to grow by using the existing products and huge market share in the current market. Uber can grab the large market share by decreasing the price of the existing offerings. The company is focusing on promoting and make use of distribution support. These include giving the promo codes to allow users to have a discount for their next ride. The company is also using the ‘VIP Uber’ programs to increase the loyalty among the consumer that also provides the rewards to the riders with special access (Walsh, Dose and Schwabe, 2016).

Market Development

The market development can be defined as the developing the market by expanding the existing business into the new markets. This can be done by the Uber by using or targeting the different segments of the market. The company can focus on expanding the business in more than 800 cities worldwide (Medarac, Vignali and Vignali, 2016).

Product Development

Product development includes developing the new products and services in the existing market. Uber is increasing its service range throughout the world while using the updated technology in its operations. Currently, a company is providing an extensive range of services which include Uber X, Uber Pool, Uber GO, Uber MOTO, Uber premium etc.

Diversification

Diversification can be defined as the introducing the new service in the new market. This strategy is found to be risky in the market. The diversification done can be related or unrelated in nature.  Initially Uber is launching as a taxi company and now moves into the segment of delivery food items with the name of Uber Eats (Yin, 2016).

Porter’s Generic Strategy

Cost leadership Strategy

The cost leadership is the strategy adopted by the companies when they want to grab the large area of the market. The large area in the market can only be grabbed by the uber when the company is offering the low-cost services to its customer. To have the leadership in the market, Company is providing the discounts, vouchers and referrals to its customers. An organization is trying to achieve the industry low cost by charging the average prices; it will outperform the competition (Lechner and Gudmundsson, 2014).

Differentiation Strategy

The differentiation position can be defined as the position in which the company can make a distinction with its competitors. Uber makes itself differentiate by proposing the unique products and services that deliver the higher value to a wide area of the spectrum. Differentiating with the competitors can help the company to charge the higher price for the services offered. This strategy is considered to be broad in scope (Tansey, Spillane and Meng, 2014).

Focus Strategy

It is a position where the organization targets a specific group of the market. The focus can be made on the basis of the cost. This strategy is considered to be narrow in scope. Uber selects a group of a segment from the market and tries to change the strategy to serve them. In cost focus strategy, the focus is reducing the cost and giving the advantage of reduced cost to the customers in its target segment. In this strategy the focus is given on reducing the cost and it can be done by using the economies of scale in the operations.

Differentiation Focus

In this type of differentiation, the importance is giving to introducing type different ways of attracting the customer that its competitors cannot able to do or perform. This strategy is considered to be narrow in scope. By using this strategy, Uber is trying to increase the differentiation in the services by analysing the needs of the customers (Brenes, Montoya and Ciravegna, 2014). In this type of differentiation, the focus is given on giving some extra services and benefits to the customers.

Bowman’s strategy Clock

(Source: Hales and Mclarney, 2017)

Position 1:  Low price-Low Value

Low price- low value is offering the low-quality services at the lowest prices in the market.  This position is not a very competitive position for a business. This is also called the bargaining basement strategy. This strategy is adopted by the companies when they have the service so products come under the pressure of the competitors. This situation is faced by the Uber in its initial years. But at present, a company is not following this strategy as this strategy will be for a short span of time only.

Position 2: Low Price

Low price is charging the price which is lower than the price charged by the competitors.  Uber tries to reduce the price and increase the number of bookings which increases the sells volume of the company. Uber takes very low margins with a very high volume, this will make the organization sustain and become the powerful force in the market. Use of this low price wars, consumers get the maximum advantage from this, as other competitors will also a low price to have existed in the market (Brenes, Montoya and Ciravegna, 2014).

Position 3: Hybrid

This strategy offered the moderate price and moderate differentiation. In this strategy, the company is offered a product at low cost but offered with a moderate quality of value than those of other low-cost competitors. In this type of strategy, the company can build its market image by offering the perceived quality to its customers. This type of combination builds the customer loyalty.

Position 4: Differentiation

Differentiation is the stage where companies are trying to identifying the uniqueness of their products and services by them in the market. This comparison is done on the basis of offerings of the competitors. In the value of the service offered by the company like Uber is taken into consideration. It will help to make the brand position in the market. The company is trying to afford to do this by rise in the price and withstand through the upper margins or keep the prices of services low and seek a larger market share (Tansey, Spillane. and Meng, 2014).

Position 5: Focused Differentiation

Focused differentiation is the design of the service or the product according to the requirement of the customer. In this strategy, the focus is given on the high price and high perceived value. The consumer will buy this only on the name and fame of the company.

Position 6: Increased price and standard product

Sometimes company gambles in the market by simply increase the prices of the product or service offered by the company. Increase in the price is without the increase in the value of service. If the price is accepted in the market, the company appreciates the profits of being the price leader in the market and earns higher profits. This strategy can opt for the short term only as it cannot run in the long run proposition as the unjustified price has been charged by the company will be discovered sooner in the market (Lechner and Gudmundsson, 2014).

Position 7: High price low value

This is the monopoly position, company is enjoying. In this strategy, the company is charged high value and giving the low value to its customers. This type of company is the only supplier of that product or service. No close substitutes are available in the market. These types of monopoly companies are not last for long in the market.

Position 8: Low value/ Standard Price

In this type of strategy, companies are offering the standard price but providing the low value to its customers. A company which uses this type of strategy in the market will lose the market share in the short span of time (Hales and Mclarney, 2017).

The uber is following the strategy of differentiation, hybrid in the market. Using this strategy can able to grab a good portion of the market.

Conclusion

From the above discussion, it can be concluded that Uber is performing well in the market. By using the various strategies and model by the company, it is trying to analyse the performance of the company. The company is using the balanced scorecard to measure the performance of the company are aligning to the vision or mission of the company or not. Analysing the porter five forces model, it can be analysed that the Uber is shaping in the competition within the industry. From the Ansoff matrix, the strategic alliance by the Uber can be known whether the company is using the existing product in the market or going to diversify its business by moving into the segment of delivery of foods. By applying the other models and theories which include Porter’s Generic force and the Bowman strategy clock, the company is going to identify and interpret the strategic direction available to the company.

References

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Dobbs, M. (2014) Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

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Walsh, G., Dose, D. and Schwabe, M. (2016) Strategische Marketingplanung. In Marketingübungsbuch (pp. 23-42). Springer Gabler, Berlin, Heidelberg.

Yin, N. (2016) Application of AHP-Ansoff Matrix Analysis in Business Diversification: The case of Evergrande Group. In MATEC Web of Conferences (Vol. 44). EDP Sciences.

 Yunna, W. and Yisheng, Y. (2014) The competition situation analysis of shale gas industry in China: Applying Porter’s five forces and scenario model. Renewable and Sustainable Energy Reviews, 40, pp.798-805.