Introduction
The world has been affected immensely by how people have reacted to the Internet. Indeed, businesses have been established purely from the digital space with others shifting their core functions online. It is important to note that the need for such changes has been necessitated by the desire of consumers to get even better services and experiences. Today, the consumer journey is ranked higher than even product quality. On the same note, the more convenient the process of getting a product to the client is, the better it will do in the market. Many marketers believe that the paradigm shift changed in the industry in the 21st century due to the Internet (Yeshin, 2016). The rise of social media platforms further enhanced the concept of advertising and target marketing (Piskorski, 2014). Data has become an important currency in the digital economy as it allows for customisation of user experiences.
The essay will use analytic tools to do an environmental scan of the international company, Uber, in a host country, South Africa. The purpose of the scan is to identify some of the challenges that the company is facing and come up with suggestions for overcoming the same. Therefore, the question is what the company can do to improve their brand position and image in the identified market. Ideally, the work encompasses a complete look at the external forces that can shape the way a company performs in a market. The work will use the term “rider” to refer to the consumer or client. Additionally, the term “driver” will also be used interchangeably to refer to “supplier” and at times “consumer”. The differences will be clearly stated to avoid confusion. The paper will be divided into an introduction section, followed by a literature review, case analysis, suggestions and conclusion sections. A list of references that have been used will be provided at the end of the discussion.
Literature Review
The digital economy has grown in ways many could not have predicted. Indeed, more companies are shifting their focus onto the digital platforms as opposed to their traditional brick and mortar stores. This section of the paper will look into the digital economy as a whole applying some of the concepts learnt on the same. A case analysis which will further use the analytic tools specifically to the selected company will be done after this section.
Strategic Alliance Tool
The strategic alliance tool as the name suggests looks at how different parties come together and work out a partnership for the benefit of all the involved. Frynas and Mellahi (2015) note that the tool is useful in a couple of ways. First, it allows the user to gain a new client base that can be either in the same market or in a different market altogether (Smith and Hanover, 2016). It is important to note strategic alliances can be between parties within the same locality or even in different countries. Ideally, one reason why a company can seek such a partnership in an attempt to increase its client base is the issue of market penetration. Fraser (2019) notes that there are markets that are nearly impossible to penetrate due to political, social, cultural and even economic issues. In such cases, it is important that alliances be sought to make the process easier and relatively cheaper.
The strategic alliance tool is also relevant if the firm in question is seeking additional income by expanding its core business mandate. For example, if a company wants to explore whether a new idea in the market can help them improve their bottom line, they can seek partnerships with entrepreneurs to test out the same (Dahlén and Lange, 2018). The approach allows the corporation to put in enough effort to help the new idea succeed but also lower the amount of capital needed to do the same. Advantageously, strategic alliances reduce risk as they also spread out the possible risks that any of the parties involved is exposed to by entering that alliance. Significantly, this makes sense for any profit-making business as it saves costs. On the other hand, the tool can still be used by non-profit making companies as it ensures the proper management of reputation.
Five Forces Tool
The five forces tool is normally used to understand competition and the position of the company within the market. As the name suggests, there are five main components to this tool. The elements are threat of new entry, supplier power, competitive rivalry, buyer power and threat of substitution. Each of these elements is vital in understanding how a company or brand is performing the way it is at the moment. Indeed, it is important to note that the forces are not always constant. Therefore, this tool has to be used consistently in order for the firm to keep ahead of the trend. For example, the stated threat of new entrants cannot be tackled once as competitors will always try to enter the market. However, the specific company can put in place measures that ensure that even with stiff competition, its brand still captures the largest percentage of the market share.
As mentioned, one of the elements of the five forces is the threat of new entrants. Porter (2008) notes that this element fully focuses on something that is continuous, therefore, encourages constant monitoring of the same. According to Porter (2008), the theory does not encourage companies to make it difficult for other competitors to enter the market. However, it suggests that management have to fully understand the processes needed for new entrants to put their products in the market. The issue of globalisation has made this matter complex (Furrer, 2016). This is due to the fact that a significant number of international companies have been shunned for encouraging locals not to purchase products that are locally made. This affects the industrialisation capability and power of the host country. Many countries are now encouraging their citizens to support local talent, thus, also having a negative impact on international business.
Critically, a second element within the five forces theory is the buyer power. Towards this end, the buyer can also be referred to as the consumer or the client. In many instances, this power is critical if it is strong enough as it allows the consumer to drive down the prices that a company has set. There are numerous ways in which the buyer’s powers can grow within a market. First, if the market is highly saturated with similar products, then the clients will be the main factor used when determining the right pricing strategy (Porter, 2008). This is because they will always have options to the brand. Second, as Porter (2008) notes, the Internet has given consumers more power than before. This is due to the ease of accessing comparison information between products online.
Further, supplier power is also critical in understanding brand positioning. Porter (2008) explains that when the suppliers have more power than the company, they become demanding and drive the business down by pushing pricing up. It is important to note that despite the choice of pricing strategy, key elements such as investments made and operating costs have to be considered to ensure a return on investment (Gallino and Moreno, 2019). Ideally, there are numerous factors associated with supplier power. First of all, a market that has few suppliers will suffer from this concept. This is due to the fact that the firm will not have an array of choices to get the best price from when they are looking for supplies. There is no way of curbing supply power apart from ensuring that the pricing strategy used is comfortable for both the target market and the company’s bottom line.
Additionally, the threat of substitution refers to how easily a client can change brands. Many of today’s markets have high competition for almost all products. It is upon these companies to ensure that they have competitive edge in order to stay above the rest. It is important to note that competition is both in the form of alternative local and international options. The international aspect is brought in through the advance technology that has made it easier for consumers to buy goods from different countries and get them delivered right at their doorstep. the concern for substitution is also felt in product differentiation and branding. Indeed, as Strusani and Houngbonon (2019) note, companies that offer similar products albeit slight differences can have competitive advantages over others in the same market. This is especially the case if the pricing is similar or only slightly different.
Lastly, the overall competition in the industry completes the five forces tool. Porter (2008) notes that the presence of competitors will always be a force for any company. This is regardless of whether the affected company is new or not in the market. Often it has been recorded that new companies from inexperienced entrepreneurs have entered a market fully and heightened the competition. Therefore, it does not take experience or time for a competitor to be considered influential in the market. Goldfarb, Greenstein and Tucker (2015) explain that the concern of competitors raises the quality exposed to the client. This is because, as explained, when there are more competitors in the market, the buyer has more power. Despite the fact that the force cannot be resolved, it can be manipulated for the benefit of the company.
PESTLE Analysis Tool
The PESTLE Analysis tool is widely used to understand the environment of a select company. In many instances, the PESTLE analysis of two similar companies working in the same field will be the same. This is because they will be affected in the same way by the environment. The only way to ensure they are not rendered inoperable is by identifying all the elements of the PESTLE analysis that can make their business stall. Afterwards, the firms have to come up with ways in which to avoid the same negative outcome. Therefore, it is possible to find two companies producing the same product but one succeeding more than the other. Debatably, fully understanding the PESTLE analysis also allows corporations to think more about their competitive advantage and how to get ahead of the rest. Just like the five forces analysis, organisations have to conduct this analysis frequently as the business environment is ever changing.
The first aspect of the analysis is political. Gulati and Nickerson (2008) explain that it refers primarily to the political actions that can affect a business and/or its competitors. Initially, globalisation did not factor in the importance of political goodwill in the success of an international company (Eaton et al., 2016). This issue has been raised primarily by Third World countries. Mishra (2017) explains that these states have complained that the developed nations have taken much of their businesses to their economies making it nearly impossible for local industries to get clients within their regional boundaries. It is important to point out that the complains has been in regards to multinationals and not small foreign businesses. The political environment has to be considered to understand whether such issues will force the company out of the market in a few years. Change in governments is also key when discussing the political environment. This is due to the fact that a transition can also mean an intolerant government that does not show goodwill to foreign companies.
Secondly, the economic nature of the market has to be considered before a product is launched in the market. One economic factor a firm has to note is the ease of disposal funds that is available for the target market. In the event that the target population is able to buy the products, then the company can go ahead and introduce it into the market. However, in the event that the opposite is true, the company will have two choices (i) to change their costing strategy to come up with a price that is affordable to the target population or (ii) to change the plan and not launch the product or brand in that specific market (Floyd and Wooldridge, 2017). Importantly, the issue of economics also has to consider the stability of the nation. Countries that are prune to war will have unstable economies and this will affect the company’s bottom line.
The social aspect of the PESTLE analysis is often combined with the cultural attributes as well. Johnson, Scholes and Whittington (2008) note that one key element of the socio-cultural scanning is the norms of the people. Indeed, foreign companies that have completely ignored the norms of the people have struggled to penetrate those markets. An example can be given to explain further. A restaurant that wants to penetrate the Saudi Arabia market has to also respect the fact that young women cannot sit in the same space as men. This is a cultural belief that is tied to their religious beliefs. Therefore, such a restaurant has to consider having enough space to divide the areas, one for young women and families and the other for men. Additionally, social-cultural aspects also affect the way the community relates to the foreigner. An integration of some of the beliefs of the community will make the public feel like the company belongs to them as well. This sense of ownership will prove important in discussions pertaining local versus international trade.
As explained, the digital economy has shaped the world as it is today. The technological aspect of the analysis focuses on how companies can leverage on tech to advance their mandate (Ozuem, Patten and Azemi, 2019). Indeed, there are companies that have not incorporated any digital approaches to their mandate and this gives their competitors a competitive edge. On the other hand, there are institutions that were created online. Oyku (2018) explains that many such institutions believe that they have fully captured the technological aspect of the analysis. However, as Abere et al (2016) note, this is hardly true as technology is ever changing. Therefore, even companies that are hinged on technology should constantly review the environment for new, conflicting and supporting tech that can affect the company in one way or the other.
The fifth aspect of PESTLE analysis is legal. Hamilton and Webster (2018) note that this element refers to the legal policies/law that can affect the company. An example can be used to explain this notion further. In the stated argument of countries complaining that international companies are making it impossible for local manufacturers to thrive, a government can pass a law that such companies (international) have to get special licenses and also can only reside in one area of a city, which happens to attract higher taxes and have expensive infrastructure (Amankwah-Amoah, Boso and Debrah, 2018) A company that is interested in penetrating this market will have to either (i) consider the licenses, taxes and rent/infrastructure that they are allowed by law to have and compare that to their operating costs such that if still appropriate go ahead and penetrate the market and (ii) abandon the plans due to the legislature and look for an alternative market to penetrate.
Lastly, the environmental angle of the external scan has been made that more relevant over the last few years. The impact of international companies on earth’s carbon footprint has been highlighted by environment enthusiasts for years now. Dhar et al. (2016) go further to note that developed countries have even been accused of dumping the e-waste in developing countries. This has created much anger both among environmentalists and the governments of these Third World countries. On the same note, this affects the political goodwill that such large international companies get when they seek to penetrate a market. It is important to note that this does not mean that these companies cannot penetrate such developing markets. Through the environmental scan, they can learn about the concerns of the market in regards to the physical environment and align their objectives or activities appropriately.
The Case Analysis
The selected company for this case analysis is Uber South Africa. Tanneh (2017) explains that Uber entered the African market in 2013 and is currently in 14 markets in the continent. One of the reasons why the company was selected is that it has been receiving backlash in the specific country as opposed to the other countries in the continent. Alicandro et al. (2019) note that despite being the market, South Africa presented unique challenges that other African countries did not have. For example, the fact that the country has experienced several attacks on foreigners and their companies is vital in understanding why the company has not taken a significant percentage of the market as initially anticipated. Wessels (2016) explains that the xenophobic attacks not only target whites or Caucasians but also Africans from other countries within the continent. An environmental scan that should have been done before the product entered the market should have revealed this fact.
Further, like other African countries (and Third World nations) transition in politics has also affected Uber’s bottom line. This too should have come up with a proper scanning of the environment prior to the launch of the brand in the region. Importantly, the country was selected because it can still implement some of the concepts to ensure success. This section of the essay provides an analysis of Uber South Africa, not as a new brand in the market, but as an existing one. The findings that will be highlighted in this section will be critical in other sections as they will be used to form both suggestions and conclusions. It is important to note that this section will use the previously discussed analytic tools to determine the external organizational environment.
Strategic Alliance
It is crucial to point out that Uber South Africa undertook several plans to ensure strategic alliance. Kornberger et al. (2019) define the term as a partnership between two or more firms that come up with agreed goals that they all work on independently but for the benefit of the stated partnership. There are two levels of strategic alliances namely local and international. As the name suggest, the local partnerships occupy between partners within the same state boundaries while the latter involves various countries. Uber South Africa has enhanced both its international and local strategic alliances.
It is critical to note that several companies use strategic alliances to penetrate a market. The same can be said of Uber, which is headquartered in California USA. It is critical to note that the host country, South Africa, already had various taxi services that the public could use by the time Uber was entering the market. Appiah, Amankwah-Amoah and Liu (2020) further note that South Africans often prefer to use local companies as opposed to international ones. This is due to the desire to promote their local industries or businesses. Therefore, Uber required an international strategic alliance in order to succeed in the market. The nature of Uber allows for these strategic alliances to be done between the company and its potential drivers. Therefore, the public is chauffeured by local drivers who not only know the routes well but also understand the local dialect and can communicate effectively with the clients.
Critically, the company has also pursued some local strategic alliances. This has been done by the local Uber company and not the international headquarters. It is prudent to note that even though the firm is international, it has decentralised its functions such that the host countries also have their own decision-making approaches based on the intercultural interactions they experience during their operations. Therefore, the local Uber South Africa has partnered with event managers to be, for instance, the only digital hailing cabs for their functions. This has boosted both the brand image and profitability.
Arguably, there are two main external factors that influence strategic alliances. Moon and Baer (2018) explain that these two factors are technology and globalisation. Uber South Africa, as explained previously, is a digital hailing curb, which also means that it relies wholly on technology. The user has to have a phone in order to call the cab services. One factor that has to be considered is the ease of access to the technology needed by the user. Arguably, the firm has a user-friendly interface that encourages users to either call a cab, ask for help, or see the services offered. It is critical to note that the culture in South Africa is mainly to use cash or card for payment of services. Therefore, the clients rarely use e-wallets for the same. The company has insisted on the use of cash and card payments despite the fact that mobile payment options are also becoming popular in the country.
As stated, the second external driving factor of strategic alliances is globalisation. Tong, Luo and Xu (2020) define this as the unrestricted move of people and goods from one part of the world to another. Due to the fact that the stated firm is international, many foreigners who tour South Africa can also easily hail the cab services as they are used to the same in their home countries. There are several barriers to globalisation and the nature of Uber South Africa allows for the management of these barriers. For example, culture and language are a main concern for international companies trying to penetrate new markets. As mentioned, however, the application uses local drivers to ensure the end-user enjoys the services.
Debatably, Uber South Africa has also used internal drivers to ensure their position in the market. For instance, the company has spread its risk through the concept of risk limitation. Kee and Yazdanifard (2015) argue that it is critical for companies, either local or international, to spread their risk so that they can also cushion their assets from loss. Additionally, the nature of the business, where it does not own any of the vehicles but rather gets a commission from the drivers, can be viewed as a risk limitation approach. The company is, therefore, liable only for licenses, the management of the mobile application and the drivers. Additionally, the company has incorporated some cost minimisation strategies as part of their strategic alliance. As explained before, there were several cab hailing services in South Africa. However, none were based on digital platforms such as Uber. There are current new competitors who use similar digital platforms to hail cabs. Uber South Africa had to use cost minimisation strategies in order to stay ahead of the rest of the competition and maintain their position in the market.
It is arguable that the company has partnered with all the possible partners of strategic alliance. Khare (2017) argues that the main partners of strategic alliance are customers, governments, suppliers and competitors. A partnership with the government allows the company to get the required licenses and permits to run the business in the host country. On the other hand, a linkage with the competitors moves the industry forward while expanding on the quality of services offered to the clients. It is important to note that Uber South Africa has two main customers – the drivers and the end-users. The company has to attract the drivers in a way that allows the end-users an array of choices for the same service. On the same note, Uber South Africa has to ensure that the type of drivers they get for their platform is decent and respectful to the end-user in order for the latter to keep choosing the same hailing cab (Uber) whenever they require. Indeed, there are several other stakeholders who can be included in this list. As mentioned, partnerships with event managers, companies so that their staff can only user Ubers etc. are critical stakeholders as well.
Trust is a critical part of any strategic alliance. Žarkić-Joksimović and Marinković, (2018) explain that the partners have to trust that their associates will do whatever is necessary to ensure the success of the partnership. Mishkin and Eakins (2018) explain that trust can only be achieved after the partners have bonded (professionally) and have agreed that they are all working towards the same goal. Saunders and Cornett (2019) note that one of the biggest concerns for strategic alliances is proper communication. In the event that there is a fault in communication, then it will affect the trust that has already been established.
Five Forces
A critical and in-depth analysis of Uber South Africa also includes the use of the five forces concept. Backaler and Shankman (2018) explain that the theory suggests five elements that affect the competitive aspect of a company. These five aspects are rivalry among existing competitors, threat of new entrants, threat of substitutes, bargaining power of the buyers and the bargaining power of the suppliers. This section looks at each of these factors and how they relate to Uber South Africa.
Rivalry Among Existing Competitors
Initially, the company was competing against individual taxis that the consumers would hail from the curbs. However, today there are more digital hailing cabs in South Africa that have created stiff competition in the industry. Mishkin and Eakins (2018) note that one of the critical elements of this category of the five forces is product differentiation. However, the same is insignificant in the context of Uber South Africa. This is because a significant number of the cabs that use digital platforms offer the same product. Further, the user interfaces are highly similar. Differences can only be recorded in regards to customer experience and pricing. It is also arguable that there is an excess capacity of competitors in the market. Interestingly, despite the fact that there are relatively few companies that offer digital taxi calling services, the drivers are allowed to register with all these companies at the same time. It is this fact that has ensured the saturation of the market.
Critically, the competitors ensure the growth of the industry. It is arguable that Uber South Africa has tried to offer fixed costs in order to attract more clients and squash their competitors. Indeed, when the client enters a pick-up point and a destination, they get an estimate that they will pay. Whereas this is similar to what other hailing cabs have, the main difference with Uber South Africa is that these prices rarely change even if the person is caught in traffic longer than expected. It is arguable that this algorithm allows for the clients to plan their finances and adjust accordingly. Additionally, one can state that it is this aspect that makes Uber that more common in the country unlike its competitors.
Threat of New Entrants
The nature of the business makes it easier for new entrants to penetrate the market. It is critical to note that there are two types of entrants towards this end. The first is the international competitor while the second is the local taxi hailing company. The international entrant will have more barriers due to getting international permits and licenses. Therefore, it is arguable that they pose a significantly low threat on the market and the company itself. On the other hand, the local firms have an easier time getting the stated permits. Due to this fact, they offer a higher threat to Uber South Africa. The nature of the business makes it easier for local companies to start as it requires minimal capital. Indeed, the design thinking approach taken ensured that the company does not own any of the motor vehicles. Therefore, when starting out, a competitor also does not need any new cars to offer the drivers.
It is prudent to also note that the access to distribution channels is similar for Uber and its competitors. This is because they all depend on the sim card in one’s phone. A user has to register on the digital applications using their sim cards. However, the same sim card can accommodate all of the available digital cab hailing applications at the same time. It is then upon the client’s desire to use any of the apps installed at whatever time they wish. Mourdoukoutas (2017) argues that the issue of channels of access is often overlooked when business ideas are discussed. This puts many companies at a disadvantage. As mentioned, there is little product differentiation, thereby also enhancing the threat of the new entrants as Uber does not have a competitive edge.
Threat of Substitutes
There are three main things to consider when discussing the threat of substitutes. The first is pricing, which as explained earlier, has been kept in a fixed approach. Substitutes that have come up have not been able to copy the same algorithm. Therefore, although they will offer the price range for a client, they might not stick to it by the end of the trip. There are two main things that have to be considered under this realisation. The first is that Uber South Africa has to consider what its competitors are offering as estimates. It can be argued that if the competitor’s initial estimates are lower, then the client will most likely take a ride with the other company as opposed to Uber. This is despite the fact that the previous corporation does not offer the fixed element of transport fare. Secondly, one has to consider how much of a difference the client has to pay at the end of the trip for both Uber South Africa and its competitors.
The act of switching costs can be seen as a pain point for the user. Saunders and Cornett (2019) note that many clients expect that the agreed upon price after bargaining should stand at the end of the transaction/experience or in this case, trip. In the case of Uber South Africa and its competitors, the act of bargaining occurs when the client inputs his or her pick-up point and destination. Therefore, the estimated costs should not be higher but can be lower to ensure consumer satisfaction. The client’s propensity of the substitute will, therefore, only be relevant if the latter offers cheaper rates despite the switching of prices.
Bargaining Power of the Buyers
The bargaining power of the buyers is a critical element that allows companies to come up with best strategies for advancing their position in the market. One element that has to be considered in this context is buyer concentration (Rao and Klein, 2015). This refers simply to the action by a small number of buyers who purchase the most of a company’s product. This is a significant challenge for Uber South Africa as their product is mainly used by middle class citizens, who make up a significantly small percentage of the country’s population. A majority of the population is lower class/low earning citizens. Due to the high competition and the nature of the work, the buyer concentration experienced in South Africa has led to a reduction of profits for companies in the industry.
Buyer switching costs also play a critical role in the bargaining power of clients. Antonucci et al. (2019) refer to the term as the amount of extra money a client has to use in order to switch brands. At the onset, this cost is minimal for the taxi client in South Africa. This is due to the fact that all the taxi hailing apps in the country are free. However, one has to consider the costs of the new brand that the client will be adopting. If these fees are high, then it is likely the client will go back to the original brand. Buyer information is important in ensuring that the client already knows such information before they decide to change brands. It is critical that when providing such information highlighting competiti9ve advantage Uber South Africa not participate in unfair competition as stipulated in intellectual property law.
Bargaining Power of the Suppliers
Similarly, the suppliers have their own bargaining power that can be used to shape the industry. It is important to note that for the purpose of this analysis, the suppliers will be the drivers of the Uber cabs. Like the buyers, these stakeholders have supplier concentration, where a few suppliers work with the brand. This is a significant problem for Uber South Africa. This is because there are a few of the drivers who have registered for all digital hailing cabs. one significant problem with this fact is that it dilutes the user experience due to the different customer journeys the various applications or firms subscribe.
Critically, buyer information also affects suppliers in various ways. First, it ensures that the buyers are aware of all their options. This means that the company will face more competition. Arguably, the fact that the suppliers are allowed to register with all digital hailing cabs for free ensures that they also recommend the best service to the client. It is debatable that the supplier will be biased towards the service that offers them the best packages, not necessarily for the client’s benefit. This puts significant bargaining power to the supplier. The additional fact that the buyer switching cost is theoretically irrelevant makes their (suppliers) power stronger. Critically, the issue of international expansion also has to be considered when discussing supplier power. Uber South Africa was the first digital hailing cab in the country, region and continent. However, after its penetration, various international competitors such as Bolt also entered the market. On the same note, Uber penetrated other African markets. The competition across the continent, it can be argued, is therefore, similar as the one within South Africa.
PESTLE Analysis
Political
One of the key political challenges Uber South Africa faced was the government’s action towards traditional taxis. Critically, Uber South Africa is still seen as a foreign entity despite using local drivers. Additionally, many of the people who were working in the traditional taxi sector lost their jobs due to the introduction of Uber South Africa. Therefore, there was a need for the government to ensure that the locals could still go about their everyday lives and businesses despite allowing international companies to also offer services in the nation. Manderson, Cartwright and Hardon (2018) explain that a key political involvement is goodwill. Even though the company had this when they first penetrated the market, a change in government due to elections led to further political trouble for the multinational. The new government did not support the fact that a significant number of the local taxi drivers had lost work or were expected to compete with Uber’s systems.
The political trouble led to the seizing of the Uber drivers’ cars by the government. The issue was, however, resolved with the introduction of a new Uber taxi driver permit that is paid to the local government. Critically, the issue of government and politics has to be carefully considered. Hollensen (2019) explains that this is especially important in developing countries that are yet to fully take advantage of systems to ensure proper transition when government change. Arguably, the issue of transition from one government to another is a complicated element that can either affect businesses negatively or positively. In the case of Uber South Africa, the situation was made worse as the local taxi drivers went ahead and registered local firms at the same time Uber was experiencing political difficulties.
Economic
The nature of Uber South Africa can be defined as a sharing economy. As a result of this, Uber as a brand does not buy or own any of the cars used but works in partnership with car owners who would like to use their platform. One advantage of this type of economic approach is that it hires many people. This is due to the fact that car owners do not have to be the drivers, but can hire other people and share the profits. However, a disadvantage of the same is that there are no benefits across the chain. Therefore, the driver has to cater for their own health insurance and also pay his or her taxes separately. Uber South Africa has tried to resolve this issue by ensuring that people who drive the cars are the same ones who are registered on their platform. They receive the Uber taxi driver card to also help identify themselves to both the local authorities and the public.
Further, entry into the South African market also affected general economy. It was difficult for a significant number of the traditional taxi drivers to join Uber South Africa. One of the reasons for this is simply the fact that change is not easy. These drivers lowered their rates significantly in order to maintain their clients and keep in business. In turn, the market research that had been done prior to the penetration of the market was rendered null and void due to the new changes. In turn, Uber South Africa also had to rethink its pricing strategy in order to attract clients.
Socio-cultural
One key socio-cultural element that has actually made Uber South Africa retain a significant percentage of the population is the society’s uptake of the smartphone. Critically, like many other countries in the African continent, South Africa has more youth than elderly. According to Duffett and Wakeham (2016), the youth in South Africa are approximately 17 million of the population. Thus, more mobile users opt to purchase smartphones in order to socialise with family and friends online through digital services such as Whats App, Facebook, Twitter and Instagram. This ensures that the same clientele can be easily targeted through the same platforms for purposes of advertising and even accessing the Uber app. It is important to note that the advertising element of the company is critical as it sets the brand image among the target population.
As previously mentioned, the majority of the population can be described as low income or lower class. This is a vital socio-economic element that has to be considered when discussing socio-cultural aspect of Uber. What the premise means is that if the population was not able to use taxi services before, or even normal public transport, they will also not take up Uber services. The company has tried to resolve this particular issue by introducing new packages that are more affordable. Arguably, despite this, Uber South Africa is still facing challenges convincing the larger majority to take up their services. The company has ensured that their prices target the different social groups of the country. This is in regards to whether the users are in urban centres or rural areas. Those in the urban cities have to pay more than those in the rural areas as they are expected to have more disposal income. However, this is hardly the case as a significant number of the populates of the cities are actually living below the one dollar per day mark.
Indeed, the country has also faced xenophobic attacks over the years. Zenger (2016) notes that the state has approximately 2.3 million foreigners who have taken up some of the blue and white collar jobs that locals believe belong to them. The issue with xenophobia is that the locals feel entitled to the jobs regardless of whether they are qualified or otherwise. Interestingly, as Modiba and Kekwaletswe (2020) note, despite the anger being directed to the foreigners approximately 80% of the lives lost during xenophobic attacks are South African (local). This target is usually because the attacked are believed to be enablers of the foreign investors.
Technological
This is one of the key attributes associated with Uber. Barbour and Luiz (2019) explain that the technology behind the company is a disruptive one. Therefore, it changed how the whole world perceived businesses and consumer journeys. Further, it reinforced the importance of technology, innovation and the Internet. As stated, the user must have a smartphone and access to the Internet. This will allow the client to download the app and to input their pick-up and drop off locations, which are also guided by GPS. The calculation of costs is done through an algorithm that is also only made possible by technology. Still on the app itself, pop-up messages and SOS services are also included to ensure that the user feels safe and knows everything that is going on during the trip. Further, the client has to change destination by him or herself. This ensures more security for the rider as the company can easily trace the way the client changes destinations, or in the event that the driver uses a different route.
It is important to note that the nature of technology makes it ever changing. The technology that was being used when the concept of Uber was conceived has changed tremendously over the years. It is, therefore, important for the company to keep abreast of all the new changes in technology. This refers both to technology that has a direct impact on the app itself and other technology that affects both the user and driver’s experiences with the brand. It is important to also note that the technology should be available to a good number of the target population for it to improve the company’s bottom line.
Legal
One legal factor that has affected Uber South Africa is the wage laws. Indeed, wage laws differ from one country to another. For example, in the US, people are paid per hour whereas in South Africa, they are paid primarily on a monthly basis. Even though Uber US does not pay per hour, the payment algorithm factors this in when the firm determines the percentage it will take from the drivers. The same application cannot, however, be used in South Africa, where most bills are paid on a monthly basis. The fact that the process ensures drivers have payment daily makes it harder for the drivers to actually live a better life. It is critical that Uber South Africa fully understands the differences and importance of these legal issues.
Importantly, to ensure that the company is on the right side of the law, the company has to get all the required permits and licenses. Initially, it did not force drivers to take their taxi and Uber driver identification cards. As explained earlier, this led to the government seizing all the vehicles of Uber drivers. It is important for the company to ensure that its drivers and riders also adhere to the law in order to have a working relationship with the government. Currently, there is a debate on whether the drivers are workers of Uber or not. This is due to the benefits that they should also get as workers of Uber. However, such a legal debate is complicated b4cecause, as stated earlier, Uber does not own the vehicles and it changes their whole business idea. This is not a problem in South Africa, as of yet, but the company should use the legal challenges faced in other countries to shape their business in order to minimise losses.
Environmental
One crucial environmental factor that Uber South Africa has to consider is environmental pollution. The world is currently trying to curb the carbon footprint each company is producing. Uber South Africa, like all other country offices of the brand, is struggling to do the same due to the use of diesel and other similar fuel products in the vehicles associated with their brand. It is important to note that the use of fuel alternatives squarely lies on the driver of the taxi. This is due to the fact that the motor vehicle belongs to the that specific owner and not the Uber brand. Pedro and Cagica (2017) explains that when buyer information is limited in terms of things that can affect brands, then the larger brand will suffer the most. In this case, Uber South Africa suffers because it is renowned yet its drivers are using fuel alternatives that have been highly discouraged by environmentalists.
A second environmental concern for the company is sustainability of their approach in regards to the changing physical environment. The question here is whether the company will be able to convince its drivers to use alternative fuel that is environmentally friendly and still make profit. This is because the suggested alternative fuels are considered to be more expensive than the traditional diesel and petrol. The issue of cost, however, is only felt at the beginning where more capital is needed to buy an electric car than the traditional car in the region. After this initial investment it is significantly cheaper to maintain the vehicle as there will be no cost for fuel as the car uses electricity. However, the company also has to consider where the drivers will charge their vehicles and how this will affect their own profitability as they are paid per trip.
Suggestions
Customisation
The element of customisation misses out from the Uber South Arica experience and has contributed significantly to some of the problems the company is facing currently. First, customisation refers solely to the ability of the company to give individual experiences to both the rider and the driver. A push for this suggestion would mean more investment in the technological aspect of the company. An example can be given to enhance the discussion further. Many marketers agree that the algorithm used in social media platforms – such as Facebook, Twitter and Instagram – highly customise content to suit the user. Therefore, a person who has been viewing content related to fashion on Google will go to social media and find similar page suggestions. One advantage of this is that it enhances consumer experience while ensuring the client also spends as much time as possible on the application.
The challenge for Uber South Africa is to ensure that the same level of customisation is also considered in their app. Currently, only people who do not use the app can have such targeted communication with the brand. However, it completely ignored present consumers and does not factor in the fact that the clients can be easily convinced to switch brands due to low product differentiation. It is highly suggested that the company uses technological advancements such as user data to customise their experience. For example, the user might prefer certain types of music and these should be available throughout the ride without the driver asking for the same from the client. Additionally, return clients might prefer different routes over others. Such data should be saved to ensure better customisation of experience for the user and driver.
Consumer Journeys
The consumer journey is important in determining whether clients will take up a brand or otherwise. Viljoen and Henama (2017) note that the customer journey does not begin and end when the client starts and ends a trip. However, it begins when the client first interacts with the brand – either digitally or through traditional media. The adverts that are made to attract the client should ideally also shape the consumer journey. For instance, in South Africa, Bolt has been advertised as a “party cab”. This means that it has been advertised alongside events and people having fun. On the other hand, Uber South Africa has been promoted as a serious and work related taxi services. Therefore, companies prefer Uber to Bolt. All these factors affect the consumer journey as they affect the choice the client will make.
Prudently, the consumer journey ends when the client either recommends or tells family and friends why the service was not good. Due to the fact that the consumer journey is long, it is almost impossible for Uber South Africa to come up with viable solutions to all pain points. However, it is suggested that the company come up with a fast and reliable feedback service that makes the user feel appreciated. Currently, the company asks the clients to rate their driver. This information is used to show other users how the driver is rated, and also to rate the user for the drivers. However, no other information is provided on some comments that have been left by the previous users or drivers. This makes this element of feedback rather plain to advance the consumer journey. It is suggested that the feedback mechanism should be closely linked to the customer journey.
Adaptability
The ability to adapt to changing times is critical for any business. As explained previously, one challenge that Uber South Africa is facing is its role in ensuring environmental protection. Secondly, the company is also struggling with issues such as xenophobia, which is a socio-cultural element. It is suggested that the management consider becoming more adaptable in order to resolve these mentioned problems. In the first case of environment pollution, the company should consider providing all Uber drivers electric cars. Indeed, this might appear an extravagant and impractical thing for the individual drivers, but not for the company. The company currently provides cars on loans to potential drivers who then pay back the loan with interest. The recommended electric cars can also be distributed in the same way. Such an action will not only help the company tackle the issue and protect the environment but will also buy political goodwill for the company.
On the other hand, the issue of xenophobia can only be resolved through a complete integration into the community such that members of the public do not see the company as a foreign entity but one of their own entities. This can be achieved through thorough and sincere corporate social responsibilities. Further, the people leading the country team have to be local and not foreigners. Again, as explained previously, the issue of trust is key in such situations. The management in the Uber headquarters in the US should be comfortable enough and trust that there are competent South Africans who can run the brand to ensure it is fully accepted by the public. It is such actions that will help the company maintain a significant percentage of the market.
Product Differentiation
As explained earlier, there is significantly low product differentiation currently between Uber South Africa and its competitors such as Bolt. These companies have near similar systems and user interfaces. Despite the fact that they offer the same product (taxi services) they are free to become creative on other ways to diversify their product in an attempt to ensure product differentiation and record more profits. Uber South Africa so far also has Uber Eats, which is a food delivery service that primarily uses motor bikes and small vehicles to deliver food. Competitors are yet to take up the same business but it offers no competitive advantage as it can be easily copied. Additionally, there are separate companies that offer similar services (food delivery). To ensure competitive advantage in product differentiation, the company has to come up with ideas that cannot be copied easily by competitors.
One way of doing this is by incorporating the food delivery service within the app. Currently. users have to download a second app, the Uber Eats app, to get this service. It is strongly suggested that the company synch the two applications such that users do not have to download the latter app at all. Doing so will remove a pain point for the client in both downloading the app and using two apps of the same brand. It is important to note that the synching of the apps into one will ensure that the issue of customisation is also resolved. This is due to the fact that on its own Uber Eats is able to track the user’s preferences for food and even suggest restaurants that the client would like. The same algorithm can then be used to enhance the user experience.
USSD Control
Critically, the Uber app can only be used on smart phones. Further, the user must have access to the Internet in order to use the service. Whereas a significant number of the South African population is youth, 17.84 million, who have access to smart phones and are tech savvy, a good number is also elderly. This means that the app has completely ignored the older generation from the app. This is especially the case for rural areas where the need for such services is more compared to the urban centres where public transport and personal cars are also in plenty. Therefore, it is suggested that the company consider including a USSD control that can be used for people who (i) do not have smart phones and cannot download the app and (ii) do not have access to the Internet for one reason or the other.
The USSD control will work by allowing the user to press the selected umbers on their phone keypad and proceed through a series of instructions. The company should include the option for voice for people who cannot write. Such inclusivity will also boost the company’s plans to achieve sustainability. The rise of social media cannot be ignored even by transport and logistic companies such as Uber. It is further suggested that Uber South Africa also incorporate the use of Whats App, which is largely used in South Africa as explained previously, for user support. The link between the two applications can be put within the Uber South Africa product for easy usage. All these suggestions work to ensure that the client has an easier time using the application and that it is accessible to anyone who is in need. Therefore, it raises the company’s brand equity and overall profitability of the firm.
Conclusion
In conclusion, companies can still thrive within a foreign market. It is critical that the environmental scan be done to ensure that any concerns are identified early, preferably before the brand enters the market. The advantage with doing this is that it prepares the company for any future struggles that might happen in the market. One of the key analytic tools that firms can use to analyse the potential market is the PESTLE analysis. The term refers to six elements that have to be considered namely – political, economic, social, technological, legal and environmental. A second analytic tool that can be used is the five forces that looks at buyer power, threat of new entrants, supplier power, competitive rivalry and threat of substitutes in relation to the company. Further, the strategic alliances tool identifies and tracks the possible partners that would help boost the business within the target market.
The essay applied the stated tools to Uber South Africa in an attempt to come up with viable suggestions the company can implement to raise its market share. One suggestion that was made was product differentiation which mainly refers to the unique characteristics of products. It is critical that Uber South Africa loo for uniqueness and incorporate it into their competitive advantage. This will allow the company to stay ahead of its competitors. Additionally, the company has to come up with creative and user-friendly ways to reach more of its clientele. Arguably, the use of the USSD code will allow the rural South African residents to also enjoy the services offered by the company without necessarily having a smartphone and Internet.
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