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MGMT6015 International Business Strategy Assignment Solution
The Uber Technologies Inc. is doing business as Uber in more than 785 cities around the globe. The Uber company is famous for the privatized riding facilities it provides. The company headquarter is located in San Francisco, California, United States(Uber.com 2018). In the year 2009, the company was founded by Travis Kalanick and Garrett Camp. The Uber company primarily works online by the help of Uber mobile app. The Uber employment has changed the economic face of the countries where it operates(Uber.com 2018). The services of the Uber company fascinate the customers because it has enabled the customers to avail the transport facility only at the distance of a single touch and that also in moderate fair. Few of the countries where Uber has greater influence are Germany, Australia, China, Egypt, South Africa, UAE, India and many others(Uber.com 2018). There are three basic criterions of the Uber company are at first determining the market demand and growth. The actual economic growth and demand as well as the projected growth and demand, both are evaluated. Next, the growth and demand of the market is related with the transport infrastructure and then evaluated to understand the impact(Uber.com 2018). The last criterion is the smartphone penetration that is the most essential because the entire Uber business and service are depended on smartphone and Internet services.
The rationale for choosing Argentina as suitable market
The Uber company selects countries and cities to expand its global business carefully and analyzing the existing environment and business opportunities of that particular country(Uber.com 2018). The company keeps in mind where to launch and how to launch internationally. The company selects cities or countries based on three factors including the market demand and growth, the impact of the existing public transport infrastructure and the level of smartphone penetration in that country (Grünig and Kühn 2015). Keeping their country selection criteria in mind it is suggested that Uber should take the initiative to operate in A South American famous city, Buenos Aires (Argentina) as per the overview of year 2016. The city is highly famous for their wine, food and unique culture. The country has still remained free of Uber services because the taxi drivers of Argentina are fighting hard to keep the Uber services out of the country. However, the country has undoubtedly stored better opportunities for the Uber services.
The Uber launch in this country can support the company in getting their revenues multiplied fast. The country has a large population that is the key point and also the rapid industrial growth in the country paves the way for stronger and better transportation system(Uber.com 2018). Although taxi services and other public transport services are there, the favor to get a private car service just at the distance of a single click allures the time –saving business people more. Uber having the most effective telematics service and geo-tracking services will definitely attract the work-oriented busy people of that country. The exclusives feature of Uber will catch the public transport market of Argentina and fulfill the customer demands up to greater extent. The employment rates of the city Buenos Aires and the country as well will be enhanced which will strengthen he economic condition of the country.
PESTEL Analysis of Argentina’s macro environment
1. Political- The country is in the process to stabilize its economic condition and trying to repair the fences from the presidential election of 2011. The country is also trying to re –enter the debt markets which is a possible way to increase the portfolio funding and foreign directs (Haggard and Kaufman 2018). The publicly traded banks have been valued attractively as compared to the lenders in other countries and the investment opportunity is high in this country.
2. Economic- The economic condition of the country is recovering since the crisis of 2001/2002. The GDP growth of the country has remarkably gone high in the last 5 years. The country has received huge investments from countries like china, France, UK and many others. Among the most profitable industries of the country, real estate, telecommunication, energy sectors, mining and transportation are necessary. The country has a favorable economic environment for starting a business or expanding a business.
3. Social- The country supports family ties stronger than any other European or North American countries. This results in the maximum numbers of business in family joint venture. The gender cultural and social clashes in the country have reduced through legislation and also the women of Argentina have displayed a dynamic increase in their economic independence. The education rates of the country are high and it accepts all varieties of b religions to be practiced within the country.
4. Technological - A technological dichotomy exists in cities like Rosario, Buenos Aires and others. These cities share a view of controlling the technology mechanism in their urban locations. The country ‘s road infrastructures are a little inconsistent which impedes the travel from one place to another. The country has adopted digitization in their operations but due to poor network problems caused by inclement weather sometimes people get exhausted and miss many important works.
5. Legal - There are Federal and Provincial Court system in Argentina, The Federal court system handles the national government agency issues, foreign people and companies, violation of constitutional rights and other issues (Alfaro, L., 2015). The provincial courts, on the other hand, handles the criminal, labor courts and many other issues.
Therefore, it can be seen that although there are few constraints in the country, Argentina is possibly an advantageous country where the company can avail many benefits from the favourable environment of the country. Threats are there but the opportunities are more. The Uber company can take up necessary strategies and planning to develop in a new country keeping in view their different macro and microenvironmental factors which are the key influencers of a business. Argentina has been considered as one of the most digitally advanced countries of the world and the people are the busiest ever in this country. The country is looking forward for a better, cost –efficient and eco-friendly transport services which would also support the country to be categorized under the most sustainably developing countries. The Uber company can catch up this gap and provide them their exclusive and upgraded services at the same time gaining profit and competitive edge over its market rivals.
Porter’s five force Analysis of Argentina’ industrial environment
The porter’s five force analysis propounded by Michael Porter analyses the business strategy and competition that shapes a business. This tool is helpful in determining the rivalry and attractiveness of a business. There are five elements that affect any industry including power of the suppliers, power of the buyers, competitive rivalry, threat of substitutes and threats op new entrants. Uber is one of the rapidly growing omnipresent transportation company which has established an individual position in many parts of the world. It has spread its services and business in more than 60 countries since its foundation in the year 2009. The company has become able to cater to the different preferences of its customers and has also captured their loyalty. The on –demand and swift services of the company has enabled it to expand the market share. Its expansion in the business market of Argentina and the provision of its success or failure can be determined by putting the variables in the frame of porters’ five force model.
Bargaining power of the suppliers
The ability of the suppliers to drive the prices of a company determines the power of the suppliers and the probability of the company to sustain its prices. In the transportation industry, one of the leading suppliers are the drivers. Uber transports human and the suitability of the drivers determine the company reputation and safety issues. The company selects and hires inly those people who are skilled, sincere, responsible, non-alcoholic and customer –oriented. Due to such criterions the number of drivers are less in Argentina even if the population of the country is high. Uber applies a subcontracting policy in their employment process to maintain the standards of their web application. The employees are less and the company needs more number of responsible drivers. The drivers (suppliers) take this opportunity to claim increment on their salaries. Therefore, the power of suppliers is high in Argentina.
Power of buyers
The customer strengths can affect the company ‘performance in many ways by forcing the company to lower the prices of the products or services. The buyer concerns are high for the Uber company because there are so many rivals in the market of Argentina and the customers have got options to go for. With the growth of markets, the opponents also grow in number. The land of Argentina holds so many opponents for the Uber company such as Transfer Lubre, Transfers Ezeiza and many others. Therefore, since Uber will enter Argentina for the first it will require customers to establish its impression and reputation, this threat is high. The company will have to adopt new strategies or modify the existing ones according to the demands of the south American customers to retain them.
Threat of New Entrants
The position of a company can be influenced by the threat of new market entrants. The new entry of other similar organizations can instantly waver the popularity and profits of a company. Uber company has to build strong relationships with the customers in the new country bridging a link between the transport providers and the customers. Although, this industry demands huge capital to start up and enter into the existing potential market, the new entrepreneurs in this field are trying to break the norms by utilizing small capitals and snatch the catch in the market (Haleem and Jehangir 2017). Ubers exclusive services can be soon swapped by the free services of the new entrants. Imitation cannot be stopped by the company and there is a chance that the new companies copy the Uber strategies in a different way and gain the competitive edge.
Threat of substitutes
Uber company operates in the transportation industry and there are other options of transportations too frequently used by public(Uber.com 2018). In Argentina, there is an existing popularity of taxi and people usually prefer that. People also opt for public buses, trains, metro rails, trams and many other public transports which are cost- friendly too. In this situation, if Uber decides to enter the country and replace the existing substitutes, it will have to develop certain strategies and serve the customers better than the other substitutes in a cost –friendly way. Therefore, threat of substitutes is high in Argentina.
The competence of the competitors determine how much the company has to give effort to earn revenues more than the previous year (Kim and Mauborgne 2014). It is important to keep track of the actions of the competitors because without contrary there is no progression. In Argentina Uber will have to compete with the market giants of the transportation industry such as Cabify, Easy Taxi and others. Cabify is the most potential competitor of Uber in terms of price. Another competitor is the Easy Taxi which is extremely useful for the customers with GPS systems and many other facilities operating mainly in Buenos Aires, Cordoba and Rosario. The Uber company has to consider these potential competitors before operating in Argentina because they have occupied the most part of the marketing communications. The company can also learn from the business strategies of these competitors.
Value Chain Analysis of Uber
The value chain analysis is a strategic analytical tool that helps to recognize the resources and competitive advantages of the company. This analysis is mainly done to the global transportation technology company and in this case it will take Uber for the analysis. The value chain analysis will analyze Uber’s Inbound and outbound logistics services, the marketing and sales of the company, its infrastructure, technology development, procurement and other operations of the company.
The Uber company possesses an extremely well-structured inbound logistics system. It is known that the inbound logistics comprises of the reception and storage of raw materials. Uber is one such rare companies which does not own the vehicles its operates with. The vehicles are owned by the drivers who are not the employees but the contractors. The drivers and the customers operate with Uber apps installed on their smartphones. The internet based business of the company adds extra value to the business. The Uber company operates in more than 760 cities going through three basic steps such as requesting the ride, providing the ride and having the pay and go facilities. According to their first step the customers can just download the Uber app, touch a button for each ride and view the size, price and time easily. Uber cars pick up the customers from their pick –up location ad drop them at their destinations. The next step indicates that the customers can track the car, see the contact details of the driver, see the car number and all necessary information regarding the vehicle. Their exclusive pay and go service allows the customers to pay thee charge online and just hop out of the as soon as it reaches the destination. The Uber company provides a highly sophisticated service to the customers supported by the app facilities which remarkably heightens the functions and capabilities of the company making it a truly ‘smart serving’ company. Therefore, it can be said that Uber app is one of the main sources of Uber value chain.
It is known that the outbound logistics comprises of the warehousing and distribution of the products of a company. However, this kind of logistics is not applicable in the case of Uber because this sector does not offer products, but services. It is a global Taxi technology company and the internet based nature of its services is the foremost advantage of Uber company.
The marketing and sales strategies of Uber relies on word of mouth marketing and social media marketing that communicates and spreads the brand message to the customers. Apart from these, Uber conducts so many advertising activities such as promotional campaigns and events, media and print advertising. The payment method of the company is unique and adds value to the sales. The customers prefer Uber due to the ease in payment they avail. They can avail the service just by registering their credits cards with the Uber app.
The upgraded GPS services of the company allows the customers to track the vehicle. Customers can complain if the driver is caught doing misbehavior with the customer. The company also provide refund service in such cases. The customers also avail the chance to rate the service which helps to elevate the image of the company in front of its stakeholders and other customers.
According to the value chain analysis of Uber, it is apparent that the company has so many points that add value to the service and reputation of the company. In every step of the value chain analysis it is seen that Uber’s internet based business and service plays the trick for the rapid development and popularity of the company. In the 21st century people get little time to go, wait and hire a taxi to reach the destination. In the context of Argentina, there is an existing popularity of the conventional taxi services. It is not that the taxi services cannot provide what Uber provides, but going fir an ultra –modern technology in the ultra –modern world is always considered to be a smart choice. The entry of Uber into the cities of Argentina will show radical change and people will understand the benefits of using an Uber for a taxi. The e-booking facility, time saving facility security concerns, digital receipt facility and lastly the cozy ride definitely fascinate the people of Argentina and enable them to maintain their lifestyle with the high developing digital world.
Modes of entry in the market of Australia
Modes of entry into an international market are the channel through which an organization enters a new country market. There are many modes of entry available for the Uber company such as Internet, International Agents, Licensing, Strategic Alliances, Overseas Manufactures and International Sales Subsidiaries. Licensing is the mode of entry by which an organization charges a fee or loyalty for the application of its technology or expertise. Franchising is another mode which includes the branding, expertise and other few facets that are required for an organization to enter a new market. Turnkey contracts are other modes that include the training and development of the employees and in this case the Uber company can train the drivers of Argentina where intends to enter. The International Agents are also useful mode to enter a new market. The Uber company can hire international agents to introduce Uber in the market of Argentina for the first time and market on the company’s behalf. These agents do not usually claim their ownership on the product or services but they take commission on the monthly or annual income of the company. The Uber company can also enter the market of Argentina by building strategic alliances with the existing company to get marketed and promoted but at the same time keeping the organizational individualism intact (Uber.com 2018). For example –iPhone was marketed by O2 in the UK but these ae two separate companies till date. The Uber company can also enter the foreign market of Argentina through Joint Venture i.e. the present parties in power in that country or market are sourced to get the assistance.
Internet on the other has been considered to be the most effective modes of entry in the market of a new country. Through this mode of entry, the Uber company can incorporate many innovative ideas into the marketing strategy. There are many companies for whom internet is an additional mode of entry but for the Uber company it is the best way to enter a new country like Argentina. It is a digitally developing country and at the same time the Uber company is an internet based company which deals in online business and services. Therefore, the company can use this mode as the primary mode to win the transport industry of Argentina.
Therefore, from the above report it can be said that the international expansion of Uber through the mode of Internet and few of the other modes will facilitate the company to catch the transport market of Argentina. The company can evade the issue with the contractors claiming more salary, by setting the incentive system which will also increase the revenues of the company and spread its business. The report shows that the market of Argentina holds so many constraints and hurdles for the company, but the Uber company can strategically overcome all the threats and establish the business by their exclusive technologies and optimal customer services. The company does not need to cut down the prices in order to gain the competitive edge over the market rivals, the still developing unique strategies of the company can easily elevate the brand image. It can place the company as the first preference over the conventional taxis of the people of Argentina.
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