Abstract
Technological advancement has positively influenced and revolutionized the transport industry. In the Middle East, Careem incorporated the use of technology in enhancing its competitive position through collaborative ventures and service accountability, which are key success factors in its market penetration.
Moreover, the company has maintained an innovative culture in line with multifaceted customer needs for sustained growth. However, some of the challenges affecting organization growth in the industry include political factors, socio-cultural environment, and low entry barriers. These factors intensify the rivalry between local players, government institutions, and new entrants, and thus threaten the profitability of the transport industry. Therefore, Careem must utilize its strength of service accountability and collaborative ventures in developing strategies to expand innovative culture and adopt a localized penetration of diverse markets.
Careem, a high-tech company initiated in 2012 in the United Arab Emirates by Mudassir Sheikha, Magnus Olsson, and Abdulla Elyas, connects the transportation industry with technology through its mobile app and web-based services. The company’s mission is to inspire and improve lives by solving the ordeals and challenges people experience in the transport industry (Careem, 2018). It has expanded its operations to 13 countries in the Middle East, South Asia, and North Africa.
Careem continues to excel in service delivery through innovativeness and implementation of customer-centric processes. The United Arab Emirates vision 2021 and Abu Dhabi vision 2030 is to transform the country into service and knowledge-based economy (Careem, 2018). The strategic plan involves the establishment of excellence as a national culture through innovation, sustainable development, and creativity.
Given that Careem’s mission is in line with the country’s leadership vision, the shared goals formed the basis for the choice of the company for this study. Therefore, this essay will examine the competitive position of Careem based on its pillars of success and determine the best expansion model for its sustainable growth.
Literature Review
The accelerated growth of the economy over the years due to technological advancement has positively transformed communication, lifestyle, and human behaviors. Access to the high-speed Internet and advanced mobile wares has revolutionized the e-commerce and payment systems.
Revunova, Vlasenko, and Bukreev (2017) report that transportation services are among the most technology-influenced processes in the world. Technological advancement influences the model of personalized transport car-hire services through the expansion of opportunities and innovation growth strategies. High price sensitivity and associated-market dependability command the need for strong financing for sustained growth.
Most industry players have regulated their global expansion and focus on consolidating efforts on home market due to strong market competition. However, regional focus and flexible global expansion strategies are essential in the achievement of long-term organizational goals for sustained growth.
In the Middle East, socio-cultural practices and religious beliefs restrict women from driving social and economic activities such as driving. However, due to the on-going global campaign on women rights, the United Arab Emirates is involved in championing for the engagement of women in development through inclusive job opportunities and social activities (Careem, 2018).
Additionally, the UAE’s government has provided a good business environment for the transport industry by enhancing taxi infrastructures such as runways, signs, fare policies, and collection system. One of the challenges in the UAE the participation of the government in car-hire business lowers prices and reduces profitability. Moreover, the entry of global players such as Uber in these markets has significantly increased competition.
Despite the challenges, Careem has emerged as a strong industry player in the Middle East and has expanded to North Africa and South Asia. Careem identified the social and religious restriction of women’s engagements in driving and the inconveniences caused by local operators as a cutting edge in its entry into the market.
According to Dechezlepretre and Sato (2017), environmental factors, such as government regulations and policies, control the formulation of strategies by both small and large-scale enterprises. The UAE government policy requires private operators to charge 30% above the government price (Careem, 2018). Based on UAE strive for excellence in service provision, this pricing approach alone greatly influences consumer choice and places private operators on the unfavorable competitive environment. Product line remains to be part of the challenges experienced in the industry.
The entry of other industry companies such as Uber, Limofied, and Easy has intensified rivalry in service delivery. Lev (2017) argues that competitive market strategies utilized by the different market players involve lowering of price rates, which greatly cuts into companies profit and threatens sustainable growth.
Other strategies include the provision of call center services, localized database, and different booking and payment options. Most competitors, for instance, Uber, have adopted a business model that focuses on fast growth and expansion in multiple markets. Given this strategic approach fails to consider the needs of the target market, it has not succeeded in the Middle East. However, Careem has aligned its operating model with the context of the Middle East, a step that has positively influenced its competitive position.
On the other hand, Careem faces growth challenges due to limited resource areas, product line, and price rates. Careem charges high price rates compared to Uber and government-operated taxi services. However, Uber experience surge prices often when there are high demand and less availability of cars due to traffic challenges. Overall, these industry shortcomings act as a future opportunity for growth for both established market players and new entrants.
External Analysis
PESTEL Analysis
Social-cultural factors are the basis of the company’s brand for Careem originates from Arabic act of generosity. Social factors, such as cultural limitations, lifestyle attitude, and the role of the Internet, have positive influence on business activities (Lin, Hu, & Jiang, 2016). Some of the social conditions that shaped the transport challenges include restrictions on driving for Saudi women and the friendly lifestyle of the Jordan citizens who enjoyed resource sharing.
Additionally, consumers face diverse challenges from established players in the industry due to high cost, inflexible arrangements, and limited accessibility. Corporate leaders exploited these social differences in the target market to expand its product line to include services such as Saudi-based home delivery, car-pool travels, flexible arrangements, app or online-based bookings, and multiple payment options. The establishment of real-time online customer service presence expressively builds a strong market brand influencing customer loyalty and choice of service.
Careem is subject to political factors in the external environment because it establishes its business activities under legal guidelines involving tax compliance and licensing regulations. However, the company’s expansion has faced several political challenges, such as the legal battles, protest, and attacks by police and local industry players in Egypt, which threaten to cripple its growth.
In Dubai, the government formulated policies to regulate private operators such as Careem and Uber to adopt limousine service providers. These approach aims to control competition between private service companies and the government run-taxi services. According to Lin, Hu, and Jiang (2016), political challenges are significant in the development of business strategies by corporate leaders.
However, in a strategic twist, Careem utilizes a business model that accommodates local market needs, for instance, partnership agreements and pre-scheduled bookings with other complementary service providers such as hotels. This strategic approach enhances Careem’s competitive advantage while facilitating sustainable business development. Collaborative agreements help to unlock a wider demand scale per client and ensure a constant stream of revenue while maintaining a classified means of payment.
Porter’s Five Forces
Low barriers to entry in the transport business have positively stimulated the growth of the industry. However, inadequate legislative control with the low capital and limited expertise requirement has significantly intensified competition between existing service providers and new entrants. These factors threaten the potential of expansion in the industry. Additionally, Careem faces harsh competitive environment from three different market players, namely, government, global players, and local operators. Competitors utilize diverse business strategies that enhance their competitive position (Bagchi & Sivadasan, 2017).
In UAE, the government, in an attempt to maintain its service provision in line with its vision 2021 and 2030 culture of excellence, formulated transport regulatory policies to control private investors influence on service provision. The pricing policy imposed a high fee charge to private service providers, which gives the government taxis a positive competitive position in the market.
The entry of global players such as Uber in the Middle East and the presence of local taxi operators such as in Egypt have increased rivalry in the market. The intensity of the rivalry involve attacks, protests, and legal battles, which have a negative impact on the company’s brand, trust, and customer loyalty as a result of safety concern. However, Careem has adopted social context strategy of sponsoring, participating, and collaborating with other interested firms such as Cricket League that promote charity works. This strategy has positively influenced the company’s competitiveness over rivals.
Due to the exciting market and feasible opportunities for growth in the transport service, the industry attracts several investors both from the international and local markets. Additionally, the industry has low barriers to entry due to low capital requirement, readily available freelance taxi operators, skilled drivers, and low level of expertise required. Bagchi and Sivadasan (2017) hold that low barriers make it easy for started-up companies and interested investors to penetrate into the market. The entrant of these new players in the market poses a strategic challenge on product versus price differentiation approach.
In the context of the Middle East, the government of the UAE has championed for service excellence, which acts as a benchmark for other service providers in the region. This limiting factor has influenced Careem to adopt product differentiation strategy in beating competitors and establishing its market share with sustained growth. Careem product differentiation strategy involves collaborative ventures, the establishment of a localized database, call center services, and adoption of the locally accepted payment system. Therefore, Careem utilizes product differentiation strategy to strengthen customer, employee, and driver loyalty that enhances the company’s sustained growth and expansion.
Internal Analysis
SWOT Analysis
Strengths. Careem continues to lead its rivals in market share because the customer-oriented business strategy has potentially enhanced its competitive position and profitability. The company adopted the customer-centered approach due to the social context of the Middle East and matched UAE 2021 and Abu Dhabi’s 2030 visions. The innovation of customized products is essential in enhancing customer satisfaction (Lev, 2017). The tailor-made services include flexible car hire service and payment mode, the establishment of call center offices, pre-informed fare charge estimate, and enhanced customer privacy.
Contractual car hire and collaborative ventures with other service firms such as hotels and charity organizations have significantly boosted the company’s social image and reliability. Additionally, the adoption of mobile app services in the techno-savvy environment is essential in promoting the customer-centric strategy, which considerably improves Careem’s competitive position in the market.
Weaknesses
Careem has adopted a simple business model that is prone to imitation. Interested companies and local investors can easily adopt Careem’s business approach that includes the use of mobile app services, contract agreements with taxi operators, and flexible car rental options. According to Bagchi and Sivadasan (2017), low entry requirement is critical in determining the competitiveness of the industry, profitability, and opportunities for growth.
Additionally, the company faces low control of the fleet of cars due to lack of company’s ownership, which allows individual owners to withdraw once their contracts expire. This contractual form of car ownership is a weakness because contract partners can pull out and start or join a rival company. Given the personalized driver- client relationship, any differences that affect contract agreements can cause drivers to influence customer loyalty and make them switch the new rival company.
Opportunities
The existence of robust innovative framework is an opportunity that enables Careem to develop mobile app services, GPS tracking system, and localized database. The physical environment of the Middle East keeps changing due to the effects of desert characteristics making Google Maps inaccurate and misleading.
Therefore, the innovative culture and the capacity of Careem have influenced the formation of a private database of locations. The use of Google Maps is associated to the inaccurate online identification of a location. Thus, the creation of own database helps to control interruption of pre-scheduled bookings, which enhance service delivery and customer satisfaction
Threats
The company’s business model does not provide strong barriers for new entrants. On the other hand, the concept of the potential profitability of the transport industry attracts different investors both local and international. Therefore, given Careem’s easy to imitate business model, new firms and local operators can easily establish themselves leading to intense competition, expansion risk, and unsustainable business.
For example, in Careem’s current market, several local players have emerged such as Limofied of Pakistan, Didi Chuxing in Egypt, and Dubai Taxi. Additionally, global players such as Uber and Easy Taxi have adopted Careem’s business model of the cash payment that accommodates Middle East social context, and thus, increasing competition. The simplicity of the simple business model threatens Careem’s sustainable growth and expansion.
Porters Value Chain Model
Operations. Careem service logistics involve customized products appropriate to the social context of the local market. Adopting service-oriented strategy is essential in building a strong market brand and winning customer trust (Sivula & Kantola, 2014). The company has packaged its service delivery along the UAE’s goal of service excellence. Establishment of local call centers promotes clear communication that guides in handling customer complaints, needs, and feedback for improvement.
Online presence and development of mobile apps together with flexible payment modes allow control of movement schedules and simplifies customer live. This method of service delivery eliminates the frustrating experience of accomplishing task creates and value for customers while helping the organization to meet its business goals. The customer-oriented improvement enhances the company’s competitive position in the market.
Services. Careem collaborates with several service providers such as Dubai Cares and Cricket League in promoting social activities. The company sponsors charity work through sponsorship of cricket raises funds to support children in developing nations. Participating in charity work shows an act of generosity that is in line with the company’s brand name, which builds customers trust on the company’s commitment to improving lives.
By accepting accountability in service delivery, the company has entered contractual agreements with other service firms to provide reliable car hire services for both its clients and employees. Therefore, Careem’s approach of providing value-added services to customers is significant in enhancing sustainable growth and expansion.
Recommendations
Competitive Advantages
Careem has earned customer trust through service accountability. The company has established call centers and online platforms for receiving and responding to customer needs promptly. Service accountability is in line with the UAE government’s goal of service excellence.
Additionally, the company participates in charity work that aims to improve the lives of the needy children in developing nations. The company has revolutionized the effectiveness of these customer center platforms through continued innovations to facilitate reliable service delivery. Hence, in conforming to the national policy requirement of promoting lives, the corporate managers have positively influenced the company’s competitive position in the market.
Careem’s management identified collaborative ventures as the key success factor in establishing and expanding their market share. The company collaborates with other service companies in providing pre-schedule bookings for their employees, as well as their customers. This strategic approach allows the organization to focus its business marketing strategies to organizations and individuals. Consequently, Careem has adopted collaborative venture in enhancing its competitive advantage, expanding customer network, and building company’s brand.
Strategic Recommendation
In establishing their business platform in the Middle East, South Asia, and North Africa, the corporate executive puts into consideration the social demands of the local society that significantly shaped its success. This approach strengthened the organization’s business establishment in the market. Additionally, the company takes pride in key success factors such as collaborative ventures, accountability of service delivery, and customer-centric business model.
Therefore, given these internal strengths in product development and service delivery, it is essential for Careem to explore new markets in the global society. Understanding of the diverse social context in new markets is essential in building products along the local society behaviors. Thus, it requires corporate managers to adopt the social context approach while observing the key success factors to promote sustained growth in the industry.
In the transport industry, most firms limit their customer relationship to transport needs only. However, customers have multifaceted needs in life. Solving customer needs beyond transport services is essential in strengthening the partnership. Therefore, as it is necessary for Careem to maintain its leadership in providing customized services, the corporate managers must expand their innovative culture.
The expansion involves collaborating with other service firms, such as hospitals, supermarkets, and hotels, which allow customers to make an online order for their products and wait for door delivery. This approach permits customers to accomplish multiple tasks through a click of a button thus promoting excellence in service delivery.
Impact of Recommendations on Visions
The adoption of the recommended strategies enables the company to play a positive role in shaping the service culture towards the government’s objective of service excellence as expressed in Abu Dhabi Vision 2030 and the UAE Vision 2021.
References
Bagchi, S., & Sivadasan, J. (2017). Barriers to entry and competitive behavior: Evidence from reforms of cable franchising regulations. The Journal of Industrial Economics, 65(3), 510-558. Web.
Careem. (2018). Careem for business. Web.
Dechezlepretre, A., & Sato, M. (2017). The impacts of environmental regulations on competitiveness. Review of Environmental Economics and Policy, 11(2), 183-206. Web.
Lev, B. (2017). Evaluating Sustainable Competitive Advantage. Journal of Applied Corporate Finance, 29(2), 70-75. Web.
Lin, W., Hu, Y., & Jiang, P. (2016). The impact of external environment factors on the growth of cultural enterprises in China. Journal of Discrete Mathematical Sciences and Cryptography, 19(6), 1091-1107. Web.
Revunova, S., Vlasenko, V., & Bukreev, A. (2017). Modeling the sustainable development of innovation in transport construction based on the communication approach. Earth and Environmental Science, 90(1), 1-24. Web.
Sivula, A., & Kantola, J. (2014). Combining crowdsourcing and Porter’s value chain. International Journal of Advanced Logistics, 3(2), 17-26. Web.