A) Introduction:

1. Purpose of Project
Uber Technologies (UBER) explosive growth and constant controversy made it one of the
most fascinating companies to emerge over the past decade. The firm, founded in 2009, soon
grew to become the highest valued private start-up company in the world. With Uber's rapid
growth came many controversies that knocked down the firm's valuation from a lofty $70
billion to $48 billion in its Jan. 2018 funding round. On May 23, 2018, the company announced
a new tender offer that would bump the company's value to $62 billion. With all the
controversies and rapid growth, it attracts everyone look at this as a special

The purpose of this project is to:

 Understand the demand and supply conditions, market structure, economies of scale
and short and long term scenario of Uber Technologies Inc. (UBER)
 Understand the performance of the company in local and global markets.
 Understand the impact of decision on company, industry and economy.
 Managerial lessons and its application in decision making process.

2. Introduction to Company, Industry & Economy:

E-commerce helps in maintaining relationships and conducting business transactions that
include selling information, services, and goods by means of online telecommunications
networks. On demand service is one of the components of E-Commerce. Under the roof of on
demand services comes Online Cab service. And one of the best examples on it is Uber. Uber
has transformed the traditional taxi industry. We thus found that the sharing economy has
transformed the existing market in a positive and welfare-enhancing way. The company's
founding came from a "simple idea" - what if you could request a ride right from your mobile
phone? Uber has taken an interesting path in its 10 years in business. Uber was founded as
UberCab by Garrett Camp, the founder of Stumble Upon, and Travis Kalanick in 2009. Camp
and his friends spent $800 hiring a private driver, he wanted to find a way to reduce the cost
of direct transportation. He realized that sharing the cost with people could make it
affordable, and his idea morphed into Uber. Kalanick joined Camp and gives him "full credit
for the idea" of Uber.

The uber service is generally accessed via mobile app. Uber uses a dynamic pricing model;
prices vary according to supply and demand at the time of service. However, customers are
quoted the fare or delivery fee in advance. Uber is based in San Francisco and has operations
in over 900 Metropolitan areas worldwide. It is one of the largest providers in the gig
economy and is also a pioneer in the development of A self-driving cars. Uber is estimated to
have over 110 million monthly active users worldwide. In the United States, Uber has a 67%
market share for ride-sharing and a 24% market share for food delivery. Uber has been so

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prominent in the sharing economy that the changes in industries as a result of it have been
referred to as “Uberaisation” and many start-ups have described their products as "Uber for
X". The sharing economy has transformed the existing market in a positive and welfare-
enhancing way.

Vision and mission:

Uber is committing to becoming a fully electric, zero-emission platform by 2040, with 100%
of rides taking place in zero-emission vehicles, on public transit, or with micro mobility. Uber
believes it is their responsibility as the largest mobility platform in the world to more
aggressively tackle the challenge of climate change. Uber will do this by offering riders more
ways to ride green, helping drivers go electric, making transparency a priority and partnering
with NGOs and the private sector to help expedite a clean and just energy transition.

In addition to giving riders a way to get from point A to point B, Uber is working to bring the
future closer with self-driving technology and urban air transport, helping people order food
quickly and affordably, removing barriers to healthcare, creating new freight-booking
solutions, and helping companies provide a seamless employee travel experience.

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B. DEMAND & SUPPLY SIDES OF MARKET
3. DD conditions & Revenue Analysis:
Pricing Strategies:

When you go to request a ride on a Saturday night, you might find that the price is different
than the cost of the same trip a few days earlier. That’s because of our dynamic pricing
algorithm, which adjusts rates based on a number of variables, such as time and distance of
your route, traffic and the current rider-to-driver demand. Sometimes, this can mean a
temporary increase in price during particularly busy periods.

When demand increases, Uber uses variable costs to encourage more drivers to get on the road
and help deal with number of rider requests. When we notify you of an Uber fare increase, we
notify drivers as well. If you decide to go ahead and request your ride, you’ll get an alert on
the app to make sure you know that the rates have changed. Once more drivers get on the road
and ride requests are taken, the demand will become more manageable and fares should revert
to normal.

If you’re a regular rider, you’re probably already aware of Uber’s peak timings, where
increased demand and prices are more likely. These include: Friday and Saturday nights, After-
work rush hour, Big events and festivals.

Dynamic pricing helps us to make sure there are always enough drivers to handle all our ride
requests, so you can get a ride quickly and easily – whether you and friends take the trip or sit
out the surge is up to you.

Sales volumes and Revenue Analysis:

Uber Technologies Inc. (Uber) makes money by running a ride-hailing service, and takes a
cut of the fares. The company also has a food order and delivery business, Uber Eats, and a
freight shipping business, Uber Freight. These work similarly to ride-hailing, except that they
match people with delivery drivers and freight shippers, respectively.

Uber Segment Breakdown

Uber’s Financials

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Uber’s market cap is about $53 billion. Total revenue fell 29.2% year-over-year (YOY) in Q2
2020, which ended June 30, 2020. The company, which has consistently struggled to make a
profit, posted a net loss of $1.8 billion for the quarter. However, this was not as bad as the
$5.2 billion net loss posted in Q2 2019. Uber's adjusted earnings before interest, taxes,
depreciation, and amortization (EBITDA) across all of its businesses is slightly better, but
still registered a loss of $345 million in Q2 2020.

Uber’s Business Segments

Uber has made some changes to the way it classifies its reportable business segments for Q2
2020. The Rides segment has been renamed to Mobility and the Eats segment has been
renamed to Delivery. Additionally, Uber sold its JUMP electric bike rental service, which had
been categorized under its Other Bets segment. Certain immaterial offerings previously
organized under Other Bets have now been moved to the Mobility segment. Uber now has
just four operating and reportable segments: 1) Mobility; 2) Delivery; 3) Freight; and 4) ATG
and Other Technology Programs. The Other Bets segment was included in the company's Q2
2020 earnings report for comparison purposes, and we include it below.

Mobility (formerly Rides)

Uber’s Mobility segment is its flagship ride-hailing business. This segment, once Uber's
largest, made up just 35% of Uber’s revenue in Q2 2020, having fallen 66.8% YOY. Uber
reports adjusted EBITDA for its reportable segments. Even using this more generous measure
of profitability, only Uber’s Mobility segment is profitable. The segment posted adjusted
EBITDA of $50 million in Q2 2020, down 90.1% compared to the same quarter a year ago.

Delivery (formerly Eats)

Uber's Delivery segment offers an app that lets people order meals from restaurants remotely
for either pickup or delivery. For delivery, customers are matched with drivers similarly to
how they are for Uber’s ride-hailing business. The segment was first launched in 2014 as
UberFRESH, before becoming UberEATS in 2015. segment, which is now officially reported
under the name Delivery, generated 54% of Uber’s revenue as of Q2 2020, seeing revenue
grow 103.5% YOY.

Freight
Launched in 2017, Uber Freight connects truck drivers to shippers looking to move freight in
the same way that its ride-hailing business connects drivers with people looking for a ride.
Uber Freight only makes up a small portion of Uber’s total revenue, or about 9% as of Q2
2020. But it is growing, up 26.3% YOY.

Advanced Technologies Group (ATG) and Other Technology Programs

Uber’s ATG is its program to develop self-driving vehicles. The other major part of this
segment is Uber Elevate, a program to develop vertical takeoff and landing (VTOL) aircraft
ride-hailing. This segment is composed of very early-stage projects, and registered revenue of
just $25 million in Q2 2020. There was no reported revenue in Q2 2019 for comparison.

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Other Bets
As mentioned above, Other Bets is no longer considered by Uber as one of its operating and
reportable segments. However, it is included here for comparison purposes. The segment had
included Uber's JUMP electric bike rental service until that business was sold. The segment
also included Transit, UberWorks, and the company's Incubator group. Other Bets posted
revenue of $4 million in Q2 2020, down 85.7% compared to the same quarter a year ago.

Recent Developments
Uber announced in early July that it had reached a definitive agreement to purchase
Postmates Inc. for approximately $2.65 billion in an all-stock transaction. Postmates operates
a food and grocery delivery service, similar to Uber's Delivery business but with distinctive
geographic focus areas and customer demographics. The move suggests Uber is becoming
more serious about its Delivery service, which has overtaken its ride-hailing service in terms
of revenue amid the COVID-19 pandemic.

4. SS Conditions & Cost Analysis:

Uber’s total expenses grew from about $7 billion in 2016 to about $14 billion in 2018, driven
primarily by higher cost of revenues.
We project that total expenses will stand at about $21 billion by 2021.
YoY Growth rate of expenses has declined from 75% in 2017 to less than 20% in 2018.

Cost of Revenue:
Cost of revenues is the biggest driver of Uber’s expenses, accounting for a little over 40% of
total Operating expenses. This includes Core Platform insurance expenses, credit card
processing fees, data centre expenses, mobile device and service expenses. Cost of revenue
rose from around $2.5 billion in 2016 to about $6 billion in 2018. We expect the metric to
rise to about $9 billion by 2021.
However, we expect the cost of revenue as a % of revenue to post a steady decline, driven by
better economies of scale.

General and Administrative expenses:

G&A expenses are Uber’s second largest expense item, accounting for about 15% of total
Operating expenses. G&A expenses include compensation for management and
administrative employees (finance and accounting, HR, and legal etc). Metric increased from
around $1 billion in 2016 to about $2 billion in 2018.

Sales and Marketing Expenses:

Sales and marketing expenses include expenses relating to advertising, salaries to sales and
marketing employees as well as consumer discounts, promotions, refunds, and credits and
related expenses. The metric has increased from around 1.6 billion in 2016 to 3.2 billion in
2018. We expect it to increase steadily to over $5 billion by 2021.

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R&D Expenses:
Uber’s R&D expenses have increased from around $0.9 billion in 2016 to about $1.5 billion
in 2018, driven by the company’s platform improvement investments and other technology
bets such as self-driving cars. We expect the metric to rise to over $2 billion by 2021.

Operations and Support Expenses:

These expenses include costs of supporting operations in cities, including driver operations,
community management, and customer support.
Expenses have increased from around $0.9 billion in 2016 to $1.5 billion in 2018.
We expect them to grow at a slower pace to about $1.9 billion by 2021.

Operating Break Even point:

We expect Uber’s revenues to grow to levels of over $20 billion by the year 2021.
Using the above forecasts for the company’s various expenses, we believe that it’s possible
that it will approach operating break-even by 2021, as growth in expenses has been slower
than the growth in revenues.

C. Market Structure & Porters’ Five Forces Analysis

5. Market structure & Five force analysis

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 Uber is one of the fastest growing omnipresent ride-sharing transportation company that has
managed to command a significant presence in the main parts of the world spreading by over
60 countries since its inception in 2009. Within the few years of existence, the organization has
succeeded in capturing the loyalty of its customers by catering to the on-demand rides of
individuals of all caliber of society. This has, in turn, enabled Uber to expand its market share
and provision of better services. With the enormous glory and popularization surrounding the
company, Porter’s Five Forces Analysis brings to light the strengths and weakness the firm
possesses in the industry in various countries.

The potential threat of new market entrants:

A company’ position can be immensely affected by the ability of other organizations to enter
their market. The potential risks that the enterprise face are as follows;

 Setting itself in the technological arena, Uber aims to provide a linking bridge between
customers and transport providers. This market requires a higher amount of initial capital to
start up, and though Uber’s founders parted with a substantial amount of capital, upcoming
rivals are utilizing lesser initial capital to jump start their operations thereby quickly penetrating
the market.
 Though Uber’s policy is to freely offer their software to willing clients, these services can
however easily be swapped at zero charges. As the demand to balance costs become imminent,
Uber is not invulnerable to raising rates, making it easier for other organizations to penetrate
the industry. The ease of service swap by customers is a strong force because it defines the
firm’s survival rate in the sector.
 Various problems have popped up in Uber operations; legal issues, negative press around
several areas and even fines by government authorities such as Germany, France, India,
Thailand, Netherlands and United Kingdom has made the market to be under controversies
thereby making new entrants very cautious stepping into the business. This has at least for a
short period, reduced the threat of new entrants into the market who must work in overcoming
all these challenges.
 As a technology-based company, it is not easy for Uber to stop any form of imitation by any
other transportation firm. This means that it is easy for the concept to be copied by new ride-
sharing companies and other competitors thereby to not only operate in the same way as Uber
but to also charge less for the same distance.

The threat of substitutions:

A Substitute is a well know fear that is experienced in a competitive business environment. In

the transportation industry, there are numerous member organizations that can quickly provide
a replacement for Uber services. With the service quality that Uber provides, taxi services, for
instance, is the closest opponent and a potential substitute emerging from the traditional
transportation industry. Taxi service is traditional to towns with ride-sharing operations
because of both its lower-cost and efficiency, and user-friendly designing. As such, their
abundance is enough to curb Uber from elevating the service fees. It is noteworthy that due to

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 price sensitivity, a minor rise of Uber rates can result in customer taking on the services of its
closest adversaries and alternatives. Moreover, due to the presence of other public means of
transport like trains, private cars and even self-driving cars (Google Cars) that offer similar
services can threaten Uber’s existence or operations. A constant threat of substitutes is
currently a weak force in the case of Uber.

Supplier Bargaining Power:

This is the ability of suppliers to drive up the prices of a company’ inputs. The threat of supplies
to Uber is experienced below:

 One of the leading suppliers of the transportation industry is the availability of drivers. Uber
does not own vehicle among its fleets. As such, the company’s business model is mostly
dependent on drivers owning cars. Regrettably, the concentration of this group of suppliers to
work for Uber is not very high due to the stringent requirements needed to be hired by Uber.
Uber utilize a subcontracting policy for its employment process to individuals that meet the
terms of use of their web application. It is also tough to substitute individual drivers as they are
given the freedom to choose between the organization and rivals. This results in drivers
negotiating for better attention to the company’s expense. Therefore, it is undeniable that the
suppliers have a stronger power in impacting Uber’s performance.
 Oil and gas suppliers is another major provider. The oil price has been plunged since 2015, and
the lowest level has reached less than $30 in the year 2017. Highly fluctuation of the price of
such an essential component to company’s transportation industry brings a high risk to the
market because of the level of uncertainty and non-predictability of oil to powers vehicles.
Suppliers of these components thereby have a high bargaining power in the operations of
Uber.

Threat of buyers: High- Buyer Bargaining Power:

The strength of customers can affect the performance of a firm by lowering the prices placed
on the products and services.

 Uber’s clienteles are sensitive to price variations due to the existence of alternatives and rivals.
As the market grows bigger, the number of opponents bringing customers more choice also
becomes larger thus makes the switching cost for customers comparatively low. This is because
Uber application software is not only free but just requires a client’ registration. Customers can
therefore freely choose between Uber, Curb, Lyft, or other emerging ride-sharing entities at no
cost.
 The number ownership of private cars has experienced a huge rise during the past few years,
and though the parking problems have been more severe than ever before, this has not stopped
individuals from desiring the status attached to one owning a car. This as an alternative means
that the demand forUber services is low.

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In light of these factors, the buyers’ bargaining power has limited the amount of income for the
firm, hence solidifying it as an active force.

The degree of rivalry:

This is the strength of competition in the industry. The trend of concentration of the industry
appears to be higher than previous years, and the existing companies in the market compete
with both suppliers (car drivers) and customers.

Though there are some competitors such as Curb and Didi Chuxing, Lyft is considered the
principal competitor of Uber. Lyft has an almost indistinguishable business ideas and
procedures to that of Uber. Not only are the two firms contending for market share but also the
suppliers. A modern business setting demands organizations target a customer base within a
given geographical locations to cut on the operation cost. This is the incident for Lyft and Uber.
Uber has a deep-rooted business system and massive capital investment. In essence, it is a
market trail-blazer, but small variation strategies limit the firm’s potential. Competition is a
weakening force given Uber’s supremacy. Uber is indeed a dominant force in the ride-sharing
industry. However, there is a need for improvement of its innovative strategies to gain a
competitive edge. The transport sector especially the US has many alternates and competing
entities. To survive, it is vital for Uber to lower the cost of operation to avoid raising customer
charges. It is not identified what Uber’s future is. Google cars are a serious threat to its success.
Uber should address the flaws found in the SWOT and turn weaknesses into strength. The team
must work and exploit the opportunities and avoid the shortcomings.

6. C-I-E Framework & company’s stock market performance –

Industry Performance:

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Stock Market Performance:
After a much-hyped debut on May 10, 2019, Uber stock is one of the most watched IPO
stocks today, but is Uber a buy right now in the current coronavirus stock market rally?
Uber is in the midst of a dramatic turnaround, as the company fights to turn a profit. In 2018,
Uber had earnings of 59 cents per share, but the profit was temporary. The company lost
$5.04 a share in 2019, as the company continues to burn through cash.

Uber stock is tracing a cup with handle with a 38.62 buy point. Shares are about 7% away
from the new buy point in the current stock market rally.
The stock's relative strength line is approaching recent highs, a sign of solid stock market
outperformance.

D.
7. Value lessons / insights or takeaways for a management trainee’s team.
Don’t Give Up on Your Bright Idea - if you think you have dreamed of a game-changing idea,
don’t give up on it too easily.

Create the Perfect Solution - An incomplete or lousy solution is an invitation to competitors.

The team perfected the solution before introducing it to the market, so the brand has been
dominating the industry since its inception.

Select the Right Technology - Technology has progressed, and you can easily access the
technology So before starting anything new choose proper technology best for your venture.

Enter Brand Partnerships - One aspect of Uber’s marketing strategy includes co-promotions
with well-known brands. Uber enters brand partnerships quite regularly. Examples include
cash back for Capital One card users, free rides in the BMW 7 Series, and hotel points for
Starwood.

Expand - Uber has expanded its on-demand business model to new areas of market
demand. Diversification and expansion are great strategies for boosting profits, but you
should be careful not to stretch the brand too thin.

REFERENCES:
1. https://www.uber.com/in/en/
2. www.wikipedia.org
3. www.investopedia.com
4. www.moneycontrol.com
5. www.forbes.com

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