Uber PESTEL Analysis: a brief overview

PESTEL is a strategic analytical tool and the acronym stands for political, economic, social, technological, environmental and legal factors. Uber PESTEL analysis refers to the analysis of potential impact of these external factors on the performance of the ride-hailing giant and its long-term growth prospects.

Political Factors in Uber PESTEL Analysis

Generally, political factors affecting businesses include government stability, bureaucracy, levels of corruption, impacts of home market lobbying groups and others.  When Uber started its operations in 2009, there was no other ride-hailing taxi app. Accordingly, legislations related to the regulations of such services did not exist.

Global disruption of taxi services: political implications

With the advent of Uber, the following and other questions needed to be answered by local governments and authorities:

• Who is responsible in case of car accident: Uber or the driver?
• Does it need to be compulsory for Uber drivers to have taxi licences?
• Can Uber list thousands of its drivers as contractors, but not employees?
• Does Uber have to comply with minimum wage requirements?

Dealing with above and other related questions in different countries and regions have caused charged political debates.  Moreover, it can be argued that Uber has caused political debates in the global scale in a way that few companies have done.

Different stance by local governments

While some local governments have been favourable towards Uber taking into account its modern business model, others demanded strict adherence to the rules and regulations making no difference between Uber and regular taxi companies. As a result, Uber has been banned in a number of countries and such as Bulgaria, Hong Kong and Germany and certain cities such as London and Brno.

Lobbying as attempts to affect political factors

Uber engages in lobbying activities to try to impact legislations in the US and worldwide to become more favourable for rail-haling services in general and to Uber in particular. As it has been illustrated in Figure 4 below, lobbying budget of the largest mobility platform in the world has been consistently increasing to reach USD 2,63 million in 2020.

Annual lobbying by Uber Technologies

 Economic Factors in Uber PESTEL Analysis

The range of economic factors affecting businesses is extensive and the most important factors include macroeconomic climate, inflation rate, interest rate, currency exchange rates and unemployment rates. Moreover, economic factors such as cost of labour, changes in disposable income of consumers and tax rates also affect businesses.

Taxation

Taxation is one of the most noteworthy economic factors affecting ride-hailing services and other businesses. For example, due to a new tax law introduced in the US in February 2018 “freelancers and other independent contractors will be able to deduct 20 percent of their income from their taxable income before paying the new lower tax rates”.[1] This particular change in external economic factor has positive effect on Uber, because it increases attractiveness of becoming Uber driver from a financial point of view.

Changes in exchange rates 

In 2020 markets outside the United States accounted for approximately 79% of all Trips.[2] Accordingly, changes in exchange rates between USD and local currencies have direct and substantial impact on Uber revenues and profit. Specifically, strengthening US dollars against local currencies decreases the reportable amount of revenues generated from international markets, while weak USD increases reportable profits generated from international markets.

Sharing economy

Uber’s business model is based on sharing economy, a concept that may change the state of economies, especially in developed countries.  The economic impacts of the global transportation technology company are controversial. Uber has created additional income opportunities for many people, at the same time as taking away jobs from local taxi drivers. The long-term growth prospects of the ride-hailing giant is affected by tendencies and developments in the sharing economy in direct and indirect manners.

Uber Technologies Inc. Report contains a full version of Uber PESTEL analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Uber. Moreover, the report contains analyses of Uber business strategy, leadership, organizational structure and organizational culture. The report also comprises discussions of Uber marketing strategy, ecosystem and addresses issues of corporate social responsibility.

[1] Zaveri, P. & Bosa, D. (2018) “The new tax law creates a huge boon for Uber and Lyft drivers” CNBC, Available at: https://www.cnbc.com/2018/02/05/uber-lyft-drivers-and-other-contractors-get-2018-tax-law-benefit.html

[2] Annual Report (2020) Uber Technologies Inc.