MUST READ THIS INSTRUCTION FIRST
Individual Case Analysis Paper Guidelines
For this assignment, you are asked to read the accompanying Wall Street Journal articles, do your own analysis of the situation described and then write a short, i.e. two (2) page, analysis and recommendation. Given the page restriction, you will need to be very concise but provide sufficient explanations of your analysis, recommendations and plan for implementation.
Case Analysis Paper #1: Uber
Read the case in the textbook, Uber: Driving Global Disruption, Hill 12e, pp C107-C117 and a foundation.
Then read the provided WSJ articles: (1) “Uber Sees Path to Profitability After Blow From Coronavirus” (2) “Uber, Lyft Cut Costs as Fewer People Take Rides Amid Coronavirus Pandemic” and (3) “California Sues Uber, Lyft Saying They Misclassified Drivers as Independent Contractors”, which provide updates on Uber’s situation.
The question you must address is: Based on recent changes in the external environment and Uber’s internal environment, what do you recommend the company to do successfully move forward given its current situation?
Case Analysis Outline (abbreviated)
(Derived from: Analyzing a case study and writing a case study analysis, Hill 12e, pp C4-C11)
1. Introduction to the issue or problem (two to three sentences only).
2. Identify the company’s internal strengths and weaknesses (Think in terms of resources, capabilities and distinctive competence).
3. Analyze the external environment (Consider the macro environment and the industry).
4. Summarize the SWOT analysis
5. Describe the corporate level or business level strategy
6. Make recommendations regarding WHAT the company should do and HOW it should do it. This is your recommendation about what to do and your plan for implementing the recommendation.
Format
Two pages only. No title page required. Standard single spacing (default setting on most docs), 1 inch margins for top, bottom and sides.
At the top of page, list your name and the assignment title, for example: “Don Rumsfeld, Case Analysis #1”.
Submit the finished paper through the assignment submission link provided in the assignment folder.
California Sues Uber,
Lyft
Saying They Misclassified Drivers as Independent Contractors
Lawsuit sets up confrontation over new state law
California Gov. Gavin Newsom signed legislation last year intended to classify some independent contractors as employees.
PHOTO: RICH PEDRONCELLI/ASSOCIATED PRESS
By Sebastian Herrera and Tim Higgins, The Wall Street Journal
Updated May 5, 2020 4:10 pm ET
California sued
Uber Technologies
Inc. and Lyft Inc. for allegedly misclassifying their drivers as independent contractors instead of employees, a move that intensifies a battle between the ride-hailing giants and their home state.
California, which is suing the companies under authority granted by a new state law, said the decision to classify drivers as contractors has deprived them of rights such as paid sick leave and unemployment insurance.
“We believe it’s time for all workers to be treated fairly,” California Attorney General Xavier Becerra said Tuesday. “Innovation, regardless of what Uber and Lyft tell you, doesn’t require these companies to mistreat their workers.”
The state, which seeks up to millions of dollars in civil penalties and to force the companies by court order to reclassify drivers and restore what it called unpaid wages, also said Uber and Lyft haven’t contributed state payroll taxes used to fund general health welfare programs. The lawsuit was filed with the city attorneys of San Francisco, where Uber and Lyft are based, and Los Angeles and San Diego.
Uber and Lyft have maintained that their drivers are properly classified after the state passed
the so-called gig economy law
last year and Gov. Gavin Newsom signed it. The law codified a test companies must pass to classify their workers as independent contractors, which enables companies to avoid costly benefits such as health care. Uber and Lyft have said the law could take away flexibility for drivers and force them to work pre-scheduled shifts.
“We are looking forward to working with the Attorney General and mayors across the state to bring all the benefits of California’s innovation economy to as many workers as possible, especially during this time when the creation of good jobs with access to affordable health care and other benefits is more important than ever,” a spokeswoman for Lyft said in a statement.
An Uber spokesman said the company would contest the action in court. “At a time when California’s economy is in crisis with four million people out of work, we need to make it easier, not harder, for people to quickly start earning,” the spokesman said.
Lyft has said it has 325,000 drivers in California. Uber has said it has more than 200,000.
The legal battle comes as
the coronavirus pandemic
has raised an unprecedented crisis for the ride-hailing companies. Ridership has plummeted as governments have encouraged or ordered people to shelter in homes and closed nonessential businesses in a bid to stop the spread of Covid-19.
Spending on Uber and Lyft rides plunged 83% during the week of April 20 in the U.S. compared with a year ago, according to data from researcher Edison Trends.
Uber drivers have turned to the food-delivery business while ride-hailing has languished. The company has pulled its guidance ahead of reporting first-quarter financial results on Thursday.
Lyft last week announced it was cutting 17% of its workforce and instituting unpaid furloughs and salary cuts for those who remain. The company reports first-quarter results on Wednesday.
The confrontation highlights the difficulties in the pandemic for some workers on the front lines, including those making deliveries, who may not have
benefits such as sick pay
. A number of companies have provided paid sick leave only in the event of a positive Covid-19 diagnosis for some workers.
Many drivers have talked about the conundrum they face: Drive and risk getting sick, or stay home and don’t get paid.
“The pandemic highlights the danger of the work these essential workers are doing,” San Francisco City Attorney Dennis Herrera said Tuesday.
California Gov. Gavin Newsom said Tuesday the issue predates the coronavirus. “The letter of the law has to be applied,” he said at a daily news conference. “We want to be cooperative and collaborative, but we as a state have to do what we’re going to do.”
Of the 4.1 million people who have filed for unemployment insurance in California since March 12, 450,000 did so through a program for the self-employed, including gig workers, according to Mr. Newsom.
Uber, Lyft and several other companies have amassed more than $110 million to pass
a November ballot initiative
to exempt themselves from the law. Uber, along with food delivery company Postmates Inc., late
last year filed a lawsuit
challenging the law. It is unclear how those plans have been affected by the impact coronavirus is expected to have on elections and organizing.
Since it was passed last fall, the new California law has prompted opposition from a number of industries, including free-lance journalism and trucking. Uber and Lyft have been among the most organized opponents of the legislation.
The companies have said the law doesn’t apply to their businesses but have also warned that if they are forced to reclassify their drivers, it could force them to hire far fewer drivers and reduce the areas where they operate.
Although the companies have said their workers are properly classified, they see their ballot initiative as a potential legal shield for lawsuits. The initiative, if passed in November, would promise benefits such as health care for drivers who work a certain amount of hours a week but also seeks to eliminate any lawsuits in the past year.
A group representing the companies in March said more than one million signatures had been collected, nearly double the number required to qualify for the November ballot.
Uber is “
pushing to raise the standard of independent work
for drivers in California, including with guaranteed minimum earnings and new benefits,” the Uber spokesman said.
https://www.wsj.com/articles/california-to-sue-uber-lyft-saying-they-misclassified-drivers-as-independent-contractors-11588700626?mod=searchresults&page=1&pos=20
Uber
Lyft
Cut Costs as Fewer People Take Rides Amid Coronavirus Pandemic
Uber said Wednesday it is cutting 14% of its workforce as pandemic upends sharing economy
By Tim Higgins and Parmy Olson, The Wall Street Journal
Updated May 6, 2020 8:20 pm ET
Uber Technologies
Inc. and smaller rival Lyft Inc. are bracing for a new reality in ride-hailing: fewer passengers for the foreseeable future.
Uber said Wednesday it is cutting about 14% of its workforce and smaller rival Lyft, which cut about 17% of its staff last week, is responding to the
coronavirus pandemic
with aggressive cost cutting to ride out the exceptional challenge to their businesses.
Lyft reported first-quarter earnings Wednesday that seemed resilient to the worst of the pandemic, but they only incorporated a couple of weeks of the impact, through the end of March. In April, as global travel ground to a halt and local governments ordered people to shelter in place, ridership plunged 75%, the company said.
“Even as shelter-in-place orders and travel restrictions are modified or lifted, we anticipate that continued social distancing, altered consumer behavior and expected corporate cost cutting will be significant headwinds for Lyft,” Chief Executive Logan Green said during a conference call with analysts. “Rider demand on our platform will be down for the foreseeable future.”
Almost one in five Uber rides last year was booked in the metro areas of Chicago, London, Los Angeles, New York City and San Francisco. Photo: David Paul Morris / Bloomberg News
The pandemic has challenged the very business model that supercharged Uber and Lyft. They grew into some of the world’s most valuable startups shuttling people to and from restaurants, offices and airports by connecting customers with drivers. The San Francisco-based ride-sharing companies are now facing existential questions about what life will look like after the pandemic and whether people will still want such services and can afford them.
Lyft posted its first sequential drop in quarterly ridership since becoming a public company last year. The business threat comes as both companies, before the pandemic, had been trying to improve their profitability to appease investors that had grown increasingly worried about the hefty losses they were incurring in their rush to grow.
Wednesday, Uber said it was cutting about 3,700 workers and that Chief Executive Dara Khosrowshahi agreed to waive his base salary for the rest of the year. Last week, Lyft said it was
cutting more than 900 jobs
and putting some employees on unpaid furloughs as well as trimming salaries.
Mr. Khosrowshahi, in a memo to employees, hinted at more cuts to come, telling workers that the job reductions were part of a broader exercise to adjust the company’s cost structure and that he expected a further and final update on that effort within the next two weeks.
“We are looking at many scenarios and at each and every cost, both variable and fixed, across the company,” he said in the memo. “We want to be smart, to move fast, to retain as many of our great people as we can, and treat everyone with dignity, support and respect.”
The CEO acknowledged the pain of the action in his memo: “Days like this are brutal.” Uber reports its earnings Thursday.
Lyft posted a loss of $398.1 million on sales of $955.7 million. The better-than-expected sales figure helped to lift beaten-down Lyft shares in after-hours trading. The stock, down 39% in 2020 before the results, rose 19% to $31.10 in late trading Wednesday.
Lyft ridership grew 3% in the three months through March 31 from the year-ago period, but the number of active riders declined to 21.2 million in the first quarter from 22.9 million in the October through December period.
The company has suspended its full-year guidance because of uncertainty about the business effects from the pandemic and shelved a commitment to post its first profitable quarter on an adjusted basis by the end of next year.
“We are responding to the pandemic with an aggressive cost-reduction plan that will give us an even leaner expense structure and allow us to emerge stronger,” Mr. Green said.
Even with the uncertainty over future ridership, Mr. Green said that consumers, in the wake of the pandemic, may choose to avoid public transportation in favor of the products it offers: ride-, bike- and scooter-sharing.
The company said cost savings, including the layoffs and overhead-expense reductions, will reduce annualized expenses by about $300 million by the fourth quarter of this year compared with previous projections. The company also said it slashed capital-expenditure plans for the year to $150 million from $400 million.
Lyft ended the quarter with $2.7 billion of cash and other funds it can quickly tap.
Uber’s share price, off 6.5% in 2020, has held up better than Lyft’s, in part because of its food-delivery operations. Online ordering from grocery stores and restaurants has surged since the U.S. declared a national emergency in March.
Analysts will be looking closely at Uber’s results to better understand what an increase of its Eats food-delivery business means to the bottom line. Pressure on fees from restaurants and local governments could offset any increase in demand because of Covid-19, Wedbush Securities analyst Daniel Ives said.
Before the pandemic, Uber was spending heavily to grow Eats as it faced heavy competition from DoorDash Inc. and Postmates Inc. In the fourth quarter, Uber said Eats’ adjusted loss from operations widened by 66% to $461 million from the year-earlier quarter.
Lyft said Wednesday that it has no plans to enter the food-delivery business.
Uber and Lyft have faced pressure from regulators and lawmakers over how their drivers are classified, and on Tuesday
California sued the companies,
citing the state’s gig-economy law that became effective Jan. 1. The state said the ride-hailers’ decision to classify drivers as contractors rather than employees has deprived them of rights such as paid sick leave and unemployment insurance—two issues made more visible during the pandemic.
Lyft Chief Financial Officer Brian Roberts says cost-cutting measures the ride-hailing company is implementing could ease the path to profitability. Mr. Roberts says measures taken now mean Lyft can be profitable at a ride volume 15% to 20% below what it initially thought. “The actual timing,” he said, “will depend on the speed of the recovery. It could be earlier or later.”
https://www.wsj.com/articles/uber-lyft-results-will-show-how-bad-coronavirus-is-for-sharing-economy-11588766412?mod=searchresults&page=1&pos=15
Uber Sees Path to Profitability After Blow From Coronavirus
Ride-hailing giant signals more cost cuts as demand shrinks and losses mount
The ride-hailing company has deferred its profitability hopes until next year.
PHOTO:DARRYL DYCK/THE CANADIAN PRESS/ASSOCIATED PRESS
By Robert Wall, Updated May 7, 2020 7:07 pm ET
Wall Street Journal, WSJ.com
Uber Technologies Inc.
UBER 5.79%
chief Dara Khosrowshahi mapped a revised path to profitability after the coronavirus pandemic undermined ridership for the company resulting in a larger first-quarter loss.
Mr. Khosrowshahi said Thursday that Uber plans $1 billion in fixed-cost cuts, including lowering marketing expenses, deferring capital expenditures and a recently announced 14% reduction of staff. “Reaching profitability as soon as possible remains a strategic priority for us. We believe the disruption caused by Covid-19 will impact our time line by a matter of quarters and not years,” the CEO told analysts on a conference call.
Those measures could put the ride-hailing company in a position to be profitable in 2021, Chief Financial Officer Nelson Chai said on the call. Uber had targeted this year for reaching that milestone on an adjusted basis before interest, taxes, depreciation and amortization, but withdrew the forecast in April because of the sharp drop in demand caused by the health crisis.
Uber shares, up more than 11% on the day, were ahead 8% in aftermarket trading.
Smaller rival Lyft Inc. also has shelved its profitability target and embarked on a cost-cutting effort that it says will make it easier to turn profitable once ridership recovers. “The actual timing will depend on the speed of the recovery. It could be earlier or later.” Chief Financial Officer Brian Roberts said Wednesday.
Uber and Lyft both said they have seen a slight pickup in ridership in recent weeks after demand plummeted mid-March as shelter-in-place restrictions were imposed across much of the U.S. to stem the coronavirus outbreak. Overall for the first quarter, Uber said the number of trips was up 7% from a year earlier, but down 13% from 2019’s final quarter.
Uber on Thursday reported a net loss of $2.94 billion on sales of $3.54 billion in the three months ended March 31, compared with a net loss of $1.09 billion and sales of $3.1 billion a year earlier. The larger loss includes $2.1 billion in pretax write-downs on some of Uber’s investments that have lost value because of the coronavirus crisis. Analysts surveyed by FactSet had expected a $1.38 billion net loss on sales of $3.53 billion for the quarter just ended.
Uber posted a $612 million first-quarter loss on an adjusted basis before interest, taxes, depreciation and amortization, which excludes costs linked to its Covid-19 response. The company said its response, which included measures such as offering health-care workers free rides and providing protective gear to drivers, took $19 million from its top line and added $5 million in costs.
One bright spot was Eats, Uber’s food-delivery business. It has thrived as people stuck at home have relied on such services to get meals from some of their favorite restaurants. Eats gross bookings surged 52% from last year’s first quarter to $4.68 billion.
“While our rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet, focus additional resources on Uber Eats, and prepare us for any recovery scenario,” Mr. Khosrowshahi said in a statement.
He said there were signs of ridership recovering after plunging 80% year-on-year in April, though “the recovery is uneven.” In Georgia and Texas, where shelter-in-place rules have eased, gross bookings are up 43% and 50%, respectively, from their recent lows. Hong Kong, he said, is back to 70% of pre-crisis gross bookings levels.
And growth at Uber Eats, Mr. Khosrowshah said, was poised to remain strong, with millions of new customers having tried the service. Uber has shifted some of its rideshare drivers idled by falling trip demand to satisfy the strong food-delivery demand.
Lyft, which reported earnings on Wednesday, said ridership fell 75% in April and will likely take time to fully recover.
“Even as shelter-in-place orders and travel restrictions are modified or lifted, we anticipate that continued social distancing, altered consumer behavior and expected corporate cost cutting will be significant headwinds for Lyft,” Chief Executive Logan Green told analysts. The company plans to trim about 17% of its staff as part of an effort to cut expenses by $300 million this year.
Uber on Wednesday said it was cutting about 3,700 workers and that Mr. Khosrowshahi agreed to waive his base salary for the rest of the year. “We are continuing to look at all levers to ensure our core rides and Eats businesses emerge from this crisis stronger than ever,” Mr. Chai, the finance chief, said in the statement Thursday.
He said that as growth returns, Uber would add staff but probably at a slower pace than precrisis as it focuses on efficiency in a post-pandemic environment.
Beyond the current economic slowdown, Uber and Lyft also face pressure from regulators and lawmakers for classifying their drivers as contract workers rather than employees. On Tuesday,
California sued the companies
, citing the state’s gig-economy law that took effect Jan. 1, saying their treatment of drivers deprives them of rights such as paid sick leave and unemployment insurance—issues made more visible during the pandemic.
Despite the difficult period, Uber is continuing to invest in ride-sharing activities. The company led a $170 million funding round in electric-scooter rental startup Lime, which had its own round of job cuts last month. Lime, in a statement Thursday, said that as part of the transaction it was buying Uber’s electric-scooter unit Jump.
Uber contributed $85 million to the round as part of a deal that includes an ability to acquire 100% of Lime in two years, according to a person familiar with the terms. The Lime service will be integrated into the Uber app. It also allows Uber to cut its own bike and service operations, which make up much of the company’s other bets segment. In the first quarter, that segment reported a $63 million adjusted operating loss, compared with a $42 million loss a year earlier.
https://www.wsj.com/articles/ubers-first-quarter-loss-balloons-on-coronavirus-impact-11588882349?mod=business_minor_pos7