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GSBS6060 Strategic Management

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GSBS6060 Strategic Management

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Course Code: GSBS6060
University: The University Of Newcastle

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Country: Australia

Question:
Prepare a Project Report on the following:

Critically examine a global industry in a country in the Asia-Pacific region. What are some of the interesting companies in the industry, and what strategies are they pursuing?
Choose TWO firms, one of which should be classified as a challenger or latecomer in the industry, and one should be classified as a leading global incumbent. Compare the differences in resource building and strategy between the two organisations using appropriate course frameworks, models and concepts.
Be sure to:
(1) analyse how the global challenger firm fashioned its strategies in relation to the resources available, the competitive dynamics of the industry and its country context, and,
(2) consider/discuss some of the key CAGE factors and institutional voids that the leading global incumbent firm likely had to navigate when entering the marketplace in the Asia Pacific.

Answer:

Introduction
The report helps in the overall analysis and examination of the global industry in the Asian market in which Philippines has been selected as the market. The two firms which have been selected in the respective report are Uber and Grab in which Grab is latecomer or challenger in nature and on the other hand, Uber is incumbent.
Proper analysis of the different strategies which have been fashioned by challenger is required to be done in relation to the availability of the different resources. Furthermore, discussion of some of the key CAGE factors along with institutional voids are required to be analysed efficiently in which this will help incumbent to navigate when they are entering into the Asia Pacific region which is Philippines.
Description of Uber
Uber Technologies Inc is food delivery, peer to peer ride sharing along with transportation network company which was founded in the year 2009 in the month of the March (Uber.com 2018). The headquarter of the company is situated in San Francisco, California and the operations of the company is spread across 633 cities in the entire world. The founders of the company Uber are Travis Kalanick and Garrett Camp and the net income which have been generated by the company is US$6.5 billion till the year 2016, The number of employees working in the respective organization is above 12000 and the company has gained huge profit in the recent years which is about US$15.7 billion till the year 2016.
Description of Grab
GrabTaxi Holdings Pte. Ltd is one of the Singapore based technology organization which will offer logistics, ride hailing and ride sharing services through the application in Singapore along with in neighbouring Asian countries which is inclusive of Philippines, Malaysia, Vietnam and Thailand (Grab SG 2018). The main competitor of Grab has been Uber and the Grab was founded in the year 2012 and the net income which have been generated by the company is US$ 82.8 million till the year 2016 and the number of employees working in the organization is about 5000 till the year 2016. Lastly, the founders of the company Grab are Anthony Tan and Tan Hooi Ling and this is a privately held company.
Discussion of the Strategic Analysis
Strategic Analysis of Uber and Grab
Uber has no such fleet of its own and this is different form other taxi services as Uber tries to connect the licenced drivers along with the customers in the market. Uber charges more than 20% commission on fare along with driver gets rest 80% and the dynamic kind of pricing helps Uber in charging premiums. Uber is the leading global incumbent in the entire market and there are different strategic tools which are being used by Uber in order to increase their operations effectively while entering the marketplace in Asia Pacific region which is Philippines (Aivazidou et al. 2017).
On the other hand, this has been seen that Grab is the other large technological company which helps in offering chauffeured services related to transportation varying from motorbikes, cars and coach services in South East Asia which mainly targets both female and male varying from the age group of 18-55 years of age (Huang et al. 2015). However, in comparison to Uber, Grab is the challenger or late comer in the entire market and there are different kinds of challenges which are being faced by Grab in managing the tasks in an ineffective manner while entering the market of Asia Pacific Region which is specifically Philippines (Keller and Kotler 2016).
VRIO Analysis of Uber
With the help of the VRIO analysis, this will help Uber in making different kinds of effective decisions and the results will help in providing competitive advantage in the entire market. VRIO analysis is the internal analysis which is used to evaluate and identify the resources of the organization efficiently. From the below VRIO analysis table, this can be identified that there are different resources of Uber which have made them internally strong and this has helped the company in gaining huge competitive advantage in comparison to the other competitors in the market. This is one of the best strategy tools which can be adopted to expand their business in Philippines market (Kleinaltenkamp, Plinke and Geiger 2016).
 

Resource/Capability

Valuable

Rare

Imitable

Organizational exploitable

Competitive Advantage

Relationship with the customers and suppliers

Yes

Yes

Yes

Yes

Partially

Human Resources

Yes

Yes

Yes

Yes

Partially

Management

Yes

Yes

Yes

Yes

Partially

Simplicity of operations

Yes

Yes

Yes

Yes

Partially

Market Share

Yes

Yes

Yes

Yes

Sustained

Price

No

Yes

Yes

No

Sustained

Customer Support

Yes

Yes

Yes

Yes

Partially

Brand Name

Yes

Yes

Yes

Yes

Partially

Table 1: VRIO Analysis of Uber
(Source: Created by Author)
VRIO Analysis of Grab 
VRIO analysis of Grab helps in consisting of different kinds of factors which are analytical and essential in nature for evaluation of the resources of the company and this will help in gaining competitive advantage (Litman 2018). From the below VRIO analysis of Grab, this can be identified that there are different kinds of valuable resources both tangible and intangible in nature and these are essential in the success of the organization as well. However, in comparison to Uber, this has been seen that the Grab’s market share is not valuable and imitable in nature as well. Moreover, the privacy concern is low and there are different drivers are dependable on the different kinds of techniques which is required to be followed.
 

Resource/Capability

Valuable

Rare

Imitable

Organizational exploitable

Competitive Advantage

Relationship with the suppliers and the customers 

Yes

Yes

No

Yes

Partially

Human Resource Management Practices

Yes

Yes

Yes

No

Partially

Management of the Grab Organization

Yes

Yes

Yes

Yes

Partially

Operations Simplicity 

Yes

Yes

Yes

Yes

Partially

Share in the market of Grab 

Yes

Yes

Yes

Yes

Sustained

Pricing Strategies

No

Yes

No

No

Partially

Customer Support

Yes

Yes

No

No 

Partially

Brand Image and Goodwill

Yes

Yes

Yes

No 

Partially

Table 1: VRIO Analysis of Grab Taxi
(Source: Created by Author)
 

Particulars

Cultural Distance

Administrative Distance

Geographic Distance

Economic Distance

Attributes Creating Distance

Different Languages in the Philippines Country
Lack of connective kind of ethics or the social networks
Different kinds of social norms which was different from California

Absence of Colonial Ties
There is absence of various kinds of government policies and the transportation industry is not so effective in nature
Less of institutional weaknesses

Physical remoteness
The physical remoteness is the first element which is weak in Philippines
There is weak transportation or communication skills and links in Philippines

Differences in Income of Consumers
There is huge difference in costs and quality of the financial resources along with the spending of the consumers is different from California

Industries or Products affected by Distance

Products have Linguistic Content
The features of the cars of Uber and Grab varied in terms of size in Philippines

Government Involvement is High
The suppliers are less in Philippines and this was the main cause of failure of Uber and Grab Taxi in Philippines

Products have low value to weight to bulk ratio
Communications and Connectivity was the major disadvantage in Philippines and this was the major issue in Philippines

Nature of Income varies with level of income
Distribution network of Philippines was weak and this caused huge problem for Uber along with Grab to become advantageous in Philippines

Table 3: CAGE Framework of Philippines
(Source: Armstrong et al. 2015)
Porter’s Diamond Model Analysis of Uber and Grab Taxi
With the help of the Porter’s Diamond Model analysis, this can be analysed that there are various kinds of factors which are required to be analysed effectively and this has been noticed that Philippines was not positioned in a proper manner and Uber was not successful in the respective market. Furthermore, this was seen that the transportation market of Philippines was not successful in managing the different kinds of demand and factor conditions which was required in operating the transportation industry (Martín-de Castro 2015).
From the respective analysis, Uber tried to gain competitive advantage in the different Asia Pacific regions, however the company was not successful in implementing the different operations as there was huge rivalry in the firm and there was no such differentiation technique which was being followed by Uber in the Philippines market (Villeneuve and Pasquier 2017).
On the other hand, this has been seen in case of Grab Taxi, there are huge dissimilarities in marketing their products and services in Philippines market (Fulker et al. 2016). The biggest rivalry of Grab Taxi in the entire Philippines market was Uber, however this was seen that Uber did not able to survive in the market as the demand conditions in the market of Asia Pacific regions were different from other countries such as California. Grab tried to survive in Philippines market by introducing various types of services and cars, however the company was not successful in gaining competitive advantage in Philippines market (Weinstein and Pohlman 2015).

Figure 1: Porter’s Diamond Model
(Source: Armstrong et al. 2015)
BCG Matrix of Uber
Uber operates their business in mainly four sectors which are mainly Uber Pool, Uber Go, Uber X and Uber XL. Uber Go and Pool services are being categorized as stars in the BCG matrix as they have huge market share and there is high competition and growth in the market of transportation as well (Wagner and Eggert 2016).

Figure 2: BCG matrix of Uber
(Source: Kotler 2015)
BCG Matrix of Grab Taxi
Grab taxi operates the business in different countries in which the main sectors is inclusive of the coach, taxi, shuttle, cycle, family along with different food services which are being provided to the customers in the market. In the BCG Matrix, Grab Taxi is in the market (Sheth and Sisodia 2015)
 
Figure 4: BCG matrix of Grab
(Source: Kotler 2015)
SWOT Analysis of Uber
Uber has different kinds of strengths, weaknesses, opportunities and threats which are required to be analysed effectively which will help them in competing in the entire market.

Strengths

Well Recognized brand in the entire world (Baker 2016)
High standard of service and has unlimited fleet of drivers
Operational cost is low in nature
System is convenient for the different drivers

Weaknesses

There is huge competition in the entire transportation market
There are huge privacy concerns
Costs of the operating vehicles are high in nature (Armstrong et al. 2015)
Business Model is unpredictable

Opportunities

Cheaper electric cars are being used and there is tap growing markets in suburban areas
Customers are often dissatisfied traditional taxi service and there are high prices and long waiting time

Threats

Increasing competition in the market will be a huge threat for Uber
Drivers of Uber are not happy with the different services with low profit margins
There are different legal regulations and this is affecting Uber in an ineffective manner

 
SWOT Analysis of Grab Taxi

Strengths

There is huge recognition of the brand
There is huge diversification of the different kinds of services 
High standard of technological advancements and the culture is suitable for the different marketing of the product

Weaknesses

There is huge competition in the market and there is no bonding between the customers and the Grab Taxi
Incentives which are being provided to driver partners are low and they are losing trained drivers
Drivers are too much dependent on tips

Opportunities

The Gran Taxi can provide different kinds of school going kids by taking them to school wherein taxi services are not present
The charges which are being estimated along with summary of the details of the driver will be shown in the next screen when the booking will become successful (Chernev et al. 2018)

Threats

Drivers ask for tips constantly and this makes the customers feel repulsed and this will make the customers feel not to use the service anymore in the near future
Initial kind of period was very tough with different kinds of skeptics

Reasons for Failure of Uber Philippines in Comparison to Grab Taxi
After the strategic analysis, which has been conducted on both Grab Taxi and Uber, this can be seen that there were different issues which were faced by Uber in remaining unsuccessful in operating their services in Philippines market. Firstly, in case of Uber, this has been seen and analysed that Uber is trying to sell their Asian ride hailing along with food delivery business to the largest rival Gran Taxi in Philippines market as the Uber company faced huge losses in the market of Philippines as there was huge fluctuation in the market (Bloomberg 2018).
Furthermore, few years ago, Uber lost $4.5bn as there was fierce competition from Grab Taxi in Asia Pacific Regions and the CEO and founders of Uber commented that the conditions in the Asian countries may not be profitable for them and this will be a huge threat for the company in the coming years (Hempel et al. 2018).
The business model was not suiting in the Asia Pacific regions and this was the other major reason for failure of Uber in Philippines. Moreover, Uber retained 27.5 percentage of share in comparison to Grab in Asian Pacific regions and there was huge pressure on Uber from the different other competitors in the entire market which was difficult for Uber to survive in the entire Philippines market.
External Environmental Analysis

Particulars

Grab

Uber

Political

There are different curbs in government regulations in various countries such as Asia (Di Benedetto and Lindgreen 2018)

Political Stability
The government policies are stable in nature and not volatile (Berbegal-Mirabent, Gil-Doménech and Alegre 2016)

Economic

The dynamic kind of pricing model
There has been huge loss which have been incurred by Uber

Monopolised industry
GDP is stable and huge in Asian Countries

Social

Diversity of the different employees
There is huge and proper service at time of crisis along with work ethics

There are various issues related to environment and ethical practices are being followed

Technological

Proper relationships with the customers are being provided through social media channels
Increase in penetration of internet and smart phone customers

There is huge advancement of technology (Bresler and Lubbe 2014)
Proper research and development are done in attracting more customers

Environmental

Pool services provided by Uber is eco-friendly in nature and this helps in satisfying needs of the customers (Foxall 2014)

Cycle rides are being provided to customers which helps Grab Taxi in becoming more significant

Legal

There are law suits and legal regulations

There are no such legal regulations which are being followed by Grab Taxi

 
Conclusions and Recommendations
Therefore, this can be concluded from the entire report that there is different strategic analysis which has been conducted for both Uber and Grab Taxi is that the Uber failed in the Philippines market and this has affected the entire brand image of Uber in Asian Pacific regions. Furthermore, this has been seen that the company Uber tried to adopt different technological advancements like Grab as to get success in Philippines, however the company was not successful in the market. Furthermore, the VRIO, CAGE framework along with internal and external analysis have been conducted as to gain knowledge on strategic growth of the firms.
With the help of the external environmental analysis, this will help in analysing and identifying the different kinds of strategic directions which can be provided to Uber in successfully operating in different countries in future. However, Grab was unsuccessful in few other countries wherein there was other taxi services which were becoming huge successful.
From the PESTEL analysis, this can be identified that in Philippines market, Uber was not being able to market as there were different strategies which were not up to the standard and the company incurred huge losses in comparison to the other taxi applications which provides the customers to become successful. As per the political issues, this can be seen that in Philippines, there is huge political instability which has affected the growth of the firm in an ineffective manner.
The different kinds of recommendations which have been provided to Uber for future success and growth in the market includes the following aspects:

Uber needs to need to know about the market in which they want to expand their business as this will help them in becoming successful and gain competitive advantage
Furthermore, Uber is incumbent in nature, therefore the fear of unfamiliarity is similar and this has affected the growth of firm. However, Uber needs to take this challenge on a serious note as this will provide them with different techniques such as showing real time notifications and reducing the surge pricing technique like Grab Taxi Services.
Uber needs to provide shortest routes to the customers who are the loyal customers of Uber as this will encourage more customers to gain more competitive advantage in the future.

References
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Baker, M. J. 2016. What is marketing?. In The Marketing Book (pp. 25-42). Routledge.
Berbegal-Mirabent, J., Gil-Doménech, D., and Alegre, I. 2016. IMPROVING BUSINESS PLAN DEVELOPMENT AND ENTREPRENEURIAL SKILLS THROUGH A PROJECT-BASED ACTIVITY. Journal of Entrepreneurship Education, 19(2), 89.
Bloomberg, A. 2018. Lessons from SE Asia: Uber must embrace local players to succeed abroad. [online] Business-standard.com. Available at: https://www.business-standard.com/article/international/lessons-from-se-asia-uber-must-embrace-local-players-to-succeed-abroad-118032800236_1.html [Accessed 23 Aug. 2018].
Bresler, M., and Lubbe, I. 2014. Marketing management.
Chernev, A. 2018. Strategic marketing management. Cerebellum Press.
Di Benedetto, C. A., and Lindgreen, A. 2018. The emergence of Industrial Marketing Management as the leading academic journal in business-to-business marketing. Industrial Marketing Management, 69, 5-12.
Foxall, G. 2014. Strategic Marketing Management (RLE Marketing) (Vol. 3). Routledge.
Fulker, D., Timur, A., Dew, K., and Butler, J. 2016. A Case Study of the Grey Oaks Community and Club: Creation of a High-Performance Culture Through the Innovative Use of a Data-Driven Business Plan. International Journal of Hospitality & Tourism Administration, 17(1), 72-99.
Grab SG. 2018. Grab – Transport, Food Delivery & Payment Solutions. [online] Available at: https://www.grab.com/sg/ [Accessed 23 Aug. 2018].
Hempel, J., Hempel, J., Rosselló, R., Simonite, T., Tiku, N., Upson, S., Simonite, T. and Goode, L. 2018. Grab Is Giving Uber a Run for Its Money in Southeast Asia. [online] WIRED. Available at: https://www.wired.com/story/ubers-grab-on-the-developing-world/ [Accessed 23 Aug. 2018].
Huang, J., Guo, P., Xie, Q., and Meng, X. 2015. Cloud Services Platform based on Big Data Analytics and its Application in Livestock Management and Marketing. Proceedings of science.
Hutchinson, K., Donnell, L. V., Gilmore, A., and Reid, A. 2015. Loyalty card adoption in SME retailers: the impact upon marketing management. European Journal of Marketing, 49(3/4), 467-490.
Keller, K. L., and Kotler, P. 2016. Marketing management. Pearson.
Kleinaltenkamp, M., Plinke, W., and Geiger, I. 2016. Business Relationship Management and Marketing. Springer-Verlag Berlin An.
Kotler, P. 2015. Framework for marketing management. Pearson Education India.
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Martín-de Castro, G. 2015. Knowledge management and innovation in knowledge-based and high-tech industrial markets: The role of openness and absorptive capacity. Industrial Marketing Management, 47, 143-146.
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