Uber could jeopardise its long-term future with short-term cost cutting

Following the recent news that Uber will lay off an additional 3,000 workers;

Danyaal Rashid, Thematic Analyst at GlobalData, a leading data and analytics company, offers his view:

“Uber’s latest round of job cuts finds the firm caught between cost cutting and continued innovation. Uber pioneered the ride-sharing industry and does not want to become just another company competing in a saturated landscape.

“COVID-19 has had a devastating impact on Uber. GlobalData has given the company a rating of just a one out of five for the expected impact that the outbreak will have on the company, suggesting it will negatively affect its business. As a result, Uber’s ranking in GlobalData’s latest ecommerce thematic scorecard has fallen six places, from 8th to 14th – however it is still above competitors Lyft and Didi.

“Some of the latest round of job cuts are occurring in Uber’s Advanced Technologies Group (ATG), the area of the business that handles research and development (R&D) activities for its autonomous vehicles. With a long-term strategy focused on R&D, Uber’s position as the world’s largest (and best-known) ride-sharing platform puts it in a unique position to take advantage of economies of scale and develop driverless technologies and machine learning algorithms for its platform. Uber is very aware that it will not reach its desired levels of profitability through subsidized cab rides, making innovation even more important.

“Yet, innovation at a time like this seems like a luxury few can afford. Outside of the logistics of continuing R&D projects in a locked-down economy, the trade-off is stark: either risk losing the whole business by pursuing cost-intensive projects or sideline them until survival is guaranteed. Uber does not need to end its cost-cutting approach. It just needs to ensure that it is selective in what is being cut.”

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