Harvard Case - Careem: MENA Ride-hailing Leader Strategizes Future Growth as an Uber Subsidiary
"Careem: MENA Ride-hailing Leader Strategizes Future Growth as an Uber Subsidiary" Harvard business case study is written by Christopher Groening, Ahmad Al Asady. It deals with the challenges in the field of Strategy. The case study is 24 page(s) long and it was first published on : Jul 13, 2020
At Fern Fort University, we recommend that Careem, as a subsidiary of Uber, leverage its existing strengths and the resources provided by Uber to further penetrate the MENA market, expand into new segments, and explore innovative business models. This strategy should focus on:
- Leveraging Uber's technology and resources: Integrating Uber's technology platform, data analytics, and operational expertise to enhance efficiency, optimize pricing, and improve customer experience.
- Expanding into new segments: Targeting underserved markets within the MENA region, including smaller cities and rural areas, offering specialized services like delivery, logistics, and financial services.
- Developing innovative business models: Exploring new revenue streams through partnerships, subscriptions, and value-added services, while maintaining a focus on social responsibility and environmental sustainability.
2. Background
Careem, founded in 2012, emerged as a leading ride-hailing platform in the Middle East and North Africa (MENA) region. Its success was built on a strong understanding of local culture and a commitment to providing reliable and affordable transportation. However, facing intense competition from Uber, Careem's growth trajectory was impacted. In 2019, Uber acquired Careem for $3.1 billion, creating a dominant force in the region. This case study explores the strategic challenges and opportunities facing Careem as it navigates its future as a subsidiary of Uber.
The main protagonists of the case study are:
- Careem: A regional ride-hailing leader seeking to maintain its growth and relevance within the MENA market.
- Uber: A global ride-hailing giant with vast resources and technological capabilities aiming to leverage Careem's local expertise.
3. Analysis of the Case Study
Competitive Analysis:
- Porter's Five Forces:
- Threat of New Entrants: High due to the low barriers to entry in the ride-hailing industry.
- Bargaining Power of Buyers: Moderate, as customers have choices but are often price-sensitive.
- Bargaining Power of Suppliers: Low, as drivers are independent contractors with limited bargaining power.
- Threat of Substitutes: High due to the presence of traditional taxis, public transportation, and other mobility services.
- Rivalry Among Existing Competitors: High, with intense competition from Uber, regional players, and emerging technologies.
SWOT Analysis:
Strengths:
- Strong brand recognition and customer loyalty in the MENA region.
- Deep understanding of local culture and market dynamics.
- Established network of drivers and partners.
- Access to Uber's technology and resources.
Weaknesses:
- Limited global reach compared to Uber.
- Dependence on Uber's technology and platform.
- Potential for cultural clashes with Uber's global operations.
Opportunities:
- Expanding into new segments like logistics, delivery, and financial services.
- Leveraging Uber's data analytics and AI capabilities for improved efficiency and customer experience.
- Exploring strategic partnerships and alliances for market expansion.
Threats:
- Continued competition from Uber and other ride-hailing companies.
- Regulatory challenges and evolving government policies.
- Potential for technological disruption from emerging mobility solutions.
Value Chain Analysis:
Careem's value chain consists of:
- Inbound Logistics: Recruiting and managing drivers.
- Operations: Providing ride-hailing services, managing payments, and ensuring safety.
- Outbound Logistics: Delivering passengers to their destinations.
- Marketing and Sales: Building brand awareness, acquiring new customers, and promoting services.
- Customer Service: Addressing customer inquiries and resolving issues.
Business Model Innovation:
Careem can explore various business model innovations, including:
- Subscription-based services: Offering premium features and benefits to loyal customers.
- Value-added services: Integrating with other businesses to offer complementary services like food delivery or travel booking.
- Partnerships with local businesses: Collaborating with retailers, restaurants, and other companies to offer exclusive deals and promotions.
Corporate Governance:
Careem's corporate governance structure needs to be aligned with Uber's policies and practices while maintaining its commitment to local values and ethical principles.
4. Recommendations
1. Leverage Uber's Technology and Resources:
- Integrate Uber's platform: Migrate Careem's operations onto Uber's technology platform to gain access to advanced features like real-time pricing, dynamic routing, and fraud detection.
- Utilize data analytics: Leverage Uber's data analytics capabilities to optimize pricing, improve service quality, and identify new growth opportunities.
- Adopt Uber's best practices: Implement Uber's operational processes and standards to enhance efficiency and customer experience.
2. Expand into New Segments:
- Target underserved markets: Expand into smaller cities and rural areas within the MENA region, offering affordable and reliable transportation options.
- Develop specialized services: Offer delivery, logistics, and financial services to diversify revenue streams and tap into new markets.
- Explore partnerships: Collaborate with local businesses and organizations to offer tailored solutions and expand reach.
3. Develop Innovative Business Models:
- Subscription-based services: Offer premium features like priority booking, discounts, and exclusive benefits to loyal customers.
- Value-added services: Partner with other businesses to offer complementary services like food delivery, travel booking, or financial services.
- Develop new revenue streams: Explore partnerships, advertising, and other revenue-generating opportunities beyond ride-hailing.
4. Embrace Social Responsibility and Environmental Sustainability:
- Promote sustainable transportation: Encourage the use of electric vehicles and carpooling to reduce carbon emissions.
- Support local communities: Invest in initiatives that promote economic development and social well-being in the MENA region.
- Champion ethical business practices: Ensure fair treatment of drivers and customers while adhering to local regulations and ethical standards.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Leveraging Uber's technology and resources aligns with Careem's mission of providing reliable and affordable transportation while expanding its reach and capabilities.
- External customers and internal clients: The recommendations focus on improving customer experience, expanding service offerings, and creating new value propositions for both customers and drivers.
- Competitors: The recommendations aim to position Careem as a strong competitor by leveraging Uber's resources and developing innovative solutions.
- Attractiveness: The recommendations are expected to drive growth, profitability, and market share, ultimately enhancing Careem's value proposition.
6. Conclusion
Careem's future as an Uber subsidiary presents both challenges and opportunities. By leveraging Uber's technology, resources, and global reach, Careem can solidify its position as a leading ride-hailing platform in the MENA region. By expanding into new segments, developing innovative business models, and embracing social responsibility, Careem can create sustainable growth and value for its stakeholders.
7. Discussion
Alternatives:
- Maintaining independence: Careem could have chosen to remain independent and compete directly with Uber, but this would have required significant investment and risked losing market share.
- Focusing solely on ride-hailing: Careem could have focused solely on expanding its ride-hailing services within the MENA region, but this would have limited its growth potential and competitiveness.
Risks and Key Assumptions:
- Integration challenges: Integrating Uber's technology and systems with Careem's existing infrastructure could pose significant challenges.
- Cultural clashes: Differences in corporate culture between Uber and Careem could lead to friction and hinder integration.
- Regulatory hurdles: Expanding into new segments and markets could face regulatory challenges and legal complexities.
8. Next Steps
- Develop a detailed integration plan: Outline the steps and timelines for integrating Uber's technology and systems with Careem's existing infrastructure.
- Identify and address potential cultural clashes: Develop strategies to foster collaboration and ensure a smooth integration process.
- Conduct market research and feasibility studies: Assess the potential for expanding into new segments and markets.
- Develop a comprehensive marketing and communications plan: Communicate the benefits of the acquisition to customers, drivers, and stakeholders.
- Monitor progress and adjust strategies as needed: Continuously evaluate the effectiveness of the integration and expansion strategies and make necessary adjustments.
By taking these steps, Careem can successfully navigate its future as an Uber subsidiary and continue to thrive in the dynamic and competitive ride-hailing industry.
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Case Description
This case examines the unique challenges faced by ridesharing company Careem as a business operating in the Middle East and North Africa (MENA) region. The case presents issues related to Careem's growth options after it was acquired by Uber. Protagonist Mudassir Sheikha, Careem co-founder and chief executive officer, has two goals as he decides the company's future direction: 1) providing solutions benefiting Careem's customers, employees, and drivers, and 2) managing a profitable company. The terms of the Uber acquisition dictate Careem will continue to operate as a separate entity, and Sheikha must present Careem's forward-looking strategy to all relevant stakeholders in two weeks. The case addresses issues specific to the MENA region and how they differ from those in the West. Students will examine the opportunities and threats created for Careem in the wake of the Uber acquisition. This case was the first place winner in WDI Publishing's MENA Case Writing Competition "Doing Business in the Middle East North Africa Region," sponsored by Michigan Ross Executive Education.
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