Uber Business Model Analysis and CSR
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Published: Wed, 26 Jul 2017
Founded in 2009, Uber is a web-based transportation network company headquartered in San, Francisco, California. It offers a taxi-replacement technology platform that connects “driver-partners” with riders via a location-based app and operates in over 60 countries around the world. As the first ride-sharing business, it has become the term used when describing the service. South Africa is a challenging market to enter because of economic divide, national pride, and high crime. Uber’s core competencies are its brand name and reputation from being a first-mover and a corporate culture created from effective talent management that drives entrepreneurship and innovation. This has allowed the young company to effectively organize drivers and vehicles it does not own.
By being the first web-based transportation network, Uber has a competitive advantage over similar companies as a first-mover. As a first-mover, Uber has been able to understand its business model, customer problems, and the fast pace of technology. This has given them the ability to be both proactive and reactive to solving issues in a rapidly changing environment. Uber had a three-year head start in the market and took full advantage of it. Its first-mover advantage is firm-specific and used maintain its competitive edge to prevent fast followers from catching up. It has a bold history and used a “beg for forgiveness rather than an ask for permission” strategy to enter the market. The taxi industry is highly fragmented, deeply regulated and mostly stationary in terms of innovation. It realized consumer frustration with the status-quo taxi industry and solved the problem by building a disruptive business model to execute an aggressive strategy and apply innovation to provide immediate relief to the chaotic situation. Professors Henrich Greve of INSEAD and Marc-David Seidel of the University of British Columbia studied the role of how being a first-mover played in overall success. The two professors realized that first-movers typically had an advantage over rivals, even with an inferior product or service, because they learned from mistakes and became better over time (Greve & Seidel, 2014). Only eight years old, Uber is a young company, but has already become a well-recognized brand. Its brand name has become a verb, synonymous with the online ride-sharing service. Uber’s name recognition as a first-mover produces loyalty among current customers and attracts new customers to its service even before other firms have entered the market. As a first-mover, Uber benefits from economies of scale and a vast network of established stakeholders and resources (drivers, customers, employees, technology, capital, etc.), which allows it to increase efficiency and decrease costs. Its first-mover advantage allowed the company to learn rapidly and obtain large amounts of data to create customer-driven marketing strategies, labor specialization and industry cooperation. Because of a longer learning curve, it can create customer value, drive down prices and implement more cost-efficient techniques into its business model. Uber is a cut-throat corporation with a large war chest. Founded in 2009, it is now worth around $70 billion and is the world’s most valuable startup company (The Economist, 2016). Its capital, gained from being a first-mover, allows the company to expand faster and take risks its competitors can’t afford to. Uber established itself as tech firm and not a transport company, which allowed it to expand globally and bypass taxicab regulations. If it is not able to enter a specific market because of extensive regulations it implements capital-intensive battle strategy. Uber has been able to spend billions on aggressively fighting and disrupting taxi industries around the world. It also has spent large amounts of money to boost innovation, diversify its business, and lock in strategic relationships with governments and other businesses. It’s first-mover advantage has also been able to attract and retain the top talent shaped that has been able to shape its corporate culture.
In business, culture is important because it attracts talented and skilled individuals, increases employee productivity and operational efficiency, and improves quality and reputation. Uber’s culture is a core capability and firm-specific because it uses a highly paid, extremely motivated and specialized workforce who keep the company’s mission at heart. The company created a customer-centric and data-driven culture that promotes creativity and encourages passion. Its culture is based around value creation and uncovering This culture was created from its differentiating brand identity, which allowed it to capture and preserve a dynamic group of top talent. Its first-mover advantage, “cool” image and unique brand identity has created a staff of intrapreneurial millennials by attracting and retaining a workforce of intelligent young talent from all over the world to create its dynamic and innovative-driven. Most of Uber’s employees are between the ages of 25 and 35. It is also one of the few companies in Silicon Valley that hires large amounts of employees with PHDs.
Its business model is driven by its culture and has earned it a reputation of providing an enhanced user experience, translating to higher customer satisfaction and increased revenue. Its corporate culture has led to great innovation and Uber’s pioneering technology with its verified drivers and cars, its dual-rating system that improves customer satisfaction and user confidence, and has allowed Uber to deliver a premium level of reliable service at an affordable rate. Its intelligent and aggressive culture created the atmosphere to bypass high barriers of entry into the taxi industry. To promote itself, the ride-sharing technology company creates strategic partnerships and uses great advertising and marketing campaigns to promote itself, which has resulted in the company’s high visibility and customer awareness. and an unlimited fleet of partners and vehicles has made it a global player in the market.
Uber used its strong transferable international brand to enter and disrupt the South African taxi industry. The company implemented its brand and leveraged its current business model into the country by adding programs to address the issues it would face. Uber’s brand had the chance of suffering from location disadvantages in South Africa because of high crime and unemployment rates, but Uber was able to address these key issues early on, before they had the chance to hurt its intimable brand name and reputation. It improved safety features concerning its service. In South Africa, all drivers had to be verified and an annual follow-up was required to protect users.
In South Africa, public transportation was slow and inconvenient. It low cost attracts mostly poorer citizens. There are safety concerns with the taxi services in the country because of high crime and taxi turf war. This issue is increased because taxi drivers only accept cash payments. Uber’s main coemption will be against Zebra Cabs, a South African metered cab service
South Africa is a technological country where most citizens are technology-savvy. Uber used its disruptive technologies to enter the country by adapting and offering technology that catered to local needs. Uber uses great technology to bring riders and driver partners together.
Africa has a huge potential market for Uber and South Africa is the most economically developed country on the African continent
Corporate Social Responsibility (CSR),
With the rise of technology, the world and the business environment has become more globalized and transparent. Multinational Corporations (MNC) compete in a global arena. In the realm of rapidly moving business environments and an increased rate of globalization, the concept of Corporate Social Responsibility (CSR) has become more significant and apparent. The society of the world has put substantial pressure on these global firms to make them responsible for activities and actions. CSR can be simply summarized as “doing the right thing”. It is concerned with how the activities of firms have an impact of the fundamental, economic, and social impact on society. Still a relatively young subject, CSR
Kim Kercher examined
History, Research and Writings on CSR
The concept of corporate social responsibility is a relatively young subject matter, mainly a product of the 20th century, especially the last 70 years. Its roots can be traced back centuries further, but formal writing on the subject has been a product of recent times. Archie B. Carroll traced the evolution of modern CSR back to 1950s (Carroll, 1999). Before the 1950s, CSR was referred to simply as “social responsibility” (SR), possibly because these periods preceded the era of corporate influence and dominance. The contemporary idea of CSR was established by Howard R. Bowen, known as the “Father of CSR” because of his early and influential work. In his landmark book Social Responsibilities of the Businessman, Bowen believed that the world’s largest businesses were “vital centers of power and decision making” and the activities of these specific firms affected the lives and aspects of many (Morrison & Bridwell, 2011). In his 1953 publication, Bowen argued that corporate responsibility encompasses more than following the law and reaches beyond a legal scope. Bowen’s social responsibility doctrine explained the responsibilities businesses owners had and how they must protect humanity from the harmful side effects of certain business activities by implementing policies and rigorously following them. The 1960s were significant in the history of corporate social responsibility. The depth of CSR began to expand in the 1960s as one of its first and most influential writers, Keith Davis (1960), defined social responsibility as “businessmen’s decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest” and that being socially responsible would pay the company back in the long run, through an increase of economic gain. In his piece, the Iron Law of Responsibility, Davis observed that businessmen were more worried about profit and immediate economic interests than they were about other important subjects. He broadened the thoughts of Bowen’s Social Responsibilities of the Businessman by stating that “social responsibilities of businessmen need to commensurate with their social power”. Davis argued social responsibility should consider the environment and other issues regarding public welfare issues and that the power of corporations must continuously be checked by social responsibility. The term CSR was first used in the 1970s and became widespread due to globalization.
Core Characteristics and Benefits
According to Sen and Korschun, CSR is driven by stakeholder relations, social obligations and marketing (Sen & Korschun, 2006). Every firm is responsible and held accountable to its stakeholders. In spite of many efforts to create a clear and impartial definition of CSR, there is still no universally correct definition for the concept. While the fundamental features of CSR are visible in the practice and remain the core characteristics of the concept, hardly any definition includes them all. Aminu Ahmadu Hamidu, Harashid Md Haron, & Azlan Amran (2015) state that corporate social responsibility has six characteristics: Voluntary, Internalizing or Managing Externalities, Multiple Stakeholder Orientation, Alignment of Social and Economic Responsibilities, Practices and Values, and Beyond Philanthropy.
Corporate social responsibility has become a standard business practice in the business environment, even more so for multinational corporations. CSR has been implemented into global branding and is the core of many business strategies in order to promote long term growth. Jevons and Polonsky (2009) believe that today’s multinational corporations must view CSR from a strategic view within the global arena. With an advance of technology and faster communication channels, consumers are more aware on world and business events. Studies have shown that the ethical conduct of firms has a great influence on the purchasing decisions of consumers. In an investigation by Environics International, more than twenty percent of consumers stated their purchases were companies based solely on how they perceived the business (Mohanty, 2008). With increased interest from customers and other stakeholders (employees, suppliers, investors, communities, and activist groups), there is a growing demand for greater disclosure. Because of this, organizations and the individuals within them must consider its complexity and explore it to better understand how it is related to branding strategies. Because these multinational firms operate in several business environments, they must be able to relate each set of responsibilities at numerous points, encompassing a variety of company activities (Valor, 2007). Strategic CSR is used to help firms achieve a positive impact on society while maximizing the shared value for all the organization’s stakeholders. The notion of share value creation derived from Professor Michael Porter’s theory of competitive advantage (Porter, 2011). This theory suggests that firms need a structuralist view to create a strategic share value for competitive thinking. By implementing this strategy, firms are able to defend themselves against competitors. Firms use strategic CSR in the daily operations of the firm and is central to the activities of the firm value creation system.Â Werther and Chandler (2005) examined several multinational companies and found out that “global brands are often central to competitive strategy” and work by guaranteeing consumers are provided the best in “quality, consistency, and security”. By delivering customers guarantees, these brands can reduce costs while increasing profits. Studies have discovered the positive effect of CSR practices on profitability and other performance measures (Goyal et. al, 2013). The public’s expectation of firms is that they will function in humanity’s best interests. With the rise of technology and social media, the importance of CSR is intensified. David Woods studied the correlation of revenue and CSR and found out that CSR is not only ethical, but profitable, especially in regards to long term gains (Woods, 2011). Woods wrote that studies have shown that “organisations that had a genuine commitment to CSR substantially outperformed those that did not, with an average return on assets 19 times higher”. Kellie McElhaney (2007) believes that CSR is more of a strategy than a concept. McElhaney does not believe that CSR is a remedy to the problems that affect the planet, its inhabitants and the global business environment, but a practicable and essential element of overall business strategy. McEkhaney believes to be more effective, strategic CSR needs to be aligned with the core business objectives and core competencies of the organization. Matthews (1982) believes that corporations are not monolithic entities, but organizations administered and controlled by individuals and attached in the societies in which they operate. Because of this aspect, CSR must reflect the human element of firms and contribute to their communities and overall society.
Impact of Globalization on CSR
Professor Roland Robertson defines globalization as “the compression of the world and the intensification of consciousness of the world as a whole” (Robertson, 1992). Consumers are no longer restricted to their smaller-scaled home markets and now have access to a vast international market. Globalization, especially for multinational corporation, brings more opportunities and benefits, but also creates ethical issues and other problems when dealing in foreign countries. CSR covers a wide range of interests and the rapid rate of globalization has led certain corporations and developing countries to become significant players in the world economy. However, developing countries with emerging economies have critically encountered an abundant amount of issues (religious, governmental, social, cultural, environmental, etc.) Rhys Jenkins (2005) studied the effects of globalization on CSR and its influence on society. Jenkins notes that the present movement and concentration of global CSR today dates back to the early 1990s. This movement led to the international rise of CSR, global deregulation, the creation of development agencies, increased foreign investment, and the reduction of poverty, but played a major part in the shrinking role of national governments. With globalization and corporate responsibility intertwined in an increasingly competitive market, the influence and responsibility of business firms is increased while the control of governmental bodies is reduced. Historically, national governments depended on regulatory measures to bring societal and ecofriendly purposes to the business sector. Verma (2015) claims that dwindling government resources, combined with a suspicion of regulations created a search for voluntary and non-regulatory initiatives which reduced the power of governments. Scherer and Palazzo (2011) assert that it is crucial to shift towards a larger, politically-centric concept of CSR, especially in a globalized world. Because of globalization, the authority of national governments is getting weaker when it comes to regulating the activities of global firms. Governments around the world are in a constant battle (and race to implosion) with other countries in order to win the competition. Corporations must practice morally and promote ethical decision making standards in order to avoid political conflict and the societal consequences. Global firms are not only responsible of their in-house activities, but also for the activities of their suppliers and partners. Due to an exploitation of child labor from its suppliers, Nike faced a global consumer boycott and had to make extensive enhancements in the working environments of its various supplier plants (Brause, Locke and Qin, 2007). While some activities and practices may reduce costs and legal in some parts of the world, partaking in these unethical business practices may be considered immoral and damage the public’s perception of the company.
The Future of CSR
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