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Changes Brought in Careem

Changes Brought in Careem’s

Organizational Culture and Working after Acquisition by Uber

Abstract

This study focuses on the management of challenged faced in changing the management, policies, and procedure of an organization, especially small and medium enterprises (SMEs). Taking the example of Careem acquisition by Uber, the research focuses on the changes introduced in Careem and the challenges faced in implementing these new procedures. The association between the change leadership, organizational culture, and the change administration process in UAE is thoroughly analyzed in the paper with the help of existing literature. The primary method of collection of the data and hypothesis used in this study is via a proposed research model and help from the existing authentic research papers related to SMEs in the UAE. The outcomes of the study show a strong influence of change agents on change management, and hierarchical culture is effective in UAE organization for a positive and rapid change. The need for innovation via modernization, technology, and human resources in SMEs in UAE is highlighted in this report. In the end, few recommendations, like the adoption of technology, globalization, and diversity in organizational culture, are made to facilitate change. The general purpose of this report is to improve the SMEs and change management literature on small businesses, especially in emerging economies like the UAE.

Introduction

The primary aim of this report is to study the change management with the specific example of Careem, a Dubai-based business. It was acquired by Uber, a San Francisco-based competitor of Careem. As a result, various changes in organizational culture and leadership of Careem were brought a few months after the acquisition.  This section deals with the background of Careem, the factors that led to its acquisition, the changes made in the company, and the reasons that led to this change.

Background of Careem

Before moving on towards the topic of this report - acquisition of Careem by Uber – it is important to know about the journey of Careem and how it became a ubiquitous part of life for the citizens of UAE. Mudassir Sheikha and Magnus Olsson established Careem in 2012 as a small business. (Wadhwa, 2019) Initially, it was based on web for only business carpooling, after which it evolved into a large transportation company all over the UAE and other parts of the world.

Careem established its headquarters in Dubai because it wanted to capitalize on the fact that Dubai is a global city that will always need an efficient transportation system. Moreover, the personal car ownerships in UAE are believed to be low, so carpooling is smart business. As a result, Careem started to offer quick and reliable solutions to transportation problems.

It was established on a basic idea of solving transportation issues and soon became heavily popular in the entire region. By 2018, Careem was believed to be operating in about 96 cities all over the world and had the worth of about $1.7 billion. (Wadhwa, 2019)

Careem became an extremely successful startup by 2018 and established other small businesses like RoundMenu, a Dubai-based restaurant, and a delivery service called Careem now. (Entrepreneur Middle East Staff, 2018)

Even though Careem was succeeding in the market, it was still facing numerous challenges in terms of payment options, dwindling stocks, and managing the extensive transportation network it had established by 2018. Moreover, Careem was facing tough competition in the ride-hailing services like Uber, a San Francisco based company. Careem was bought by Uber in March 2019 at the price more than $3 billion to increase its reach in the region. (Uber, 2019) The acquisition triggered various changes in the policies and management of Careem.

Problem Statement

The acquisition of Careem by Uber led to numerous changes in policies, procedures, and management of Careem. The topic of this report is to study these changes in detail and analyze their impacts.

Aims and Objectives

The primary aim of this study is to analyze the impacts of management changes in Careem and how it is coping up with such changes.

  1. To investigate the immediate impact of Careem acquisition in the UAE by a foreign company
  2. To study the changes brought in Careem’s leadership, policies, and working procedures.
  3. To discuss the effects of administrative culture on change in SMEs, particularly Careem.
  4. To analyze the reaction of Careem to the changes and strategies formulated for successful evolution.
  5. To recommend approaches for successful organization changes.

Changes Brought in Careem

There is a systematic approach to dealing with changes in an organization that gives importance to people and other resources of any organization, including small and medium enterprises (SMEs). An effective change is the one that is coordinated and controlled to make sure people can adapt to the change positively (Carter, 2008). Coordination, regulation, and adaptation are important for the leaders in change supervision. Nevertheless, to accomplish expected outcomes, change must be sustainable (Lanning, 2001).

Every business should expect change because it is unescapable, but the degree of continuous change in this age is at a peak in history. With the evolution of technology and management techniques, change is seen as a perpetual feature of a business and a chance for the SMEs to enhance their efficiency, revenue, and quality of services. (Lucey, 2008)

One thing that has been emphasized by many types of research and experts is that managing an organizational change, like the one brought in Careem, is not possible without an effective change in leadership and executive policies. Management experts like (Metre, 2009) and (Carole Weinstein, 2005) have explained that old and bad leadership can result in total failure in bringing the change in an organization. Careem is also still going through the phase of major change in leadership. 

As soon as the merging of Uber and Careem was completed, it was announced that Careem will keep working as an independent organization and will retain its brand name. (Paracha, 2019). However, major changes were announced in Careem, for example, major shifts in managerial positions, and expansion plans to diversify the organization. The next few years are considered to be of utmost importance for Careem because it is at a turning point in its history, and there is a myriad of changes made in the organization in different departments. These changes are discussed and analyzed in detail in the next sections of this report.

Importance of Careem Acquisition

This study focuses on Careem because it is one of the most successful and popular organizations in the UAE that started as a startup and emerged to be a big name in the transportation sector. This particular topic was selected because last year when Uber bought Careem, it took the stock markets and the consumers by surprise as there was great uncertainty looming over the future working procedures of Careem. Moreover, it interested the experts as well as common citizens because it was the largest acquisition deal ever in the Middle East.

It is important to analyze the changes brought in Careem and how it has transformed since its acquisition by Uber to understand the potential future of one of the most important SMEs of UAE.

Literature Review

There is a scarcity of the existing research journals and academic reports about the changes brought in an organization based in UAE, especially SMEs. The available data suggests that businesses in UAE are committed to bringing change in their companies and keep up with modern technology and the latest trends. There are several projects which have evolved over the past decades and played a vital part in improving the economy of the UAE (Mimouni, 2011). 

The studies suggest that leadership and organizational culture play an essential role in bringing change successfully to an organization (Baddah, 2016). Experts also suggest that companies must have appropriate measures for dealing with nationalization within a business in UAE because it can lead to adverse effects on the growth of the company (Al-Waqfi, 2013).

Current State of Managing Organization Change

Change Management and Organizational Culture

The working procedures and culture of a business has a huge impact inn bringing change in an SME, like Careem. The change is effected by a company's mode of work, values, beliefs, behavior in the market, and hierarchy culture. Culture is a very comprehensive term that covers all internal and external relationships and features of an organization. It runs deep in business and influences the action of individual employees as well (Martin, 1983)

Culture can evolve by itself because of its relations and in reply to diverse steps and to wide-ranging degrees (Zhu, 2000). As a result, input from different departments and ranks is important in change management concepts. In order to bring successful change in a business, employees with conflicting interests and cultural ideologies must understand each other in an organization (Andrews, 2008)

It is essential because a company’s culture is founded on a diverse set of values, expectations, principles, and behaviors, and the way they work together to impact change, employees, and overall performance of the business (Andrews J. C., 2012)

Market and Hierarchical Culture

The market culture has not been focused in this study because the main component of market philosophy is to fulfil the needs of investors one way or another, and not uphold the organizational value (Hartnell, 2011). On the other hand, clan organizational culture makes use of collaborative strategies and build trust among the employees and executives (Carlström, 2012)

A hierarchy of culture use control to regulate the process, capacity, and consistency of change to make the whole process efficient and timely (Carlström, 2012). Experts have concluded that in strong organizational culture, it is challenging to achieve change successfully (Jaskyte, 2004)

The world is changing at a rapid speed, and SMEs like Careem must adopt their changing policies according to their culture (Sarros, 2005). A business that can understand the importance of organizational culture, and maintain, tolerates, and allow the change process will be successful in implementing a strong change (Luu, 2016)

Relation Between Leadership and Change Management

Management plays an essential part in mitigating struggle against variation by using effective fundamentals of organizational philosophy to keep the employees motivated and make them contribute in the change procedure (Jaskyte, 2004)

Experts believe that change is carried by the leader of a company or other mediators who have designated the task of facilitating change and revolutionizing the business. The whole process is prone to considerable resistance from the employees (Andrews J. C., 2012)

In order to make change management a triumph, the leader must lead by example for the employees by exhibiting a obligation to evolve and should also show a positive behavior towards employee’s opinions and strategic plans implemented to facilitate change in an organization (Abrell-Vogel, 2014)

The leader of the company responsible for bringing change is essential in this procedure as he or she can reduce the employee resistance and bridge the gap between company executives and employees, who can work together to bring the change together (Griffith-Cooper, 2007)

Such collaboration strategies are highly dependent upon the qualification and skills of the change leader. According to (Northouse 2013), a change leader must demonstrate behavior that leads to the accomplishment of the goals and also adopts measures that allow the employees to feel comfortable during major shifts in business.

In their study, (Hartnell, 2011), stated that in SMEs where aims are easily attained, leaders assumed managerial and adaptive styles to guarantee actual change management.

Change Agents and Change Management

(Nazim, 2014) has declared that a change mediator is someone who presents a notion, notion, or modern invention that results in a suitable setting for innovation, eases the application of variations in procedures, and assesses the result of evolution.

The responsibilities of innovative managers, according to (Luscher, 2008) are to take part in the change procedure, and it is also momentous that they interrelate with staffs at numerous stages in the business and at several periods. For example, (Baddah, 2016) elucidated that managers need to have a wide range of considerate of the rudimentary values involved in the evolution process.

The skill to uphold the balance between the message of the fundamentals of innovation procedure can be exhausting. However, change is a method that aid managers, as new management, to initiate associations with workers that allow and enable the transformation process, thus confirming that the innovation is efficiently achieved (Nazim, 2014)

Aspects of Change Management

For evolution of an organization to be successful, they must possess specific skills, attitudes, and capabilities (Luscher, 2008). Some of the aptitudes recognized in the studies present about change management of SMEs include long-term plan, motivation power, and the aptitude to resolve difficulties, adapt, arbitrate, make immediate decisions when required, connect, and provide truthful evidence (Nazim, 2014).

Other studies conclude services such as people, practical, and theoretical knowledge (Northouse, 2013) highlight that it is also vital for change managers to use their aptitudes and services to guarantee that change is attained.

In debating leaders as bringer of change, this study delivers a robust evidence for a structural philosophy type that permits change agents to apply their services most suitably to enable change constructively. (Carter, 2008) confirms that the positive outline of the change and constant change administration needs real control over the process.

(Miller, 2010), though, explains that the principles of the management are significant to the change management procedure, and, as such, durable management is dominant in the achievement of the most important change. In short, the existing literature has proven that strong change leadership is required for fruitful change management.

Importance of the Existing Research in Changes in Careem Management

As seen from the previous section of this report, there is a strong association between the change, leadership, and culture of an organization. It is significant to study the influences of changes in Careem because it is one of the most successful SMEs in the UAE.

In the UAE, about 92% of the total companies are SMEs, and they contribute about 50% of the GDP. Moreover, SMEs in UAE are responsible for about 85% of the jobs in the private sector (UAE Ministry of the Economy, 2013). Hence, it is important to study the change management in SMEs, like Careem, and the challenges faced during the change process.

Since its acquisition, Careem has also gone through a number of the team. These changes are analyzed in detail in the next section of this report.

Analysis

Significance of the Problem

There were a number of challenges faced by Careem after it was acquired by Uber. One of the major issues was the lack of understanding of the UAE culture by the new owners of Careem. Before the merger, Careem had a profound understanding of the culture in the UAE because it was established in this region and had headquarters in Dubai. However, after its acquisition and across the board, leadership change was expected, and Uber, a foreign company, lacked a deep understanding of the UAE's culture and working procedures. (Karam, 2019)

With Uber buying Careem in the largest acquisition deal ever in the UAE, it established Uber monopoly over the whole region in terms of leading the carpooling services. As a result, strong resistance by the local transportation startups and investors was faced by the change in Careem ownership.

Importance of Changes Brought in Careem

According to (Andrews J. C., 2008), whenever there is a complete overhaul of leadership of an organization like it was expected in the case of Careem, the change management should be slow, and no major changes should be made in the top leadership of the business. This strategy was executed to the letter by Uber as it did not make any immediate changes in Dubai HQ of Careem and instead announced that Careem would continue to operate as an independent subsidy.

However, major changes were announced in the aims and vision of Careem. It was announced that Careem was targeting to become the first super app of UAE by 2022 by providing numerous types of solutions to people and solve their everyday problems.

Implementation of Changes

The following major changes were implemented by Careem in UAE after it was acquired by Uber:

Sharp Increase in Fares

Just a month after Uber bought Dubai-based Careem, it announced a sharp increase in its fares (Serkal, 2019). The move may not have been well-thought by Careem because it was resisted strongly by the consumers of Careem as they did not expect an increase of more than 46% in fares in such a short amount of time after it was announced that Careem is going to focus on expanding its reach in UAE.

This is an example of how sometimes decisions are taken by management without considering the needs and opinions of its customers, and as a result, strong resistance is faced by the company, like the backlash that Careem received when it unexpectedly revised its fares in UAE. (Serkal, 2019)

Major Changes in Leadership Structure

As expected, Careem announced a major shake-up in its leadership structure soon after its acquisition by Uber. A major change clearly observed was that when Careem was working as an independent business, the majority of its top leadership was the local citizens of the UAE. While, soon after its acquisition, it got quite dominated by foreigners.

In a statement to (MenaBytes Staff, 2019), Careem announced making some significant modifications in the leadership structure to execute its 2022 vision and become the leading ride-hailing app in UAE. Other measures like a wide range of services like economical services and delivery services were announced as well. As concluded in the previous section, a strong change leader is necessary to bring positive change in any business. Keeping this hypothesis in mind, Careem announced that it was going to expand the part of its managing directors. They will now actively participate in markets other than transportation and focus on introducing more products into the market under the Careem brand.

Major shifts in leadership included making Ibrahim Manna, one of the very first employees of Careem, the head of Saudi Arabia branch. Similarly, the Managing Director for Egypt was shifted to North African territories. In the UAE, where headquarters of Careem is located, much of the original leadership was maintained, which reflected a smart move by the company in order to implement successful change. (MenaBytes Staff, 2019)

The move was declared to be a strategic expansion move by Careem. The top executive of Careem stated that they wanted to utilize this opportunity in expanding their scope and size by making leadership changes and make sure that the change process was smooth and efficient. (Uber, 2019)

Result of Change Management

Despite the initial resistance to change in Careem, the change was appreciated by employees as well as investors. It put Careem on the world map and provided it the opportunity of expanding its reach all around the globe with immense resources of Uber. Similarly, experts declared it to be a milestone in UAE’s history as this move would speed the technology revolution in the region by providing more resources for entrepreneurs and foreign investors (Diaa, 2019). The impacts and challenges faced during change management are discussed in the next section of this study.

Discussion

Based on the verified, authentic, and well-researched literature, such as (Jaskyte, 2004), (Carlström, 2012), (Carole Weinstein, 2005), and (Smollan, 2009), different hypothesis about change management have been established. This report suggests the research model in figure 1 study effective change in a small business (See Appendix).

The proposed model shows that the change management predominately affect the change management in a business. At the same time, there is a robust link between change control and management affected by the organizational culture. The model depicts the links between organizational culture, change agents, and change process.

This research paper analyses the change management taking the example of Careem, which has been the leading ride-hailing service in UAE. It has constantly evolved and innovated its services by venturing into different sectors like delivery services and restaurants. Even after its acquisition, Careem has remained an independent organization and dedicate most of its earning towards innovation, investment, and research and development. (Serkal, 2019)

The studies suggest that SMEs in the UAE are in dire need of innovation. Not every business like Careem can go through change management successfully. Many Emirati SMEs have successfully innovated over the past few years. However, many small businesses have little to none innovation because they lack global services and are just limited to the UAE or even just one city.

Conclusion

Based on the discoveries of this report, it can be determined that change management is an essential part of change management. A leader or change agent can positively impact the organizational culture, hierarchy, and  planned as well as emergent change management in SMEs in the UAE. This concept is applicable in our specific example of Careem as well because strong leadership changes and variations in working procedures were announced to manage change effectively.

The results also show that hierarchical administrative culture has a vital part in developing and planned change in UAE businesses due to the cultural values, beliefs, and overall behavior of the region. It is also concluded that hierarchical, instead of the clan or adhocracy culture, impacts the change positively and facilitate the evolution. Moreover, the findings indicate a optimistic relation between hierarchical culture, leadership, and organizational change administration.

It is quite evident that UAE has a very high business potential, which has made it an attraction for investors from all over the world. SMEs can play a vigorous role in globalization and change of UAE’s business landscape (Baddah, 2016). The analysis of the data about changes brought in SMEs in Dubai, like Careem, shows that there has been a wide-ranging technology revolution in the innovation landscape of the region. With hundreds of companies and startups being launched daily, there is strong competition in every industrial sector.

The implications of these conclusions suggest that the existing research acknowledges the role and importance of change leadership. However, theoretical research is still inadequate in vindicating the part of hierarchical organizational culture in changing business. Moreover, research is even more scarce, specifically in the UAE, and there is no definite conclusion about the fact of whether the findings apply to only UAE or other SMEs around the world.

The findings and the changes brought in Careem after a major shift in its own shows that it is significant to preserve the organizational culture while managing change. It allows the businesses and change leaders to be prepared for the hurdles in the change process and ensure the positive relationship between new top leadership and employees, resulting in sustainable change management.

Recommendation

Based on the conclusions drawn in the previous section, the following recommendations are made to the different businesses and SMEs to handle change management effectively:

  1. Organizations in UAE reconsider their business model and make it more adaptable for innovation.
  2. Overall business environment and working procedures should be made friendlier and more open to change through internationalization.
  3. The rulers of the UAE has often stated their interest in changing and supporting small businesses by providing funds for resources (El-Sokari, 2013). Organizations should capitalize on such opportunities to expand their reach and thrive in the market.
  4. Training of the local workers of an organization is important in modernizing the working procedures. It also helps in promoting a global organizational culture and facilitate change.
  5. Along with the option of international expansion, this is the right time for small businesses in the UAE to invest locally and expand their business. Many businesses are apprehensive of expanding their business because of the massive change it brings in an organization. However, with a sharp change leader, it can bring numerous benefits to the business.
  6. To conclude, SMEs must adapt their management models to an evolving situation according to the modern market trends and technology revolution. It is essential that the SMEs get globalized and improve their human capital and utilize the latest technology to make change management successful (Dubai SME, 2013)

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