Uber Eats announced in a regulatory filing that it will cease operations in eight markets by June 4.
Uber Eats announced in a regulatory filing that it will cease operations in eight markets by June 4. The move follows a unique business strategy, which has already yielded favourable results for the company.
How does Uber Eats plan to benefit by leaving some areas? The answer may surprise you.
Uber Eats will leave the markets with only 1% of its total revenue. These include the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Ukraine, Uruguay, and the United Arab Emirates (UAE), where the company will relocate its subsidiary to Karimuk.
The Securities and Exchange Commission (SEC) filed a statement saying, “These decisions are part of Uber’s current strategy to remain first or second in all Eats markets while leaning on investment in some countries.”
In short, the company model should be number one in a region or not at all. With Uber Eats not dominating the food supply, the company is cutting its losses and leaving, instead of focusing on its most successful regions.
Exiting the market gives the company the opportunity to sell its business to its biggest competitor in the region. As a result, international venture reduces costs in failed markets, while gaining a small boost from sales of its operations.
Reinvestment
Although it is operating again in emerging markets, Uber Eats has a long-term plan to expand its business.
In a statement, the company explained that “we will see these savings reinvested in priority markets, where we expect a better return on investment.” In other words, it takes money from unsuccessful endeavours and pays it to successful companies.
One or none of the Uber Eats lines is not the product of the COVID-19 disease. The company has successfully used this tactic in the past, meaning it sold its base in India to rival Zomato for $350 million.
Regulating fat is a cornerstone of good management. There is not much profit from pouring money into a market that has shown little traction, from the mistaken belief that sticking to it will make a difference. Sometimes it is better to cut your losses and focus on your business in successful sectors.
As the global economy reaches recession, other businesses may be wise to look at the example of Uber Eats: If you are not the first, try running a different race.
