Introduction
Uber is a bright example of the so-called gig economy based on short-term contracts. It has a minimum number of full-time employees and minimizes its expenses through online services. Despite significant expenses to pay drivers and invest in technological advances, such a business relies on the developed technological infrastructure and extremely flexible working contracts.
The company started in 2009 after two entrepreneurs, Travis Kalanick and Garrett Camp, experienced a lack of cabs to rent in Paris. Hence, they decided to create a platform where every driver could work as a taxi driver. It was developed as a mobile and web platform, with minimum expenses on physical assets and a minimum number of employees.
Accounting and Financial KPIs
As one can see, Uber’s revenue has been constantly growing since 2013, when it started to scale extensively. The exception was the well-known 2020 due to the COVID pandemic outbreak. On the right side, one can see Uber’s balance sheet for 2022. Many of its assets correspond to so-called goodwill, a positive difference between the fair value and the actual purchase price (Uber Technologies Inc., 2022).
Lastly, one can see the five crucial financial KPIs for Uber. The adjusted EBITDA is for Earnings Before Interest, Taxes, Depreciation, and Amortization and helps evaluate Uber’s overall performance (Uber Technologies, Inc., 2023). The contribution margin is the approximate revenue from each customer. In contrast, customer acquisition represents how much the company must spend to attract one customer, and the number of active users shows the app’s coverage and popularity.
Uber Performance and CSR
Uber’s performance can be evaluated as high, but as one can see, there are many challenges, too. It experienced rapid growth for less than ten years, becoming one of the largest companies, and it actively invested in technologies to ensure its progress (Uber Technologies Inc., 2022; Uber Technologies, Inc., 2023). However, the developed technology infrastructure leads to possible security breaches, and if its drivers and other customers/suppliers are not loyal to Uber, it risks losing all its income. In addition, it has significant expenses on technological modernization and driver payments, which can significantly decrease its revenues. Therefore, Uber’s business strategies should be based on increasing its attractiveness to drivers and couriers as its leading suppliers; this is the most critical benchmark for the company.
Lastly, Uber is a pretty responsible company: it has a 63/100 score by Environmental, Social, and Governance (ESG) rating, which is relatively high. (CSR Information for Uber, 2023). In addition, protecting its drivers and couriers is one of the main focuses of the company’s attention.
Porter’s Five Forces Analysis
Porter’s five forces analysis, which can be seen on the diagram, is an excellent way to see the challenges in the market and summarize which recommendations can be made. As one can see, severe competition and the high bargaining power of suppliers (drivers) are the strongest, and thus, Uber must be prepared to cope with them. To face competition successfully and ensure that its suppliers, such as drivers and couriers in the case of Uber Eats, will not become disloyal, the company’s strategy should focus on ensuring they are satisfied. Therefore, Uber’s financial benchmark of increasing its attractiveness for customers enables it to handle two of the strongest forces: the bargaining power of drivers and the competition.
Conclusion
In conclusion, let’s see three crucial recommendations to ensure that Uber’s success will persist. First, Uber’s primary financial benchmark is attractiveness for users, which means drivers in Uber’s case. As it heavily depends on their satisfaction, it can be pushed out of the market if they become disloyal. Therefore, its business strategies should be focused on satisfying existing customers and attracting new ones in various parts of the world using its technological infrastructure.
Second, EBITDA usage has proven crucial for Uber’s accounting, enabling it to monitor its money flow closely, so it should use it for its accounting guidelines. Third, as Uber has significant expenses, they should be precisely controlled to ensure that the company will not spend more than it can afford on innovations and drivers.
References
CSR information for Uber. (2023). CSRHub – Sustainability and Corporate Social Responsibility (CSR) Ratings. Web.
Uber Technologies Inc. (2022). Financials. Uber. Web.
Uber Technologies, Inc. (2023). Q1 2023 Earnings.